Glencore sees battery minerals powering profit in 2017 and beyond

LONDON (Reuters) - Miner and trader Glencore said on Tuesday its battery minerals, especially cobalt, should spur profit in 2017 and beyond in an update for investors that also promised to grow the business, especially through partnerships.

FILE PHOTO: The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, July 18, 2017. REUTERS/Arnd Wiegmann/File Photo

It said its marketing, or trading, division’s 2017 EBIT (earnings before interest and tax) would be at the top end of its previous guidance at $2.8 billion, steady from 2016 but effectively an increase given that Glencore sold half of its agriculture business last year.

The company also issued full-year 2018 overall EBITDA (earnings before interest, tax, depreciation and amortization) guidance of $16.2 billion, slightly below some analysts forecasts, but higher than Glencore’s guidance for full-year profit this year of $15 billion.

After recovering from a deep commodities crash in 2015, Glencore has led the mining sector higher, outperforming its peers this year.

Shares eased one percent on Tuesday, but have risen in value by more than a quarter this year, more than the three other leading diversified majors.

Despite this, Glencore says it will remain cautious and curb spending to keep its net debt to EBITDA ratio, a measure of health in the capital intensive mining sector, below 2.

“We will continue to focus on creating value through capital efficient growth within a conservative balance sheet structure,” CEO Ivan Glasenberg said.

Growing through partnerships, which are less costly, would “remain a key element of our approach,” he added.

Glencore also says it will avoid flooding the market with commodities it does not need.

In the depths of the 2015 downturn, Glencore reduced output of zinc and copper, which it is gradually bringing back online.

Glencore said next year’s zinc production would be roughly steady at just over one million tonnes, although it will start to ramp up some capacity.

Its Katanga Mining unit, which operates cobalt and copper mines in Democratic Republic of Congo (DRC), also said on Monday it would produce an additional 150,000 tonnes of copper and 11,000 tonnes of cobalt in 2018 as it brings online a new processing plant.

In 2016, Glencore produced nearly 30,000 tonnes of cobalt, more than a quarter of the current global market.

The metal is one of the minerals where Glencore sees a strategic advantage because around two-thirds of the world’s output is concentrated in DRC, which many miners consider too risky because of its political instability.

It commissioned metals consultancy CRU Group to model requirements for electric vehicles and it predicted the world will in 2030 need more than three times as much cobalt as is currently available.

Battery makers are trying to find alternatives, but Glasenberg predicted all available cobalt would be needed and still there would not be enough.

He said he would remain opportunistic about doing any deals that came along that met strict criteria for return on investment, but told reporters in a media call he had “zero interest” in lithium.

Although the market is currently strong, predicting future price levels is difficult as lithium is abundant and many new projects are under way.

Additional reporting by Eric Onstad and Pratima Desai in London, editing by David Evans