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Xstrata, Glencore agree terms for $90bn merger - 8 February 2012

Mining group Xstrata and commodities trader Glencore have agreed terms for a merger that will create a natural resources group with a market value of $90bn, they said on Tuesday. If successful, the combined group will have what they called a "unique business model, fully integrated along the commodities value chain, from mining and processing, storage, freight and logistics, to marketing and sales."

It will be a major supplier of raw materials to the global steel industry. It is the world's largest producer of ferro-chrome and a substantial supplier of other alloys as well as zinc. It is No.4 in nickel and No.5 in metallurgical coal.

One stated ambition of the new company will be to diversify into what the partners called “new commodities with attractive fundamentals”. Analysts have told Steel Business Briefing that iron ore will be one of these.

Xstrata’s iron ore projects in Mauritania – through Sphere Minerals – are at the feasibility study stage. Another project in Republic of Congo is less advanced. Glencore has marketing rights to iron ore from London Mining’s Marampa project in Sierra Leone, and to around half the output from Mt Gibson’s Extension Hill operation in Australia, among others.

Anglo American, with its controlling share of Kumba Iron Ore and operations in Brazil, is mooted as a possible takeover target.

If it overcomes shareholder opposition, the merger is expected to become effective in the third quarter of 2012, and the new company is to be called Glencore Xstrata International.

 

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