Glencore shares bounce back but have a way to recoup losses

While Glencore shares jumped 17% on Tuesday, they’re still down almost 77% in the a year ago.

Glencore has been hobbled as copper, aluminium and nickel prices have dropped 25 percent from 2014 levels.

Earlier this month Glencore attempted to reassure investors that it was on top of its finances by announcing a $10.2bn plan to cut its debt pile by about a third.

Bernard Aw, a strategist at IG Asia Pte in Singapore, said: “Glencore’s fall was significant due to its prominence and size, and the plummet was in part triggered by perceived inadequacy in efforts to reduce its debt amid deteriorating mining prospects”.

However, its shares enjoyed a modest rebound as trading got under way in London, rising around 9%.

Forbes says that Glasenberg was the 301st wealthiest person on their rich list just after the mining giant’s IPO in 2011, but he’s now slipped more than 1,000 places to 1,335th, and he’s the last Glencore billionaire.

Glencore said it had strong lines of credit and access to funding, according to a statement from the company sent to media outlets in Australia and picked up by worldwide newswires.

In a note to clients, Hillcoat warned that Glencore could end up “solely working to repay debt obligations” if commodity prices don’t recover. The company is now weighed down by over US$30 billion of net debt (total debt less cash and the value of the commodities it holds for trading purposes) following is purchase of Xstrata in 2012, while its market capitalisation has fallen to about US$15 billion.

“Overdone” By Tuesday afternoon Glencore had put together a statement in which it assured the market its business “remains operationally and financially robust” with “no solvency issues”. “There is value in Glencore shares if the company can pull the appropriate levers now, but risks are clearly very high”, it said, giving the stock a “hold” rating.

Short-sellers have had the ailing giant in their sights for a few time (see box), but UBS analyst Myles Allsop also said the stock was “heavily oversold”. Glencore’s trades and mining inventory are also largely hedged, so big price falls shouldn’t have a corresponding effect.

Citi analysts said: “In the event the equity market continues to express its unwillingness to value the business fairly, management should take the company private, where restructuring measures can be taken easily”.

In a stock market announcement, Glencore said: ‘Glencore has taken proactive steps to position our company to withstand current commodity market conditions.

Glencore Plc plunged 31 per cent, extending a rout that’s wiped more than $13 billion off its value this month and highlighting investor concerns that it’s not cutting its debt load quick enough.