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NEWS-LEADING DEVELOPMENTS Glencore Approaches Xstrata
At Portovesme, Alcoa will begin a con- sultation process to permanently close the facility. The La Coruña and Avilés curtailments are planned to be partial and temporary.
The curtailments are expected to be completed during the first half of 2012. Alcoa's alumina production will be reduced across its global refining system to reflect the curtailments in smelting as well as pre- vailing market conditions.
At the time of the announcements in mid-January 2012, aluminum prices had fallen more than 27% from their peak in 2011.
SX-EW operator Manuel Castaneda inspects copper cathode at the Xstrata's Lomas Bayas mine in northern Chile.
Xstrata confirmed during early February that it had been approached by and is in discussions with Glencore International plc regarding a possible merger of equals which may or may not lead to an offer being made by Glencore for Xstrata. Both companies are headquartered in Switzerland. Glencore launched a $10 bil- lion IPO last year and is listed on the London and Hong Kong Stock Exchanges. The IPO provided Glencore the capital it needs to make an acquisition of this magnitude. The combined company would have a market capitalization of more than $100 billion, placing it in a No. 3 position behind BHP Billiton and Vale, and just above Rio Tinto. Glencore, which currently owns 34% of Xstrata, has until March 1 to announce whether it will make an offer. This is the first time that formal merger talks have been confirmed publicly. In 2010, a privately-held Glencore proposed a merger with Xstrata and was rebuffed. Xstrata was formed in 2002 when it purchased Glencore's coal assets. Today, Xstrata is one of the world's largest metals and mining companies. It mines coal, cop- per, nickel and zinc, and other metals, such as ferrochrome and vanadium. The company also provides technical services to the mining business. Xstrata has more than 100 mines and it operates in 20 countries, employing more than 70,000 people. Last year the company mined 85 million metric tons (mt) of coal, 889,000 mt of copper, 106,000 mt nickel and 738,000 mt zinc.
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Founded in 1974, Glencore has evolved from purely marketing commodi- ties sourced from third parties into a diversified natural resources group. The group also provides financing, logistics and other supply chain services to pro- ducers and consumers of commodities. Directly or through its subsidiaries, Glencore holds significant stakes in pub- licly-listed mining companies including Xstrata Plc (UK), Century Aluminum (USA), Katanga Mining (Canada), Minara Resources (Australia) and UC Rusal (Hong Kong). Its trading operations employ more than 2,700 worldwide in 40 countries. The company's industrial installations employ more than 54,800 in 30 coun- tries. The group trades much of Xstrata's commodities and is the sole distributor of its nickel and cobalt production. Inte- grating Glencore's trading business and mining assets with Xstrata's mining assets could be an interesting mix.
Alcoa to Cut Smelting Capacity by 531,000 mt Alcoa has announced plans to close or cur- tail 531,000 metric tons (mt), or 12%, of its worldwide smelting capacity to improve its production-cost position. Closure of the company's smelter in Alcoa, Tennessee, USA, and two lines at its Rockdale, Texas, USA, smelter, account for 291,000 mt of the capacity reduction. Curtailments at its smelters in Portovesme, Italy, and La Coruña and Avilés, Spain, account for another 240,000 mt.
Alcoa reported a loss from continuing operations of $193 million in the fourth quarter of 2011 on restructuring charges associated with the closures and curtail- ments, lower aluminum prices, and contin- ued market weakness. Excluding the net negative impact of restructuring and other special items, the loss from continuing operations was $34 million.
For full-year 2011, Alcoa reported in- come from continuing operations of $614 million, more than double its 2010 re- sults. The company ended the year in a strong cash position, with $1.9 billion cash on hand. It expects global aluminum demand to grow 7% during 2012 and forecasts a global deficit in primary alu- minum supply.
Freeport Plans to Sell More Copper in 2012
Despite fourth quarter 2011 disruptions, Freeport McMoRan Copper & Gold (FCX) believes it is sitting in a great position. "We are continuing to advance our growth projects which are expected to result in meaningful increases to copper and molybdenum production in future peri- ods. Our exploration programs continue to identify opportunities to grow our reserve base. We ended the year with significantly more cash than debt and have a positive outlook for the future prospects of our busi- ness," said Richard C. Adkerson, president and CEO.
Consolidated sales for 2011 totaled 3.7 billion lb of copper, 1.4 million oz of gold and 79 million lb of molybdenum, compared with 3.9 billion lb of copper, 1.9 million oz of gold and 67 million lb of molybdenum in 2010. The estimated impact of the labor and pipeline disrup-
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