Glencore to Impair Value of Chad Oil Unit by About $790 Million

The company said that following the sharp decline in oil prices in late 2014 and continuing into this year, significant amendments were made to Chad’s work programme, with the objective of preserving value for the long term, while reducing cash outlays in the near term. As a result, Glencore said the number of drilling rigs in operation in Chad will also “significantly” reduce.

Further, Glencore said it expects to impair the value of Chad operations by some $790 million in its interim accounts. The company is due to report first-half results on August. 19.

Analysts said the production results largely met expectations, apart from a small beat on copper and a small miss on zinc.

Zinc output, another large earnings driver after copper for the company, rose 12% annually to 730,300 tons in the first half, mainly due to the ramp-up of expansion projects in Australia.

Glencore, which has the biggest exposure to copper of the large diversified miners, said its own sourced copper production fell 3% to 730,900 tons in the first half of the year, compared with the same period a year earlier, due to lower output from its operations in South America. 3 thousand tonnes. The drop in production reflected anticipated grade changes at certain assets and planned maintenance activities at Collahuasi.

Glencore agreed to buy Caracal Energy Inc. for about $1.35 billion in April last year to take control of oil and gas assets in the central African nation of Chad.

In the fist half, own sourced coal production was 68.7 million tonnes, down 4 percent, primarily due to the market-driven decision to cut back production.

Optimum has been in talks with Eskom over the course of the past few years to try to renegotiate the contract but, in June, Eskom said it was not willing to renegotiate the framework already in place and terminated the agreement, which had been used to conduct the negotiations between the two parties. “Eskom is enforcing specifications in the supply agreement which Optimum is unable to meet on a sustainable basis and which were the subject of the recent renegotiation discussions”, Glencore said.

In London, Glencore shares were gaining 1.6 percent to trade at 183 pence.

At 9.28am, the share was up 2.04% to R36.48, valuing the company at about R475bn.