GLNCY Glencore Plc (PK)

By Alex MacDonald 

LONDON -- Glencore PLC shares hit their highest price in more than a year Thursday, punctuating a rebound for a mining and commodities-trading giant that 12 months ago seemed to be on the brink of collapse.

The Swiss company's stock is up 130% this year to 208 pence a share in intraday trading in London, making it the third-best performer in the U.K.'s blue-chip FTSE 100 index after miners Anglo American PLC and Fresnillo PLC. That is the highest Glencore shares have traded since July 31, 2015.

Shares closed Thursday up 5.5% at 207.9p.

Glencore's share price has been buoyed this year by rising commodity prices, particularly in zinc and coal. The company has also focused on slashing its heavy debt burden.

Glencore's rise marks a reversal of fortune. On Sept. 28, 2015, its shares fell 29% in one day, to 69 pence, because of concerns it would struggle to pay down almost $30 billion in net debt. The company's stock had been steadily declining since its initial public offering price of 530 pence in 2011.

Glencore responded to investor concerns by announcing a raft of measures to cut debt, including an equity issue, dividend suspensions and billions of dollars in asset sales. The plan is bearing fruit, with analysts expecting net debt to drop to well within the company's guided range of $16.5 billion to $17.5 billion by year-end, down from $23.6 billion at June-end and $29.6 billion a year before then.

Rising commodity prices have also been a boon to earnings. As the world's largest exporter of thermal coal and zinc miner, Glencore has benefited from the rise in zinc and coal prices, two of its key earnings drivers.

Liberum Capital on Thursday raised its recommendation on Glencore to a hold from a sell and its target price on the stock to 185 pence from 140 pence after raising its long-term thermal coal price forecast to $60 a ton from $50 a ton. This was due to China's recent decision to curtail the work days of Chinese coal workers to 276 from 300 annually, thereby boosting the need for more coal imports to make up for a shortfall in domestic coal production.

Glencore declined to comment Thursday.

Glencore has also contributed to a 43% rise in this year's zinc price by curbing production at several zinc mines late last year. Together those mines account for roughly 4% of the world's 12 million ton annual market, according to Liberum Capital.

In a rare move, Glencore executed several derivative trades during the second quarter to sell 55 million tons of its coal output to customers at a fixed price by June 2017. It was meant to secure revenues to pay down debt. But it resulted in a noncash impairment of nearly $400 million in the first half of the year after coal prices rose above the deal's fixed price. Thermal coal prices are up more than third this year.

Commodity prices have surged from multiyear lows earlier this year thanks to China, the world's largest commodities consumer, which has "shown very, very clearly that they're willing to stimulate their economy," said Jeremy Wrathall, an analyst at Investec Securities.

China has flooded its economy with credit and new infrastructure projects. State-owned firms have boosted investment by more than 20% so far this year, government data show, while fiscal spending on roads and waterways reached 1.15 trillion yuan ($228.4 billion) from January through August, up 7.5% year on year, according to China's Ministry of Transport.

Mr. Wrathall said commodities stocks have also been buoyed by investors looking for high yields given current low interest rates.

"In a world that lacks opportunities for investments, the mining industry is now attractive," he said.

Glencore in August said it would consider reinstating dividend payments in 2017.

Write to Alex MacDonald at alex.macdonald@wsj.com

(END) Dow Jones Newswires

September 22, 2016 12:41 ET (16:41 GMT)

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