antamina

Glencore in Talks with Franco-Nevada & Silver Wheaton

Issue 140, September 2015

Glencore is in talks with Silver Wheaton and Franco-Nevada over gold and silver streaming deals on three of its copper mines in South America, according to high level sources directly involved in the process.

Negotiations are currently focused on Glencore's Antamina and Antapaccay copper mines in Peru and its Collahuasi copper mine in Chile. They are all “proven operations”, one source involved told Global Mining Observer, with long mine-lives and substantial precious metal byproduct, making them ideal for streaming contracts, equivalent to a bulk forward sale.

The contracts could raise more than $1.4bn for Glencore, based on pricing in recent deals, if it closes agreements over 50 to 75 per cent of its attributable gold and silver from each of the three mines. Antapaccay is wholly-owned by Glencore, whilst Antamina is shared with BHP Billiton, Teck and Japan's Mitsubishi.

Collahuasi, which has a 68-year mine-life, is co-owned by Anglo American. It is unclear whether Anglo American and Teck, which are both locked in capital raising efforts of their own, have also taken a seat at the table.

"Non-Core"

News of the discussions follows surprise measures announced by Glencore last week, including the cancellation of its dividend, a $2.5bn equity raise and an 18-month shutdown of its copper mines in Zambia and the Congo.

The group is also targeting up to $2bn in asset sales, including streaming deals and a potential sale of a minority stake in its agricultural logistics business. Glencore's finance director Steven Kalmin told a conference call last week that the group is “in a process” over streaming, predicting an agreement “before the end of the year.”

Glencore is one of the world's five largest silver miners, generated as byproduct from its base metals mines, and produced 411,000 ounces of gold in the first 6-months of this year, nearly double the output of Canada's largest gold mine.

A Glencore source says its gold and silver byproduct is “non-core”, because it cannot be pumped through the group's $178bn trading division, which is focused on larger markets, including copper, zinc, coal, oil and wheat. A $5bn spin-off of its Kazakh gold assets, part of its Kazzinc portfolio of zinc mines, was pulled in 2010, shortly before Glencore's listing in London, Switzerland and Hong Kong, due to market conditions.

The Kazakh mines account for nearly two-thirds of Glencore's gold production, but are not part of current discussions. Its attributable production...

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