Half-Year Report 2020

RNS Number : 6803U

Glencore PLC

31 July 2020

 

NEWS RELEASE

Baar, 31 July 2020

Half-Year Production Report 2020

Glencore Chief Executive Officer, Ivan Glasenberg:

"Glencore has delivered an overall strong first-half operating performance amid the unprecedented challenges presented by Covid-19, reflecting both the ability and dedication of our teams to adapt to these difficult conditions. As a responsible operator, our top priority has been to protect the health and safety of our people and the communities that host our businesses.

"Although some of our industrial operations were temporarily suspended in line with national and regional guidance, or where our risk assessment determined a suspension was appropriate, the majority of our assets continued to operate relatively normally. I am particularly pleased to report a strong operational performance at Katanga, with its ramp-up on track to achieve design capacity by the end of the year.

"Our Marketing business has also risen to the challenge, delivering robust counter-cyclical earnings. A very strong first-half performance allows us to now raise our full year 2020 EBIT expectations to the top end of our $2.2-$3.2 billion guidance range.

"In the near-term, we remain alert to the continuing challenges that Covid-19 presents. While we expect our operating cash flow to remain solid, we are ready to adapt to changing market conditions."

Production from own sources - Total¹

		H1 2020	H1 2019	Change %
Copper	kt	588.1	663.0	(11)
Cobalt	kt	14.3	21.3	(33)
Zinc	kt	550.1	535.9	3
Lead	kt	127.9	147.5	(13)
Nickel	kt	55.2	55.4	-
Gold	koz	385	423	(9)
Silver	koz	14,185	15,490	(8)
Ferrochrome	kt	466	799	(42)
Coal - coking	mt	3.7	4.3	(14)
Coal - semi-soft	mt	2.6	3.3	(21)
Coal - thermal	mt	51.8	60.6	(15)
Coal	mt	58.1	68.2	(15)
Oil (entitlement interest basis)	kbbl	2,612	2,240	17

1  Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated later in this report.

Realised prices

	Realised		LME (average 6 months) $/t	Difference  %
US$ million	¢/lb	$/t
Copper	239	5,269	5,502	(4)
Zinc	94	2,072	2,049	1
Nickel	566	12,477	12,477	-

Realised prices differ from LME benchmarks, reflecting provisional pricing adjustments, commercial terms / qualities, etc.

• The average spot Newcastle coal price for the period was $62/t. After applying a portfolio mix adjustment (component of our regular coal cash flow modelling guidance) of $1.70/t to reflect, amongst other factors, movements in pricing of non-NEWC quality coals, an average price of $60.30/t was realised across all coal sales volumes.

Covid-19 situation - update report

• While the majority of our assets continued to operate through Q2 with minimal disruption, certain operations were temporarily suspended, on account of mandatory governmental lockdown provisions, or otherwise where a risk assessment determined such action appropriate. The curtailed operations have mostly restarted as follows:

Jurisdiction	Asset	Commodity	Date suspended	Date restarted	Comment
Canada (Quebec)	Raglan	Nickel	Late March	Late April	Expect to make up the majority of lost tonnes over the balance of 2020
Canada (Quebec)	Matagami	Zinc	Late March	Late April	Production restarted in line with historical levels
Chad	Oilfields	Oil	April	Currently on care and maintenance	See "Operational update" below
Colombia	Cerrejon JV	Coal	Late March	Early May	Limited restart in May. FY 2020 attributable production expected in the 6.5-7.0mt range (2019: 8.6mt)
Colombia	Prodeco	Coal	Late March	Currently on care and maintenance	See "Operational update" below
DRC	Katanga	Copper/cobalt	n.a	n.a.	No material production disruption; acid plant commissioning delayed to H2 2020
New Caledonia	Koniambo	Nickel	n.a.	n.a.	Delays to planned maintenance from restrictions impacting availability of key maintenance teams. Will be operated as a single-line operation for the balance of 2020
Peru	Antamina JV	Copper/zinc	Mid April	Late May	Operations restarted with a reduced workforce; expect a phased ramp-up through H2
South Africa	Ferroalloys	Chrome and vanadium	Late March	Early May	See "Operational update" below
South Africa	SA Coal	Coal	n.a.	n.a.	Major complexes operated relatively normally throughout the SA lockdown
South Africa	Astron Energy	Oil refining	Late March	Operations suspended	Post delayed turnaround, refinery restart disrupted by an incident requiring major repair and remediation. Fuel marketing and distribution operations unaffected throughout, although underlying demand has been weaker
Zambia	Mopani	Copper	n.a.	n.a.	See "Operational update" below

Marketing update

• Marketing performance in H1 2020 was very strong, with full year EBIT expectations now raised to the top end of our long-term $2.2-$3.2 billion range. Contributing towards H1 2020's EBIT performance was a sizeable increase in carried inventory ("Carry Trades") transactions / quantities (although the overall dollar value of inventories was somewhat lower than December 2019, due to lower commodity prices) and also a build in non-RMI net working capital on account of the varying terms of trade in our respective business units. In particular, our oil department, which in recent years has managed its receivables portfolio days on hand to around 20 days and accounts payable around 45 days, saw a significant reduction in its net payables position (payables less receivables) via the sharp reduction in oil prices, as well as lower sales volumes due to weaker product demand in H1 2020. Together with the initial cash margining required to give effect to the additional Carry Trades, this has led to an increase in our Net Debt as at 30 June 2020.

Operational update

• Mopani notified the Zambian government of its intention to place the mining operations on care and maintenance to preserve value and maintain the option to deliver its various growth projects when conditions further improve. Mopani was notified by the relevant authorities that its proposal was rejected. Mopani has appealed this decision. Mining operations will continue pending the outcome of the appeal and Mopani continues to engage with the relevant authorities.

• The outlook for Prodeco's business remains challenging due to ongoing weakness in the Atlantic coal market, exacerbated by the impact of Covid-19. Prodeco is in the process of optimising its mine plans to account for the current market environment. This process requires consultation and approval by a number of external parties. An application has been made to the authorities for Prodeco to remain on care and maintenance, which will help preserve the value of the assets and the option to implement the revised plans when the appropriate approvals have been obtained and market conditions have improved.

• Due to Covid-19 related disruptions to international mobility, transportation and supply chains, the Chad oil fields were placed on care and maintenance in April. These disruptions and prevailing market conditions are being monitored to determine when some restart of operations would be appropriate.

• The Ferroalloys business has for some time experienced a structurally worsening competitive environment across the South African ferrochrome industry, including via substantial electricity price increases. In January 2020, a consultation process was initiated on the future of the Rustenburg smelter, and in June 2020, a further process commenced across the entire business, to seek a more competitive operating cost structure. This is an ongoing process with all alternatives being considered.

Production guidance and updated cost outlook

• Full year 2020 production guidance, including accounting for the latest expected business interruptions due to Covid-19 noted above, is set out below, with further remarks on page 19.

				Q1	Q2	Actual H1	ROY		Current guidance		Previous guidance
				2020	2020	2020	2020		2020		2020
Copper	kt			293	295	588	667 ± 35		1,255 ± 35		1,255 ± 45
Cobalt	kt			6	8	14	14 ± 2		28 ± 2		28 ± 2
Zinc	kt			296	255	550	610 ± 30		1,160 ± 30	1	1,160 ± 30
Nickel	kt			28	27	55	59 ± 4		114 ± 4		122 ± 5
Ferrochrome	kt			388	78	466	534 ± 25		1,000 ± 25		1,000 ± 25
Coal	mt			32	26	58	56 ± 3		114 ± 3		132 ± 3

1 Excludes Volcan

• Industrial Assets unit cost guidance updated for changes to production and current producer currency levels, energy costs and by-product pricing, is as follows:

					Actual FY		Previous guidance		Current guidance		FYE 2020 split
					2019		2020		2020		H1	H2
Copper	c/lb				148		105		106	1	109	104
Zinc - excl. gold credit	c/lb				47		58		48	2	64	32
Zinc	c/lb				13		14		5	2	28	(20)
Nickel - excl. Koniambo	c/lb				277		240		257		230	281
Nickel	c/lb				398		382		413		395	437
Coal	$/t				45		42		46		46	47

1 Copper unit cost guidance excludes costs associated with non-operating or significantly curtailed assets, including those on care and maintenance. In this regard, an 
  estimated combined approximately $350 million of net operating costs is expected to be incurred in relation to Mopani, Mutanda, Alumbrera and Polymet in 2020.

2 Excludes Volcan.

H1 production highlights

• Own sourced copper production of 588,100 tonnes was 74,900 tonnes (11%) lower than H1 2019, mainly reflecting Mutanda being on care and maintenance in the current period, expected lower grades at Antapaccay and the short-term impact of Antamina's Covid-19 related demobilisation/remobilisation, partly offset by stronger milling throughput at Collahuasi.

• Own sourced zinc production of 550,100 tonnes was in line with H1 2019, reflecting stronger grades at the Canadian mines and the various temporary Covid-19 related suspensions at Antamina and other South American operations.

• Own sourced nickel production of 55,200 tonnes was in line with H1 2019, reflecting a strong period of operations at Murrin offsetting the delayed delivery of matte from the Sudbury smelter to the Nikkelverk refinery.

• Attributable ferrochrome production of 466,000 tonnes was 333,000 tonnes (42%) lower than H1 2019, mainly reflecting the South African Covid-19 national lockdown during March/April. Smelting operations partly resumed on 1 May, with further capacity expected to be restarted towards the end of Q3.

• Coal production of 58.1 million tonnes was 10.1 million tonnes (15%) lower than H1 2019, mainly reflecting the Covid-19 related asset suspensions in Colombia.

• Entitlement interest production of 2.6 million barrels was 0.4 million barrels (17%) higher than H1 2019, due to new wells drilled in Equatorial Guinea and Cameroon, which helped to offset the Covid-19 related suspension of the Chad assets.

To view the full report please click 

www.glencore.com/dam/jcr:73768468-8e04-4bcf-ae43-f16844720672/GLEN_2020-HY_ProductionReport.pdf  

For further information please contact:

Investors
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Maartje Collignon		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 60 responsibly-sourced commodities that advance everyday life. The Group's operations comprise around 150 mining and metallurgical sites and oil production assets.

With a strong footprint in over 35 countries in both established and emerging regions for natural resources, Glencore's industrial activities are supported by a global network of more than 30 marketing offices.

Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. We also provide financing, logistics and other services to producers and consumers of commodities. Glencore's companies employ around 160,000 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. 

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.

 

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