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Glencore Xstrata logs $7.4bn net loss, eyes oil deal with Russia

CEO Ivan Glasenberg.

Mining and commodities giant Glencore Xstrata (LON:GLEN) dove deep into the red last year, reporting a massive net loss of US$7.4 billion, compared with a profit of $1 billion in 2012, after booking massive write downs related to its merger.

The weaker results were largely triggered by $11.1 billion of one off charges, said the firm Tuesday. Those included a $7.5 billion write down on goodwill generated when it bought the 66% of Xstrata, which didn’t already own last May in an all-share deal worth $29.5 billion.

Revenues for the year however, jumped 9% to $232.6 billion, while its adjusted earnings before interest and taxes, or EBIT, rose 34% on the year to $5.97 billion, largely due to the eight- month inclusion of Xstrata’s profits and a robust performance from its commodities trading business.

Deal with Russia, Chinese investors

Glencore Xstrata also disclosed a potential $1 billion deal with Russian oil company Russneft, despite the threat of war in Ukraine that has investors worrying over possible international sanctions against Russia.

The firm’s vote of confidence in the region comes as stock markets and the rouble looked to bounce back from yesterday’s slide, as the Kremlin ended military manoeuvres close to the border.

Late last year the firm also vowed to boost coal production in another rocky market, South Africa. Glencore said it would invest close to US$100 million in new developments, expected to supply nearly 60 million tonnes a year.

CEO Ivan Glasenberg further announced that discussions over the sale of Las Bambas massive copper project in Peru with China Minmetals were now focused only on price, as the venture still needs a $2.4 billion to come to a completion.

Glencore is widely expected to sell the Peruvian copper project to satisfy conditions set by Chinese competition regulators as part of the approval for the Xstrata deal. But Glencore is bullish on the outlook for copper and is expected to demand a high price for the project.

Glasenberg also revealed its company was in talks with to Rio Tinto (ASX, LON: RIO) about combining their coal operations in the Hunter Valley in Australia.

“We are talking to Rio but it takes time for both sides to assess each others’ assets. How far will we get and how soon we can reach an agreement I don’t know. But it’s clearly something that makes a lot of economic sense,” he said.