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Glencore’s bottom line hit by lower commodity prices but net debt down

Glencore has posted its results for the six months ended 30 June 2016 with adjusted EBITDA of US$4.0b, 13% lower than H1 2015, and adjusted EBIT down 38% to US$875b as the group’s commodity production was impacted by lower prices. The company delivered on lowering its costs and reports that 66% of the negative price impact was offset by real cost reductions and favourable foreign exchange movements.

Production was down in line with expectations as the company reduced output at its copper, zinc, lead, coal and oil. Copper production was 703kt, down 4% on H1 2015 principally due to the closure of its mines in Zambia. Zinc production was 31% lower at 507kt, again due to voluntary cuts in Australia and Peru. Coal production of 58.8mt was 14% lower, reflecting production curtailments, disposal of Optimum Coal, the scheduled closures of two mines and some volume reductions and restrictions in Colombia. Oil production was 4.4mb, down 18% form 2015.

In contrast, nickel production was up 17%, to 57kt despite the shutdown of the Sudbury smelter in 2015. Agricultural products’ production was up 43%, to 6.4mt.

Within the overall EBIT figure, the marketing business contributed US$1.2b, a 14% rise on the previous year.

The company continues to actively manage its debt reduction programme with agreed asset disposals of US$3.9b, on track to meet its US$4-5b reduction target for the year. As at 30 June, net debt stood at US$23.6b, down US$2.3b since the end of 2015.

In the latest development in this debt reduction strategy, the company has reached agreement with Australian gold miner, Evolution Mining, to sell a 30% interest in its Ernest Henry copper/gold mine, in Australia, for A$880m upfront plus monthly contributions to copper concentrate costs.

Evolution will receive the equivalent of 30% of copper and silver payable and 100% of gold payable production from the mine.

Ernest Henry produces approximately 60kt/y of copper and 80koz/y of gold in copper concentrate and has a remaining life through to 2027.

Glencore’s bottom line hit by lower commodity prices but net debt down: GLEN

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