Glencore and Xstara Merger: Four Simple (and Unanswered) Questions

Glencore International Plc (LON:GLEN) and Xstrata PLC (LON:XTA) both head quartered in Switzerland to merge.

It is probably all over the news, but here is the number:

  • Glencore International Plc (LON:GLEN) mines about half of all zinc and cobber plus is a major player in grain.
  • Xstrata PLC (LON:XTA) is one of the largest coal miners.
  • If the merger goes through the new company will have a value of 70 bio. EUR


So much for the blurb “financial analysts” enriches news with.

Let’s see the commodity prices:

Shall I draw You a picture? Ok!

Glencore and Xstara Merger: Four Simple (and Unanswered) Questions

Let’s do some wild guesses:

1)      Commodity prices – especially metals – are dropping presumably due to falling Chinese activity. Maybe, just maybe, the costumers aren’t that willing to accept delivery and prices.

2)      You can call mining a lot of things, but NOT cheap: “Oh, My Darling Clementine!” So there might not be that much profit in employing expensive machinery and greedy workers in remote places.

Mines very rapidly become unprofitable when prices drop – especially where scrap is an alternative source.

3)      As they are located in Switzerland their bank just might be calling home their loans?

4)      Maybe their stock is just so much rubble?

But that is just me. But You are right! It is not my money!