Glencore copper production falls nine per cent in first half as commodity giant reduces full-year guidance

Jasper Jolly
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Glencore has mining operations all over the world (Source: Getty)

Commodity mining and trading giant Glencore reduced its guidance for full-year results almost across the board in the face of declining production of some of its key minerals.

Shares fell by as much as 0.65 per cent in early trading but recovered to a small 0.05 per cent gain at the time of publication.

The figures

Copper production fell nine per cent year-on-year in the first half of 2017 to 642,900 tonnes. The company blamed production changes at its Antamina and Antapaccay mines, both in Peru, as well as wet weather in the Mutanda copper mine in the Democratic Republic of the Congo. Meanwhile output from the Alumbrera mine in Argentina suffered from "pit stability" issues as it "nears end of life". Guidance was reduced by two per cent for the full year.

Zinc production rose by 13 per cent to 570,800 tonnes, driven by a transition in the Antamina mine towards the metal and "solid performances" in its other mines. The sale of its Rosh Pinah and Perkoa mines, in Namibia and Burkina Faso respectively, will complete in August after being announced initially in March.

Read more: Glencore has lifted its full-year guidance on its trading unit

Nickel production fell by 10 per cent to 51,200 tonnes because of maintenance work on other mines, dragging down its full-year guidance by four per cent.

It was a similar story for ferrochrome, the main input for stainless steel: Glencore reduced its full-year guidance by four per cent despite a 10 per cent year-on-year increase in production to 836,000 tonnes.

Coal output increased by four per cent to 61.1m tonnes, but Glencore reduced its full-year guidance by two per cent.

Why it's interesting

The FTSE 100 commodity leviathan has seen shares more than treble over the past 18 months as it has paid down debts and fixed its balance sheet. Rising copper prices from lows at the start of 2016 have undoubtedly helped.

Now it seems Glencore's attention has turned towards putting itself on a growth path, with a flurry of bid battles for Rio Tinto's Australian coal assets and Bunge, a US grain trader.

However, the latest production update is "downbeat", according to Yuen Low, an analyst at Shore Capital Markets, with only earnings guidance on marketing operations, in which the company ships commodities around the world, seeing an improvement among the major segments.

Richard Knights, an analyst at broker Liberum, said: "Despite weaker production and likely higher unit costs, we are still looking at substantial net upgrades to our numbers on improved commodity prices, in particular coal and copper.

Recent gains may be unwound in the coming weeks, he added. He said: "The share price rally over the past month has Glencore trading above our current fair value."

Read more: UK dividend payments soar to record high of £33.3bn for the second quarter

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