October 5, 2015 / 7:32 AM / 4 years ago

UPDATE 3-Glencore CEO bets on copper production cuts as shares surge

* Copper supply will tighten - Glasenberg

* Shares recoup all of last week losses

* Glencore in talks to sell agri business - sources (Releads with CEO quotes on copper, adds analysts comments)

By Dmitry Zhdannikov and Olivia Kumwenda-Mtambo

LONDON, Oct 5 (Reuters) - Glencore Chief Executive Ivan Glasenberg said steep output cuts by copper miners will help lift prices in the next 18 months, in some of his first public comments since fears about commodities demand and the company’s debt battered the company’s shares.

Trader and miner Glencore’s stock jumped as much as 72 percent in illiquid trade in Hong Kong and as much as 20 percent in London, partly on prospects the company will sell some assets to cut debt.

The stock has recouped all of its losses from the past week, with several brokers saying a recent sell-off was overdone as the miner and trader had the ability to withstand the crunch on commodity prices.

The price of copper, Glencore’s largest earner, hit six-year lows below $5,000 a tonne in August due to a slowdown in China, one of the world’s biggest consumers of metals and other raw materials. It was around $5,180 on Monday.

“Supply will ultimately tighten... Fundamentals will prevail,” Glasenberg told the FT African Summit on Monday.

Glencore said in September it would suspend some copper production at Katanga Mining in Democratic Republic of Congo and at Mopani Copper Mines in Zambia for 18 months.

“The governments understood what we are doing,” Glasenberg said on Monday, adding that production would resume once the mines become competitive.

The Swiss-based trader has pledged to cut its net debt to $20 billion from $30 billion, by selling assets, reducing capital expenditure, suspending dividend payments and raising $2.5 billion of new equity capital with a share sale.

With the share sale completed, the market is now focussing on asset sales.


Reuters reported on Friday that Glencore is in talks with a Saudi Arabian sovereign wealth fund and China’s state-backed grain trader COFCO, along with Canadian pension funds, to sell a stake in its agricultural assets.

The company has said it is on track to sell a stake in its agricultural business by early next year, according to Barclays.

Separately, The Telegraph newspaper reported Glencore would listen to offers for a takeover of the entire company although its management did not believe there were any buyers willing to pay a fair value for the company. The company’s share price has fallen more than 60 percent this year.

“Since the company announced the debt reduction plan, nothing has changed. The company remains focused on executing this plan,” an industry source said on Monday in response to the story in The Telegraph.

On Monday, Glencore’s Hong Kong-listed shares surged as much as 72 percent before closing up 18 percent at HK$12.6.

The shares rose as much as 20 percent in early trade in London, and were up 16 percent at 1500 GMT.

Glasenberg declined to comment on Monday’s share spike and in a filing to the Hong Kong and London stock exchanges, the company said it was not aware of any reasons behind the stock moves.

“While the leverage is clearly of concern it is not anywhere near an immediate existential threat to the company - it is an issue that needs to be managed, and that is exactly what the company is doing,” broker Sanford Bernstein said in a note.

Bernstein maintained an “Outperform” rating on the stock with a target of 450 pence.

“We understand the concerns about the company seeing its ‘Lehman moment’, but believe that the analogy is stretched,” Societe Generale said on a note on Friday, referring to Lehman Brothers, which collapsed in 2008.

It upgraded Glencore to “Buy” with a target price of 130 pence. (Additional reporting by Sonali Paul and Melanie Burton; Editing by Peter Graff and Susan Thomas)

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