Glencore to write down billions in Xstrata nickel assets

As GlencoreXstrata reports its first set of results on Tuesday since merging in May, it is predicted the company will write down the value of its Xstrata assets by as much as $US7.61 billion.

According to analysts the company will write down the value of former Xstrata assets to the amount of $US5 billion to $US7 billion.

The biggest assets to take the hit will be nickel, including Xstrata’s $US5 billion Koniambo venture in New Caledonia, The Age reported.

It comes as nickel prices drop to less than a third of 2007 levels and supply surpasses demand.

Xstrata announced last year it will stop operations at its Cosmos nickel mine and cut its workforce.

The nickel price slump also hurt Russia's Norilsk Nickel, which closed it Lake Johnston operations in April and cut 180 workers.

Copper, which figures considerably in Xstrata’s future mines and expansions, could be another asset to take a hit.

Glencore, which has a 34 per cent stake in Xstrata, has been examining Xstrata’s assets over the last three months.

Thirteen analyst predictions given by Glencore said half-year core profit, or earnings before interest, tax, depreciation and amortisation (EBITDA) stood at $US5.88 billion, and net earnings at $US1.7 billion.

The mining sector has seen billions of dollars worth of asset writedowns this year as the industry sees a downturn.

Rio Tinto offloaded a number of its coal assets in Queensland and New South Wales, while Alacer Gold wrote down $US412 million off its Western Australian goldfields.

AngloGold wrote down asset values by up to $2.6 billion and restrained production plans.  

Newcrest Mining posted a $6.23 billion write down, including $AU3.5 million at Lihir, $AU1.17 million at Telfer, $AU406 million at Hidden Valley, and $AU486 million in West Africa.

GlencoreXstrata merged in May after some delays and missed deadlines to form a mining giant rivalling BHP Billiton.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.