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GLENCORE PLC - GLN: Half Year Production Report 2020.

Release Date: 31/07/2020 08:00
Code(s): GLN     PDF:  
Wrap Text
GLN: Half Year Production Report 2020.

(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK
Baar, Switzerland

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.

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.


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:
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
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
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
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
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.


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

                                                                                                                      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
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
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


For further information please contact:
 Martin Fewings                           t: +41 41 709 2880            m: +41 79 737 5642     
 Maartje Collignon                        t: +41 41 709 32 69           m: +41 79 197 42 02    

 Charles Watenphul                        t: +41 41 709 2462            m: +41 79 904 3320     
Glencore LEI: 2138002658CPO9NBH955

(Incorporated in Jersey under the Companies (Jersey) Law 1991)
(Registration number 107710)
JSE Share Code: GLN
LSE Share Code: GLEN
HKSE Share Code: 805HK

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
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.

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.

Absa Corporate and Investment Bank, a division of Absa Bank Limited


Date: 31-07-2020 08:00:00
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