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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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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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