The slump is gone, long live the slide? Overnight Wednesday a consortium of Glencore and the sovereign wealth fund of Qatar became the latest groups to signal the long period of contraction in resources, especially oil and gas, is over when they combined to buy a stake in Russia’s giant state oil group, Rosneft for a huge $10.5 billion euros – or nearly $A15 billion.
The deal is the first major move by Glencore for three years and follows its declaration that the years of cutting were over and that a dividend of $US1 billion would flow to shareholders in 2017 (management will be very happy with their large holdings).
The move, announced on Wednesday night, follows the auction of prime oil prospects by Mexico in its section of the Gulf of Mexico, one of which BHP Billiton won and will spend or support investment of $US11 billion for a 60% stake. A few days earlier BP committed to the $US9 billion Mad Dog 2 project in the US part of the Gulf. BHP has a near 24% stake in that project as well.
In late November Anglo American called a halt to its campaign of asset sales, including two big coal mines in Queensland valued at $US2 billion. Anglo says its debt reduction campaign is ahead of target, it is thinking of hiving off its African based assets into a stand alone company (thereby separating it from a big negative, the volatile South African economy and political instability). Anglo said it would still sell assets, but only a good prices (not current estimates in other words).
For that reason it will be interesting see how far Wesfarmers goes with its attempts to find a buyer or buyers for its Curragh high grade coal and thermal coal mine in Queensland and 40% of the big Bengalla mine in the Upper Hunter Valley of NSW. The prices for both have risen as the coal price has soared in recent months. But that could scare off possible buyers who were looking for a ‘bargain’.
And BHP is reported to be prepared to sell its mothballed Gregory Crinum mine in Queensland. But that has been on the market for more than three years.
In early November, South32, the BHP spin off, was one of the first big global miners to let open its purse when it paid $US200 million plus a profit share deal for the Peabody Energy Metropolitan mine on the NSW south coast.
The latest deal will see Glencore and Qatar’s main investment fund buy a 19.5% in Rosneft for €10.5bn, matching BP’s 19.75 % holding. Glencore shares are up around 200% this year as it has sold assets, cut debt and boosted efficiency levels.
This massive deal means that it like BHP is looking at oil to grow in. For that reason you’d have to say that Glencore’s long held ambition to buy Rio Tinto is off the cards, especially with iron ore prices rising strongly for now and copper doing well (which also helps Glencore).
