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Vale, Glencore Xstrata talks raise speculation – (CBC News Sudbury – October 16, 2013)

http://www.cbc.ca/sudbury/

Mining giants Vale and Glencore Xstrata are in early talks to combine their mining efforts in Sudbury, according to a report that came out late last week. Both companies have declined to comment, and the news has some worried about what this could mean for Sudbury.

Whatever ends up happening, it’s probably not going to be a merger says a professor of business strategy at Laurentian. Jean Charles Cachon said the companies are too big and too international to merge with each other.

“They have separate systems. A merger of the two firms is very unlikely due to anti-trust regulations in North America and Europe,” he said — but added there are other more plausible outcomes. One is the creation of a third company that will exist just to handle Sudbury mines.

The other is a formal agreement in which the companies will pool some resources, but will remain autonomous. A former executive with Falconbridge said whatever happens, this kind of deal will probably mean some workers are made redundant — particularly as nickel prices around the world are in a slump, and Chinese demand lags.

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Sudbury [mining Vale Glencore] merger likely: Analysts – by Carol Mulligan (Sudbury Star – October 15, 2013)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Glencore Xstrata and Vale could and likely will one day merge their Sudbury operations. If and when that happens, it will be a marriage of convenience, not a “Rock Hudson- Doris Day romance,” says a nickel analyst.

It would be complicated to join the companies’ operations, but it may be necessary to compete against record-high production of nickel pig iron in China, says Terry Orstlan. He wasn’t surprised last week when Reuters broke the news Vale and Glencore Xstrata were in talks to explore combining their Sudbury operations.

Orstlan has been advising that for years. “Talks, that is exactly what they are, talks,” said Ortslan of TSO & Associates in Montreal. “Let’s have coffee and talk. Let’s have tea and talk. Let’s go out and talk,” he said. It would have made sense 30 years ago for the nickel giants to join forces, said Ortslan.

When Vale was owned by Inco and Glencore Xstrata by Falconbridge, their vastly differ-e nt cultures and powerful unions made a merger unthinkable.

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Glencore, Vale discuss merger of nickel operations in Ontario – by Eric Reguly and Marta Lillo (Globe and Mail – October 12, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Glencore Xstrata PLC and Vale SA have convened “exploratory” talks aimed at combining their respective nickel operations in Sudbury, Ont., in a move aimed at cutting costs, sources close to Glencore said.

Declining nickel prices have forced the companies to consider the move, the source said. Prices for nickel traded on the London Metal Exchange have fallen by more than a quarter from this year’s high of nearly $19,000 (U.S.) a tonne in February to less than $14,000 a tonne now.

Vale has controlled its share of nickel operations in the Sudbury Basin, several hundred kilometres north of Toronto, since the Brazilian company bought Inco Ltd. for $20.3-billion in 2006. Xstrata, which was bought by Glencore earlier this year, paid $18.2-billion for Falconbridge Ltd. the same year, in order to bolster nickel holdings as the metal was hitting record highs.

Vale’s nickel operations generated $983-million out of a total $11.3-billion in operating revenue in the three months ended June 30, according to the company’s most recent earnings report. The nickel revenue fell from $1.08-billion in the last quarter of 2012.

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Exclusive: Glencore, Vale in talks over Canadian nickel tie-up – sources – by Clara Ferreira-Marques and Euan Rocha (Rueters U.S. – October 11, 2013)

http://www.reuters.com/

LONDON/TORONTO – (Reuters) – Glencore Xstrata (GLEN.L) and Vale (VALE5.SA) have revived talks over a potential combination of the mining groups’ nickel operations in Canada’s Sudbury basin, in an effort to cut costs as prices for the metal languish, sources familiar with the situation said.

The discussions are still at an early stage but have revived hopes of a long-debated Sudbury tie-up, with the companies considering a number of options for their mining and processing operations in the area, the sources said.

Depending on the details of a potential deal, several of the sources said a tie-up could mean substantial savings for both mining heavyweights, if all or part of their mining, milling and even smelting operations are brought together.

In 2006, a proposed merger of Falconbridge and Inco – the then-players in Sudbury, but later taken over by Xstrata and Brazil’s Vale (VALE5.SA), respectively – expected annual synergies and cost savings of about $550 million.

The sources said talks restarted after Glencore completed its acquisition of Xstrata earlier this year. Discussions have progressed against the backdrop of a nickel price that has fallen by around a fifth since January to around four-year lows, weighed down by over-supply.

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Two of Canada’s more isolated mines continue to impress: Raglan and Eleonore – by Russell Noble (Canadian Mining Journal – October 2013)

Russell Noble is the editor for the Canadian Mining Journal, Canada’s first mining publication.

Nunavik and Quebec’s Raglan Mine and Éléonore, operated by Glencore and Goldcorp respectively, are two of the larger and more successful mining operations in the country, but their locations are about as unfamiliar to most people as the northern landscapes where they are located.

In other words, most people don’t have a clue where they are on the map, let alone what the surroundings are like that far north. Both mines are indeed, remote and somewhat isolated, but when it comes to mineral deposits, Raglan Mine and Éléonore are at the forefront and envy of the mining community across the country.

In fact, the world is also keeping watch as Glencore and Goldcorp continue to move towards making their Canadian operations two of the more productive mines on the globe.

Starting at the farthest point north at the Raglan Mine, which is located in Nunavik approximately 1800 km northwest of Montreal or, about the same as Cuba is to the south, is near Deception Bay on the Hudson Straight and is linked by all-weather roads to an airstrip at Donaldson.

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NEWS RELEASE: Timmins Kidd Operations’ outstanding safety performance recognized — again

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

Ontario Mining Association member Kidd Operations, a Glencore Company, has been presented with the President’s Award for being the top safety performer by Workplace Safety North (WSN). The honour was bestowed at WSN’s inaugural workplace excellence awards and this honour recognizes continuous improvement in occupational health and safety.

“Everyone is really proud of the win,” said Tom Semadeni, General Manager for Kidd Operations, a Glencore Company. “It is really icing on the cake because earlier this year, we won the John T. Ryan award for the best safety performance for a Canadian metal mine. So it is further reinforcement that we’re on the right track.”

“I think it is great to promote success,” added Mr. Semadeni. “A lot of times businesses have a tendency to notice and follow up on things when they are going badly, or wrong, but you need to recognize success. We need to do that internally for our own business but also out in the public. Just having an award like this demonstrates to the public that there is a good commitment to improving.”

In May of 2013, the Kidd Operations in Timmins was presented with the John T. Ryan national safety trophy in the metal mine category for having the best reportable injury rate of all metal mines in Canada.

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The X factor – how well timed is Davis’ return to mining? – by Lawrence Williams (Mineweb.com – October 3, 2013)

http://www.mineweb.com/

Former Xstrata CEO, Mick Davis, has raised $1 billion towards what appears to be his aim of creating a new major diversified mining company from scratch.

LONDON (MINEWEB) – Given the low commodity prices currently facing the sector, Mick Davis, former highly successful dealmaking CEO of Xstrata, could well have picked the perfect time to start a new company.

On Monday, Davis announced his return and, importantly, that he has already raised $1 billion with which he hopes to become a major player in the diversified mining sector – in short birthing another Xstrata (he has even named his new company X2 Resources). Buying when prices are depressed would seem to be the ideal time for a well-funded entity to enter the market, provided prices don’t fall too much further.

But even if commodity prices do fall further, the downside is probably relatively low given the extent of the fall to date, which has left companies really focusing on savings and cost cutting which should leave them in a far better position to weather any continuing storm. And in setting up a new major mining company you don’t invest for the short term anyway, but look for long term growth – and the depths of a market downturn are obviously the best time to do this.

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Ex-Xstrata CEO Davis Raises $1 Billion From Noble, TPG – by Firat Kayakiran (Bloomberg News – September 30, 2013)

http://www.bloomberg.com/

Mick Davis, former chief executive officer of Xstrata Plc, raised $1 billion from Noble Group (NOBL) and private-equity fund TPG to start a resources company.

Noble, Asia’s largest raw-materials trader, and TPG agreed to each invest $500 million in the new company X2 Resources, according to a statement today from X2 Partners, founded by Davis and former Xstrata Chief Financial Officer Trevor Reid.

X2, also in talks with other potential investors, will use the funds to start a diversified mining and metals group. Davis, 55, and Reid, 52, were part of the team that set up Xstrata, a company that grew 100-fold to a market value of about $50 billion after 10 years of mergers, acquisitions and expansion.

“This is a great time to acquire assets in the mining sector,” said John Meyer, an analyst at London-based SP Angel Corporate Finance LLP. “The majors continue to offer sub-scale assets, including some better quality but smaller operations as they refocus on their larger cash generators.

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Inuit employment in Nunavik mines still weak – by Sarah Rogers (Nunatsiaq-on-line.ca – September 27, 2013)

http://www.nunatsiaqonline.ca/

Only 175 Inuit work at the Raglan nickel mine

Nunavik Inuit still make up only 13 per cent of the work force at the region’s only fully operational mine. At the Raglan nickel mine complex, in operation since 1998, only 175 of 1,292 workers are Inuit — well under the 20 per cent initially targeted for the region.

And those numbers haven’t changed much since 2012. “The data for Xstrata mine site is very similar to last year,” said Margaret Gauvin, director of the Kativik Regional Government’s sustainable employment department, during a regional meeting earlier this morning.

“Contract companies have a harder time getting Inuit workers, and that brings the percentage down.” A number of companies like Katinniq Transport, Iglu Construction and Nunavik Construction are contracted to work at the Xstrata site. But increasing Inuit employment in the mining sector remains a priority for the KRG, which wants to encourage students to stay in school or return to school in areas related to mining, Gauvin said.

More than $10 million over the next two years is targeted at mine training in Nunavik — to respond to a growing number of mining projects in development and to address fears among Nunavimmiut that they are being left out of the process.

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Glencore to vaunt successes of $46 billion Xstrata deal one year on – by Clara Ferreira-Marques (Reuters India – September 6, 2013)

http://in.reuters.com/

LONDON (Reuters) – Almost a year after winning the battle for Xstrata, Glencore (GLEN.L) is set to show investors evidence of early successes, with costs to come down more than targeted, asset sales in hand and key staff retained.

Glencore Xstrata, which has yet to shed a reputation for opacity, will bring its entire management team to London on Tuesday to outline progress after four months in control of Xstrata, following the $46 billion takeover that became the mining sector’s largest to date.

In its first major presentation on the deal since it was completed, analysts expect the trading and mining conglomerate to impress with tougher cost cutting targets. These are likely to include a significant improvement on the $500 million per year synergy goal provided at the time of the acquisition.

That covered only marketing benefits – not costs to be squeezed out of Xstrata’s mines – and Glencore has already said it expects a final number “materially in excess” of that. Analysts at RBC Capital Markets said this week they expected marketing synergies of $600 million – as more Xstrata products go through the Glencore trading machine.

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Rio to BHP Invest $244 Billion as Glasenberg Warns: Commodities – by Elisabeth Behrmann & Jesse Riseborough (Bloomberg News – September 4, 2013)

http://www.bloomberg.com/

The biggest mining companies are set to spend about $244 billion on expansions to 2015, slow to heed Glencore Xstrata Plc Chief Executive Officer Ivan Glasenberg’s call for austerity to end an oversupply in mineral markets.

That’s just a 2.4 percent drop from the $250 billion in capital expenditures made in the previous three-year period, according to forecasts compiled by Bloomberg for the 20 largest mining companies by market value. Glasenberg joined a chorus of investors pushing for spending cuts after the companies had to make $60 billion of writedowns over 18 months.

From BHP Billiton Ltd. (BHP), the world’s biggest, to Rio Tinto Group, industry members are telling investors they’ve become more optimistic for demand growth in the U.S. and China, the biggest minerals buyer, and that future capex will be more disciplined. The Bloomberg World Mining index has jumped about 16 percent from a four-year low in July.

“Institutional shareholders still feel that management need to prove to them that over the long term the discipline associated with capital allocation is there,” Catherine Raw, co-manager of BlackRock Inc. (BLK)’s $7 billion World Mining Fund, said yesterday in a phone interview from London. “They could always do more. Shareholders are not releasing the pressure.”

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Stephen Harper Arctic tour: Big hopes, bigger challenges – by Tonda MacCharles (Toronto Star – August 24, 2013)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Prime Minister Stephen Harper has a strong vision for Canada’s North, but what stands out in his latest trip to the region is the immense challenge of making it a reality.

RAGLAN MINE, QUE. — It was a long way to come for what seems like comparatively little. Prime Minister Stephen Harper arrived in Inuit territory Friday in northern Quebec, 400 kilometres above the tree line, to visit a nickel mine and talk about clean energy.

Or at least the exciting possibility of it. Last year, the Conservative government injected $720,000 into a feasibility test that one day may help resolve the problem of shipping diesel to the North to power many Arctic communities and lower costs of massive mining developments trying to operate far from hydro dams and other sources of energy.

Yet like so much of what the Conservative government leader has tried to do on his eighth trip to the Arctic, what stands out is the immense challenge of it all. Harper has defended his record and called his investments in the North “groundbreaking,” though he has not quite lived up to his early boastful promises of armed icebreakers and brand-new deepwater sea ports for the region.

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No excuse for Glencore Xstrata writedown – by Paul Murphy (Financial Times – August 23, 2013)

http://www.ft.com/home/us

Argument claiming ‘accounting construct’ fails to convince

When large companies announce big asset impairment charges after a controversial takeover, as Glencore Xstrata did this week, two things happen.

First, the financial press bang the multibillion-dollar figure into a headline or two; then, almost immediately, ranks of investment banking analysts step up to explain, in condescending tones, that this is just an accounting exercise and really doesn’t matter since no cash was involved.

If the acquisition under debate involved the predator paying solely or largely in shares, as Glencore did in acquiring Xstrata, then those ignorant newspaper headlines are treated with complete disdain.

Step forward, then, Dominic O’Kane of JPMorgan Cazenove in London. As he told his clients on Wednesday: “$10.1bn of impairments/significant expenses, including a total of $8.8bn on XTA, were seized on by the press and sections of the market as evidence of the latest and perhaps most egregious example of capital misallocation in a sector with a poor recent track record. We would argue this misrepresents the true situation.”

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COLUMN-Diversified miners’ short-term challenges at odds with long-term views – by Clyde Russell (Reuters U.S. – August 21, 2013)

http://www.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Aug 21 (Reuters) – The world’s top diversified mining companies are starting to resemble choir boys singing the same hymn about cutting projects and costs.

The recent financial results of BHP Billiton, Rio Tinto, Glencore Xstrata and Anglo American were remarkably similar, as were the accompanying comments by their chief executives.

All reported lower earnings, but not dramatically so, which may be a bit of a surprise given weaker commodity prices in the first half of 2013 and widespread concern of worse conditions to come.

And all four also repeated the mantra of cost cutting and slashing capital expenditure, while at the same time trying to give equity investors more of what they want in the form of dividends and higher share prices.

The question is whether this unanimity is the right path or whether the diversified miners are going too far in a bid to boost share prices.

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Glencore takes $7.7-billion writedown as mining industry woes continue – by Eric Reguly (Globe and Mail – August 21, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

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.

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