http://www.ft.com/intl/companies/mining
Ivan Glasenberg, the chief executive of Glencore, demonstrated in a 48-hour period this year why the Switzerland-based group occupies a singular place among the world’s biggest mining companies.
With acquisitions taboo for most large miners after a decade-long spending binge, perhaps only the ebullient trader would have followed a $5.85bn disposal of a Peruvian copper mine with the $1.35bn purchase of Caracal, a west African oil explorer, a day later.
The flurry of activity showed not only that Mr Glasenberg has retained his eye for an opportunity after the $80bn purchase of Xstrata last year, but also that he has a unique mandate to grow via acquisition, at a time when peers such as BHP Billiton are reversing years of dealmaking growth and streamlining their businesses.
“The market believes the Glencore management team are a solid allocator of capital,” says Dominic O’Kane, analyst at JPMorgan.
“What Ivan buys next” has been a favourite mining sector parlour game even before Glencore’s stock market flotation in 2011. Now it is likely to be played with increasing interest. Glencore has digested most of Xstrata as well as Viterra, a Canadian grain trader it bought for C$6.1bn in 2012, and can take advantage of opportunities while rivals stick to a diet of austerity.
Its shares – currency for large acquisitions – have also started to outperform its mining peers, with Glencore benefiting from its diversity of earnings and lack of exposure to iron ore, this year’s worst performing bulk commodity.
A buzzword at Glencore’s Swiss headquarters is “optionality”. Glencore denies any goal to grow in a particular commodity, insisting only that any mine, oilfield or agricultural production can be funnelled into its formidable trading and logistics machine.
Mr Glasenberg also stresses that he will give cash back to shareholders, including himself with an 8 per cent stake, if no high-returning growth options emerge. Glencore has already started to return capital, launching a $1bn buyback last month, while saying it saw plenty of “organic and other growth opportunities to pursue when appropriate”.
“Do I think Xstrata was the end of Ivan’s ambitions?” asks Paul Gait, analyst at Bernstein Research. “Absolutely not”.
One of the miners most frequently mentioned as a likely Glencore target is Anglo American. The venerable mining house underperformed its rivals during the commodities boom and fended off a previous takeover bid from Xstrata in 2009. Chief executive Mark Cutifani is battling to revive its fortunes.
However, two of Anglo’s largest businesses are diamonds and platinum, neither of which Glencore trades. In fact, Glencore wants to sell a minority stake in platinum producer Lonmin, inherited from Xstrata.
Other Anglo assets such as coal could also cause antitrust issues for Glencore in South Africa. All told perhaps “less than a third” of the business – its iron ore and copper – will interest Glencore, says an adviser.
Some bankers say Glencore can think bigger. Rio Tinto, larger than Glencore by market capitalisation, gains almost all its earnings from iron ore, where its operations are generally seen as the best in the business. In contrast, Glencore trades but does not mine the steelmaking commodity.
The lack of meaningful overlap between the companies would make the creation of a “GlenTinto” a powerful alternative to BHP, which is ending its interest in several commodities by spinning off a portfolio of non-core assets.
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