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Glencore Needs More

0809_Glencore

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What's going on?

On Wednesday, mining and commodities giant Glencore reported a 23% rise in profit for the first half of the year – but it wasn’t as great a rise as investors expected and its stock dropped, though it later recovered.

What does this mean?

Glencore’s been doing pretty well, considering. It had the best-ever start to a year on the back of a record 2017. And it managed to achieve this in spite of higher costs – it had to pay higher royalties on its copper and cobalt revenue – and mining by-products (that Glencore also sells) losing value (like cobalt, which has nearly halved in value since April).

Why should I care?

For markets: Glencore keeps swinging.


In July, Glencore was subject to corruption investigations, resulting in its stock falling 8%. The company hit back at its naysayers by pledging to buy back $1 billion of its own shares, taking advantage of their falling price (buying up its own stock should help boost its value by increasing demand and lowering supply since there’ll be fewer shares available to buy). Glencore’s earnings miss and the likelihood of higher costs to come could weigh on its stock price – not to mention that it hasn’t added to its buyback plans or increased its dividends as hoped (but its rivals have).



The bigger picture: Mining delivers.


Fellow miners Rio Tinto and Anglo American have also reported results in the last few weeks to the sound of applause. Rio Tinto’s on track to pay the largest half-year dividend in its history, while Anglo American Platinum – the company’s platinum mining business – reported a 350% increase in profit, keeping that dividend tap flowing.

Originally posted as part of the Finimize daily email.

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