Investec: Glencore to attract JSE investors

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Glencore Reuters. The logo of Glencore is seen in front of the company's headquarters in the Swiss town of Baar.

Johannesburg - Glencore Xstrata Plc, the global metals producer and commodities supplier that started trading in Johannesburg today, will draw strong demand for its stock from South African investors, according to Investec Asset Management.

“In terms of diversification, it offers something pretty unique,” said Hanre Rossouw, Investec Asset Management’s head of commodities for frontier and emerging markets.

With Glencore’s copper mining and marketing business, “you’ve got two-thirds exposure to something you don’t really get in the South African market,” he said.

Glencore’s primary listing remains in London, with a further secondary one in Hong Kong.

Johannesburg-born chief executive Ivan Glasenberg, 56, won approval from Xstrata Plc investors to combine the companies in a November 2012 vote, creating the world’s fourth-largest mining group, with operations in more than 50 countries, including South African coal, chrome and platinum assets.

Glencore traded at 54.60 rand by 9:37 a.m. on the Johannesburg Stock Exchange, the equivalent of 332 pence, after opening at 55 rand.

It was the most active share by value.

It closed at 331.5 pence in London yesterday, valuing the company at about $70 billion.

The JSE listing “not only deepens our relationship with South Africa, it highlights our confidence in Africa as a place to invest,” Glasenberg said in a statement today.

South African investors are able to buy Glencore’s Johannesburg stock without it counting toward foreign ownership limits imposed by local authorities.

 

‘Most Diversified’

 

Glencore’s South African assets include the Goedgevonden thermal-coal complex in the Mpumalanga province, the Helena underground chrome mine on the eastern limb of the Bushveld Complex, the Wonderkop ferrochrome plant in the North West Province and the Eland platinum mine near Pretoria.

Glencore is the most diversified among the biggest mining “majors,” the Baar, Switzerland-based company said in a November 11 presentation.

While iron ore accounted for 89 percent of first-half earnings before interest and taxation at Rio Tinto Group, 52 percent at BHP Billiton Ltd. and 48 percent at Anglo American Plc, Glencore’s biggest-single contributor was copper at 30 percent, the presentation shows.

“We anticipate healthy demand” for Glencore stock from South African fund managers, Jeff Largey, an analyst at Macquarie Group Ltd. in London, said in e-mailed comments yesterday.

The Johannesburg Stock Exchange listing may have a negative impact on shares of Anglo American, which also trades in the city, Largey said.

Local investors may switch to Glencore to further dilute their “South Africa risk,” given the mining and commodities-trading group’s lower overall reliance on the African country. South Africa accounts for about 45 percent of Anglo’s revenue.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore Xstrata. - Bloomberg News



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