An official stands in front of a sign for mining company BHP Billiton outside the Perth Convention Centre, where their annual general meeting was being held in Perth, Western Australia, November 19, 2015. (Reuters Photo/David Gray)

Major Mining Assets Change Hands After Commodity Rout

BY :REUTERS

SEPTEMBER 09, 2016

Large mining companies are selling off prized assets after the prolonged global commodities markets rout left some with high levels of debt.

Anglo American, Glencore and Freeport have been at the forefront of those companies trying to sell, but BHP Billiton and Rio Tinto have also been seeking to rationalize their assets while signalling an interest in acquisitions.

Slower growth in China triggered the slide in the prices of raw materials, and Chinese companies are among the potential buyers of assets on sale, aiming to secure natural resources as the economy expands. China Molybdenum Co snapped up two assets in less than a fortnight.

Share prices in mining firms have recovered as investors take a cautious view that commodity prices have bottomed out.

Ultra low interest rates that limit investment opportunities and Britain's vote in June to leave the European Union have also boosted the shares of London-based mining firms whose earnings are mostly overseas and denominated in the US dollar, now stronger relative to sterling.

Following is a list of the main mining companies, some of the sales so far and what assets are on offer:

BHP BILLITON LIMITED

Market capitalization: 58.5 billion pounds ($78.3 billion)(Reuters data)

Net debt: $26.1 billion (company reported in August)

Share price movement this year: up 31.4 percent (to close of business Sept. 7)

In 2015, it span off South32 to focus on its core business.

The world's largest exporter of metallurgical coal, BHP has agreed to sell its coal assets in Indonesia to partner Adaro Energy for $120 million.

Together with Exxon Mobil Corp, BHP Billiton said it is considering selling depleting energy assets in Australia, including Kingfish, the country's largest discovered oilfield.

It has agreed to sell half of its stake in the Scarborough area gas fields off Western Australia for $400 million.

Sources say BHP may also be seeking to buy some coal assets from Anglo American.

RIO TINTO PLC

Market capitalization: 43.3 billion pounds

Net debt: $12.9 billion (company reported in August)

Share price movement this year: up 17.8 percent

Rio has been seeking to offload less profitable businesses.

Last year, it agreed to sell its 40 percent stake in the Bengalla coal mine in Australia to New Hope Corp for $606 million.

In January, it agreed to sell its Mount Pleasant thermal coal to Salim Group's MACH Energy Australia for $224 million.

Rio Tinto has also been running an on/off process to sell its Hunter Valley assets although no deal has been struck.

The miner is shifting its emphasis to copper and said it will no longer fund major expansions in iron ore as that market reaches saturation.

GLENCORE PLC

Market capitalization: 26.1 billion pounds

Net debt: $23.4 billion (company reported in August)

Share price movement this year: up 105.4 percent

Glencore has said it is aiming to cut its debt to between $16.5-$17.5 billion by the end of this year by selling assets worth $4-5 billion, after it took a heavy beating on the stock market in late 2015.

In August, it said it had already agreed asset sales of $3.9 billion.

They include a deal to sell just under half of its agricultural business to two Canadian funds for $3.125 billion. At the same time, it shifted $3.6 billion in debt over to Glencore Agri.

Glencore is also considering selling its Vasilkovskoye gold mine in Kazakhstan, worth more than $2 billion, sources close to the deal said.

In August it announced it was selling a 30 percent stake in its Ernest Henergy copper mine in Australia as well as all the gold produced as a byproduct.

Glencore is seeking to sell its Cobar copper mine in Australia.

It has abandoned plans to sell its Lomas Bayas mine in Chile.

But together with Origin Energy ORG.AX has put its hydropower business Energia Austral in Chile up for sale, two people familiar with the process said.

Glencore could also get up to A$1.5 billion ($1.2 billion) for its coal trains in Australia, as it taps into a hot market for infrastructure.

Last year, it raised $2.5 billion in a share sale last year and sold some copper and nickel mines for about $290 million that it inherited when it bought rival Xstrata.

VALE SA

Market capitalization: 87.7 billion Brazilian reais ($27.40 billion)

Net debt: $27.5 billion (company reported in July)

Share price movement this year: up 50.6 percent

The Brazilian miner has been hit with charges to cover and repair damages after the Samarco dam collapsed at its iron ore mine last year.

The world's biggest iron ore miner has been in talks with Fortescue Metals Group that could see Vale taking a minority stake in the Australian company and blending their iron ore operations to win market share in China.

Vale has also handed its stake in Brazil's CSA steel plant to majority owner Germany's ThyssenKrupp AG for a token sum.

At the start of July, it said it had sold three of its giant "Valemax" iron ore ships to a group led by Industrial and Commercial Bank of China for $269 million. It is also seeking to sell other Valemax ships, also known as Very Large Ore Carriers.

FREEPORT-MCMORAN INC

Market capitalization: $14.2 billion

Net debt: $19.3 billion (results presentation in July)

Share price movement this year: up 56 percent

Freeport-McMoRan has pledged to cut its debt by as much as $10 billion and said it will consider a "broad spectrum" of asset sales.

The company has agreed to sell its majority stake in the Tenke copper project in the Democratic Republic of Congo to China Molybdenum Co Ltd for $2.65 billion in cash. Freeport has an effective 56 percent interest in Tenke, one of the world's largest copper-cobalt deposits.

The Phoenix, Arizona-based company's portfolio includes the Grasberg mine in Indonesia and Cerro Verde in Peru.

In February, it sold a 13 percent stake in the Morenci open-pit copper mine to Japan's Sumitomo Metal Mining for $1 billion.

The biggest US-listed copper producer said in January it would focus on divestitures and joint ventures, although it has so far failed to find a buyer for its oil and gas assets. It suspended its annual dividend last year.

ANGLO AMERICAN PLC

Market capitalization: 11.8 billion pounds

Net debt: $11.7 billion (company reported in July)

Share price movement this year: up 180.8 percent

The miner is aiming to cut its debt to $10 billion by selling $3-4 billion of assets in 2016, including its iron ore, coal and nickel units.

It plans to retain only 16 core assets from 45 previously and also said it would review its Minas-Rio iron ore project in Brazil after three years.

So far, it has sold its niobium and phosphate businesses in Brazil to China Molybdenum for $1.5 billion.

Anglo has also sold its stake in Australia's Foxleigh metallurgical coal mine to a consortium led by Taurus Funds Management for an undisclosed price.

Its metallurgical coal assets in Australia could be valued at about $1.5 billion, sources have said.

In July, its De Beers unit said it was selling its Snap Lake diamond mine in Canada after suspending operations at the unprofitable mine last December.

Anglo is also seeking to sell nickel assets in Brazil, including the Barro Alto and Codemin mines, although offers so far had been too low to lead to a deal, sources have said.

ANTOFAGASTA PLC

Market capitalization: 4.8 billion pounds

Group net debt: $1.04 billion (company reported in August)

Share price movement this year: up 9.1 percent

In July, the Chilean copper miner paid Barrick Gold Corp $1 billion for 50 percent of the Zaldivar copper mine in Chile, an asset once dubbed the "Andean ATM".

Antofagasta posted a worse than forecast fall in profit in March. Its chief executive said the company would monitor opportunities but saw no attractive targets at present.

FIRST QUANTUM MINERALS LTD

Market capitalization: 7.1 billion Canadian dollars ($5.5 billion)

Net debt: $4.1 billion (results presentation in July)

Share price movement this year: up 97.4 percent

The Canadian miner sold Finnish mine Kevitsa to Boliden in March, with the Swedish group paying $712 million. The company had been seeking to reduce its debt levels by more than $1 billion.

Reuters reported in November that First Quantum had been looking to sell the nickel-copper-platinum Kevitsa mine as well as Ravensthorpe, an Australian nickel mine.

First Quantum said in April the uncertainty regarding its ability to meet the net debt to EBITDA ratio covenant under its debt financing agreements had been removed.

Reuters

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