Debt-hit Glencore cuts global zinc output

A cargo ship sits docked at a terminal owned by Glencore in Vancouver, Canada.
A cargo ship sits docked at a terminal owned by Glencore in Vancouver, Canada.PHOTO: BLOOMBERG

One of world's largest miners reduces annual production by a third 'to preserve value of reserves' amid price crash

GENEVA • Mining and commodities giant Glencore, burdened by debt and a commodity price crash, announced yesterday that it was slashing its worldwide output of zinc by a third.

"The main reason for the reduction is to preserve the value of Glencore's reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources," the miner said in a statement.

Glencore, which claims to be one of the world's largest miners and producers of zinc, said it was slashing zinc production by 500,000 tonnes across its operations in Australia, South America and Kazakhstan.

The firm said its operations at Lady Loretta in Australia and Iscaycruz in Peru would be suspended and operations at George Fisher and McArthur River in Australia and various mine operations in Kazakhstan would reduce production levels. "These changes, which represent around one-third of Glencore's annual zinc production, will reduce fourth-quarter 2015 mine production by approximately 100,000 tonnes of contained zinc metal."

The Swiss-based firm, which employs around 181,000 people worldwide, acknowledged that "these changes, although temporary, will unfortunately affect employees at our operations". A spokesman said that around "1,540 people will unfortunately lose their jobs".

Zinc has a number of industrial applications, including as an anti- corrosive coating for iron and steel, and a component for batteries and making metal alloys. Around 13.5 million tonnes of zinc is produced worldwide each year.

Following the news, Glencore saw its share price surge 6.38 per cent to 128.35 pence (S$2.78) in early trading, making it the top gainer on London's FTSE 100 index.

The company's share price has meanwhile plummeted 60 per cent since the beginning of the year, and has already faced wild fluctuation in recent weeks amid investor fears that sinking commodity prices would affect its ability to meet outstanding debt obligations.

Most resource-linked firms have taken a hit in recent months as the price of copper, aluminium, iron ore and oil have tumbled as growth in China's economy, the world's second largest, slows. Zinc prices, which had fallen by nearly 30 per cent since May, shot up 8 per cent after Glencore's announcement.

Glencore has been particularly badly hit because of its huge US$30 billion (S$42 billion) debt load, even after the firm this month raised US$2.5 billion via a share issue as part of a vast plan to rejig finances.

Glencore has already mothballed output at two copper projects in Africa, and on Wednesday closed a platinum mine in South Africa.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on October 10, 2015, with the headline 'Debt-hit Glencore cuts global zinc output'. Print Edition | Subscribe