Wrap Text
GLN: Half Year Production Report 2020.
GLENCORE PLC
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64
Baar, Switzerland
NEWS RELEASE
31 July 2020
Half-Year Production Report 2020
Glencore Chief Executive Officer, Ivan Glasenberg:
“Glencore has delivered an overall strong first-half operating performance amid the unprecedented challenges presented by Covid-19, reflecting both
the ability and dedication of our teams to adapt to these difficult conditions. As a responsible operator, our top priority has been to protect the health and
safety of our people and the communities that host our businesses.
“Although some of our industrial operations were temporarily suspended in line with national and regional guidance, or where our risk assessment
determined a suspension was appropriate, the majority of our assets continued to operate relatively normally. I am particularly pleased to report a strong
operational performance at Katanga, with its ramp-up on track to achieve design capacity by the end of the year.
“Our Marketing business has also risen to the challenge, delivering robust counter-cyclical earnings. A very strong first-half performance allows us to
now raise our full year 2020 EBIT expectations to the top end of our $2.2-$3.2 billion guidance range.
“In the near-term, we remain alert to the continuing challenges that Covid-19 presents. While we expect our operating cash flow to remain solid, we are
ready to adapt to changing market conditions.”
Production from own sources – Total1
H1 2020 H1 2019 Change %
Copper kt 588.1 663.0 (11)
Cobalt kt 14.3 21.3 (33)
Zinc kt 550.1 535.9 3
Lead kt 127.9 147.5 (13)
Nickel kt 55.2 55.4 –
Gold koz 385 423 (9)
Silver koz 14,185 15,490 (8)
Ferrochrome kt 466 799 (42)
Coal - coking mt 3.7 4.3 (14)
Coal - semi-soft mt 2.6 3.3 (21)
Coal - thermal mt 51.8 60.6 (15)
Coal mt 58.1 68.2 (15)
Oil (entitlement interest basis) kbbl 2,612 2,240 17
Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated later in this report.
Highlights
continued
Realised prices
LME (average 6
Realised months) Difference
US$ million ¢/lb $/t $/t %
Copper 239 5,269 5,502 (4)
Zinc 94 2,072 2,049 1
Nickel 566 12,477 12,477 –
Realised prices differ from LME benchmarks, reflecting provisional pricing adjustments, commercial terms / qualities, etc.
The average spot Newcastle coal price for the period was $62/t. After applying a portfolio mix adjustment (component of our regular coal cash flow
modelling guidance) of $1.70/t to reflect, amongst other factors, movements in pricing of non-NEWC quality coals, an average price of $60.30/t was
realised across all coal sales volumes.
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Highlights
continued
Covid-19 situation – update report
While the majority of our assets continued to operate through Q2 with minimal disruption, certain operations were temporarily suspended,
on account of mandatory governmental lockdown provisions, or otherwise where a risk assessment determined such action appropriate.
The curtailed operations have mostly restarted as follows:
Jurisdiction Asset Commodity Date suspended Date restarted Comment
Canada (Quebec) Raglan Nickel Late March Late April Expect to make up the majority of lost tonnes over
the balance of 2020
Canada (Quebec) Matagami Zinc Late March Late April Production restarted in line with historical levels
Chad Oilfields Oil April Currently on care See “Operational update” below
and maintenance
Colombia Cerrejon JV Coal Late March Early May Limited restart in May. FY 2020 attributable
production expected in the 6.5-7.0mt range (2019:
8.6mt)
Colombia Prodeco Coal Late March Currently on care See “Operational update” below
and maintenance
DRC Katanga Copper/cobalt n.a n.a. No material production disruption; acid plant
commissioning delayed to H2 2020
New Caledonia Koniambo Nickel n.a. n.a. Delays to planned maintenance from restrictions
impacting availability of key maintenance teams.
Will be operated as a single-line operation for the
balance of 2020
Peru Antamina JV Copper/zinc Mid April Late May Operations restarted with a reduced workforce; expect
a phased ramp-up through H2
South Africa Ferroalloys Chrome and Late March Early May See “Operational update” below
vanadium
South Africa SA Coal Coal n.a. n.a. Major complexes operated relatively normally
throughout the SA lockdown
South Africa Astron Energy Oil refining Late March Operations suspended Post delayed turnaround, refinery restart disrupted by
an incident requiring major repair and remediation. Fuel
marketing and distribution operations unaffected
throughout, although underlying demand has been
weaker
Zambia Mopani Copper n.a. n.a. See “Operational update” below
Marketing update
Marketing performance in H1 2020 was very strong, with full year EBIT expectations now raised to the top end of our long-term $2.2-$3.2 billion range.
Contributing towards H1 2020’s EBIT performance was a sizeable increase in carried inventory (“Carry Trades”) transactions / quantities (although the
overall dollar value of inventories was somewhat lower than December 2019, due to lower commodity prices) and also a build in non-RMI net working
capital on account of the varying terms of trade in our respective business units. In particular, our oil department, which in recent years has managed
its receivables portfolio days on hand to around 20 days and accounts payable around 45 days, saw a significant reduction in its net payables position
(payables less receivables) via the sharp reduction in oil prices, as well as lower sales volumes due to weaker product demand in H1 2020. Together
with the initial cash margining required to give effect to the additional Carry Trades, this has led to an increase in our Net Debt as at 30 June 2020.
Operational update
Mopani notified the Zambian government of its intention to place the mining operations on care and maintenance to preserve value and maintain the
option to deliver its various growth projects when conditions further improve. Mopani was notified by the relevant authorities that its proposal was rejected.
Mopani has appealed this decision. Mining operations will continue pending the outcome of the appeal and Mopani continues to engage with the relevant
authorities.
The outlook for Prodeco’s business remains challenging due to ongoing weakness in the Atlantic coal market, exacerbated by the impact of Covid-19.
Prodeco is in the process of optimising its mine plans to account for the current market environment. This process requires consultation and approval by
a number of external parties. An application has been made to the authorities for Prodeco to remain on care and maintenance, which will help preserve
the value of the assets and the option to implement the revised plans when the appropriate approvals have been obtained and market conditions have
improved.
Due to Covid-19 related disruptions to international mobility, transportation and supply chains, the Chad oil fields were placed on care and maintenance
in April. These disruptions and prevailing market conditions are being monitored to determine when some restart of operations would be appropriate.
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Highlights
continued
The Ferroalloys business has for some time experienced a structurally worsening competitive environment across the South African ferrochrome industry,
including via substantial electricity price increases. In January 2020, a consultation process was initiated on the future of the Rustenburg smelter, and in
June 2020, a further process commenced across the entire business, to seek a more competitive operating cost structure. This is an ongoing process
with all alternatives being considered.
Production guidance and updated cost outlook
Full year 2020 production guidance, including accounting for the latest expected business interruptions due to Covid-19 noted above, is set out below,
with further remarks on page 19.
Actual Current Previous
Q1 Q2 H1 ROY guidance guidance
2020 2020 2020 2020 2020 2020
Copper kt 293 295 588 667 ± 35 1,255 ± 35 1,255 ± 45
Cobalt kt 6 8 14 14 ± 2 28 ± 2 28 ± 2
Zinc kt 296 255 550 610 ± 30 1,160 ± 30(1 ) 1,160 ± 30
Nickel kt 28 27 55 59 ± 4 114 ± 4 122 ± 5
Ferrochrome kt 388 78 466 534 ± 25 1,000 ± 25 1,000 ± 25
Coal mt 32 26 58 56 ± 3 114 ± 3 132 ± 3
1 Excludes Volcan
Industrial Assets unit cost guidance updated for changes to production and current producer currency levels, energy costs and by-product pricing, is as
follows:
Actual Previous Current
FYE 2020 split
FY guidance guidance
2019 2020 2020 H1 H2
Copper c/lb 148 105 106(1 ) 109 104
Zinc – excl. gold credit c/lb 47 58 48(2 ) 64 32
Zinc c/lb 13 14 5(2 ) 28 (20)
Nickel – excl. Koniambo c/lb 277 240 257 230 281
Nickel c/lb 398 382 413 395 437
Coal $/t 45 42 46 46 47
1 Copper unit cost guidance excludes costs associated with non-operating or significantly curtailed assets, including those on care and maintenance. In this regard, an estimated combined approximately
$350 million of net operating costs is expected to be incurred in relation to Mopani, Mutanda, Alumbrera and Polymet in 2020.
2 Excludes Volcan.
H1 production highlights
Own sourced copper production of 588,100 tonnes was 74,900 tonnes (11%) lower than H1 2019, mainly reflecting Mutanda being on care and
maintenance in the current period, expected lower grades at Antapaccay and the short-term impact of Antamina’s Covid-19 related
demobilisation/remobilisation, partly offset by stronger milling throughput at Collahuasi.
Own sourced zinc production of 550,100 tonnes was in line with H1 2019, reflecting stronger grades at the Canadian mines and the various temporary
Covid-19 related suspensions at Antamina and other South American operations.
Own sourced nickel production of 55,200 tonnes was in line with H1 2019, reflecting a strong period of operations at Murrin offsetting the delayed delivery
of matte from the Sudbury smelter to the Nikkelverk refinery.
Attributable ferrochrome production of 466,000 tonnes was 333,000 tonnes (42%) lower than H1 2019, mainly reflecting the South African Covid-19
national lockdown during March/April. Smelting operations partly resumed on 1 May, with further capacity expected to be restarted towards the end of
Q3.
Coal production of 58.1 million tonnes was 10.1 million tonnes (15%) lower than H1 2019, mainly reflecting the Covid-19 related asset suspensions in
Colombia.
Entitlement interest production of 2.6 million barrels was 0.4 million barrels (17%) higher than H1 2019, due to new wells drilled in Equatorial Guinea and
Cameroon, which helped to offset the Covid-19 related suspension of the Chad assets.
To view the full report please click
www.glencore.com/dam/jcr:73768468-8e04-4bcf-ae43-f16844720672/GLEN_2020-HY_ProductionReport.pdf
https://senspdf.jse.co.za/documents/2020/JSE/ISSE/GLN/H1PrRep20.pdf
Highlights
continued
For further information please contact:
Investors
Martin Fewings t: +41 41 709 2880 m: +41 79 737 5642 martin.fewings@glencore.com
Maartje Collignon t: +41 41 709 32 69 m: +41 79 197 42 02 maartje.collignon@glencore.com
Media
Charles Watenphul t: +41 41 709 2462 m: +41 79 904 3320 charles.watenphul@glencore.com
www.glencore.com
Glencore LEI: 2138002658CPO9NBH955
GLENCORE PLC
(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
ISIN: JE00B4T3BW64
Notes for Editors
Glencore is one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 responsibly-
sourced commodities that advance everyday life. The Group's operations comprise around 150 mining and metallurgical sites and oil production
assets.
With a strong footprint in over 35 countries in both established and emerging regions for natural resources, Glencore's industrial activities are supported
by a global network of more than 30 marketing offices.
Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. We
also provide financing, logistics and other services to producers and consumers of commodities. Glencore's companies employ around 160,000
people, including contractors.
Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights and the International Council on Mining and Metals. We
are an active participant in the Extractive Industries Transparency Initiative.
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Important notice concerning this document including forward looking statements
This document contains statements that are, or may be deemed to be, “forward looking statements” which are prospective in nature. These forward
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not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned",
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certain actions, events or results "may", "could", "should", “shall”, "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements
are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections
about future events, results of operations, prospects, financial condition and discussions of strategy.
By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore’s control.
Forward looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that
could cause these uncertainties include, but are not limited to, those disclosed in the last published annual report and half-year report, both of which
are freely available on Glencore’s website.
For example, our future revenues from our assets, projects or mines will be based, in part, on the market price of the commodity products produced,
which may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include
(without limitation) the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the
recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and actions
by governmental authorities, such as changes in taxation or regulation, and political uncertainty.
Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of
the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance
on these forward-looking statements which only speak as of the date of this document.
Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any
intention, obligation or undertaking, to update or revise any forward looking statements, whether as a result of new information, future events or
otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of
Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date.
No statement in this document is intended as a profit forecast or a profit estimate and past performance cannot be relied on as a guide to future
performance. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for any securities.
The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal entities. In this document, “Glencore”,
“Glencore group” and “Group” are used for convenience only where references are made to Glencore plc and its subsidiaries in general. These
collective expressions are used for ease of reference only and do not imply any other relationship between the companies. Likewise, the words “we”,
“us” and “our” are also used to refer collectively to members of the Group or to those who work for them. These expressions are also used where no
useful purpose is served by identifying the particular company or companies.
Sponsor
Absa Corporate and Investment Bank, a division of Absa Bank Limited
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Date: 31-07-2020 08:00:00
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