Barclays keeps Glencore as 'top pick' despite darkening skies

Analysts at Barclays reiterated Glencore as their 'top pick' within the European Metals and Mining space.

Despite what they termed were 'darkening skies' for the sector, they believed that there were opportunities to be had.

In the case of Glencore, they believed the shares were underpinned by a structural shift towards coal which they believed was being ignored by the market and a spot free cash flow yield of 34%.

They estimated that Glencore shares were discounting a price of $66 per tonne of thermal coal to perpetuity, against a 2027 forward curve on $280 per tonne.

"EU coal equivalent gas price at $525/t gives significant incentive to switch, giving room for prices to run higher into N. hemisphere winter," they said.

"We forecast shareholder returns (divi and buybacks) of 49% of market cap over 2023-24 using our base case forecasts, 50% using forward curves and 57% using spot."

As an aside, BHP, on which the analysts were at 'equalweight' was seen as "relatively cheap" among the large capitalisation diversified miners.

Barclays kept its target price for Glencore at 700.0p.