Glencore’s decision to invest up to $US956 million to greatly increase its shareholding in a Peruvian zinc miner may have been motivated by an insight it gained during its dark days in 2015.
Overnight Glencore announced it had reached agreement with shareholders of Volcan Compania Minera, one of the world’s largest producers of zinc, lead and silver, to acquire 27 per cent of the group’s class A shares for $US531 million.
It will make an offer to other Volcan shareholders for up to 48 per cent of the class A shares, which would lift the outlay closer to $US1 billion. Depending on the level of acceptances, Glencore would end up with between 48 per cent and 66 per cent of the class A shares, which have voting rights. It had a pre-existing holding of about 18 per cent of those shares.
The bid comes against a backdrop of soaring zinc prices. The price of zinc, used to galvanise steel, has risen about 35 per cent this year to decade-high levels and has more than doubled since its low point in January 2016 coincided with a Glencore financial crisis. The two events appear to be related.
It was the crashing of commodity prices in the last quarter of 2015 that saw Glencore’s share price slashed almost 30 per cent in a day (and which caused Rio Tinto and BHP Billiton to abandon their progressive dividend policies).