2019 Investor Update
3 December 2019
Important notice concerning this document including forward looking statements | 1 |
This document contains statements that are, or may be deemed to be, "forward looking statements" which are prospective in nature. These forward looking statements may be identified by the use of forward looking terminology, or the negative thereof such as "outlook", "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", "shall", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy.
By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore's control. Forward-looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those disclosed in Glencore's 2018 Annual Report.
For example, our future revenues from our assets, projects or mines will be based, in part, on the market price of the commodity products produced, which may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include (without limitation) the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and actions by governmental authorities, such as changes in taxation or regulation, and political uncertainty. Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward- looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document.
Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention, obligation or undertaking, to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date.
No statement in this document is intended as a profit forecast or a profit estimate and past performance cannot be relied on as a guide to future performance. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities.
The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal entities. In this document, "Glencore", "Glencore group" and "Group" are used for convenience only where references are made to Glencore plc and its subsidiaries in general. These collective expressions are used for ease of reference only and do not imply any other relationship between the companies. Likewise, the words "we", "us" and "our" are also used to refer collectively to members of the Group or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies.
2019 Investor Update
Our investment case
Ivan Glasenberg - CEO
2019 Investor Update
Our investment case | 3 |
Our markets
- Tightly balanced and destocked
- Easily accessible, high-quality resources are increasingly scarce
- Well positioned for key future growth trends
- Urbanisation/ rising living standards
- Electrification of mobility
- Decarbonisationof energy
- Growing market deficit potential for our commodities
Our business
- Unique combination of assets and marketing
- Diversified portfolio of new energy materials and high quality coal
- Large long-life assets with generally first quartile cost positions
- Significant pipeline of internal growth options to supply future needs
- Countercyclical resilience of Marketing cash flows
- Robust and flexible balance sheet
- Highly cash generative business throughout the cycle - illustrative 2020 FCF of c.$4.4bn at current pricing
Creating value
- Integration of sustainability throughout our business
- Experienced management team
- Relentless focus on maximising value creation through balancing business
reinvestment/growth and shareholder returns
- Flexible business model that adapts quickly to changing conditions
- Disciplined approach to value over volume
2019 Investor Update
Operational Update
Peter Freyberg - Head Industrial Assets
2019 Investor Update
Production Update | 5 |
Summary
Diversified portfolio of generally large long-lifelow-cost
Copper equivalent production forecast - own source
assets
- Largely flat production profile over the next three years
- Higher zinc and oil with generally steady coal and nickel volumes across the outlook period, offset by the transition of Mutanda to care and maintenance
- Continued focus on operational improvement, supported by our GT and XPS technology businesses
Growth
- Copper - Katanga, Mopani
- Cobalt - Katanga
- Zinc - Zhairem, Antamina
- Coal - United Wambo
- Nickel - Koniambo
- Oil - Equatorial Guinea, Chad, Cameroon
Declines
• Copper and cobalt - Mutanda, non-copper department |
by-product production at Kidd, Sudbury and Kazzinc |
Key changes
(-) Mutanda
Care and
Maintenance
- Mopani smelter restart
(+) Increasing oil | |
equivalent volumes: | |
Chad, EG, Cameroon | (+) Katanga |
2020-2022 | annualised |
steady state |
- United Wambo start up
(-) Cu: Kidd, Sudbury | |
and Kazzinc by | |
(+) Zhairem: | product |
(-) Zn: Matagami and | |
first production | |
Izcaycruz | |
• | Zinc - Depletion of current reserves: Matagami and |
Iscaycruz | |
• | Nickel - INO modest decline ahead of new production |
from 2023 |
(+) Antamina: high Zn production 2020/21
End 2019F | End 2020F | End 2021F | End 2022F |
2019 Investor Update
Production Update | 6 |
Summary
Group guidance - own source(1)
2019F | 2020F | 2021F | 2022F | ||
Copper - excl. African Copper | kt | 1010 ± 20 | 975 ± 25 | 980 ± 25 | 930 ± 25 |
Copper - African Copper(2) | kt | 375 ± 15 | 325 ± 25 | 355 ± 25 | 370 ± 25 |
Copper - Group | kt | 1385 ± 35 | 1300 ± 50 | 1335 ± 50 | 1300 ± 50 |
Cobalt | kt | 43 ± 2 | 29 ± 4 | 32 ± 4 | 32 ± 4 |
Zinc(3) | kt | 1110 ± 25 | 1265 ± 30 | 1400 ± 30 | 1200 ± 30 |
Nickel | kt | 128 ± 5 | 125 ± 5 | 126 ± 6 | 129 ± 7 |
Ferrochrome | kt | 1450 ± 25 | 1340 ± 25 | 1450 ± 25 | 1450 ± 25 |
Coal(4) | Mt | 140 ± 2 | 135 ± 4 | 136 ± 5 | 140 ± 5 |
Oil - entitlement interest | Mbbl | 5.5 ± 0.2 | 6.5 ± 0.2 | 11.0 ± 0.4 | 12.7 ± 0.4 |
2019 Investor Update | Notes: (1) With the exception of coal, mid-point 2019F production guidance as per Third Quarter 2019 Production Report, Page 17. (2) Reflecting the lengthy Mopani smelter |
maintenance shutdown in H2 2019, 2019F African copper production includes c.9kt of copper contained in concentrate that will either be held for sale or processed to | |
produce cathode when the smelter restarts. (3) Excludes Volcan. (4) Coal 2019F guidance reduced by 5Mt to 140Mt, reflecting recent Colombian volume reductions as well as | |
a safety stoppage In South Africa. |
Production Update | 7 |
Ramp-up / Development assets progressing to plan
Katanga
- Targeting annualised steady state production of 300ktpy Cu and 30ktpy Co towards the end of 2020
- The first of Katanga's two cobalt dryers has been restarted. Realisation of full drying capacity expected mid-2020
Mopani
- Smelter restart expected from early 2020
Koniambo
- Continued focus on stabilising the operation and reducing metallurgical plant downtime
- 30-40ktpyNi in FeNi planned over the next 3 years, c.50ktpy Ni in FeNi long-term target
Katanga sulphuric acid plant
2019 Investor Update
Production update | 8 |
Copper and cobalt
Copper guidance
- Modest decline over the outlook period, primarily reflecting the transition of Mutanda to care and maintenance in Q4 2019
- Option to restart Mutanda at some point, subject to market conditions and feasibility study validation
- African copper production: Katanga expected to reach annualised steady state capacity by the end of 2020
- Copper production, excluding African copper, lower in line with expected declines (primarily grade related) in non- copper department assets (Kidd, INO and Kazzinc)
Cobalt guidance
- Mutanda care and maintenance in 2019, partially offset by forecast higher Katanga cobalt production over the outlook period
- As above, option to restart Mutanda at some point subject to market conditions
Copper guidance (kt) - own source(1,2)
1385 ± 35 | 1300 ± 50 | 1335 | ± 50 | 1300 ± 50 | |
375 | ± 15 | 325 ± 25 | 355 ± 25 | 370 ± 25 | |
1010 | ± 20 | 975 ±25 | 980 | ± 25 | 930 ± 25 |
2019F | 2020F | 2021F | 2022F | ||
Copper - excl. African Copper | African Copper | ||||
Cobalt guidance (kt) - own source(1)
43 ±2
29 ± 4 | 32 ± 4 | 32 ± 4 |
2019F | 2020F | 2021F | 2022F |
2019 Investor Update | Notes: (1) Mid-point 2019F production guidance as per Third Quarter 2019 Production Report, Page 17. (2) Reflecting the lengthy Mopani smelter maintenance shutdown in |
H2 2019, 2019F African copper production includes c.9kt of copper contained in concentrate that will either be held for sale or processed to produce cathode when the | |
smelter restarts. |
Production update | 9 |
Coal
Coal guidance
- 2019 production guidance reduced by 5Mt to 140Mt, reflecting recent Colombian volume reductions as well as a safety stoppage in South Africa
- Flat production by 2022 with nearer-term volumes (2020 and 2021) impacted by permitting delays (United Wambo)
- Production volumes comfortably within our commitment to limit capacity to levels at the time of announcement(1) - broadly 150Mtpy
Colombia
- Cerrejon volumes adjusted to 26Mtpy (100%) in line with challenging Atlantic market conditions. Prodeco volumes are flat over the outlook period, however decline thereafter
Australia
- Permitting delays have shifted United Wambo (c.5Mtpy at 100%) first production towards the end of 2020
South Africa
- Stable volumes across the outlook period
Coal guidance (Mt) - own source
Coal production capacity cap - 150Mtpy
140 ±2 | 135 ± 4 | 136 ± 5 | 140 ±5 | |||
2019F | 2020F | 2021F | 2022F | |
Coking Coal | Semi-soft Coal | |||
Australia Thermal Export | Australia Thermal Domestic | |||
SA Thermal Export | SA Thermal Domestic | |||
Prodeco | Cerrejon | |||
2019 Investor Update | Notes: (1) See RNS 20 February 2019, "Furthering Our Commitment to the Transition to a Low Carbon Economy". |
Production update | 10 |
Zinc
Zinc guidance
• Production increases through the outlook period with near- |
term higher Antamina zinc grades and commissioning of |
Zinc guidance (kt) - own source(1,2)
1400 ±30
Zhairem in Kazakhstan |
Kazzinc
- Zhairem - first production expected in 2020. Temporary spike in 2021 from parallel-running of Zhairem and Maleevsky, which depletes over the medium term
Australia
- Steady production over the outlook period
North and South America
- Production volumes in 2022 impacted by the depletion of current reserves at Matagami in Canada and Iscaycruz in Peru, and a return to more 'normal' levels of zinc production from Antamina
1265 ±30
1110 ± 25
1200 ± 30
2019F | 2020F | 2021F | 2022F | ||||
Kazzinc | Australia | North America | |||||
South America | Cu dept - Antamina | ||||||
2019 Investor Update | Notes: (1) 2019F production guidance as per Third Quarter 2019 Production Report, Page 17. (2) Excludes Volcan. |
Production update | 11 |
Nickel
Nickel guidance
- Flat production profile across the outlook period with the planned ramp up of Koniambo offsetting some modest expected declines from INO's existing mines, before they recover from 2023 as new projects get commissioned
Koniambo
- Focus on stabilising the operation and minimising downtime of the metallurgical plant
- 30-40ktpyNi in FeNi planned over the next 3 years; c.50ktpy Ni in FeNi long-term target
INO
- Production profile reflects some modest expected depletion of existing mines, while new volumes from Raglan Phase II and Onaping Depth are realised from 2023
Murrin Murrin
- Consistent production of 36-39ktpy, depending on maintenance timing
Nickel guidance (kt) - own source(1)
128 ± 5 | 125 ± 5 | 126 ± 6 | 129 ± 7 |
2019F | 2020F | 2021F | 2022F | |||||
INO | Murrin Murrin | Koniambo | ||||||
2019 Investor Update | Notes: (1) 2019F production guidance as per Third Quarter 2019 Production Report, Page 17. |
Production update | 12 |
Oil
Oil guidance
- Increasing equivalent oil entitlement interest over the outlook period, driven by material growth in Equatorial Guinea (primarily LNG) and liquid volumes in Chad and Cameroon
Equatorial Guinea
- Higher volumes from 2021 as the Alen field transitions to its LNG development phase
Chad
- Steady growth through the outlook period, with production from the Badila and Mangara fields supplemented later by the Krim field
Cameroon
- Increasing volumes from the Bolongo field (Glencore interest 37.5%)
Oil equivalent guidance (mbbl) - entitlement interest(1)
12.7 ± 0.4
11.0 ±0.4
6.5 ±0.2
5.5 ± 0.2
2019F | 2020F | 2021F | 2022F | |||
Chad | Equatorial Guinea | Cameroon | ||||
2019 Investor Update | Notes: (1) 2019F production guidance as per Third Quarter 2019 Production Report, Page 17. |
Production Update | 13 |
Future growth options
Significant pipeline of internal brownfield and greenfield growth options for when markets inevitably require these commodities
Cu 70Mt M+I Resources(1) | Co | Zn 57Mt M+I Resources(1) |
Coroccohuayco: Peru | Mutanda sulphides: DRC | Volcan projects: Peru |
El Pachon: Argentina | Obruchevskoye: Kazakhstan | |
Polymet: USA | Ni 4.6Mt M+I Resources(1) | Novo-Leninogorsky:Kazakhstan |
Collahuasiexpansion: Chile | Chekmar: Kazakhstan | |
Agua Rica (integrated with | VasilkovskoyeUG: Kazakhstan | |
Alumbrera): Argentina | Pallas Green: Ireland | |
Mutanda sulphides: DRC | ||
Nickel Rim Depth: Canada | Hackett River: Canada | |
Lomas Bayassulphides: Chile | ||
Moose Lake: Canada | ||
Norman West: Canada | ||
Raglan Phase 2 extensions: | ||
Canada |
14bt M+I Resources(1)
Argent: South Africa
Nooitgedacht: South Africa Zonnebloem P2: South Africa
Valeria: Australia
Glendell North: Australia
Mangoola North: Australia
Bulga extension: Australia HVO extension: Australia
2019 Investor Update | Notes: (1) Measured and Indicated contained relevant commodity in resource calculated on corresponding tonnages and grades presented in the 2018 |
Resources and Reserves report and adjusted to reflect Glencore's attributable interest. |
Safety update | 14 |
Unacceptable number of fatalities in 2019
- Copper: Mopani - six, DRC - three
- Zinc - five
- Coal - one
- Alloys - one
Immediate actions
- Fatality reduction interventions at Mopani and Kazzinc to address conditions and behaviours
- Corporate-leddeep dive SafeWork assessments at targeted assets
Reinforcement of Fatality Reduction Programs, comprising six key elements:
- Major interventions
- SafeWork reviews
- Safety cases
- Assurance
- Leadership development
- Improved integration planning
We believe that all Glencore operations can be fatality free
- The updated Fatality Reduction Program builds on our investment in SafeWork with the goal of achieving a step- change in performance
2019 Investor Update
Financial Update
Steven Kalmin - Chief Financial Officer
2019 Investor Update
2020 unit cash costs/margins | 16 |
Cu | Zn | Ni | ||||
Production: 1.30Mt, -85kt vs 2019E | Production: 1.27Mt,+155kt vs 2019E | Production: 125Kt, -3kt vs 2019E | Production: 135Mt, -5Mt vs 2019E | |||
Unit costs: 120 ¢/lb, -36 ¢/lb vs 2019E | Unit costs: 25 ¢/lb (57 ¢/lb ex Au) | Unit costs: 396 ¢/lb, unchanged | Unit costs: Thermal FOB cash cost | |||
Unit costs ex-Africa:82 ¢/lb | +15 ¢/lb (+14 ¢/lb ex Au) vs 2019E | Unit costs ex-Koniambo:287 ¢/lb | $47/t, +1$/t vs 2019E |
- Forecast first quartile position
- Targeting c.100 ¢/lb group mine unit cash costs by 2021 with achievement of steady state production at Katanga
• Forecast first quartile position | • Forecast second quartile position | • Forecast first quartile cash margin |
• Cost increase reflects forecast lower | • Stable unit costs | curve |
by-product credits per tonne of | • Stable unit costs | |
proportionately higher Zn metal | • Declining margin in line with lower | |
produced and some impact of higher | overall net pricing | |
Zn TCs. Underlying gross mine unit | ||
costs are broadly steady year-on-year |
Mine costs (¢/lb) | Mine costs (¢/lb) | Mine costs (¢/lb) | Thermal mine costs and margin($/t) | |||||||||||||||||||||
156 | 57 | 396 | 396 | 47 | 46 | 47 | ||||||||||||||||||
120 | Ex gold | 43 | ||||||||||||||||||||||
104 | 24 | 25 | Ex Koniambo | 40 | Margin @ | |||||||||||||||||||
80 | 82 | $80/t Newc | ||||||||||||||||||||||
101 | 211 | 288 | 287 | |||||||||||||||||||||
10 | 27 | |||||||||||||||||||||||
23 | ||||||||||||||||||||||||
Ex Africa | -4 | |||||||||||||||||||||||
2018A | 2019 | 2020 | 2018A | 2019 | 2020 | 2018A | 2019 | 2020 | ||||||||||||||||
2018A | 2019 | 2020 | ||||||||||||||||||||||
H1 update | Guidance | H1 update | Guidance | H1 update | Guidance | H1 update | Guidance | |||||||||||||||||
2019 Investor Update
Capex update | 17 |
2020-2022 guidance - Industrial capex average of c.$5.0bn per annum
Sustaining capex
- Average $3.7bn
Expansionary capex
- Average $1.3bn
Average c.$0.2bn per annum uplift over December 2018 guidance
- Mainly change in footprint, reflecting the acquisition of Astron (oil refinery and related distribution)
- Impact of new leasing standard (IFRS 16)
- Some Tailings Storage Facility reinforcements to meet more conservative scenario probability thresholds
Capex outlook ($bn)
To allow better like for | ||||||||||
2019F | 5.0 | like comparison: | ||||||||
primarily Astron, some | ||||||||||
Sustaining | 4.6 | 0.4 | capitalisation of | |||||||
$3.7bn | previous operating | |||||||||
5.0 | leases and progression | |||||||||
of various mine project | ||||||||||
studies (eg. Polymet/El | ||||||||||
2020F | 4.9 | Pachon) | ||||||||
Sustaining | 5.1 | 0.4 | ||||||||
$4.0bn | ||||||||||
5.5 | ||||||||||
2021F | 4.4 | |||||||||
Sustaining | 4.7 | 0.3 | ||||||||
$3.7bn | ||||||||||
5.0 | ||||||||||
2022F | 2018 Guidance | |||||||||
2019 Guidance | ||||||||||
Sust. | 3.9 | 0.3 | ||||||||
$3.2bn |
4.2
Industrial Oil portfolio
- Deployment of capital into E&P (Chad, Cameroon, EG) and the recent acquisition of the Astron refinery is forecast to generate meaningful EBITDA in the coming years
- Basis $65/bbl, EBITDA generation is forecast to exceed $650M by 2022
Forecast Industrial Oil EBITDA ($M)
>650
153
2018A 2019F 2020F 2021F 2022F
2019 Investor Update
Marketing | 18 |
Guidance update
2019 Marketing Adjusted EBIT
- Tracking within our long-term range, including accounting for the previously reported negative H1 2019 non-cash cobalt mark-to-market impact
Long-term Marketing Adjusted EBIT
- Unchanged guidance range of $2.2 to $3.2bn
- Current market conditions suggest 2020 earnings towards the middle of the long-term range
Performance towards the top end of the long-term range requires the alignment of conditions for many/all commodities that reflect:
- Production/volume growth
- Tight/tightening physical market conditions
- Selective deployment of additional working capital
- Higher interest rates
Long-term Marketing Adjusted EBIT ($M)
3.5 | 3.2 | |||||||||||
3.0 | 2.8 | 2.8 | 2.9 | |||||||||
2.5 | 2.3 | 2.4 | 2.5 | |||||||||
2.1 | 2.4 | |||||||||||
1.9 | ||||||||||||
2.0 | ||||||||||||
1.5 | Long-term | |||||||||||
1.6 | guidance range: | |||||||||||
$2.2-$3.2bn | ||||||||||||
1.0 | ||||||||||||
0.5 | ||||||||||||
0.0 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019+ |
2019 Investor Update
2020 illustrative "spot" annualised cashflows | 19 |
Group | $bn |
Copper EBITDA | 3.6 |
Zinc EBITDA | 1.7 |
Nickel EBITDA | 0.7 |
Coal EBITDA | 3.1 |
Other Industrial EBITDA(1) | 0.4 |
Marketing EBITDA(2) | 2.9 |
Group EBITDA | 12.4 |
Cash Taxes, Interest + other | -2.7 |
Industrial Capex(3) | -5.3 |
Illustrative spot free cash flow(4) | 4.4 |
Ex-Africa | ||||||
Copper(5) | Guidance | Guidance | Zinc(7) | Guidance | ||
Total copper production (kt) | 1300 | 975 | Total zinc production (kt) | 1265 | ||
Cu from other depts (kt) | -110 | -110 | Zn from Cu department (kt) | -152 | ||
Net relevant production (kt) | 1190 | 865 | Payability deduction (kt) | -165 | ||
Realised Cu price - 96% LME (c/lb) | 256 | 256 | Net relevant production (kt) | 948 | ||
Full cash cost (c/lb) | -120 | -82 | Spot Zn price (c/lb) | 105 | ||
Margin (c/lb) | 136 | 174 | Cost guidance (c/lb) | -25 | ||
Margin ($/t) | 2999 | 3837 | Margin (c/lb) | 80 | ||
Spot annualised Adj. EBITDA ($M) | 3570 | 3320 | Margin ($/t) | 1773 | ||
Spot annualised Adj. EBITDA ($M) | 1680 | |||||
Coal(6) | Guidance | Nickel(8) | Guidance | |||
Total coal (Mt) | 135 | Production (kt) | 125 | |||
Relevant NEWC price ($/t) | 80 | Spot Ni price (c/lb) | 660 | |||
Portfolio mix adjustment @ December 2019 ($/t) | -10 | Cost guidance (c/lb) | -396 | |||
Thermal cost guidance ($/t) | -47 | Margin (c/lb) | 264 | |||
Margin ($/t) | 23 | Margin ($/t) | 5817 | |||
Spot annualised Adj. EBITDA ($M) | 3105 | Spot annualised Adj. EBITDA ($M) | 727 |
Notes: (1) Other industrial EBITDA includes Ferroalloys, Oil and Aluminium less c.$350M corporate SG&A. (2) Marketing Adjusted EBITDA of $2.9bn is calculated from the mid-point of the of the $2.2-$3.2bn EBIT guidance range plus $200M of Marketing D+A. (3) Net cash capex including JV capex in 2020E, but excluding c.$200M of capitalised leases compared to Slide 17. (4) Excludes working capital changes and distributions. (5) Copper spot annualised adjusted EBITDA calculated basis mid-point of 2020 production guidance Slide 6 adjusted for copper produced by other departments. Spot LME price as at 26 November 2019. Costs include by-products, TC/RCs, freight, royalties and a credit for custom metallurgical EBITDA. (6) Coal spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 6. Relevant forecast NEWC price of $80/t, as at end November 2019, less $10/t portfolio mix adjustment and mine costs of $47/t (Slide 16) giving a $23/t margin to be applied across overall forecast group mid-point of production guidance of 135Mt. (7) Zinc spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 6 adjusted for zinc produced by other departments less payability adjustment. Spot LME price as at 26 November 2019. Cost includes credit for by-products and custom metallurgical EBITDA. (8) Nickel spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 6. Spot LME price as at 26 November 2019.
2019 Investor Update
Capital allocation | 20 |
Balancing shareholder returns, capital structure and growth
2019 distributions and buybacks total $4.7bn:
- $2.7bn base distribution (20 ¢/share), basis 2018 cash flows
- $2.0bn share buyback program
2020 distribution in respect of 2019 cash flows
- Minimum: $1bn from marketing cash flows + 25% of industrial free cash flows
- Seek to match 2019's base distribution of 20 ¢/share (c.$2.6bn at current relevant share count)
2020 equity cash flows will be prioritised for:
- Net debt- maintain $10-$16bn(1) guidance range. Targeting reduction in Net debt to Adj. EBITDA towards 1x over the next 12 months (1.24x at 30 June)
- Buybacks- accounting for above, as and when surplus free cash flow generation allows
Non-core asset disposals
- Reiterate target of at least $1bn from non-corelong-term asset monetisations during 2019/2020 (c.$0.3bn completed to date)
Shareholder Capital
returns structure
Growth
2019 Investor Update | Notes: (1) Excluding Marketing related finance lease liabilities in respect of previously classified operating leases required to be capitalised under the new IFRS leasing standard, effective 1 |
January 2019. Such amount was c.$0.6bn as at 31 October 2019, representing primarily chartered vessels and various storage facilities, where the majority of such commitments expire | |
within 2 years. |
Well positioned
Ivan Glasenberg - Chief Executive Officer
2019 Investor Update
Well positioned | 22 |
Despite weaker 2019 demand, base metals are fundamentally in good shape
Markets are tightly balanced …
Supply demand balance, as % of demand(1)
10%
Surplus
5%
… and heavily destocked
Global visible inventory, days consumption(2)
30 | Copper | 10 days' |
consumption
20
10
0
60 | Zinc | ||||||||||
0% | 40 | 3 days' | |||||||||
consumption | |||||||||||
20 | |||||||||||
-5% | 0 | ||||||||||
Deficit | 90 | Nickel | 15 days' | ||||||||
60 | consumption | ||||||||||
-10% | 30 | ||||||||||
1995 | 1999 | 2003 | 2007 | 2011 | 2015 | 2019F | |||||
0 | |||||||||||
Copper | Zinc | Nickel | Q1 1995 | Q1 2001 | Q1 2007 | Q1 2013 | Q1 2019 |
2019 Investor Update | Notes: (1) Wood Mackenzie Q3 2019 Long-Term outlook for zinc. Wood Mackenzie Q3 Long-Term outlook for copper. Wood Mackenzie Q2 2013 Long-Term outlook for nickel |
for 1995-2007 estimates, Glencore estimates for 2008-2019F. (2) Visible inventories comprise various sources including LME, SHFE, and Comex. Wood Mackenzie has | |
estimated Chinese bonded warehouse stock, included for copper. |
Well positioned | 23 |
Key future growth trends …
Urbanisation and rising living standards:
2bn increase in global population by 2050 (1)
Benefits all commodities across the spectrum, from basic infrastructure through to discretionary consumer goods
Thermal coal competing with renewables in new energy supply. Coal expected to remain competitive in its current key Asian demand region
Electrification
of Mobility:
Up to 580M EVs on the road by 2040 (2)
Material new source of commodity demand, considerably benefiting nickel, cobalt and copper
Thermal coal provides significant current baseload generation as well as being part of the planned energy growth mix in Asia. LT outlook driven by pace of decarbonisation
Decarbonisation of energy:
+1,000GW of wind power by 2029 (3)
Requires redesign of traditional energy systems to run on renewables. Benefits copper, nickel, cobalt and vanadium through battery systems and related biomass/wind/solar grid infrastructure
Thermal coal with CCS has a critical role to play in the successful transition to a low carbon economy(4)
2019 Investor Update | Notes(1) United Nations Population Division, World Population Prospects: The 2019 Highlights, medium-variant projection. (2) BNEF Long-Term Electric Vehicle outlook |
2019. (3) Copper and the Green economy - Thoughts from our decarbonisation conference, Bernstein, 30 September 2019. (4) Imperial College London, CIAB study, | |
October 2019. |
Well positioned | 24 |
… are major new sources of demand
Decarbonisation requires a lot of copper
Additional cumulative Cu demand needed(1)
Current Government policies to reduce CO2 emissions by 2030 will require an additional cumulative 22Mt of copper by 2030(1)
2018 Refined copper supply: c.23.5Mt(2)
Electrification of mobility requires nickel and cobalt
Nickel demand in electric vehicles (kt Ni)(3)
+330kt of new EV nickel demand by 2025
2018 nickel market: 2.4Mt
2019F2025F
22
Copper supply needs to grow 3.6% every year between now and 2030 to meet modelled government targets(1):
2000-2018 annual average copper supply growth: 2.6%(2)
Cobalt demand in electric vehicles (kt Co)(3)
+73kt of new EV cobalt demand by 2025
2018 cobalt market: 120kt
2019F2025F
2019 Investor Update | Notes: (1) Bernstein, Metals & Mining: Copper and the Green economy - Thoughts from our decarbonisation conference, European Commission Joined Research Centre |
EDGAR, International Energy Agency (IEA), US Department of Energy, "Government Targets 2030" gradual reduction in emissions - Mid level scenario. (2) Wood Mackenzie, | |
Q3 2019 Long-Term copper outlook. (3) Glencore estimates, B3, based on 11.5Mt new passenger EV sales by 2025, ca. 10% penetration rate. |
Well positioned | 25 |
Energy demand fundamentals also support an ongoing role for coal, primarily in Asia
As the global population expands and living standards improve, more energy is needed
• New coal fired generating capacity build in Asia/Middle |
East expected to add c.160 million tonnes of coal demand |
by 2030(1) |
• In Asia, coal based power generation is forecast to remain |
the lowest cost source of baseload power into the |
mid-2030s(2) |
Structural deficits emerging
Seaborne thermal coal supply demand balance (Mt)(1)
1,200
Demand Range
1,000
• New Asian generating capacity offsets European declines |
Supply increasingly at risk
- Development approval delays and shrinking financing options likely to limit planned future supply
- Indonesian seaborne supply (c.42% of seaborne supply in 2018) is expected to reduce as domestic coal generating capacity expands
- Accelerating depletion of the seaborne coal reserve base
Growing risk of failure to meet energy needs and compromised economic growth
800
600
400
200
New build generating capacity(1)
Region | Volume (Mt) |
North Asia | +20 |
South-East Asia | +55 |
Sub-continent | +55 |
Middle East | +30 |
Supply
risk
Planned
supply
Supply with no
reinvestment
0 | |||||
2010 | 2015 | 2020F | 2025F | 2030F | 2035F |
2019 Investor Update | Notes: (1) Glencore analysis - net global demand growth c.90Mt (2) Coal vs renewables with battery firming, NPS+Carbon Tracker - The Trillion dollar energy windfall |
Our 2020 priorities
2019 Investor Update
Our 2020 priorities | 27 |
Health & safety
Ramp-up / | Operating | Strong | ||
efficiency & | Management | Confidence | ||
development | balance | |||
Capital | ||||
assets | sheet | |||
discipline | ||||
- Deliver a step- change in safety performance
- Implementation of the Glencore Fatality Reduction Program
• | Deliver Katanga | • | Deliver |
2020 guidance of | budgeted | ||
270ktpy Cu and | operational | ||
29ktpy Co | volumes at/near | ||
• | Mopani smelter | first quartile | |
costs/margins | |||
restart early 2020 | |||
• | Maximise free | ||
• | Successful | ||
cash flow | |||
commissioning of | |||
generation | |||
the new Katanga | |||
• | Focus on | ||
Acid plant | |||
through H1 2020 | portfolio NPV | ||
• | Koniambo | per share | |
operational | |||
stability |
• | Commitment to | • Transition to | • | Stability and |
strong BBB/Baa | new generation | consistency of | ||
Investment | of leadership | operational and | ||
Grade | financial | |||
• | Targeting | performance | ||
reduction in | • | Return excess | ||
ND/Adj. EBITDA | capital to | |||
towards 1x over | shareholders | |||
next 12 months | • | Be disciplined | ||
• | Buybacks as and | |||
within our capital | ||||
when surplus free | allocation | |||
cash flow allows | framework |
2019 Investor Update
Appendix
2019 Investor Update
Buyback update | 29 |
Shares eligible for distribution
$2bn buy back - c.$90M remaining
- 566 million shares purchased since 22 February 2019
- 1.071 billion shares purchased since buybacks commenced in July 2018
- Current $2bn buyback program to run to year end
Shares eligible for distribution as at 26 November 2019 (thousand shares):
Issued share capital | 14,586,200 |
Less Treasury shares (@ 26 Nov 2019) | 1,227,808 |
Less Trust shares(2) | 129,993 |
Shares eligible for distributions | 13,228,399 |
Shares eligible for distribution (million shares)
Issued share capital | ||
14300 | H1 18: 14,254 | |
Shares eligible for | ||
distribution - issued share | ||
capital less treasury and | FY 18: 13,832 | |
13800 | trust shares | |
30 June 2019: 13,550 | ||
13300 | ||
FY 19F: 13,201 (1) | ||
H1 15: 12,937 | ||
12800 | ||
FY14 H115 FY15 H116 FY16 H117 FY17 H118 FY18 H119 FY'19 |
2019 Investor Update | Source: Glencore, as of 26 November 2019. (1) Assumes $2bn buyback completed by year-end at an average GBP2.50 share price and 1.287 GBP/USD. (2) Refer Note 15, 2019 Half-Year Results. |
Page 46 |
Listed entity market valuations and selection of other entities | 30 |
Listed entities | % owned | Market value $M |
Russneft | 25.0% | 638 |
EN+ | 10.6% | 625 |
Volcan | 23.3%(1) | 398 |
Rosneft | 0.6% | 428 |
Century | 47.4% | 297 |
Yancoal | 6.8% | 181 |
Other(2) | Various | 216 |
Total | 2784 |
Selection of other entities
US oil infrastructure
BaseCore (50% owned royalty company)
2019 Investor Update | Notes: Market values as at 26 November 2019. (1) Economic interest based on aggregate market cap derived from both share classes. (2) Other includes Trevali Mining, Recyclex, Oz |
Minerals, Paranapanema and Merafe |
2020 key EBITDA sensitivities | 31 |
Approximate estimated impact on FY2020 EBITDA of a 10% change: | $M | ||
Copper price | 740 | ||
Australian export thermal coal price | 350 | ||
Australian hard coking coal price | 115 | ||
Zinc price | 270 | ||
Cobalt price | 90 | ||
Nickel | 180 | ||
AUD vs USD | 520 | ||
ZAR vs USD | 145 | ||
CAD vs USD | 160 | ||
CLP vs USD | 55 | ||
2019 Investor Update
Technology solutions for our industry | 32 |
Glencore has been leading industry technology for decades: Primus, CTSCo, Onaping Depth electric mine
GLENCORE TECHNOLOGY
- Global leader in metals and minerals processing technology for more than 30 years
- Supplies services/technology to 22 of the 26 ICMM members
- IsaMill - Grinding/Ultrafine grinding: 129 installations across 21 countries
- IsaKidd - Copper refining: produces >11 million tpy of copper from more than 100 licences (c.47% of global copper supply)
- Jameson Cell - Flotation: 350 installations across 30 countries
- IsaSmelt - Lead and copper smelting: more than 9 million tpy of copper containing materials smelted with IsaSmelt
- Albion Process - Oxidative leaching of base/precious metal sulphide concentrates
- Team of world-class metallurgists, engineers, geoscientists, technicans and technologists with real world experience in process development/optimisation, asset integrity management and mine/process automation
- Supplies services to 38 clients across the world's major mining districts
2019 Investor Update | Source:www.glencoretechnology.com,www.xps.ca |
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Glencore plc published this content on 03 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 December 2019 14:02:03 UTC