Glencore shares jump
Glencore increases its debt reduction target and deepens its capital spending cuts as it fights for survival.
|||Johannesburg - Mining and trading company Glencore has increased its debt reduction target and deepened its capital spending cuts as it fights for survival in the face of low commodity prices, sending its shares up more than 9 percent in early trade.
The London-listed company said on Thursday it was targeting net debt of between $18 billion and $19 billion by the end of 2016, against a previous target of $20 billion.
Glencore has come under pressure from investors and credit ratings agencies to cut its net debt of $30 billion, one of the highest in the industry, as prices for its key products copper and coal languish at multi-year lows.
Chief Executive Ivan Glasenberg said the company had already cut debt by $8.7 billion and was well placed to continue to be cash generative in the current environment, and at even lower commodity prices. “We retain a high degree of flexibility and will continue to review the need to act further as required,” he added.
Swiss-based Glencore cut its capital expenditure for 2015 to $5.7 billion from $6 billion. Spending is seen falling to $3.8 billion in 2016 from a previous estimate of $5 billion.
Credit Suisse analysts said in a note: “In the current price environment the company will need to show continual delivery against this plan but this update is better than expected, sufficiently detailed and provides a clear debt reduction pathway and timeline.”
Glencore's debt-reduction plan involves asset sales, reducing capital expenditure, suspending dividend payments and raising $2.5 billion of new equity capital, which the company said would allow it withstand copper prices of $4 000 a ton, as expected by some market players.
The share sale was completed in September.
Broad spectrum
Glencore also said it aimed to raise between $3 billion and $4 billion from assets sales, up from $2 billion previously. It is selling a minority stake in its agriculture business, as well as its Lomas Bayas copper operation in Chile and its Cobar copper mine in Australia.
It said a broad spectrum of parties had shown interest in buying a stake in the agriculture business, while Australian, Asian and South American strategic and financial investors had shown interest in the copper mines.
Initial bids for the three transactions were expected by mid-December with deals seen done in the first half of 2016.
Glencore also said it was working on more precious metals “streaming deals”, a type of alternative financing in the mining industry where funds are provided upfront to a miner in exchange for the sale of a fixed amount of future, usually by-product, production at a discounted price.
Glencore said its trading division will generate adjusted earnings of $2.5 billion in 2015, against previous guidance of $2.5 billion to $2.6 billion. It set guidance of $2.4 billion to $2.7 billion for the division's earnings in 2016, reflecting lower working capital and reduced copper, zinc, lead and coal volumes.
It also estimated group core earnings or EBITDA of $7.7 billion in 2016 at current prices.
REUTERS