JOHANNESBURG (miningweekly.com) – Global commodities mining and marketing company Glencore on Monday announced a fully committed proposed equity capital raising of up to $2.5-billion alongside additional $10.2-billion capital preservation and debt reduction measures, portfolio optimisation and cost cutting actions, to lower net debt to the low $20-billion range by the end of 2016.

Some 78% of the proposed $2.5-billion equity issuance, to reduce debt and increase financial strength, will be underwritten by Citi and Morgan Stanley.

The remaining 22% of the issuance will be covered by commitments from Glencore senior management, including CEO Ivan Glasenberg, CFO Steven Kalmin and several board members.

Additional measures with a value of up to $7.7-billion are to be implemented between now and the end of 2016, including $1.6-billion to be saved from the suspension of the 2015 final dividend, intended to do so in the current commodity environment; $800-million to be saved from the suspension of the 2016 interim dividend; $1.5-billion to be generated from further reduction in working capital; $2-billion to be raised from the sale of assets, including the proposed precious metals streaming transaction and the minority participation of third-party strategic investors in certain of Glencore's agriculture assets.

Some $500-million to $800-million will be generated from a reduction in long-term $4-billion loans and advances made by Glencore and $500-million to $1-billion to be saved from an additional reduction in industrial capital expenditure (capex) to the end of 2016.

The company will exert ongoing focus on portfolio optimisation and reduction of operating expenditures.

The operations at Katanga and Mopani will suspend 400 000 t of copper cathode from the market for 18 months while they engage in plant expansions and upgrades (see separate article).

The strident moves highlight the desire of the company to strengthen and protect its balance sheet amid the current market uncertainty, without affecting its core business activities and overall franchise value and have been designed to accelerate balance sheet deleveraging, maximise future cash flow generation in the current weak commodity price environment and substantially improve financial and credit metrics, in the event of a prolonged weaker pricing environment.

“We remain very positive on the long-term outlook for our business and this is reinforced by senior management's commitment to take up 22% of the proposed equity issuance,” Glasenberg and Kalmin said in a media release.

The company said that copper and zinc were both supply-challenged and an essential ingredient of future global growth.

In seaborne thermal coal, a capex drought and low prices had helped rebalance the market.

“We’re confident that thermal coal's position and availability as the lowest cost fuel source for many large economies will underpin its key role in the global energy mix for many years to come,” Glasenberg said.

The 2015 full-year earnings guidance for marketing earnings before interest and tax was reiterated at from $2.5-billion to $2.6-billion and the company remained confident of its long-term guidance range of $2.7-billion to $3.7-billion.