Glencore to vaunt successes of $46 billion Xstrata deal one year on – by Clara Ferreira-Marques (Reuters India – September 6, 2013)

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LONDON (Reuters) – Almost a year after winning the battle for Xstrata, Glencore (GLEN.L) is set to show investors evidence of early successes, with costs to come down more than targeted, asset sales in hand and key staff retained.

Glencore Xstrata, which has yet to shed a reputation for opacity, will bring its entire management team to London on Tuesday to outline progress after four months in control of Xstrata, following the $46 billion takeover that became the mining sector’s largest to date.

In its first major presentation on the deal since it was completed, analysts expect the trading and mining conglomerate to impress with tougher cost cutting targets. These are likely to include a significant improvement on the $500 million per year synergy goal provided at the time of the acquisition.

That covered only marketing benefits – not costs to be squeezed out of Xstrata’s mines – and Glencore has already said it expects a final number “materially in excess” of that. Analysts at RBC Capital Markets said this week they expected marketing synergies of $600 million – as more Xstrata products go through the Glencore trading machine.

In addition they saw further savings from the group’s industrial side that could exceed an annual $1.2 billion, mostly from Xstrata’s largest divisions, copper and coal.

“Glencore has spoken much about the corporate overheads to come out of Xstrata, but we also think that the company has done as much as possible to strip out additional costs at every level of the old Xstrata operations,” the RBC analysts said in a note.

Glencore is expected to update investors on its review of the Xstrata portfolio of mines and projects. The main project under construction, the $5-billion-plus Las Bambas copper mine in Peru, is already for sale – its disposal was a condition of the Xstrata deal set by China’s antitrust regulators.

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