Glencore has struck a deal to buy out billionaire Israeli-mining entrepreneur Dan Gertler’s stakes in two copper and cobalt mines in the Democratic Republic of Congo, in an agreement that values the assets at $960m.
The Swiss-based mining and trading house, which is back on the deal making trail after two years of deleveraging, will take Mr Gertler’s 31 per cent stake in the Mutanda Mining joint venture, held through his Fleurette Group, and his 14 per cent stake in Katanga Mining.
Mutanda is valued at $922m and Toronto-listed Katanga Mining is valued at $38m, according to a statement from the Fleurette Group, with Glencore set to pay Fleurette $534m in cash after debts are paid. News of the sale was first reported by Bloomberg.
“Mutanda and KCC (Mutanda’s DRC subsidiary) have generated $3bn in tax revenues since our investment – a significant contribution to the DRC economy,” Mr. Gertler said in a statement.
“With the mine now operating at full capacity, we feel now is the right time to exit our investment and to re-invest in further brown and greenfield opportunities.”
The deal is another sign that Glencore’s billionaire chief executive Ivan Glasenberg is back making deals after two years of paying down debts and strengthening the company’s balance sheet. It also marks the first significant cash expenditure since Glencore started its deleveraging programme at the height of the commodity slump in late 2015.
Just before Christmas, the company joined forces with Qatar’s sovereign wealth fund to buy almost a fifth of Rosneft, the giant Russian oil company, in a complex transaction that allowed Glencore to keep its cash outlay to a minimum.
Many of the world’s biggest mining companies are keen to increase their exposure to copper because of its attractive fundamentals, with large supply deficits expected to emerge before the end of the decade. The metal hit a two-year high of above $6,200.
However, they have found it difficult to buy high quality assets because the owners of these mines have been reluctant to sell at anything other than sky high prices.
Glencore has invested heavily to turn Mutanda into a large copper producer. It has been hailed by analysts as one of the Glencore’s most attractive copper assets even though it is in the DRC, where there has been bloody suppression of anti-government demonstrations in recent months.
Three years ago Glencore paid $430m to buy a 14.5 per cent stake in Mutanda from High Grade Minerals, a privately-owned company. That increased its holding to 69 per cent with the rest controlled by Mr Gertler.
Glencore will now own 100 per cent of the shares in Mutanda and around 86.3 per cent of the shares in Katanga.