Glencore Stock Plunges as Copper Prices Decline

Glencore PLC shares plunged as much as 12.6% on Thursday, dropping below £ 1 for the first time in more than a month as copper prices slumped to six-year lows.

The company's share price has shed more than 68% this year as investors worry about its high levels of debt. The share price plummeted nearly 30% on Sept. 28, a shocking dive that sent Glencore scrambling to shore up confidence among investors worried about its high debt levels.

The Switzerland-based company is unique among miners in that it has a huge trading arm that requires billions of dollars in short-term debt. In the first half of 2015, Glencore had about $30 billion in long-term net debt, much of it derived from its acquisition of mining giant Xstrata in 2013.

Investors have worried that the company's credit rating—two notches above junk status—could be hit if metals' prices continue marching downward. Glencore has a high credit rating for traders, but it is much lower than mining peers like BHP Billiton Ltd. and Rio Tinto PLC.

Glencore declined to comment on Thursday.

Copper prices sank to fresh six-year lows on Thursday amid concerns that production cuts announced by Glencore and other miners won't be enough to ease a supply glut at the same time demand from China is waning. China is the world's biggest copper consumer.

Copper for December delivery, the most actively traded contract, was recently down 1.8% to $2.1790 a pound on the Comex division of the New York Mercantile Exchange, the lowest level since July 2009.

"There may be a lot of cuts coming, but the market isn't sure if they are permanent in nature, or if they are enough to make up for the slowing demand," said Edward Meir, a strategist at INTL FCStone. "China's industrial sector appears to be in a recession."

Copper is Glencore's biggest earnings driver. A dent in the company's credit rating could spell trouble for its debt-fueled trading arm. The company has said its credit rating is safe, and even if its was lowered, the added costs would be negligible.

Glencore has laid out a plan to reduce its net debt by $10 billion to about $20 billion, by cutting its dividend, issuing $2.5 billion in new stock and selling assets, including the sale of the rights to some of its silver production last month.

The Wall Street Journal reported in October that Glencore executives were aiming to cut even more debt than announced in a bid to secure a credit rating increase, in a nod to investor sentiment.

Glencore shares had recovered through much of October and closed at £ 1.26 ($1.91) on Nov. 4 before beginning a rapid slide last week.

Other big miners of copper have also been hit hard. Anglo American PLC, the British mining giant, was down almost as much as Glencore on Thursday.

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November 12, 2015 12:15 ET (17:15 GMT)

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