Glencore sells off following investor update

• Glencore (OTCPK:GLCNF, OTCPK:GLNCY) delivered its annual investor update today, with the stock promptly selling off, even as the sector rallied on higher metals prices and a strong equity market.
• The only weak spot in production guidance came with the medium-term zinc outlook, where volume estimates were lowered when compared to last year's update and 2024+ volumes shown falling nearly 20% on mine closures.
• Sustaining capex stepped up by $500M per year on inflationary pressures from fuel, freight and currency, cutting free cash flow at spot commodity prices by ~5%.
• However, even with higher sustaining capex, Glencore indicates the company can generate $10.8B in free cash flow annually, at spot commodity prices (~23% of the current market cap).
• Of note, and following last months request from activist investor Bluebell Capital to divest the coal business, Glencore increased medium-term coal production guidance and affirmed the Company's strategy of winding down the coal assets slowly.
• Underperformance on the back of punchy cash flow guidance and a stable production profile likely stemming from lack of detail on the dividend and managements openness to inorganic growth now that net debt has fallen to the targeted $10B level.