Glencore's Glasenberg Talks Up Copper's Prospects--Update
05 Outubro 2015 - 7:34AM
Dow Jones News
By Scott Patterson
Glencore PLC Chief Executive Ivan Glasenberg, speaking publicly
for the first time since his company's shares plunged a week ago,
said he believes copper prices will ultimately rise as mine
supplies are pulled from the market.
Mr. Glasenberg, speaking in central London, said the Swiss
mining giant's plans to take 400,000 tons out of the market with
the shutdown of two copper mines in Africa, announced in its
sweeping balance-sheet restructuring plan last month, "should have
an effect on the price" as demand ultimately outweighs
supplies.
Mr. Glasenberg has blamed hedge funds, including some operating
in China, for artificially pushing copper prices lower.
"The funds are playing the commodity cycle," Mr. Glasenberg
said. "But in the end the fundamentals will prevail," noting that
"demand is still there."
Mr. Glasenberg said his company has seen a "massive destocking
around the world" this year in commodities such as copper as prices
decline. He said there is only three weeks supply of copper stock
available in warehouses, which he said is "the lowest inventory
I've seen in copper stocks for many years."
Glencore is particularly vulnerable to sliding copper prices.
The company produced 730,900 tons of copper in the first half of
2015. A 10% decline in copper from where it stood in the first half
of the year would erase about $1 billion from Glencore's adjusted
earnings, according to estimates by Liberum Capital analyst Ben
Davis. On the other hand, a 10% gain would be a boon for Glencore
and help ease fears about its high debt levels.
Glencore last month said it planned to shutdown one copper mine
in the Democratic Republic of the Congo and another in Zambia for
18 months while it upgrades the infrastructure. Some had questioned
whether the company would get pushback from the governments of the
two countries amid concerns that the shutdowns would hurt
employment.
Mr. Glasenberg said Monday at the FT Africa conference that he
"must congratulate both the president of the DRC and Zambia because
they understood what we're doing." Since the mines were
unprofitable, the countries weren't getting a decent tax return on
the production of the mines, he said.
"Long term it is better for them when we do dig it out of the
ground and they'll get more revenue, more taxation," he said.
"There is no reason to keep digging the stuff out of they round
when you're not making a decent margin," Glencore's CEO said.
Plunging commodity prices have sapped Glencore's earnings this
year. In the first six months, it posted a loss of $676 million,
and its high debt levels have sparked concerns that the company
could be slapped with downgrades by ratings firms if its earnings
fall much further.
Mr. Glasenberg has been scrambling to allay investor fears about
the impact of sliding commodities. He has been jetting around the
world, visiting mines, investors, banks and trading offices trying
to gather information and allay market fears. The CEO believes
markets have overreacted to the firm's situation, though he has
noted the risks of carrying too much debt and owning mines at a
time of weak commodity prices, according to people who have spoken
with him in recent weeks.
The company's shares and bonds have been whipped around over the
past week by those fears, including a 29% drop a week ago that has
since been erased. The stock was up around 7.4% in morning trading
in London, thought the shares are still down by nearly two thirds
so far this year.
Glencore executives are struggling to stop the bleeding by
selling assets and cutting billions in debt. Last month, Glencore
raised $2.5 billion in a share offering. It also said it would
suspend its dividend and raise cash by selling assets
Glencore says its finances are solid and credit lines from more
than 60 banks are intact. Banks have appeared to stand by those
credit agreements.
Write to Scott Patterson at scott.patterson@wsj.com
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(END) Dow Jones Newswires
October 05, 2015 06:19 ET (10:19 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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