Ivan Glasenberg’s advice is buy not build, but rival miners aren’t listening – by Matthew Stevens (Australian Financial Review – May 14, 2016)


Annually in May global mining bosses assemble in Miami for an industry summit described as “speed dating for chief executives”. “They fly into Miami, they get a chance to talk directly to their big US investors and then they all retreat into private meetings with each other,” one miner suggested this week. “That is the real value of going there, they get to look the whole industry in the eye.”

If that is the rule for Miami, then Ivan Glasenberg followed it to the letter. Glasenberg is a headliner whenever he speaks and Tuesday in Miami was no different. But every illuminating, eye-watering utterance he offered his audience in Miami was shaped more for the ears of his mining peers as much as it was the attention of his investors.

Rhetorically recharged after Glencore’s slightly humiliating 18 month-long brush with financial calamity, Glasenberg allowed himself to return to the pre-crisis conversational themes.

Glasenberg has consistently spanked his competitors for wasting and ultimately popping the now deflated long resources boom through a suicidal splurge on growth that took no account of demand and pricing.

In Miami though his message was slightly more tempered and forward looking. Sure the industry had shot itself in the collective foot by driving supply of bulk minerals and some metals so far past current and predicted demand. But what is done is done. The question now is whether or not the industry can avoid compounding or repeating this unfortunate history.

Glasenberg reminded executives and investors alike that they had pumped $US1 trillion into growth of the global mining estate over a dozen years to the end of 2015. Over that same time the industry had generated less than $US350 billion in free cash flows. Glasenberg has consistently assigned responsibility for this disconnect to investment strategies that focused on supply growth rather than margin and cash flow protection. The result is an embedded over-supply.

What was new in Glasenberg’s peer-group pitch was the recognition that much of that investment has been made in long life assets, that not a lot of that capital has actually been lost and that the “ultimate outcome” of this boom-time punt on growth “will be heavily influenced by actions from here onwards”.

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