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GLENCORE PLC - GLN - First Quarter 2020 Production Report and General Update

Release Date: 30/04/2020 08:00
Code(s): GLN     PDF:  
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GLN - First Quarter 2020 Production Report and General Update

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

NEWS RELEASE
Baar, 30 April 2020

                                      First Quarter 2020 Production Report and General Update

Glencore Chief Executive Officer, Ivan Glasenberg:

    “The global impact of the COVID-19 pandemic is an unprecedented challenge for individuals, governments and
    companies alike. Disruptions to our business have, to date, been manageable and the majority of our assets are
    operating relatively normally, a credit to our people that have stepped up to the challenge of a changed working
    environment, especially those who continue to carry out their work on site at our industrial assets – Glencore’s
    frontline. Some industrial assets have been temporarily suspended, generally in line with national and regional
    lockdowns. Our updated full year production guidance reflects these impacts.

    “A rigorous focus on optimising our asset portfolio has helped to preserve solid levels of overall Industrial Asset free
    cash flow generation in the current operating environment. Focussed cost control, lower energy costs, favourable
    movements in producer currencies and higher precious metals’ by-product credits, have underpinned reductions in
    forecast full year unit cash costs for our key commodity departments. Copper unit costs are now guided lower to
    105c/lb, zinc unit costs 39% lower at 14c/lb and thermal coal guided unit cash costs are $3/t lower at $42/t. We also
    expect a c$1.0 to $1.5 billion reduction in 2020 capex compared to our original 2020 guidance of $5.5 billion.

    “Furthermore, notwithstanding global macroeconomic / demand headwinds , the volatile and complex commodity
    trading environment has provided opportunities for our Marketing business, such that, to date, we have generated
    annualised earnings within our $2.2 to $3.2 billion p.a. long-term guidance range.

    “Given our strong liquidity position and resilient business model, we are well positioned to navigate the current
    challenges. We recognise the uncertainty caused by the current environment and endeavour to support our
    stakeholders, as appropriate.”

Glencore Q1 2020 Production Report and General Update                                                                      
Highlights

Production from own sources – Total(1)
                                                                                       Q1 2020       Q1 2019     Change %
    Copper - excl. African Copper                                                kt      226.0         225.4            –
    Copper - African Copper, in development/optimisation
phases                                                                           kt       67.3          95.3         (29)
Copper                                                                           kt      293.3         320.7          (9)
Cobalt                                                                           kt        6.1          10.9         (44)
Zinc                                                                             kt      295.6         262.3           13
Lead                                                                             kt       61.7          73.9         (17)
Nickel                                                                           kt       28.2          27.1            4
Gold                                                                            koz        199           202          (1)
Silver                                                                          koz      7,778         7,620            2
Ferrochrome                                                                      kt        388           402          (3)

   Coal - coking                                                                 mt        1.8           2.6         (31)
   Coal - semi-soft                                                              mt        1.6           1.0           60
   Coal - thermal                                                                mt       28.5          29.6          (4)
Coal                                                                             mt       31.9          33.2          (4)

Oil (entitlement interest basis)                                               kbbl      1,806         1,145           58

1   Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated later in this
    report.

COVID-19 situation report and outlook
•    The COVID-19 pandemic is an unprecedented challenge for all of us, including our colleagues, families, local
     communities and society at large. As a responsible operator, our top priority is to protect the safety and health of our
     people and the communities that host our businesses.
•    Glencore operates more than 180 sites and offices in over 35 countries. The scale and diversity of our operations
     means that the impact of the virus varies by location. In addition, many of our operations are located in remote areas
     with limited public health care systems. Our teams are working closely with governments, health agencies and others
     key responders to provide effective local solutions.
•    We have introduced a number of precautionary measures across our offices and industrial assets in response to
     COVID-19. This includes the implementation of enhanced hygiene and cleaning measures, application of social
     distancing and identification of higher risk groups. Our goal is to operate only when we can keep our people safe and
     healthy, while safeguarding jobs and providing support to our local communities. A near-total restriction on non-
     essential travel has been implemented as well as remote working, where possible.
•    The majority of our industrial assets continue to operate relatively normally, accounting for the various changed
     practices noted above. Various operations have been temporarily suspended, where national/regional lockdowns or
     other circumstances have dictated such.
•    The assets that have been principally impacted are noted below:
     Jurisdiction      Asset               Commodity        Expected impact in 2020
     Canada            Raglan              Nickel           Operations stopped late March. Now recommenced and in process
     (Quebec)                                               of being ramped up. Impact is less than one month of output
     Canada            Matagami            Zinc             Operations stopped late March. Now recommenced and in process
     (Quebec)                                               of being ramped up. Direct impact is less than one month of output
     Chad              Oilfields           Oil              On care and maintenance since mid-April
     Colombia          Cerrejon JV         Coal             Mining operations ramped down from late March. See below
     Colombia          Prodeco             Coal             On care and maintenance since late March. See below
     DRC               Katanga             Copper / cobalt  Acid plant project commissioning delayed from H1 2020 to H2 2020.
                                                            No impact on 2020 production
     Kazakhstan        Kazzinc             Zinc             Zhairem mine development to be completed, but delivery to market
                                                            of expected zinc production being intentionally delayed to 2021
     New               Koniambo            Nickel           The planned maintenance shutdown on one production line (of two)
     Caledonia                                              was extended, with restart delayed by approximately two months
     Peru              Antamina JV         Copper and       Operations were initially halted for a two-week period from 13 April.
                                           zinc             This has now been extended, with restart timing subject to Antamina
                                                            being able to ensure the workforce’s ongoing health and wellbeing
     South Africa      Ferroalloys         Chrome and       All mining and smelting operations were suspended for the duration
                       production          vanadium         of the lockdown, a staggered start-up is currently in progress
     South Africa      SA Coal             Coal             Major complexes supplying domestic power and exports continued
                                                            to operate. A smaller complex was temporarily closed
     South Africa      Astron Energy       Oil refining     The planned Q1 refinery maintenance turnaround has been
                                                            extended
     Zambia            Mopani              Copper           Operating scenarios under discussion with the Zambian government.

•    Colombian coal – given the continued pressure on European coal pricing, production volumes are at risk of further
     reduction.
•    Volcan – excluded from Glencore’s production statistics due to our relatively small equity interest (c.23%). Operations
     were suspended on 19 March due to national government restrictions in Peru, and will restart when such restrictions
     are lifted.

Production guidance and updated financial outlook

•    Full year 2020 production guidance, including accounting for latest expected business interruptions due to COVID-
     19 noted above, is set out below, with further remarks on page 19.

                                                                Actual         Previous       Current
                                                                    FY         guidance      guidance          2020 weighting
                                                                  2019             2020          2020           H1        H2
  Copper - excl. African Copper                           kt      1,001        975 ± 25      975 ± 20          47%       53%
  Copper - African Copper                                 kt        370        325 ± 25      280 ± 25          50%       50%
Copper                                                    kt      1,371      1,300 ± 50    1,255 ± 45          48%       52%
Cobalt                                                    kt         46          29 ± 4        28 ± 2          48%       52%
Zinc                                                      kt      1,078      1,265 ± 30    1,160 ± 30 (1)      50%       50%
Nickel                                                    kt        121         125 ± 5       122 ± 5          46%       54%
Ferrochrome                                               kt      1,438      1,340 ± 25    1,000 ± 25          47%       53%
Coal                                                      mt        140         135 ± 4       132 ± 3          47%       53%
Oil                                                     mbbl        5.5       6.5 ± 0.2     See below (2)      n.a.      n.a.

1 Excludes Volcan
2 Oil updated guidance under review, but will be materially lower as the field operations in Chad have been suspended,
  relating to COVID-19 disruption in international mobility, transportation and supply chains

•    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 - excl. African Copper                             c/lb         81            82          83    (1)        90       78
Copper                                                    c/lb        148           120         105    (1)       116       94
Zinc – excl. gold credit                                  c/lb         47            58          58    (2)      65.1       50
Zinc                                                      c/lb         13            23          14    (2)        27        1
Nickel – excl. Koniambo                                   c/lb        277           227         240              220      257
Nickel                                                    c/lb        398           351         382              391      372
Coal                                                       $/t         45            45          42               44       40

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 $400 million of net operating
  costs is expected to be incurred in relation to Mopani, Mutanda, Alumbrera and Polymet in 2020. Comparable to
  previous guidance, the 120c/lb cost would have been 106c/lb, plus approximately $300 million of net operating costs
  associated with the non-operating or significantly curtailed assets
2 Excludes Volcan.

•    Industrial Assets capex for 2020 now expected to be in the $4.0-4.5 billion range (previous guidance: $5.5 billion)
     reflecting some assets curtailing production levels (with associated capex savings), various deferrals and lower
     equivalent USD costs due to generally weaker producer currencies and lower input costs, particularly through oil
     price changes.
•    Our Marketing business is delivering annualised Adjusted EBIT performance within our through the cycle long-term
     guidance range of $2.2 to $3.2 billion p.a.
•    As previously announced, Glencore’s revolving credit facilities have been refinanced and extended, effective 22 May
     2020, on the same commercial terms as our 2019 facilities. These comprise:
                -    a $9.975 billion 12-month facility, with a 12-month term-out option at Glencore’s discretion; and
                -    a $4.65 billion 5-year revolving credit facility.

Q1 production highlights
•     For the most part, the disruptions noted above took effect close to or after 31 March. Q1 production was therefore
      largely unaffected by them.
•     Own sourced copper production of 293,300 tonnes was 27,400 tonnes (9%) lower than Q1 2019. No production was
      reported in the quarter for Mutanda (on care and maintenance) and Mopani (Q1 smelter restart processed 5.0kt (of
      10.6kt) of copper contained concentrates produced and reported in H2 2019, while the smelter underwent a major
      multi-month rebuild).
•     Own sourced zinc production of 295,600 tonnes was 33,300 tonnes (13%) higher than Q1 2019, mainly relating to
      the Antamina joint venture, the Iscaycruz mine in Peru that restarted in Q3 2019 and higher grades from Canada.
•     Own sourced nickel production of 28,200 tonnes was 1,100 tonnes (4%) higher than Q1 2019, reflecting the offsetting
      effects of disruptions in the base period at INO and Koniambo, and maintenance in the current period at Murrin
      Murrin.
•     Attributable ferrochrome production of 388,000 tonnes was 14,000 tonnes (3%) lower than Q1 2019.
•     Coal production of 31.9 million tonnes was 1.3 million tonnes (4%) lower than Q1 2019, mainly reflecting operating
      challenges in South Africa and mining sequencing in the Australian coking portfolio, partly offset by higher Australian
      thermal coal production.
•     Entitlement interest oil production of 1.8 million barrels was 0.7 million barrels (58%) higher than in Q1 2019, primarily
      reflecting the drilling campaign in Chad and, from Q3 2019, the Bolongo field in Cameroon.

To view the full report please click:
https://www.glencore.com/dam:jcr/9c31e323-e61c-4034-a424-f08a12a5ecc0/GLEN_2020-Q1_ProductionReport.pdf

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

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.

Glencore Q1 2020 Production Report and General Update                                                                          5
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 looking statements may be identified by the use of forward looking terminology, or
the negative thereof such as “outlook”, "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is
subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates"
or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements
that 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

Date: 30-04-2020 08:00:00
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