Swiss commodity trader Glencore is in talks to exit a key asset in Kazakhstan. The company is discussing the sale of 70% of the Kazzinc mining enterprise with local entrepreneur Shahmurat Mutalip. The transaction value is estimated at $4–4.5 billion.
Kazzinc is engaged zinc and gold mining and last year became one of Glencore’s best-performing assets. The high yield is largely due to the record rise in gold prices, which is now trading at five thousand dollars per ounce.
But the negotiations are not limited only to Kazzinc. Mutalip also claims a stake in another large Kazakh structure – Eurasian Resources Group. He is negotiating to buy out 40% of ERG from the company’s founding families. At the same time, the purchase of gold miner Altynalmas is being discussed. If successful, the entrepreneur will gain control over a vast network of assets from aluminum to zinc, which will seriously change the balance of power in the country’s mining and metallurgical complex.
Financing such large-scale acquisitions is a different story. Glencore is ready to help Mutalip with money to buy Kazzinc in exchange for long-term marketing rights. Similar conditions are being discussed for the deal with ERG, but there a competitor has joined the negotiations – trader Mercuria, who also offers financing in exchange for access to raw materials.
For Glencore, the sale of Kazakhstan assets is part of a strategy to focus on the copper business. Earlier this month, merger talks with Rio Tinto, which would have created the world’s largest mining company, collapsed. Glencore now intends to get rid of non-core or problematic divisions in order to free up resources for the development of the copper business.
At the same time, there will not be a complete break with Kazakhstan. Even after the sale, Glencore plans to retain a share of gold revenues and continue to sell Kazzinc and ERG products through its channels. This will allow the company not to lose access to raw materials, but to transfer operational risks and investments to a local partner.
Negotiations are at an active stage, but sources warn that there are no final guarantees. Deals may fall through or change content. However, the very fact of such negotiations signals a change of era. The assets that have defined Glencore’s presence in Kazakhstan for decades are coming under the control of local capital.
Source: Bloomberg
Image: Oralgazieva Elzhana
