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MINING

Glencore and Xstrata in blockbuster merger

Raw materials giant Glencore and mining firm Xstrata announced a vast merger on Tuesday, creating a $90 billion group and a new powerhouse in the global commodities industry.

Published: 7 February 2012 14:03 CET

The bid by Glencore, uniting the two Swiss groups as Glencore Xstrata International, will give birth to a company with revenues of $209.4 billion and put it among the world’s top mining groups, behind BHP Billiton, Vale and Rio Tinto.

“A merger between Glencore and Xstrata offers a unique opportunity to create a new business model in our industry to respond to a changing environment,” said Xstrata chief executive Mick Davis in a statement.

His Glencore counterpart Ivan Glasenberg said the company would be the most diverse major resource group, and the $61.9-billion merger would realise “immediate and ongoing value.”

The two companies, based in Baar and Zug respectively, had been in talks over a possible deal since 2006, Glasenberg told AFP.

The new group will have a combined equity market value of $90 billion. 

“With the IPO (initial public offer) in May it was easier to get a better value for Glencore. The market understood Glencore better.

“We’ve been talking weekly and towards November, December we landed on most of the points,” Glasenberg said.

Glencore has offered 2.8 shares for each Xstrata share held, representing a 15.2-percent premium over the closing share price on Wednesday, the day before Xstrata’s announcement that it was in discussions with Glencore.

The new company is forecast to increase production by 11 percent annually to 2015 and have a significant presence in African copper mines as well as in Kazakhstan and South America.

Davis is to take over as head of the combined group, with Glasenberg as his deputy.

The deal will be put to a shareholder vote and the companies’ forthcoming AGMs in May.

“This is not a transaction about cost reductions,” said Davis.

“It’s a transaction about putting together two companies … we will operate across the whole spectrum and in that way build synergies by putting Xstrata’s production through the Glencore marketing system.”

In the 12 months ending December 31st, Glencore reported $186.2 billion in sales and had core earnings before exceptional items of $6.5 billion.

Xstrata had sales of $33.9 billion over the same period, and core earnings of $11.7 billion.

Glencore was successfully launched on the London Stock Exchange and in Hong Kong in May last year.

In addition to being a giant trading company, it also holds major mining assets in minerals such as zinc, copper, lead and aluminum.

The company also has interests in energy (oil and coal) and agricultural (cotton, sunflower, wheat, sugar).

Glencore has its own port facilities, warehouses and a fleet of ships to supply customers around the world.

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MINING

Spain’s vast supplies of untapped rare minerals pit environmentalists against high-tech

Spain's untapped rare earths (the second biggest supply in Europe) are stoking tensions between mining companies and environmentalists over fears of the devastating impact of extracting minerals considered essential for a high-tech and low-carbon economy.

Published: 7 October 2021 12:07 CEST
Spain's vast supplies of untapped rare minerals pit environmentalists against high-tech
Rare earths are essential in a range of high-tech products key to combatting climate change. Photo: Christophe ARCHAMBAULT/AFP

The group of 17 minerals are — despite their name — widely distributed across the globe, but exist in such thin concentrations that extracting even small quantities requires the processing of enormous quantities of ore.

Still, they are key ingredients in a range of high-tech and cutting-edge products, from wind turbines and electric vehicles to smart phones, medical devices and missile-guidance systems.

With China having a stranglehold on global supply and demand surging to meet the transition to a low-carbon economy, the political pressure – and financial incentive – to put strategic interests ahead of the environment is growing.

“Spain has the largest amount of rare earths in Europe after Finland. There is real potential,” said Vicente Gutiérrez Peinador, president of the National Confederation of Mining and Metallurgy Companies (Confedem).

Ninety-eight percent of the rare earths used in the EU are imported from China, prompting Brussels to recently urge member states to develop their own extraction capacities.

Spain’s reserves are estimated at 70,000 tonnes, according to the Geological and Mining Institute of Spain.

“On a global level this is not much, but on a European scale it is significant,” said Roberto Martínez, head of mineral resources at the institute.

‘Opportunity for Spain’

And it is enough to arouse the interest of investors as demand for the minerals continues to surge.

“It is an opportunity for Spain,” said Confedem’s Peinador, but also “for Europe”.

“Two sites in particular are considered interesting: one in Monte Galineiro, in Galicia,” and the other in the province of Ciudad Real, in the Castilla y Leon region, said Martinez.

Only the 240-hectare (590-acre) Matamulas site in Ciudad Real has so far been the subject of an application to mine.

The site is rich in monazite — an ore containing rare earth minerals including thorium, lanthanum and cerium.

A cyclist wears a protective face mask while riding along a dusty roadv where dozens of factories processing rare earths
China has a stranglehold on global supply of rare earths — along with the environmental devastation their extraction creates Photo: FREDERIC J. BROWN / AFP

However, the project has been blocked: the region refused the mining permit filed by Madrid-based Quantum Mineria in 2019 due to concerns about its environmental impact.

“This deposit is located in an area of great environmental value”, between two protected areas, said Elena Solis, coordinator for mining issues of the NGO Ecologists in Action.

It would involve “moving an astronomical amount of earth, which would put the whole area at risk”, said Solis, who also pointed to the “enormous amount of water” needed for this operation and the risk of pollution by toxic or even radioactive dust.

Holes filled in

These arguments were rejected by the company, which lodged a legal appeal.

The refusal of the permit “is incomprehensible” because “we are in a territory considered suitable for mining” by the administration, said Enrique Burkhalter, project director of Quantum Mineria, who denounced “unfounded fears” around the proposal.

According to the company, the extraction would take place on the surface, using a technique that limits the risk of toxic dust: the earth would be transported by truck to a factory, then sieved and finally returned to the site, once the minerals have been removed.

“It is not an open pit… The holes would be quickly filled in so that the crops could be cultivated again,” said Burkhalter.

These arguments are in turn rejected by Ecologists in Action, which believes that the land concerned will be permanently affected.

What will the courts say?

Beyond their differences, industrialists and environmentalists agree on the importance of the court’s decision, which could make or break the extraction projects.

The ruling, expected in several months’ time, will be “important” but “will not put an end to the debate”, said Martinez, who pointed to a paradox inherent in mining: “On paper, everyone wants to reduce external dependence, but as soon as we talk about concrete projects, it’s a different matter.”

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