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Glencore flags progress on debt reduction

Keith Bowman | 4 November 2015 | A A A
Glencore flags progress on debt reduction

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Glencore plc Ord USD0.01

Sell: 470.65 | Buy: 470.85 | Change 6.45 (1.39%)
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A third quarter update from the mining company saw management flagging "significant progress" on the delivery of previously announced measures aimed at reducing group net debt to the low $20s billion by the end of 2016. The share price rose by over 6% in early UK stock market trading.

Actions taken included:

  • $2.5 billion raised from the equity placement on 16 September.
  • $2.4 billion saved from the suspension of the 2015 final distribution and 2016 interim distribution.
  • $900 million raised from its first precious metals streaming transaction. Additional streaming transaction is in progress and management expects to make an announcement prior to year-end.
  • Sales processes commenced for the minority stake in the Agriculture business as well as the Lomas Bayas and Cobar copper operations.

As a result, available committed liquidity at 30 September increased to $13.8 billion (from $10.5 billion at 30 June), reflecting $1.7 billion of net capital raised (equity placement less interim dividend), as well as continued cash generation from the underlying operations.

The board is now targeting net funding and net debt of c.$40 billion and c.$25 billion respectively by year end, down some 15-20% from their respective 30 June 2015 and 31 December 2014 amounts. It also reiterated its 2015 full year marketing adjusted EBIT guidance of $2.5 to $2.6 billion. Marketing was stronger over the quarter, with improved contributions from metals and minerals and agricultural products.

On the production front, measures to both reduce mined copper production by 455,000 tonnes by end 2017 and reduce mined zinc production by 500,000 tonnes per annum remained ongoing. Year to date nine month production saw the company reporting actions including a 2% fall in own sourced copper production, a 14% increase in attributable ferrochrome production and an 8% retreat in own sourced coal production.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

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