Ivan Glasenberg says commodity rout is over as Glencore falls to $5bn loss

Chief executive has axed the dividend, raised billions from shareholders and launched plans to sell off chunks of the operation to cut debt

The rout in commodity prices that have left the mining and commodity trading giant Glencore nursing a $5bn (£3.6bn) annual loss may finally be over, its billionaire chief executive Ivan Glasenberg has said. 

The mining industry has been at the centre of the storm amid fears over flagging demand from China – but concerns among investors centred on the ability of Glencore’s balance sheet to withstand falling prices, prompting drastic action from the business.

Mr Glasenberg axed the dividend, raised billions from shareholders and launched plans to sell off chunks of the operation to cut debt to $15bn by the end of next year – as well as slashing capital spending to $3.5bn this year.

But asked whether the pain was over for industrial metals after dramatic price collapses last year, the chief executive responded: “Has it bottomed? I think so.” 

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The mining mogul also said that sales to China – the biggest buyer of commodities – had been “pretty good”, giving a modest fillip to the prices of industrial metals including copper, aluminium and zinc. 

The People’s Bank of China also boosted metal prices by cutting the reserves that banks have to hold at the central bank, in a bid to stimulate the world’s second-biggest economy. 

Glencore was the biggest London float of all time in 2011, and was known as the “millionaires’ factory” for the vast paper fortunes racked up by dozens of managers following its initial public offering. The launch price for the shares was 530p, putting a value of £38bn on the company. 

But the shares fell as low as 68p last September when the worries over its finances were at their height. The company has recovered ground since, although the shares dipped 2.75p to 130.5p. 

The latest fall leaves Mr Glasenberg bearing the personal scars of the miner’s annus horribilis: his 8.4 per cent stake is worth less than half the £3.4bn at which it was valued at the start of last year. 

The losses in 2015 were driven by writedowns of $5.8bn, mainly focused on Koniambo, the huge nickel project in New Caledonia 750 miles off the coast of Australia.  The project – inherited from its merger with rival Xstrata – has been hit by cost overruns and tumbling nickel prices.

The company is aiming to complete the sale of a minority stake in its agricultural trading business by the summer, as well as its Cobar and Lomas Bayas copper assets, raising up to $5bn.

The balance sheet remains a concern in the City, however. Nicolas Ziegelasch, head of equity research at Killik & Co, said cutting debt would be the “overriding focus” for 2016.  

“While so far this strategy has been executed well, the company remains exposed to further falls in commodity prices. Under this scenario, Glencore may be forced to pursue more aggressive restructuring, further reducing its ability to participate in any possible price recovery.”

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