Glencore could end share torpor with improved dividends

A DECISION in August by Glencore management to retain the group’s coal assets raises the possibility of much-improved cash dividends and cash generation, analysts say.That’s the central thesis for Glencore in 2025. The stock is down 16% over the last 12 months which looks overdone.The Swiss headquartered miner and minerals marketing firm bought Elk Valley Resources from Canada’s Teck Corp. last year, and intended to spin out its coal as it sought a green premium. By keeping the coal, however, the former policy of paying out excess cash returns once net debt is below $10bn.Deutsche Bank estimates net debt of between $6bn and $7bn. Keeping EVR, which produces metallurgical coal used in steelmaking will also help improve free cash flow yield from about 8% in 2024 to 12% this year. It’s not the 25% yield of 2022 but metal prices have retracted since that time.In terms of metal prices it’s worth pointing out again the entire market expects copper to appreciate, which Glencore mines. The case for coal is also improved. Peak coal demand of one billion tons was supposed to have been registered this year but some expect those levels to continue to 2030 as the adoption of green technologies slows.One other point worth mentioning is there’s rumours Glencore is looking to move its main listing. If it adopts New York instead of London, there’s the potential benefit of a broader shareholder base and improved liquidity.One risk to these expectations is that metal prices could disappoint this year. The market is heavily influenced by the rate of growth in China’s economy which recently benefited from stimulus measures.While China remains an unknown the election of Donald Trump to the US presidency raises all sorts of questions about the impact of tariff increases on world trade. Unsurprisingly, there are less hopes that the Federal Reserve rate cuts last year herald a far more doveish approach to monetary policy.If the world economy becomes an uncertain place it may create the platform for continued consolidation in minerals production.Glencore is an opportunistic predator which could present opportunities, however, it’s typically not a payer of deal premiums.Despite being linked with Anglo American’s metallurgical coal mines in Australia, Glencore was not present among the final shortlist, suggesting it will opt for cash to shareholders over expensive M&A everytime.However, the revelation earlier this month that it had held potential deal talks with Rio Tinto suggests the group’s executive are prepared to respond to the growing metals supply deficit in surprising ways.A version of this article first appeared in the Financial Mail.The post Glencore could end share torpor with improved dividends appeared first on Miningmx.Weiter zum vollständigen Artikel bei Mining.com Weiter zum vollständigen Artikel bei Mining.com