Glencore lowers production guidance, but earnings up

GLENCORE yesterday lowered its 2022 production guidance on copper, zinc and cobalt after operational challenges and Covid-related absenteeism in the first quarter drove output for some metals lower.

The London Stock Exchange and JSE-listed miner released its first-quarter 2022 production report yesterday.

However, despite this Glencore said it expected its full-year earnings to comfortably exceed the top end of its long-term adjusted earnings before interest and taxes guidance range of $2.2 billion (R35bn) to $3.2bn a year.

The group’s share price surged almost by 6 percent on the JSE on the outlook. The shares closed slightly lower, dropping by 5.1 percent to R97.

Coal production increased by 11 percent year-on-year, while there was also a 2 percent improvement in ferrochrome production from Glencore’s South African assets.

Its coal mines increased production in the reported period despite heavy rains in South Africa and Australia.

“Own sourced copper production of 257 800 tons was 43 400 tons, 14 percent lower than Q1 2021, reflecting temporary geo-technical constraints at Katanga of 14 000 tons, the basis change arising from the sale of Ernest Henry in January 2022,” the company said.

Prices for many of the metals Glencore mines surged due to the market volatility created by the invasion of Ukraine by Russia.

Glencore chief executive Gary Nagle said: “For the most part, the group’s quarterly production was in line with our expectations.

“However, production in quarter one 2022 reflects several temporary impacts, including geo-technical challenges at Katanga (in the DRC) and

Covid-19 absenteeism, particularly in Australia. ”

Higher operating rates in Koniambo, situated in New Caledonia, continued into the first quarter of this year, while overall coal production, on a like-for-like basis, reflected Glencore’s increased Cerrejón ownership, which was broadly flat period-on-period, Nagle said.

Nagle said reflecting the quarter one production performance, full-year guidance was reduced for copper and cobalt, but increased for nickel and ferrochrome.

However, the slower-than-expected ramp-up at Zhairem reduced full-year zinc production guidance by 9 percent.

Zinc production of 241 500 tons was 41 000 tons, or 15 percent, lower than quarter one 2021, reflecting Mount Isa Covid-19 related absenteeism and the planned mining cessation of Iscaycruz in Peru in the third quarter of 2021.

Own sourced nickel production of 30 700 tons was 5 500 tons, 22 percent higher than quarter one 2021, primarily reflecting Koniambo operating both production lines in 2022.

“Our marketing activities were supported during the quarter by tight physical market conditions and periods of extreme volatility,” Nagle said.