Glencore cutting zinc production by 500,000 tonnes
Mining giant Glencore announced on Friday that it plans on reducing zinc production by 500,000 tonnes.
A total of 1,540 jobs will be affected.
The move is in response to the plunge in commodity prices – over the past few months zinc prices have dropped 30 percent to five-year lows.
Glencore said that fourth quarter mine production will be reduced by 100,000 tonnes.
The FTSE 100 firm said in a statement that the cutbacks will affect its mining operations in Australia, South America and Kazakhstan.
The company said: “Glencore remains positive about the medium and long term outlook for zinc, lead and silver, however we are taking a proactive approach to manage our production in response to current prices.”
The company will suspend operations at Lady Loretta in Australia and Iscaycruz in Peru. It will also scale production at George Fisher and McArthur River in Australia and at a number of locations in Kazakhstan. It said that “these changes, although temporary, will unfortunately affect employees at our operations.”
The move is part of an effort to “preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources”.
Glencore’s share price has plummeted since it went public on the London market in 2011 at 530p.
The company has suffered because of the sharp decline in commodity prices. In addition, investors are growing concerned about its huge debt pile – of approximately $30 billion – which was created by the takeover of Xstrata. Last week analysts at Investec warned that declining metal prices will eventually “evaporate” the value of Glencore because of its heavy debts.
Zinc prices rallied 6% on the news and Glencore shares increased 6.5% in early Friday trading.