Since then, however, investors have continued to de-rate the stock on the basis of what Glencore CFO, Steve Kalmin referred to during a conference call following the announcement as ‘Doomsday, what if scenarios’ and, as a result, the firm decided to remove any uncertainty from the equation by ensuring its balance sheet is bullet proof.”
On the same call, Glasenberg added that it might be that down the line it becomes clear that the measures taken were “too much” but then they can always be reversed and the dividend reinstated.
Indeed, when asked, hypothetically, if the firm’s share price hadn’t been hit so hard by stakeholders prioritising the balance sheet strength it would have felt the need to make these cuts, Glasenberg said, no, that the firm stands by the view expressed at its interim statement.
There is no doubt that any production cuts will be welcomed by the broader market, which could explain why Antofagasta, which is heavily exposed to copper, rose by around the same amount as Glencore. But, at present, markets continue to remain keen to see proof of this particular pudding before further piling in.
As Liberum mining analyst, Ben Davis told Portfolio Adviser: ““What Glencore has done today will be enough for spot market conditions. But, the concern is what happens if prices continue to fall from here.” Which he says, is perhaps not quite the doomsday-like scenario that Kalmin believes it to be.
And, he added: “We do not expect to see commodity prices rise much from current levels over the course of the next 12 months and, we maintain that a good rule of thumb is that one shouldn’t be looking at mining stocks when commodities prices are falling.”
If that is the case, then today’s move upward could well be a flash in a pan at least until there is more certainty about where demand for the commodities is likely to come.
