What do you get when you cross a Glencore with an Xstrata?

You get a $90 billion mining behemoth


Two global resource giants have reached a merger agreement that, if approved, would create the world’s fourth largest mining firm. Glencore International and Xstrata, which owns Canada’s Falconbridge, reached a US$90 billion deal that has been in the works since last spring, the Globe reports.

The new joint firm could immediately rival global mining leaders such as Rio Tinto and BHP Billiton. But regulatory hurdles remain. The Globe’s Eric Reguly says EU anti-trust officials are not likely to challenge the merger, but those in Australia, China, South Korea and Japan could take a hard look, especially given the new joint firm’s dominance in key areas such as coal.

“Regulators everywhere would be crazy not to review the Xstrata-Glencore merger, worth $90b,” Reguly wrote on Twitter. “Its control of some commodities is outrageous.”

Xstrata shareholders, meanwhile, believe the deal undervalues the company, the BBC reports. Several large shareholders are expected to vote against a merger in April. But with Glencore already controlling 38 per cent of the firm’s shares, a shareholder revolt seems unlikely to succeed.

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What do you get when you cross a Glencore with an Xstrata?

  1. I read a Telegraph or Guardian article about the skyrocketing cost of Rare Earth metals, and how this was a problem for wind turbine industry.  When I looked at the petroleum crack-spread contracts available on NY or Chi Exchange, a while back, it gave me a headache.  There is so much churn around different petro-chemicals.  Rare Earths are like that too.  They are mostly a by-product of copper mines.  Copper should be treated like that, with Rare Earths being traded as spreads.

    Then more liquidity will be traded, and more copper mines will be developed.  Taking it even further, there are some wind turbine designs that use Iron-based components instead of Rare Earths.  This ratio itself could be a derivative instrument.  I guess rich petro-finance people aren’t too bright.

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