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Glencore lifts share price with new debt target

Published: 00:05 11 Dec 2015 AEDT

Mining2_opt
Not quite down to last one standing

Mining and metals trader Glencore (LON:GLEN) rallied strongly as boss Ivan Glasenberg laid out plans to cut debts further.

Miners globally have been hammered by sliding metal prices and the update followed just days after a disastrously received retrenchment programme from fellow mining major Anglo American (LON:AAl) that wiped 13% of its value.

But City analysts liked Glencore’s news especially the measures to lower borrowings.

An original debt reduction target of US$10bn has been upped to US$13bn, with almost US$9bn of this already locked in said Glasenberg.

By the end of next year, debts will fall to between US$18-19bn, against a low twenties previous target, while underlying profits [EBITDA] in 2016 will be US$7.7bn and free cash flow of over US$2bn.

Capital spending has been reined back to US$5.7bn this year and US$3.8bn next.

“Glencore is well placed to continue to be cash generative in the current environment - and at even lower prices. We retain a high degree of flexibility and will continue to review the need to act further as required," said Glasenberg.

SP Angel added: “Unlike Anglo’s rabbit in the head lights presentation of their prospects against low commodity prices, Glencore has put forward a more considered plan which sees them making money against current spot prices and positioning themselves should prices go lower.

Cut backs in supply and expansionary capex should be supportive of medium to long term prices, the broker added.

Liberum added that the forecast of reduced underlying profits in marketing of US$2.5bn this year and US$2.4-2.7bn for 2106 may be more of an issue as, though small, the downgrade may shake the market’s confidence in the longer-term profitability of the division.

Shares rose 12.5% to 93p.

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