DIVERSIFIED miner GlencoreXstrata is interested in acquiring more coal assets in South Africa — depending on price — and sees no problems with the competition laws that would hinder further acquisitions at this stage, according to CEO Ivan Glasenberg and group executive Clinton Ephron.
The group is also still looking to sell its platinum assets in South Africa, which include a 24.9% stake in Lonmin as well as smaller operations Eland Platinum and the Mototolo joint venture with Anglo American Platinum.
"We are working on it," Mr Glasenberg said on Tuesday in reply to questions at a media teleconference on the group’s results for the year to end-December.
Glencore Xstrata is the only international resource major currently investing heavily in coal projects in South Africa.
The group views its mines in the country as key elements in what it describes as "the world’s leading seaborne thermal coal business" and has forecast increasing productivity and cash margins as the new, low-cost production in South Africa is commissioned.
Coal industry sources view Glencore Xstrata as the obvious buyer for the South African assets of Total Coal South Africa, which are up for sale. Total owns two mines and a 4.8% stake in the Richards Bay Coal Terminal (RBCT).
There has also been persistent speculation in the industry that BHP Billiton is looking to exit its remaining South African coal interests, but the group has repeatedly declined to comment since it does not respond to "market speculation".
"I don’t know whether BHP Bill iton will sell out of South Africa," Mr Glasenberg said. "We have heard that over the last five years but we have not yet heard it from BHP Billiton itself."
BHP Billiton has been reducing its exposure to the South African coal sector for more than a decade.
The disposals have dropped the group’s shareholding in the RBCT from above 40% a decade ago to 21%.
Glencore Xstrata is now the largest shareholder in the RBCT with a 25.3% stake following the acquisition of Optimum Colliery — one of the key coal assets previously sold off by BHP Billiton.
An obvious concern for future merger and acquisition activity by the group would be obtaining the necessary approval from the Competition Board.
Acquiring Total would increase Glencore Xstrata’s stake in the RBCT to 30.1%. Taking over BHP Billiton’s remaining coal assets would boost this to 51%.
Then there is the potentially touchy issue of having undue influence over domestic coal supplies to Eskom.
Mr Ephron said that he believed Glencore Xstrata had "a bit of space left".
"We account for only about 17% of Eskom’s coal business, so we are nowhere near any anti-competitive levels on Eskom," he said. "When you look at the shareholdings previously held in the RBCT of above 40% by some members we are nowhere near this level at the moment."
Glencore Xstrata’s results were ahead of consensus expectations and the group has increased its total dividend to 16.5 US cents a share — 4.8% up on financial 2012.
The results are complicated by the takeover of Xstrata by Glencore and associated accounting issues, impairment charges and pro forma statements.
"The numbers are complex with many moving parts," said Investec Securities.
"The $7.4bn statutory loss was largely driven by impairments after the merger. Longer term, our concern is potential earnings downgrades on commodity price underperformance, particularly in coal and copper."
Mr Glasenberg indicated that he felt concerns about an oversupply of copper were overstated. "While 2013 copper mine supply experienced the strongest growth seen over the last decade, similar mine growth forecasts for 2014 and 2015 carry higher performance risk," he said.
"Beyond the copper projects in construction and commissioning this year and next, a lack of large, high-quality mine projects from 2015 onwards is expected to shift the market back into structural deficit, particularly given the number of mine closures that are forecast over the second half of this decade."