glencore

Glencore To Sell Kazakh Gold Mine

May 5th, 2016 by

Mining giant Glencore is looking to sell its Vasilkovskoye gold mine in Kazakhstan, in another move to reduce its towering debt load. The company’s largest gold mine, it has proven and probable reserves of more than 5 million ounces, and production of 350,000 ounces a year.

Glencore values the mine at $2 billion, which would go a long way to the company’s goal of reducing its debt by $9 billion in 2016.

Options For Vasilkovskoye

glencoreGlencore is holding on to the option of entering a streaming deal at Vasilkovskoye, if it doesn’t get an adequate offer for the mine outright. The company has had some success with previous streaming deals, Since precious metals mining is not considered a core area for the company, it feels more flexible regarding sales or streaming deals.

Some market analysts forecast that the most likely buyers for the gold mine will be Chinese. Since Kazakhstan and China share a border, Chinese companies have been eager to develop sources of coal and base metals in the country, and have already invested many billions of dollars fostering trade between the two countries.

Even though Kazakhstan is the largest nation and largest economy in Central Asia, its comparative remoteness from Europe and the US make Western mining companies less interested in working there.

Trimming Down to the Bone

In addition to selling off or making streaming deals for its precious metal production, Glencore has been shedding assets as fast as it can, as long as it can get a good price. While the rate of divestiture has been quick, management is not looking to hold a fire sale.

thumbs-upFrom a high of $55 billion in debt after its acquisition of mining company Xstrata in 2013, Glencore started 2015 with nearly $35 billion in total debt. Stung by a plunging stock price and persistent talk of bankruptcy, Glencore management embarked on a concerted effort to lose the dubious distinction of being the most-indebted mining company in the world. The company exceeded its 2015 goal of slashing $5 billion in debt, cutting liabilities by $8.7 billion.

Glencore’s goal for 2016 is to bring debt down by another $9 billion, to $17 billion.  Efforts this year toward that goal include selling a 40% stake in its agriculture business for $2.5 billion; a $500 million streaming deal from its gold and silver production in Nevada; and a possible $1 billion sale of a copper mine in Chile. A sale of the Vasilkovskoye gold mine in Kazakhstan would put the company 2/3 of the way to its debt reduction target in the first half of the year.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product