Glencore has announced its intention to sell its Cobar copper mine.
According to the miner it is “in response to Glencore receiving a number of unsolicited expressions of interest for these mines from various potential buyers”.
It is unknown how the decision is likely to affect the 500 odd workers anc contractors at the Cobar operation.
It is also looking to sell of its Lomas Bayas copper mine Chile as well.
A source close to the situation told Australian Mining that despite these mines being on the block, it is not guarantee of a sale, and it will remain business as usual for these operations.
It is understood that Glencore would only sell if it could get it at the value at which it pegs the operations, although this figure is not yet known.
Cobar itself last year produced 49,600 tonnes of copper concentrate, and 445 ounces of silver, and is reportedly the highest grade copper mine in Australia, and the second deepest in the country.
The sale of its copper assets comes as a deficit in the metal is forecast for next year.
According to Capital Economics notes, "planned and unplanned cuts to copper supply now make it increasingly likely that the market will be in deficit next year (and possibly this year), even with very subdued demand projections."
However, despite this it appears that Glencore is making a cogent business decision, as the price is not predicted to move in line with the demand.
"This outlook is not being reflected in prevailing copper prices. Indeed, if demand surprises on the upside, as we think likely, the price of copper will have to rally sharply to catch up with fundamentals," Capital Economics stated.
This sale process “will allow potential buyers to bid to purchase either one or both of the mines and may or may not result in a sale,” it said in a company statement.
It is likely to carry out the sale of these operations in order to drive down its outstanding levels of approximately US$10 billion in debt in the wake of the extreme share price volatility it has seen on the market in the last few weeks.
It follows the miner’s announcement last week that it will slash zinc production globally, and shutter some of its zinc mines.
It is understood that the sale of these two copper mines is in addition to the $2billion worth
It plans a half million tonne reduction in its output globally, with much of the reduction to come in Australia, as well as South America and Kazakhstan.
This comes as the metal experiences a sharp decline following its steady growth since April last year on the back of a weakening US dollar.
The metal grew from $2180 per tonne in April 2014 to a height of $2890 per tonne in May this year, before sharply dropping to $2480 per tonne as of August, recoding an 8.15 per cent delcine compared to July.
Zinc itself lost 1.2 per cent earlier this week, with more weakness predicted ahead, however Glencore believes this is an undervaluation for the metal, and uses the current price as a basis for its decision.
"Glencore believes that current prices do not correctly value the scarcity of our zinc resources; our finite resources are valuable and reducing production, in response to current prices, preserves value," it said in a company statement.
According to a source close to the company, it believes it is more valuable to reduce production and keep the asset in the ground until prices rise, and sees the lack of a strong zinc pipeline ahead as a welcoming omen for potentially raising output in the future.
The majority of this is coming from Glencore’s Mt Isa operations at Lady Loretta and George Fisher where 245,000 tonnes will be removed from production, with Macarthur River dropping its annual output by 135,000 tonnes annually
Glencore did not state how long operations would be suspended or how many jobs will be affected, only saying the situation was temporary.
The decision will result in the loss of around 535 Australian jobs, approximately a fifth of its entire Australian zinc workforce.
Of this 335 will be Glencore employees, while the remaining 200 will be contractors.
Globally Glencore will cut 1600 positions.