The market response was very positive two trading days after Glencore PLC (GLEN.L, Financial) notified its shareholders of its results on first-quarter 2018 production.
The market prized the stock in the copper and base metals mining company with a 0.2% premium on Thursday’s price level to around $4.90 per ordinary share. On Monday, the London Stock Exchange was closed because of a bank holiday. For the 52-weeks through May 4, the stock has gained 24.12%.
Glencore is, however, trading cheaply since the share price is below the 200, 100 and 50-SMA lines. The current market capitalization of 14.3 billion shares outstanding is approximately $70 billion. Per share, it is slightly above the 52-week range. The 52-week range is about $3.73 to $5.66 per share.
Let’s see some figures on production for the first quarter of fiscal 2018.
Reflecting the commission of the ore leach project’s phase 1 at Katanga in the Democratic Republic of Congo, the production of copper was 345,400 tonnes in the first quarter of 2018. That was a 6.6% growth from the analogous quarter of fiscal 2017.
The sale of Rosh Pinah in Namibia and Perkoa in Burkina Faso, which were completed in August 2017, sent zinc production down 13% from the comparable leve of 2017 to 242,700 tonnes. This production of zinc was extracted by Glencore from its own resources.
In the first quarter, the production of nickel from Glencore’s own sources increased by 21% on a year-over-year basis to 30,100 tonnes. The higher production of nickel was a result of the ongoing stabilization of the processing plant and its ramp-up at Koniambo in New Caledonia. With their solid performances, Murrin in Australia and INO in Canada also helped the miner to deliver an increased level of nickel output.
Glencore's challenge wiith a furnace triggered a 7% decrease year-over-year in the first quarter related to attributable production of ferrochrome to 409,000 tonnes.
The production of coal at 30.7 million tonnes was in-line with the prior-year quarter. The production of coal from the Australian thermal portfolio was stronger in the first quarter of 2018 because in the comparable of 2017 operations were affected by adverse weather conditions.
The entitlement interest in the production of oil declined 15% to 1,156,000 barrels. Compared to the same quarter of 2017, the company produced 209,000 fewer barrels of oil. However, it was on par with the production for the last quarter of 2017. That was because rising production in the Republic of Chad provided a counterbalance. In Chad, Glencore started the drilling campaign in the second half of fiscal 2017.
In addition, Glencore anticipates earnings before interest to fall in the $2.7 billion to $3.2 billion range. Glencore has a price-book (P/B) ratio of 103.21 times and an enterprise-to-earnings before interest, taxes, deprecation and amortization ratio of 6.8 times. The industry averages 2.06 and 9.90 times for the two ratios.
Glencore has a recommendation rating of 2 out of 5.
In April, 26 analysts were surveyed on the copper miner. A total of 17 say is a 'buy.' A total of eight analysts believe the stock is 'hold." And one analyst believes the stock will underperform. The average target price is nearly $6 per share.
(Disclosure: I have no positions in any security mentioned in this article.)
