Glencore Agrees $670 Million Sale of Australian Gold Output

Glencore Seeks to Dig Itself Out of Debt Hole
  • Evolution Mining to acquire gold production from Ernest Henry
  • Deal gives Australian gold producer 30% stake in operation

Glencore Plc, the miner and trader that’s sold assets and shares to cut debt, agreed a A$880 million ($670 million) deal to sell future output from an Australian copper and gold mine to Evolution Mining Ltd.

Evolution, Australia’s second-largest gold producer, will receive the equivalent of 100 percent of future gold and 30 percent of copper and silver production from the Ernest Henry operation in Queensland, Glencore said Wednesday in a statement. Evolution will also take a 30 percent interest in the mine.

Miners including Vale SA are being attracted to so-called streaming deals as a method of trimming debt. Baar, Switzerland-based Glencore, run by billionaire Ivan Glasenberg, has sold future output and disposed of assets in a bid to almost halve its borrowings to as low as $17 billion by the end of the year.

Streaming deals give miners upfront payments in exchange for metal. Under a deal agreed last November, Glencore sold a share of its future silver output to Silver Wheaton Corp. for terms that included a $900 million upfront payment. In February, the producer agreed a $500 million deal with Franco-Nevada Corp. to sell a precious metals stream from its Antapaccay mine in Peru.

Glencore has sold about 50 percent of its agriculture business for just over $3.1 billion, while copper mines, an Australian coal rail unit and a Kazakhstan gold mine have also been put up for sale under efforts to reduce debt. The producer is scheduled to report first-half earnings later on Wednesday.

Higher Output

Adding output from Ernest Henry, which Glencore will continue to manage, will raise Evolution’s forecast gold output this fiscal year to between 800,000 and 860,000 ounces, the producer said in a separate statement. Evolution also announced a A$901 million capital raising to fund the deal, comprising a A$401 million sale of new shares to existing holders and a new A$500 million syndicated loan. Royal Bank of Canada advised Evolution on the deal.

“The addition of low-cost gold production from Ernest Henry to our portfolio gives us exposure to another high-quality, long-life asset,” Evolution Executive Chairman Jake Klein said in the statement. Evolution last week agreed to sell its Pajingo gold mine in Australia under a drive to improve the quality of its portfolio.

After rising as much as 9.1 percent by March, copper has now lost almost all its gains in 2016 as investors anticipate supply will outpace demand. It’s the worst performer among the six major metals traded on the London Metal Exchange. In contrast, gold has advanced 26 percent this year as investors have sought haven assets amid global political and economic uncertainty.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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