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The logo of Glencore is pictured in front of the company’s headquarters in the Swiss town of Baar in this file photo.Michael Buholzer/Reuters

The falling fortunes of the global mining industry were again put on display Tuesday morning when Glencore Xstrata, the Swiss mining company and commodities trader that owns Canada's Falconbridge Ltd. and Viterra Inc., wrote down the value of its mining assets by $7.7-billion (U.S.).

The writedown came three months after the completion of Glencore's all-share purchase of Xstrata for $29-billion (U.S.), a deal that created a mining and trading giant capable of competing with industry heavyweights BHP Billiton, Rio Tinto, Vale and Anglo American.

Tuesday's results, for the six months to the end of June, were the first for the combined group.

In deciding to write down the purchase price on Xstrata, Glencore took a more conservative approach to valuing early-stage and greenfield projects. It also took into account a lower commodity price outlook since the deal closed on May 2.

"We wanted to value them [Xstrata's greenfield projects] a little bit more conservatively, noting that Glencore has no intention to develop them in the near future," Glencore Xstrata chief excutive Ivan Glasenberg told journalists on a conference call.

The group reported an $8.9-billion loss. The figure includes $8.8-billion of impairment charges and revaluations related to the Xstrata purchase (Glencore had owned 34 per cent of Xstrata before the takeover).

Adjusted pro-forma earnings before interest, tax, depreciation and amortization (EBITDA) were $6-billion, somewhat ahead of analysts' forecasts, compared to $6.6-billion a year earlier.

Pro-forma net income, before the impairment charges and other one-off items, was $2-billion, a fall of 39 per cent. In early morning trading in London, Glencore shares were down more than 3 per cent, taking the one-year decline to 17.4 per cent.

Analysts had widely expected Glencore Xstrata to announce impairment charges, given the steep drop in commodity prices that has also led other mining companies to write down assets. However, the size of the writedown caught some by surprise.

"The magnitude of impairments sits at the top end of market expectations," said Liberum Capital in a note. It "will undoubtedly grab some headlines, although the market will have anticipated a wiping clean of the slate and inevitable associated impairments following commodity price and share price moves over the last year."

Mr. Glasenberg declined to say whether the company intends to sell any assets as a result of its portfolio review but said that the company was making good progress with the sale of the $5.2-billion Peruvian Las Bambas copper project, divestment of which was a condition for securing Chinese regulatory approval for its Xstrata purchase.

Glencore's results test the "strong for longer" price theory, promoted by Mr. Glasenberg and former Xstrata CEO Mick Davis, that the commodities cycle would remain intact for a long time because of rapid urbanization in China, among other factors.

Prices for mining commodities are in decline as China's growth rates slow and the U.S. and European recoveries prove weak. Analysts note that commodities upturns and downturns can last years, sometimes decades.

Despite the asset writedown, Mr. Glasenberg sounded optimistic Tuesday, predicting that the annual cost savings of merging the two companies would be "materially in excess" of the $500-million predicted by the company in May.

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