All trading involves risk. Losses can exceed deposits.

Synergies boost Glencore Xstrata

Global mining and futures commodity company Glencore Xstrata has updated markets on the benefits of the combined organisation following its first year since amalgamation.

All trading involves risk. Losses can exceed deposits.

In the initial assessment of cost-cutting and synergies between Glencore and Xstrata, it was hoped that the two companies combined would be able to save around $500 million on an annual basis. This has now been revised to in excess of $2 billion, with $450 million saved in marketing, $175 million from financing and $1.4 billion from cost savings. Traders and investors had certainly not factored in that savings would end up being four times the original $500 million estimate.

Today’s news will give the company a boost early in its 2014 accounting year and with plans further down the road to cut expenditure in 2015 by $3.5 billion, Glencore Xstrata will hope to turn around market pessimism following the $7.7 billion write-down of Xstrata assets.

Since the early July lows around 256p the company has seen a return to form and the shares have climbed back above the 200-day moving average. The miner will need to add almost another 20% to challenge the year’s highs, but today’s move is a step in the right direction.

Glencore Xstrata plc (DFB) chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts