Glencore said it planned to raise up to $2.5 billion in a shares sale and suspended dividend payments until further notice in an attempt to cut its debt by $10.2 billion by the end of next year.
Production has also been suspended at mines in Zambia and the Democratic Republic of Congo, Glencore also said, as the company reels from what it has previously described as the worst commodities market since the financial crash of 2008-2009.
A slowdown in China, the world's top commodities consumer, has reverberated around the globe, with major producers, including Brazil and Canada, falling into recession.
Concerns over prolonged stalled growth in China have slashed iron ore prices by roughly a half, as coal, copper and other commodities have fallen by 20-40 percent.
Glencore last week saw its largest decline on the London stock exchange since it went public in 2011, and the company has lost more than half of its market value this year.
In a joint statement, Glencore's CEO Ivan Glasenberg and Steven Kalmin sought to underscore the company's “strong liquidity” and other solid indicators, insisting they “remain very positive on the long-term outlook” of the business.
But, they said, the need to stabilise the company's balance sheet became necessary amid concern from stakeholders “around the sustainability of our leverage.”
The company last month reported a $676 million dollar first half loss, compared with the same period in 2014, as well as an impairment to its recently acquired oil operation in Chad.
Glencore shares were up 7.59 percent at 132.50 pence in mid-morning trading in London.
FINANCE
Swiss mining firm faces multi-billion-dollar debt
Swiss mining giant Glencore, hit by a collapse in commodities prices, announced on Monday a series of extraordinary measures to eliminate roughly a third of its $30 billion dollar (27 billion euros) net debt.
COVID-19
Court turns down AfD-led challenge to Germany’s spending in pandemic
The German Constitutional Court rejected challenges Tuesday to Berlin's participation in the European Union's coronavirus recovery fund, but expressed some reservations about the massive package.
Germany last year ratified the €750-billion ($790-billion) fund, which offers loans and grants to EU countries hit hardest by the pandemic.
The court in Karlsruhe ruled on two challenges, one submitted by a former founder of the far-right AfD party, and the other by a businessman.
They argued the fund could ultimately lead to Germany, Europe’s biggest economy, having to take on the debts of other EU member states on a permanent basis.
But the Constitutional Court judges ruled the EU measure does not violate Germany’s Basic Law, which forbids the government from sharing other countries’ debts.
READ ALSO: Germany plans return to debt-limit rules in 2023
The judgement noted the government had stressed that the plan was “intended to be a one-time instrument in reaction to an unprecedented crisis”.
It also noted that the German parliament retains “sufficient influence in the decision-making process as to how the funds provided will be used”.
The judges, who ruled six to one against the challenges, did however express some reservations.
They questioned whether paying out such a large amount over the planned period – until 2026 – could really be considered “an exceptional measure” to fight the pandemic.
At least 37 percent of the funds are aimed at achieving climate targets, the judges said, noting it was hard to see a link between combating global warming and the pandemic.
READ ALSO: Germany to fast-track disputed €200 billion energy fund
They also warned against any permanent mechanism that could lead to EU members taking on joint liability over the long term.
Berenberg Bank economist Holger Schmieding said the ruling had “raised serious doubts whether the joint issuance to finance the fund is in line with” EU treaties.
“The German court — once again — emphasised German limits for EU fiscal integration,” he said.
The court had already thrown out a legal challenge, in April 2021, that had initially stopped Berlin from ratifying the financial package.
Along with French President Emmanuel Macron, then chancellor Angela Merkel sketched out the fund in 2020, which eventually was agreed by the EU’s 27 members in December.
The first funds were disbursed in summer 2021, with the most given to Italy and Spain, both hit hard by the pandemic.
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