LONDON: Glencore shares tumbled more than 30 percent to an all-time low yesterday on fears that the mining and trading company was not doing enough to rein in its debt to withstand a prolonged fall in global metals prices.
About $5.33bn in market value was wiped off the firm, which is in the middle of a drive to sell assets and raise cash to help cut its $30bn debt pile and protect its credit rating after a crunch in prices of its main products, copper and coal.
Swiss-based and London-listed Glencore earlier this month raised $2.5bn through a share placement, part of a wider plan to cut its net debt by a third by the end of 2016.
Glencore’s top individual shareholders, according to Thomson Reuters Eikon data, include CEO Ivan Glasenberg (pictured), with an 8.4 percent stake.
The fall spread to the broader UK mining sector, which has also felt the pain from an emerging-markets slowdown and a crash in commodities prices. The FTSE 350 mining index sank to its lowest level since December 2008.
Traders cited a Investec note that raised doubts over Glencore’s valuation unless spot metal prices improve. The note pointed to high debt levels and a need for deeper restructuring.
“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate,” analysts at Investec wrote.
Both Glencore and Anglo American declined to comment.
Shares of Glencore were down 24 percent at 73.16 pence at 1323 GMT after falling as much as 31 percent to a record low of 66.67 pence. The stock is down around 75 percent year-to-date.
The cost of insuring exposure to the debt of Glencore hit record highs, also on concerns the company could not withstand steep fall in metals prices.
Anglo American shares were down 7.7 percent.
The outlook for China’s economy was also a drag on markets, with forecasts pointing to a likely shrinking of the country’s giant factory sector for the second month in a row. Profits earned by Chinese industrial companies declined at the sharpest rate in four years in August, according to official data.
Brewin Dolphin analyst Nik Stanojevic said investors were likely pricing in a fresh drop for metals and commodities prices.
News that Glencore had sold a nickel project in Brazil to Horizonte Minerals for $8m offered little respite, with Hobart Capital Markets’ Justin Haque saying the price was a fraction of what Glencore had spent.Reuters
