By Steve Fiscor, Editor-in-Chief
One of the big stories this month is BHP Billiton spinning off a group of assets as the company plans to get back to basics (See Leading Developments, p. 4). The $16 billion deal, the largest of its kind in the mining business, drew immediate fire from analysts and stockholders, who were anticipating something else. If the new company, which has no name and will not be headquartered in Melbourne, were a restaurant, the menu would be described as an eclectic mix. The new company could become a takeover target. In this business climate, there are only a few companies with deep enough pockets to buy everything on the menu, but some may order a al carte.
One of those companies would be Glencore, which also has its own mix of fusion dishes. It also has the ability as a metals trader to extract value where others cannot. At the time BHP announced its plans to retrench, Glencore announced it would buy back $1 billion in shares. In doing so, the company outlined the fact that it was returning cash to shareholders rather than investing in expansion. “Growth for growth’s sake isn’t for us,” said Ivan Glasenberg, CEO, Glencore. This is a magnanimous gesture from a company flush with $6 billion in cash from this month’s sale of the Las Bambas copper mine in Peru.
Las Bambas will be an interesting project to watch going forward. Xstrata began developing the project before it was taken over by Glencore. Now the project has been sold to a Chinese consortium, MMG (62.5%), Guoxin International Investment Corp. (22.5%), and Citic Metals Co. (15%). Headquartered in Melbourne, Australia, and listed on the Hong Kong Stock Exchange, MMG owns and operates mines in Australia, Laos and the DRC. This month’s CSR & Sustainability report (See Mining Sector Sustainability in 2014, p. 44) highlights how Peru, the DRC and even Laos are becoming hotbeds for anti-mining activity. The report also delves into an explanation of why the Chinese have struggled with community relations. Bringing Las Bambas into production will be an opportunity for MMG to shine.
Meanwhile, Australia and China have their own issues. A bitter fight between Clive Palmer, a mining magnate and politician in Australia, and Citic, a Chinese hedge fund, has cast a light on the feeling of distrust some Australians have for the Chinese. The timing couldn’t be worse (or more perfect depending on one’s stance), as Australian politicians are crafting preferred trade agreements with the Chinese. It was the free trade between these two countries that kept the Australian economy out of recession during the global financial crisis. The Minerals Resources Rent Tax (MRRT) would undo that. As this edition of E&MJ was going to press, the Australian Senate had voted to repeal the MRRT after repealing the Carbon Tax a few weeks earlier. Australians voted for politicians who supported this agenda, Palmer included. So far, common sense has prevailed.
There is a similar situation boiling over in Indonesia (See Indonesian Mining Industry in Transition, p. 87). In a nationalistic move, some Indonesians would like to do away with all foreign investment. Many oppose this, seeing massive job losses and a free fall into poverty, especially in the rural mining regions. The country has a newly elected leader, Joko Widodo (or Jokowi), and he faces similar difficult decisions regarding nationalism, mining policy and trade with China.
Steve Fiscor, E&MJ Editor-in-Chief