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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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UPDATE 2-Glencore seeks fresh start with $7.7 bln hit to Xstrata mines – by Clara Ferreira-Marques (Reuters India – August 20, 2013)

http://in.reuters.com/

LONDON, Aug 20 (Reuters) – Glencore Xstrata took a $7.7 billion hit on Xstrata’s mining assets on Tuesday, drastically reducing the value of early-stage projects after falling prices dragged down first-half profit.

The mining industry has been pummelled by billions of dollars in writedowns since the start of the year, with cooling prices and demand prospects denting the value of mining projects.

Glencore had been expected to follow suit once it completed the acquisition of Xstrata, and in its first post-takeover results on Tuesday it announced the figure alongside a 9 percent drop in core profit.

In absorbing the impact of a drop in commodity prices during the time it took to close the marathon takeover, Glencore wiped out all the goodwill value it had provisionally allocated to Xstrata’s mines at the time of the merger.

“We just had to value the business with a blank sheet of paper,” Chief Financial Officer Steven Kalmin said.

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Glencore expected to writedown billions – by Reuters/Star Staff (Sudbury Star – August 20, 2013)

http://www.thesudburystar.com/

Glencore Xstrata is expected to write down the value of assets inherited from Xstrata by as much as $7 billion when it reports first-half earnings on Tuesday — the first full set of results since the takeover that created the mining giant in May.

Glencore’s management, no strangers to Xstrata given the trader’s 34% stake in the miner, have been reviewing Xstrata’s assets as owners over the past three months and they had been expected to book a hit alongside maiden results.

Analysts and an industry source said the group writedown, mostly on the value of former Xstrata assets, would likely amount to $5 billion to $7 billion.

Nickel assets — including Xstrata’s $5 billion Koniambo operation in New Caledonia — are likely to take the brunt of the pain as nickel prices languish at less than a third of their 2007 highs and supply continues to exceed demand.

Glencore’s local operations, now officially known as the Sudbury Integrated Nickel Operations, include Fraser Mine and Nickel Rim South Mine, Strathcona Mill and the Sudbury smelter. Nickel and copper are its main products.

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Glencore cuts budget for $5.9 billion Philippine project – by Erik dela Cruz (Reuters U.S. – August 13, 2013)

http://www.reuters.com/

MANILA – (Reuters) – Glencore Xstrata (GLEN.L) will cut up to 920 jobs and slash spending at its $5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a record-breaking takeover.

Tampakan, a challenging project in a restive region of the southern Philippines, has not been officially put up for sale.

But, like many of the big-ticket mining projects previously held by Xstrata, it is under review by its new owners and is one of four projects Glencore has said it could sell to appease Chinese regulators’ concerns over its dominance in copper – if it is unable to sell the Las Bambas mine in Peru.

Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said on Tuesday it had revised its work plan as the project still faced “substantial development challenges” – including a ban on open-pit mining in South Cotabato province.

That means it is unlikely to hit an already revised 2019 target for first production. “No investment decision can be made until the current project challenges are resolved and necessary approvals obtained,” Sagittarius spokesman John Arnaldo said.

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Glencore, Vale should join forces, analyst says (CBC News Sudbury – August 9, 2013)

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

For an indepth radio report, click here: http://www.cbc.ca/video/news/audioplayer.html?clipid=2400108515

Merging the two mining giants will help reduce redundancies, particulary in Sudbury operations

In a search for cost cutting measures, one mining analyst says a merger between Vale and Glencore should be an option that’s considered. Brazilian mining company Vale released its second quarter results Thursday, which showed an 84 per cent drop in profits.

Base metal prices are also down across the board. Terence Ortslan, managing director with TSO and Associates, an independent mining, metals and fertilizer research firm, said combining operations could help reduce redundancies.

“I think the question is, is it going to be out of necessity, or is it going to be creative in doing things? I think the assets have to be put in a pool to see who can do better and how it’s going to be streamlined in terms of a critical path.”

Glencore recently took over Xstrata — a firm that took over Sudbury’s Falconbridge Ltd. in 2006. Sudbury residents have, for decades, heard and talked about mergers between Falconbridge and Inco Ltd., the company now known as Vale.

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Xstrata-Glencore merger prompts name change (CBC News Sudbury – August 6, 2013)

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

Sudbury’s Xstrata Nickel to become Sudbury Integrated Nickel Operations

One of Sudbury’s major mining companies is going through another rebranding exercise. Xstrata Nickel operations in Sudbury — formerly known as Falconbridge Ltd. before it was bought by Xstrata in 2006— will now go by the name Sudbury Integrated Nickel Operations, or Sudbury I-N-O.

The name change comes as a result of Xstrata’s merger with another Swiss mining company — Glencore. The vice president of Sudbury I-N-O said the takeover means more independence for local operations.

“The interesting thing about Glencore is that it really relies on its local management to develop the business opportunities, [and that’s reflected] in the naming nomenclature,” Marc Boissonneault said. The company’s short-term plans include revitalizing its Fraser Operations near Onaping and to work on a joint project with Vale.

Future rebranding will continue to take place for the next few months, Boissonneault added. “You’ll see our signs change in coming weeks, those are the more visible ones. Other things will just take weeks and, in some cases, maybe a couple of months.”

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Falling profits for Vale – by Reuters and Star Staff (August 6, 2013)

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

Battered by falling iron ore and nickel prices, Vale on Wednesday is expected to report a 30% drop in second-quarter profit to $1.85 billion US from a year earlier, analysts are predicting. If so, it would be Vale’s eighth consecutive quarterly profit fall, according to the average preliminary estimates of seven analysts surveyed by Reuters.

Most of the decline is due to a 12% drop in average iron ore prices and a 38% decline in nickel prices, more than offset-t ing increases in volumes shipped by the world’s No. 1 iron ore miner and No. 2 nickel producer.

Its shares have been the worst performer among the world’s big five mining companies, down 27% this year, despite a rally from nearly four-year lows in July. Of the big five, Rio Tinto, Brazil’s Vale, Glencore Xstrata and Anglo American are expected to report sharp drops in profit.

They have been slammed by weaker copper, iron ore and coal prices as they struggle to sell off assets. Anglo — the first of the diversified majors to publish results — said last week underlying operating profit fell in the six months to $3.3 billion, ahead of a consensus estimate of $3.12 billion.

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Tanzania: Kabanga Nickel Project – Light At the End of Long Tunnel – by Meddy Mulisa (All Africa.com – August 2, 2013)

http://allafrica.com/

Bukoba — THE much-awaited Kabanga Nickel Project will soon start its operations, bringing fresh hopes to many in terms of labour and employment, according to President Jakaya Kikwete during his recent tour of Kagera Region.

Kabanga Nickel is an active mine exploration project 130 kms south west of Lake Victoria in Ngara District, Kagera Region. The project is a joint venture between Barrick Gold and Xstrata Nickel.

The Minister for Energy and Minerals, Prof Sospeter Muhongo said the government would buy shares which would later be sold to wananchi. He also appealed to Tanzanians to grab the opportunity for their wellbeing. He said a total of 80 megawatts would be produced at Rusumo Falls to generate power at Kabanga Nickel.

“This is a joint project between three countries -Tanzania, Burundi and Rwanda with each country taking 27 megawatts. Kabanga’s 58 million tonne nickel resource is regarded as one of the best undeveloped greenfield nickel sulphide deposits in the world. Since 2005, there has been continued progress made in the development of the Kabanga Nickel Project with a significant investment to date of over US$205 million in drilling and evaluation studies.

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Donkin mine project receives environmental approval – (Cape Breton Post – July 17, 2013)

http://www.capebretonpost.com/

DONKIN — Although residents of Donkin and surrounding areas are happy another aspect of the Donkin mine project has moved forward — the transportation proposal continues to be controversial.

Morien Resources Corp. of Dartmouth announced in a press release that Peter Kent has signed off on the environmental assessment of the Donkin mine project proposed by Xstrata Coal Donkin Management Ltd. Kent’s tenure as the federal environment minister ended this week, but the Donkin project received his approval after his review of a Canadian Environmental Assessment Agency report.

Hugh Kennedy, chair of the Donkin Xstrata community liaison committee, said the approval is good news which will move the project ahead and allow those involved to acquire permits. He believes this approval will help with the sale of the mine. “A company ready to invest hundreds of millions of dollars … into this mine is not going to do that unless they know it has environmental approval.” The province must also approve the environment assessment, explained Kennedy.

“I can’t see any roadblocks as the provincial and federal authorities have been working closely and sharing in the process. “Hopefully now with this out of the way Xstrata will continue with that work, to get approval from the provincial government on how to repair the tunnels and put a plan forward, get it approved and seek a permit for the mine.”

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NEWS RELEASE: Glencore announces acquisition of 31,756,979 common shares of PolyMet and repayment of Bridge Loan

BAAR, Switzerland, July 5, 2013 /CNW/ – Glencore Xstrata plc announces that its indirect, wholly-owned subsidiary, Glencore AG (“Glencore”) has acquired 31,756,979 common shares of PolyMet Mining Corp. (“PolyMet”) at US$0.66 per common share pursuant to its basic subscription privilege and additional subscription privilege under PolyMet’s previously announced rights offering (“Rights Offering”), representing approximately 11.6% of PolyMet’s issued and outstanding common shares following the Rights Offering.

Following completion of the Rights Offering, Glencore holds 78,724,821 common shares representing approximately 28.6% of PolyMet’s issued and outstanding common shares. The Rights Offering triggered the customary anti-dilution provisions of PolyMet’s convertible debenture exchange warrant and purchase warrants held by Glencore. The numbers of common shares issuable to Glencore under the convertible debenture exchange warrant and purchase warrants have been adjusted to 24,083,366 and 6,458,001, respectively, which, if exercised, would result in Glencore holding 109,266,188 common shares representing approximately 35.8% of the outstanding common shares of PolyMet on a partially diluted basis.

In connection with the closing of the Rights Offering, PolyMet repaid the principal amount and all outstanding accrued and unpaid interest thereon of the previously announced US$20 million loan (“Bridge Loan”) advanced by Glencore to PolyMet on April 11, 2013.

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Fugitive financier Marc Rich dies – by John Aglionby and James Shotter (Financial Times – June 26, 2013)

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

Marc Rich, the colourful and controversial commodities trader and founder of Glencore who fled the US to avoid federal indictments, has died in Switzerland aged 78.

“Marc Rich died in Lucerne in a hospital as a result of a brain stroke,” said Christian König of the Marc Rich Group in a statement. He is expected to be buried in Tel Aviv on Thursday.

Ivan Glasenberg, the chief executive of Glencore Xstrata, said: “We are saddened to hear of the death of Marc. He was a friend and one of the great pioneers of the commodities trading industry, founding the company that became Glencore. Our deepest sympathies and condolences are with his family at this time.”

Rich, born in Antwerp, Belgium, was an oil trader who fled to Switzerland in 1983 hours before being indicted on more than 50 charges of trading with Iran during an embargo, wire fraud, racketeering and evading more than $48m in income taxes – at the time the largest tax evasion case in US history.

He remained one of the US’s most wanted fugitives until Bill Clinton pardoned him on his last day as US president in January 2001. Mr Clinton said such cases should be settled in civil not criminal courts and also cited clemency pleas from Israeli officials, including Ehud Barak, the then prime minister.

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As Glencore grows, investors ask about life after Ivan – by By Clara Ferreira-Marques and Sinead Cruise (Reuters U.S. – June 20, 2013)

http://www.reuters.com/

LONDON – (Reuters) – Glencore Xstrata (GLEN.L) boss Ivan Glasenberg, a former coal trader who has been at the helm for over a decade, is known for his pre-dawn runs, cut-throat competitiveness and a grueling travel schedule that shows no signs of slowing.

Yet while no one expects the imminent departure of Glencore’s top shareholder – at 56, not far above the average CEO age – the takeover of $46 billion miner Xstrata has prompted investor questions over how a company so closely identified with a boss will manage his succession.

This includes not just the process of earmarking future leaders, but that of rebuilding the board and bringing in a new chairman willing to act as a counterweight to both Glasenberg and a culture born of almost four decades as a private company.

“On the one hand you don’t want to stifle the entrepreneurialism, aggression, dynamism that people associate with Glencore versus the style of the other mining companies,” said analyst Paul Gait at Sanford Bernstein.

“But on the other hand, you do want to put into place the processes and protocols that you associate with a bluechip company,” he added.

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Sudbury mourns fallen workers – by Carol Mulligan (Sudbury Star -June 21, 2013)

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

There is only one correct answer to the question of whether workers should fight for improved workplace safety or “just remember” those who were killed, injured or got sick on the job, says the president of Mine Mill Local 598/CAW.

As long as one worker in the world is killed every 15 seconds, the union representing four men who died in a rockburst at Falconbridge Mine in 1984 will do more than just honour those miners’ memories.

It will continue to call for workplace improvements in health and safety, Richard Paquin told about 150 people at the 29th annual Workers’ Memorial Day at the Caruso Club.

Paquin repeated what he has said at previous services, a fact that every year drives home how many people are hurt on the job. “More people have died at work than in war,” said Paquin.

That includes more than 1,125 people who died in a fire at a Bangladesh garment factory in April and the 12 construction workers killed on the job every year in New York City.

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Glencore Loan Wins Banks on Future Business: Corporate Finance – by Stephen Morris (Bloomberg News – June 19, 2013)

http://www.businessweek.com/

Glencore Xstrata Plc (GLEN) raised the biggest loan on record for a commodity trader at interest rates below those offered to competitors as the 80 banks backing the deal count on winning future business from the company.

The world’s biggest publicly-traded commodity supplier signed $17.3 billion of revolving credit facilities last week, paying a margin of 90 basis points more than benchmark rates for a three-year portion, according to data compiled by Bloomberg. That’s 47.5 basis points less than Vitol Group, the largest independent oil trader, pays on its main $5 billion credit line, and 100 basis points less than Trafigura Beheer BV’s $2.9 billion deal, the data show.

“Banks have fallen over themselves to provide credit as they see Glencore Xstrata as an active and attractive counterparty, which has a big trading book,” said Jeff Largey, head of European metals and mining equity research at Macquarie Group Ltd. (MQG) in London. “Glencore Xstrata is seen as a growth company, it’s been acquisitive in the past and it will remain so. If you’re seen as extending credit to them, that potentially opens up other business opportunities.”

Glencore, which generated revenue of $214 billion last year trading commodities including coal, oil and corn, awards relationship banks ancillary business in trade financing, currency hedging, and acquisitions, according to David Mannarino, a Brussels-based corporate banker for Fifth Third Bancorp, which lends to the company.

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Excerpt: From Meteorite Impact to Constellation City: A Historical Geography of Greater Sudbury – by Oiva W. Saarinen

To order a copy of “From Meteorite Impact to Constellation City”, please click here: http://www.wlupress.wlu.ca/Catalog/saarinen-meteorite.shtml

From International Nickel Company to Inco, and Merger with Mond (1902–1928)

Between 1902 and 1928, International Nickel prospered from the pre-war European demands for nickel in armour plate, the military needs of the First World War, increased peacetime uses for nickel in the United States, and the impact of the roaring twenties. By 1903, nickel production from Sudbury exceeded that of its main rival, New Caledonia. This dominance became continuous after 1905. The control of Sudbury’s wealth was paralleled by the dominance of International Nickel within the nickel industry. Through the use of long-term contracts with its consumers, the company was able to thwart competitors from entering the market, especially in the United States.

Its ability to meet the growing global demand for nickel was facilitated by the opening of Creighton mine in 1901 and the growth of this operation by the First World War into the world’s largest operating mine.10 Its output far surpassed that of the company’s other major source, Crean Hill.

Also significant was the opening of a new smelter by the CCC in Copper Cliff in 1904 which heralded the appearance of the first of three great smokestacks which dominated the Sudbury skyline for years to come. These smokestacks served to disperse the sulphur fumes released during the smelting process into the atmosphere.

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