FROM scrap dealers in the rich world to wild-cat miners in Africa, the ripple effects of slowing demand for metals in China are being felt far and wide. But few have been hit as hard as Glencore, a debt-laden Anglo-Swiss miner and trader. On September 28th its shares fell by almost a third, despite the firm’s attempt to buttress its balance-sheet a few weeks earlier by raising $2.5 billion of equity and suspending the dividend. Shares of Anglo-American, a London-based mining firm more exposed to platinum than copper, also took a beating. Glencore’s shares have fallen to a sixth their level at its listing in 2011. There is even talk of taking the firm private again—although financing such a step would be tricky.
The trigger was a note from Investec, an investment firm, speculating that if weak prices persist, their earnings would be consumed by debt repayments and servicing, eventually wiping out the value of their share capital. It noted that the biggest global miners, Rio Tinto and BHP Billiton, though less indebted, were also likely to see rising debt ratios if prices remained low, which might require dividend suspensions and asset...Continue reading