St Gallen: Mining companies will fight growing resource nationalism and could pull out of countries where governments are demanding too large a share of the pie, commodities giant Glencore warned on Friday, a day after Argentina nationalised the country’s biggest oil firm. “The mining industry is forming tight groups among each other on how we are going to fight it” Glencore Chief Executive Ivan Glasenberg said.
Glasenberg, speaking at a conference in the Swiss town of St Gallen, warned there would be consequences to producer countries seeking an ever larger share of mining profits, a trend which has risen alongside commodity prices as the main mining constituencies raise taxes and royalties.
Glasenberg, whose company is in the throes of a tie-up with miner Xstrata, warned Glencore would not hesitate to withdraw investments in places like Africa if governments change the terms of existing contracts in their favour. “African states are going to have to be very careful because there are minerals all over Africa and if they start this nationalism or if they start taking a bigger profit, we will go elsewhere,” he said.
Glencore, the world’s largest diversified commodities trader, operates across Africa, with key production assets on the continent in South Africa, the Democratic Republic of Congo, Zambia and Equatorial Guinea. Glasenberg also said Xstrata, the FTSE 100 miner in which it has a share of almost 34 per cent, was holding back on the big copper investment in Argentina. “That won’t happen for the moment,” Glasenberg said at a conference session on emerging market risks.
Argentina’s Congress voted on Thursday to nationalise YPF, seizing a majority stake from Spain’s Repsol. The move has drawn swift reprisal from Spain and has prompted warnings that Argentina risks scaring off much-needed foreign investment. Glasenberg declined to specify the asset in question in Argentina.
Xstrata’s assets in the South American country include Alumbrera, the country’s largest copper mine, a joint venture. It also has a 50 per cent interest in Agua Rica and 100 per cent of El Pachon, two early stage copper projects. Agua Rica is just 35 km from Alumbrera.
“Work progresses on the evaluation of our El Pachon and Agua Rica growth projects in Argentina, and we continue to monitor the situation in the country,” an Xstrata spokeswoman said, adding that the status of both the projects was unchanged.
Major miners across the sector have been reviewing their investment in major greenfield projects, as they come under pressure from shareholders to do a better job of balancing investment in growth and returns for investors. Swiss-based Glencore is currently seeking shareholder backing for a US$37 billion takeover of Xstrata. The structure of the deal requires 75 per cent of shareholders excluding Glencore to approve it.
Glasenberg said that the deal was broadly supported but that shareholder demands were not yet resolved. Most shareholders like the deal but shareholders want more. “They are asking for a better ratio,” he said, declining to comment on whether Glencore could improve its current offer of 2,8 Glencore shares for every Xstrata share held. Xstrata investors are expected to vote on the deal in July.