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Posts Tagged ‘London’

Mining Week 08/’12: GlenStrata’s antitrust & an Indian giant

February 25, 2012 Comments off

Top Stories of the Week:

  • Glencore and Xstrata to seek merger approval in Brussels
    • Despite earlier statements that Xstrata and Glencore would not need to seek approval from the European Commission the parties have now decided to submit their case for approval in Brussels.
    • The companies argue that there is no significant increase in market domination because of the strong ties the companies already had prior to the merger.
    • The European Commission will now have to decide on the potential restrictions to the new company, such as the obligation to sell certain elements of the business. A market density index calculation is used to see whether or not the new company would have a too dominant position. The big uncertainty in this calculation is how the Commission will scope the market or markets the companies are active in.
    • Sources: Wall Street Journal; Financial Times; EU Merger Control Rules
  • Vedanta merges Indian assets to create Indian mining giant: Sesa Sterlite
    • Vedanta has decided to merge all its Indian assets, including Sesa, Sterlite, and Cairns India, into one big Indian company. This new Entity will be named Sesa Sterlite and will have a market capitalization of around $22bln. Vedanta will hold just under 60% of the shares.
    • Sources: Times of India; Economic Times; Vedanta presentation
  • Tavan Tolgoi plans to list in June
    • The Mongolian government plans to list a significant part of Tavan Tolgoi, a large coking coal project in the south of the country, in both London and Hong Kong this summer. Regulatory issues threaten to delay the HKEx listing.
    • The government plans to eventually hold 51% of the shares, give 20% to the population, sell some 10% to local business at a discount, and make the rest available to international investors. A significant part of the 20% given to the population might find its way to international investors.
    • Sources: Wall Street Journal; FOX Business

Trends & Implications:

  • The creation of Sesa Sterlite builds both a second diversified miner with a significant oil & gas business (next to BHP Billiton) and a second diversified miner with a significant interest in zinc (next to Glencore/Xstrata).
  • If Vedanta manages to both make the merger integration of the 7 or more individual companies a success and to manage its investments in other developing countries successfully, it creates the primary candidate to become the stable Indian mining giant. Growth of the Indian industry is phenomenal but faces many challenges. The mixture of a very strong Indian foothold with high growth assets in many other developing countries could prove to be a good basis for risk diversification.

©2012 | Wilfred Visser | thebusinessofmining.com

Mechel Mining Plans London IPO

July 26, 2011 Comments off

“Russian coal and steel group OAO Mechel’s mining division, Mechel Mining, plans to hold an initial public offering in London this year, two bankers familiar with the matter said. The deal may raise between $3 billion and $4 billion, the first banker said adding the placement will most likely take place in the fourth quarter.

Morgan Stanley will take the lead roles on the deal, the bankers said. ‘It’s one of half a dozen Russian deals due out of the blocks in the fall,’ the first banker said. A handful of Russian deals were withdrawn from marketing in London in the first half of the year, after investors pushed back on price and amid volatile markets.”

Source: Wall Street Journal, June 3 2011

Observations:

  • Mechel’s mining segment includes: Southern Kuzbass Coal Company, Yakutugol, Mechel Bluestone coal company (USA), and the Korshunov Mining Plant. In 2010 Mechel’s plants produced 21.6mln tonnes of coal and 4.2 mln tonnes of iron ore concentrate and 3.8mln tonnes of coke.
  • Mechel announced the intention to bring the Mining division to the stock exchange in November 2010, still doubting between London, New York, and Hong Kong. The company itself listed at the end of 2004 in New York.
  • Based on a new share offering of 25% of common shares the size of the IPO still will be in the range of $3.3-4.0bln, above earlier expectations.

Implications:

  • The proceeds of the IPO will help Mechel to expand production capacity by developing the Elgo coal deposit and to reduce its gearing. Like many Russian companies Mechel is facing high debt costs while and at the same time needs to invest heavily. This combination of issues drives many Russian companies to an IPO this year.

©2011 | Wilfred Visser | thebusinessofmining.com

Polyus set for listing after Kazakh progress

June 24, 2011 Comments off

“Polyus Gold, Russia’s largest gold producer, is poised to come to the London market after a long-delayed merger with Kazakhgold appeared resolved on Friday. The deal, which carries a nominal share-swap value of $13.1bn (£8bn), would create the largest gold miner on the London market in production terms.

Polyus, which has controlled Kazakhgold since 2009, proposed a reverse takeover last year. Polyus was to be bought by its smaller, majority-owned subsidiary, in order to gain access to Kazakhgold’s London listing.”

Source: Financial Times, June 18 2011

Observations:

  • Polyus Gold reached gold production of 1.4Moz last year, which is over 20% of total Russian production and close to 2% of global production. The company operates 9 mines and has 2 development projects at present. Reserves of 78Moz place the company among the gold miners with the largest potential globally.
  • Polyus will get access to the London Stock Exchange by merging with Kazakhgold, which already is listed in London.

Implications:

  • The deal is an example of the trend of Russian miners pursuing a listing on western stock markets (especially London) to enable western investors to invest and make it easier to raise capital for the range of development projects to be undertaken in Russia.
  • Secondary reason to pursue a London listing mentioned by Polyus is the potential for ‘acquisition and consolidation in the industry’, as the listing makes it easier to execute both share-based and cash execute. As Polyus currently is not sitting on a huge war-chest the company will likely stick to organic growth and small acquisitions financed share issuance. Furthermore the company could look around for potential international buyers.

©2011 | Wilfred Visser | thebusinessofmining.com