Glencore in talks to exit Kazzinc operations

Zinc metal Source: LME

GLENCORE was considering selling its stake in Kazzinc as CEO Gary Nagle continues the group’s strategy of portfolio simplification, said Bloomberg News.

Glencore is also in the process of selling the Kazzinc-operated Vasilkovskoye gold mine having scrapped a previous sale more than seven years ago, the newswire said.

The gold mine and Kazzinc’s core zinc operations could be sold to separate buyers or a single party, said Bloomberg News. Discussions were described as preliminary. Glencore declined to comment when contacted by the newswire.

A deal could value Glencore’s nearly 70% holding in the Khazak mining company at several billion dollars, citing people familar with the matter.

Morgan Stanley analysts estimated an enterprise value of $2.7bn for Kazzinc, equal to 17 pence/share. Kazzinc generated an average Ebitda of $900m (on a 100% basis) over the last three years and was valued on Glencore’s books as of December 23 at $3.6bn.

Kazzinc is made up of a network of mines, concentrators and metal finishing plants across Kazakhstan that allow the company to go from digging ore to producing finished zinc metal and products, said Bloomberg News.

The company was set up in 1997 through the merger of eastern Kazakhstan’s three main non-ferrous metals companies, which were majority government-owned.

While zinc prices have improved this year the long-term stability of the metal was in question as it was heavily tied to the under pressure construction sector. Glencore has sought to exit from challenging mines as part of its simplification strategy.

In February, it announced it would close its 49%-owned Koniambo mine in New Caledonia following a steep decline in nickel prices. The group had sunk more than $4bn into Koniambo since 2013 and $9bn since project inception. The operation had not made a profit in the last 10 years, it said.