Concerns over Glencore’s $71 billion debt pile have wreaked havoc on the commodities multinational’s share price, and the wider global market, with ASX-listed miners feeling ripple effects on Tuesday.
Glencore, whose shares were worth more than 300 pence on the London Stock Exchange as recently as May 5, slumped 30% in just hours to as low as 66.7 pence on Monday, with growing concerns over the trader’s significant debt.
Market chatter earlier this week was that the debt, coupled with poor market conditions in Glencore’s key mining commodities, meant the company’s stock could very well be completely worthless.
The company saw a 20% bounceback in share price overnight, after it responded to the speculation with a brief statement.
“Glencore has taken proactive steps to position our company to withstand current commodity market conditions,” the company wrote from its headquarters in Baar, Switzerland.
“Our business remains operationally and financially robust – we have positive cash flow, good liquidity and absolutely no solvency issues.”
The company said it was progressing with plans announced earlier in September, to reduce its debt levels by up to US$10.2 billion through a range of measures.
Glencore boss Ivan Glasenberg early in September announced the debt restructuring, which he said followed “recent stakeholder engagement in response to market speculation around the sustainability of our leverage highlights the desire to strengthen and protect our balance sheet amid the current market uncertainty”.
The company reinforced the stability of its balance sheet this week.
“Glencore has no debt covenants and continues to retain strong lines of credit and secure access to funding thanks to long term relationships we have with the banks,” the company said on Tuesday.
“We remain focused on running efficient, low cost and safe operations and are confident the medium and long-term fundamentals of the commodities we produce and market remain strong into the future.”
Despite these assurances, Glencore was still hammered on the stock exchange in London, and ripple effects were felt in Sydney, where ASX-listed mining giants Rio Tinto and BHP Billiton both fell to multi-year lows.
Rio Tinto closed on Tuesday at $46.52 a share, its lowest closing price since July 10, 2013.
BHP Billiton closed on Tuesday at $21.61 a share, its lowest closing price since July 13, 2009, in the midst of the global financial crisis.