Glencore puts copper mines up for sale in bid to slash $30bn debt pile

A note two weeks ago said the shares were virtually worthless

Glencore's headquarters in Baar, Switzerland (Getty)

The ailing mining and trading giant Glencore has intensified efforts to slash its $30bn (£20bn) debt pile by putting copper mines in Australia and Chile up for sale.

Glencore said it was ready to spin off the Cobar mine in New South Wales and the Lomas Bayas mine in Chile’s Atacama desert, following “a number of unsolicited expressions of interest for these mines from various potential buyers”. Citi analysts put a potential $1bn price-tag on the two mines, based on a long-term copper price of $6,200 a tonne.

The Swiss-based behemoth has been in the eye of the storm since August. Worries over its exposure to a slowing Chinese economy and lower metal prices prompted investors to force its chief executive Ivan Glasenberg to strengthen the balance sheet.

Sources close to the company said that the sales were on top of the $10bn plans to cut Glencore’s debts into the “low $20bns” unveiled in September. These included a $2.5bn placing, a scrapped dividend and capital spending, as well as the sale of a stake in its agricultural commodities business. Glencore is thought to be in talks with Asian sovereign-wealth funds over a possible deal.

Cobar produces around 50,000 tonnes of copper concentrate a year, while Lomas Bayas produces around 75,000 tonnes of copper cathode. It is understood the assets will not be sold unless a deal is “accretive to shareholders”. Citi added: “We believe selling the smaller assets would be a positive outcome as it would allow Glencore to focus on larger and more profitable assets while still generating the sale proceeds to de-gear the balance sheet.” Brokers at Killik & Co added that “further asset disposals may help investor sentiment around the company’s balance sheet”.

The last major deal for a copper mine in Chile was Barrick Gold’s $1bn sale of a 50 per cent stake in the Zaldivar mine to Antofagasta, although this deal was struck just before the worst turmoil hit financial markets in August. The price of copper for delivery in three months’ time traded at $5,300 a tonne today, barely half the record $10,190 set in 2011.

Glencore’s shares were briefly suspended overnight in Hong Kong. In London the shares fell 6 per cent, or 7.95p, to 121.15p, following a huge 10 per cent jump on Friday when the company slashed its zinc production by a third, triggering a rally in metals prices. Glencore has also cut copper and coal production because of sliding commodity prices. The shares have doubled since an Investec note two weeks ago said they were virtually worthless, but are still down by more than half this year, at a fraction of the 530p launch price in 2011 – London’s biggest ever float.

Goldman Sachs analysts played down the recent rally in commodity prices, predicting they will fall to around $4,500 a tonne by the end of 2016. Its analysts said: “We continue to look to the long-run commodity supply trends, and the ‘hard-data’ of emerging-market demand, which paints a more bearish picture.”