Glencore share price wobbles on budget reduction and Lonmin stake disposal

Glencore (LON:GLEN) plans to divest its stake in Lonmin (LON:LMI) and to cut capital expenditure this year in response to “the volatile market backdrop”, the miner has said as it revealed increased output across the board during 2014.

The Switzerland-based commodities giant announced today that it intended to divest its 23.9 percent interest in the FTSE 250-listed platinum producer, stressing that it viewed the stake as “non-core”. According to Glencore’s statement, the sale would be implemented by way of a distribution in specie, as a straightforward market disposal of the holding at this time “would not be in the best interests of its shareholders”. The group, which inherited the Lonmin stake through its May 2013 purchase of Anglo-Swiss miner Xstrata, further revealed that it planned to put the demerger to a vote at the company’s annual shareholder meeting on May 7. It hopes to close the deal during the first half of the year.

Details of the Lonmin disposal plan came as Glencore said it would slash spending on its mines by more than $1 billion in 2015 as it aimed to combat tough market conditions and falling commodity prices. In December, the mining company laid out a $7.9 billion capital expenditure budget for 2015, which has now been revised down to between $6.5 billion and $6.8 billion.
In other news, Glencore also announced today that production of copper, nickel, ferrochrome, coal and oil had increased in 2014, while zinc output was flat.
Glencore’s share price has been swinging from gains to losses in early trading today. As of 08:57 GMT, the stock stood at 271.30p – 0.09 percent up intraday. According to the Financial Times, as of 2 February 2015, the consensus forecast amongst 29 polled investment analysts covering Glencore has it that the company will outperform the market.
As of 09:52 GMT, Wednesday, 11 February, Glencore Xstrata PLC share price is 273.30p.