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BRICS warns volatile commodity prices pose risk for recovery

Glencore aims for $11 bln in largest IPO this year
Hong Kong (AFP) April 14, 2011 - Commodities giant Glencore plans to raise up to $11 billion from listings in London and Hong Kong, in what is set to be the world's biggest initial public offering this year, a report said Thursday. The move comes as prices for some commodities hit record highs and makes Glencore, the world's biggest commodities trader by revenue, the latest to seek a foothold in Hong Kong's share markets to tap rich Chinese investors. Glencore, which is based in Baar, Switzerland, will list about 20 percent of its shares in the offering, and expects to sell 2.5-10 percent to Hong Kong retail investors, according to Dow Jones Newswires, quoting a term sheet. The company is valued at $60 billion.

It will use around $5 billion of the proceeds for capital expenditure over the next three years and around $2.2 billion to increase its stake in Kazakh mining firm Kazzinc Ltd and reducing debt. Glencore deals in commodities including oil, metals, minerals and agricultural products and employs almost 55,000 people in more than 40 countries. Founded in 1974 and initially focused on marketing commodities sourced from third parties, the firm has turned into the leading supplier by buying and developing mining, smelting, refining and processing production assets. Among its major investments is a 34.5 percent stake in Switzerland-based mining giant Xstrata.

The IPO comes as commodity prices sit at highs amid huge demand from Asia, particularly China and India, for resources to power their red-hot economies. Oil is at two-and-a-half-year peaks, while the prices for iron, copper and aluminium are also riding high. The listing in London, its primary listing venue, is expected to raise up to $8.8 billion with $2.2 billion from its Hong Kong listing. However there is a greenshoe option which will allow the firm to raise up to $12.1 billion in the case of strong demand, through an increase in the size of the offering by 10 percent. Glencore will set an indicative price range for the shares around May 4. Hong Kong stock exchange declined comment.

The firm is expected to announce details of the listing later Thursday. The IPO would be the world's largest this year, doubling the $5.5 billion listing in Singapore of Hong Kong billionaire Li Ka-shing's Hutchison Port Holdings Trust last month. However, it will be much smaller than the $22.1 billion raised by Agricultural Bank of China last year in a dual listing in Hong Kong and Shanghai. Glencore posted a 40.7 percent jump in 2010 net profit to $3.8 billion, reflecting strong demand for metals and minerals. Revenues were up 36.3 percent at $145 billion, said the group.
by Staff Writers
Sanya, China (AFP) April 14, 2011
Leaders of the top emerging economic powers meeting in China on Thursday warned volatile commodity prices posed risks for the global recovery and voiced fears about capital inflows.

Inflation has been rising on higher food, energy and metal prices due to Japan's nuclear disaster and the Libya conflict, while investors worried about the global outlook have poured money into fast-growing emerging economies.

"Excessive volatility in commodity prices, particularly those for food and energy, poses new risks for the ongoing recovery of the world economy," Brazil, Russia, India, China and South Africa -- or BRICS nations -- said in a joint summit communique.

The five nations said they would "carry out closer cooperation on food security", adding that the international community needed to work together to increase production capacity of commodities in general, not just food.

Russian President Dmitry Medvedev, Chinese President Hu Jintao, Brazil's Dilma Rousseff, South Africa's Jacob Zuma and Indian Prime Minister Manmohan Singh gathered for the talks on Thursday on China's southern Hainan island.

It marked the third annual meeting for the leaders of the four original BRIC nations, and the first in an expanded format that included South Africa, which was invited to join the bloc late last year.

Together, the five countries represent more than 40 percent of the world's population, and their combined GDP accounted for 18 percent of the global total in 2010, according to the International Monetary Fund.

They said emerging economies were threatened by "massive" capital flows which have been blamed for pushing up their currency values.

The leaders meanwhile welcomed discussion about the role of the IMF's international reserve asset, noting the global crisis had exposed the "inadequacies and deficiencies" of the current monetary and financial system.

"We support the reform and improvement of the international monetary system, with a broad-based international reserve currency system providing stability and certainty," the statement said.

French President Nicolas Sarkozy and US Treasury Secretary Timothy Geithner last month called for a widening of the basket of currencies underlying the IMF's Special Drawing Rights (SDR) during a G20 seminar in China.

The West wants to see the yuan become part of the SDR basket as part of its efforts to prod Beijing into opening up its tightly managed and controversial currency regime.

The issue was unlikely to have been raised at the summit as it is a contentious one -- Brazil believes the yuan is undervalued, giving China an edge on exports and hurting the South American nation's trade balance.

The BRICS state development banks also agreed to open credit lines in their national currencies, Russia's state development bank Vnesheconombank said in a separate statement, which would reduce their reliance on the dollar.

The leaders said nuclear power would continue "to be an important element in future energy mix of BRICS countries".

The announcement came even after Japan declared the disaster at the Fukushima Daiichi nuclear plant, which was hit by the March 11 quake-tsunami, was a level seven emergency -- the worst rating on an international scale.

"International cooperation in the development of safe nuclear energy for peaceful purposes should proceed under conditions of strict observance of relevant safety standards," the leaders said in their statement.



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BRICS urges 'early' WTO accession for Russia
Sanya, China (AFP) April 14, 2011
The leaders of China, India, Brazil and South Africa on Thursday threw their support behind Russia's 18-year-old bid to join the World Trade Organisation, urging an "early accession" for Moscow. The backing for Moscow's bid to join the Geneva-based trade body came at the end of a summit of the so-called BRICS nations - Brazil, Russia, India, China and South Africa - in the southern Chinese ... read more







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