Glencore – Page 35 – Republic of Mining

Glencore Investors Force CEO Glasenberg to Prepare for Doomsday – by Javier Blas and Jesse Riseborough (Bloomberg News – September 8, 2015)

September 8, 2015

http://www.bloomberg.com/

After a breakfast meeting with a small group of hedge funds in New York last week, Glencore Plc Chief Executive Officer Ivan Glasenberg concluded that investors could no longer stomach his famously bullish outlook.

The meeting capped two weeks of discussions with shareholders from North America to Europe after the Swiss miner and trader reported a 56 percent decline in profit. His plan to trim Glencore’s $30 billion debt by 10 percent by the end of next year wasn’t enough to halt a plunge in the company’s market value, which has more than halved to about 17 billion pounds ($26 billion) this year. On Monday, the company announced a strategy to reduce debt much more quickly.

“This is definitely the first time you get the impression that shareholders are the most important voice in the room versus management,” Ben Davis, a mining analyst at Liberum Capital Ltd., said by phone from London. “Until now, a lot of the market has seen Ivan as the smartest guy in the room.”

The U-turn was unprecedented for the 58-year-old South African billionaire, who has run Glencore almost single-handedly from the sleepy lakeside Swiss city of Zug for a decade and a half.

Rio Tinto shows Glencore’s Ivan Glasenberg who knows China best – by James Thomson (Australian Financial Review – September 4, 2015)

September 4, 2015

http://www.afr.com/

Finally, a little relief for Glencore chief Ivan Glasenberg, who watched the miner’s stock climb 6.6 per cent on Thursday night after two horror days of trading that saw it fall 6.7 per cent and then 8.4 per cent.

Glencore stock has hit record low after record low since Glasenberg delivered the company’s results on August 19. Obviously this has been a period of extreme volatility for global markets, and a global commodities trader with a debt pile of $42.7 billion won’t win any awards for defensive stock of the month. But a 26 per cent fall in 12 days isn’t pretty.

Thursday night’s jump came despite Standard & Poor’s revising its outlook on Glencore to “negative” from “stable” after lowering its price assumptions for aluminium, copper, and other metals, “reflecting a change in market conditions and uncertainties about China’s economic outlook.”

But it did take a little financial show of strength to get the shares moving in the right direction again. On Wednesday Glencore said it would pay back $US350 million ($500 million) of perpetual bonds next month, at the earliest possible date. It was a clever way of showing the company has cash to pay debt as it battles the commodity price slump.

Glencore sinks on equity issuance fears – by Bryce Elder (Financial Times – September 1, 2015)

September 1, 2015

http://www.ft.com/

Glencore hit another record low on Tuesday on growing concerns that it may be forced into an equity issue.

Miners slumped on data showing China’s factory activity contracted at its fastest pace in three years, which put further pressure on copper and coal prices.

Glencore closed down 10 per cent to 133.5p, which took its loss since flotation in 2011 to 75 per cent. With the major miners needing to raise as much as $60bn to recapitalise their balance sheets, companies should act quickly, argued Merrill Lynch.

“Early recappers could be rewarded with less dilution, premium market ratings and possibly a licence to undertake M&A,” it told clients.

Merrill estimated that, if current spot commodity prices stretch into perpetuity, Glencore has a $9.3bn capital shortfall against the debt target needed to safeguard its credit rating and would need to raise more than $16bn to cut net debt to 2 times earnings before interest, tax, depreciation and amortisation.

Commodity Traders Feel Unusual Pain of a Market Rout – by Sarah Kent (Wall Street Journal – August 25, 2015)

August 26, 2015

http://www.wsj.com/

Firms find they can no longer thrive on volatility after building up a physical presence

LONDON—For years, the secretive club of the world’s largest commodities traders thrived on volatility and sometimes tiny price differences in the raw materials they trade—styling themselves as nimble middlemen able to profit whether markets were rising or falling.

These days, many outfits are very different animals and that’s causing unusual pain amid today’s commodities-market rout.

During a decade of booming commodities prices, many of these trading firms put billions of dollars into mines, pipelines and storage terminals. Those bets were supposed to help their traders understand supply and demand, while providing their trading floors with a ready source of supply. But they also made them more exposed to falling prices in markets in which they have built up a physical presence.

Just how much, however, is difficult to gauge, since many of the biggest traders are still privately held and disclose little. Even the trading floors of big, publicly listed traders—including Glencore PLC of Baar, Switzerland, and Hong Kong-based Noble Group Ltd.—are difficult to value because they have so few peers.

Can You Read China? Top Mining CEOs Disagree on Biggest Customer – by Thomas Biesheuvel (Bloomberg News – August 25, 2015)

August 25, 2015

http://www.bloomberg.com/

What on earth is going on in China?

Two of the biggest mining companies feeding the country’s appetite for raw materials can’t even agree on whether there’s an answer to the question.

Andrew Mackenzie, head of BHP Billiton Ltd., is bullish on his ability to comprehend a country that consumes more commodities than any other — and whose economic woes have shaken markets around the globe this week.

“We don’t find China impossible to read,” Mackenzie, chief executive officer of the world’s biggest mining company, said Tuesday.“We’ve been at this game for decades.”

His certainty conflicts with billionaire mining rival Ivan Glasenberg’s admission last week that he couldn’t read the world’s second-largest economy right now and neither could anyone else.

Glencore CDS Costs Soar On Poor Results – by Christopher Whittall and Laurence Fletcher (Wall Street Journal – August 20, 2015)

August 20, 2015

http://www.wsj.com/

Costs have tripled since last September as company’s earnings drivers trade at six-year lows

The price investors must pay to insure against a default on Glencore PLC’s debt ballooned after poor results from the commodities giant.

As of Thursday, investors had to pay $330,000 to insure against $10 million of Glencore debt for five years using credit default swaps, or CDS, according to data group Markit. That is more than three times the price of insuring against a default last September. At the end of last week, it cost $294,000.

The Swiss mining firm reported a sharp half-year loss on Wednesday amid a slump in commodity prices and a slowdown in the Chinese economy. Prices for copper and oil, two of Glencore’s earnings drivers, are trading at or near six-year lows.

Andrey Kuznetsov, a credit analyst at Hermes Investment Management, which oversees £30 billion ($47 billion) in assets, said the main takeaway from Glencore’s earnings call was that the company was caught off guard by the slowdown in China.

“They are involved in metals and trading, so you would expect them to have a better understanding of what’s happening in China.

COLUMN-Glencore caution, Rio optimism over China? You decide – by Clyde Russell (Reuters U.S. – August 20, 2015)

August 20, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Aug 20 (Reuters) – Take two top mining executives and ask them about China. One says he cannot fathom what’s happening in the world’s biggest commodity consumer, the other says he remains unashamedly bullish.

This isn’t an exercise to determine which executive is right and which is wrong, rather it underscores just how difficult it has become to make long-term investment decisions at the current stage of the commodity cycle. Ivan Glasenberg, the outspoken chief executive of Glencore , was candid when presenting the London-listed miner’s 29-percent slump in first half earnings on Wednesday.

“(Commodity demand is) difficult to call at the moment with what we see in China,” Glasenberg said. “That’s the one we are all struggling to read, demand in China.”

Battling to understand the dynamics of President Xi Jinping’s “new normal” isn’t confined to Glasenberg, with views on China currently ranging from the doom and gloom of an imminent hard landing to the more benign gradual, if somewhat disorderly, transition toward a more sustainable, consumer-driven economy.

Glencore Slumps to Record Low as Profit Drops 56% on Metals Rout – by Jesse Riseborough and Javier Blas (Bloomberg News – August 19, 2015)

August 19, 2015

http://www.bloomberg.com/

Glencore Plc slumped to a record in London after reporting a 56 percent drop in first-half profit on the China-led rout in commodity prices.

Glencore, the worst performer on the U.K.’s benchmark stock index this year, slid as much as 9.4 percent. The company cut its full-year earnings forecast for its trading division. It also outlined further spending reductions as billionaire Chief Executive Officer Ivan Glasenberg pares debt in an effort to maintain dividends while preserving an investment-grade credit rating.

“We’ve got a worsening situation right now,” John Meyer, a mining analyst at SP Angel Corporate Finance LLP, said in an interview with Bloomberg Television. “Glencore I think should’ve performed a little bit better through the first half. This is going to disappoint many. The metals trading didn’t do so well. China really slowed down, it totally hit a wall.”

The world’s biggest natural resources companies have seen copper and oil prices fall to six-year lows as China’s economy expands at the slowest pace in a quarter of a century. Glasenberg said in an interview that nobody can read the Chinese economy right now.

Glencore swoops on Sirius’ nickel – by Peter Ker (Sydney Morning Herald – August 18, 2015)

August 18, 2015

http://www.smh.com.au/

Glencore’s financial troubles have not prevented the Swiss giant from swooping on the remaining offtake from Sirius Resources’ Nova mine in WA. In a deal that completes the offtake process for Sirius for the time being, Glencore will buy half of the nickel and copper concentrate produced at Nova for the first three years of the mine.

The agreement comes after BHP Billiton agreed in March to buy half of the first three years’ concentrate from Nova, and Trafigura agreed to buy copper concentrate from the mine.

Both BHP and Glencore have nickel operations within a few hundred kilometres of the Nova mine but while the concentrate bound for BHP will go into its Nickel West smelter at Kalgoorlie, Sirius said the concentrate bought by Glencore would be shipped overseas out of either Esperance or Geraldton ports.

Nova is not expected to come into production until late 2016, and the fact that 100 per cent of production for the first three years has already been sold amid a weak nickel market is a tribute to the expected high quality of the Sirius concentrate.

US activist builds Glencore stake – by John Ficenec (The Telegraph – August 16, 2015)

August 17, 2015

http://www.telegraph.co.uk/

Activist investor Harris Associates builds stake in FTSE 100 commodity and mining giant Glencore as it grapples with commodity rout and tumbling profits

One of America’s most influential activist investors has secretly amassed a stake in FTSE 100 mining giant Glencore as it attempts to wrestle with the dramatic fallout from tumbling commodity prices.

Harris Associates has built a £250m position in the world’s largest commodities trader in a move likely to pile further pressure on Glencore chief Ivan Glasenberg who faces a barrage of problems.

David Herro, the investment chief at the Chigaco based fund with $135bn under management, has an impressive track record against ambitious bosses, and could prove a formidable taskmaster for the combatitive Mr Glasenberg as he formulates a plan to turn around Glencore’s declining fortunes.

Saving mining giant requires real superpowers – by Ben Marlow (The Telegraph – August 15, 2015)

August 17, 2015

http://www.telegraph.co.uk/

Glencore has found itself in a world of pain as China cools and commodity prices tumble

From genius to mere mortal soul. To be fair, it took something as seismic as the end of the commodities supercycle to prove his fallibility, but apparently Ivan Glasenberg isn’t superhuman or from another dimension, after all.

It wasn’t long ago that the founder of mining giant Glencore was widely lauded as a dealmaking genius when he floated the company on the London Stock Exchange.

It was 2011, a time of huge global uncertainty, when most other business figures were focused on little more than simple self-preservation.

Yet the suave South African chose this moment to push the button on the largest listing the City had ever seen. In one fell swoop, the commodities trader was catapulted into the upper ranks of the FTSE 100, Glasenberg joined the ranks of the super-rich thanks to a 15pc stake that saw him become a dollar-billionaire 10 times over, and its army of nearly 500 traders all made just over $100m (£64m) each.

Glencore sells assets as downturn bites – by James Wilson (Financial Times – August 14, 2015)

August 14, 2015

http://www.ft.com/intl/

Glencore sold a trio of mining assets for $290m, extending its retreat from unwanted projects and continuing a trend among the largest resource companies to streamline their portfolios as the commodities downturn bites.

The UK-listed miner confirmed the sale of Tampakan, a copper project in the Philippines. It also revealed deals to sell Falcondo, a nickel producer in the Dominican Republic, and Sipilou, another nickel project in Ivory Coast.

Glencore inherited the assets as part of its takeover of Xstrata, completed in 2013, but has not significantly invested in them. For a project such as Tampakan, it could cost close to $6bn to build a mine.

Ivan Glasenberg, Glencore’s chief executive, has repeatedly said he dislikes the risks of “greenfield” mining developments, preferring to seek growth by expanding existing mines or via deals.

“Tampakan is one of those giant greenfield deposits . . . that’s been on the table for a long time, but struggling to obtain development approvals in the Philippines,” said analysts at Numis.

Glencore: world of big mining agog at huge fall – by Nils Pratley (The Guardian – August 12, 2015)

August 14, 2015

http://www.theguardian.com/

Financial challenges ahead for Ivan Glasenberg as share price at mining and commodity-trading company falls by two-thirds since it came to market

How do you make a £2bn fortune from commodities? Answer: start with a £6bn fortune.

Ivan Glasenberg, chief executive of Glencore, won’t be laughing. Those numbers are the value of his shareholding in the mining and commodity-trading company at flotation in 2011 and now. Yes, Glencore’s share price really has fallen by two-thirds, from 530p to 180p, since it came to market with a fanfare. Among London’s big miners, only Anglo-American has done worse.

This week alone the fall has been 10% as the China-inspired rout has run through commodity markets and mining stocks. Glencore is being whacked harder than the likes of BHP Billiton and Rio Tinto for a simple reason – relative to earnings, it has a lot more debt.

Analysts predict borrowings will stand at about $48bn when the company reports half-year numbers next week, which is a hell of a sum even for a business making top-line (before interest and tax) earnings of $10bn-$12bn.

Glencore and BHP Fall to Lowest in Years as Miners Shunned – by Jesse Riseborough and Thomas Biesheuvel (Bloomberg News – August 12, 2015)

August 12, 2015

http://www.bloomberg.com/

Glencore Plc and BHP Billiton Ltd. shares fell to the lowest in at least four years as investors continued to shun mining companies on concern Chinese demand for commodities is waning.

The FTSE 350 Mining Index of 14 producers fell for a second day to the lowest since March 2009. BHP, the world’s biggest miner, dropped to a six-year low while Glencore slid as much as 7 percent to the lowest since it started trading in 2011.

Commodity prices are near a 13-year low and this year’s 18 percent plunge in the Bloomberg World Mining Index wiped almost $200 billion off the value of the biggest producers. China, the biggest raw-materials user, this week devalued its currency in a move that supports exports and makes imports more expensive. That further spooked investors already concerned that consumption is falling as the country’s economy expands at the slowest pace in a quarter of a century.

“This is coming at a time when the market is capitulating anyway,” Marc Elliott, an analyst at Investec Plc in London, said by phone, referring to the weakening yuan.

Glencore’s Trading Profit at Risk From Rout in Commodities – by Jesse Riseborough and Javier Blas (Bloomberg News – August 10, 2015)

August 10, 2015

http://www.bloomberg.com/

Glencore Plc’s trading business is at risk of missing its earnings target for this year, if analyst estimates and historical precedent are any guide.

The division may report adjusted earnings before interest and tax of $1.28 billion for the first six months of the year, according to the average estimate of nine analysts surveyed by Bloomberg News. That’s less than half the company’s full-year target of $2.7 billion to $3.7 billion. For the past three years, second-half trading profit has never beat first-half.

The trading operation, which handles everything from cotton to copper to oil, is under pressure as a glut of global metal supply reduces the premiums that Glencore can charge to clients.

Agriculture traders have also struggled, with Cargill Inc. reporting its first quarterly loss since 2001 and Bunge Ltd. missing analysts’ estimates. Glencore shares hit a record low last week and have slumped 62 percent since 2011.

“While everyone has been quick to call the end of the commodities super-cycle, the more important shift for Glencore is the end of the era of super-profits in trading,” said Ben Davis, analyst at Liberum Capital Ltd. in London. “What made Glencore rich in the past is unlikely to happen again.”