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ROME — The falling fortunes of the global mining industry were again put on display Tuesday morning when Glencore Xstrata, the Swiss mining company and commodities trader that owns Canada’s Falconbridge Ltd. and Viterra Inc., wrote down the value of its mining assets by $7.7-billion (U.S.).
The writedown came three months after the completion of Glencore’s all-share purchase of Xstrata for $29-billion (U.S.), a deal that created a mining and trading giant capable of competing with industry heavyweights BHP Billiton, Rio Tinto, Vale and Anglo American.
Tuesday’s results, for the six months to the end of June, were the first for the combined group.
In deciding to write down the purchase price on Xstrata, Glencore took a more conservative approach to valuing early-stage and greenfield projects. It also took into account a lower commodity price outlook since the deal closed on May 2.
“We wanted to value them [Xstrata’s greenfield projects] a little bit more conservatively, noting that Glencore has no intention to develop them in the near future,” Glencore Xstrata chief excutive Ivan Glasenberg told journalists on a conference call.
The group reported an $8.9-billion loss. The figure includes $8.8-billion of impairment charges and revaluations related to the Xstrata purchase (Glencore had owned 34 per cent of Xstrata before the takeover).
Adjusted pro-forma earnings before interest, tax, depreciation and amortization (EBITDA) were $6-billion, somewhat ahead of analysts’ forecasts, compared to $6.6-billion a year earlier.
Pro-forma net income, before the impairment charges and other one-off items, was $2-billion, a fall of 39 per cent. In early morning trading in London, Glencore shares were down more than 3 per cent, taking the one-year decline to 17.4 per cent.
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