Glencore raises its bet on zinc by increasing stake in Peruvian miner Volcan Cia Minera
London — Glencore is doubling down on its bet on zinc after prices rallied to a 10-year high.
The Swiss commodities giant, already the world’s top zinc miner, is planning to increase its stake in Peru’s Volcan Cia Minera, the largest producer of the metal in Latin America.
Glencore reached an agreement to buy out members of the Letts family and acquire 27% of Volcan’s Class A voting shares for $531m.
It will offer to increase its stake via a public tender for as much 48%, which could raise the total price to $956m, according to a statement on Tuesday.
Volcan’s Class B shares, which are more actively traded, rallied almost 40% in the two weeks leading up to the deal. The stock rose 6.5% to 1.31 Peruvian soles on Tuesday.
Glencore’s offer price of $1.215 compares with the current value of the Volcan’s A shares of 3.20 soles, or $0.98.
The deal gives Glencore even more exposure to zinc, which has surged on supply cutbacks and China’s tougher curbs on mining.
The metal has rallied 27% this year and is the best performer on the Bloomberg commodities index.
"The transaction will provide an increase and extension of Glencore’s zinc production profile and the opportunity for synergies with Glencore’s existing Peruvian zinc operations," the company said in the statement.
While other major miners such as Rio Tinto and BHP Billiton have focused on bigger dividends, share buybacks and other ways to reward shareholders, Glencore has been an exception.
The company said in August that it would use its balance sheet to pursue selective growth opportunities.
Before the deal, Glencore owned 18% of the Class A shares, which carry voting rights, and 0.02% of the B shares, giving it a total interest in Volcan of 7.7%.
In the first five months of 2017, there was a global deficit in zinc of 181,000 tonnes, according to the World Bureau of Metal Statistics.