The shares recovered on Tuesday, and were up 20 percent at 82.56 pence at 1321 GMT.
Advertisement
On Tuesday, Glencore stock rebounded 17 percent when the company issued a statement saying its business remained “operationally and financially robust”.
Lower the price will go, tougher will it be for Glencore to finance its debt (though it has financed a few already).
More than £3.5bn was wiped off Glencore’s market value after a warning from analysts at Investec.
“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate”, the analysts wrote.
Monday’s fall spread to the broader United Kingdom mining sector, which has also felt the pain from an emerging-markets slowdown and a crash in commodities prices.
Chief executive Ivan Glasenberg had to bow to shareholder pressure this month by agreeing to cut debt as worries mounted over the firm’s ability to protect its credit rating.
It has also has announced plans in recent weeks to suspend its dividend and sell off assets as part of debt reduction measuresto bolster its balance sheet.
“The figures were off in terms of EBITDA and free cash, and unlike Lehmans we have a lot of liquidity, no covenants, and ample lines of funding with banks”.
Glencore has hired Citigroup and Credit Suisse Group AG to sell a minority stake in its agricultural business, a person familiar with the situation said Friday.
On Monday its shares dived 30% after a note from analysts at Investec said its equity value could be “eliminated”.
It’s not clear how much PolyMet may be counting on Glencore to invest of the $600 million needed to actually build the mine and refurbish a processing center if and when the project is approved.
Mining giant BHP was up 16 cents at $21.77, rival Rio Tinto had gained 83 cents to $47.35 and Fortescue Metals had risen 4.5 cents to $1.715.
“Miners grew hugely to meet the demand from China and they borrowed heavily to find it and the cost of servicing that debt and the schedule of repayments are really putting companies such as Glencore under the spotlight”, said Laura Lambie, Senior Investment Director at Investec.
The new Glencore Xstrata shares listed in London in May 2013 at 343 pence a share. Mining and commodities companies sought to take advantage of the country’s booming growth at the turn of the decade, when numerous world’s leading economies were struggling to emerge from the global financial crisis and ensuing recession. Doing so, they added, would allow the management to undertake restructuring measures “easily and quickly” and to prepare for an eventual float of the industrial business.
Advertisement
Tokyo’s Nikkei index fell 4 per cent to an eight-month low and turned negative for the year, with shares of commodity-linked firms and shippers pummelled.
