Glencore thriving despite weaker commodity prices

published 1 November 2012

Commodities trader and mines owner Glencore said its third quarter was a good one, despite generally weaker commodity prices.

The group's marketing operations continued to trade strongly, with the group saying the quarter saw a healthy improvement both year-on-year and sequentially. Agriculture and metals were particularly strong. Glencore's outlook for the remainder of the year in marketing remains positive.

The industrial portfolio, meanwhile, saw an overall improved volume performance compared with the preceding quarter and the corresponding quarter of 2011. The group's interim management statement said the energy division put in a particularly strong shift.

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"Although the financial outcome in our Industrial operations will remain dependent on commodity price levels, the 10-15% annual volume growth forecast from 2011-2015 should continue to provide us with incremental positive operating leverage," the statement said.

Kazzinc, the Kazakhstan mining outfit which is 69.81% owned by Glencore, saw gold production rise 18% year-on-year with recovery rates continuing to improve.

At Katanga, copper production rose 3% year-on-year, with cathode production up 14%. Copper cathode increased 9% quarter-on-quarter. At Mutanda, copper production rose 31% year-on-year, producing at an annualised rate of 81,000 tonnes at the end of September.

There was significant growth in coal production from South Africa, including a large increase in export capacity through Richards Bay Coal Terminal following the inclusion of both Optimum and Umcebo from the start of the year. At Aseng, oil production was ahead of expectation at 62,000 barrels a da. The Alen field is on schedule and budget for first production in the second half of 2013.

"We are not assuming any short term material improvement in global macro conditions. We are confident that in this environment our business model places us in a strongly competitive position, underpinned by our strong relationships in marketing and our highly capital-efficient low-cost brownfield expansion projects in industrial activities," the group said.

In a separate announcement, Glencore said it has completed the $160m acquisition of Vale's European manganese ferroalloys operations.

The operations, located in Dunkirk, France and Mo I Rana, Norway, currently have the capacity to produce 150,000 tonnes and 110,000 tonnes of manganese ferroalloys per annum respectively. As part of the transaction, Glencore will become the marketing agent for Vale's metallurgical manganese ore outside Brazil for a period of five years.