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Glencore Xstrata cuts capex 15.6% for 2013-15

Keywords: Tags  Glencore Xstrata, copper, nickel, investor day, capex, Las Bambas, Koniambo, claire hack

LONDON — Glencore Xstrata Plc has reduced its total capital expenditure for 2013 to 2015 by 15.6 percent to $26 billion, it said at its investor day presentation Sept. 10.

The trader-miner expects its sustaining capex to be $4 billion per year, at the lower end of its previous guidance of $4 billion to $5 billion per year.

Glencore Xstrata’s initial industrial asset portfolio review has been completed, and its underlying capex for 2013-15 has been reduced by $1.3 billion.

Risk management processes also have been integrated across the merged companies, confirming that "existing Glencore liquidity and value at risk thresholds remain appropriate for the enlarged group," the company said.

Cost savings from synergies are expected to be $1.6 billion in 2014, derived mainly from corporate and divisional restructuring.

Savings from operational productivity and streamlining also are expected to rise, the company said.

Lower headline capex and sustaining capex, as well as greater certainty, are expected to lead to total capex of $12 billion this year, $8 billion next year and $6 billion in 2015. This includes a $1.9-billion reduction in underlying metals and coal capex, which will be partially reallocated to high-return exploration and production.

The priority was to understand Xstrata’s commitments through an evaluation of the combined portfolio, the company said.

The sale process for Glencore Xstrata’s Las Bambas copper project in Peru has now been confirmed, and another 88 projects have been reviewed. Of these, 44 projects have been suspended and seven have had their scope and costs reduced, the company said. Further divestments are likely to result from the industrial asset portfolio review.

The revised capex at Las Bambas and at the Koniambo nickel project in New Caledonia is now higher than the company’s last 2013-15 budget for the projects, totaling $1.5 billion.

Glencore Xstrata’s total capex was cut by $1.3 billion excluding the revisions for Las Bambas and Koniambo, and by $1.9 billion excluding an increase in oil capex.

The Baar, Switzerland-based company is planning to channel excess capital toward best returns and value creation, including bolt-on acquisitions, brownfield expansion and returns to shareholders.

A version of this article was first published by AMM sister publication Metal Bulltin.

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