Glencore Jumps As Xstrata Plc Acquisition Brings Savings

Michael Teague |

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.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BHP BHP Billiton Limited 38.02 0.22 0.58 2,222,707
DNPLY Dai Nippon Printing Co. Ltd. ADR (Sponsored) 9.65 0.09 0.94 23,842

Comments

Emerging Growth

AfterMaster Inc

Studio One Media Inc is a diversified media and technology company. It is engaged in the development and commercialization of proprietary, edge audio and video technologies for professional and consumer…

Private Markets

Santo Diablo Mezcal

Santo Diablo Mezcal has been created to capitalize on a boom sector of the beverage market currently full of many small unmemorable products by producing one sexy, household, easily recognizable…

Snapchat

Snapchat is the fastest way to share a moment with friends. The mobile app, allows users to not only share photos with friends but also control how long they can…