GLNCY Glencore Plc (PK)

By Alex MacDonald And Scott Patterson 

LONDON--Shares in Glencore PLC climbed after the Swiss miner delivered an upbeat earnings forecast, unveiling more cuts to its debt pile and saying it could turn a profit even if commodity prices fell further.

Glencore's stock gained 7% Thursday in London, surging as much as 14% in intraday trading, another wild ride for a company whose share price has experienced big swings in recent months as prices for copper and other commodities it digs up and sells have plunged.

A combination of lower costs and solid gains from its trading arm will help Glencore generate earnings before interest, taxes, depreciation and amortization, or Ebitda, of $7.7 billion next year, the company said, topping some analysts' expectations.

"This company is well set up for current prices," Glencore Chief Executive Ivan Glasenberg said on a conference call Thursday.

It was a rare bit of good news for a company whose share price has fallen more than 70% in 2015 as investors worried that its debt was too high and commodities prices too low for it to survive long. Its trading arm became a perceived liability as concerns increased that its access to cash would dry up if the company lost its investment-grade credit rating.

On Thursday, Glencore said trading will churn out between $2.4 billion and $2.7 billion in adjusted earnings before interest and taxes in 2016, as a result of lower working-capital levels and reduced output of copper, zinc, lead and coal following production cutbacks.

That was ahead of some analyst expectations. Credit Suisse had forecast the division to generate $2.35 billion next year.

Glencore, the world's fourth-largest mining company by market value, said it is now aiming to reduce its net debt even more than planned. By the end of 2016, the company said it would reduce net debt to between $18 billion and $19 billion compared with a previous target of just above $20 billion, announced in September.

Glencore has had net debt as high as $29.6 billion this year, a high level among the world's big miners.

The company said it has delivered on the bulk of its debt-reduction commitments, or $8.7 billion this year, through asset sales, cost cuts and dividend suspension. It is now boosting its net debt-reduction target by almost $3 billion, to $13 billion, and has increased its targeted asset sales to a range of $3 billion to $4 billion, from $2 billion previously, with a view to selling more if needed.

The company has sold $1.1 billion in assets since September, and is working on selling a minority stake in its agricultural business, either to a strategic investor--its preferred option--or via an initial public offering, according to Chief Financial Officer Steve Kalmin. The company is also looking at further sales of precious metals, copper and possibly even infrastructure, he said.

Glencore has been hammered, along with other miners, by a slump in commodity prices stemming from an economic slowdown in China, the world's largest consumer of raw materials, and a sudden ramp up of supplies following years of investment in mine expansion.

The price of copper, Glencore's largest earnings driver, hit a more than six-year low last month and is down 27% this year at $4,854 a metric ton as of Thursday. Still, Mr. Glasenberg said the company had free cash flow of $2 billion a year and could generate cash even if copper prices fell to $3,500, a level even the most bearish analysts haven't predicted.

"We have many levers we can pull in this company," he said. "We will pull them when required."

Glencore said it is still generating positive cash flow at current spot prices at all of its assets that are fully operational except for two. The company is deciding whether to close its unprofitable Murrin Murrin nickel operations in Australia and its Sherwin alumina operations in the U.S. It is still trying to turn around its Koniambo nickel operations in New Caledonia, but Mr. Glasenberg said the company has "no intention to...burn cash." Glencore also said it would further reduce capital expenditures this year and next.

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

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

(END) Dow Jones Newswires

December 10, 2015 17:50 ET (22:50 GMT)

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