Glencore hit by $790 million writedown, cuts spending

Glencore hit by $790 million writedown, cuts spending

Tintaya concentrator in Peru (Source: Glencore)

Mining and commodities giant Glencore (LON:GLEN) revealed Thursday it would take a $790-million charge on its oil assets in Chad, and cut its capital expenditure this year to preserve cash, as the Switzerland-based firm battles with weaker prices.

Glencore said it would write down the value of its oil assets in Chad after cutting the number of drilling rigs and changing the capital budget of its operations because of weaker oil prices. The firm acquired the assets in the central African nation last year through its roughly $1.5 billion Caracal Energy purchase.

Oil slid back into a bear market in July amid an ongoing supply glut, and dropped to a six-year low near $40 a barrel in New York Tuesday.

Glencore also said it would reduce this year’s overall capital expenditure budget to $6 billion, down from a range of $6.5-$6.8bn announced in February.

Glencore is not the only one among the world’s top miners to announced upcoming writedowns. Last week, Rio Tinto (LON:RIO) said it would take a $400 million writedown and reduce capital expenditure to $5.5 billion from $7 billion. Anglo American (LON:AAL) has also written down the value of its assets and cut down spending.

And BHP Billiton (ASX:BHP), which is due to publish full-year results on Aug. 25., is also expected to slash spending, as it has already said it would write down the value of its U.S. onshore petroleum business by $2 billion.

Copper, coal hanging on

Glencore also reported full-year forecast for metals and energy production. Output for copper, the largest earner for the company, is expected to remain largely unchanged, at 1.55 million tons, while zinc output will gain to up to 1.57 million tons. Coal production will fall to as low as 135 million tons from 146 million tons last year.

The company’s stock dropped to record lows on Wednesday, and are down around 40% since the beginning of the year, under pressure from the rout in the commodity prices.