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Glencore: An Investment Overview of a Mining Giant (Continued from Prior Part) Leverage ratios
The metals and mining industry is capital-intensive by nature. Companies have to borrow money to invest in plants and new mines. As a result, it’s important for investors in mining companies (XME) to know how these companies manage their leverage ratios. It’s important to know the companies’ debt ratios when market conditions are as challenging as they are under current market conditions.
Glencore’s leverage ratios
Glencore had a net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of 2.7 in 1H15, as can be seen in the chart above. The ratio has risen from the previous year, as Glencore’s earnings have fallen on lower commodity (DBC) prices. However, the ratio is not high considering industry standards. Glencore’s net debt to EBITDA is much lower compared with that of other companies in this space, such as Freeport-McMoRan (FCX) and Teck Resources (TCK).
Incidentally, Freeport has raised $1 billion from at-the-market equity offering and announced plans to raise another $1 billion using the same route. The cash from these equity offerings could help Freeport become free cash flow positive in fiscal 2015.
Rio Tinto (RIO) has lower financial leverage ratios compared with Glencore. Both Rio Tinto and BHP Billiton (BHP) have maintained their dividends despite falling commodity prices.
Debt to equity
Glencore (GLNCY) had a total debt-to-equity ratio of 104.4% as of June 30, 2015. The ratio has been pretty steady over the last couple of years. Again, Glencore’s debt-to-equity ratio isn’t high considering industry standards.
There are concerns about Glencore’s ability to roll over its debt. To get a clear picture, we can look at the company’s upcoming debt maturities, which we’ll discuss in detail in the next part of this series.
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Vale Inco est une société de production minière de nickel et de cuivre basée au Bresil. Vale Inco est productrice de nickel, de cuivre, d'or, de palladium et de platine au Canada, et détient divers projets d'exploration au Bresil, au Canada, au Perou, en Australie, en Indonesie, en Nouvelle-Caledonie et en Turquie. Ses principaux projets en production sont MCCREEDY WEST MINE et VICTORIA - INCO au Canada et ses principaux projets en exploration sont EAGLE CREEK, MEL PROJECT, B20, SHEBANDOWAN - BAND-ORE et GARSON MINE au Canada et BIG FOUR HERON - GOONGARRIE, GOONGARRIE HILL - GOONGARRIE, GOONGARRIE SOUTH - GOONGARRIE, HIGHWAY - GOONGARRIE, SCOTIA - GOONGARRIE, BORDER DOWNS et TOBY PROPERTY en Australie. |