The collapse in commodity prices has delivered a devastating blow to the mining company
After a week that saw its shares plummet spectacularly and then recover following a slew of warnings from bank analysts about its high levels of debt and the collapse in commodities prices, it is little wonder than some in the market have likened the problems besieging Glencore as similar to those that beset Lehman Brothers ahead of its collapse in 2008.
If the London-listed commodities trader and miner is to avoid the same fate as the infamous Wall Street bank, it will require the unwavering support of its largest shareholder, Qatar Holdings.
The Qatari sovereign wealth fund is this weekend understood to be feeling “raw” about the billions of dollars in paper losses it is carrying on Glencore, which listed its shares in May 2011 at 530p each.
The shares – which closed on Friday night at 95p – were trading at one point last week as low as 71.10p amid a frenzy of speculation that the commodities giant was in danger of defaulting on debt covenants and that its equity value could be worthless should the prices of key commodities continue to fall.
More worrying was that the rout in its share price came just a few weeks after its chief executive and second largest shareholder, Ivan Glasenberg, announced a bold plan to shore up its balance sheet.
The Telegraph has learnt that Glasenberg sought the backing of the Qatari sovereign wealth fund before last month unveiling the hastily drawn up scheme to cut $10.2bn (£6.7bn) from the company’s gargantuan $29.5bn debt pile.
The South African mining mogul – who has been chief executive since 2002 – believed it was necessary to “bullet proof” Glencore’s balance sheet in the event that the already sharp downturn in commodities prices deepened further.
China’s economic slowdown has seen the price of key commodities, which Glencore produces and trades, plummet over the last year. Copper prices hit a six-and-a-half-year low last week below $5,000 per tonne and Australian thermal coal loaded in Newcastle Port, New South Wales, is hovering near historic lows well below $60 per tonne.
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