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Glencore, Ramaphosa eye 50/50 mining JVs in SA

The two partners will continue to pursue deals in coal and beyond on an equal footing.

LONDON (Reuters) – Commodities trader and miner Glencore is pursuing 50:50 joint ventures with South African partner Cyril Ramaphosa across the mining sector with an emphasis on bolt-on deals, industry sources and analysts briefed by the commodities group said.

Ramaphosa’s Shanduka Group last week said it wanted to increase its stake in a coal venture currently 70 percent owned by Glencore, without saying what the stake would be.

South African news reports had suggested could increase its interest to a controlling stake as it reviews its strategy, but the sources and analysts told Reuters the two partners would continue to pursue deals in coal and beyond on an equal footing.

Glencore and Ramaphosa are powerful partners in the region and the two are pursuing a broad strategy in South Africa — a country which has attracted less foreign investment than others in Africa — with a shipping list that includes Anglo American unit Kumba Iron Ore, coal miner Exxaro, BHP Billiton reserves and high-quality reserves in junior miners’ hands, they said.

Kumba and Exxaro would not be easy or short term, however.

“Glencore is not backing out in any way by reducing its stake in Shanduka Coal (joint venture), quite the opposite – Glencore wants to move quickly and is going on an acquisition spree. But whatever they do with Ramaphosa will be done on a 50:50 basis and for all assets, not just coal and on a country-wide basis,” one London-based industry analyst said.

“Shifting the stakes in Shanduka Coal is just putting everything on the same basis but they want to grow the partnership into something on a much bigger scale,” he said.

Glencore and a Ramaphosa venture said last month they aimed to take a controlling stake of miner Optimum Coal Holdings. They would become South Africa’s fourth-largest coal exporter if the bid succeeds. .

In an indication of appetite for precious metals, Shanduka has agreed with Lonmin, the world’s third-largest platinum producer, on a deal that could see it investing $137 million for control of its Limpopo division .

“They can do more with smaller assets than a larger group could, they see more broadly, the bigger picture, so Glencore are looking to do bolt-ons, they have their eyes on a number of assets and Cyril’s a key link to that,” the analyst, who declined to be named, said.

How the various deals and pieces fit together into the bigger picture is key, the sources and analysts said.

“Optimum is a $1 billion deal but it’s not so huge given Glencore’s size. For that, export allocation at Richards Bay (Coal Terminal) was the most important thing of all, it’s mostly about getting access to RBCT,” another industry analyst said.

Glencore declined to comment on the structure of its partnership with politician-turned-businessman Ramaphosa or its acquisition plans.

Cyril Ramaphosa, who has made no public comment on the bid for Optimum, was unavailable for comment.

EQUAL PARTNERSHIPS

Whichever vehicles are used to buy assets, the shareholdings will be equally split between Glencore and Ramaphosa as the partnership expands, the mining investors said, one citing the Shanduka Coal venture as an example.

“My feeling is that there is a whole strategy going there around those coal assets between Shanduka and Glencore and so on. At the end of the day you may well find that it all gets wrapped into one thing,” a Johannesburg-based analyst said.

“You have the same parties involved in all of this, and it looks like there is some bigger strategy that involves all of those smaller deals,” he added.

A Shanduka group spokesperson said the transaction with Glencore was not finalised and gave no details.

In coal, aside from Optimum, Glencore has made informal approaches to get involved in the development of the Pegasus coal reserve, a former BHP asset, which contains low phosphorous coal used in ferrochrome production.

Glencore is also waiting for mining rights to BEE miner Umcebo’s reserves and mines to be transferred.

“It’s not just coal, it’s anything to do with mining where the assets are good quality,” a junior mining source said. “Right now there are many smaller players who have debts and need to cash out.”

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