Can the Mara copper deal propel Glencore’s share price higher?

Glencore has confirmed a deal to buy out its partner Pan American Silver’s majority stake in Argentina’s Mara copper project, as the Swiss commodity trader and miner aims to ramp up production to boost its copper exposure. The company has also been linked with a move for Teck Resources’ coal unit, and reported a fall in copper and nickel production in H1.

Glencore’s [GLEN.L] share price eked out a 1.5% gain last Monday 31 July before closing lower on the week, after the Swiss commodity and mining giant confirmed it had agreed a deal to buy out its partner Pan American Silver’s [PAAS] majority stake in Argentina’s Mara copper project for $475m.

Glencore is looking to ramp up production of copper as part of a strategy to boost its exposure to the metal, with the company having previously increased its holding in the Mara project last year in a deal with Newmont [NEM].

The Pan American Silver buyout follows confirmation of a fall in Glencore’s copper and nickel production figures in its half-year update. Meanwhile, Eramet [ERA.PA] has announced a $400m lithium contract with Glencore, while the company has also been linked with a move for Teck Resources’ [TECK-B.TO] coal unit.

What’s happening with the Glencore share price?

Glencore’s share price has fallen 16.97% so far this year, leaving it virtually unchanged over the last 12 months, down 0.77%, after Friday 4 August’s close at 463.20p. While the shares have moved 12.71% off their 52-week low of 410.95p reached on 15 March, they remain 20.75% lower than the 18 January 52-week high at 584.50p.

Taking a slightly longer view of the GLEN share price, the stock is up 42.35% in the last two years, and an impressive 162.35% over the previous three years.

Glencore buys Pan American stake in key copper project

Glencore and Pan American Silver have reached an agreement for Glencore to acquire its 56.25% stake in the Mara project. Once the deal is completed, likely in the third quarter, Glencore will take full control of the Argentinian mine. Glencore’s share price moved 1.51% higher following the announcement.

With an estimated 27-year mine life, Mara is expected to become one of the world’s leading global copper production sites once operational, with an expected average production in excess of 200,000 tonnes per annum, reports International Mining.

The project was formed through a joint venture between Yamana Gold [YAU.L], Glencore and Newmont in December 2020, before Glencore acquired Newmont’s 18.75% stake in October 2022 for $160m, which took its shareholding to 43.75%.

Copper is used in renewable energy systems to generate power from solar, hydro, thermal and wind energy. Its prevalent use in areas such as electric vehicles and power grids explains why mining companies are anticipating soaring demand for the metal over the next few years.

Copper and nickel production falls

In its recent half-year update, Glencore revealed that copper production fell by 488,000 tonnes — around 4% — versus the year-ago quarter, in line with previous guidance. The company also said nickel production was down 11,400 tonnes versus the first half of 2022, equating to a sizeable 20% decline. The miner put this down to higher third-party production, largely owing to a strike at its Raglan plant in Quebec. On the plus side, cobalt production rose 5% year-on-year.

CEO Gary Nagle said that despite the volatile market in the first part of the year, he expects full-year adjusted earnings before interest and taxes to come in “above the top end of our $2.2–3.2bn per annum long-term guidance range, likely in the $3.5–4bn range”. Glencore’s share price slipped 0.17% intraday following the update, before closing marginally lower, down 0.004%.

Glencore aims for lithium and coal deals

French miner Eramet said last week it had signed a $400m deal with Glencore to jointly market 50,000 metric tons of lithium produced on its Argentine site over five years.

Separately, Canada’s biggest diversified mining firm, Teck Resources, confirmed last week that it was considering a range of proposals, including a partial sale of its coal business, after Glencore offered up to $8.2bn for the unit. This follows Glencore's initial bid for the whole company in April for $22.5bn, which the Canadian miner knocked back.

Then in June, Glencore offered to buy Teck's coal unit. Its coal mines are among a dwindling number that remain globally, a factor that appeals to Glencore as it looks to combine Teck’s mines with its own thermal coal business, report Reuters.

Where do analysts see the Glencore share price heading?

Among 11 analysts polled by Refinitiv offering 12-month price targets for Glencore, the median target of 548.23p represents a healthy potential upside of 18.36% from Friday’s close of 463.20p. This is supported by analysts’ positive outlook on the shares, with five ‘buy’ and seven ‘outperform’ recommendations. One analyst has placed a ‘hold’ on the stock, while there are no ‘underperform’ or ‘sell’ recommendations.

With Glencore about to assume full control of the significant Mara copper project, and other deals in the pipeline, investors will be hopeful that Glencore’s share price can move back towards the January year-high.

• Glencore buys partner Pan American Silver’s 56.25% stake in Mara copper project.
• Copper and nickel production fall but earnings expected to beat guidance.
• Teck Resources reveals Glencore’s latest bid for its coal business.