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RPT-Glencore seen reluctant to step up asset sales to include top mines

Published 2015-09-30, 02:30 a/m
© Reuters.  RPT-Glencore seen reluctant to step up asset sales to include top mines
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(Repeats Tuesday story to more subscribers with new slug)
* Sale of whole ags unit could reap $10-12 bln-UBS
* Asset sales tough amid depressed commodity markets
* Owns top copper mines in Chile, Peru

By Eric Onstad and Olivia Kumwenda-Mtambo
LONDON/JOHANNESBURG, Sept 29 (Reuters) - Debt-laden Glencore
GLEN.L may unload all its agricultural assets instead of just
a stake, analysts said, but the commodity group is unlikely to
expand its divestment programme to include top mines.
Selling assets is one prong of a wider strategy by the
Swiss-based trader and miner to cut about a third of its $30
billion debt and to regain the trust of investors after its
shares tumbled by about three quarters this year to record lows
amid weak global commodity prices.
On Tuesday, Glencore shares bounced and the group said it
was "operationally and financially robust".
Earlier this month, Glencore outlined a plan to reap $2
billion for its debt reduction plan by selling a minority stake
in its agricultural business and also the rights to precious
metals extracted from its copper and zinc mines, among other
possible asset sales.
On Monday, Glencore provided a taste of what might come with
the $8 million sale of a Brazilian nickel project.

"If there's an interesting bid on the table, Glencore may
consider selling all of the agriculture assets," said UBS
analyst Myles Allsop.
"These guys are very pragmatic - if they can raise $10-$12
billion from the sale of ags and address all the balance sheet
concerns, they would seriously consider it."
Glencore declined to comment on the possibility of selling
its entire agriculture business, but a source close to the
company said that if it received an attractive bid, it would
have to look at it.
Glencore's agricultural division, which focuses on grains,
oilseeds, cotton and sugar, expanded three years ago with the
C$6.1 billion takeover of Viterra, Canada's biggest grain
handler.
But getting a decent price for any commodity assets on the
block is expected to be tough as markets hit multi-year lows,
especially when some buyers regard Glencore as under pressure.
"The (ags) business has got hugely volatile earnings.
Selling weaker assets in a portfolio in a weak market is
particularly challenging, it's not an easy task," said analyst
Marc Elliott at Investec in London.
The Food and Agriculture Organization's food price index,
which measures monthly changes for a basket of cereals,
oilseeds, dairy, meat and sugar, slumped to a near six-year low
in July.
Agriculture prices, along with other commodities, have been
hit by an economic slowdown in China, the world's biggest buyer
of raw materials, together with ample supplies.
"The difficult thing now is that Glencore are forced sellers
and if I was buying something off them, I wouldn't give them a
very good price, because I would know they were desperate," said
Matthew Hasson, a sales specialist in mining for Numis.

TOP SOUTH AMERICAN MINES
Glencore would not be keen to sell crown mining jewels in
such depressed market conditions, analysts said.
Some of its top mining assets are in South America, where it
owns a 44 percent stake in Collahuasi in Chile and 33.75 percent
in Antamina in Peru.
"I don't think they want to sell tier 1 mining assets in
this sort of environment ... Selling copper assets at a decent
price at this point in the cycle is tougher," Allsop said.
Instead of selling mines, Glencore is offering the chance to
buy a stream of precious metals produced as by-products from
base metals operations.
Macquarie estimated that Glencore could raise as much as
$1.5 billion by streaming just 10 percent of its gold output.
That sales process - in which separate transactions are
typically agreed for individual mines - is already underway and
deals are expected in the next few months, analysts said.
The sale of agricultural assets may take slightly longer,
with the first quarter of next year a likely target, they added.
Glencore's plan to cut debt also involves reducing working
capital and selling off some inventories, but analysts said
there was not a lot more scope in this area since a certain
level of stocks is important to its trading operation.
The sales of any assets in the current gloomy market
conditions is unfortunate, said senior analyst Paul Gait at
Bernstein.
"This is the problem with the short-term panic that you see
in these kinds of markets. It basically precipitates sub-optimal
decision-making in an attempt to appease market forces rather
than deliver long term value to shareholders."

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