[miningmx.com] – GLENCORE Xstrata underlined its reputation for going into places where its peer group fears to tread after making a £807m ($1.35bn) bid for Caracal Energy, a UK-listed company that drils for oil in Africa’s Republic of Chad.
Shares in Caracal Energy, which will withdraw from a proposed transaction to merge with TransGlobe Energy Corporation, rose 58% to trade at £5.41/share, just below the Glencore Xstrata offer of £5.50/share.
Caracal Energy directors said they were in support of Glencore’s offer which will require a two-thirds vote in favour for the bid to succeed. Gary Guidry, Caracal president and CEO, said the all-cash offer was “… strong recognition of the value Caracal created for its shareholders since inception”.
Said Alex Beard, Glencore’s head of oil in an announcement today: “We believe the combined business will be even better placed to take advantage of the long term opportunities across the African oil sector’.
Caracal has three production sharing agreements with Chad’s government to explore 26,103 square kilometres for oil and gas in the southern part of the country. The two companies had been in partnership since 2012.
Commenting on the group’s recent listing in Johannesburg, Glencore CEO, Ivan Glasenberg said Africa was strategically important and that the company was perhaps less risk averse to operating in the continent that its rivals.
Chad has been producing oil since about 2002. ExxonMobil leads a consortium of Chevron and Petronas that has invested $3.7bn to develop oil reserves which have been estimated at one billion barrels in southern Chad.
However, the country is the seventh poorest nation on earth. The Washington-based Fund for Peace listed Chad in its most recent Failed State Index. The country, which is bordered by Libya and Sudan, recently saw off a coup in 2013.
Shares in Glencore were nudged 0.5% in London by mid-afternoon trade after a busy period for the Swiss headquartered group.
On April 13, it said it had signed an agreement to sell its Las Bambas copper mine project for $5.85bn to a consortium in which China Minmetals Non-Ferrous Metals is a major shareholder.
A further $400m representing capital expenditure and other costs is also payable by the consortium which consists of MMG Limited (62.5%), GUOXIN International Investment Corporation Limited (22.5%) and CITIC Metal Company Limited (15%). China Minmetals Non-Ferrous Metals owns 74% of MMG.
Glencore Xstrata said the capital from the disposal would either be reinvested with surplus capital returned to shareholders.
“Today’s announcement demonstrates our commitment to maximising value for our shareholders,” said Glasenberg. “Our willingness to sell reflects the level of the offer and our conviction that we can utilise the sale proceeds to create additional shareholder value,’ he said.
Las Bambas, located in Peru, is scheduled to commence production in 2015. It was developed by Xstrata prior to its merger with Xstrata. The transaction is expected to close prior to the end of the third quarter of 2014, Glencore Xstrata said.
