Glencore to buy back Colombian coal mine from Xstrata for $2.25 billion

Glencore International AG, one of the world's largest privately held companies and among the largest suppliers of commodities and raw materials, yesterday reacquired the Prodeco coal mine in Colombia from mining group Xstrata for about $ $2.25 billion.

Baar, Switzerland-based Glencore, which had until yesterday to exercise its option to acquire the Prodeco coal operations, will pay $2.25 billion in cash as well as profits made by the operations and any cash invested by Xstrata.

Glencore, which holds a 34.5-per cent stake in Zug, Switzerland-based Xstrata, did not have cash to participate in Xstrata's $4.1-billion rights issue in January 2009.

Instead, Glencore offered to tender Prodeco to Xstrata for an agreed price of $2 billion so as to maintain its stake. But both companies opted for a call option since they could not arrive at an agreement on an appropriate price for Prodeco since value of commodities had started to plunge with the onset of the recession.

Mick Davis, Xstrata chief executive said, ''The acquisition of the Prodeco operations last year facilitated an orderly rights issue process during very challenging market conditions."

Although Xstrata will receive $2.25 billion, it is expected to receive a total of around $2.5 billion after adding the investments and profit.