Glencore Xstrata Plc (GLEN), the global mining and commodities group that started trading in Johannesburg today, has an edge over rivals through its mix of businesses, its chief executive officer said.
Combining mining and trading “gives us a very big advantage,” Ivan Glasenberg told reporters in the city. “We see and understand the performance of markets sooner than anyone else because we’re dealing. If you take coal, we deal with the Russians, we deal with the Indonesians, we deal with the Colombians, we deal with the Americans,” he said. “We see things before any other mining companies.”
Glencore has become the third-biggest company on the Johannesburg Stock Exchange, while keeping its primary listing in London and a further secondary one in Hong Kong. Glasenberg, 56, won approval from Xstrata Plc investors in a November 2012 vote to create the fourth-largest mining group, with operations in more than 50 countries, including South African coal, chrome and platinum assets.
The stock closed at 53.87 rand, 2.1 percent below its opening level. It was the most active share by volume and value. Glencore dropped 2 percent to 324.9 pence by the close in London, valuing the company at about $69 billion.
South African investors are able to buy Glencore’s Johannesburg stock without it counting toward foreign ownership limits imposed by local authorities.
“In terms of diversification, it offers something pretty unique,” said Hanre Rossouw, Investec Asset Management’s head of commodities for frontier and emerging markets. With Glencore’s copper mining and marketing business, “you’ve got two-thirds exposure to something you don’t really get in the South African market,” he said.
Glencore’s South African assets include the Goedgevonden thermal-coal complex in the Mpumalanga province, the Helena underground chrome mine on the eastern limb of the Bushveld Complex, the Wonderkop ferrochrome plant in the North West Province and the Eland platinum mine near Pretoria.
Glencore is the most diversified among the biggest mining “majors,” the Baar, Switzerland-based company said in a Nov. 11 presentation. While iron ore accounted for 89 percent of first-half earnings before interest and taxation at Rio Tinto Group, 52 percent at BHP Billiton Ltd. and 48 percent at Anglo American Plc (AAL), Glencore’s biggest-single contributor was copper at 30 percent, the presentation shows.
“We anticipate healthy demand” for Glencore stock from South African fund managers, Jeff Largey, an analyst at Macquarie Group Ltd. in London, said in e-mailed comments yesterday.
The JSE listing may have a negative impact on shares of Anglo American, which also trades in the city, Largey said. Local investors may switch to Glencore to further dilute their “South Africa risk,” given the mining and commodities-trading group’s lower overall reliance on the African country. South Africa accounts for about 45 percent of Anglo’s revenue.
Glencore would consider further diversification, looking at potential opportunities in iron ore, where it has a marketing business, Glasenberg said. The company still plans to divest the 24.5 percent stake in platinum producer Lonmin Plc (LON) it gained in the Xstrata takeover.
“We’ve always said at some stage we’ll dispose of our stake in Lonmin,” Glasenberg said today. “We’ve just got to decide when is the right time.”
Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore Xstrata.
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