Mining Giant Glencore To Sell Gold & Silver Output To Pay Down Debt

GLENCOREIn an ironic twist of fate, the mining conglomerate Glencore is seeking to pay down its massive debt by selling future gold and silver output.  While this is only part of its solution to pay down a third of its $30 billion in debt, it’s quite interesting that the company is selling forward production of two of the most despised monetary metals in the Mainstream Media.

According to the Bloomberg article, Glencore’s next step seen as selling future gold, silver output:

The company is seeking more than $1 billion in a so-called precious metals streaming deal linked to some of its mines in South America, according to two people familiar with the situation, who asked to not be identified because the talks with potential buyers are private. The transaction is part of Glencore’s broader restructuring to reduce its $30 billion debt pile by about a third and bolster its finances to withstand a continuing slide in commodities.

The company produced 35 million ounces of silver last year and 955,000 ounces of gold from mines in South America, Kazakhstan and Australia.

The company’s negotiations in the streaming deal are likely to attract interest from the small group of companies, such as Silver Wheaton Corp., that specialize in the transactions, which give miners upfront payments in exchange for metal that’s later sold. Other companies involved in those kind of sales include Franco Nevada Corp.

What wasn’t stated in the article was the selling of a percentage of Glencore’s gold and silver production was in fact a “Forced hedging strategy.”  Thus, Glencore’s massive debt burden has forced them to sell their future gold and silver at bargain-basement prices.

We must remember, Silver Wheaton pays between $4-$6 for silver and $400 for gold in its standard streaming agreements.  Glencore may start off by selling 10% of its gold production, but this might not be enough.  According to the Bloomberg article:

Glencore could raise $1 billion to $1.5 billion by selling 10 percent of its gold output through streaming deals, Macquarie Group Ltd. said in a report Tuesday. That means there’s “substantial scope” to conclude more of the transactions, the bank said. JPMorgan Chase & Co. analysts wrote in a note to clients on Wednesday that it sees the company being able to raise more than $1 billion.

Aside from its South American mines, Glencore could also look to sell a gold and silver stream from its Kazzinc project in Kazakhstan, BMO’s Sterck said. Glencore owns about a third of the Antamina copper operation in Peru. Teck Resources Ltd., which has a 22.5 percent stake in the mine, previously said it would consider selling silver streams to increasing liquidity.

The interesting part of the quote above we need to highlight is, JPMorgan Chase & Co. analysts wrote in a note to clients on Wednesday that it sees the company being able to raise more than $1 billion.”

How nice of JP Morgan to write a note to clients that Glencore could raise more than $1 billion to pawn off its gold and silver production at below bargain basement prices.  I wouldn’t be surprised if analysts at JP Morgan Chase & Co. advised Glencore to sell even more of its gold and silver production forward.

Glencore being forced to sell a portion of its future gold and silver production to pay down debt is just another irony in a sea of ironies now taking place as Central Bank propped up highly leveraged stock markets are on the verge of another epic collapse.

The majority of investors are not prepared for whats coming.  As I stated in my previous article… There were 713 survivors on the Titanic of the total 2,229 passengers and crew.  Thus, 32% survived the sinking of the Titanic, whereas only 1-2% of investors have gold and silver lifeboats.

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30 Comments on "Mining Giant Glencore To Sell Gold & Silver Output To Pay Down Debt"

  1. Same old, same old. The bankers have a deathly debt grip around the miners “nuggets”. Doesn’t this all look similar to the end of the last bear around 98-01… ?

    Great work Steve, keep it up, it is much appreciated.

  2. TPTB will continue to talk Glencore up and investment funds will continue to invest other peoples money into this company. They should be putting those associated with its demise in jail. If you know anything about charts; keep your eye on BHP and RIO (Rio Tinto), they will be next…. ROFL.

    • silverfreaky | October 1, 2015 at 3:02 am |

      Agree.With money you can pay everything.The banksters drive the big producer in debts,pay the managment and then they sell for an apple the PM.

      With the explorer the same.Downwards 80-90 % and more.And now they where included in a
      bigger company.The stock holder lost nearly everything.

      After the gold is in forward selling away the pumping begins again.

  3. As metal prices go lower companies are pressured to lock in ever lower prices. This is ironic. like I said, it sure looks like a good time to invest in silver. Something tells me that 2015 is the bottom.

    Mike

    • silverfreaky | October 1, 2015 at 6:48 am |

      They sell the PM in the Future.In the Future Silver is not available anymore.They make cash settlement.

      With money you can pay everything.Only if silver isn’t available for the industrie, than the game is over.

  4. ” according to two people familiar with the situation, who asked to not be identified because the talks with potential buyers are private”

    Who’s buying? JPM, HSBC, China? Who ‘owns’ most of Glencore’s debt? My guess it’s the big banks again, buying up hard assets for pennies. ZIRP pennies.

  5. Steve,

    Another article looking at and into facts and details like no one else does. Outstanding.

  6. I suspect the big bank’ interest in Glencore is more about stashing PM’s than flipping assets on paper for clients or currency profits, i.e. they are salivating over this.

  7. WHY DID JIM SINCLAIR AND BOB HOLTER HAVE TO GO TO AFRICA FOR MEETINGS

  8. And for you algo news readers…”US Mint American Eagle silver coin sales in September fall 23% to 3.8 million oz”… posted 9/30/15 @ 10:09:26 FXWire Commodities
    Ah yes, keep the spinning it bearish any way you can!

    • jsauai,

      Yeah… FXWire Commodities provides us with a bit of COMEDIC RELIEF… howbeit a lousy joke. Maybe they should have mentioned that the U.S. Mint cut back the weekly allocation to its Authorized Dealers to 750,000 in the second week of Sept. Kind of hard to sell more Silver Eagles in September when the U.S. Mint puts a cap on Silver Eagle output.

      steve

      • jsauai, you been OWNED!

      • Steve, it would be interesting if you did an article on the mint’s requirements are for making silver Eagles. It is generally assumed that they are required by law to make as many of these as demand requires. Clearly that does not happen. So what are the nuts and bolts of this? Are they violating the law? Or are they operating within the fine details of the law?

        Mike

        • Mike,

          The U.S. Mint has upgraded its production facility considerably since 2008. If you looked at my previous article, the U.S. Mint only sold 6.1 Moz of Silver Eagles JUN-SEP 2008 compared to 18.8 Moz JUN-SEP 2015. These both occurred during retail shortages.

          It costs a great deal of money to upgrade production facilities. The U.S. Mint projected a certain amount of production this year, and of course it didn’t account for huge surges due to financial events.

          Even though the U.S. Mint could produce even more, we have to give them credit that they can produce 45+ Moz compared to the Royal Canadian mint 30 Moz of Silver Maples and much less production from other mints.

          steve

          • The law from 1985 doesn’t offer specifics. We can say that the Secretary has repeatedly failed to produce enough coins to meet demand. It appears they are allowed to have that failure as they are only required to produce enough to meet their own estimation of demand. I found nothing about limits on cost except that the cost of the coins will cover production costs.

            Steve, I’m not as forgiving as you are. This isn’t rocket science. Some historical data and a simple probably distribution is all you need to calculate the number of coins you need to produce. I’m an engineer. It just is not that hard. And if you over produce its not like you are over producing a product that expires. They aren’t running a dairy farm.

            “(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand, coins which—”

            Mike

          • Mike,

            I hear ya. Yeah, maybe the U.S. Mint could pump out more Silver Eagles. However, that means the Sunshine Mint would have to also be able to pump out more silver blanks to supply the U.S. Mint. I am not defending the U.S. Mint, rather I am just offering the other side.

            If you want INCOMPETENCE, look at the Mexican Mint that produces the Silver Libertad. I just did an interview with Doc at Silver Doctors today and he said the Mexican Mint has already shut down production of 2015 Libertads. They can’t even produce 3 Moz of the damn coins….LOL.

            Furthermore, I have had email exchanges with Hugo Salinas Price of Mexico. He owns a lot of small Bank Branches, which sells and buys Libertads. Hugo wrote me that twice the Mexican Mint halted supplies of Libertads.

            AND THIS IS FROM ONLY PRODUCING 2-3 MOZ…..LOL.

            So… even though the U.S. Mint could produce more Silver Eagles, we should actually be grateful they can produce as many as they are presently knowing what the U.S. Govt, Treasury and Federal Reserve have been doing to manipulate the markets.

            steve

          • “Probability distribution”. Darned iPad typo correction strikes again.

            Mike

        • Wasn’t the law changed from “in quantities sufficient to meet public demand” to “quantities and qualities that THE SECRETARY DETERMINES TO BE SUFFICIENT to meet public demand” (emphasis added)?

          So he can just determine that they’re doing sufficient to meet the demand, rather than actually meeting it…

    • Juergen Heil | October 1, 2015 at 1:43 pm |

      That’s why Premiums still rising.

      http://jessescrossroadscafe.blogspot.de/2015/10/silver-coin-premiums-continuing.html

      Maybe Maple and Eagle sales will fall even more to protect the wholesale markets from a shortage. And maybe there will never be a wholesale shortage because no coins will be available to the public before that happens.

  9. silverfreaky | October 1, 2015 at 1:12 pm |

    The physical selling is good.The paper market is the problem.

    Owned.What does it mean.He get money for bashing?

    • By “owned” he means jsauai was apparently unaware of the reason sales figures were down and assumed it meant a 23% decline in demand, which Steve corrected him on.

  10. I don’t know nothin but stack and keep on stackin. I might not be a big stacker but I stack what I can.
    I can’t spell cause I don’t no nutin but stack,stack,stack,ect;

  11. Besides stack I watch SRSrocco and also watch and listen to Peter Schiff and Mike Maloney but ultimately you must have a plan to survive the coming disaster. Stacking is only part of the equation.
    Good luck to all.

  12. OutLookingIn | October 1, 2015 at 7:13 pm |

    Glencore is done. Stick a fork in it. It is eating itself alive.
    note:
    Announced Monday, Horizonte Minerals consolidates Araguaia Nickel project through acquisition of Glencore project property. Price set at $8 million USD.

    Glencore’s 5 year CDS rates have now risen to nose bleed levels! It will continue liquidation of itself until there is nothing left. The sharks have been circling and are now chewing off chunks!

  13. OutLookingIn | October 1, 2015 at 8:18 pm |

    EXCLUSIVE: Glencore Working On De-Listing

    Analysts at Citibank;
    “If the market continues to express unwillingness to value the business [Glencore] fairly, management should take the company private, whereby restructuring measures can be taken easily and quickly.”

    Paying pennies on the dollar to buy the company back and leaving equity investors fuming.

    http://www.globalminingobserver.com/glencore-privatisation-142

  14. I looked at streaming, and there is an interesting detail about it: the resource sold via a Volumetric Production Payment agreement (VPP) is removed from the producing company’s resource accounting, therefore it most likely ‘disappears’ from statistics such as USGS.
    USGS data for 2014 shows 19 years of production remaining for gold, and 20 years for silver. We know what will happen to the resource estimates due to energy ‘surprises’. As VPPs have a seniority to the rest of production (returns on VPPs are delivered first, the rest comes after), these volumes will come earliest, and the remaining volumes may never come due to energy ‘surprises’. It makes a very good sense for those who push Glencore to sell Au/Ag via VPPs now, and the ‘small group of companies’ that do VPPs is not so small: any big bank may do it.

  15. Hi Steve,

    Won’t this just prolong the paper game? I wouldn’t be surprised if JP Morgan and the other riggers buy the forward contracts. They would then have supply to prolong the attack on the precious metals.

Comments are closed.