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Glencore Falls on 1st-Half Production Results

Shares of Glencore PLC (LSE:GLEN) were down 2.44% at around 2.6635 British pounds ($3.24) on Wednesday following the release of production results for the first six months of 2019.

While copper and nickel production was broadly in line with the Switzerland-based miner's expectations, the market was not happy with the declines from the prior-year period. Production of the red metal decreased 5% year over year to 663,000 tons and nickel fell 11% to 6,800 tons due to the depletion of Argentinian reserves, the divestment of the Chilean Punitaqui mine in 2018 and maintenance costs for Oceania assets.

The realization of a lower copper price of $5,754 than the London Market Exchange average of $6,167 per ton and a lower zinc price of $2,668 compared to the average of 2,732 per ton is also impinging on the stock's share price.

In contrast, higher output from assets in the Democratic Republic of the Congo and Colombia, together with improved performance of Australian operations, drove cobalt production up 28% to 21,300 tons, zinc production up 8% to 535,900 tons and coal production up 10% to 68.2 million tons. The acquisition of several mineral interests in Australia in 2018 also boosted coal production.

Attributable ferrochrome and oil were at 799,000 tons and 2.2 million barrels, flat year over year.

In addition, Glencore earned $12,500 from the sale of one ton of nickel versus the London Market Exchange average of $12,318.

"I am pleased to report a solid performance from our underlying base business, where our key assets in copper, coal, zinc and nickel performed largely in line with our expectations," CEO Ivan Glasenberg said. "However, our African copper business did not meet expected operational performance."

The miner, however, is planning multiple initiatives to improve operations in Africa.

"Our African copper assets retain significant potential and will play a key role in the transition to a low carbon economy," Glasenberg said.

Shares of Glencore have fallen about 21% over the past year through July 30 and are now trading significantly below the 200- and 100-day simple moving average lines and slightly below the 50-day simple moving average line. The closing price of 2.73 British pounds on Tuesday was below the midpoint of the 52-week range of 2.4975 pounds to 3.4360 pounds.

The market capitalization is 37.2 billion pounds. The stock has a price-book ratio of 1.03 versus the industry median of 1.45, a price-sales ratio of 0.21 versus the industry median of 1.03 and an enterprise value-Ebitda ratio of 5.02 versus the industry median of 8.57.

The company has a forward dividend yield of approximately 5.5% versus the industry median of 2.38%. Yields are as of July 30. The analyst recommendation rating is overweight and the average target price is 3.3359 pounds.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.