Glencore plans to list its shares on the ASX, targeting Australia’s massive pool of superannuation funds as future shareholders.
Glencore chief executive Gary Nagle told The Australian the decision to seek a secondary listing came in response to multiple requests from Australian funds – particularly super funds – whose mandates prevented them from investing too heavily in overseas markets.
Mr Nagle said Glencore would not be seeking to raise any capital as part of its listing, and expected to be trading on the Australian exchange by October.
Glencore is capitalised at about $134bn on the London market, and Mr Nagle said that given the number of queries the company had received, he believed the company would quickly meet the threshold of about $5bn needed for inclusion in the ASX 100.
“Australian investors are very smart, they’re savvy, and they understand mining. Given its economy, Australia has a very well-educated mining investor community. Australians really know their stuff,” he said.
After running a similar secondary listing on South Africa’s Johannesburg exchange, Mr Nagle said about $10bn worth of Glencore stock was now held in the country, and said he expected Australian funds would quickly drive a similar take-up through the ASX when it completes the listing later this year.
Glencore’s decision to seek an ASX listing comes after the expiry of a standstill imposed by UK corporations laws on Rio Tinto relating to a return-to-talks with Glencore over a potential tie-up between the two companies. Rio walked away from negotiations in February, and is not believed to be in any hurry to revisit merger talks with Glencore.
Entry on to the ASX 100 would likely also help underpin Glencore’s share performance, and potentially deliver a short-term boost, as demand for its shares would then be driven by mandatory buying from index-based funds.
Speaking to reporters after the release of Glencore’s first-half financial results, Mr Nagle pointed to low levels of copper exposure on the Australian market other than BHP and Rio Tinto as a reason for the demand for Glencore stock.
“There’s no longer a Metals Acquisition Corp, there’s no longer an OZ Minerals. So if Australian investors want a proxy for copper investments, we’re a very strong copper play given our existing portfolio and our pipeline,” he said.
“So it gives them more optionality to invest in a copper portfolio on the ASX, which they currently don’t have that kind of optionality.”
The secondary listing would make it easier for Glencore to issue performance-based stock incentives to local workers, and potentially use scrip if it were considering acquisitions inside Australia.
Glencore is one of the biggest coal miners in the country, and its Australian thermal coal operations delivered earnings before tax, interest depreciation and amortisation of $US638m in the first half of the year. Its coking coal operations delivered EBITDA of $US238m.
Glencore booked total EBITDA of $US10.1bn for the first half of the year.
But the company’s struggles at its Mt Isa base metals and Murrin Murrin nickel operations in WA are continuing.
Glencore booked a fresh $US457m impairment against Murrin Murrin. It wrote the book value of the ageing laterite nickel operation to nothing, and warned that the high sulphur prices – partly the result of the war in the Middle East and partly the result of BHP’s decision to close its Kalgoorlie nickel smelter – were putting further pressure on the operation.
Glencore shut down its underground copper mines near Queensland’s Mt Isa last year, and is running the regional city’s copper smelter on third-party feed. The long-term survival of that smelter is in doubt, despite the state and federal governments agreeing to a $600m bailout of the smelter last October which would keep the smelter open until at least 2028.
Glencore booked a $US4.4bn net profit for the first half of the year.
Nick EvansMargin Call Columnist and Resource Writer