Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
China’s state-backed Silk Road Fund, a $40 billion venture that invests along the nation’s ancient trade routes with Central Asia, is said to be weighing a joint bid with China National Gold for Glencore’ gold mine in Kazakhstan.
According to sources familiar with the matter, quoted by Bloomberg, the group could pay up to $2 billion for the Vasilkovskoye mine, which is Glencore’s largest gold operation.
Bid may compete with Chinese bullion producers Shandong Gold Mining, Zijin Mining and Zhongjin Gold.
The sale would bring the Swiss mining giant closer to its target of cutting net debt to below $18 billion this year. It would follow similar recent moves, such as Glencore’s decision to sell an almost 10% stake in its agriculture unit to Canada’s British Columbia Investment Management Corp. for $624.9 million in cash last month.
Falling metal prices hit Glencore’s shares hard last year as investors became concerned about its debt load. But a strong 2015 performance from its trading arm, led the oil unit, and an aggressive debt reduction plan has helped trigger a significant bounce in its shares so far in 2016.
Glencore decided to consider selling its 70% stake in Vasilkovskoye mine earlier this year, after being approached by several suitors, and has appointed BMO Capital Markets and Deutsche Bank to handle a possible deal.
The sale would bring Glencore closer to its target of cutting net debt to below $18 billion this year.
Chinese firms Zhongjin Gold Corp., Shandong Gold Mining Co. and Zijin Mining Group Co. have also been singled out as some of the competing bidders for the mine.
Vasilkovskoye’s gold output is pegged at roughly 350,000 ounces a year. A smaller gold mine Glencore used to own in Kazakhstan, Komarovskoye, was sold in April to Polymetal International for an initial $100 million.
Kazakhstan, the world’s largest landlocked country by land area, is known for its riches.
According to data provided by the Embassy of Kazakhstan to the Canada, the Asian country holds the second largest uranium, chromium, lead, and zinc reserves, as well as the third largest manganese deposits and the world’s No. 5 copper reserves.
Kazakhstan is also said to rank in the top ten for iron, and gold, it’s a well-known diamonds exporter and holds the 11th largest proven reserves of both petroleum and natural gas.
