GLNCY Glencore Plc (PK)

By Rhiannon Hoyle And Alex MacDonald 

Glencore PLC said it is considering selling two of its copper mines, as the commodities group races to shore up its balance sheet and restore investor confidence.

The Switzerland-based company in September said it intended to sell some assets to help raise cash as it pledged to cut net debt by a third, to about $20 billion, by the end of next year. Concerns about the company's debt have sent its stock on a wild ride in recent weeks, sending it down 29% in one day on Sept. 28 before a recovery.

Glencore--the world's largest copper supplier and third-largest copper miner--said Monday it had launched a process to sell its Cobar underground mine in Australia's New South Wales state and its Lomas Bayas open-pit operation in northern Chile. The company started the process in response to a number of unsolicited expressions of interest from various potential buyers. Interested parties will be able to place an offer for one or both of the mines, the company said.

Glencore didn't disclose a value for the assets. Analysts said the mines could fetch between $600 million to $1 billion.

"The assets are small in the context of Glencore's portfolio, but likely to be relatively valuable to other entities, in our view," said Citigroup, the company's corporate broker, in a note. "We believe selling the smaller assets would be a positive outcome as it would allow Glencore to focus on larger and more profitable assets while still generating the sale proceeds to de-gear the balance sheet." Citi valued the two assets at $1 billion.

Glencore's shares rose more than 2% in early morning trading before falling 1% on the day at 127.75 pence a share.

The copper sales are a fresh sign of how Glencore and other miners are grappling with a multiyear slump in prices for nearly every commodity they produce and sell--from coal to copper to zinc.

Copper hit a more than six-year low in August over fears of excess supply given an economic slowdown in China, the world's second-largest economy and world's largest consumer of many commodities. The price has since rebounded 8.4% to be at $5,334.50 a ton on expectations that other miners might follow Glencore's lead in cutting copper output.

A person close to the company said Glencore would only sell if the price is right and said this would be in addition to the $2 billion in assets sales proposed last month. Glencore has appointed Bank of America Merrill Lynch and UBS Group AG to advise on the process, said another person familiar with the matter.

The Cobar mine has a relatively high copper grade but is slated to close in five years' time. It was valued at $329 million by Glencore at the end of 2013 and is set to produce about 45,000 tons of copper in concentrate this year, according to Citi.

Meanwhile the Lomas Bayas mine, located in northern Chile's Atacama desert--the world's driest--is a low-grade copper mine with enough red metal to keep operating until 2028. Citi forecasts the mine will produce about 70,000 tons of copper cathode this year.

Liberum Capital mining analyst Ben Davis questioned whether it made sense for Glencore to sell copper assets when the price of copper is hovering near multiyear lows. "If they get a good price maybe it's good; who knows," he said.

Glencore last month said it would shut two of its loss-making African copper mines until the first half of 2017 to complete cost-cutting programs. The miner said this would result in a loss in copper output of about 400,000 tons, equivalent to more than 1% of global supply during the period.

Aside from selling the two copper mines, Glencore has also been considering selling a stake in its agricultural business, a unit it expanded in recent years with the 2012 acquisition of Canada-based Viterra, as well as new streaming deals--a method of fundraising that tends to be a quicker way of raising cash than asset sales.

In a meeting with fund managers in New York last week, Glencore executives, including Chief Executive Ivan Glasenberg, said the company expects to raise between $1 billion and $1.5 billion from streaming deals, which give miners an upfront payment in exchange for the future delivery of metals such as gold, according to people familiar with the presentation.

Investors have raised concerns about the health of Glencore's debt-fueled trading business amid a marked downturn in world resources markets. That has triggered share price volatility in recent weeks.

The company has already issued $2.5 billion in new shares, and expects to save billions more by scrapping dividends and cutting costs.

Scott Patterson contributed to this article

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

October 12, 2015 06:13 ET (10:13 GMT)

Glencore (PK) (USOTC:GLNCY)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024

Glencore (PK) (USOTC:GLNCY)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024