Glencore will honour Zanaga obligation

[miningmx.com] – GLENCORE would remain invested in the Zanaga Iron Ore Project in the Republic of Congo (RoC) whilst it had a legal obligation to do so, the group said during a press briefing in Johannesburg.

“We need to get it to a certain stage,” said Ivan Glasenberg, CEO of Glencore who, when asked if the Swiss group was therefore a seller of the asset, replied: “We are a seller of any asset at a certain price”.

Of the seven commodities in which Glencore has invested or trades through its marketing division, iron ore is the only mineral it estimated would go down in price between now and 2018.

In terms of a supplemental agreement signed in September 2013 between Glencore and UK-listed Zanaga Iron Ore Company (ZIOC), the parties are to develop the project jointly until developmental finance has been attracted.

The project was first identified by Xstrata and therefore inherited by Glencore when it completed the Xstrata merger.

Glencore has operational control of the project with a 50% plus one share stake while ZIOC owns the balance. ZIOC was to contribute $17m to the project to December 2013 according to a presentation in September last year.

Glencore has an option over the project which was scoped to be developed in two stages producing 12 million tonnes a year (mtpa) in its first stage increasing to 30mtpa in stage two.

The project is situated in-land in the RoC, some 380km from the nearest port. It therefore requires significant infrastructural development which may deter Glencore from remaining in the investment in the long-term.

Glasenberg expressed a similar approach when asked if Glencore had interest in investing in Guinea’s significant iron ore prospects, saying that if infrastructure could be built first it may become a buyer.

Glasenberg has repeatedly distanced Glencore from investment in capital intensive greenfields projects saying the group would focus on bolt-on organic growth, and merger and acquisition opportunities as and when they arrived.

By 2015, it would have no new greenfields projects on its books and had taken down industrial (mining asset) capital expenditure some $1.7bn in its 2014 financial year compared to the 2013 year.

Echoing comments made at the group’s interim results presentation on August 20, Glasenberg said that new supply capacity “was killing” the commodities supercycle which remained intact from a demand perspective.

“Demand in the supercycle is not over; in fact, it’s better than its ever been,” said Glasenberg today. “Iron ore growth is good, but you’ve got to look at supply. Iron ore under pressure because everyone’s adding growth,” he said.