LONDON – Glencore PLC said it could invest nearly $1 billion in a Peruvian zinc operation, another sign the Swiss mining and trading giant is opening its cash hoard for acquisitions as rebounding commodity prices refill its coffers.
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The investment in Peruvian mining company Volcan Compañia Minera S.A.A. will add to Glencore's world-beating zinc assets. Glencore is the world's leading miner and trader of zinc, an essential metal for making steel, owning a position big enough already that the company's decisions can move prices.
Soaring zinc prices, buoyed in part because of the firm's 2015 decision to shut down about 4% of global zinc production, have boosted Glencore's profits this year.
Glencore said Tuesday it had already struck agreements with shareholders of Volcan to purchase 27% of its class A shares for $531 million. It said it is making an offer to all Volcan shareholders for up to 48% of its class A shares, which would put its total holdings of class A shares as high as 66.3%.
Including class B shares, Glencore, an investor in Volcan since 2004, will hold between 19% and 28% of the company following the investment, which it expects to complete by November or December.
The total amount payable by Glencore, depending on shareholders' response, will be between $531 million and $956 million, the company said. The investment will be paid out of existing cash resources, it said.
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Glencore, which was required to make an offer for the B shares in accordance with Peruvian stock-exchange rules, is unlikely to spend significantly more than the $531 million outlay for the A shares, according a person familiar with the matter.
Volcan is "one of the world's largest producers of zinc, lead and silver, " according to the company's website.
Glencore, led by mining-deal maven Ivan Glasenberg, has been more focused on acquisitions during the recent recovery in commodities than most of its competitors.
Glencore inked a $1.1 billion deal in July for a stake in Australian coal assets and considered a bid for $11 billion grain trading company Bunge Ltd. In February, Glencore agreed to pay $531 million in cash to acquire stakes in two African copper projects.
Glencore's shares have surged more than 400% since they plunged in 2015 as investors worried that falling commodity prices, sparked by an economic slowdown in China, would lead to downgrades from credit-ratings firms.
Rebounded prices for copper, cobalt, zinc, coal and other commodities have provided much needed cash to Glencore and other mining companies, letting them pay down debt, reinstate dividends and, increasingly, look to do deals.
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(END) Dow Jones Newswires
October 03, 2017 14:35 ET (18:35 GMT)