Jesse Riseborough London
Glencore, the world’s third- largest mining company, will retain its focus on returning excess cash to investors amid declining prices for its two key sources of profit – coal and copper.
The company “will continue to focus on return of excess capital to shareholders”, Baar, Switzerland-based Glencore said yesterday in a statement ahead of presentations by senior executives to investors in London.
A $1 billion (R11.5bn) share buyback announced in August is 65 percent complete.
Investors have demanded greater returns from mining companies following a decade-long $1 trillion investment spree marred by failed acquisitions and overspending on mine expansions that flooded metals markets.
After a decade of price gains fuelled by Chinese demand, often defined as the commodities supercycle, miners have been contending with slower growth by shunning mergers, reducing spending and cutting costs.
“Capital misallocation, not a lack of demand, remains a key issue for the sector resulting in a clear need to differentiate by commodity,” Glencore chief executive Ivan Glasenberg said.
Disciplined approach
“We will continue our disciplined approach to capital allocation, based on the supply-demand fundamentals.”
Prices for iron ore and coal are trading near five-year lows amid a worldwide glut of both materials, while copper has dropped about 12 percent this year.
Rio Tinto Group, which rebuffed an approach in July from smaller rival Glencore to create the world’s biggest mining company, was a “cash machine” under any price scenario, chief executive Sam Walsh said last week. Rio is the second-largest exporter of steelmaking iron ore.
The supercycle was not dead as Chinese demand was stronger than ever, Glasenberg said in an August interview.
Rather, the price slump had been caused by over-investment in new mines, he said.
The company expected to spend about $4bn a year on its projects through to 2017 when spending would drop to about $3.5bn, it said yesterday.
Glencore is halting production at its Australian coal mines for three weeks this month as prices for the power-station fuel languish at a five-year low.
That will rein in about 5 million tons of output, or about 6 percent of Glencore’s Australian coal production last year – Bloomberg