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Glencore lowers production guidance but still expects robust earnings ahead

The miner expects its full-year earnings to comfortably exceed $3.2bn. Arnd Wiegmann, Reuters.

The miner expects its full-year earnings to comfortably exceed $3.2bn. Arnd Wiegmann, Reuters.

Published Apr 29, 2022

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Glencore yesterday lowered its 2022 production guidance on copper, zinc and cobalt after operational challenges and Covid-related absenteeism in the first quarter drove output for some metals lower.

The London Stock Exchange and JSE-listed miner released its first-quarter 2022 production report yesterday.

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However, despite this Glencore has said it expects its full-year earnings to comfortably exceed the top end of its long-term adjusted earnings before interest and taxes guidance range of $2.2 billion (R33bn) to $3.2bn a year.

The group's share price has surged by almost 6 percent on the JSE on the outlook.

Coal production has increased by 11 percent year-on-year, while there is also a 2 percent improvement in ferrochrome production from Glencore’s South African assets. Its coal mines has increased production in the reported period despite heavy rains in South Africa and Australia.

"Own sourced copper production of 257 800 tonnes was 43 400 tonnes 14 percent lower than Q1 2021, reflecting temporary geo-technical constraints at Katanga of 14 000 tonnes, the basis change arising from the sale of Ernest Henry in January 2022," the company said.

Prices for many of the metals Glencore mines surge due to the market volatility that Russia’s invasion of Ukraine has created.

Glencore chief executive Gary Nagle said: “For the most part, the group’s quarterly production was in line with our expectations.

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“However, production in quarter one 2022 reflects several temporary impacts, including geo-technical challenges at Katanga (in Congo) and Covid-19 absenteeism, particularly in Australia.”

Higher operating rates in Koniambo, situated in New Caledonia, continued into the first quarter this year, while overall coal production, on a like-for-like basis, reflected Glencore’s increased Cerrejón ownership, which was broadly flat period-on-period, Nagle said.

Nagle said reflecting the quarter one production performance, full-year guidance was reduced for copper and cobalt, but increased for nickel and ferrochrome. However, the slower-than-expected ramp-up at Zhairem reduced full-year zinc production guidance by 9 percent.

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Zinc production of 241 500 tonnes was 41 000 tonnes, or 15 percent, lower than quarter one 2021, reflecting Mount Isa Covid-19 related absenteeism and the planned mining cessation of Iscaycruz in Peru in the third quarter of 2021.

Own sourced nickel production of 30 700 tonnes was 5 500 tonnes, 22 percent higher than quarter one 2021, primarily reflecting Koniambo operating both production lines in 2022.

“Our marketing activities were supported during the quarter by tight physical market conditions and periods of extreme volatility,” Nagle said.

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