Glencore rallies on Credit Suisse upgrade

The bank said that since it downgraded the stock back in July, the sector has been range-bound but the lift in coal prices gives it more confidence in the deleveraging and free cash flow generation of Glencore heading into 2017.

“While there is still further to go on deleveraging the bulk of the debt reduction has been delivered and we think this puts a restart of the dividend insight within the next six months.”

CS said that as the story progresses on from balance sheet recovery it sees three drivers of outperformance in the next six to 12 months.

The bank noted free cash flow yields are the highest of the peer group and said this is likely to translate into a sustainable dividend yield of around 5% from next year.

In addition, it said that as the most diversified major it has greater confidence in its 2017/18 cash flow estimates.

Finally, CS said latent capacity in copper and zinc provides around $1.4bn (14%) upside to current group earnings before interest, tax, depreciation and amortisation.

The bank upped its 2017 attributable EBITDA estimate by 6% to $9.2bn, namely on the back of higher thermal coal prices.

At 1145 BST, Glencore shares were up 4.7% to 193.70p.