Although it took an impairment knock of $611 million (R11 billion) from its South African coal mining operations in the first half of this year, Glencore has so far invested $175m into the Cape Town oil refinery and related projects after acquiring Astron Energy.
Glencore made commitments to invest up to R6bn or $329m with the Competition Tribunal and the South African Economic Development Department, when its 75% acquisition of Astron Energy was given the go-ahead in 2019.
Yesterday, Glencore confirmed that Astron Energy “has made several investments amounting to R3.2bn or $175m in qualifying expenditure, related to the Cape Town oil refinery as at September 30, 2023. The refinery was rocked by an explosion in 2020 while Glencore has said in the past few months that it is committed to investing fully into the facility.
Shares in Glencore inched up 1.38% to R93.61 in afternoon trade on the JSE yesterday.
The Swiss-headquartered diversified resources miner announced yesterday that it was retaining its coal mining assets, including those in South Africa.
It, however, reported that it had suffered impairments amounting to $611m from its South Africa coal mining operations that have been rocked by rail and port inefficiencies, bringing its total impairments for the half year period to June, 2024 to $997m against $47m a year ago.
“Impairments of net $997m. The current period charge primarily relates to South African coal operations ($611m), due to lower thermal coal price assumptions and the ongoing export logistics challenges in South Africa,” the company said.
South Africa was particularly problematic for Glencore during the half-year period under review. Its South African subsidiaries also suffered losses of $17m in respect of foreign exchange translation losses.
Worse still, Glencore’s production of thermal coal from South Africa slumped by 7% to 7.9 million tons, mainly reflecting measures implemented in 2023/2024 to progressively reduce coal production due to export rail-capacity constraints.
“As and when additional rail capacity is restored, the potential exists to increase production rates,” the company said.
Against this background, Glencore’s adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) fell by 33% to $6.3bn during the interim period to June, while its net income before significant items declined 65% to $1.5bn.
This translated to a net loss attributable to equity holders of $233m after accounting for the $1bn impairment charges that were weighted by South Africa coal operations.
After funding $2.9bn of net capital expenditure and $1bn of shareholder returns, Glencore closed the half year with net debt of $3.6bn, including marketing-related lease liabilities, compared to $4.9bn at the end of 2023. There is also about $16.6bn in available committed liquidity after maintaining bond maturities around a cap of $3bn.
Gary Nagle, Glencore’s CEO, said: “The strength of our diversified business model across marketing and industrial has proved itself adept in a range of market conditions, giving us a solid foundation to successfully navigate the near-term macroeconomic uncertainty.”
In the second half, higher production-levels are anticipated from African Copper which is expected to recover from a mill outage in the first half and to access higher ore grades. An additional 30 000 tons is expected to accrue from this.
Glencore’s own-sourced copper production of 462 600 tons was 2% below the same period last year. Its own-sourced cobalt production of 15 900 tons was also below last year’s level by some 5 800 tons “reflecting planned lower run-rates at Mutanda in response to the current weak cobalt-pricing environment and lower throughput”, and cobalt grades.
The company’s production of zinc during the half year to June also tipped 4% to 417 200 tons largely as a result of lower zinc tons from Antamina.
BUSINESS REPORT