Glencore goes all out to slash debts amid commodity price crash

Borrowing at troubled mining and trading group now set to dip below $20bn

Ivan Glasenberg’s stake in Glencore is now worth less than £1bn, compared to about £6bn when the company was floated (EPA)

Glencore, Ivan Glasenberg’s mining and trading giant, intensified efforts to slash its huge debts yesterday in response to the worsening storm in global commodity markets.

The Swiss-based company is now aiming to cut its borrowing by almost $3bn (£2bn) more than it originally planned three months ago, lowering its net debt to between $18bn and $19bn by the end of 2016.

Mr Glasenberg was first pressured into acting in September by investors worried about a balance sheet in danger of buckling under $29.5bn in debts. With iron ore prices now at their lowest for a decade and copper hitting a six-year low two weeks ago, the billionaire is cutting deeper into spending, reducing it from $5bn to $3.8bn next year. He is also doubling the target for sell-offs to $3bn to $4bn.

Glencore has already scrapped its dividend, raised $2.5bn in a share placing and began talks on selling a stake in its agricultural trading unit to shore up its finances. It also signed a deal to get $900m in revenues upfront on production from its Antamina silver mine in Peru.

Since Mr Glasenberg unveiled the original plans, the price of copper has fallen nearly 11 percent and hit a six-year low of $4,443.50 a tonne in November.

Sources close to the company said the revised plan would help Glencore cope with copper at below $4,000 a tonne or even as low as $3,500. But the cost of credit-default swaps on Glencore – in effect, insurance against the company going bust – has surged since January as investors bet against the business.

Mr Glasenberg told analysts: “We have accelerated our actions in the face of further price weakness since our September announcement.”

He added: “We retain a high degree of flexibility and will continue to review the need to act further as required.”

A float of the agricultural business is also an option, according to the chief financial officer Steven Kalmin.

Shares in Glencore surged as much as 14 per cent at one stage before finishing yesterday 5.82p, or 7 per cent, higher at 88.9p as the City welcomed the increased debt-reduction plan. But the shares are still 70 per cent down on the year, making them one of the FTSE 100’s worst performers and wiping more than £2bn off the value of Mr Glasenberg’s 8.4 per cent stake in the company. It floated at 530p a share in 2011 in the biggest listing in the history of the London Stock Exchange.

Glencore’s trading division will make underlying profits of $2.5bn in 2015, at the low end of previous guidance of $2.5bn to $2.6bn.

Credit Suisse analyst Liam Fitzpatrick said Glencore’s update was “better than expected”, but added: “In the current price environment, the company will need to show continual delivery against this plan.”

The company’s update came after mining rival Anglo American said this week that it would sell more assets, suspend dividends until the end of 2016 and whittle its business down to three divisions, to cope with severe falls in commodity prices. More than 80,000 jobs will be shed under the plans. Platinum producer Lonmin is also struggling, even after a deeply discounted $400m share issue to stay afloat.