Glencore Xstrata ups savings target to $2bn in cost-cutting blitz

Glencore Xstrata today told investors that the $46 billion deal (£29 billion) that created the commodities giant would result in at least four times the amount of savings than previously claimed.

As senior bosses met with investors in London, chief executive Ivan Glasenberg announced the company had identified at least $2 billion in savings by next year, having originally promised to find just $500 million when the takeover — the largest the mining sector has ever seen — was unveiled last year.

Since the purchase of Xstrata by Glencore was completed in May shares in the combined group have been struggling in comparison to its rivals in the mining sector, and an investor day was being held in London today in an attempt to convince the Square Mile that the takeover has been a success so far.

With the increase in cost savings revealed much higher than analysts had been expecting, Glencore Xstrata shot up 10.6p to 331.9p.

Glasenberg said the integration of the Anglo-Swiss miner had been “successfully and rapidly completed”, and added that most of the synergies had come from slimming down overhead costs at its head and regional offices.

There were also suggestions there could be even more savings, with Glasenberg revealing the company was “just starting to comprehensively look at the combined mining and metallurgical operations.”

Glencore Xstrata said $450 million of the savings would come from marketing, with $175 million and $1.4 billion from financing and cost savings respectively.

The company said it would reduce capital expenditure by $3.5 billion by 2015, while also keeping spending to sustain op-erations at $4 billion — towards the bottom of previous forecasts. It also vowed to shelve risky projects.

In addition, Glencore announced it would apply for a secondary listing on the Johannesburg Stock Exchange, citing South Africa’s “strong institutional investor base” and describing Africa as “an important and growing market for the group”.

Last month investors were hit by Glencore Xstrata announcing a $7.7 billion writedown on Xstrata’s assets in the wake of plunging metal prices amid fears over the prospects for the commodities-hungry Chinese economy.

At the time Glasenberg promised cost savings would be “materially in excess” of $500 million.