Rescue plans unveiled by embattled mining companies Glencore Plc and Anglo American Plc in the past year have won over investors. Yet a rally in the stocks is stalling this month.
Glencore is barely changed in August and Anglo is up less than 4 percent after they more than doubled in the year through July. For Glencore, there are now fewer catalysts for gains as the Swiss company is closer to completing a $13 billion debt reduction plan, according to Macquarie Group Ltd. analyst Alon Olsha, who downgraded the stock to neutral last week because of the rally.
The world’s biggest mining companies have sold assets, scrapped dividends, reined in spending, and in Glencore’s case sold $2.5 billion of stock, to cut debt loads that panicked investors last year as raw-materials prices collapsed. On Wednesday, Glencore investors will get an update on its progress toward a net-debt target of as low as $17 billion by the end of the year as it announces first-half profits.
“Balance sheets are very much on the mend; it looks like the mining sector has turned a corner,” Olsha said in an interview with Bloomberg Television. “The big question is whether current commodity price levels are sustainable into the end of the year or whether excess capacity comes back and depresses prices again.”
One top-five Glencore shareholder has decided to lock in profits after the recent rally. David Herro, chief investment officer of Harris Associates LP, said in an interview with Bloomberg Radio on Monday that he’s reduced his holding from 8.5 percent to 6 percent. The rapid rise in the shares had forced him to “re-position” his holding, Herro said.
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