Glencore eyes sale or IPO of its gold mines

City A.M. Reporter
COMMODITIES trader and miner Glencore is thought to be considering putting its gold mines on the market as gold prices remain robust while other metals prices tumble.

One option is understood to be for the Glencore, the world’s biggest commodity trader, to list the assets which mainly consist of the largest gold mine in Kazakhstan, Vasilkovskoe. The value of the mines is unclear, but they produce almost as much gold as recently listed African Barrick Gold, which has a market value of $3.7bn (£2.6bn).

Privately held Glencore , which has taken initial steps towards a public listing valuing it at more than $35bn, said in March it planned disposals after it bought back the Prodeco coal operations in Colombia for around $2.5bn from mining group Xstrata.

The Switzerland-based company promised about $1bn of disposals after discussions with credit rating agencies about its liquidity.

Glencore’s gold assets are owned through Kazzinc, in which Glencore has a 51 per cent stake. Kazzinc owns 100 per cent of Vasilkovskoe and 48 per cent of the Novoshirokinskoe mine in Russia.

The combined gold assets produce 700,000 to 800,000 ounces of gold per year compared to forecast output of 800,000 to 850,000 ounces at African Barrick this year.

On 28 May, Kazzinc launched a $700m processing plant for its gold operations in northern Kazakhstan. When Glencore issued first-quarter results to bondholders, it said Kazzinc had paid $200m in cash and shares to buy the remaining 60 per cent stake in Vasilkovskoe Gold.

Gold prices, which touched a record peak of $1,248 per ounce last month, have outperformed other metals. Gold has gained about 11 per cent so far this year while copper has shed 17 per cent, touching an eight-month low yesterday on the back of worries about the European debt crisis.

“It makes perfect sense, they (gold assets) enjoy higher valuations in the market,” said credit analyst Roberto Pozzi at Societe Generale in London.

“Their liquidity now is solid, the problem is the outlook is relatively uncertain, so I think they will need to strengthen their ratios and need to make such disposals,” he added.