Looking to capitalize on current market conditions, Glencore is considering creating a standalone company to acquire mining royalties around the world.
The spin-off business would be seeded with at least £300 million of streaming agreements Glencore already owns, and would pursue deals in copper, zinc, nickel and cobalt with a view to an eventual stock market listing.
The Telegraph reported that the business would not be acquiring properties but instead will follow in the example of other companies that involved with streaming supply. One such company, Canada-based Franco-Nevada, does not own any mines but instead makes money by “streaming” supply from miners for resale. In return, the streaming company advances loans to the miner to help fund capital projects.
Franco-Nevada recently outperformed many mining companies. Not owning assets means it can keep its costs low; it is, however, dependent on reliable supply to keep generating cash.
The new company would serve to feed supply to Glencore’s large trading arm, which ships commodities around the world, and the FTSE 100 giant may seek a “partner with deep pockets” to invest, a source familiar with the discussions said.
The spin-off could be launched by the end of the year and would include the rights to stream product from the Antamina copper-zinc mine in Peru, which it co-owns with BHP Billiton. Though a number of companies currently own rights to gold and silver streams, Glencore’s bid would be the first attempt to bundle up royalties from base metals.
Glencore boss Ivan Glasenberg has said he is looking to forge more partnerships in the sector, citing the sale of a 49pc stake in its agriculture business to two Canadian pension funds last year as an example of how the company can grow without stretching its balance sheet.
At the same time Glasenberg has signaled his appetite for more acquisitions, with a stalled takeover tilt for grains trader Bunge and a thwarted attempt to buy coal mines from Rio Tinto.