Mining giant says it has no solvency issues

GENEVA • Mining giant Glencore, facing rumours in financial circles that it would soon be delisted, insisted yesterday its business remained robust which sent its shares rebounding by 20 per cent.

"Our business remains operationally and financially robust - we have positive cash flow, good liquidity and absolutely no solvency issues," the Swiss company said in a statement.

In London afternoon trading, Glencore shares climbed 20.08 per cent to 82.47 pence, after the stock had plunged by nearly 30 per cent on Monday.

By the end of Monday, Glencore had lost more than three quarters of its value since listing with much fanfare in London and Hong Kong in May 2011, sparking speculation it might be delisted.

The firm was hammered by weak commodity prices as Chinese demand stumbled, taking a heavy hit because of its towering US$30-billion (S$42.8 billion) debt-load.

Dealers were further spooked on Monday when brokerage Investec said in a research note to clients: "The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve.

"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."

But yesterday, Glencore stressed that it had already taken a number of "proactive steps to position our company to withstand current commodity market conditions".

It said it was making progress on a range of drastic moves announced at the beginning of the month aimed to cut its debt by a third. Among other measures, the company has raised US$2.5 billion in share sales, suspended dividend payments until further notice and suspended production at its Katanga copper and cobalt mine in the Democratic Republic of Congo.

"Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long term relationships we have with the banks," the firm said in yesterday's statement. "We remain focused on running efficient, low-cost and safe operations and are confident the medium- and long-term fundamentals of the commodities we produce and market remain strong into the future."

Meanwhile, Glencore's management will meet debt investors today amid a market rout that drove the yields on some of its bonds to junk levels, according to three people with knowledge of the matter. The meeting will be hosted by Barclays in London, said the people, who asked not to be identified because the event is private.


A version of this article appeared in the print edition of The Straits Times on September 30, 2015, with the headline 'Mining giant says it has no solvency issues'. Print Edition | Subscribe