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Glencore Is Close to Creating a Mining Royalty Company

Glencore Plc is close to finalizing a $700 million deal with the Ontario Teachers’ Pension Plan to create a new base-metals royalty company, according to people familiar with the matter.

The Swiss commodity giant will bring royalty agreements from about 10 mines, while Ontario Teachers’ will contribute about $350 million in capital to allow the company to buy further royalty streams from other projects. Glencore and Ontario Teachers’ will each have a 50 percent stake in the new vehicle and the deal is expected to close in the next few weeks, the people said, asking not be to identified as the talks are confidential.

The deal would create the world’s first major base metals-focused royalty company and is the latest move by Glencore Chief Executive Officer Ivan Glasenberg to expand his control of key commodities without extending his company’s balance sheet.

Glencore and Ontario Teachers’ declined to comment.

The largest royalty stream included in the package is Glencore’s 33.75 percent stake in Antamina in Peru, which produces copper, zinc and silver. Glencore will also contribute several smaller streams it owns from other mines in South America and Canada, the people said.

Future Sales

Royalty companies normally receive a regular percentage of future metal sales in return for upfront capital to help bring a mine into production. For Ontario Teachers’, the vehicle offers a new way to invest in the metals markets as the outlook for materials including copper, zinc and nickel strengthens. While royalty and streaming companies such as Franco-Nevada Corp. and Wheaton Precious Metals Corp. have been successful in precious metals, there’s no large royalty company specializing in base metals.

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