RIO Rio Tinto Plc

By Alex MacDonald and Josie Cox 

LONDON-- Glencore PLC shares hit a new low Tuesday, reversing last week's gains as coal prices fell and investors became fretful about the company's debt-rescue plan.

Shares in the Swiss commodities trader and producer fell nearly 8% to an intraday low of 118 pence before paring back some of the losses to 123 pence by midafternoon European trade, still down more than 3%. The rest of the U.K. mining sector also fell, with the FTSE 350 mining index down 1.4% and other large miners such as Rio Tinto PLC and BHP Billiton PLC down 1.3% and 1.4% respectively.

Glencore's stock is the worst performer in the U.K.'s blue-chip FTSE 100 index so far this year. The company's shares have fallen nearly 60% since the beginning of the year and more than three quarters since its London share listing in 2011.

The reason: a continued collapse in a basket of commodities prices including copper and coal, two of its most important earnings drivers. The company has also been hit by growing uncertainty about the timing and structure of the proposed equity issue of up to $2.5 billion as it seeks to pay down debt and stave off a potential credit-rating downgrade.

Glencore announced last week $10 billion worth of measures aimed at cutting its net debt by a third to around $20 billion by the end of 2016. This helped boost the company's shares.

But with Glencore's share price continuing to fall, some analysts say the company may need to issue more shares to raise funds.

"The more the share price drops, the more dilutive [issuing new stock] becomes. They will have to issue more shares to achieve the same level of funding," said Carole Ferguson, an equity analyst at advisory firm SP Angel.

A Glencore spokesman declined to comment.

Glencore has also been troubled by some of its biggest bets not panning out. The commodities rout has raised new concerns about Chief Executive Ivan Glasenberg's decision to acquire Anglo-Swiss miner Xstrata PLC for $29.5 billion, taking Glencore away from its trading house roots.

The purchase catapulted Glencore into the mining big league, making it the world's largest thermal coal exporter and largest copper supplier. Since then prices for those two commodities, and several others, have fallen to multiyear lows due to weaker-than-expected demand from China, the world's largest consumer of those commodities, and excess supply.

Copper dropped to a more than six-year low last month.

The benchmark thermal coal prices in South Africa and the Netherlands were hovering at $51.95 a metric ton and $50.90 a ton respectively on Tuesday, a multiyear low since the onset of the financial crisis in 2008. A third benchmark thermal coal price in Australia was hovering at $57.65 a ton, down 6.9% this year.

A general malaise is affecting the entire mining sector, analysts say. There is an oversupply of materials like iron ore and copper, and demand from China appears to be slowing as the giant consuming nation experiences new economic difficulties.

"In the short term the [mining] sector will certainly remain volatile, and looking at the fundamentals it seems to us that further downside risk could emerge," said Viviane Ting, equity analyst at Amundi Asset Management in a note to clients on Tuesday. "It will take some time before new demand sources take over from the decelerating domestic demand trend from China."

In the longer term, however, she said she expects the sector to improve, because of increasing commodity demand from countries like India.

Write to Alex MacDonald at alex.macdonald@wsj.com and Josie Cox at josie.cox@wsj.com

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(END) Dow Jones Newswires

September 15, 2015 09:47 ET (13:47 GMT)

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