Glencore took a hit on Xstrata's mining assets for USD 7.7 billion on Tuesday . This reduced the worth of Xstrata's mining projects that were in their early stages. The weakening prices dragged down first half profit.
The mining industry had lost billions of dollars. Mining companies were forced to reduce the book value of their assets when market values dropped drastically. Glencore was anticipated to follow the trend after it acquired Xstrata.The trading results on Tuesday showed a drop of 9% in its core profit. Glencore wiped out Xstrata's goodwill value during the negotiations in the takeover, anticipating the big drop of commodity prices at that time.
Chief Financial Officer Steven Kalmin said, "We just had to value the business with a blank sheet of paper." He said, "There are clearly areas where we have taken a fairly conservative approach to value in the current environment, including the greenfield, early-stage projects in which Xstrata had committed spending."
Sales are anticipated to made after the Glencore's review of Xstrata's assets. Chief Executive Ivan Glasenberg, however, clarified that they were not in hurry to dispose their new acquisition. "Our major focus now is bringing down the cost," said Glasenberg.
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