LONDON: Glencore cut its 2020 capital expenditure and output targets on Thursday to reflect the impact of the coronavirus on its operations, saying the belt-tightening left it well placed to weather the pandemic.
The miner and trader, reporting first-quarter production data, said spending for the year would fall by $1 billion-$1.5 billion from an original expectation of $5.5 billion.
Government restrictions to curb the spread of COVID-19 forced miners including Glencore to shut some operations while the industry also lowered spending.
Glencore and its peers have strengthened their balance sheets since the commodities crash of 2015-16 by paying down debt, cutting costs and holding back on expensive transactions.
“Given our strong liquidity position and resilient business model, we are well positioned to navigate the current challenges,” CEO Ivan Glasenberg said.
Glencore closed some operations in Chad, Peru, Colombia, South Africa and Canada, but most of its larger operations have been unscathed by the disruptions. It said it was re-opening some mines in Canada and South Africa.
Other miners including Antofagasta, Anglo American and Freeport-McMoRan have also cut capital expenditure due to the new coronavirus, while Rio Tinto cut its forecast for annual copper output.
Glencore said copper production in its first quarter to March 31 fell 9 percent to 293,000 tons year on year, while cobalt output slid by 44 percent to 6,100 tons as it shut its Mutanda mine in Congo and its Zambia mine was closed.
The reduction in spending reflects lower production, deferrals and lower costs due to weaker local currencies, a slump in oil prices and higher prices for gold.
Costs are expected to be down across the business, with copper lowered by 12 percent, zinc by
39 percent and coal by 6 percent.
In March, it deferred a decision on paying its $2.6 billion dividend, citing worsening economic conditions brought on by the coronavirus.
Analysts at UBS said Glencore’s lower cost, production and capital expenditure targets implied a higher free cash flow yield, and the miner’s “robust” balance sheet positioned it well for recovery.