Complex Voting Puts Glencore-Xstrata Merger at Risk – by Dana Cimilluca (Wall Street Journal – November 12, 2012)

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LONDON—Xstrata PLC’s effort to seal a merger with Glencore International PLC has run into several unexpected obstacles since it was unveiled nine months ago. Now another hurdle is looming that could prove fatal.

Shareholders next week will vote on the merger using an untested ballot system devised to sidestep investor opposition to retention payments that Xstrata has proposed.

As next Tuesday’s vote approaches, people on both sides of the deal have expressed confidence that the merger will be approved. But behind the scenes, they are fretting that the complex voting procedure contains land mines that could blow up the deal even though most shareholders seem to be in favor of it.

The proposed merger would create a natural-resource company with a market value currently measured at $68 billion. It has traveled a rocky path since it was first proposed in February. Glencore originally proposed to pay 2.8 of its shares for each Xstrata share in a deal that would have awarded several senior Xstrata executives, including Chief Executive Mick Davis, millions of dollars for staying with the combined company for three years. That proposal called for Xstrata shareholders separately to approve the price and the retention payments.

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Nickel supply continues to spring surprises – by Andy Home (Reuters – November 2, 2012)

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(Reuters) – Nickel has been the underperformer of the industrial metals traded on the London Metal Exchange (LME) for much of this year. The stainless steel input fell harder during the summer sell-off and rallied less than the others on the QE3-fuelled bounce in September.

Since then the broader price pull-back has seen three-month nickel crash back to below $16,500 per tonne, a level where it is challenging the top end of the production cost curve.

The reason for this consistent underperformance is not just concern about the state of the stainless steel sector. After all, global growth fears have affected just about every industrial commodity from aluminum to iron ore to zinc.

What has marked nickel out since the start of the year and what continues to weigh so heavily on prices is the market’s supply side. Supply is expected to exceed demand by 50,000 tonnes this year, according to the International Nickel Study Group.

It will do so again next year but the scale of surplus will depend on the success of a wave of new projects currently entering production, a classic commodity example of bad timing.

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Glencore offers to end Nyrstar deal to land Xstrata – by Foo Yun Chee (Mineweb.com – November 1, 2012)

http://www.mineweb.com/

A source close to the deal says Glencore is prepared to end an exclusive zinc sales deal and sell its minority stake in Nyrstar to win EU approval for its $33 billion takeover of Xstrata.

BRUSSELS (REUTERS) – Commodities trader Glencore has offered to end an exclusive zinc sales deal and sell its minority stake in world No. 1 producer Nyrstar to win EU approval for its $33 billion takeover of Xstrata, a source said on Wednesday.

The European Commission – which is examining the merger, one of the largest in the sector to date – is concerned the deal will hand the group an excessive slice of the northern European zinc market, the person familiar with the matter said.

Analysts estimate a combined Glencore-Xstrata, which would be the world’s largest zinc miner, would have 50 percent of the European zinc metal market. Ending Glencore’s agreement with Nyrstar would free up 350,000 tonnes, the person said.

The person said Glencore, the single largest shareholder in Nyrstar, was also willing to sell its stake of just under 8 percent in the company. The EU competition authorities will decide whether the offer is sufficient to allay regulatory worries or more is required.

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Xstrata seeks New Brunswick miners – by Liz Cowan (Northern Ontario Business – October 2012)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North.

Xstrata Copper and the Timmins Economic Development Corporation (TEDC) joined forces recently to recruit some potential employees. The Brunswick Mine in Bathurst, N.B., a division of Xstrata Zinc, is winding down operations since its mine life ends in 2013.

The Timmins operation, which includes the Kidd Mine and the metallurgical site, made a pitch to try and recruit some employees to Timmins.

“We gave a presentation on our operations and then the (TEDC) gave a presentation on the city itself,” said Brian Fleury, Xstrata senior human resources advisor in Timmins. “We had about 40 positions to fill at the time and we are always looking for those with mining experience. These would be very familiar with Xstrata’s way of doing things so they could fit in very well and hit the ground running.”

Cheryl St. Amour, director of business development and retention for the TEDC, offered the prospective employees an overview of what their life would be like in Timmins. “It wasn’t just the mine talking about their mine and their perspective of the community,” she said. “I talked about what the community offers.”

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Mining inquiry gains momentum – by Heidi Ulrichsen (Sudbury Northern Life – October 2, 2012)

This article came from Northern Life, Sudbury’s biweekly newspaper.

150 pack Steelworkers Hall for forum

Wendy Fram said she was overwhelmed by the turnout at a forum examining the need for a mining inquiry at the Steelworkers Hall Oct. 1. About 150 people, many of them friends of her late son, Jordan Fram, packed the hall, and stood at the back when the chairs ran out. Jordan, along with his co-worker Jason Chenier, died in a mining accident at Vale’s Stobie Mine last year.

“I find that there’s already support to help us deal with this inquiry,” Wendy said. “Hopefully this is going to work for us. I’m going to try to stay as positive as I can and work hard and get this going.”

During the event, Wendy was elected chair of a new group called Mining Inquiry Needs Everyone’s Support (MINES), which will push for a mining inquiry. Her daughter, Briana Fram, was elected the group’s secretary. Miner Jodi Blasutti along with Cheryl Dufoe, whose son, Lyle Dufoe, died in a mining accident in Timmins in 2007, will act as co-vice-chairs.

Those at the event were invited to sign up as members of the group. “It’s my first time ever being a chair of a committee,” Fram said. “I’ll do my best. I have my daughter for support, which is a great support. My husband works at Vale, so he has a lot of great input as well.”

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Glencore merger gets nod from Xstrata board – by Eric Reguly (Globe and Mail – October 2, 2012)

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 biggest takeover of the year looks set to go ahead after Anglo-Swiss mining giant Xstrata PLC recommended that its shareholders vote in favour of Glencore International’s overhauled merger proposal.

The deal, which was held up for half-a-year because of fights over price and executive pay, would value the combined group at about $80-billion (U.S.), based on current trading prices. It would vault the new company into mining’s super leagues, where it would compete with BHP Billiton, Rio Tinto, Vale and Anglo American. Xstrata boss Mick Davis and his Glencore counterpart, Ivan Glasenberg, have made no secret of their desire to own Anglo American; Xstrata tried to buy Anglo in 2009, but was rejected.

While the Xstrata-Glencore merger will almost certainly go ahead, risks abound. Glencore is primarily a trading and logistics company and Xstrata is a miner – it is the biggest exporter of thermal coal. Putting the two together is bound to create some cultural and operational tensions, all the more so since the new group is to be run by Mr. Glasenberg even though Glencore is smaller than Xstrata.

The bigger question is the enduring strength of the commodities “supercycle” as China’s growth rates come down. Mr. Davis’s bet that commodities were on a “stronger for longer” run certainly proved true in the last decade, when he built Xstrata from virtually nothing, but prices for some metals have dropped this year amid uneven demand.

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Xstrata board backs Glencore’s $33bn takeover offer – by Firat Kayakiran (Mineweb.com – October 1, 2012)

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Xstrata’s board members have backed Glencore’s revised offer after gaining assurances over the combined company’s board and decoupling approval of incentive payments from a vote on the offer.

LONDON (BLOOMBERG) – Xstrata Plc (XTA)’s board recommended shareholders back a $33 billion sweetened takeover offer by Glencore International Plc (GLEN) after gaining assurances on board composition and delinking votes on the bid and bonus payments.

Shareholders will be asked to consider two resolutions: one to approve the takeover along with 144 million pounds ($232 million) of retention bonuses and a second that excludes the pay question, Xstrata said in a statement today. This means the deal can proceed even if the incentive payments are rejected.

The recommendation brings Glencore’s billionaire Chief Executive Officer Ivan Glasenberg one step closer to his goal of creating the world’s fourth-largest mining company. The combination, five years in the making, would couple Glencore’s global trading operations with Xstrata’s coal, copper, and zinc production, establishing a resources group with about 130,000 employees in more than 40 countries.

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Gencore Deal Hinges on Pay – by DAna Gimilluca (Wall Street Journal – September 27, 2012)

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Could a proposed outlay of just $200 million really threaten a $70 billion deal? In the case of the proposed merger of natural-resource giants Glencore International GLEN.LN -0.03% PLC and Xstrata XTA.LN -0.22% PLC, the surprising answer appears to be yes.

The deal, which has faced numerous twists and turns since it was announced in February, is approaching another moment of truth. Xstrata’s board has until early Monday to decide whether to endorse a recently amended merger proposal from Glencore.

The decision is far from a simple one. While Xstrata’s board supports the tie-up in principle, it is caught between the disparate demands of its own shareholders on one side and Glencore’s negotiators on the other. If it can’t find common ground with both, it may be forced to withhold its support, which would likely doom the deal.

With its own shareholders, the thorniest issue involves roughly $200 million of planned payments to some 70 Xstrata managers over two years that are designed to ensure they don’t jump ship after the deal closes. That is a risk given that their current boss, Xstrata CEO Mick Davis, will be leaving if the merger goes through. Xstrata insists the payments are necessary to ensure the combined company runs smoothly, given that the Anglo-Swiss firm’s mining assets will account for about 80% of the enlarged organization’s profit. The payments are a bargain given what is at stake, they argue. A number of the company’s shareholders agree.

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Glencore firms up Xstrata bid – by Clara Ferreira-Marques and Dinesh Nair (Reuters/Sudbury Star – September 10, 2012)

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

LONDON — Trader Glencore, hammering out a revised $36-billion bid for miner Xstrata in intense weekend negotiations, is set to detail its new offer to the market as early as Monday, days after proposing 11th-hour changes to save the deal.
 
Sources familiar with the deal said commodities trader Glencore, keen to clarify its own position but also under pressure from Xstrata and U.K. regulators, would publish details of the higher offer early next week.
 
Two sources said the new, firm, offer was expected on Monday. The firm offer will then be studied by Xstrata’s board and non-executive directors — who on Friday questioned Glencore’s new proposal and said they required more details in order to decide on whether or not to recommend it. The Xstrata board will also discuss the proposal with top independent shareholders, one other source familiar with the deal said.
 
The deal has implications for Sudbury. Xstrata owns Xstrata Nickel, whose Sudbury operations consist of the Nickel Rim South Mine, Fraser Mine, a mill and a smelter. Nickel and copper are the primary metals, but cobalt and precious metals such as platinum are also produced. Xstrata employs about 1,000 people in the Sudbury area.

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With Glencore deal on verge of collapse, Xstrata ponders growth options – by Clara Ferreira-Marque (Reuters/National Post – September 6, 2012)

The National Post is Canada’s second largest national paper.

LONDON — With Glencore’s US$34-billion takeover bid set to collapse on Friday, Xstrata boss Mick Davis will have to woo back disgruntled shareholders in the miner and push ahead alone with ambitious growth plans.
 
Chief Executive Davis aims to steer the fourth-largest diversified miner from its acquisition-fuelled first decade into a phase of organic, or self-generated, growth, which the miner hopes will boost volumes by 50% by the end of 2014 and cut average operating costs by a fifth.
 
The broad, bespectacled South African who has led Xstrata for the past decade has major hurdles ahead – unhappy minority shareholders demanding changes at the top and an even unhappier situation in Xstrata’s platinum investment Lonmin, the South African miner hit by a strike and soaring costs.
 
Davis will also have to find new working relationships with 34-percent shareholder Glencore – increasingly a competitor as the commodity trader’s mining presence grows – and with Qatar.

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Glencore’s friendly bid for Xstrata turns hostile – by Peter Koven (National Post – September 7, 2012)

The National Post is Canada’s second largest national paper.

 The biggest takeover bid of the year is shaping up as one of the most unusual, as a battle over money and control have changed the face of it overnight.
 
What started as a friendly takeover of mining giant Xstrata PLC by Glencore International PLC has turned into an apparent hostile bid, and Xstrata is threatening to reject it even though the new offer price is higher than the one it previously accepted.
 
The dramatic turn of events began Thursday night, when Glencore chief executive Ivan Glasenberg held a secret meeting with Qatari Prime Minister Hamad bin Jassim al-Thani. According to the Financial Times, Tony Blair brokered the deal that brought them together.
 
Glencore thought it locked up Xstrata back in February, when it offered 2.8 of its shares for each Xstrata share. But that plan was thrown into doubt when Qatar Holdings, the country’s sovereign wealth fund, acquired a large minority stake in Xstrata and pushed for a higher price.

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Glencore sweetens Xstrata bid as shareholder vote delayed – by Pav Jordan (Globe and Mail – September 7, 2012)

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.

Global commodities giant Glencore International PLC has sweetened its offer to acquire Swiss miner Xstrata PLC, bowing to pressure from a key shareholder who said the initial $34-billion was too low.

Xstrata, which is 34-per-cent owned by Glencore, said the new proposal envisaged an increase to the merger ratio to 3.05 Glencore shares for every Xstrata share, from a previous merger ratio of 2.8 shares.

“The board of Xstrata PLC has received a proposal from Glencore International PLC to amend the terms of the merger of Glencore and Xstrata,” Xstrata said in a statement.

Glencore’s offer to acquire Xstrata hit a road block in recent months after one of its top shareholders, Qatar Holdings, a global investment house founded by the Qatar Investment Authority, said the offer was too low.

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UPDATE 2: Glencore ups offer for Xstrata to $37bn – by Clara Ferreira-Marques and Emma Farge (Mineweb.com – September 7, 2012)

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Glencore is now proposing to offer 3.05 new shares for every Xstrata share, with Ivan Glasenberg as the new CEO in place of Xstrata’s Mick Davies.

LONDON/ZUG (Reuters) –  Commodity trader Glencore has raised its offer for miner Xstrata to salvage a bid, now worth about $37 billion, that appeared to be heading for the rocks after Xstrata shareholder Qatar held out for more.
 
Xstrata said Glencore was now proposing to offer 3.05 new shares for every Xstrata share, up from 2.8, with Glencore Chief Executive Ivan Glasenberg to become CEO of the combined group, instead of Xstrata boss Mick Davis as originally envisaged.
 
Xstrata said Glencore was also suggesting a possible change to the structure of the deal that could allow it to pass more easily with a simple majority of shareholders.
 
Glencore’s bid had been teetering on the brink of collapse after Xstrata’s second-largest shareholder, Qatar, with 12 percent, said it would vote against the deal unless it was improved.

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A failed deal with Glencore means a lonely road to growth for Xstrata – by Clara Ferreira-Marques (Mineweb.com – September 6, 2012)

www.mineweb.com

With Glencore’s $34 billion takeover bid set to collapse on Friday, Xstrata boss Mick Davis will have to woo back disgruntled shareholders to push ahead a solitary growth plan

LONDON (Reuters) –  With Glencore’s $34 billion takeover bid set to collapse on Friday, Xstrata boss Mick Davis will have to woo back disgruntled shareholders in the miner and push ahead alone with ambitious growth plans.
 
Chief Executive Davis aims to steer the fourth-largest diversified miner from its acquisition-fuelled first decade into a phase of organic, or self-generated, growth, which the miner hopes will boost volumes by 50 percent by the end of 2014 and cut average operating costs by a fifth.
 
The broad, bespectacled South African who has led Xstrata for the past decade has major hurdles ahead – unhappy minority shareholders demanding changes at the top and an even unhappier situation in Xstrata’s platinum investment Lonmin, the South African miner hit by a strike and soaring costs.

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Glencore Bid Faces Its Moment of Truth – by Dana Cimilluca and John W. Miller (Wall Street Journal – September 6, 2012)

http://online.wsj.com/home-page?mod=WSJ_topnav_’home_main

The combatants in the imperiled tie-up between Glencore International GLEN.LN +1.23%PLC and Xstrata PLC could still salvage the $34 billion deal before a Friday shareholder vote, people close to the companies say, though recent attempts to break an impasse over price have been unsuccessful.

Passage of the deal rests in large part on the approval of one of Anglo-Swiss miner Xstrata’s largest shareholders, Qatar Holding LLC. Although both Glencore and Qatar Holding say they want to do the transaction, Glencore says it won’t overpay, while Qatar Holding says the current terms are lopsided in Glencore’s favor.

Xstrata shareholders vote Friday morning in Zug, Switzerland, to determine whether to combine with the world’s biggest commodities trader, which would create a company with a combined market capitalization of roughly $72 billion. The price squabble separating Glencore and Qatar Holding, Xstrata’s two biggest shareholders, could doom the deal to the same fate as the aborted merger of mining giants BHP Billiton BLT.LN +1.24%and Rio Tinto RIO.LN +1.95%four years ago.

Qatar Holding, a unit of the Middle Eastern country’s sovereign-wealth fund, leads a group of shareholders with a blocking stake.

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