Glencore, the miner and commodity trader, is “able and willing” to grow its business through bolt-on acquisitions and expansion projects, striking a different tone to many of its rivals who are still focused on debt reduction.
Ahead of a briefing to investors later today, the Swiss-based company set out its strategy for 2018 and beyond, flagging its exposure to the raw materials that will power the electric vehicle revolution.
Glencore is a major producer of copper and cobalt from its mines in Australia, South America and the Democratic Republic of Congo. It is also a large nickel miner.
Glencore’s thinking marks it out from many of its peers who are still focused on reducing debts and returning capital to shareholders rather than growth and expansion.
“We will continue to focus on creating value through capital efficient growth within a conservative balance sheet structure. Partnerships to grow the business will remain a key element of our approach,” said Glencore chief executive Ivan Glasenberg, a renowned deal-maker, in a statement.
Over the past year, Glencore has joined forces with large sovereign wealth and pension funds to acquire assets. A year ago, it worked with the Qatar Investment Authority to buy a 19.5 per cent stake in Rosneft, the Russian oil company, and more recently it teamed up with Ontario Teachers’ Pension Plan to create a new base metals investment vehicle.
Analysts believe its agricultural joint venture will two Canadian pension funds will make a takeover offer for Bunge, the US grains trader, when a lock-up agreement expires next year.
Glencore said on Tuesday that it was “able and willing” to grow its business by “reactivating idled capacity when appropriate”, expanding existing “brownfield” projects and through bolt on acquisitions.
On Monday, Glencore said it had completed an $880m upgrade project that will boost production of copper and cobalt and reduce costs at its Katanga mine in the Democratic Republic of Congo.
The company suspended production at Katanga in September 2015 so that its could start work on the construction of a new leach plant. The mine is expected to produce 150,000 tonnes of copper and 11,000 tonnes of cobalt next year, rising to 300,000 tonnes and 34,000 tonnes respectively in 2019.
Glencore, which is also a major producer of coal and zinc, made no changes to earnings guidance for its muscular trading arm on Tuesday but said the group would record earnings before interest, tax, depreciation and ammortisation of $16.2bn in 2018 at current and forward commodity prices.
It said the optimal net debt range for the business was $10-$16bn and its dividend policy for 2018 would comprise a fixed payment of $1bn plus a minimum payout of 25 per cent of the cash generated by its mines, or industrial assets.
Shares in Glencore have risen 26 per cent this year and closed at 351p on Monday