Johannesburg - A mining analyst has unexpectedly become an overnight celebrity, after the sharp slide in Glencore’s share price last week was placed squarely on his shoulders.
Marc Elliot, of London-based Investec, said yesterday that he was surprised at the reaction to his note of last Monday when Glencore’s shares fell by nearly a third. This showed the market was on edge, he said, and looking for a scapegoat.
The note shows the precarious situation billionaire Ivan Glasenberg, who heads mining and commodity trader Glencore, finds himself in after moving from one public relations disaster to the next.
Other broker notes have also knocked Glencore’s share price.
In the week before the release of the Investec note, Glencore shares fell 10 percent to a record low after Goldman Sachs had raised concerns about the company’s financial position.
But it appears the Investec note was the killer blow that really knocked Glencore’s price.
The stock has been the worst performer on the FTSE100 index, having fallen by as much as 77 percent this year.
“I think it’s safe to say we have been surprised by what took place last week with Glencore. It clearly highlights market concerns on the debt,” said Elliott, who is in his mid-30s.
“This was a note that we did as a team. I think people got very excited about Glencore.
“I don’t want to claim I was the cause of the share price slide... It has been an interesting week,” he said.
Hunter Hillcoat and Jeremy Wrathall are also analysts from Investec who helped Elliott pen the note.
It warned that the mining and commodity trader could have its equity wiped out if commodity prices remained at the current weak levels or went any lower.
Hold position
Elliott maintained a hold recommendation for the company, given that Investec does not see sufficient growth in value to justify an upgrade.
“Under a spot scenario, we feel Glencore may have to undertake further restructuring beyond the dividend suspension, capital raising and asset sales programmes it has already announced or implemented,” the note read.
Elliot has a master’s degree in chemical and process engineering (MEng) from Sheffield University in the UK. He also has 13 years’ experience analysing the resources sector.
He began at Société Générale, and moved to Johnson Matthey. These were followed by Numis Securities, Fairfax and more recently Anglo Pacific Group, before Investec.
Ian Woodley, a manager at Old Mutual Mining and Resources Fund, said yesterday that blaming the losses – which were estimated at about $6 billion (R82bn) – to an Investec note was excessive.
“I think by attributing the entire loss to the Investec scenario report, you are giving it too much credit,” Woodley said.
He added that an additional, contributing factor to the lowering of the price was poor economic data from China.
“Glencore has a large exposure to copper, of which China is the largest consumer in the world. Any bad economic news tends to impact commodity prices generally, and copper prices in particular at the moment,” said Woodley.
Asked whether the share price implosion would affect Glencore’s operations here, Woodley said he doubted the company would close its local assets based solely on recent share price moves.
BUSINESS REPORT