Thursday, March 1, 2012

Glencore buys stake in zinc-miner Trevali

TORONTO – Giant trading and mining company Glencore has struck a deal to buy a 7.8% stake in Canada’s Trevali, which owns a multi-metal mine in New Brunswick, for $18-million.

Trevali CEO Mark Cruise said on Thursday the investment was a “ringing endorsement” of the company’s Halfmile mine, which started producing late last year, and its Santander project in Peru, which it would use the proceeds to fund.

Glencore’s Chris Eskdale will also join TSX-listed Trevali’s board.

The commodities trader, which earlier this year made a bid to merge with Xstrata to create a competitor to the world’s biggest mining firm, BHP Billiton, also owns a $2-million convertible debt facility in Trevali.

If the facility, which is convertible in September, were exchanged for shares today, Glencore would own 8.8%.

Trevali said that an associate of Glencore owned shares and warrants that would lift its total stake to 12.45% if all the warrants were exercised.

Zinc, used to galvanise steel, is currently in a surplus, but there is a growing expectation that there will be a shortage in coming years as large mines reach the end of their lives, and not enough new ones are brought into production to replace them.

The Vancouver-based company late last year reached an agreement with Xstrata to toll treat ore from its Halfmile zinc mine at the diversified major’s nearby Brunswick 12 mill. Xstrata will also buy the metals in concentrate.

Glencore already had a relationship with Trevali.

According to a 2010 partnership agreement, Glencore would design, build and operate the mill and mine at Santander on a contractor/toll basis and buy the plant’s concentrate at benchmark terms.

Trevali would then acquire the plant and associated infrastructure over a four-year period following commercial concentrate production.

Santander is set to start producing zinc concentrate later this year.

Trevali has a goal to reach yearly production of 400-million pounds of zinc equivalent by 2015.