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Glencore’s Big Loss Reflects Hard Times for Mining Companies

Glencore, the mining and energy giant whose fortunes over the last year have been hit particularly hard by the global price slump in raw materials, said on Tuesday that it lost $5 billion in 2015.

Buffeted by the same headwinds facing other mining and oil companies, Glencore was forced to reduce the book values of its oil fields in Chad, a nickel mine in New Caledonia and other facilities.

The company, based in Switzerland, had a $2.3 billion profit in 2014.

Because the company’s results reflect the economic slowdown in China and other countries that were once driving global growth, Glencore’s struggles underscore a broader industry challenge.

In recent weeks, other major mining companies including the London-based Rio Tinto, BHP Billiton of Australia and Vale of Brazil have reported sharply lower operating results and net losses after writing down the value of assets because of depressed prices.

Vale reported a staggering loss for 2015, $12.1 billion, on a combination of the diminishing value of its assets and a sharp decline in the Brazilian currency against the dollar.

“We are now well and truly advanced in one of the worst bear cycles the mining industry has ever seen,” said Paul Gait, an analyst in London at Bernstein Investment Research and Management.

Mining executives have been cheered by the recent modest rise in most commodity prices, including oil, after lows at the beginning of the year. But they remain on guard.

Ivan Glasenberg, Glencore’s chief executive, told analysts on Tuesday that it was sometimes preferable to leave minerals in the ground rather than to try to feed them into an oversupplied market.

Glencore differs from other mining companies in that, besides extracting raw materials, it also has large operations in trading and marketing oil, metals and other commodities. Though not a complete buffer, these businesses held up much better than the mines in last year’s difficult market.

Source: Mytims