Glencore share price lifted by plans to slash zinc production by a third
Glencore announced this morning that it plans to cut zinc production by 500,000 tonnes each year.
The reduction, which will knock off around a third of the mining company's current zinc output, is taking place to counteract plummeting prices of the metal. Since May, zinc has lost around 30 per cent of its value.
Shares in the company rose when markets opened this morning, and are currently up 7.34 per cent at £1.30.
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Areas where mining will be scaled back are Australia, South America and Kazhakstan. The hope is the move will cause the commodity's price will rise.
The main reason for the reduction is 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 remains positive about the medium and long term outlook for zinc, lead and silver prices. This decision will ensure that our zinc operations are sustainable well into the future, providing jobs in the communities where we operate and returns to shareholders.
The company, which expects its fourth-quarter output to fall by 100,000 tonnes, also confirmed that the change will trigger job cuts across the affected operations, with talks due to begin with employees in the coming days.
Glencore has been hit hard by the commodities rout. Last month shares dropped to their lowest value since the company listed on the London Stock Exchange in 2011.
The economic slowdown in China has accelerated the decline in commodity prices, which were already being pushed down by an oversupply relative to demand.