Glencore Xstrata slashes costs, lifts synergy target

10th Sep 2013 07:42

Glencore Xstrata has lifted its target to at least two billion dollars of synergies next year as the miner vowed to cut costs and improve operational efficiency.The company had initially aimed for $500m of synergies when Glencore first announced its merger with Xstrata last year. Ahead of a presentation for investors in London on Tuesday, the miner said it would deliver its new target through $1.4bn in cost savings, $450m from marketing synergies and $175m from financing synergies. The firm will focus on key projects and trim $3.5bn in capital expenditure this year through 2015. Capital expenditure will be sustained at $4bn, the lower end of previous guidance of $4bn to $5bn."We have successfully and rapidly completed the integration of Xstrata, identifying at least $2bn of synergies by 2014," said Chief Executive Officer, Ivan Glasenberg."A significant portion of the synergies are in overhead costs at head and regional offices. We are only just starting to comprehensively look at the combined mining and metallurgical operations."He said Glencore will have a diversified asset base with a strong cost curve position. Glasenberg added that the group had a strong balance sheet and cash flow to support its targets. "This is an interesting time for the sector, and an exciting one for Glencore," he said. "There is sound demand for commodities, and we see positive signs of financial discipline across the sector. This provides an environment in which Glencore's owner-manager philosophy will thrive."RD