Glencore (LON:GLEN) is upping its presence in the African mining landscape through the purchase of stakes in two mines it already partially owns.
For the last month the Switzerland-based commodities trader has been studying strategic options for the Mutanda copper mine in the DRC, an asset it jointly owns with billionaire mining tycoon Dan Gertler. There were questions about whether the government needed to authorize changes to the ownership structure. Gertler has been accused of bribing DRC officials but the Israeli businessman denies the allegations.
Today Glencore announced it will purchase the 31% stake in the copper-cobalt project owned by Gertler's Fleurette Properties Limited, taking full ownership of the mine from its present 69% share- in a transaction that values the stake at USD$922 million. The company will also purchase Gertler's minority stake in Katanga Mining Ltd. (TSX:KAT), for $38 million, increasing its ownership in the company which owns the Katanga copper-cobalt mine, also located in the DRC, to about 86%. Including loans that it has already made to Fleurette, Glencore will pay $534 million in net cash for the two assets.
The announcement vaulted Glencore's stock, which closed up 2.67% on the London Stock Exchange.
Glencore, which was severely hit by the recent rout in commodity prices, managed last year to strengthen its balance sheet and cut debt. It also resumed work at a few halted mines, including a few coal operations in Australia.
Now the firm led by Ivan Glasenberg is looking to deals. In December, the company joined forces with Qatar's sovereign wealth fund to buy almost a fifth of Rosneft, the giant Russian oil company, in a deal worth $11 billion.
In 2015, Mutanda produced 216,100 tonnes of copper and 16,500 tonnes of cobalt, more than any other mine in Congo. The operation is considered one of Glencore's main growth assets and a key operation in the DRC, largely thanks to its high ore grades and low expansion costs.
Katanga's operations were suspended in September 2015; that year it produced about 113,00 tonnes of copper. The suspension continued through 2016 and production is expected to resume once cost-cutting upgrades to the processing circuit are completed, in the second half of the year.