Glencore leaded by its African copper activity

In the wake of the poor performance of its operations on the continent, the mining and trading group published lower than expected half-year results.

For the Anglo-Swiss commodities giant Glencore, the first half of 2019 is to be forgotten. After acknowledging at the end of April that it was the subject of an investigation by the US commodity regulator into suspicions of corruption, and subsequently announcing a downward revision of its mining production forecasts for 2019, the group presented below expectations half-yearly results on Wednesday 31 July.
This was due in particular to a 5% contraction in copper mining compared to the same period last year, to 663,000 tonnes, as the company’s African operations in the DRC and Zambia were a major factor (business disruptions due to strike activity). This situation was further aggravated by the low copper prices over the period, which fell by 7%, and by the very poor performance of cobalt prices, the other major primary resource extracted in Congo, whose value has fallen by almost half since the beginning of the year. As a result, Glencore warned that the underperformance of its two commodities, mainly extracted in Africa, would result in an operating deficit of USD 350 million over the past six months. This is enough to make the teams of the investment firm BMO Capital Markets, quoted by Reuters, say that the company « will have to increase production of almost all its commodities by between 20% and 40% in order to achieve its objectives for the year as a whole ».
In its earnings release, however, the group’s CEO, Ivan Glasenberg, was reassuring, stating that « the company has addressed the challenges faced in Katanga, with several changes in management and a detailed review of activities ».

A mining operation of the group in Katanga (DRC) ©Glencore

However, taking into account the current mistrust of some of the investors positioned on the stock, the manager indicated that he would separate « within two years » the group’s African copper-related operations from other copper activities « present in less risky regions ».