The Glencore headquarters in Baar, Switzerland, in April, 2011.Urs Flueeler/The Canadian Press
Glencore PLC GLNCY is buying the piece of an Argentine copper and gold project it didn’t already own for almost half a billion dollars, firming up its footing in critical minerals assets, while it engages with Vancouver-based Teck Resources Ltd. around a possible blockbuster M&A deal.
Swiss mining and commodity trading giant Glencore said Monday that it intends to buy a 56.2-per-cent stake in the MARA project from Pan American Silver Corp. for US$475-million to bring its ownership up to 100 per cent.
MARA was one of the projects earmarked by Vancouver-based Pan American PAAS-T as a non-core asset when it acquired a suite of gold and silver properties from Yamana Gold Inc. earlier this year. As part of the deal with Glencore, Pan American has been granted a royalty on any copper that may eventually be produced at the mine. MARA’s reserves could support a mine life of 27 years.
The MARA purchase is part of Glencore’s strategy to streamline and strengthen its position in long-life critical minerals assets such as copper, which investors ascribe a significantly higher valuation to compared to its large portfolio of environmentally destructive thermal coal mines.
Glencore earlier this year launched a takeover attempt for Teck TECK-B-T, which produces copper and zinc alongside metallurgical coal. The Swiss company was rebuffed on several occasions by the board of the Vancouver based miner, as well as its controlling shareholder, Norman B. Keevil.
After Teck failed in its plan to spin off its own coal business into a separated publicly traded unit, it entered talks with several parties interested in buying its coal division only, including Glencore.
Teck chief executive Jonathan Price last week said he was pleased at the significant interest the company had generated around its coal business but talked down the prospect of an imminent deal.
Apart from Glencore, Teck is also fielding offers from a consortium led by mining veteran Pierre Lassonde, Japan’s Nippon Steel Corp. and India’s JSW Steel.
Glencore, whose offer is worth up to US$8.2-billion, is the only known bidder for the entire coal business, a scenario that would appear to give it a competitive advantage.
However, even if Glencore eventually reaches an agreement with Teck, the deal would have to be approved by the federal government after it conducts a national-security review.
Several federal politicians have already expressed reservations about Teck being sold to Glencore.
“We need companies like Teck here in Canada,” wrote Deputy Prime Minister Chrystia Freeland, Industry Minister François-Philippe Champagne and Natural Resources Minister Jonathan Wilkinson in a letter to the Greater Vancouver Board of Trade in April.
Glencore already has a significant presence in Canada owing to its inheritance of the massive nickel mines that Xstrata PLC bought from Falconbridge Ltd. in the mid-2000s, and it employs around 9,000 workers in the country. (Glencore acquired Xstrata in 2013.)
Glencore’s other large Canadian asset is its stake in grain handler Viterra Ltd. In June, Glencore agreed to sell its 49.9-per-cent stake in Viterra for US$4.1-billion to Bunge Ltd.
Shares in Glencore rose by 1.5 per cent Monday on the London Stock Exchange to close at £4.73 ($8).
Niall McGee