21st Jul 2023 10:33
(Alliance News) - Mining stocks on Friday returned some of Thursday's gains, after Glencore PLC delivered a somewhat mixed trading update.
Glencore on Friday delivered mixed performance across its portfolio of commodities ranging from coal to copper, gold, zinc and nickel in the second half of its financial year, and left its annual guidance in tact.
On Thursday the Barr, Switzerland-based miner and commodity trader shares closed up 4.2% in London. On Friday morning, they were down 0.9% to 468.50 pence each. In Johannesburg on Friday morning, they were up 0.2% to ZAR108.35 each.
Other mining stocks were also up on Thursday, boosted by optimism from China.
Anglo American closed up 3.3%, boosted by a positive trading update on Thursday. Antofagasta rose 2.7%, more than recovering its 1.4% fall it suffered on Wednesday after it lowered output guidance.
The People's Bank of China on Thursday held its one-year loan prime rate - which serves as a benchmark for corporate loans - at 3.55%. The five-year rate remained at 4.20%.
On Friday, it was a different story, however, with commodities giving up some of their gains. Anglo American lost 0.3%, and Antofagasta shed 0.1%.
"In the UK Glencore shares came under pressure as it posted lower production volumes for the first half. While this was in line with expectations and the company anticipates an improvement in output will help it meet full-year estimates, firms often come a cropper when they look for a second-half recovery to get them out of trouble," said AJ Bell head of financial analysis Danni Hewson.
Glencore said copper production for the first six months of 2023 was 488,000 tonnes, down 4% from 510,200 tonnes in the corresponding period last year.
Ferrochrome decreased to 717,000 tonnes, down 9% from 786,000 tonnes. Nickel was worse off, falling by 20% to 46,400 tonnes from 57,800 tonnes.
Over this period, coal output fell 2% to 54.2 million tonnes from 55.4 million tonnes. Zinc declined 10% to 434,700 tonnes from 480,700 tonnes, while lead was 8% lower at 87,400 tonnes from 95,100 tonnes.
Silver production dropped by a quarter to 9.4 million ounces from 12.5 million ounces.
However, gold production rose 10% to 369,000 ounces from 334,000 ounces. Cobalt grew 5% to 21,700 tonnes from 20,700 tonnes.
"We are pleased to report a solid first-half production performance from our underlying base business, where our key copper, coal and zinc assets performed in line with expectations and previously communicated guidance," Glencore Chief Executive Gary Nagle said.
Glencore maintained its annual production guidance unchanged. Copper production is guided to drop to 1.04 million tonnes in 2023 from 1.05 million tonnes in 2022.
Coal output is expected to remain flat at 110 million tonnes.
On cobalt, production is estimated at 30,000 tonnes from 43,800 tonnes, and zinc is projected at 950,00 tonnes, compared to 939,000 tonnes.
Nickel production is expected to increase to 112,000 tonnes from 108,000 tonnes, but ferrochrome is forecast at 1.31 million tonnes from 1.48 million tonnes.
Further, Glencore continues to expect a full-year adjusted earnings before interest and tax to be above the top end of its USD2.2 billion and USD3.2 billion per annum long-term guidance range, likely in the USD3.5 billion to ZAR4.0 billion range.
Liberum said it had expects Ebit to come in at USD3.2 billion. In 2022, adjusted Ebit was USD6.4 billion.
Glencore also that they are expecting a release from non-readily marketable inventories marketing working capital. Liberum's Ben Davis noted that non-readily marketable inventories had built up by about USD7 billion over the past couple of years.
"Unclear how much of release to expect but certainly will mean the dividend will be better covered than its peers," Davis added.
Liberum reiterated its 'buy' recommendation for Glencore, as well as its 660p target price.
By Sophie Rose, Alliance News reporter
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