GLNCY Glencore Plc (PK)

By Scott Patterson And Ira Iosebashvili 

Shares of Glencore PLC and other large miners plunged anew on Thursday, as a slump in copper prices revived worries about companies' ability to shoulder large debt loads.

Glencore's stock fell 7.6% to close below GBP1 for the first time in more than a month, bringing losses to 24% over the last six trading sessions.

The renewed weakness in the Swiss miner's shares is a sign that investors are again jittery about the company's ability to pay down billions in debt amid what many analysts say is likely to be a prolonged decline in commodity prices. Copper, which is Glencore's main earnings driver, sank to a fresh six-year low on Thursday.

The selloff is stoking worries of a repeat of a late-September rout, when Glencore's shares plummeted nearly 30% in one day. The shocking dive forced Glencore to take several actions to shore up its balance sheet and investor confidence.

Glencore declined to comment on Thursday.

Other big mining companies also took a hit, extending a sectorwide swoon that shows little sign of abating. Anglo American PLC, the fifth-largest miner by market value, tumbled 8.6% and is down 63% so far this year. Freeport-McMoRan Inc., one of the world's largest copper producers, fell 5.8%.

Lower copper prices "drive the earnings of these companies down, and push the shares lower," said Jack Ablin, chief investment officer at BMO Private Bank. "These companies tend to get overly punished in down markets and overly rewarded in up markets."

Copper prices stabilized in October after several miners, including Glencore, announced production cuts that investors hoped would ease a global supply glut. But the industrial metal, which is used in everything from iPhones to air conditioners, resumed its decline amid downbeat economic indicators out of China, the world's biggest copper consumer.

In the U.S., November copper fell 1.9% to $2.1730, the lowest level since July 2009.

In a research note dated Wednesday, Goldman Sachs analysts predicted copper prices will fall further by the end of 2016 and stay low through 2018 due to abundant supplies and weak demand.

"There may be a lot of cuts coming, but the market isn't sure if they are permanent in nature, or if they are enough to make up for the slowing demand," said Edward Meir, a strategist at INTL FCStone. "China's industrial sector appears to be in a recession."

The copper market has also been rattled by a strengthening dollar, which can further depress global demand by making dollar-denominated copper relatively more expensive for buyers outside the U.S.

Moody's Investors Service, a credit-ratings firm, in September had highlighted copper below $2.20 a pound as a particular threat to Glencore.

Since then, the company has raced to assure investors it is ready to withstand lower prices.

Glencore has laid out a plan to reduce its net debt by $10 billion to about $20 billion, by cutting its dividend, issuing $2.5 billion in new stock and selling assets, including the sale of the rights to some of its silver production last month.

The Wall Street Journal reported in October that Glencore executives were aiming to cut even more debt than announced in a bid to secure a credit-rating increase, in a nod to investor sentiment.

Glencore is unique among miners in that it has a huge trading arm that requires billions of dollars in short-term debt. In the first half of 2015, it also had about $30 billion in long-term net debt, much of it derived from its acquisition of mining giant Xstrata in 2013.

Investors have worried that the company's credit rating-two notches above junk status-could be hit if metals' prices continue marching downward. Glencore has a high credit rating for traders, but it is much lower than mining peers like BHP Billiton Ltd. and Rio Tinto PLC.

Prices of several bonds issued by mining companies also slid on Thursday. Glencore bonds maturing in 2021 fell to about 88 cents on the dollar to yield 7.22%. At the start of the year, they were trading $1.06 on the dollar.

A dent in the company's credit rating could spell trouble for its debt-fueled trading arm. The company has said that even if its credit rating was lowered, the added costs would be negligible.

Separately, Anglo American on Thursday announced a management shake-up, including the departure of its iron-ore chief. Chief Executive Mark Cutifani has launched a turnaround plan aimed at driving operating efficiency at the U.K. company's mines, slashing costs and selling unwanted assets.

Write to Scott Patterson at scott.patterson@wsj.com and Ira Iosebashvili at ira.iosebashvili@wsj.com

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(END) Dow Jones Newswires

November 12, 2015 16:51 ET (21:51 GMT)

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