Glencore earnings take successful as coal worth droop offsets copper increase

Glencore profits took a hit last year as the copper rally failed to offset a slump in coal prices. 

In its first update to investors since it abandoned talks with rival Rio Tinto to create a £200billion mega-merger, Glencore said adjusted earnings fell 6 per cent to just under £10billion. 

The group said the tumble in profits was ‘primarily reflecting lower energy and steelmaking coal prices.’

Coal prices have been depressed amid an oversupply and a move from countries including China towards using their own resources.

But Glencore said this had been ‘partially offset by stronger metals pricing’ amid a boom in copper, which is crucial for electrification.

FTSE 100 mining giants Glencore and Rio Tinto called off talks for a mega-merger this month

Copper prices have soared to fresh highs this year, rising by more than a third as concerns over military action in the Middle East came into focus. It hit a high of around $14,000 a ton but is trading at around $12,700, having given up some of its recent gains.  

Investor demand for ‘safe haven’ assets and a weaker dollar have also helped to push copper prices higher. 

Glencore also announced a deal with Gécamines,  the state-owned mining company of the Democratic Republic of Congo (DRC), for long-term mining leases for copper and cobalt production.

Chief executive Gary Nagle reiterated his ambition to turn it into the ‘biggest copper producer in the world’ within the next decade, and is targeting over 1 million tonnes  by the end of 2028. 

Defending its decision to ditch talks with Rio Tinto, Nagle, said: ‘Glencore’s standalone investment case is strong.’

He added: ‘We have a well-diversified business across a range of commodities.’

The two major miners this month said they had ended discussions to forge an industry powerhouse as global players fight for dominance in the lucrative copper market.

A deal would have seen Rio buy Glencore.

But Rio said it was ‘no longer considering a possible merger or other business combination’ as it ‘could not reach an agreement that would deliver value to its shareholders’.

Glencore said negotiations faltered because Rio wanted its chairman Dominic Barton and chief executive Simon Trott to run the combined firm.

It said that this would have ‘significantly undervalued’ Glencore’s ‘relative value contribution to the combined group’ even before a ‘suitable’ price could be agreed.

Shares rose 2.80pc to 499.6pence in early trading as Glencore handed $2billion back to its shareholders. 

It means shareholders will get 17 cents per share this year, based on a $10 base payout and a $7 top-up supported by the rising value of its remaining stake in agricultural trader Bunge.