London — Glencore, the miner and commodity trader, could take full control of a large African copper asset it jointly owns with billionaire Israeli-mining entrepreneur Dan Gertler.
The Swiss-based company said on Thursday it was considering strategic options for Mutanda, a mine in the Democratic Republic of Congo. This could involve buying all or part of the 31% stake owned by Fleurette, the mining vehicle of Dan Gertler.
After paying down debt and strengthening its balance sheet, Glencore’s chief executive Ivan Glasenberg is looking to deals. Just before Christmas, the company joined forces with Qatar’s sovereign wealth fund to buy almost a fifth of Rosneft, the giant Russian oil company, in a complex transaction that allowed Glencore to keep its cash outlay to a minimum.
Many of the world’s biggest mining companies are keen to increase their exposure to copper because of its attractive fundamentals, with large supply deficits expected to emerge before the end of the decade. However, they have found it difficult to buy high quality assets because the owners of these mines have been reluctant to sell at anything other than sky high prices.
Glencore has invested heavily to turn Mutanda into a large copper producer. In the nine months to September its pits produced 162,300 tonnes of copper and more than 18,000 tonnes of cobalt, a metal used to make batteries for mobile phones and electric vehicles. It has been hailed by analysts as one of the Glencore’s most attractive copper assets even though it is in the DRC, where there has been bloody suppression of anti-government demonstrations in recent months.
Copper is one of Glencore’s most important mined commodities alongside thermal coal and zinc. "From Glencore’s perspective, consolidating an asset in a commodity they like makes sense," said Tyler Broda, analyst at RBC Capital Markets. "Mutanda has also got a long mine life," he said.
As such, investors would probably welcome a deal to take full control of the mine but only if it did not place stress on Glencore’s balance sheet. Glasenberg has said he will not allow the company’s net debt to rise to more than twice the level of its underlying earnings.
Three years ago Glencore paid $430m to buy a 14.5% stake in Mutanda from High Grade Minerals, a privately-owned company. That increased its holding to 69% with the rest controlled by Gertler.
"Glencore has received certain incoming press enquiries in relation to the potential acquisition of a further stake in Mutanda," the company said in a statement. "Glencore is currently considering its strategic options in connection with Mutanda and a further announcement will be made in due course, if appropriate".
© Financial Times 2017