Glencore share price: Heavy investment in thermal coal

on Dec 8, 2013
Updated: Oct 21, 2019
Listen Sunday, December 8: Swiss-based commodity trading and mining company Glencore Xstrata (LON:GLEN) is investing more in thermal coal than its three closest competitors combined, despite warnings that the fuel’s outlook is deteriorating.

Billionaire Ivan Glasenberg, a former coal trader and the chief executive of Glencore, is betting that prices for the commodity will rebound from a three-year drop. The mining giant, in which Glasenberg owns eight percent, is investing $4.75 billion (₤2.9 billion), mostly in projects inherited from Xstrata, to increase output by 21 percent through 2016. Meanwhile, BHP Billiton, the world’s biggest mining company, Anglo American and Rio Tinto have curbed new investments, divested from mines and halted others.

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An increasing number of analysts are questioning Glencore’s strategy of heavy investments in thermal coal. “Earning a return on incremental investment in thermal coal mining and infrastructure capacity is becoming increasingly difficult,” Goldman Sachs analysts commented earlier this year.
For others, Glasenberg’s move makes perfect sense. “This is a classic counter-cyclical acquisitive strategy that Ivan Glasenberg has made his name in,” Sanford C. Bernstein mining analyst Paul Gait told Bloomberg.

**Glencore planning to remove ‘Xstrata’ from corporate name**
Glencore Xstrata is planning to drop ‘Xstrata’ from its corporate name, according to people familiar with the situation quoted by the Financial Times. The move, which requires shareholders’ approval, will erase the final remnants of a company that had been one of the world’s five top miners before a takeover from Glencore last year.

Since the Xstrata deal was finalised in May, the Glasenberg-led Glencore has been working hard to dismantle Xstrata’s corporate structure. It had cut costs by $1.4 billion (₤857 billion), shut down 33 Xstrata offices and mothballed more than half of the development projects it inherited. The takeover also resulted in the departure of Xstrata’s chairman and most of its senior directors including chief executive Mick Davis.

**Glencore to boost zinc exports through Luderitz**
Glencore plans to accelerate shipments of lead and zinc concentrates from its Rosh Pinah mine in Namibia after switching ports. By the end of March, a stockpile of a little less than the mine’s 98,000 metric tonne annual production will be shipped through the port of Luderitz (Mining round-up, December 5 )
**Analysts on Glencore**
UBS reaffirmed its ‘neutral’ rating and 330.00p price target on Glencore’s shares in a note sent to investors last month.
Five equity analysts rate Glencore as a ‘sell’, six give it a ‘hold’ rating and 13 call it a ‘buy’. The shares have a consensus rating of ‘hold’ and an average price target of 363.48p.
**As of Friday, 06.12, buy Glencore shares at 310.00p.**
**As of Friday, 06.12, sell Glencore shares at 302.00p.**
Trade these shares now through Hargreaves Lansdown from £5.95 per deal.
Prices can go up and down meaning you can get back less than you invest. This is not advice. Dealing services provided by Hargreaves Lansdown.


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