In a bid to redeem its promise to investors that it will unload its burden of debt, mining giant Glencore has announced the sale of its copper mines in Australia and Chile. The Cobar copper mine in Australia’s New South Wales and the Lomas Bayas copper mine in Chile will be up for grabs.

Glencore has been facing a huge debt burden estimated to be US$30 billion (AU$41.3 billion). The company has claimed that expressions of interest have already been received for both the mines.

“The sale process is in response to Glencore receiving a number of unsolicited expressions of interest for these mines from various potential buyers,” a statement said.

Glencore also announced in early October that it is going to cut more than 500 jobs at its zinc mines in Australia as global zinc production has been reduced to one-third.

Huge debt

Worries about Glencore's piling debt had the company's share price slumping one-third and triggered a global share market rout in September. It was able to regain the loss in shares after reassuring investors that it would pay off the debts.

Commenting on the sale offer, analyst Jonathan Barratt, chief investment officer at Ayers Alliance, expressed the apprehension that a distress sale would be bad for Glencore. There is speculation that Chinese buyers will step in, reports ABC News.

"We'd like to think it is a price that will be around about the cash-flow for the particular mine than trying to get rid of assets to reduce the debt, which we know is exorbitantly high,” Barratt said.

The analyst noted that Glencore expanded significantly after its merger with Xstrata in 2013.

“Assets that were previously relevant to a company like Xstrata are not necessarily relevant to a company of the enlarged size Glencore is today,” Wendt added.

“They are good quality assets and copper is a commodity that is of universal appeal to a whole range of miners around the world,” mining analyst Gavin Wendt said.

The analyst noted that Chinese investors have stated over recent times that they would be interested in acquiring advanced production assets.

Strategy blamed

Meanwhile, Jim Chanos, the founder of New York hedge fund Kynikos Associates, blamed Glencore for the debt burden as a fall out of its faulty decisions. Chanos is famous for his predictions on the 2001 collapse of Enron and slowdown of the Chinese economy. His views on stocks are always taken seriously.

“The problem with Glencore is that this was a company with 80 per cent trading, 20 per cent hard assets until 2012 - right at the top of the cycle they bought Xstrata, changed the face of the company completely," Chanos told Bloomberg.

He noted that post- takeover, Glencore got more exposed to coal, copper and other minerals. This was at a time commodities fell on the back of depleting Chinese demand. From the trading business, Glencore incurred huge debt unlike the competitors, BHP Billiton and Rio Tinto and caused concern among the investors, the Australian Financial review reported.

For feedback/comments, contact the writer at feedback@ibtimes.com.au or let us know what you think below.

RELATED STORIES