Glencore Xsrtata Plc ($GLNCY), one of the world’s largest miners and traders of hard commodities, saw shares higher on the pink sheets Tuesday after announcing that the recent merger of Glencore and Xstrata Plc would result in about four times the savings than had initially been expected.
The announcement is welcome news for a major company in an industry where just about everyone is trying to reduce expenses by shedding assets and tightening up spending. Indeed, mining firms have been selling off underperforming assets, as BHP Billiton (BHP) did in April when it concluded the sale of its Ekati diamond mine in Northern Canada, in order to shore up production on more profitable metals like copper, and especially iron ore, both crucial to rapidly developing economies such as China.
And it looks as though the Xstrata purchase was one of the best cost-saving measures that Glencore could have undertaken. The company has been able to close 33 Xstrata offices, and with employee layoffs, this has added up to a savings of $1.4 billion. Original estimates had savings resulting from the $29 billion deal at about $500 million, though the expectations are now much higher at at least $2 billion.
Furthermore, the company appears to be letting off on coal production. Since the merger, no less than 10 coal projects have been suspended, as demand for the resource wanes across much of the world.
Shares for Glencore were up 2.37 on the OTC markets in mid-Tuesday trading to $10.35. On the London Stock Exchange, shares were up the same percentage, to a share price of $328.75.
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