Monday, March 31, 2014

Glencore share price: Miner steps up iron ore drive

iNVEZZ.com, Monday, March 31: Glencore Xstrata (LON:GLEN) has reached a preliminary deal with Mauritania for a $1 billion contract for access to railway and port facilities, as part of its plans to expand into iron ore mining, the Financial Times reported yesterday.

The Switzerland-based commodities giant, whose robust copper and coal output pushed 2013’s earnings higher (Glencore share price: Mining giant posts 2013 earnings ahead of forecast), is keen to expand into iron ore, a vital source of profits from rivals BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Brazil’s Vale (NYSE:VALE).

However, unlike its peers, which are mainly looking to expand in Latin America, Australia and Mongolia, Glencore has put Africa at the core of its development, planning three big projects in Mauritania -- two in partnership with state-controlled miner Société Nationale Industrielle et Minière (SNIM) and one as a standalone development.

The railway contract with the western North African country -- pending some final discussions -- is one of the three key obstacles to building the remote Askaf mine and comes after two years of negotiations. Inside sources told the FT that SNIM had initially given Glencore far too high a price for access to its railway for the next 20-25 years.

Mauritania's minister of oil, energy and mines, Mohamed Ould Khouna, told the newspaper in an interview in Nouakchott: "They have now agreed with SNIM the price to use the railway per tonne [according to] international practice."

The FT further revealed that Glencore is also close to reaching a deal for a construction contractor, but the company is still in negotiations with the Mauritanian government about the tax terms of the operation. The talks could take months, according to insiders.

Even if Glencore resolves all the obstacles in the next few months, the Askaf mine is unlikely to start shipping iron ore before the end of the decade. But SNIM CEO Abdellahi Ould Mohamed Oudaâ hailed the preliminary deal with Glencore as an important step. He told the FT: “It’s very rare to find a mining opportunity like this with such exceptional advantages – a rail and port that are already functioning well – that exists nowhere else in Africa.”

Glencore declined to comment on the development.

Glencore share price edges higher

Glencore’s share price opened higher this morning and as of 08:39 UTC today, shares in the FTSE 100-listed mining company had risen 0.54 percent to 314.95p.

According to AnalystRatingsNetwork data, five research analysts have a ‘sell’ rating on Glencore, six have it as a ‘hold’, 14 rate it as a ‘buy’ and one calls it a ‘strong buy’. The stock’s consensus rating is ‘buy’ with an average price target of 367.33p.

As of 08:40 UTC, buy Glencore shares at 315.10p.

As of 08:40 UTC, sell Glencore shares at 314.95p.

Prices can go up and down meaning you can get back less than you invest. This is not advice. Dealing services provided by Hargreaves Lansdown.

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