Glencore slumps 25 pct as debt fears grow

Shares in commodity giant Glencore plunged 25% after analysts fear lower metal prices.

SWITZERLAND (FILE) (GLENCORE) – Glencore shares tumbled more than 25 percent to an all-time low on Monday on fears over the mining and trading company’s ability to withstand a prolonged fall in metals prices.

About 3.5 billion pounds ($5.33 billion) in market value was wiped off the firm, which is in the middle of a drive to sell assets and raise cash to help cut its $30 billion debt pile and protect its credit rating after a crunch in prices of its main products, copper and coal.

The fall spread to the broader UK mining sector, which has also felt the pain from an emerging-markets slowdown and a crash in commodities prices. The FTSE 350 mining index sank to its lowest level since Dec. 2008.

Traders cited a Investec note that raised doubts over Glencore’s valuation if spot metal prices did not improve. The note pointed to high debt levels and a need for deeper restructuring.

Glencore declined to comment.

Shares of Glencore were down 23 percent at 75.01 pence at 1028 GMT after falling as much as 27 percent to a record low of 70.66. The stock is down around 75 percent year-to-date.

Anglo American shares were down 7.9 percent.

The outlook for China’s economy was also a drag on markets, with forecasts pointing to a likely shrinking of the country’s giant factory sector for the second month in a row. Profits earned by Chinese industrial companies declined at the sharpest rate in four years in August, according to official data.

News that Glencore had sold a nickel project in Brazil to Horizonte Minerals for $8 million offered little respite, with Hobart Capital Markets’ Justin Haque saying the price was a fraction of what Glencore had spent.

Traders warned that the stock might might fall even further if more assets were put on the block.