Glencore boss Ivan Glasenberg is said to be pretty passionate about cycling and its Grand Tours. So he would be well aware of the term “gruppetto”. It is the pack of riders that sits at the back of mountain stages with that aim of just finishing the day inside the time limit. They are sprinters looking just to survive until conditions better suit their skills.
Consolidation before and during the long mining boom crafted five diversified global miners: BHP Billiton, Rio Tinto, Vale, Glencore and Anglo American. By the end of a sectoral recession of rare severity, even in this most cyclical of industries, this group of five could be permanently trimmed to two giants and the rest.
The question right now is whether or not Glencore has the wherewithal or the will to join BHP and Rio Tinto in their break away from big mining’s rapidly withering peloton.
To be clear there, Anglo American is restructuring itself into a much smaller mining animal under the crushing pressure of falling income and rising debt.
Anglo’s task is survival. And Vale, for all the unfailing quality of its core iron ore business, has recently confirmed a slate of asset disposal in the hope of raising $US5 billion ($7 billion) to lighten the debt load accumulated through a decade of international growth of which logic is increasingly being stress tested by metals markets. A generation of growth is under threat.
On Tuesday, Glencore joined Anglo and Vale in declaring a firm target for asset sales that will be made in the name of debt reduction and balance sheet security. Glasenberg seasoned his owners to expect assets sales of $US4.5 billion by June 30. He promised that net debt would be reduced from $US25.7 billion to nearer $US18 billion by the December 30. Doubtless he will deliver on both targets.
THE SHRINKING THREE
All told, our shrinking three – Anglo, Vale and Glencore – have flagged something like $US14.5 billion worth of divestments over the past couple of weeks alone. Given the pain abroad in China Inc and the obvious defensiveness of the M&A radars at BHP and Rio, it is very hard to see where the natural acquirers of those assets might be.
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