2019 Half-Year Production Report

RNS Number : 2590H

Glencore PLC

31 July 2019

 

Glencore Plc

NEWS RELEASE

Baar, 31 July 2019

2019 Half-Year Production Report

Highlights

•       Own sourced copper production of 663,000 tonnes was 33,200 tonnes (5%) lower than H1 2018, mainly reflecting: (i) Alumbrera open-cut depletion and sale of Punitaqui in H2 2018 (together, 15,900 tonnes); (ii) re-bricking Kazzinc's furnace (6,200 tonnes); and (iii) smelter outages at Mopani culminating in the shutdown of the plant in June, with a major refurbishment programme now underway (5,000 tonnes). Katanga's ramp-up and Mutanda's updated mine plan largely offset each other.

•       Own sourced cobalt production of 21,300 tonnes was 4,600 tonnes (28%) higher than H1 2018, reflecting a full six-month period of operation of Katanga's cobalt circuit (started in Q2 2018) and improved cobalt recoveries at Mutanda. Katanga continues to apply technical solutions, which seek to maximise cobalt hydroxide production within acceptable uranium limits resulting in approximately 3,600 tonnes (59%) of the 6,100 tonnes produced in H1 2019 being below such limits.

•       Own sourced zinc production of 535,900 tonnes was 37,700 tonnes (8%) higher than H1 2018, reflecting the contribution of Lady Loretta mine (Mount Isa) and a stronger performance at McArthur River, partly offset by expected reductions at Antamina, reduced activity in Argentina and the impact of a safety-related stoppage at Kazzinc. Own sourced sales during H1 2019 were 59kt lower than production, due to timing of shipments following flooding in North Queensland that damaged rail infrastructure.

•       Own sourced nickel production of 55,400 tonnes was 6,800 tonnes (11%) lower than H1 2018, reflecting maintenance at Murrin and Koniambo, and the feed mix delivered to the INO refinery in Norway favouring third-party material (expected to reverse in H2 2019).

•       Attributable ferrochrome production of 799,000 tonnes was broadly in line with H1 2018.

•       Coal production of 68.2 million tonnes was 6.2 million tonnes (10%) higher than in H1 2018, reflecting the contribution of interests in HVO and Hail Creek acquired during 2018, higher production at Prodeco, following a period of increased mine development, a strong operational performance in South Africa, partly offset by lower Cerrejón production to meet air quality requirements (control of dust emissions). Own sourced sales during H1 2019 were 3 million tonnes lower than production, due to timing of shipments.

•       Oil entitlement interest production of 2.2 million barrels was broadly in line with H1 2018, reflecting expected natural declines in Equatorial Guinea, offset by increases in Chad as the current drilling campaign delivers incremental production.

•       Average key base metals' realised prices for H1 2019 were as follows:

		Realised		LME (average 6 months)	Difference
		¢/lb	$/t	$/t	%
	Copper	261	5,754	6,167	(7)
	Zinc	121	2,668	2,732	(2)
	Nickel	567	12,500	12,318	1

•       The average spot Newcastle coal price for the period was $88/t. After applying a portfolio mix adjustment (component of our regular coal cash flow modelling guidance) of $10/t to reflect, amongst other factors, movements in pricing of non-NEWC quality coals, an average price of $78/t was realised across all coal sales volumes.

•       Updated production guidance (except for Africa copper and cobalt) is shown on page 17. As previously advised, Katanga is conducting a comprehensive business review which is expected to indicate lower production levels for 2019. The review is nearing completion and updated guidance, with accompanying presentation material, is expected to be provided next month, upon release of our interim financial statements. In H1 2019, Katanga produced 109,700 tonnes of copper and 6,100 tonnes of cobalt in hydroxide.

•       As flagged at our Investor Update in December 2018 and discussed again alongside our 2018 full year results in February, our Marketing segment has cobalt purchase commitments from the Group's own mines (primarily in the DRC), against which price risk cannot be perfectly matched, due to the illiquid / immature hedging tools available and/or inadequate depth of the physical forward market. Reflecting our overall Group risk tolerance and appetite, our target cobalt price exposure (within Marketing) is minimal, however during any period of market oversupply, we could build some "involuntary" cobalt price exposure, which is what occurred through 2018. In this regard, from a Group perspective, there remains an unrealised profit lag (effectively between our Industrial and Marketing segments) until the final sale of product to an external counterparty. Our net cobalt price exposure was broadly unchanged from 31 December 2018 to 30 June 2019, reflecting a period of solid sales volumes. Based on our carried internally sourced priced cobalt exposure of 10.3kt, with the Metal Bulletin cobalt price falling some 50% during H1 2019 (from $58.4k/t to $29.4k/t) and a significant decline in hydroxide payabilities, we expect to report related EBIT losses within Marketing of approx. $350 million during this period. It is important to note that this reportable loss in H1 2019 will be principally non-cash, as funding in respect of building the position occurred predominantly in 2018. Excluding this cobalt loss, we expect to report overall H1 2019 Marketing EBIT of approx. $1.3 billion, which on an annualised basis is within the $2.2-3.2 billion p.a. guidance range.

Glencore Chief Executive Officer, Ivan Glasenberg:
"I am pleased to report a solid performance from our underlying base business, where our key assets in copper, coal, zinc and nickel performed largely in line with our expectations. However, our African copper business did not meet expected operational performance. We have moved to address the challenges at Katanga with several management changes as well as overseeing a detailed operational review, targeting multiple improvements to achieve consistent, cost-efficient production at design capacity. In Zambia, we are nearing the end of our multi-year site transformation projects, including plans to commission a new copper concentrator towards the middle of 2020 and the development of 3 new mining shafts. Completion of repairs to Mopani's smelter is expected by the end of 2019. Our African copper assets retain significant potential and will play a key role in the transition to a low carbon economy. We have developed detailed turnaround plans and I look forward to taking you through these plans along with our financial performance on 7 August."

To view the full report please click

https://www.glencore.com/dam/jcr:9a598e35-657b-4489-a445-dc221706c20d/GLEN_2019-HY_ProductionReport.pdf 

For further information please contact:

Investors
Martin Fewings		t: [phone]		m: [phone]		[e-mail]
Media
Charles Watenphul		t: [phone]		m: [phone]		[e-mail]

www.glencore.com 

Glencore LEI: 2138002658CPO9NBH955

Notes for Editors

Glencore is one of the world's largest global diversified natural resource companies and a major producer and marketer of more than 90 commodities. The Group's operations comprise around 150 mining and metallurgical sites, oil production assets and agricultural facilities.

With a strong footprint in both established and emerging regions for natural resources, Glencore's industrial and marketing activities are supported by a global network of more than 90 offices located in over 50 countries.

Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, oil and food processing sectors. We also provide financing, logistics and other services to producers and consumers of commodities. Glencore's companies employ around 158,000 people, including contractors.

Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights and the International Council on Mining and Metals. We are an active participant in the Extractive Industries Transparency Initiative.

       www.facebook.com/Glencore 

       www.flickr.com/photos/glencore

       www.instagram.com/glencoreplc

       www.linkedin.com/company/8518

       www.slideshare.net/glencore

       www.twitter.com/glencore

       www.youtube.com/glencorevideos

Important notice concerning this document including forward looking statements

This document contains statements that are, or may be deemed to be, "forward looking statements" which are prospective in nature. These forward looking statements may be identified by the use of forward looking terminology, or the negative thereof such as "outlook", "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", "shall", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy.

By their nature, forward looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore's control. Forward looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those disclosed in the last published annual report and half-year report, both of which are freely available on Glencore's website.

For example, our future revenues from our assets, projects or mines will be based, in part, on the market price of the commodity products produced, which may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include (without limitation) the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and actions by governmental authorities, such as changes in taxation or regulation, and political uncertainty.

Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document.

Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention, obligation or undertaking, to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date.

No statement in this document is intended as a profit forecast or a profit estimate and past performance cannot be relied on as a guide to future performance. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities.

The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal entities. In this document, "Glencore", "Glencore group" and "Group" are used for convenience only where references are made to Glencore plc and its subsidiaries in general. These collective expressions are used for ease of reference only and do not imply any other relationship between the companies.  Likewise, the words "we", "us" and "our" are also used to refer collectively to members of the Group or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies.

 

END

 

 

DRLEBLFXKDFZBBE