Glencore profit slumps 32% as cobalt production halted

Glencore said it was shuttering its Mutanda cobalt mine in response to a plunge in prices and higher costs as the miner reported a sharp fall in adjusted core earnings.

The company on Wednesday said adjusted earnings before interest, tax, depreciation and amortisation fell 32% to $5.6bn, reflecting a “challenging economic backdrop for our commodity mix”.

Mutanda, in the Democratic Republic of Congo, is the world's biggest producer of the metal used in electric car batteries.

Glencore said it was moving the operation to “temporary care and maintenance by year end, reflecting its reduced economic viability in the current market environment, primarily in response to low cobalt prices”.

Cobalt prices have fallen more than 70% since April 2018 when supply unexpectedly started oustripping inventory. Glencore booked a $350m non-cash loss on its operations for the metal.

Glencore added that its African copper business did not meet expected operational performance and that it was starting an operating review into its Katanga and Mopani operations including “several management changes”.

"Looking ahead, we are confident that commodity fundamentals will move in our favour and that our diverse commodity portfolio will continue to play a key role in global growth and the transition to a low-carbon economy,” Glencore said in a statement.

“Ultimately, cobalt medium and long-term fundamentals remain well underpinned by the expected strong structural demand growth arising from electric vehicles.”

Revenue fell to $107.1bn from $108.5bn a year earlier. Marketing adjusted earnings before interest and tax (EBIT) was $1bn, down 35%, but only 13%, excluding the cobalt related loss on an “involuntary” long cobalt position and against a particularly strong base period.

Glencore said on an annualised basis, pre-cobalt marketing adjusted EBIT of $1.3bn was tracking towards the middle of its $2.2bn - $3.2bn long-term guidance range.

Net debt of $16.3bn was at the upper end of the company's target range, on account of a new lease accounting standard.