GLNCY Glencore Plc (PK)

By Scott Patterson And Alex MacDonald 

LONDON--Investors pounded shares of mining giant Glencore PLC on Monday, sending it to a new all-time low amid fresh concerns that persistently low commodity prices will cripple its debt-laden balance sheet.

The Swiss company's stock has collapsed in recent months despite a series of moves designed to bolster investor confidence and ease its debt burden. Glencore raised $2.5 billion earlier this month by issuing new equity to pay down debt.

Monday's plunge, in which Glencore tumbled 31% at one point to a record low of 66.7 pence, put its stock about 47% below the price investors paid just weeks ago in the stock offering.

But weakness in China, coupled with soft prices for commodities such as copper and zinc that are central to the company's earnings, have scrambled Glencore's efforts to boost confidence.

Investec Securities said in a report Monday that if commodity prices don't rebound, the value of Glencore's stock is "virtually eliminated." That is because Glencore, with nearly $30 billion in debt, would need to dedicate excess cash to repaying debt obligations, the analyst said.

If prices don't recover, "Glencore may have to undertake further restructuring beyond the dividend suspension, capital raising and asset sales programs it has already announced," Investec said.

Glencore's internal projections are at odds with Investec's analysis, according to a person close to the company. Glencore expects earnings before interest, taxes, depreciation and amortization this year to be in the high single-digit billions of dollars, the person said.

Goldman Sachs Group Inc. has similar concerns though. Investors aren't "convinced that Glencore has gone far enough to totally allay fears that the industrial assets can service the new lower debt level," analysts at the New York bank said in a note on Thursday.

Not all analysts believe the situation is so dire.

Sanford C. Bernstein analyst Paul Gait said in a Sept. 23 note that the selloff in Glencore's shares are overdone.

"For there to be no equity value left in the business at all, there would need to be a significant further fall in the commodity price deck, " he said.

Other factors weighing on Glencore are poor Chinese macroeconomic indicators showing a slowdown in the world's second-largest economy and concerns that Glencore may struggle to execute its $10 billion worth of measures in a timely fashion and reach its target of reducing net debt by a third to around $20 billion by the end of 2016.

Glencore is also seeking to raise around $2 billion from asset sales, which at least two analysts say could be tricky to execute.

The company has hired Credit Suisse Group AG and Citigroup Inc. to unload a minority stake in the agricultural business, a deal that could value the business at up to $12 billion, a person familiar with the matter said.

On Monday Glencore also agreed to sell a Brazilian nickel project for $8 million. It is also looking to sell rights to its precious metals production.

China's industrial profits fell 8.8% on year in August, extending July's fall as the slowing economy hit enterprises' profitability.

Copper, the company's biggest earnings driver and a barometer for the health of the global economy, is down a fifth so far this year, having hit a six-year low last month.

Glencore's shares are down more than 75% so far this year, making it the worst performer in the blue-chip index, and are down nearly 90% since their listing in London in 2011.

SP Angel mining analyst John Meyer said the stock feels oversold. "I would be looking for Glencore to rebound from here...[but] only time will tell."

Corrections & Amplifications

Investors aren't "convinced that Glencore has gone far enough to totally allay fears that the industrial assets can service the new lower debt level," analysts at the New York bank said in a note on Thursday. An earlier version of this article said the note was published Friday.

Write to Scott Patterson at scott.patterson@wsj.com and Alex MacDonald at alex.macdonald@wsj.com

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(END) Dow Jones Newswires

September 28, 2015 09:18 ET (13:18 GMT)

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