UPDATE 2-Glencore's "strong" trading helps offset mine setbacks

Thu Nov 1, 2012 6:24am EDT

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By Clara Ferreira-Marques

LONDON, Nov 1 (Reuters) - Glencore said its closely watched trading operations performed "strongly" in the third quarter, against a more uneven picture for its mines, where strikes and Congo power cuts dampened growth.

Glencore, in the throes of a $33 billion takeover of miner Xstrata, said in a trading update that its overall performance was "good" in the three months to the end of September, despite weaker commodity prices and tough global economic conditions it said would not improve any time soon.

"(The third quarter) saw a healthy improvement," Glencore said of its marketing - or trading - operations, which accounted for just over a third of profit last year, but are seen as a bellwether and less easily forecast by the market than the industrial arm, made up of mines, farms and oil fields.

"Glencore's outlook for the remainder of the year in marketing remains positive."

Glencore's industrial operations provide the larger share of profit and volume growth was more uneven. The most significant improvements were in its nascent oil division, gold and coal - the latter boosted by acquisitions over the past year which helped offset the impact of strikes in Colombia.

Analysts said the numbers and positive commentary on marketing were broadly in line with expectations, lifting shares in Glencore just 0.5 percent at 0920 GMT, marginally outperforming a flat UK mining sector.

CONGO POWER

Among trouble spots in Glencore's industrial arm was the Katanga operation in the Democratic Republic of Congo, hit by power outages which cost the group 49 days of production over the first nine months of the year.

Power cuts are a huge hurdle for miners operating in the African country, devastated by years of war and under-investment, and have clouded Congo's aspirations of returning to production levels on a par with neighbouring Zambia.

A new power converter, which should help sustain more regular power supplies to Katanga, has been delayed after transport strikes in South Africa and a separate strike last month on the border between Congo and Zambia.

Copper production there was up 3 percent over the period, but rose over 9 percent over the third quarter.

Copper production rose at other major operations, including Mutanda, also in Congo, and Mopani, in Zambia.

At Kazakh producer Kazzinc, where Glencore increased its stake to just under 70 percent last month, the group saw gold production increase 18 percent over the nine months and 30 percent over the quarter, as the precious metal was prioritised over the production of other metals, including lead.

Coal production more than doubled over the nine months, thanks to the inclusion of recently acquired South African producers Umcebo and Optimum, which helped offset weakness at Colombia's Prodeco, hit by a strike at its La Jagua mine.

Oil from its Equatorial Guinea operation was ahead of schedule. Glencore's Alen field is on target for first production in the second half of 2013.

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