May 3 - The world's fourth largest mining company, Glencore Xstrata, begins trading on the London Stock Exchange on Friday after the completion of the $30 billion acquisition of Xstrata. Joanne Nicholson looks at the company's game plan in a climate of waning commodity prices.
It's the mining sector's biggest ever acquisition deal. The new company - combining trading giant Glencore and miner, Xstrata - was valued at $71 billion as its first day of trading got underway on the London Stock Exchange. It's promising bigger dividend payments to shareholders and says success will come from cutting unncecessary costs, as commodity prices cool. Known for his hands-on management approach, Glencore Xstrata's boss, Ivan Glasenberg has criticised his peers for opening up too many new mines, which eat into profits. Paul Gait is a mining analyst at Sanford C Bernstein. SOUNDBITE (English) PAUL GAIT, SENIOR RESEARCH ANALYST, SANFORD C BERNSTEIN, SAYING: "We've invested over the last ten years. Now let's start seeing some of that investment come back to shareholders. That's how I think the industry is beginning to change. An increase and a renewed focus on operating cost productivity." The deal, which has taken almost 15 months to complete, makes Glencore Xstrata the world's fourth-biggest mining company by market value. It will employ about 190,000 people in more than 50 countries. And own 150 mines. But it's not the size of the company that will concern the competition. SOUNDBITE (English) PAUL GAIT, SENIOR RESEARCH ANALYST, SANFORD C BERNSTEIN, SAYING: "The tension for the incumbent players, the RioTinto's, the BHPBilliton's, Anglo Americans, is the language coming from Ivan Glasenberg, his approach to how he's going to run the business, maximising shareholder returns, maximising returns on capital, increased capital discipline and cutting back from these large scale mega green field projects that have characterised the industry to date." The company now says it will take a hundred days to carry out a full review, which could result in a sell-off of some assets. It's also indicated it will be trimming down its management structure. Glencore's executives have taken most of the 17 top positions leaving only two slots for former Xstrata senior managers, leaving little doubt that what was heralded as a merger of equals has ended as a takeover.