Glencore puts South American zinc, silver mine portfolio up for sale
The portfolio includes Glencore's Aguillar mine in Argentina, the Los Quenuales mines in Peru, the Sinchi Wayra and Illapa operations in Bolivia as well as a stake in a Colombian exploration package, the sources who declined to be named because the negotiations are private said.
Glencore, which declined to comment to Fastmarkets questions
through a spokesman, is the world's largest miner of zinc and produces around
12% of the globe's annual output in addition to holding equity-linked offtakes
at major producers Trevali and Volcan.
At 112,000 tonnes of zinc in concentrate and 6.121 million
oz of silver produced last year, the mines account for 9.6% and 18.7% of
Glencore's total zinc and silver production respectively.
The move to sell the portfolio comes at a time of
strengthening prices for silver, which hit an eight-year high in February at
over $30 per oz. Sources with knowledge of the offer told Fastmarkets the
assets are being marketed as sales or as potential partnerships to investors.
The offer is also taking place following a generational
shake-up in Glencore's zinc and lead division last year, with Nick Popovic
taking over from long-time trading head Daniel Maté and a team of asset
managers including Popovic replacing Chris Eskdale in overseeing the company's
mines and smelters.
‘Silver belt’ package
There has been a boom in commodity prices since the start of
2021, with zinc futures on the London Metal Exchange hitting a two-and-a-half
year high of $2,952 per tonne on Monday February 22. The three-month lead price
traded at a 16-month high of $2,185 per tonne on the same day.
Despite this, the assets are being marketed to potential
buyers as a package deal to invest in mines and projects across the
mineral-rich Andes “silver belt”. Glencore's 22% stake in Peruvian zinc miner
Volcan and 33.75% holding in Antamina are not included in the offer.
While the assets have piqued interest among several
investors, appetite to purchase all the mines together could be limited, with
some highlighting political risk in Bolivia, where Glencore's Illapa group is a
joint venture with state-owned Comibol.
"They are good mines, but the requirement that it has
to be a package could be a no-go," a source with knowledge of the dealings
said.
'Tail' asset cutback
Glencore’s senior management alluded to a potential
rationalization of the company's non-core asset base on a February earnings
call with investors, coming after announcements that it would sell its Mopani
copper mines to the government of Zambia and relinquish coal mining contracts through
its Colombian subsidiary Prodeco.
"We want to reduce the amount of tail assets, the ones
that take a large amount of management time and don't contribute a lot to the
profit," outgoing chief executive officer Ivan Glasenberg told analysts.
In 2017 the company sold its stakes in two zinc mines, Rosh
Pinah zinc mine in Namibia Burkina Faso's Perkoa, to Trevali for a cash plus
equity deal that also included life-of-mine offtakes.
"We'd obviously want to sell for value and do things
that make sense, both in structural or ongoing commercial ties," Glencore
chief financial officer Steve Kalmin added during the call.
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