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VANCOUVER (miningweekly.com) – Following on the heels of its divestment of its Africa-based zinc assets, global mining major Glencore has reached agreement with three shareholders of Peru’s biggest zinc producer Volcan Compañia Minera to increase its stake, the vertically integrated company revealed on Tuesday.
Volcan’s operations are located in the richest polymetallic production area in Peru, producing some of the highest-quality zinc concentrates. The transaction will provide an increase and extension of Glencore’s zinc production profile and the opportunity for synergies with Glencore’s existing Peruvian zinc operations.
The Baar, Switzerland-headquartered multinational said it will buy at least 26.73% of the Class A voting shares of Volcan, burnishing its current disclosed economic interest in the Peruvian company of 7.68%. The miner will pay $1.215 for each Class A common share, for a total payment of $531-million.
Glencore already holds 18.11% of the outstanding Class A shares and 0.02% of the outstanding Class B shares.
Glencore, which first invested in Volcan in 2004, said it will make a public tender offer to Volcan’s shareholders, subject to Peruvian legislation, for up to 48.19% of the total Class A common shares of Volcan at an offer price of $1.215 a Class A common share. The company advised that the selling shareholders have agreed to divest all of their shares.
After closing, and depending on the level of acceptances, Glencore will hold between 44.84% and 66.3% of the total Class A common shares and will have an economic interest in Volcan of between 18.98% and 28.07% (taking into account the class B common shares and excluding treasury shares).
The total value of the deal will be between $531-million and $956-million, depending on the level of acceptances, payable in cash on closing. The transaction will be funded by Glencore out of existing cash resources.
Glencore expects to make the offer to Volcan shareholders by October 27 and the offer is expected to close before the end of the year.
Zinc prices are on a tear, testing ten-year highs on the London Metal Exchange at about $3 195/t on Tuesday.