Diversified miner Glencore on Friday reported an 11% year-on-year increase in its copper production and a 54% year-on-year increase in its cobalt output, mainly as a result of the restart of Democratic Republic of Congo- (DRC-) based subsidiary Katanga Mining’s processing operations in late 2017.
Glencore’s own sourced copper output increased to 1.4-million tonnes, but copper sales were 22 000 t lower than production, as a result of the timing of shipments.
Cobalt output rose to 42 200 t.
Katanga was, however, towards the end of 2018 forced to implement a long-term solution to remove excess uranium levels in the cobalt it produces, with ore currently being stockpiled on site for future processing.
Meanwhile, Glencore’s own sourced zinc production of just over one-million tonnes for 2018 was in line with that of 2017, which the company said reflected the offsetting impacts of the disposals of the African zinc assets in August 2017 and the restart of mining at Lady Loretta, in Australia, in mid-2018.
Nickel production of 123 000 t was 13% higher year-on-year, as a result of the Koniambo mine, in New Caledonia, running two production lines throughout the year.
Further, attributable ferrochrome production of almost 1.6-million tonnes was in line with that of 2017, while attributable coal production of 129.4-million was 7% higher year-on-year.
Glencore attributed the higher coal output to the recovery in Australia from weather-related and industrial action disruption and the acquisitions of interests in HVO and Hail Creek. In turn, these were partly offset by lower production at Prodeco, in Colombia, as equipment was reallocated to additional overburden removal and mine development activities.
An analyst from the Royal Bank of Canada (RBC) commented that a strong final quarter in the 2018 financial year from Glencore’s copper operations, offset by a weaker quarter in coal had set the company up well for this year.
While full-year guidance was nearly achieved, RBC said the realised pricing was going to act as a small drag on copper, although the implied realised revenue of $8.6-billion was in line with RBC forecasts.
However, the lower prices towards the end of 2018, especially in oil, in conjunction with some shorter-dated contracts, would result in a $2-billion cash outflow from working capital for Glencore.
Katanga’s cobalt sales will now likely take place in 2020, owing to Katanga having received a suspension from the DRC’s Mines Minister around plans to build an ion exchange plant to remove uranium from the cobalt hydroxide.
As a result, spot prices will defer about $650-million into the next year, RBC projected.
Considering that copper and zinc prices are recovering, coal’s stability and the company trading at 3.8 times RBC’s earnings before interest, taxes, depreciation and amortisation forecasts, RBC said it continues to see Glencore as a preferred exposure in the mining space.