Glencore Shares Hit New Low

LONDON—Glencore PLC shares hit a new low Tuesday, reversing last week's gains after the commodities trader and producer announced a debt rescue plan.

Shares in the Swiss commodities trader and producer fell 4.6% to 120.5 pence a share in mid afternoon European trade, cementing the firm's ranking as the worst performer out of the U.K.'s blue chip FTSE 100 index so far this year. The rest of the U.K. mining sector also fell, with the FTSE 350 mining index down 1.6% and other large miners such as Rio Tinto PLC and BHP Billiton PLC down 1.3% and 1.2% respectively.

The Swiss miner's shares have fallen nearly 60% since the beginning of the year and by more than three quarters since its London share listing in 2011.

The reason: a continued collapse in a basket of commodities prices including copper and coal, two of its most important earnings drivers. The company has also been hit by growing uncertainty about the timing and structure of the proposed equity issue of up to $2.5 billion as it seeks to pay down debt and stave off a potential credit rating downgrade.

Glencore last week announced $10 billion worth of measures aimed at cutting its net debt by a third to around $20 billion by the end of 2016. This helped boost the company's shares.

But with Glencore's share price continuing to fall, some analysts say the company may need to issue more shares to raise funds.

"The more the share price drops, the more dilutive [issuing new stock] becomes. They will have to issue more shares to achieve the same level of funding," said Carole Ferguson, an equity analyst at advisory firm SP Angel.

A Glencore spokesman declined to comment.

Glencore has also been troubled by its biggest bets not panning out as prices fall for nearly every commodity, from copper to coal, oil to zinc. The rout has raised new concerns about Chief Executive Officer Ivan Glasenberg's decision to acquire Anglo-Swiss miner Xstrata PLC for $29.5 billion, taking Glencore away from its trading house roots.

The purchase catapulted Glencore into the mining big league, making it the world's largest thermal coal exporter and largest copper supplier. Since then prices for those two commodities, and several others, have fallen to multiyear lows due to weaker-than-expected demand from China, the world's largest consumer of those commodities, and excess supply.

Copper dropped to a more than six-year low last month while the benchmark price for thermal coal from South Africa fell to its lowest level since 2007.

Write to Alex MacDonald at [e-mail]

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(END) Dow Jones Newswires

September 15, 2015 08:55 ET (12:55 GMT)

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