Glencore has increased production of the metals used to make electric car batteries faster than its major mining rivals, according to an industry-wide analysis that shows the scale of a strategy that has big prospective risks and rewards.
The Anglo-Swiss company’s output of cobalt and copper roughly doubled in the five years to 2016, while its production of nickel quadrupled, the research compiled for Reuters by S&P Global Market Intelligence shows.
Electric vehicle metals account for roughly 50 percent of Glencore’s core profit, more than double the proportion of its major listed competitors – BHP , Rio Tinto and Anglo American.
The analysis, based on companies’ reports, supports Glencore’s assertion it is well positioned to capitalise on an anticipated surge in demand for electric cars in the coming decade.
However the drive also holds potential perils; most of the production has been added through acquisitions, and Glencore has racked up more debt than its competitors, according to S&P Global Market Intelligence.
It had $28.4 billion of net debt, compared with BHP’s $16.3 billion, Rio Tinto’s $8.1 billion and Anglo American’s 5.5 billion, found the study compiled in November.
Concerns about the size of Glencore’s debts at a time of falling commodity prices led to its share price crashing to an all-time low in 2015, its management pumping in more money themselves and implementing a debt-reduction plan.
The stock has since rebounded, driven by rising commodity prices and Glencore’s efforts to strengthen its balance sheet.
Glencore’s reliance on Democratic Republic of Congo for cobalt as well as copper presents another risk. The other majors avoid the country, which is plagued by pockets of lawlessness and conflict, political tumult, child labour and an opaque legal system.
Glencore’s willingness to operate in Congo has made it the leading global producer of cobalt among the major miners. It increased its cobalt output from 12,880 tonnes in 2011 to 28,300 last year, accounting for more than a quarter of the roughly 100,000 tonne global market, according to the analysis.
It also raised production of copper from 700,000 to 1.4 million tonnes, while its nickel output rose from 28,500 to 115,100 tonnes and zinc from 563,100 to 1.1 million tonnes.
Source: Reuters
