(Corrects analyst's company in pars 10 and 22)
* Deal includes Peru sale and concentrate agreements
* Glencore on track to close deal on May 2
* Xstrata announces executive departures
By Clara Ferreira-Marques
LONDON, April 16 China's antitrust authorities
removed the last obstacle to Glencore's $30 billion
takeover of miner Xstrata on Tuesday after the commodities
trader agreed to sell a $5.2 billion mining project to ease its
grip on copper.
Xstrata's Las Bambas mine in Peru had been expected to be
sacrificed to secure the approval of China's Ministry of
Commerce, but Glencore also agreed 8-year commitments covering
the supply of copper, zinc and lead to China.
Chinese regulators have rarely demanded asset sales to
improve competition after a major tie-up, but the importance of
the metals that Glencore mines and trades for China's economy
meant the merger was unlikely to go through without changes.
In the event, the newest and least predictable of global
regulators was also the toughest.
Glencore had already signalled that Chinese authorities were
focused on its hold on the copper market, reflecting China's
appetite for metal and the political side of the regulator's
mission, as much as Glencore's own weight.
Glencore and Xstrata combined account for roughly 7 percent
of global copper supply, and analysts and traders have estimated
Glencore controls between 10 and 14 percent of Chinese copper
Under Tuesday's deal, Glencore has three months to begin the
process of selling Las Bambas, one of the group's biggest
development projects, and must find a buyer by the end of August
2014. The trader set a mininum price, however, as the mine will
be sold at the higher of either a fair market price as
established by two investment banks, or total costs incurred.
If it does not secure a deal for the mine - expected to
produce an annual 400,000 tonnes of copper for at least four
years from 2015 - it will have to find alternative sale
candidates from among Xstrata's copper pipeline.
It would have three months to offer up one of longer-dated
projects - namely mines in the Philippines, Papua New Guinea or
Argentina. This would be unlikely to prove a wrench for
Glencore, which has made no secret of its desire to slash the
number of Xstrata "greenfield" mines, to be built from scratch.
"Them being willing to sell Las Bambas shows there are no
sacred cows in the eyes of the Glencore management. It shows
they think a little differently - they've always shied away from
greenfield projects," analyst Jeff Largey at Macquarie said.
"If they can pull value forwards on Las Bambas by selling it
- rather than taking on all the operational and execution risk
associated with building it (and) bringing it to production - I
think the market will reward them."
Cash from the sale will also help cut Glencore's debt pile -
Liberum analysts said a sale could free up around $3 billion of
capital over the next two years.
Satisfying China's appetite for concentrate, an intermediate
product that feeds refineries and smelters, Glencore agreed to
supply a minimum of 900,000 tonnes of copper to Chinese clients
a year for 8 years from 2013. The price for at least 200,000
tonnes will be priced in accordance with the benchmark level.
Glencore also agreed to supply zinc and lead concentrate on
"fair and reasonable" terms.
Analysts said the conditions reflected China's desire to
avoid being subjected to price movements created by external
factors such as financing deals, which are locking away
increasing amounts of metal into warehouses.
China's green light on Tuesday paved the way for Glencore to
tie up at last its long-desired acquisition of Xstrata by next
month's deadline, more than a year after its plan to create a
mining and trading powerhouse was first announced.
But separate news on Tuesday of a stream of departures from
Xstrata's management team - all but one of its main business
unit bosses - highlighted the challenges ahead during what will
be Glencore's biggest integration to date.
Xstrata announced chief executive Mick Davis would not take
up that role at the combined group for six months, as initially
agreed. Davis, who leaves after investors complained about a
retention deal, will receive just over 14 million pounds - 4.6
million relating to pay, bonus, benefits and pension for the
six-month period he had initially agreed to work, and the rest
relating to departure terms agreed before Tuesday.
He will leave on June 30, but will sublet the Xstrata
offices until March 2017 - a detail likely to fuel expectations
Davis will now set up a privately backed investment venture.
In a detail highlighting the strained relations between
Davis and the Glencore bosses he is leaving behind, Davis will
have to pay the combined group for the furniture and computers.
Among the divisional heads departing alongside Davis are
Xstrata's copper boss Charlie Sartain, nickel chief Ian Pearce,
along with Thras Moraitis, Xstrata's head of strategy and a
close associate of Davis.
"This clearly turned into a takeover rather than a merger.
We all knew (Glencore chief executive) Ivan Glasenberg was going
to be the top dog, it was just a matter of time," Macquarie's
Among those waiting in the wings to replace the divisional
heads is veteran Glencore man Peter Coates, moved from a
non-executive board role to an unspecified executive role last
Glencore has already cleared regulatory hurdles including
the European Union, which instead of copper focused on the
group's concentration in European zinc.
Glencore had agreed to scrap a European zinc sales agreement
with producer Nyrstar, and said on Tuesday it had
agreed a deal. Glencore will pay Nyrstar a 44.9 million euro
($58.8 million) termination fee, which the producer will then
use to buy out Glencore's almost 8 percent equity stake.
($1 = 0.6531 British pounds)
(Additional reporting by Stephen Eisenhammer, Jane Barrett and
Silvia Antonioli in London; Michael Martina and Shao Xiaoyi in
Beijing; editing by Jonathan Standing, David Stamp and Giles