Glencore surges 14% after breakfast call

There were no surprises in Glencore'sthird-quarter results last month, but a scheduled update at breakfast time Thursday was packed full of good news. And it needed to be, following the latest plunge in mining shares this week.

In an 8.30am conference call, the miner and metals trading company told analysts, investors and media that efforts to slash debt had gone better than expected, and how it was now prepared for even lower commodity prices.

Glencore shares, which had sunk from a 2013 float price of 530p to less than 68p in September, soared as much as 14% to 95p.

Management had planned to cut the out-of-control debt pile by $10.2 billion (£6.7 billion) to the low $20 billions by the end of 2016. But, having already achieved or locked in $8.7 billion, it's raised the target to $13 billion, and now believes net debt will be as low at $18-$19 billion in a year's time versus a predicted $25 billion at the end of this month.

Glencore is already trying to sell a minority stake in the agriculture business. A 40% interest could be worth a rumoured $3-$4 billion, and the whole business could be worth as much as $10 billion. If a sale cannot be agreed, Glencore’s finance director Steven Kalmin raised the prospect of an IPO.

More so-called "streaming" transactions - or forward sales - and offloading more copper mines will raise cash, too.

"We retain a high degree of flexibility and will continue to review the need to act further as required," said chief executive Ivan Glasenberg, suggesting that more can be done if needed.

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Capital expenditure (capex) will fall further, too, down to $5.7 billion for 2015 and $3.8 billion in 2016 versus $6 billion and $5 billion previously. Production cuts have also reduced overall supply and cash outlay.

Trading arm remains an earner

And Glencore's trading arm (or marketing), "remains a unique, low risk defensive earnings driver." Yes, commodity prices have plunged, but the unit should still make an adjusted operating profit of $2.5 billion, "underpinned by continued strength in oil and stronger contributions from Agriculture and Metals during the second half".

That's a tad less than previous guidance of $2.5-$2.6 billion and down from $2.8 billion in 2014. And management trim estimates for 2016 to $2.4-$2.7 billion, to reflect lower working capital levels and reduced copper, zinc, lead and coal production.

Group adjusted cash profit (earnings before interest, tax, depreciation and amortisation - EBITDA) for 2016 is estimated at about $7.7 billion at current prices. That's down from over $12.7 billion in 2014 - but still better than many analysts had expected.

Free cash flow at spot prices is put at over $2 billion, and Glencore is tipped to "remain comfortably free cash flow positive at materially lower price levels". And liquidity is expected to top $14 billion and keep rising as other debt reduction measures are implemented.

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