Glencore to issue shares, sell assets, to cut net debt

MINING and commodities group Glencore will issue R16.7 billion in new shares, sell assets to raise about R27.8bn, suspend dividends and put in place other measures to cut net debt to about R278bn by the end of next year, it said yesterday.

Glencore, which has been hammered by falling metals prices and reported a 29 percent fall in first-half earnings last month, said the capital preservation and debt reduction steps it was taking had a value of up to R142bn.

The group – which has suspended copper production at its Katanga and Mopani mines for 18 months – said it was already in talks with buyers for certain of its assets, and would suspend its 2015 final dividend and its 2016 interim dividend, saving R22.2bn and R11.1bn, respectively.

“The measures we have announced do not affect our core business activities and overall franchise value and have been designed to sensibly accelerate the de-leveraging of our balance sheet, maximise future cash-flow generation in the current weak commodity price environment.

“The measures will also substantially improve our financial and credit metrics, stability and strength, in the event of a prolonged weaker pricing environment,” chief executive, Ivan Glasenberg and chief financial officer, Steven Kalmin, said yesterday.

They added that Glencore remained “very positive” on the long-term outlook for its business with senior management committing to buy up 22 percent of the new planned shares.

The group reiterated its 2015 full-year marketing earnings before interest and tax forecast of R34.8bn to R36.1bn.

Glasenberg and Kalmin said they also remained confident of Glencore’s long-term guidance range of R37.5bn to R51.5bn. – ANA