Our opinion on the current state of GLENCORE(GLN)Glencore, one of the world's largest global diversified natural resource companies, manages over 150 mining, metallurgical, oil production, and agricultural facilities across more than 50 countries. The company's extensive global presence and diverse commodity portfolio make it less volatile compared to more specialized mining houses. Since the commodity cycle uptick in early 2016, Glencore has particularly benefited from owning significant cobalt resources in the Democratic Republic of Congo (DRC), crucial for electric vehicle batteries. However, the DRC government's move to classify cobalt as a "strategic mineral" could lead to higher taxes.
Glencore has also been proactive in shareholder returns, initiating a $2 billion buyback of its shares. A strategic move saw Glencore acquiring Anglo American's 33% stake in the Colombian Correjon colliery for $294 million on 28th June 2021, capitalizing on heightened coal prices amid the Ukraine conflict.
In a December 2022 investor update, the company announced plans to close half of its coal mines in Australia, South Africa, and Colombia as part of its strategy to reduce its carbon footprint. This decision reflects a significant shift towards more sustainable practices amidst global climate concerns.
Financially, Glencore's 2023 year-end results indicated a decline, with revenue down by 15% and earnings per share decreasing by 74%. The company reported an adjusted EBITDA of $17.1 billion and net income attributable to equity holders of $4.3 billion, evidencing robust earnings despite lower commodity prices affecting global energy trade flows.
For the first quarter of 2024, Glencore maintained its full-year production guidance, although there were declines in the production of key commodities like copper (down 2%), cobalt (down 37%), ferrochrome (down 26%), and coal (down 1%). Conversely, increases were noted in lead (up 11%), nickel (up 14%), and gold (up 7%).
Technically, Glencore's share price movement showed a "descending double top" pattern, a bearish signal where the second peak fails to rise above the first, noted in April 2024. This pattern, coupled with the failure to surpass the January 2023 high of R120, suggests potential challenges ahead. Nevertheless, the share could see further upside potential if it breaks above the R120 resistance level, contingent on broader commodity market trends and Glencore's operational efficiencies.
