Glencore optimistic on cutting debt as quarterly production rises

Commodities giant Glencore reported “significant progress” on plans to cut net debt to the low $20bns by the end of 2016 and increased output from its mines generally in line with estimates.

Net debt is now expected be roughly $25bn by year end, the FTSE 100 company said, helped by $0.9bn raised from its first precious metals streaming transaction also announced on Wednesday.

Post-period end, Glencore has also repaid three bonds amounting to $1.95bn and repurchased roughly $400m more.

Total production in the third quarter to end September rose 1.34% to 396,600 metric tons compared to the same period last year.

Full year marketing adjusted guidance for earnings before interest and tax (EBIT) was reiterated at between $2.5-2.6bn as marketing was stronger over the quarter, with improved contributions from metals and minerals and agricultural products.

Total coal production fell 15% to 34m tons on a year ago, copper production was up 1%, zinc up 14%, lead up 11%, nickel down 24%, gold up 10% and silver up 13%.

Guidance for copper production has been reduced after the shutdown and restart plans for its Katanga and Mopani mines were completed, with 455kt now expected by end 2017 rather than 400kt, which also slightly reduced the current year target.

The silver streaming transaction is a non-physical silver streaming

Glencore today announced a long-term streaming agreement with Silver Wheaton, which has purchased the equivalent of 33.75% of 140m ounces from Antamina’s silver production, and then 22.5% thereafter.

In return, Silver Wheaton will prepay $900m, and then 20% of spot.

Analysts at Shore Capital noted that this was a ‘non-physical’ transaction in that no physical silver will actually be delivered, as Glencore only owns 33.75% of Compañía Minera Antamina (CMA), which in turn owns the Antamina mine.

-- More to follow --