Glencore Earnings Down 32 Percent on African Copper Struggles

In a half-year report released this week, major miner Glencore (LSE:GLEN,OTC Pink:GLCNF) revealed that its H1 2019 earnings before interest, tax, depreciation and amortization (EBITDA) fell 32 percent year-on-year to US$5.6 billion.

In spite of the losses, the company said that its coal and metal assets performed well, delivering EBITDA margins of 39 percent. Glencore’s black sheep during H1 were the Koniambo nickel operation in New Caledonia and its African copper business, which the company said “weighed” on earnings.

Referring to them as ramp up/development assets, the company noted that extensive operational and cost improvement initiatives have been taking place throughout 2019.

Despite these ramp up efforts, Glencore’s African copper assets did not meet their expected operational performance.

“We have moved to address the challenges at Katanga and Mopani with several management changes as well as overseeing a detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity,” Glencore CEO Ivan Glasenberg said in a statement.

“Our teams have identified a credible roadmap towards delivering on the significant cashflow generation potential of these assets, at targeted steady state production levels.”

Earlier this year, Glencore reduced its annual copper guidance due to a number of issues, including safety-related stoppages and smelter outages at the Mopani operation in Zambia. Guidance fell from 1.54 million tonnes to 1.46 million tonnes, representing an approximate 3 percent drop.

Katanga Mining (TSX:KAT,OTC Pink:KATFF), which is majority owned by Glencore, also took a profit hit over Q2. According to the company, its gross loss grew to US$94.8 million due to a revenue reduction stemming from lowered copper prices; this is in comparison to Q1’s loss of US$92.5 million.

The half-year results come just a day after Glencore reportedly announced the stoppage of cobalt production at its Mutanda copper-cobalt mine in the Democratic Republic of Congo. Despite being one of the largest cobalt mines in the world, the company explained that the operation is “no longer economically viable” due to cobalt’s significant price drop this year.

In London, Glencore’s share price had fallen 0.89 percent by the end of trading on Wednesday (August 7), closing the day at GBX 229.30. Meanwhile, Katanga shares took a heavy hit on the TSX, dropping 10.13 percent by 3:05 p.m. EDT to reach C$0.355.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.