Xstrata CEO Mick Davis has agreed to not take up the role of CEO and executive director of the combined Glencore Xstrata group – one of the conditions set by China’s Ministry of Commerce for it to approve the $33-billion deal.
Swiss commodities trader Glencore announced last week that the Ministry had given its conditional approval for the merger. CEO Ivan Glasenberg will assume the role of CEO of the combined group from the effective date, expected to be May 2.
Davis would serve as consultant to Glencore Xstrata until June 30 to support the integration process.
Glencore had awaited approval of the deal from the Chinese authorities for several months.
This followed Glencore and Xstrata shareholders’ approval of the merger and the creation of the $90-billion natural resources group Glencore Xstrata.
Following receipt of approval in China and Glencore having given effect to the commitments required by the European Commission, the completion of the merger is now only conditional upon completion of the Xstrata court process.
Other conditions precedent set by the Chinese Ministry of Commerce included that Glencore would have to sell all of its postmerger ownership interest in the Las Bambas copper project, in Peru – currently being developed by Xstrata – to a buyer approved by the Ministry. The trans- action would have to occur before September 30, 2014, for not less than the predetermined price.
The transfer of the project would have to be completed before June 30, 2015.
If Glencore failed to meet these dates, it would have to appoint a divestiture trustee to sell, by way of auction, its ownership in one of four properties – Tampakan, in the Philippines; Frieda River, in Papua New Guinea; El Pachón, in Argentina; or Alumbrera, in Argentina – at no minimum price within three months.
Glencore would also, for a period of eight years, starting January 1, 2013, have to con- tinue to supply its Chinese customers with a minimum volume of 900 000 dry metric tonnes of copper concentrate each year, under long-term contracts.
The price for a minimum of 200 000 dry metric tonnes of copper concentrate would have to be offered by Glencore in accordance with the applic- able yearly benchmark price agreed between major miners and major smelters, and the price for the remaining 700 000 dry metric tonnes of copper concentrate would have to be offered with reference to the applicable yearly benchmark price.
The minimum volume of copper concentrate to be offered for supply to Chinese customers would have to be adjusted during the eight-year period, based on whether there is an increase or reduction in Glencore’s forecast copper concentrate production.
Further, also for a period of eight years from January 1 this year, Glencore would have to continue to supply Chinese customers with zinc concentrate and lead concentrate through long-term contracts and spot contracts. The offered terms of these contracts, including those in relation to price, would have to be fair and reasonable and in accordance with prevailing international market terms.
Meanwhile, Glencore would have to appoint independent monitoring trustees to supervise its performance in terms of the conditions precedent.
Within 15 days after the end of each quarter following the Chinese Ministry of Commerce’s approval, Glencore would be obligated to provide reports to the Ministry and the moni- toring trustees, demonstrating that it was complying with the divestment commitment regarding Las Bambas.
Within 45 days after the end of each calendar year following the Ministry’s announcement, Glencore would also have to provide reports to the Ministry and the monitoring trustees to prove its compliance with the long-term supply commitments.
However, should Glencore show good cause, the Ministry might, where appropriate, grant a variation or release Glencore from its obligations under the remedy commitments.