Marc Elliott, the mining analyst whose bearish note sent Glencore shares crashing almost 30% in a day, is slowing changing his mind.
Investec’s Elliott said in September he feared shareholders in Glencore, a commodity trading and mining giant, could be completely wiped out because of low metal prices. Glencore has a huge debt pile of at least $ 30 billion (£19.8 billion) and paying interest and principle on this gets tougher as metal prices fall.
Since Elliott’s initial note, Glencore’s share price has rebounded spectacularly as it takes measures to boost metal prices, raise cash, and pay down debt.
On Thursday Deutsche Bank became the first major bank to upgrade Glencore since the share price crash and on Friday Elliott and his team put out a note showing his frosty view of the company is beginning to thaw.
Investec are keeping a sell recommendation but have upped their target price to 95p. The current price is 126p.
We are impressed with the terms secured on the streaming deal with Silver Wheaton due to current market conditions, but retain our cautious stance given our concern that if commodity prices remain unchanged (or worsen) a year hence, further action beyond current plans may be required to bolster the balance sheet.
Glencore is hosting an investor call on December 10 and Elliott says he will update the forecasts more fully after that.
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