* Glencore has exclusive rights to market Trevali zinc
* Zinc market seen positive after strong 2016
By Barbara Lewis and Eric Onstad
LONDON, March 14 Miner-trader Glencore
has increased its control of core commodity zinc through a deal
with Canada's Trevali in which it is selling shares in
two mines and helping to create the first pure zinc company with
wide geographical reach.
Glencore's share price has risen around 13 percent this
year, adding to gains of more than 200 percent in 2016 when it
rebounded from a commodities price crash.
Its CEO Ivan Glasenberg has said it is well-placed for
deals, which analysts say are as likely to involve commodity
offtake or tactical disposals as acquisitions.
Through a $400 million transaction, announced late on
Monday, Glencore is selling 80 percent and 90 percent stakes
respectively in a mine in Namibia and another in Burkina Faso to
Trevali with which it has a long-standing relationship.
Glencore will also increase its direct holding in Trevali
from 4 percent to 25 percent and gets two seats on the company's
board, compared with one before, while securing exclusive rights
to market Trevali's zinc.
"We are excited to form part of this unique global zinc
vehicle, providing pure zinc exposure across a wide geographic
footprint," Daniel Mate, Glencore's head of zinc marketing, said
in a statement.
Mark Cruise, CEO of Trevali, said acquiring Rosh Pinah in
Namibia and Perkoa in Burkina Faso was "a unique opportunity for
It sets the stage for "a multi-asset, low-cost global zinc
producer," whose production will double to approximately 410
million pounds per year. In addition to the African assets, it
has mines in Peru and Canada.
The total cost of $400 million comprises $244 million in
cash, with the rest paid by Trevali issuing shares and giving
Glencore $30 million to settle an outstanding debt.
Forecasters remain positive about zinc, but wary of strong
gains after the metal, used for galvanising iron or steel,
soared 60 percent last year.
That rally was spurred by Glencore's decision to limit
supply and Glasenberg has said he would only increase output
when to do so would not depress prices.
"If you were truly bullish on zinc and those assets, you
wouldn't let them go, you wouldn't decrease your zinc exposure,"
Ben Davis, an analyst at Liberum said of this week's deal.
"But maybe they see more value in the (zinc) offtake than
they do in the industrial side."
HSBC in a note said the "very small transaction" for
Glencore gave Trevali critical mass and created "a new zinc play
on the market".
Glencore's share price was down around 1 percent by 1230
GMT, while the broader sector eased 0.8 percent.
(Editing by Jane Merriman)