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Researched by Industrial Info Resources (Sugar Land, Texas)--Mining and commodities company Glencore plc (LSE:GLEN) (Baar, Switzerland) was hit with a perfect storm of problems in the first half of 2015 as it endured substantially weaker prices for virtually all of the commodities in which it trades; global markets, particularly in China, proved to be hostile territory; and it faced about $30 billion in net debt, the largest of any mining major. Executives vowed to keep up the effort to reduce capital spending. Industrial Info is tracking more than $17.5 billion in active projects involving Glencore.
Glencore lowered the ceiling for its full-year 2015 capital-spending outlook to about $6 billion, compared with an estimate of between $6.5 billion and $6.8 billion that was made at the end of 2014. For 2016, the company hopes to keep capital expenditures at or below $5 billion, should market conditions prove consistent.
Capital expenditures for the first half of 2015 were reported to be $3.19 billion, a 21% decrease from those in the first half of 2014 when using comparable measurements.
Among the Glencore projects tracked by Industrial Info are about $4.55 billion worth in Canada, including two large projects that are part of the Sudbury Mining Operation in Ontario: the $547 million construction of a mine near Onaping, and the $500 million addition to a mine near Sudbury. The Onaping project, which is next to the now-closed Craig Mine and south of the Fraser Morgan Mine, involves building a longhole facility that will produce 15.7 million tons of nickel resources, with copper credits; the Sudbury project involves developing a second deposit at the Nickel Rim South Mine. Both projects are part of a long-term plan to extend the Sudbury Mining Operation until 2035.
The company reported net losses of $676 million for the first half of 2015, compared with net profits of $1.72 billion in the same period last year. Revenues stood at $85.71 billion, a 25% decrease from first-half 2014. In an earnings release, Ivan Glasenberg, the chief executive officer of Glencore, singled out commodity prices as the major culprit, saying that they "are now at levels not seen since the financial crisis of 2008-2009." The company's industrial assets were affected noticeably; for instance, operations in Chad incurred a $792 million impairment after Glencore decided to slow development and reduce capital spending and the number of active drilling rigs.
Other exceptional expenses incurred by Glencore during the first half of the year include $377 million of income tax expenses that were mostly attributable to foreign exchange; $256 million in losses due to the distribution of the company's stake in South African platinum producer Lonmin; and $235 million in costs from a metal leak at the Koniambo facility in New Caledonia. Glencore has struggled to cut costs and manage debt, but currently is vulnerable to a drop in its credit rating from Standards & Poor. The company now has a BBB rating, the second-lowest investment-grade rating.
"Glencore's core industrial assets remain well-positioned on the cost curve," Glasenberg said in the earnings release. "We remain, by far, the most diversified commodity producer and marketer, and are well-positioned to benefit from any improvement in pricing when in finally and inevitably materializes."
Executives said that the aluminum markets were hit by lower physical premiums, while nickel markets suffered from a decline in global stainless steel production. Other market factors included a first-quarter slowdown in China's economy, including tighter local credit conditions, and Russia's unexpected levy of a new export tax earlier this year negatively affected Glencore's agricultural businesses.
Earlier this month, the company completed sales of its interests in the Tampakan copper project in The Philippines; the Falcondo nickel operations in the Dominican Republic; and the Sipilou nickel project in Ivory Coast. Proceeds from the sales totaled roughly $290 million.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Glencore lowered the ceiling for its full-year 2015 capital-spending outlook to about $6 billion, compared with an estimate of between $6.5 billion and $6.8 billion that was made at the end of 2014. For 2016, the company hopes to keep capital expenditures at or below $5 billion, should market conditions prove consistent.
Capital expenditures for the first half of 2015 were reported to be $3.19 billion, a 21% decrease from those in the first half of 2014 when using comparable measurements.
Among the Glencore projects tracked by Industrial Info are about $4.55 billion worth in Canada, including two large projects that are part of the Sudbury Mining Operation in Ontario: the $547 million construction of a mine near Onaping, and the $500 million addition to a mine near Sudbury. The Onaping project, which is next to the now-closed Craig Mine and south of the Fraser Morgan Mine, involves building a longhole facility that will produce 15.7 million tons of nickel resources, with copper credits; the Sudbury project involves developing a second deposit at the Nickel Rim South Mine. Both projects are part of a long-term plan to extend the Sudbury Mining Operation until 2035.
The company reported net losses of $676 million for the first half of 2015, compared with net profits of $1.72 billion in the same period last year. Revenues stood at $85.71 billion, a 25% decrease from first-half 2014. In an earnings release, Ivan Glasenberg, the chief executive officer of Glencore, singled out commodity prices as the major culprit, saying that they "are now at levels not seen since the financial crisis of 2008-2009." The company's industrial assets were affected noticeably; for instance, operations in Chad incurred a $792 million impairment after Glencore decided to slow development and reduce capital spending and the number of active drilling rigs.
Other exceptional expenses incurred by Glencore during the first half of the year include $377 million of income tax expenses that were mostly attributable to foreign exchange; $256 million in losses due to the distribution of the company's stake in South African platinum producer Lonmin; and $235 million in costs from a metal leak at the Koniambo facility in New Caledonia. Glencore has struggled to cut costs and manage debt, but currently is vulnerable to a drop in its credit rating from Standards & Poor. The company now has a BBB rating, the second-lowest investment-grade rating.
"Glencore's core industrial assets remain well-positioned on the cost curve," Glasenberg said in the earnings release. "We remain, by far, the most diversified commodity producer and marketer, and are well-positioned to benefit from any improvement in pricing when in finally and inevitably materializes."
Executives said that the aluminum markets were hit by lower physical premiums, while nickel markets suffered from a decline in global stainless steel production. Other market factors included a first-quarter slowdown in China's economy, including tighter local credit conditions, and Russia's unexpected levy of a new export tax earlier this year negatively affected Glencore's agricultural businesses.
Earlier this month, the company completed sales of its interests in the Tampakan copper project in The Philippines; the Falcondo nickel operations in the Dominican Republic; and the Sipilou nickel project in Ivory Coast. Proceeds from the sales totaled roughly $290 million.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
