UPDATE: Glencore CEO Warns On Resource Nationalization; Cites Argentina
May 04 2012 - 9:11PM
Dow Jones News
The chief executive of commodities giant Glencore International
PLC (GLEN.LC, GLNCY, 0805.HK) Friday issued a stern warning about
the impact of nationalization on foreign investment.
Ivan Glasenberg, who is also a director of Xstrata PLC (XTA.LN)
which is 34% owned by Glencore, told a mining conference here, "Our
associate company Xstrata is about to go in a big expansion of a
copper asset in Argentina where they were about to spend $3
billion. That won't happen for the moment," he said.
However Xstrata immediately issued a statement saying the "the
status of our projects remains unchanged....Work progresses on the
evaluation of our El Pachon and Agua Rica growth projects in
Argentina, and we continue to monitor the situation in the
country."
Xstrata owns a 50% stake in the Agua Rica project through its
joint venture Minera Alumbrera and owns 100% of the El Pachon
copper project in Argentina, according to the company's website.
Both projects are still in feasibility study and as a result
haven't yet been reviewed by the board in order to determine
whether the projects should go ahead.
Nationalization has been a growing concern for the resources
industry globally as governments have increasingly believed they
weren't getting a fair share of profits from mining on their soil.
However it has come to a head following Argentine President
Cristina Kirchner's decision to seize a 51% stake in the country's
largest oil and gas producer, YPF SA (YPF, YPFD.BA), from Spain's
Repsol YPF SA (REP.MC).
However Glasenberg didn't mention the YPF nationalization. He
also didn't specify which project in Argentina he was referring to.
Glencore declined further comment.
A spokesman from Argentina's planning ministry didn't respond to
messages seeking comment.
Glasenberg said that mining companies are now teaming up to
better defend themselves against resource nationalism.
"The mining industry is very aware of it and forming tight
groups amongst each other [about] how are we going to fight it," he
said.
Glencore's trading and mining activities range from oil, metals,
agricultural products and storage facilities. The company is
currently in the process of seeking shareholder and regulatory
approval for a merger of equals with Xstrata that would create a
mining titan with about a market capitalization of about $90
billion.
Glasenberg warned that resource nationalism could have negative
consequences for nations in the long term if mining companies
choose to curtail their investment plans as a result of governments
wanting to increase their share of the profits.
He sited as an example Glencore's decision to halt its $400
million Bolivian mine expansion project after the Bolivian
government nationalized its zinc smelter, which constituted only a
small portion of its business.
The $400 million investment "would have created a lot more jobs
in the country, it would have created more royalties for the
government, it would have created more taxes for the government.
They hurt themselves in the long term," he said.
-By Alex MacDonald, Dow Jones Newswires; +44 (0)7776 200 924
alex.macdonald@dowjones.com