Glencore may put gold mines on block, mulls unit IPO
June 7. Reuters. LONDON
By Eric Onstad
* Glencore controls biggest gold mine in Kazakhstan
* Gold assets similar in size to African Barrick Gold
* Glencore said in March it planned $1 bln of disposals
Commodities trader and miner Glencore [GLEN.UL] is considering putting its gold mines on the market as gold prices remain robust while other metals prices tumble, a source close to the situation said on Monday.
One option was for the Glencore, the world’s biggest commodity trader, to list the assets which mainly consist of the largest gold mine in Kazakhstan, Vasilkovskoe, said the source, who declined to be named.
The source declined to put a value on the mines, but they produce almost as much gold as recently listed African Barrick Gold (ABGL.L), which has a market value of $3.7 billion.
“Glencore is considering monetising the gold assets in the group,” the source said.
Privately held Glencore, which has taken initial steps towards a public listing valuing it at more than $35 billion, said in March it planned disposals after it bought back the Prodeco coal operations in Colombia for around $2.5 billion from mining group Xstrata (XTA.L).
The Switzerland-based company promised about $1 billion of disposals after discussions with credit rating agencies about its liquidity.
Glencore’s gold assets are owned through Kazzinc, in which Glencore has a 51 percent stake. Kazzinc owns 100 percent of Vasilkovskoe and 48 percent of the Novoshirokinskoe mine in Russia.
The combined gold assets produce 700,000 to 800,000 ounces of gold per year compared to forecast output of 800,000 to 850,000 ounces at African Barrick this year.
On May 28, Kazzinc launched a $700 million processing plant for its gold operations in northern Kazakhstan.
When Glencore issued first-quarter results to bondholders, it said Kazzinc had paid $200 million in cash and shares to buy the remaining 60 percent stake in Vasilkovskoe Gold.
GOLD HITS PEAK, 0UTPERFORMS
Gold prices XAU=, which touched a record peak of $1,248 per ounce last month, have outperformed other metals.
Gold has gained about 11 percent so far this year while copper MCU3 has shed 17 percent, touching an eight-month low on Monday on the back of worries about the European debt crisis.
“It makes perfect sense, they (gold assets) enjoy higher valuations in the market,” said credit analyst Roberto Pozzi at Societe Generale in London.
“Their liquidity now is solid, the problem is the outlook is relatively uncertain, so I think they will need to strengthen their ratios and need to make such disposals,” he said.
Since March, liquidity at Glencore has improved to near record levels due to new credit facilities and after working capital was released due to lower commodity prices, the source added.
It signed $10.2 billion of revolving credit facilities last month to refinance debt and cut costs.
Glencore told bondholders in May that it had enjoyed a solid start to the year.
In March, Glencore said the disposals could include selling a stake in Prodeco to a strategic partner.
It had held talks with four possible partners for Prodeco – Brazil’s Vale (VALE5.SA) (VALE.N), U.S. coal miner Alpha Natural Resources (ANR.N), Singapore’s sovereign wealth fund GIC and U.S. private equity fund First Reserve Corp.