Glencore likely to agree China concessions for Xstrata merger

City A.M. Reporter
TRADER Glencore is expected to agree to concessions this week to ease Chinese worries over its grip on the supply of copper, clearing the final regulatory hurdle in its $32bn (£20.9bn) acquisition of miner Xstrata.

After months of negotiations, Glencore is ready to yield some ground, with analysts and market sources pointing to a likely sale from among Xstrata’s promising – though challenging – greenfield copper projects, which could include Las Bambas in Peru, due to begin production in 2015.

Industry sources said a solution might also involve giving China a guaranteed slice of the group’s copper production.

Xstrata is already the world’s fourth-largest producer of copper and aims to increase output by more than 50 per cent from 2011 levels by 2015, as projects like the $5.2bn Las Bambas mine ramp up.

Xstrata and Glencore combined account for around seven per cent of global copper supply with mines in Chile, Peru, Australia and in emerging regions like Africa’s copper belt.

As a result, Chinese regulators reviewing the biggest ever mining tie-up have focused on the new group’s presence in the red metal, and specifically copper concentrate, the intermediate product that feeds smelters and refineries.

The EU’s decision to require action is also said to have emboldened China. Regulators in Brussels demanded Glencore scrap an exclusive European zinc sales agreement with producer Nyrstar and sell its equity stake.