News

November 06, 2008

Who Will Blink First In The High Stakes Poker Game Between Glencore And Zaruma Resources?

By Charles Wyatt

In October 2007 Thomas Utter, chief executive of Canadian-listed Zaruma Resources, was delighted to be able tso announce that Glencore had agreed to provide senior secured debt financing to the tune of US$22 million for the development of the Luz del Cobre copper project in Mexico. This said a lot for the project, as the Swiss-based private company Glencore is one of the world’s largest suppliers of commodities and raw materials to industrial customers. The wide range of commodities that emanate from the Glencore stable originate either from Glencore’s directly or indirectly owned production assets, or are secured by Glencore from third parties. And Glencore also boasts refining, processing and marketing expertise. A powerful partner indeed, but there is no charity in business deals and Zaruma was left with the problem of finding any further funding required over and above the US$22 million.

At that time, just over a year ago, there was already likely to be a further US$3 million required, over and above the costs estimated in the technical report published in 2006. This requirement wouldn’t have appeared insuperable, and Glencore was fully in the picture, as it has a representative on the board of Zaruma. Glencore also gave verbal assurances that there would be no problem in finding more funds, according to Mr Utter.

But just to put this in perspective, the price of cash copper...