Update | Glencore squeezes US$2 billion out of Xstrata deal

Glencore will cut spending, shelve dozens of projects and squeeze more than expected from its record-breaking purchase of mining group Xstrata, lifting benefits from the deal to at least US$2 billion next year.

Commodities trader Glencore has been at pains to defend its US$46 billion takeover of Xstrata, a blockbuster for the mining sector that came just as the commodities cycle turned.

The increase in the deal’s headline benefits was expected, given Glencore’s conservative targets. But the company’s promise of more to come, plus a commitment to capital discipline in a sector that squandered billions during the mining boom was taken positively by the market.

The commodities trader had forecast US$500 million of synergies when the acquisition was first announced last year - but that included only the benefit of channelling more of Xstrata’s output through Glencore’s marketing machine.

In its first detailed presentation since closing the deal, Glencore said it now planned for synergies to exceed US$2 billion for next year, including marketing and financing benefits but also US$1.4 billion through cost savings alone, more than many analysts had forecast.

“As we delve deeper into the assets ... I am sure there is more to go - to pinpoint what that number is, is difficult,” Chief Executive Ivan Glasenberg said on Tuesday, adding the additional cuts would come from both trading and operations.