Mining giant Glencore announces drastic balance sheet efforts
Switzerland-based Glencore announced today it will:
- Suspend its dividend
- Sell $2.5 billion in stock
- Sell precious metals and agricultural stakes
- Suspend operations at two massive African mines
The moves are designed to cut its $30 billion debt pile by $10 billion.
It's also another lesson in how corporate executives can't be trusted. Just three weeks ago, CFO Steve Kalmin said the company could "walk and chew gum" in an allusion to protecting its credit rating and paying its dividend. That may have changed last week when S&P changed its outlook on company debt to negative from stable but plans like these aren't hashed out in a week.
Shares of the company are down 60% this year and fell 17% last week but rebounded on the news.
For broader markets, the moves raise a multitude of concerns. Glencore is one of the world's largest investors in commodities and it has now clearly entered a retrenchment phase. They've already announced capex cuts and will now slash spending by an additional $500 million to $1 billion.
What's driving them to cut spending and investment is universal. Commodity prices are low and global growth is mediocre. It's especially bad news for the commodity currencies.
