Glencore’s ugly, ugly drop

Glencore (LON:GLEN) shares gave way 29.42% today to GBP68.62 (US$104.11) after analysts painted a gloomy future for the company facing persistently low commodity prices.

Investec asked what value is left for investors when Glencore has too much debt with no metal price uptick in the short term.

“The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve,” Investec said in a note to investors Monday, which was picked up by Invezz.

“Despite the drastic action that management has announced recently (even assuming all of the measures are successfully implemented), a spot price scenario results in an almost complete collapse in forward earnings such that no meaningful estimate of shareholder value can be derived under our price-to-earnings methodology.”

The damage wasn’t limited to Glencore. Anglo American was off 9.33% to GBP557.37 (US$845.62) and Rio Tinto fell GBP4.47 (US$6.78).

Glencore is currently labouring under GBP20 billion (US$30.34 billion) worth of debt. Earlier this month the company issued a share placement worth GBP1.6 billion (US$2.43 billion) to help reduce its commitments.

Glencore plc is an Anglo–Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland.

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