By Alex MacDonald 

LONDON--Commodities company Glencore Xstrata PLC swung to a net loss for 2013 amid a previously disclosed write-down on its acquisition of Anglo-Swiss mining company Xstrata PLC, drawing fresh scrutiny to one of the sector's largest deals to date.

Switzerland-based Glencore Xstrata said Tuesday its net loss attributable to shareholders totaled $7.4 billion last year, compared with a net profit of $1 billion in 2012. The weaker result was largely because of $11.1 billion of one-time charges.

The charges included a $7.5 billion write-down on goodwill generated when Glencore bought the 66% of Xstrata it didn't already own last year in an all-share deal valued at $29.5 billion.

Glencore Xstrata Chief Executive Ivan Glasenberg, who has been a vocal critic of wasteful investment by the mining sector, defended the price of the Xstrata deal Tuesday. He said the benefits from cost savings, lower financing costs and more marketing opportunities for the company's traders would more than offset the impairment charge, which Glencore Xstrata first disclosed in August. Glencore Xstrata now estimates the annual earnings boost from the deal to reach $2.4 billion.

"We are very comfortable with the acquisition," Mr. Glasenberg said in an interview. "Assume you put a multiple of seven [on earnings benefits], you are there, you cover your $7.5 billion [impairment] by a long shot."

Glencore took the write-down on the deal mainly because of a decline in the value of the mining assets it acquired from Xstrata after the deal closed on May 3. Mr. Glasenberg said the charge resulted in part thanks to the timing of the deal's closing, after more than a year of talks led to it paying 3.05 shares for every Xstrata share.

Had the deal closed "a few days later it would have been a different impairment value because the Glencore share price was down, so we would have paid less," he said. "The ratio was right."

The company also declared a full-year dividend of 16.5 cents for 2013, 4.8% higher than for 2012, reflecting its confidence about the group's future results. As the company's largest shareholder, with an 8.3% holding, Mr. Glasenberg will net $182 million from the payout.

Glencore Xstrata isn't the only mining company to have taken a big hit on large deals. Rio Tinto has written down more than half of its $38.5 billion purchase of Canadian aluminum smelter Alcan in 2007, while BHP Billiton has incurred billions of dollars in impairment charges against its U.S. shale acquisitions.

Glencore Xstrata's write-down masked a reasonable performance by the company's underlying business. Its revenue rose 9% to $233 billion last year while its closely watched adjusted earnings before interest and taxes, or adjusted EBIT, increased 34% to $5.97 billion, largely because of the eight-month inclusion of Xstrata's profit and a robust performance from its commodities-trading business.

Mr. Glasenberg said talks are continuing with a consortium led by state-controlled China Minmetals Corp. over the sale of Glencore's $5.9 billion Peruvian Las Bambas copper project. Glencore agreed to sell the mine to secure Chinese regulatory approval for the company's tie-up with Xstrata.

Glencore also said it is in talks with other mining companies over potential cooperation or joint-venture agreements where they have nearby assets. Discussions are being held with Brazilian mining company Vale SA regarding its Canadian nickel operations and Rio Tinto over its Australian coal assets, Mr. Glasenberg said. He declined to comment on whether the talks would result in an agreement.

Write to Alex MacDonald at alex.macdonald@wsj.com

Order free Annual Report for Vale SA

Visit http://djnweurope.ar.wilink.com/?ticker=BRVALEACNOR0 or call +44 (0)208 391 6028

Order free Annual Report for Vale SA

Visit http://djnweurope.ar.wilink.com/?ticker=BRVALEACNPA3 or call +44 (0)208 391 6028

Order free Annual Report for Vale SA

Visit http://djnweurope.ar.wilink.com/?ticker=US91912E1055 or call +44 (0)208 391 6028

Order free Annual Report for Vale SA

Visit http://djnweurope.ar.wilink.com/?ticker=US91912E2046 or call +44 (0)208 391 6028

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Vale (NYSE:VALE)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Vale Charts.
Vale (NYSE:VALE)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Vale Charts.