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UPDATE 1-Glencore slump spoils commodity trader appetite for IPOs – by Sarah McFarlane and Dmitry Zhdannikov (Reuters U.S. – September 23, 2015)

http://www.reuters.com/

LONDON, Sept 23 (Reuters) – Unprecedented shareholder pressure over the past six months at listed commodities firms Noble and Glencore have taught their private rivals an unforgettable lesson – think twice before going public or amassing large physical assets.

Noble’s stock is trading near its lowest since the 2008 global financial crisis and Glencore’s touched an all-time low on Tuesday due to plunging commodities prices and earnings.

“In the last two years you were possibly better off being private and not being listed, with the short sellers being so active in commodity companies,” said Karel Valken, global head of trade and commodity finance at Dutch bank Rabobank.

After the record $10 billion Glencore share offering in 2011, which turned its managers into billionaire shareholders, commodity traders had come under an unprecedented spotlight.

Even though most unlisted merchants kept insisting they saw the private model as the most appropriate for now, many market watchers said it was only a matter of time before the likes of Louis Dreyfus followed suit to raise money for expansion via listings.

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UPDATE 1-Glencore’s Zambian unit plans to cut more than 3,800 jobs – govt sources – by Chris Mfula (Reuters U.K. – September 23, 2015)

http://uk.reuters.com/

(Reuters) – Glencore’s Zambian unit Mopani Copper Mines (MCM) has notified the government that it plans to lay off more than 3,800 workers due to lower metal prices and high production costs, government sources said.

An electricity shortage in the southern African nation and weaker copper prices have put pressure on its mining industry, threatening output, jobs and economic growth in Africa’s second-biggest producer of the metal.

Mopani had initially said it planned to cut 4,300 citing lower metal prices and high production costs.

“Mopani has served the labour commissioner with a notice stating that they plan to declare 3,817 workers redundant,” a source at the labour ministry told Reuters late on Tuesday.

“They now have to wait for the labour commissioner’s opinion. The labour commissioner has to consent before they can implement the plan,” the source said.

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Analysis – Copper market may get a 2003-style supply shock from Glencore closures – by Josephine Mason (Reuters U.K. – September 22, 2015)

http://uk.reuters.com/

NEW YORK – As copper miners start to slash spending and shutter mines because of the plunge in the price of the metal, experts who analyse the market in the base metal are suddenly getting a little more cheery.

They are seeing the potential for a re-run of 2003 when Chile’s Codelco [COBRE.UL], the world’s top copper producer stockpiled 200,000 tonnes of the metal that is used in everything from pipes to autos, providing the market with a supply shock that soon drove copper prices back up.

This time around hopes are pinned on the announcement earlier this month from Glencore (GLEN.L) of a sweeping strategy to shore up cash and cut spending, including plans to shutter two major, high-cost copper mines in Zambia and the Democratic Republic of Congo over the next 18 months. That will cut company output by 400,000 tonnes and remove some 2 percent of global supply from the market.

For Glencore CEO Ivan Glasenberg, the plan helped placate shareholders worried about $30 billion (£19 billion) of debt as prices of its main products from copper to coal sank to six-year lows amid worries about China’s waning appetite for such commodities.

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Even the stars of mining deals are sidelined in sinking market – by Eric Reguly (Globe and Mail – September 19, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

ROME — You know that something is seriously awry in the global mining industry when the two smartest men in the room – Ivan Glasenberg and Mick Davis – are crouching under rocks. Mr. Glasenberg, CEO and co-founder of Glencore , the world’s top commodities trader, is busy whittling down a mountain of debt in the wake of the company’s submarine performance on the London Stock Exchange. Mr. Davis, the former CEO of Xstrata , launched X2 Resources a couple of years ago but has yet to do a deal.

The mining market, in other words, is moribund. No one is selling, no one is buying and values are still in retreat. If either Mr. Glasenberg or Mr. Davis were convinced the bottom had been reached, you would think they would find ways to swing back into deal-making mode, for that was what they did best.

Today’s commodities markets are not about growth; they are about survival, and the body language of the industry’s biggest players suggests that won’t change any time soon.

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Glencore inventory sale could sink world zinc prices further – by Eric Onstad (Reuter U.S. – September 18, 2015)

http://www.reuters.com/

LONDON, Sept 18 (Reuters) – Substantial amounts of base metal zinc could be released onto world markets, weighing further on fast falling prices, as major producer Glencore implements a plan to liquidate some of its commodity inventories to help pay off debt.

The overhang of inventories in London Metal Exchange (LME) storage facilities, which has surged more than 40 percent since early August, has wrong-footed investors who had earlier this year targeted zinc as a top bet in metals due to closures of big mines that would create shortages.

Zinc, mainly used to galvanize steel to protect against rust in autos and construction, has slumped from being one of the best performing industrial metals earlier in the year to one of the worst due to the inventory change.

“It’s been a big shock to the market, this massive flood into the LME warehouses,” said Stephen Briggs, metals strategist at BNP Paribas.

But mining and trading company Glencore may add further to a plentiful supply situation after announcing a raft of measures to slash its net debt of $30 billion.

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Vale Rules Out Following Glencore Path as Mining Pain Deepens – by Juan Pablo Spinetto (Bloomberg News – September 15, 2015)

http://www.bloomberg.com/

The world’s top iron-ore miner is betting that cost cuts and growing market share will be enough to endure low prices, shunning the path of equity sales and halted dividends taken by rival Glencore Plc.

Vale SA, the Brazilian mining giant which is also the largest nickel producer, is focused on reducing expenses further as the start of its lowest cost producing project approaches, Chief Executive Officer Murilo Ferreira told reporters in Belo Horizonte, Brazil, during an industry gathering.

“We aren’t studying a model like the one taken by Glencore, because we don’t consider it necessary for Vale,” Ferreira said, adding that he only has “superficial” knowledge of the operations of the Baar, Switzerland-based trader.

“The Vale team did the diagnosis of the end of the supercycle at the right moment. There was an expressive reduction in Vale’s costs and there is a lot still to come.”

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Glencore stock dives again on rating outlook, Zambia – by Chris Mfula (Reuters U.S. – September 10, 2015)

http://www.reuters.com/

LUSAKA/LONDON (Reuters) – Shares Glencore fell almost eight percent on Thursday after Zambia said it wanted to save jobs at mines the commodities giant plans to suspend and ratings agency Moody’s changed its outlook on the company to negative.

Glencore acknowledged on Monday the severity of the commodity market slump as it suspended dividends and said it would sell assets and new shares to cut debt by a third to around $20 billion – built up through years of rapid expansion – to protect its rating.

The strategy, which also includes plans to shut down some copper mines to support flagging prices, had triggered a rally in Glencore’s stock and propelled copper – hit by worries over the Chinese economy – to a seven-week high.

But on Thursday the stock – which this month fell to the lowest level since being floated in 2011 – resumed its fall after Zambia said it would hold talks with Mopani Copper Mines (MCM) over parent Glencore’s plan to suspend operations after a drop in the metal’s price.

“We are about to start discussions with Mopani.

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Mick Davis’ timing haunts Glencore’s Glasenberg – by Robert Gottliebsen (The Australian – September 9, 2015)

http://www.theaustralian.com.au/

Former Xstrata founder Mick Davis may have a wry smile at the sight of Glencore being forced to raise $US2.5 billion in new equity to reduce its debt.

Davis has a remarkable record for being part of groups that buy assets cheaply and sell them at high points in the market.

Glencore is in trouble partly because in 2013 it paid some $US40bn for the two thirds of Xstrata it didn’t own. Mick Davis had sold at the top of the market. It is true Xstrata shareholders received Glencore shares but they had time to sell them before the market declined sharply.

That sale was Davis’s second coup. Back in 1997 he became chief financial officer and an executive director of Billiton, which sold out to BHP four years later in 2001. BHP never made a success of most of those Billiton assets and a large number were floated off in South32 earlier this year.

After BHP took control of Billiton, Davis made his exit and established Xstrata in the belief that around Australia there were a large number of mining assets that were underpriced because there was a looming boom coming on the back of a big rise in demand for minerals from China.

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All Eyes on Anglo American After Glencore Cedes to Investors – by Jesse Riseborough and Thomas Biesheuvel (Bloomberg News – September 8, 2015)

http://www.bloomberg.com/

Glencore Plc’s billionaire chief executive caved this week to shareholder demands that the commodity-trader bolster its balance sheet. Now attention is turning to whether rival Anglo American Plc will follow.

The two companies have been among the hardest hit by China’s cooling demand for commodities on concern they’ll be unable to withstand raw-material prices at a 16-year low and pay off a combined $43.5 billion in debt. Measures might include cutting its dividend, which is yielding a record 9 percent, higher than the level in 2009, when the company last scrapped the payout.

The collapse in commodity prices is undermining Anglo’s Chief Executive Officer Mark Cutifani’s efforts to turn around the fortunes of a business that mines platinum and diamonds in Africa and iron ore in Brazil.

Glencore shares rallied the most in almost three years on Monday after the company outlined a $10 billion debt-reduction plan, including selling $2.5 billion in shares and suspending its dividend.

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Copper advances as Glencore plans mine shutdowns (Sydney Morning Herald – September 8, 2015)

http://www.smh.com.au/

Copper gained after commodities group Glencore announced plans to shut down loss-making mines to help to reduce a glut of supply that has weighed on prices.

Bearish investors scrambled to close out positions by buying futures, but analysts said it was uncertain whether Glencore’s move to close some African copper operations for 18 months would create a trend.

“It’s probably not enough to see prices go up (substantially), but it certainly supports the market,” said Grant Sporre, head of metals research at Deutsche Bank in London. “It also ensures that copper is probably not going to fall in the same way that iron ore and met (metallurgical) coal have done.”

Sporre had forecast a global copper supply/demand surplus of 350,000 tonnes for next year and said that Glencore’s move would bring the market close to balance, given that it is expected to remove 300,000 tonnes in 2016.

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Glencore Investors Force CEO Glasenberg to Prepare for Doomsday – by Javier Blas and Jesse Riseborough (Bloomberg News – September 8, 2015)

http://www.bloomberg.com/

After a breakfast meeting with a small group of hedge funds in New York last week, Glencore Plc Chief Executive Officer Ivan Glasenberg concluded that investors could no longer stomach his famously bullish outlook.

The meeting capped two weeks of discussions with shareholders from North America to Europe after the Swiss miner and trader reported a 56 percent decline in profit. His plan to trim Glencore’s $30 billion debt by 10 percent by the end of next year wasn’t enough to halt a plunge in the company’s market value, which has more than halved to about 17 billion pounds ($26 billion) this year. On Monday, the company announced a strategy to reduce debt much more quickly.

“This is definitely the first time you get the impression that shareholders are the most important voice in the room versus management,” Ben Davis, a mining analyst at Liberum Capital Ltd., said by phone from London. “Until now, a lot of the market has seen Ivan as the smartest guy in the room.”

The U-turn was unprecedented for the 58-year-old South African billionaire, who has run Glencore almost single-handedly from the sleepy lakeside Swiss city of Zug for a decade and a half.

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Rio Tinto shows Glencore’s Ivan Glasenberg who knows China best – by James Thomson (Australian Financial Review – September 4, 2015)

http://www.afr.com/

Finally, a little relief for Glencore chief Ivan Glasenberg, who watched the miner’s stock climb 6.6 per cent on Thursday night after two horror days of trading that saw it fall 6.7 per cent and then 8.4 per cent.

Glencore stock has hit record low after record low since Glasenberg delivered the company’s results on August 19. Obviously this has been a period of extreme volatility for global markets, and a global commodities trader with a debt pile of $42.7 billion won’t win any awards for defensive stock of the month. But a 26 per cent fall in 12 days isn’t pretty.

Thursday night’s jump came despite Standard & Poor’s revising its outlook on Glencore to “negative” from “stable” after lowering its price assumptions for aluminium, copper, and other metals, “reflecting a change in market conditions and uncertainties about China’s economic outlook.”

But it did take a little financial show of strength to get the shares moving in the right direction again. On Wednesday Glencore said it would pay back $US350 million ($500 million) of perpetual bonds next month, at the earliest possible date. It was a clever way of showing the company has cash to pay debt as it battles the commodity price slump.

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Glencore sinks on equity issuance fears – by Bryce Elder (Financial Times – September 1, 2015)

http://www.ft.com/

Glencore hit another record low on Tuesday on growing concerns that it may be forced into an equity issue.

Miners slumped on data showing China’s factory activity contracted at its fastest pace in three years, which put further pressure on copper and coal prices.

Glencore closed down 10 per cent to 133.5p, which took its loss since flotation in 2011 to 75 per cent. With the major miners needing to raise as much as $60bn to recapitalise their balance sheets, companies should act quickly, argued Merrill Lynch.

“Early recappers could be rewarded with less dilution, premium market ratings and possibly a licence to undertake M&A,” it told clients.

Merrill estimated that, if current spot commodity prices stretch into perpetuity, Glencore has a $9.3bn capital shortfall against the debt target needed to safeguard its credit rating and would need to raise more than $16bn to cut net debt to 2 times earnings before interest, tax, depreciation and amortisation.

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Can You Read China? Top Mining CEOs Disagree on Biggest Customer – by Thomas Biesheuvel (Bloomberg News – August 25, 2015)

http://www.bloomberg.com/

What on earth is going on in China?

Two of the biggest mining companies feeding the country’s appetite for raw materials can’t even agree on whether there’s an answer to the question.

Andrew Mackenzie, head of BHP Billiton Ltd., is bullish on his ability to comprehend a country that consumes more commodities than any other — and whose economic woes have shaken markets around the globe this week.

“We don’t find China impossible to read,” Mackenzie, chief executive officer of the world’s biggest mining company, said Tuesday.“We’ve been at this game for decades.”

His certainty conflicts with billionaire mining rival Ivan Glasenberg’s admission last week that he couldn’t read the world’s second-largest economy right now and neither could anyone else.

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COLUMN-Glencore caution, Rio optimism over China? You decide – by Clyde Russell (Reuters U.S. – August 20, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Aug 20 (Reuters) – Take two top mining executives and ask them about China. One says he cannot fathom what’s happening in the world’s biggest commodity consumer, the other says he remains unashamedly bullish.

This isn’t an exercise to determine which executive is right and which is wrong, rather it underscores just how difficult it has become to make long-term investment decisions at the current stage of the commodity cycle. Ivan Glasenberg, the outspoken chief executive of Glencore , was candid when presenting the London-listed miner’s 29-percent slump in first half earnings on Wednesday.

“(Commodity demand is) difficult to call at the moment with what we see in China,” Glasenberg said. “That’s the one we are all struggling to read, demand in China.”

Battling to understand the dynamics of President Xi Jinping’s “new normal” isn’t confined to Glasenberg, with views on China currently ranging from the doom and gloom of an imminent hard landing to the more benign gradual, if somewhat disorderly, transition toward a more sustainable, consumer-driven economy.

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