Glencore hands platinum stake to shareholders

Under the deal, shareholders will simply be given Glencore’s Lonmin shares during the first half of the year

Glencore’s chief executive Ivan Glasenberg (Getty Images)

Glencore is getting out of platinum mining after deciding it lacks the inside edge to make owning the precious metal worthwhile.

The commodities giant’s business model is based on the knowledge it accrues by being involved in all aspects of the mining industry – from digging metals and minerals out of the ground to shipping, storage and trading.

However, its platinum exposure was only through its 23.9 per cent stake in the South African Lonmin, inherited in its 2013 takeover of Xstrata.

Ivan Glasenberg, the group’s chief executive, said yesterday: “As we do not trade platinum and have no special insight into the market, we believe that it is better to leave to our shareholders the decision as to how to manage the Lonmin shares.”

Under the deal, shareholders will simply be given Glencore’s Lonmin shares during the first half of the year.

Mr Glasenberg and his fellow top team have pledged not to sell their stakes in Lonmin for now. They control a fifth of Glencore and, therefore, a fifth of the Lonmin holding. This protected the platinum group from some of the inevitable share price fall yesterday, although it still tumbled 5 per cent.

Also behind the decision will have been the fact that platinum prices have fallen sharply and output has been hit by last year’s bitter strikes in South Africa’s mines.

Analysts said that backdrop will have made it impossible for Mr Glasenberg to find a willing buyer for the stake, leading to his decision simply to split the shares off and give them to shareholders. Mr Glasenberg also announced that he would be slashing Glencore’s mining expenditure in the face of low commodity prices.

Blaming what the company called a “volatile market backdrop”, Glencore announced it would cut capital spending to between $6.5bn (£4.3bn) and $6.8bn this year, down from the $7.9bn it had forecast as recently December.

Glencore shares, which have tracked copper and oil prices down this year, falling nearly 10 per cent, rose 0.65p to 271.7p yesterday.

Lonmin described the deal as “a constructive way forward”, allowing Glencore shareholders to continue participating in Lonmin’s future. Glencore directors Gary Nagle and Paul Smith will step down from Lonmin’s board after the split, which will go to a Glencore shareholder vote at May’s annual general meeting.

Lewis Sturdy, a dealer at London Capital Group, said the deal represented “another, big-name commodity player cutting capital spending”.