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Glencore digs deep to cut debt

Thursday, December 10, 2015 - 01:40

Mining and trading company Glencore has increased its debt reduction target and deepened its capital spending cuts as it fights for survival in the face of low commodity prices, sending its shares up more than 9 percent in early trade. Sonia Legg reports.

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It's not been a good week for miners - digging deep to stay afloat. It started with Anglo American announcing 85,000 job cuts. Now it's Glencore's turn - the mining and trading giant increasing its debt reduction target and capital spending cuts. All because of prolonged low commodity prices, says Michael Hewson, from CMC Markets. (SOUNDBITE) (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON, SAYING: "No-one priced in a prolonged downturn. We are seeing the effects of that - not only from Glencore, and Anglo American, Freeport McMoRan yesterday announced significant cap ex cuts, BHP Billiton, Rio Tinto, the biggest mining stocks in the world are also announcing significant reductions." Glencore says it's already cut debt by $8.7 billion and is "well placed" to continue generating cash. Spending cuts, asset sales and dividend suspensions are all part of the survival plan, along with $2.5 billion of new equity capital. The changes mean Glencore should be able to cope with copper prices at just $4,000 a tonne - in early 2011 they were more than $10,000. (SOUNDBITE) (English) CMC MARKETS, MARKET ANALYST, MICHAEL HEWSON, SAYING: "I don't think we have seen the end of this story. BHP Billiton has a dividend yield of over 10 percent now I think that is clearly not sustainable. So I think over the course of the next few months it is going to continue to be a very rocky road." Glencore shares were up 12 percent on the news. But the pressure's not off yet - Glencore has one of the highest levels of debt in the industry. It's hoping to get it down below $19 billion by the end of 2016. But it may have to do so without much help from commodity prices.

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Glencore digs deep to cut debt

Thursday, December 10, 2015 - 01:40