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The market likes the Glencore / Xstrata deal but Money Morning doesn’t

Richard — Tue, 07 Feb 2012 10:25:17 +0000

London Mining Network’s concerns about Glencore and Xstrata involve the companies’ environmental and human rights impacts. But not even all the financial commentators are happy about the proposed merger.

Money Morning says:

Xstrata is a good fit for Glencore. The two firms operate in most of the same areas. What Xstrata digs out of the ground it sells to Glencore, which then flogs the stuff around the world. Xstrata is one of the world’s largest mining and metals firms. It’s a major producer of seven commodities used in everything from making steel, to constructing buildings and delivering electricity to developing jet engines and mobile phones. The combined entity would be the world’s biggest zinc producer with 15% of the market. And it would control 32% of the trade in thermal coal, still a key energy production fuel in China and the US. The merger looks set to be confirmed this week. And investors seem to like the idea. Since Thursday, shares in Xstrata have rocketed 15% while Glencore has jumped up by 12%. So if you have a pension, or maybe a FTSE 100 tracker fund, chances are you’re better off as a result of the merger talks. So why does the deal worry us? Because we don’t think this is a good time to be loading up on commodities. See http://www.moneyweek.com/investments/commodities/glencore-xstrata-merger-marks-top-of-the-market-20600.

Glencore and Xstrata close to takeover

http://www.guardian.co.uk/business/2012/feb/06/glencore-xstrata-takeover-announcement-due

Commodities trader and mining group expected to announced tie-up, with Xstrata taking majority of seats on board The commodities trader Glencore and mining group Xstrata are close to finalising an $80bn (£50bn) tie-up to seal the industry’s largest ever takeover – which could be announced as early as Tuesday. Xstrata, in which Glencore already has a 34% stake, announced last week the two had been in discussion prior to Christmas after years of on-off talks. It is understood a preliminary understanding has been reached on the structure of the top management, according to sources familiar with the deal, with Xstrata expected to take a majority of seats on the board, to keep its chairman – John Bond – as well as its chief executive, Mick Davis, and chief financial officer, Trevor Reid.

Why Xstrata needs to play hard to get with Glencore

http://www.guardian.co.uk/business/nils-pratley-on-finance/2012/feb/02/glencore-xstrata-merger-bargaining

Glencore’s proposed merger with Xstrata: key facts

http://www.guardian.co.uk/business/2012/feb/02/glencore-xstrata-merger-key-facts

See also, from last April:

Glencore: the story behind the $60bn float

http://www.guardian.co.uk/business/2011/apr/14/glencore-story-float?INTCMP=ILCNETTXT3487

GCM Resources in the red with loss of £690,000

Richard — Tue, 07 Feb 2012 10:17:48 +0000

GCM Resources plunged into the red in the six months to the end of December posting an after-tax loss of £690,000 against a profit of £3.3m last time. GCM says the Phulbari coal project remains the company’s key opportunity and it continue to pursue approval of the scheme of development from the government of Bangladesh.

See http://www.stockmarketwire.com/article/4301283/GCM-Resources-in-the-red-with-loss-of-690000.html.

Rio Tinto wins battle against Ivanhoe’s “poison pill” rights plan

Richard — Sat, 17 Dec 2011 15:32:13 +0000

An arbitrator has ruled that a “poison pill” rights plan erected by Ivanhoe to try and stop a Rio Tinto takeover, does not apply to the latter, leaving Ivanhoe vulnerable to a takeover next year.

See http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=141520&sn=Detail&pid=92730.

LME overhauls electronic platform as trading volumes surge

Richard — Sat, 17 Dec 2011 15:17:15 +0000

The London Metal Exchange said it had completed a major upgrade to its electronic trading platform called LMEselect with partner Cinnober to handle increased volumes – trading to date is up more than 20% compared to last year’s record volumes.
A takeover of the the LME, which handles some 80% of global trade in metals futures, appears to be in the offing as it gears up to compete against Asian metal trading hubs.

See http://www.mining.com/2011/12/06/lme-upgrades-electronic-platform-as-trading-volumes-surge/

Saami communities protest in London over mining

Richard — Tue, 06 Dec 2011 12:26:14 +0000

This morning representatives of several Indigenous Saami communities from Scandinavia protested outside the ‘Mines and Money’ London conference in order to raise awareness over the destruction of their traditional lands by mining.

Saami areas in Sweden are currently experiencing an explosion in mining developments by both Scandinavian and foreign companies. Ironically, while these companies commonly market themselves to investors based on principles of Corporate Social Responsibility, many of them risk breaching human rights conventions, because they all too often fail to see the connection between the impacts of their activities and Saami rights.

The Saami Council, the National Swedish Saami Association, and individual Saami communities are in dialogue with several mining companies and their investors, including Scandinavian Resources and Beowulf Mining, to name just two. “These companies claim to respect the rights of Indigenous peoples, yet they seem to have no problem with performing intrusive exploration and mining activities in sensitive Saami reindeer herding areas”, says Mattias Åhrén, Head of Human Rights, at the Saami Council.

Many Saami communities are at a crisis point. “Reindeer herding, and our Saami culture, simply cannot tolerate any more industrial activities. We have very little lands left and the last of them are being taken by private mining companies”, says Mats Berg, on behalf of the Saami delegation to London, representing the Saami communities of Girjas, Laevas, Sirges and Lainiovuoma.

Saami organisations are also critical of Sweden’s failure to protect Saami rights. “Sweden’s mining legislation does not provide any protection of Saami rights and the Swedish government has been critiqued numerous times by the UN for its failure to take action”, says Jörgen Jonsson, Chairman of the National Swedish Saami Association.

See Saami media release at http://saamiresources.org/2011/12/06/saami-communities-protest-in-london-over-mining/

Coal study names top 20 ‘climate killer’ banks

Richard — Sat, 03 Dec 2011 09:23:46 +0000

Barclays, the Royal Bank of Scotland and HSBC are among the top banks that have lent billions of euros to the coal sector – despite their much-vaunted environmental credentials, a new investigation has found.

See http://www.guardian.co.uk/environment/2011/nov/30/coal-banks.

Report available at http://www.banktrack.org/download/bankrolling_climate_change/climatekillerbanks_final_0.pdf.

New reports question World Bank’s coal investments

Richard — Sat, 03 Dec 2011 09:22:08 +0000

As the climate talks in South Africa approached, the World Bank continued to be overshadowed by past and prospective loans for fossil-fuel power plants.

See
http://www.minesandcommunities.org/article.php?a=11332&l=1

Glencore puts up $635 million to build world’s largest cobalt mine

Richard — Tue, 15 Nov 2011 17:10:56 +0000

Katanga Mining announced on Friday it has secured $635.5 million in new loan facilities from parent Glencore International to fund the expansion of its Democratic Republic of Congo copper-cobalt mine. Katanga says with the expansion the DRC complex it could become Africa’s largest producer of copper and the world’s number one cobalt mine.

See http://www.mining.com/2011/11/11/katanga-gets-635-million-to-build-worlds-largest-cobalt-mine/.

Evraz gets support for full London listing

Richard — Tue, 15 Nov 2011 17:05:53 +0000

Russian steelmaker Evraz has received acceptances for its proposed share swap and relocation to Britain from just over 98 percent of shareholders, allowing it to proceed with a premium London listing and potential entry to the FTSE 100. The company, part owned by the tycoon Roman Abramovich, began trading its London-listed shares on Monday.

See http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=138995&sn=Detail&pid=92730.

Indonesia ‘s Bakrie to sell 23.8% Bumi stake for $1 bn

Richard — Thu, 10 Nov 2011 16:13:28 +0000

Indonesia ‘s Bakrie Group is selling a 23.8 percent stake in London-listed Bumi Plc, its venture with financier Nat Rothschild, to coal miner PT Borneo Lumbung Energi in a $1 billion deal to avoid a loan default. The deal with Borneo, which is backed by Indonesian businessman Samin Tan, would help Bakrie pay off the bulk of a $1.35 billion loan and extricate itself from a debt crunch that has weighed on the share price of one of the world’s largest coal exporters, Bumi Resources , following the 2008 financial crisis. The agreement between the Bakrie Group, run by one of Indonesia ‘s most powerful families, and Tan marks the second time in three years that the Bakrie family has had to scramble together a transaction to ease its debt. The deal was sealed after Swiss-based Glencore, the world’s largest diversified commodity trader, dropped out of talks on refinancing the Bakrie loan.

See http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=138695&sn=Detail.

Anglo American may pull investments, jobs

Richard — Thu, 10 Nov 2011 16:01:31 +0000

In a move intended to pressure the Australian federal government to revise the proposed carbon tax, global miner Anglo American has threatened to withhold over $15 billion in coal mining investments and curtail 3,200 new jobs in Australia, according to a report by the Australian Financial Review.

See http://www.businessspectator.com.au/bs.nsf/Article/Anglo-American-may-pull-investments-jobs-pd20111101-N7Q4J?opendocument&src=rss.

Rothschild ‘Confident’ in Bakrie Loan Talks

Richard — Wed, 26 Oct 2011 12:35:06 +0000

Nathaniel Rothschild, co-chairman of miner Bumi Plc, says he has “total confidence” that Indonesia’s Bakrie family, Bumi’s largest shareholders, would succeed with plans to refinance a $1.35 billion (855.73 million pound) loan, but said talks with potential partners did not include marketing rights for Bumi’s coal. The Bakries are in the final stages of talks to refinance a $1.35 billion loan obtained in March to consolidate their debt, after mandatory repayment was triggered by a sharp drop in Bumi’s London shares. The loan is backed by the Bakrie family’s 47 percent stake in London-listed Bumi Plc.

See http://www.thejakartaglobe.com/home/rothschild-confident-in-bakrie-loan-talks/472187.

Glencore nears $800-$900 mln loan for Indonesia’s Bakrie

Richard — Wed, 26 Oct 2011 12:34:05 +0000

London-listed Glencore is close to lending $800-$900 million to Indonesia’s Bakrie coal mining group to help it repay its $1.35 billion debt and stave off a potential default.

See http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=137521&sn=Detail&pid=92730.

Dutch masters of tax avoidance

Richard — Wed, 26 Oct 2011 12:31:01 +0000

A recent report by Publish What You Pay singled out Norway as a favoured European “secrecy jurisdiction” for extractive industry corporates, but the Netherlands isn’t far behind. Schiphol airport is home to AA Holdings Argentina BV, part of Anglo American plc, while Lelystad airport is said to be “clearly the natural home of Rio Tinto’s Mali Diamond Exploration BV” (though this is “now believed” to be dormant).

See http://www.guardian.co.uk/business/2011/oct/19/tax-avoidance-in-netherlands-becomes-focus-of-campaigners.

Essar Weighs $750M Infrastructure IPO in London

Richard — Sat, 08 Oct 2011 10:05:54 +0000

Essar Group, the Indian company whose businesses range from shipping to power, is considering listing infrastructure assets in London to raise about $750 million, three people with knowledge of the matter said.

JPMorgan Chase & Co. (JPM) and Credit Suisse Group AG (CSGN) are working with Essar on the initial public offering, which may take place as early as next year, the people said, declining to be named because the process is private.

The listing may include ports and other infrastructure assets, one person said. The deal may mark the biggest overseas IPO by an Indian company since May 2010, when another Essar unit, Essar Energy Plc (ESSR), raised 1.27 billion pounds ($2 billion).

The value of overseas stock sales by Indian companies fell to $274 million this year from $2.2 billion for all of 2010, as Europe’s debt crisis caused a global stock selloff.

See http://www.bloomberg.com/news/2011-10-04/essar-weighs-750m-infrastructure-ipo-in-london.html.