Glencore Shares Drop Below a Pound for First Time in a Month

  • Stock fell as low as 90 pence, lowest level since Oct. 2
  • London Metal Exchange Index fell to six-year low this week

Glencore Plc dropped below a pound for the first time in a month as a six-day selloff in the stock accelerated and metal prices showed no signs of recovery.

Shares of the miner and commodities trader slid 7.6 percent to close at 95.92 pence, the lowest level since Oct. 2. Earlier, the stock fell as much as 13 percent, the biggest intraday plunge since Sept. 28, when the stock plummeted 29 percent on concern the company would struggle to repay its debt. Copper traded at a six-year low in London.

Glencore is the worst performer in the U.K.’s FTSE 100 Index with a 68 percent drop this year after a rout in commodity prices. The company has battled shrinking profits, along with worries over its business model and a $30 billion debt load in an environment of steadily falling prices for raw materials from wheat to zinc and copper.

“It’s very geared into the copper price,” said Richard Knights, a mining analyst at Liberum Capital Ltd. that recommends holding the shares. “Prices are obviously taking a hit on the back of U.S. dollar strength and the Fed’s clear intention to raise rates before the end of the year.”

Copper slid 2.2 percent to $4,835 a metric ton on the London Metal Exchange. The metal traded at $2.175 a pound on the Comex in New York. Rival mining company Anglo American Plc fell 8.7 percent to its lowest closing price since 1999.

Debt Plans

The renewed downturn in industrial metals heightens the pressure on Glencore Chief Executive Officer Ivan Glasenberg to deliver on a $10 billion debt reduction plan announced in September. Glencore has completed about 75 percent of the targeted reduction in borrowing and is likely to lower its debt by more than $10 billion, according to a Nov. 4 report from Deutsche Bank AG analyst Robert Clifford.

Industrial metals continued to retreat on Thursday on concerns over demand in China, the world’s biggest consumer. Data earlier this week showed the country’s industrial output matching the weakest reading since 2008. Monetary and fiscal easing in China has yet to spur an economic rebound and the country’s economy is expanding at the slowest pace in a quarter of a century.

Glencore has raised funds over the past two months by scrapping its dividend, selling assets and raising $2.5 billion through a share sale. The stock plunged on Sept. 28 after analysts at Investec Plc said the company’s equity value may “evaporate” if a rout in commodities was sustained and the company didn’t restructure.

“The impetus was clearly already there for them to try and deleverage as quickly as possible,” Liberum’s Knights said of Glencore’s debt-reduction. “Their mindset has probably changed a little bit from $2 a pound copper being a fantasy number to $2 a pound copper potentially being a realistic number.”

Goldman Sachs Group Inc. analyst Max Layton wrote in a report late yesterday that he sees “downside” risks to his year-end price estimate of $4,800 a ton.

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