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First Quarter 2020 Production Report and General Update

Baar, Switzerland
30 April 2020

 

Glencore Chief Executive Officer, Ivan Glasenberg:

“The global impact of the COVID-19 pandemic is an unprecedented challenge for individuals, governments and companies alike. Disruptions to our business have, to date, been manageable and the majority of our assets are operating relatively normally, a credit to our people that have stepped up to the challenge of a changed working environment, especially those who continue to carry out their work on site at our industrial assets – Glencore’s frontline. Some industrial assets have been temporarily suspended, generally in line with national and regional lockdowns. Our updated full year production guidance reflects these impacts. 

“A rigorous focus on optimising our asset portfolio has helped to preserve solid levels of overall Industrial Asset free cash flow generation in the current operating environment. Focussed cost control, lower energy costs, favourable movements in producer currencies and higher precious metals’ by-product credits, have underpinned reductions in forecast full year unit cash costs for our key commodity departments. Copper unit costs are now guided lower to 105c/lb, zinc unit costs 39% lower at 14c/lb and thermal coal guided unit cash costs are $3/t lower at $42/t. We also expect a c$1.0 to $1.5 billion reduction in 2020 capex compared to our original 2020 guidance of $5.5 billion.

“Furthermore, notwithstanding global macroeconomic / demand headwinds , the volatile and complex commodity trading environment has provided opportunities for our Marketing business, such that, to date, we have generated annualised earnings within our $2.2 to $3.2 billion p.a. long-term guidance range.

“Given our strong liquidity position and resilient business model, we are well positioned to navigate the current challenges. We recognise the uncertainty caused by the current environment and endeavour to support our stakeholders, as appropriate.”

Production from own sources – Total1

 

 

Q1 2020

Q1 2019

Change %

      Copper  - excl. African Copper

                       kt

                 226.0

                 225.4

                         –

      Copper  -  African Copper, in
      development/optimisation phases

                       kt

                    67.3

                    95.3

                      (29 )

Copper

                       kt

                  293.3

                 320.7

                        (9 )

Cobalt

                       kt

                       6.1

                    10.9

                     (44 )

Zinc

                       kt

                 295.6

                 262.3

                        13

Lead

                       kt

                    61.7

                    73.9

                      (17 )

Nickel

                       kt

                   28.2

                    27.1

                        4

Gold

                    koz

                     199

                    202

                         (1 )

Silver

                    koz

                 7,778

                 7,620

                         2

Ferrochrome

                       kt

                    388

                    402

                        (3 )

 

 

                           

 

 

      Coal - coking

                     mt

                      1.8

                      2.6

                      (31 )

      Coal - semi-soft

                     mt

                       1.6

                      1.0

                      60

      Coal - thermal

                     mt

                   28.5

                   29.6

                       (4 )

Coal

                     mt

                     31.9

                    33.2

                       (4 )

 

 

                           

 

 

Oil (entitlement interest basis)

                   kbbl

                  1,806

                   1,145

                      58

         


1. Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated later in this report.

 

COVID-19 situation report and outlook

  • The COVID-19 pandemic is an unprecedented challenge for all of us, including our colleagues, families, local communities and society at large. As a responsible operator, our top priority is to protect the safety and health of our people and the communities that host our businesses.
  • Glencore operates more than 180 sites and offices in over 35 countries. The scale and diversity of our operations means that the impact of the virus varies by location. In addition, many of our operations are located in remote areas with limited public health care systems. Our teams are working closely with governments, health agencies and others key responders to provide effective local solutions.
  • We have introduced a number of precautionary measures across our offices and industrial assets in response to COVID-19. This includes the implementation of enhanced hygiene and cleaning measures, application of social distancing and identification of higher risk groups. Our goal is to operate only when we can keep our people safe and healthy, while safeguarding jobs and providing support to our local communities. A near-total restriction on non-essential travel has been implemented as well as remote working, where possible.
  • The majority of our industrial assets continue to operate relatively normally, accounting for the various changed practices noted above. Various operations have been temporarily suspended, where national/regional lockdowns or other circumstances have dictated such.
  • The assets that have been principally impacted are noted below:

 

Jurisdiction

Asset

Commodity

Expected impact in 2020

Canada (Quebec)

Raglan

Nickel

Operations stopped late March. Now recommenced and in process of being ramped up. Impact is less than one month of output

Canada (Quebec)

Matagami

Zinc

Operations stopped late March. Now recommenced and in process of being ramped up. Direct impact is less than one month of output

Chad

Oilfields

Oil

On care and maintenance since mid-April

Colombia

Cerrejon JV

Coal

Mining operations ramped down from late March. See below

Colombia

Prodeco

Coal

On care and maintenance since late March. See below

DRC

Katanga

Copper / cobalt

Acid plant project commissioning delayed from H1 2020 to H2 2020. No impact on 2020 production

Kazakhstan

Kazzinc

Zinc

Zhairem mine development to be completed, but delivery to market of expected zinc production being intentionally delayed to 2021

New Caledonia

Koniambo

Nickel

The planned maintenance shutdown on one production line (of two) was extended, with restart delayed by approximately two months

Peru

Antamina JV

Copper and zinc

Operations were initially halted for a two-week period from 13 April. This has now been extended, with restart timing subject to Antamina being able to ensure the workforce’s ongoing health and wellbeing

South Africa

Ferroalloys production

Chrome and vanadium

All mining and smelting operations were suspended for the duration of the lockdown, a staggered start-up is currently in progress

South Africa

SA Coal

Coal

Major complexes supplying domestic power and exports continued to operate. A smaller complex was temporarily closed

South Africa

Astron Energy

Oil refining

The planned Q1 refinery maintenance turnaround has been extended

Zambia

Mopani

Copper

Operating scenarios under discussion with the Zambian government.

  • Colombian coal – given the continued pressure on European coal pricing, production volumes are at risk of further reduction.
  • Volcan – excluded from Glencore’s production statistics due to our relatively small equity interest (c.23%). Operations were suspended on 19 March due to national government restrictions in Peru, and will restart when such restrictions are lifted.

 

Production guidance and updated financial outlook

  • Full year 2020 production guidance, including accounting for latest expected business interruptions due to COVID-19 noted above, is set out below, with further remarks on page 19.

 

 

Actual FY

Previous guidance

Current guidance

 

2020 weighting

 

 

2019

2020

2020

 

H1

H2

Copper - excl. African Copper

kt

1,001

975 ± 25

975 ± 20

 

47%

53%

Copper - African Copper

kt

370

325 ± 25

280 ± 25

 

50%

50%

Copper

kt

1,371

1,300 ± 50

1,255 ± 45

 

48%

52%

Cobalt

kt

46

29 ± 4

28 ± 2

 

48%

52%

Zinc>

kt

1,078

1,265 ± 30

1,160 ± 30

1

50%

50%

Nickel

kt

121

125 ± 5

122 ± 5

 

46%

54%

Ferrochrome

kt

1,438

1,340 ± 25

1,000 ± 25

 

47%

53%

Coal

mt

140

135 ± 4

132 ± 3

 

47%

53%

Oil

mbbl

5.5

6.5 ± 0.2

See below

2

n.a.

n.a.


1 Excludes Volcan
2 Oil updated guidance under review, but will be materially lower as the field operations in Chad have been suspended, relating to COVID-19 disruption in international mobility, transportation and supply chains

 

  • Industrial Assets unit cost guidance updated for changes to production and current producer currency levels, energy costs and by-product pricing, is as follows:

 

    Actual FY Previous guidance Current guidance   2020 weighting

 

 

2019

2020

2020

 

H1

H2

Copper - excl. African Copper

c/lb

81

82

83

1

90

78

Copper

c/lb

148

120

105

1

116

94

Zinc – excl. gold credit

c/lb

47

58

58

2

65.1

50

Zinc

c/lb

13

23

14

2

27

1

Nickel – excl. Koniambo

c/lb

277

227

240

 

220

257

Nickel

c/lb

398

351

382

 

391

372

Coal

$/t

45

45

42

 

44

40


1 Copper unit cost guidance excludes costs associated with non-operating or significantly curtailed assets, including those on care and maintenance. In this regard, an estimated combined approximately $400 million of net operating costs is expected to be incurred in relation to Mopani, Mutanda, Alumbrera and Polymet in 2020. Comparable to previous guidance, the 120c/lb cost would have been 106c/lb, plus approximately $300 million of net operating costs associated with the non-operating or significantly curtailed assets
2 Excludes Volcan.

 

Table best viewed in landscape

  • Industrial Assets capex for 2020 now expected to be in the $4.0-4.5 billion range (previous guidance: $5.5 billion) reflecting some assets curtailing production levels (with associated capex savings), various deferrals and lower equivalent USD costs due to generally weaker producer currencies and lower input costs, particularly through oil price changes.
  • Our Marketing business is delivering annualised Adjusted EBIT performance within our through the cycle long-term guidance range of $2.2 to $3.2 billion p.a.
  • As previously announced, Glencore’s revolving credit facilities have been refinanced and extended, effective 22 May 2020, on the same commercial terms as our 2019 facilities. These comprise:
    • a $9.975 billion 12-month facility, with a 12-month term-out option at Glencore’s discretion; and
    • a $4.65 billion 5-year revolving credit facility.

 

Q1 production highlights

  • For the most part, the disruptions noted above took effect close to or after 31 March. Q1 production was therefore largely unaffected by them.
  • Own sourced copper production of 293,300 tonnes was 27,400 tonnes (9%) lower than Q1 2019. No production was reported in the quarter for Mutanda (on care and maintenance) and Mopani (Q1 smelter restart processed 5.0kt (of 10.6kt) of copper contained concentrates produced and reported in H2 2019, while the smelter underwent a major multi-month rebuild).
  • Own sourced zinc production of 295,600 tonnes was 33,300 tonnes (13%) higher than Q1 2019, mainly relating to the Antamina joint venture, the Iscaycruz mine in Peru that restarted in Q3 2019 and higher grades from Canada.
  • Own sourced nickel production of 28,200 tonnes was 1,100 tonnes (4%) higher than Q1 2019, reflecting the offsetting effects of disruptions in the base period at INO and Koniambo, and maintenance in the current period at Murrin Murrin.
  • Attributable ferrochrome production of 388,000 tonnes was 14,000 tonnes (3%) lower than Q1 2019.
  • Coal production of 31.9 million tonnes was 1.3 million tonnes (4%) lower than Q1 2019, mainly reflecting operating challenges in South Africa and mining sequencing in the Australian coking portfolio, partly offset by higher Australian thermal coal production.
  • Entitlement interest oil production of 1.8 million barrels was 0.7 million barrels (58%) higher than in Q1 2019, primarily reflecting the drilling campaign in Chad and, from Q3 2019, the Bolongo field in Cameroon.

 

To view the full report please click:
https://www.glencore.com/dam:jcr/9c31e323-e61c-4034-a424-f08a12a5ecc0/GLEN_2020-Q1_ProductionReport.pdf

For further information please contact:

Investors            

Martin Fewings    
t: +41 41 709 2880    
m: +41 79 737 5642    
martin.fewings@glencore.com

Maartje Collignon    
t: +41 41 709 32 69    
m: +41 79 197 42 02    
maartje.collignon@glencore.com

Media            

Charles Watenphul    
t: +41 41 709 2462    
m: +41 79 904 3320    
charles.watenphul@glencore.com


Glencore LEI: 2138002658CPO9NBH955

Notes for Editors
Glencore is one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 responsibly-sourced commodities that advance everyday life. The Group's operations comprise around 150 mining and metallurgical sites and oil production assets.

With a strong footprint in over 35 countries in both established and emerging regions for natural resources, Glencore's industrial activities are supported by a global network of more than 30 marketing offices.

Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. We also provide financing, logistics and other services to producers and consumers of commodities. Glencore's companies employ around 160,000 people, including contractors.

Glencore is proud to be a member of the Voluntary Principles on Security and Human Rights and the International Council on Mining and Metals. We are an active participant in the Extractive Industries Transparency Initiative.     

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