Miner and commodities trader Glencore (LON: GLEN) has deferred making a decision on whether to go ahead with the proposed 2020 cash distribution as risks associated to a global recession and massive demand shock looms.
The Swiss-based company had announced plans to reward
investors with $2.6 billion in cash distribution this year, or $0.20 per share.
Instead, it said it was taking “prudent” action to protect and strengthen its
capital structure amid the current period of heightened uncertainty.
Glencore warned that, while there were currently no risks of
material production disruption owing to the coronavirus pandemic, the
situation could rapidly change due to uncertainties.
The firm also extended its current credit facilities to
protect its capital structure and generate free cash flow.
Today’s announcement makes of Glencore the first major
diversified miner to take such a step in respect of capital returns. Others
such as BHP, Rio Tinto and Anglo American, have not commented on changes to
dividends or disruption to other kinds of capital return.
A decision on resuming the payout would be made later in the
year, Glencore said.
The news come at a difficult time for the company. It reported
in February its first annual net loss since 2015, as it had to take a $2.8
billion impairment charge to reflect the closure of its African copper business.
It also follows an audit overview of the firm’s 2019 annual report in with examiners found potentially “relevant facts” that may help authorities progress on the multiple, but separate alleged corruption and bribery investigations targeting the Swiss company.
Last week, it halted a number of smaller mines due to
government restrictions to curb the spread of the coronavirus
While today’s announcement will be painful for investors, analysts
believe it reflects a situation that is not nearly as bad as 2015, when top
miners, particularly Glencore and Anglo American, were frantically trying to
pay down debt and their share prices nosedived.