JOHANNESBURG (miningweekly.com) – The coronavirus pandemic has prompted global diversified mining and marketing company Glencore to defer its proposed $2.6-billion distribution of cash and reinforce its $10.1-billion liquidity through the refinancing and extension of revolving credit facilities on the same commercial terms as its 2019 facilities.
The London- and Johannesburg-listed company, headed by CEO Ivan Glasenberg, said on Tuesday that with Covid-19 having generated exceptional social and financial impacts around the world, the company’s first priority remained the health and wellbeing of its people, their families and communities.
“We understand the uncertainty caused by the current environment and will endeavour to support our workforce and local communities, as appropriate. Simultaneously, we are taking prudent action to protect and strengthen our capital structure amid the current period of heightened uncertainty in order to enable us to more safely navigate this challenging environment,” the company said in a release to Mining Weekly.
The company reaffirmed its commitment to maintain strong Baa/BBB investment grade credit ratings, supported by a near-term net debt target range of $14-billion to $15-billion, down from $17-billion at December 31.
The company said that it continued to generate material levels of positive free cash at current production levels and spot prices, owing to its globally diversified marketing and distribution business and industrial asset portfolio, including many large-scale, low-cost assets.
The significant weakening of its key producer currencies against the US dollar in countries including Australia and South Africa, capital expenditure deferrals being implemented and lower oil prices and interest rates had provided substantial cash offsets to the fall in US dollar commodity prices and some level of Covid-19, mainly government imposed, production disruptions.
Updated guidance on 2020 production, key industrial division unit costs and capital expenditure, alongside its first-quarter production report, are scheduled for release on April 30.
Glencore chairperson Tony Hayward commented: “As well as prioritising the health and wellbeing of our people, their families and our communities, we are taking a cautious approach to protect our capital structure amid the current period of extreme uncertainty.
“Therefore, notwithstanding that Glencore continues to generate material levels of positive free cash in the current environment, the board considers it prudent to defer the distribution decision. We will review the opportunity for a distribution at our August results, when we will have an improved understanding of Covid-19’s impact on our business and its prospects,” Howard said.
Credit facilities had been refinanced and extended with shorter-term facilities initially launched at $8-billion closing substantially oversubscribed at $10.75-billion. Glencore scaled back subscription levels and ultimately increased the size of the facilities to $9.975-billion, up from the $9.775-billion signed in 2019.
A total of 48 banks committed to the facilities, including 31 mandated lead arrangers and bookrunners.
The longer-term $4.65-billion revolving credit facility was extended to 2025.
The company said that the new and extended facilities were for general corporate purposes, comprising a $9.975-billion 12-month revolving credit facility with a 12-month term-out option at Glencore’s discretion, and a 12-month option, and a $4.65-billion five-year revolving credit facility with a 12-month extension option.
As in previous years, these committed unsecured facilities contained no financial covenants, no rating triggers, no material adverse change clauses and no external factor clauses.
Glencore is one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities. The Group's operations comprise around 150 mining and metallurgical sites and oil production assets.
With a strong footprint in over 35 countries in both established and emerging regions for natural resources, Glencore's industrial activities are supported by its global marketing network.
Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. We also provide financing, logistics and other services to producers and consumers of commodities. Glencore's companies employ around 160 000 people, including contractors.
Glencore is a member of the Voluntary Principles on Security and Human Rights, the International Council on Mining and Metals and the Extractive Industries Transparency Initiative.