Glencore Xstrata £80b merger

The flagged $80bn merger of Xstrata and Glencore was always going to cause a commotion in Colombia, the world’s fourth biggest coal exporter.

Combined, the two companies’ stakes in the hefty Cerrejon and Calenturitas mines would add up to about 49 per cent of Colombian coal production, sparking questions about possible antitrust issues.

But José Fernando Restrepo, head of research at Medellin-based brokerage Interbolsa, thinks this is unlikely.

“They export all the production, so if you want to talk about monopoly, your reference will be the world coal market,” he says.

Infrastructure could be another matter, however. Colombia’s antitrust regulators may not like what they see when they take a look at the breakdown of ownership of Colombian railways and ports in the light of an Xstrata-Glencore deal. “Regarding railroads, or railroads dedicated exclusively to coal, Glencore owns the majority of these systems in Colombia,” says Restrepo. “They also have the majority of coal ports. If united it would create this big player that could hypothetically block access to other coal producers.”

Restrepo says a merged Xstrata-Glencore would overtake Drummond, of the US, which has about 30 per cent of Colombia’s coal production.

Xstrata jointly controls Cerrejon, Colombia’s biggest coal mine, along with BHP Billiton and Anglo America. A $1.3bn expansion of Cerrejon announced last year aims to boost production an export capacity by 8 million tonnes a year (mtpa) to 40 mtpa by 2015.

Glencore controls the 5 mtpa Calenturitas, Colombia’s third-biggest coal mine, via its Prodeco unit. It exercised its option to buy back Calenturitas back from Xstrata in March of 2010 after a 2009 agreement that saw it sell Prodeco to fund its share of a $5.9bn rights issue by Xstrata.