Unlocking the vaults

1 September 2009 By John Foley Follow @johnsfoley

For the first time, the secretive Swiss commodities trader may offer equity to outsiders, including Temasek and the CIC. That would strengthen a balance sheet strained by helping 35%owned Xstrata raise capital. New investors might even support a takeover of Xstrata itself.

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Glencore, the Swiss commodity trader that owns 35% of miner Xstrata, is in talks with five potential outside investors, according to a person familiar with the situation. Among the candidates are the China Investment Corporation, Temasek, Blackrock and Fidelity, reported the UK's Independent on Sunday.

Glencore entered into an agreement with Xstrata at the time of the UKlisted firm's $5.9bn rights issue in February. Instead of putting in cash as other investors did, Glencore offered up Prodeco, a Colombian mining company valued at $2bn.

The Swiss group can repurchase Prodeco in March 2010 for $2.25bn, plus any profits earned or capital expenditure invested during Xstrata's ownership, giving an expected total of $2.45bn, a source said. Glencore had $3.7bn of cash and undrawn bank facilities at hand at the end of the first half of 2009.

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