Glencore Xstrata $8.47 Billion Write-Down Is No Big Surprise

Big mining firms wrote down more than $50 billion in assets in 2012, led by Rio Tinto PLC (NYSE: RIO), which wrote down $14 billion and fired its CEO. Mergers and acquisitions in the mining business totaled more than $1 trillion in the past decade, and the 5% write-down is really not so bad, all things considered.

Glencore paid $44.6 billion for Xstrata in a deal that closed in May of this year, and based on the impairment charge, the company overpaid by $7.7 billion. Glencore also took a $452 million charge on an Australian nickel mine, and a $324 million charge against its stake in Russian aluminum mining giant Rusal.

The culprit, as with all the other write-downs, is primarily low commodity prices. In addition to write-downs, the miners are combating the lower prices by reducing production and killing off or delaying new projects.

Glencore did not suspend its $0.054 quarterly dividend and the company’s CEO said that the company would provide a full update of its plans at its September 10 investor day presentation.

Overpaying for an asset by nearly $8 billion might put some CEOs in the unemployment line. But Glencore’s chief, Ivan Glasenberg, owns a big chunk of the company’s shares and he is unlikely be looking for a new job any time soon. But if the bleeding from the Xstrata acquisition cannot be stopped, even Glasenberg may be in trouble.