Glencore International PLC is eyeing a bid for Optimum Coal Holdings Ltd., the South African miner, as the world’s largest commodities trading house plans to use the current market turmoil for bargain-hunting, taking advantage of the recent falls in resource stocks.
The group said there was a disconnect between fears about a double-dip recession and its own upbeat forecast for commodities prices and demand.
The plans for purchases came as Glencore, which sold nearly $10-billion (U.S.) in stock in May in a landmark initial public offering in London and Hong Kong, unveiled a 57 per cent rise in first-half profits to $2.45-billion.
“The turmoil has allowed us to look more aggressively at opportunities,” said Ivan Glasenberg, chief executive. “Now is a better time to buy than six months ago.”
Glencore on Wednesday launched a $268-million Australian ($280-million U.S.) bid to acquire full control of Minara Resources Ltd., an Australian nickel miner in which it already has a 73 per cent stake. Last month it offered $475-million for one of Peru’s largest copper prospects.
Optimum is South Africa’s fourth largest coal exporter. Glencore is close to launching a bid for the Johannesburg-listed miner with the support of several South African partners, its executives said.
It is worth about $1-billion and Glencore’s share of the deal could be near $700-million. Glencore declined to comment.
Miriam Hehir, analyst at RBC Capital Markets in London, said she expected Glencore to “continue with acquisition activity.” However, industry watchers warned that Mr. Glasenberg was in effect trying to catch a falling knife.
If he was misreading the global economy, they said, his group could be buying at the start of a downturn, burdening its balance sheet with expensive assets just as demand drops.
But Mr. Glasenberg, Glencore’s largest shareholder with a stake worth $7.2-billion, insisted the global economy was not heading for a repetition of the global financial crisis of 2007-08, because Chinese demand remained strong.
“We still see robust demand in commodities; the supply side is very tight,” he told the Financial Times, adding that prices were unlikely to fall.
The bolt-on acquisitions fit with Glencore’s stated ambition of using its listing to give it the financial firepower for purchases. In particular, Mr. Glasenberg has stated his desire to merge Glencore with Xstrata PLC, the miner in which it owns a 34 per cent stake. Bankers have also speculated that the trading house could buy Kazakhstan-based miner ENRC.
Glencore shares have fallen nearly 27 per cent from their IPO price of £5.30, reducing its capacity to use paper as an acquisition currency. On Thursday they closed at £3.885.
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