Glencore (0805)

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http://www.glencore.com/

http://www.glencore.com/investors/

Gauci has no regrets over deal that ‘made’ Glencore
THE AUSTRALIAN OCTOBER 25, 2014 12:00AM

Paul Garvey

Resources Reporter
Perth
Vince Gauci
Vince Gauci, the former managing director of MIM Holdings, in his office in Brisbane. Picture: Lyndon Mechielsen Source: News Corp Australia
IT was a deal that set Glencore on the way to becoming one of the world’s biggest and most powerful mining houses, and which forged the legendary deal-making reputations of the men behind it.

But if Vince Gauci had had his way, it never would have happened. Now, 11 years later, as Glencore eyes an ambitious takeover of Rio Tinto, which would see it overtake BHP Billiton as the biggest miner in the world, Mr Gauci has opened up on the events that played out during the controversial takeover of MIM Holdings.

First and foremost, he wants it to be known that he has not spent the past decade stewing about the outcome. “People may think I’m bitter and twisted,” Mr Gauci told The Weekend Australian. “I do not understand why people would think that way, but it was a very long time ago now and I am comfortable with the role that all individuals played in the outcome.”

Back in 2003, Xstrata — the mining arm of Glencore, which was absorbed into the parent last year — was an upstart big on ­ambition but light on assets.

It saw its offer for MIM as a means of growing bigger fast. The $5 billion price tag it put on MIM sounds small in the context of the world’s mining majors, but at the time it was more than Xstrata’s own market capitalisation — just as Glencore today has not let its smaller market capitalisation get in the way of an ­approach to the larger Rio Tinto.

Mr Gauci, who had helped navigate MIM through a range of significant operational challenges, was convinced that Xstrata’s offer did not represent fair value for the company and its upside. But his fellow board members did not agree, and he was a lonely voice of opposition as shareholders followed the board’s recommendation to approve the takeover.

The deal went through just in time for Xstrata to enjoy the spoils of MIM’s coal, copper and zinc ­assets as prices for those commodities began to rocket.

Not only was it a turning point for Xstrata, paving the way for a wave of acquisitions that would propel it into the ranks of the world’s major miners, it also helped enhance the reputation of Xstrata and Glencore as some of the shrewdest deal-makers.

Those deal-makers, led by Glencore chief Ivan Glasenberg, are now weighing up their next move after initial merger talks with Rio were rebuffed.

Mr Gauci, however, did not see anything magical in the approach on MIM — except for plenty of ambition. “There was nothing unusual or special about Xstrata’s negotiating strategies at the time of the MIM takeover apart from the fact that it was a very significant transaction for them,” he said.

“The MIM management team had a view about the quality of the company and the assets, and we felt that the price that Xstrata offered was too low. And that’s been proven by time.”

The only reason for his objecting to the bid was the price Xstrata was prepared to offer.

“If I felt they were paying a fair price I would have supported it,” he says. “In the end, history has shown the price was on the very low side, put it that way.”

The takeover meant Mr Gauci and MIM did not get to enjoy the spoils of the commodity boom that dominated the subsequent years, or see the rewards of the company’s efforts from the years spent overhauling its more challenging operations.

He says he holds no animosity towards anyone over the deal — either from Glencore and Xstrata, or from his own board.

“I have a great deal of respect for both Ivan Glasenberg and (then-Xstrata chief) Mick Davis and admired the courage they showed at the time,” he said.

“I always thought that Ivan played an important role in Xstrata’s development and in many ways I am not surprised to see him managing the merged Glencore-Xstrata business.”

If there is one regret from the MIM takeover, it is that it contributed to a continued void of mid-tier miners in Australia.

With North Ltd swallowed by Rio Tinto in 2000 and WMC Resources being bought out by BHP Billiton in 2005, there has been an absence of diversified mid-tier mining houses in Australia.

Those companies, Mr Gauci says, were crucial incubators of new talent and investors in mining education. “A lot of those mid-sized Australian companies … did much to develop the mining industry in Australia and in addition strongly supported the education industry built up around the industry,” he said.

“A lot of that support has now been lost with the result that we have very few mining schools left in the country.”

Today, the Brisbane-based Mr Gauci sits on the board of gold miner Newcrest Mining and devotes much of his time to chairing the Broken Hill Community Foundation, which works to ­improve life in the mining town in which he was born.

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http://www.valuebuddies.com/thread-5054-...l#pid98025

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No more writedowns, says mining giant Glencore
THE AUSTRALIAN NOVEMBER 14, 2014 12:00AM

Matt Chambers

Resources Reporter
Melbourne
GLENCORE says the reporting of $16 billion of 2013 impairments in its Australian accounts does not represent additional writedowns beyond those booked in its global accounts, meaning it does not follow that further groupwide writedowns are on the way.

The Australian revealed yesterday that the trading and mining giant’s locally domiciled and fully-owned subsidiary, GHP 104 160 689 Pty Ltd, reported the huge impairments on goodwill and mining assets in Australia and overseas in accounts filed with the corporate regulator this month.

The total writedowns were much greater than $US9.1bn of impairments recorded in Glencore’s 2013 accounts in March.

“Glencore has not booked any additional writedowns on any assets beyond those already booked and announced in its global 2013 results,” a spokesman for the Swiss-based company said yesterday.

In its Australian accounts, Glencore said the $16bn of impairments “reflect the prevailing economic environment and also the latest mine plans”.

The difference between the two figures appears to be because the Glencore parent’s accounts included some of the huge impairments being written back due to Glencore’s $35bn scrip acquisition of Xstrata.

This happened because accounting treatment of its takeover meant it valued the assets at “fair value on acquisition” calculated by reference to Glencore’s share price on the day of acquisition, which was May 2, 2013.

“Accounting standards only allowed the writedowns or impairments to be booked and not the write-ups,” the spokesman said of the GHP accounts.

“GHP is only one set of Glencore financial statements and provides a snapshot of only some of the Xstrata assets acquired. The financial statements in question represent one part of the overall Glencore group and should be understood in that context.”

GHP was previously the Xstrata subsidiary that housed its Brisbane-based copper business and Sydney-based coal business, meaning it has global assets and that not all the writedowns were taken in Australia.

GHP does not house Glencore’s Australian nickel mines, including the Murrin Murrin mine in Western Australia.

Glencore’s accounts will come under greater scrutiny in Australia if chief executive Ivan Glasenberg resumes his hunt for dual-listed miner Rio Tinto.

Reports of a Glencore move to create the world’s biggest miner through a linking with Rio led the target to confirm that Glencore had made an approach. This has triggered UK takeover laws, meaning Glencore is not allowed to make an approach to Rio for six months.

But it has meant everyone else is talking about it.

Matt Chambers

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Price falls take heavy toll on Glencore earnings
ALEX MACDONALD DOW JONES AUGUST 19, 2015 4:47PM

Glencore has swung to a first half-year net loss and warned of less buoyant marketing earnings this year, showing how sharp falls in raw-material prices have tested the group’s hybrid mining and commodities-trading business model.

The world’s third largest globally diversified miner by market capitalisation today reported a net loss of $US676 million in the six months to end-June, missing analysts’ expectations for a net profit of $US728 million, compared with net profit of $US1.72 billion in the same period last year.

Glencore took $US1.6 billion in net exceptional charges, including $US792 million related to the writedown of its Chad oil assets and $US377 million on largely currency-related income tax expenses.

Revenue fell 25 per cent to $US85.71 billion. Gross debt fell to $US50.48 billion at June 30 from $US52.69 billion at the end of 2014.

Glencore took a hit in its mining business, largely because of weaker commodity prices, particularly copper, coal and oil which are trading near multiyear lows.

Earnings before interest, taxes and exceptional from its industrial activities, which includes mines and farms, fell 84 per cent to $US341 million in the first half of the year from the same period a year before.

Glencore’s reversal in fortune comes as the company’s stock price swooned amid the global commodities-price rout that pushed oil, copper and a host of other resources to multiyear lows, battering results from mining companies.

Even with a diverse set of assets across the metals spectrum, and a powerful trading arm, the world’s third-largest publicly traded mining company by market value, has lagged behind its other big peers as investors have weighed its large debt.

The company’s trading division reported a 29 per cent drop in first-half adjusted ebit to $US1.1 billion over the same period. This compares with Deutsche Bank’s $US1.2 billion estimate.

The company lowered its full year trading division’s ebit guidance to a range of $US2.5 billion to $US2.6 billion.

Glencore’s chief executive Ivan Glasenberg said in March that the division would generate this year between $US2.7 billion and $US3.7 billion “no matter what commodity prices are doing”.

Nevertheless the company declared an interim dividend of US6c a share, in line with last year’s interim dividend.

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Investors push Glencore into restructure on debt fears
DateSeptember 7, 2015 - 6:43PM

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Amanda Saunders
Resources Reporter

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Glencore chief Ivan Glasenberg plans to raise $US2.5 billion. Photo: Bloomberg

Mounting pressure from investors has forced debt-laden commodities giant Glencore into a $US2.5 billion ($3.6 billion) equity raising to protect its investment grade credit rating, which is needed to underpin its trading business, from being downgraded to junk status. 
Less than three weeks after Glencore's chief executive Ivan Glasenberg boasted about the miner's ability to cover its dividend with free cash flow, unlike some of its rivals, the trading giant has suspended its dividend until further notice, beginning with the final payment for the 2014-15 year and its interim dividend for 2016. 
That measure will save the group a further $US2.4 billion, as part of its new remedy plan to grab $US10.2 billion in "savings", to cut its $US29.6 billion net debt by about a third. 
It could be a fatal blow for Glencore's designs on rival Rio Tinto, which it wanted to take out through an all-scrip "merger of equals". 
Glencore's share price has been savaged since it posted an interim net loss in August,  and it failed to allay investor and analyst concerns that it was not doing enough to deal with its huge debt.
Ben Davis, a London-based mining analyst at Liberum, said Glencore's move was "smart", and a response to concerns put during an equity roadshow with shareholders.
"Management thought they were fine, but shareholders didn't think they were doing enough on debt and were being too bullish on the outlook and their ability to manage their leverage," Mr Davis said. 
Loss of face
"Two and a half weeks ago, they said there was no chance of a rights issue, so there is definitely a bit of loss of face here. But at the same time, if it's losing face by listening to shareholders then I guess it's no bad thing." 
Bernstein analyst Paul Gait said the capital restructure was positive. 
"It removes a certain degree of uncertainty, as bankruptcy risks had clearly become a serious concern for investors," he said.
Investors welcomed the news, with Glencore shares jumping about 11 per cent on the news in early London trade, from 123 pence to about 134 pence. 
Glencore listed at 530 pence in 2011 and it is understood to have traded above its listing price for only two hours since debuting – and that was on the day of listing.  
Mr Davis said it was a "smart move" by Glencore and otherwise it could have been a dead six months for investors, with no clear read on how the marketing business was going, or its net debt until their full-year results. 
"They have surprised again. It is interesting to see shares go up after a dividend cut and a rights issue. You don't see that every day." 
Two notches from junk status
The Swiss giant's BBB credit rating is two notches away from junk status. It must keep an investment grade rating to enable borrowing for its all-important trading arm. JPMorgan has said the group needed to almost halve its net debt to about $US16 billion by the end of calendar 2015 to keep its rating. 
Standard & Poor's revised Glencore's outlook to negative last week, as well as that of rival Rio. 
Glencore's remedy plan, unveiled on Monday, has "the objective of reducing net debt to the low $US20s billion by the end of 2016", through a $US10.2 billion savings grab, Standard & Poor's said. 
Mr Glasenberg said "recent stakeholder engagement in response to market speculation around the sustainability of our leverage highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty".
The Glencore chief executive,  as well as chief financial officer Steven Kalmin and other senior executives, will together take up 22 per cent of the equity raising of up to $US2.5 billion. 
Other cash-raising measures put on the table included selling precious metals assets, and stakes in agriculture assets, to raise up to $US2 billion.
It will slash another $US1.5 billion from working capital by June 2016, after shaving $US4.7 billion from it and marketing inventories in the first six months of 2015.
Cut capex again
It will also cut capex again, by $US500 million to $US1 billion by the end of 2016, and cut $US500 million to $US800 million by the end of 2016 from its $US4 billion book of loans and long-term advances. 
The miner says $US2.4 billion will be saved by suspending its final dividend for 2015 and interim dividend for 2016. Its previously announced interim dividend for 2015 of US6¢ a share would be paid. 
Glencore swung to a net loss of $US676 million in its first half from a profit of $US1.7 billion in the same period a year ago because of big writedowns in the value of its mines and oil fields, which have been hit by a price slump. 
The company is worth a fraction of what it was when it made its first attempt a year ago at a "merger of equals" with Rio Tinto, which is valued at $92.6 billion.

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Glencore gives new details on debt-reduction plan

• ALEX MACDONALD
  
• DOW JONES
  
• SEPTEMBER 16, 2015 7:23AM
  

[b]Commodities titan Glencore has released new details about its debt-reduction plan, saying it will issue new shares representing up to 9.99 per cent of its existing share capital to institutional investors.[/b]
The Switzerland-based miner and trader said it would issue 1.31 billion of new shares, which at Tuesday’s closing price of £1.28, would add up to about $US2.57 billion in new capital. The company is likely to offer the shares at a discount, though, and had said it would raise only up to $US2.5 billion.
The announcement came just past the close of trading on the London Stock Exchange, after a wild day for Glencore. The company’s stock plunged 8 per cent in early trading to a new all-time low of £1.18, before rallying late in the day.
Glencore has been the worst performer in the UK’s blue chip FTSE 100 index this year and has been under pressure to cut debt and improve profits as prices collapse for a range of commodities it produces and sells.
The stock issuance was part of a series of moves Glencore said last week it would undertake to shed up to $US10 billion in debt. The company also scrapped its dividend, pledged to cut spending, promised to sell assets and temporarily shut down two loss-making mines in Africa.
Investors were watching for how Glencore would issue the new shares, as company officials had been vague about when it would occur and what form it would take.
On Tuesday, Glencore said 78 per cent of the new placements would be underwritten by Citigroup Inc and Morgan Stanley while the remaining 22 per cent of the shares would be acquired by the company’s senior management including chief executive Ivan Glasenberg, chief financial officer Steven Kalmin and several board members.
The company will disclose the price of the new stock once Citi and Morgan Stanley complete the process of allotting the shares. Barclays is also involved in the process. The new shares will be allowed to trade on September 21.
Shares would be offered to both new and existing institutional investors. Had Glencore issued new stock representing 10 per cent or more of its shares, the move would have been more cumbersome, requiring that all new stock be offered to existing shareholders on an equal (or pre-emptive right) basis.
The company’s share price fall early in the day may have forced its hand in issuing new stock. If the company had issued the stock when it was trading lower, it may have needed to issue more than 10 per cent of its share capital to reach the $US2.5 billion equity raise.
The measures are among the most drastic taken by any mining company in a sector that has been racked by falling prices for everything from iron ore to oil to copper as demand in China wanes and supplies build up.
Glencore, a trading company founded by controversial financier Marc Rich and built into a mining powerhouse by Mr Glasenberg, has been the worst hit. Its shares have fallen nearly 60 per cent since the beginning of the year and more than three quarters since its London share listing in 2011.
Competitors such as Rio Tinto and BHP Billiton have also suffered but not as bad, losing 20 per cent and 15 per cent, respectively this year.
For Glencore, the reason for the poor performance is the continued collapse in a basket of commodities prices including copper and coal, two of its most important earnings drivers.
Glencore is the world’s largest thermal coal exporter and largest copper supplier. Since Glencore bought mining giant Xstrata in 2013, prices for those two commodities, and several others, have fallen to multiyear lows.
Copper dropped to a more than six-year low last month.
The benchmark thermal coal prices in South Africa and the Netherlands were hovering at $US51.95 a tonne and $US50.90 a tonne respectively on Tuesday, a multi-year low since the onset of the financial crisis in 2008.
A third benchmark thermal coal price in Australia was hovering at $US57.65 a tonne, down 6.9 per cent this year.
Josie Cox contributed to this article

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OMG, Glencore the major powerhouse in commodities business now facing crisis.

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strange they place out shares to themselves and no rights issue

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Glencore launches $2.5bn fundraiser in drive to shore up finances

Commodity trader has slumped to a record low, prompting share placing that will see chief executive put up as much as $210m of his own cash

Simon Goodley

Tuesday 15 September 2015 19.22 BST
Last modified on Wednesday 16 September 2015 00.02 BST

The embattled commodity trader Glencore launched its $2.5bn (£1.6bn) fundraising effort on Tuesday night, in a move aimed at shoring up its strained finances as swiftly as possible.

The share placing, part of a $10.2bn programme of fundraising and cuts announced last week, came in a week when Glencore’s struggling shares hit new lows. It will see the company’s billionaire chief executive, Ivan Glasenberg, putting up as much as $210m of his own cash.

The sale of new shares was forced on the company by investors worried that the group’s debts are too high in a world of slumping commodity prices, as previously booming demand from China has slowed.

Glencore said its bankers would attempt to place just over 1.3bn new shares to new and existing shareholders in an accelerated sales process that is expected to close no later than 7pm BST on Wednesday. The new shares represent just under 10% of the company.
Glencore first-half profit tumbles amid commodities rout
Read more

Last week Glencore succumbed to shareholder pressure by announcing it would raise up to $2.5bn by selling new shares – only weeks after the company’s management insisted they were comfortable with the group’s financial position. Glasenberg and his senior management immediately committed to buying 22% of them, worth around $550m.

However, City investors will be anxious for news on how successful Glencore’s bankers have been in selling the remaining 78%. If they succeed in selling all the new stock – and raising $2.5bn – the fundraising will have secured the cash at only a small discount to the closing share price on Tuesday evening of 3%. However, raising $2bn from selling the same amount of new equity would equate to a discount of about 22%.

The trading group did not comment further on the announcement, or give any detail on which existing shareholders would be purchasing new shares. However, aides insisted privately that a share placement was always the company’s preferred method of raising the funds – rather than a rights issue, which would have involved all existing shareholders being given the chance to invest. The second option would have taken too long, one aide said, before adding that major investors had been supportive of Glencore’s plan.
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The company’s shares have more than halved this year and closed on Tuesday evening at 128.05p each. The company floated in 2011 at 530p a share, but they have never reached that level since.

Glasenberg and his four closest lieutenants, who all became paper billionaires in the group’s 2011 flotation – Daniel Maté, Telis Mistakidis, Tor Peterson and Alex Beard – own around 20% of the company. To maintain that stake, the five men now have to find around half a billion dollars in cash.

However, by the time he is paid his latest dividend cheque later this month, the total dividends received by Glasenberg since the company floated will have exceeded $780m.

The group, which trades and produces a range of commodities including copper, iron ore, oil, wheat and sugar, also announced last week that it will be selling some assets and has suspended production at copper mines in Zambia and the Democratic Republic of Congo.

It has also axed the full-year dividend payout to shareholders, and next year’s interim dividend. The series of measures will find the company an extra $10.2bn, which will be used to cut debts “to the low 20 billions of dollars by the end of 2016”.

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To raise USD2.5b of new equity to try to pacify its lenders which had provided a total of USD50.48b in gross debts as at 30Jun15; and as part of a financial restructuring plan to raise an overall USD10.2b including from cutting capex, dividends, and selling assets, in order to cut its net debts of USD29.6b to below USD20.0b by end-2016. All these being carried out in a global environment of depressed - and likely still falling - commodity prices and slowing economic growth.

Why in the first place Glencore's management had borrowed so much? This appears to me "too little, too late".