Glencore’s half-year showing prompts analyst gusto

JOHANNESBURG (miningweekly.com) – Thursday’s half-year production report from diversified mining and marketing company Glencore, which is seen as offering particular leverage to copper, zinc and coal’s currently attractive fundamentals, elicited favourable analyst comment.

“Glencore remains our sector top pick,” Barclays Equity Research analysts Amos Fletcher and Ian Rossouw commented.

“We have a ‘buy’ on Glencore,” stated UBS analysts Miles Allsop, Kieran Daly and Daniel Major, who see a step-up of free cash generation on copper, zinc and coal pricing being "positively surprising" within the Glencore framework.

"Despite Glencore's weak second-quarter performance, we continue to rate the stock as our top pick among the majors given its compelling valuation and attractive commodity basket," mining analyst firm Macquarie Research Equity commented in a note. 

"Glencore has the most attractive commodity mix," Goldman Sachs Equity Research analysts summed up.

Headed by CEO Ivan Glasenberg, the 155 000-employee London-, Hong Kong- and Johannesburg-listed producer and marketer of more than 90 commodities reported 13%-higher zinc production, 10%-higher attributable ferrochrome production and 4%-higher coal production.

Own-sourced copper production of 642 900 t was down 9% on the first half of last year, owing to the transition to mining a greater portion of copper and higher-grade zinc ores at the Antamina mine in Peru, as well as the temporary lower copper grades at the Antapaccay mine, also in Peru, lower weather-induced ore throughput at the Mutanda copper mine in the Democratic Republic of Congo and lower production on pit stability issues at the Alumbrera mine in Argentina, which is nearing the end of its life.

The 13% rise in own-sourced zinc production to 570 800 t emerged from the higher Antamina grades and performances across the portfolio.

Own-sourced nickel production fell 10% to 51 200 t on scheduled maintenance at the Murrin mine in Australia, partly offset by the stabilising and improving performance at Koniambo mine in New Caledonia.

The 10% rise in attributable ferrochrome production to 836 000 t in South Africa stemmed mainly from greater furnace production time and strong furnace operational performances.

The 4% higher coal production of 61.1-million tonnes followed planned increases in the Australian coal portfolio.

Against the backdrop of Glencore’s oil entitlement production interest of 2.6-million barrels being 39% on natural field decline, a single-rig drilling campaign has recommenced in Chad.

The sales of the Rosh Pinah zinc mine, in Namibia, and the Perkoa zinc mine, in Burkina Faso, to Trevali Mining are expected to be completed in August.

Glencore operates from 150 mining and metallurgical sites, oil production assets and agricultural facilities, supported by a global network of more than 90 offices in more than 50 countries.

Its customers are industrial consumers in the automotive, steel, power generation, oil and food processing sectors.