Glencore is committed to mining in Africa despite its recent decision to mothball operations in Zambia and the DRC, according to chief executive Ivan Glasenberg.
Speaking at the FT Africa Summit, Glasenberg said that production had ceased at Katanga in the DRC and Mopani in Zambia, but that construction work at the mines would continue until a recovery in the price of copper.
“We have a lot of projects in Africa…The projects are still going ahead, still functioning. Where we did cut operations is where we are still building operations. We’re bringing costs down to make them competitive with the rest of world,” he said.
Glencore’s share price has been rocked in recent weeks by an international commodity slowdown prompted by continued weak Chinese demand.
The commodities giant’s shares have surged today amid press reports of possible takeover interest, while the firm is said to be in talks with sovereign wealth funds about a potential sale of a stake in its agricultural business.
“There’s no reason to keep digging stuff out of ground when you’re not making decent margins. There’s limited stuff in the ground and the commodity will not be there forever. Don’t create oversupply in market for no reason,” said Glasenberg.
Glasenberg said that Glencore’s strategy had found favour with the governments of Zambia and the DRC, who understood the need to retrench while prices continue to lag.
“During 18 months you are not reducing their reserves when government is getting no benefit out of it. Both countries understand what we’re doing, in the long term it’s better for them…They said they don’t want you producing copper if you’re not making money. Royalties are linked to commodity prices so royalties are reduced”.
Despite the bearish short-term outlook, Glasenberg expressed his confidence in the future fundamentals of copper.
“Eventually supply will tighten and it should have an effect on price. In the end the fundamentals will prevail,” he said.