Glencore looms over Anglo-Teck’s $1.4B copper prize: FT

Glencore (LSE: GLEN) could complicate Anglo American’s efforts to capture the biggest gains from its $53-billion merger with Teck (TSX: TECK.A TECK.B, NYSE: TECK) as the miners negotiate how to combine neighbouring copper operations in Chile, according to the Financial Times. 

Anglo and Glencore are discussing integrating parts of Collahuasi copper mine in Chile, where each owns 44%, with Teck’s nearby Quebrada Blanca complex. Anglo hopes to close its merger with Teck as soon as next month, pending Chinese regulatory approval.

Glencore “understands there is some real economic value to go after and is likely to play hardball,” a top Anglo investor quoted by Financial Times on Sunday said. “I don’t expect it to be smooth and easy. Glencore is in the stronger bargaining position.”

The companies are studying the construction of a 15-km conveyor to link Collahuasi’s high-grade ore to QB’s processing facilities, adding the equivalent of a new mine’s output. The system is projected to deliver an extra 175,000 tonnes of copper per year between 2030 and 2049, at lower costs and shorter timelines than a standalone development.

Hard bargain

“The industrial logic of combining Collahuasi and Quebrada Blanca is undeniable,” Anglo CEO Duncan Wanblad said in a conference call last year. He estimated an agreement with Glencore could add $1.4 billion in annual earnings before interest, taxes, depreciation and amortization.

Extracting those gains will require Anglo-Teck to establish the relative value of the assets, how an integrated operation would work and how the resulting benefits would be divided. Wanblad said in July that discussions were “in progress.”

“Everybody will be looking to make sure we’ve got the right valuations,” he said. “All of us have to get an alignment on that in the first instance and then work out how we distribute the synergy value between us.”

Glencore declined a request for comment on Monday from Northern Miner Group publication MINING.COM.

The talks come as the world’s largest diversified miners compete for greater exposure to copper, which is expected to face long-term supply constraints as demand grows from power grids and other industries. Copper-focused miners also command higher valuations than companies with broader commodity portfolios.