Glencore share price up, plans to divest Lonmin stake, cuts 2015 capex

Glencore Plc announced on Wednesday it intends to divest its 23.9% stake in South African Lonmin, the worlds third largest platinum producer.

The miner and commodities trader inherited the stake, worth around $367 million, through its $29-billion acquisition of Anglo-Swiss miner Xstrata in May 2013 and now Glencore plans to distribute the stake to its own shareholders.

The company said that an eventual sale would likely not serve in the best interest of its shareholders and would rather hand out the stake “in specie”, which would allow each individual to decide how to proceed with the investment.

Chief Executive Ivan Glasenberg restated to companys tendency to hold investments in output assets in the commodities Glencore trades. However, the company does not trade platinum, therefore the stake in Lonmin has never been consider core asset.

Additionally, Mr. Glasenberg said the lack of “special insight” into the platinum market, also helped the decision.

The company estimated that each of its shareholders will receive $0.03 per Glencore share of the Lonmin stake. However, the decision will not impact the companys “annual cash distribution consideration.”

Glencore will put its decision to a shareholder vote at its annual general meeting on May 7. The company said it would provide additional information to shareholders in early April.

The company said it expect to close the deal during the first half of 2015. Gary Nagle and Paul Smith, currently representing Glencore on Lonmins board, are projected to step down once the agreement gets a shareholder approval.

“Our senior management team do not currently plan to sell the Lonmin shares they would receive from the distribution in specie,” said Mr. Glasenberg, adding that the decision is not based on the companys or platinums performance.

In a separate statement the company said it would reduce its capital expenditure for 2015 to between $6.5 billion to $6.8 billion from its December projection of $7.9 billion. Glencore contributed the reduction to challenging market conditions and lower commodity prices.

The company also said it boosted its production during the past year for most commodities, including copper, coal, zinc and nickel. Glencore also said that its marketing division performed in line with the companys expectations, despite the fall in prices.

Further details will be provided on March 3, when the company is scheduled to release its 2014 results.

Glencore dropped 1.65% on Tuesday and closed at GBX 271.05 in London. On Wednesday the stock edged up 0.39% to GBX 272.10 at 09:00 GMT, marking a one-year decrease of 18.23%. The company is valued at £36.16 billion.