Glencore Closes Below 1 Pound

Glencore’s (LSE:GLEN) share price closed below 1 pound in London on Thursday, finishing the day down 7.64 percent, at 95.92 pence.
That’s the second time the miner’s share price has fallen below the 1-pound mark this year. Glencore fell as low as 68.62 pence on September 28, but quickly climbed back up and managed to stay around GBP1.15 for October.
Overall, Glencore’s share price is down about 68 percent so far in 2015 on the back of lower copper prices and worries about the company’s debt. Spot copper prices have lost about 8 percent over the past month and nearly 30 percent this year; they are now trading at about $2.20 per pound.

Some believe Glencore’s bad fortune has a lot to do with copper prices. “It’s very geared into the copper price,” Richard Knights, a mining analyst at Liberum Capital, told Bloomberg. “Prices are obviously taking a hit on the back of U.S. dollar strength and the Fed’s clear intention to raise rates before the end of the year.”
Glencore isn’t the only larger mining company feeling pain from the rout in commodity prices. Freeport-McMoRan (NYSE:FCX), the world’s largest publicly traded copper mining company, is down 62 percent over the past year. BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT) is down 40 percent on the New York Stock Exchange over the same period, and has lost 30 percent in Australia and 36 percent in London.
Glencore has been making big changes aimed at reducing its debt load, and reaffirmed these plans in its third-quarter results, released on November 4. It is aiming to cut its debt to the low $20 billions by the end of 2016, and will cut 455,000 tonnes of copper production by the end of 2017 due to low copper prices. The miner is also curtailing 500,000 tonnes per year of zinc production and 100,000 tonnes per year of lead production “until such time that prices return to sustainably higher levels.”
Spot zinc prices are down 26 percent year-to-date, at $0.725 per pound, while spot lead has lost 19 percent to trade at $0.724 per pound.
Still, it’s worth noting that in early October the Bank of America released a report suggesting that Glencore’s troubles could have more far-reaching effects. In it, the firm points out that the company’s debt and trade deals have a higher-than-expected level of risk, noting that “[m]any banks may now be more carefully reviewing their exposure to the commodities complex.”
Certainly, investor sentiment hasn’t been great in the mining space this year, and the downfall of larger names can’t be helping matters. On the one hand, Glencore’s moves to reduce its production have been taken as a positive for metals prices under pressure in part due to concerns of oversupply. However, those changes haven’t had a prolonged positive effect on copper prices just yet.
That said, some are still positive on the stock. As MarketWatch reports, Deutsche Bank (NYSE:DB) has raised the stock to a “hold” and has upped its target price for Glencore to GBP2.
“Glencore still needs to rebuild its relationship and trust with equity investors. However, the rapid debt reduction plans should remove the balance sheet and trading fears that have overly impacted the share price,” the firm said. “We believe that the company has now demonstrated that its liquidity position is safe and that its debt reduction plan is likely to exceed expectations.”

Junior company news

Avanco Resources (ASX:AVB) released results from drilling at its Antas deposit, reporting that they confirm shallow, high-grade copper zones at the deposit. Highlights include 12 meters of 3.52 percent copper and 2.68 g/t gold from 18 meters, including 3 meters of 5.9 percent copper and 8.72 g/t gold.
Also this week, Dynacor Gold Mines (TSX:DNG) reported the discovery of a new copper-gold porphyry northwest of its Tumipampa property in Peru. The porphyry, dubbed El Potro, is 750 meters wide and 1,700 meters long. Twenty-five surface samples taken on outcrops show copper grades from 0.012 to 0.22 percent, while 14 samples show gold grades from 0.1 to 2.51 g/t.
“I am very pleased that we have found a large Cu-Au porphyry and its associated skarns since this opens a window of opportunity for Dynacor to make further discoveries of mineralized structures on this amazing property,” said Dynacor President and CEO Jean Martineau in Tuesday’s release. “Our geologists are very optimistic and are now planning how best to further the exploration of this area.”
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.