Glencore Plc Unsp/Adr

Good morning.

Thank you for attending the call. And as you will see from the slides, I'll start off on the first part of the presentation on the 2020 half-year scorecard. And as you will see, it's a strong performance under challenging conditions because of the COVID-19 situation. As you'll see, our business model, once again, has a resilient cash generation. Group adjusted EBITDA is $4.8 billion, which is down 13%, and this is basically in line with lower prices and some production issues around COVID-19 and the cost impacts thereof. This is offset by strong marketing performance, which we will talk about later. and cash generated from operating activities before working capital changes is $4.3 billion, which is down 20% from the first half of last year. Net capex cash flow is $1.7 billion, which is down 22% from the same period last year, and you will see the free cash flow is up 50%, up to $2 billion for the first half of this year. As I said, this is supported by record marketing results for the six months, and marketing EBIT is $2 billion, which is up 108% year-on-year, supported by favorable oil marketing conditions, which you are all aware, as experienced by a large number of our competitors in the oil business. A solid operational performance in this challenging environment, Most of our metals operated relatively normally, and metals and minerals EBITDA is $2.2 billion, which is down only 16% from the same period last year, and the mining margins are running relatively similar, around about 26% as opposed to 27% last year. Energy assets were disproportionately impacted, and that's naturally, we are aware of the lower coal prices, which we've experienced during the first half of this year, Well, various issues around consumers not importing as much in their countries because of the COVID effect on the industrial assets and the demand in those areas, mainly India and China, and that has affected the world seaborne coal price. So the energy products EBITDA is $0.7 billion, which is down 65%. The full year cost margins forecast in our key commodities, we've given a few of the numbers there. Once again, displays the strong performance of our industrial assets, where we are in the lowest quartile in most of these commodities. These assets, long-term, great assets, especially in copper, you'll see our cost of production around about $0.106. Per pounds, in $0.05, nickel $2.57, and thermal coal, even under the COVID time, where we had to cut a bit of production across the board, our costs are still $46.00. The balance sheet, Steve will talk more about that later and give the details, but the net debt is $19.7 billion. It's been temporarily affected with the increase slightly because of the oil department working capital reset, which Steve will talk in more detail later. The spot illustrated free cash flow generation at current spot prices. You will see we will generate an avatar of around $4.1 billion under the current spot environment. It could be a bit higher with recent increases in copper, gold, and silver prices, and our avatar at these levels for prices around about $10.5 billion for the year. As we said, we always will target net debt between $10 billion to $16 billion. We would like it down to $16 billion by the end of the year. At a preferred range, we should, with this type of generational cash flow, get to those levels by the end of the year. We have a large amount of available liquidity, $10.2 billion, and we only have maximum maturing bonds of $3 billion in any given year. Safety performance, we are working hard in this area, and our industrial teams are working hard to progressing with enhanced group-wide fatality reduction program, and we're seeking to have a major step change in our performance there. Year-to-date performance, we have had six fatalities, over five incidents at our various operations around the world, and this is an unacceptable level, and the team is working very hard to reduce this area with intervention programs across the board where it is required. If you turn to the next slide, talking about our commitment to the transition to a low-carbon economy, and as you will see, we are lining our business with a Paris-compliant pathway. And we're focusing on our scope three emissions. And as you will see, our diversified portfolio of metals and minerals is well positioned to support the transition to a lower carbon economy. We are proud of our capital investments. to align ourselves with this transition while maintaining strong operating standards. And as you will see, the expansion of their operations is mainly in the areas of low carbon energy, cobalt, nickel, copper, which is the future of this low carbon energy, and that's where our expansion projects will be. By aligning our capital investment decisions with the goals of the Paris Agreements, we project a reduction, as we said in our previous results presentation, from the December results, our scope 3 emissions will reduce by 30% by the year 2035, and this is primarily driven by depletion of our coal reserves as we move later on in our production levels, and therefore we should achieve the scope 3 reduction of 30%. In addition to consideration of emissions from our products, we continue to reduce our own operational footprint, both our Scope 1 and 2 targets, and we'll issue our targets at the end of this year in that area. But we have exceeded our current Scope 1 and 2 targets up to date. So that we are pleased to say on our Scope 3, we are moving to reduce that as we move forward and should be reduced by 30% by the year 2035. So with that, I hand over to Steve to talk about the detailed financial performance for the first half of the year.

Thank you, Ivan. We continue then the presentation on slide seven. And good morning to all those on the call. On page seven, just a scorecard across a variety of sort of financial metrics, all of which will have some more detailed slides as we move down the track. But EBITDA, $4.8 billion, as Ivan said, down from $5.6 billion. down 13%, relatively small percentage considering the backdrop that we experienced in H1, and that was as much as marketing increasing $1.1 billion, industrial $1.9, primarily due to lower prices, but now set up for a much stronger second half 2020, as well as an annualised performance, which will show some of the cash flow going forward. We'll provide the industrial bridges, as we normally do, Later on, as well as marketing comparisons, industrial 2.6, V4.5, very much commodity price, but we've had some cost and volume impacts, COVID-related, particularly in our metals business and coal business to some extent down in South America. Marketing, a half-yearly performance of 2 billion. We've noted the oil, stronger performance and conditions. There was also a more normalised metals performance where the base period largely non-cash cobalt mark-to-market adjustment that we realized in first half last year and that's obviously hasn't reoccurred as we wouldn't have expected to have occurred. Good cash flow generation pre-working capital, funds from operation actually up 5% and free cash flow in fact up 50% because of lower capex as well and now settled into sort of the $4 billion range in terms of capex which is also driving free cash flow through the business. And CapEx, as I said, $1.7 billion, tracking comfortably within, in fact, below the $4 billion annual guidance that we have at the moment. Net debt plus 12%. I'll talk a bit about that later on. Some slides and tracking towards the end of the year. Temporarily also higher due to the working capital reset, predominantly the oil business. The marketing leases also have increased $0.4 billion, reflecting some of the short-term nature of particularly tankage. and vessels supporting some carry trades, contango trades, particularly in the oil business. Those will all resolve themselves and roll out within a couple of years. And also some of the cash margin, initial margin required to hedge those particular transactions that increase, consumed 0.5 billion. We'll talk about that later on. So jumping then into page 8, this is the industrial, 2.6 billion. Comparison 20 against 21. It's worth noting that $2.6 billion for a half year price is in volume affected as well. We are annualizing at $7.5 billion to the industrial spot. So there's near tripling impact, particularly we're going to see in the metals and I'll talk about both price and volume impacts as we move forward. So that is going to be expected to be quite a big step change as we roll into H2 cash flows as well as out into 2021 as well. Where it impacted us, the metals and minerals has been the more stable contributor, just down 16%. Good cost performances and improved Katanga contribution. We spoke 12 months ago about the turnaround of some of the ramp-up development assets. Katanga has performed as we would have hoped and expected, at least operationally, and that's set up for continued cash flow generation going forward. And we'll see some of the price impact as we roll into the second half. Of course, the energy side was down from the 2.1 to 0.7. Coal being a big factor there, but also the oil business, fairly small. On the industrial side, good trading performance. If there's one negative from both the volatility and lower prices that we have seen is both on the upstream, the E&P, and also some of the demand-driven downstream impact through... refining and marketing in our South African business has been impacted by the low oil prices as well. So the waterfall on slide nine sheds more light on that pricing, has been pretty much the, and has been the dominant driver, 2.1 billion, spread 1.2 across energy, within energy 1 billion, 0.2 on the oil side, metals 832. It's important to note, and this is where I have highlighted and pausing just on how the momentum on the industrial metals business is going now into the second half, where all the prices, if we take spot prices today relative to the average realized or the average prices during the first half of 2002, there's material increases. And that's getting, as I said, on the industrial side, $2.6 billion in the first half on a sort of annualized spot basis, tracking about $7.5 billion. So copper price was $5.502 for the first half average. Again, spot today is 18% higher. Zinc for spot price today is 17% higher against first half average. Gold is 24% higher. Silver, the standout today, is 60% higher. at over $26, $27 a pound against $17 with significant producer of silver through byproducts. Oil is up 10%, coal broadly flat. Nickel is up about 16% against first off average and cobalt not so much the average but just on a spot basis since the end of June is up close to 20% in pricing both on the metal side and the hydroxide pay abilities which is what we're mostly exposed to out of our DOC operation. So very positive cash flow and earnings momentum going into the industrial metal side of the business as well. Volume impacts for us, 273 negative, mostly COVID-related, as we had suspensions either short-term or extended. Of course, the Antamina was pretty well chronicled during the period. It had lower zinc production period on period of 32%. That's now ramping back up. Columbian Coal was down 43%. Lockdowns and shutdowns was 42% lower on Ferrochrome, and some expected lower grades in Bukai, also in copper and gold as well. Cost side, you have the double whammy of both the COVID-related curtailments, both on cost as well as volumes. So we have additional shutdown costs mainly in South Africa across fair alloys, including high electricity prices, and Australia through Australia, Through both just the mine sequencing and also how we've managed supply, you've had some long wall and some strip pressure impacts through the first half of 2020 as well. FX clearly provided some relief primarily in Australia and South Africa. And you can see where we have separated as we've done in previous years. The X price, so the volume cost impacts of the African copper business has been a $423 million turnaround there, reflecting the positive EBITDA generation and turnaround particularly at Katanga. and the other is some SG&A. That's mostly timing. There was a bit more that got expensed into the first half given timing of when certain settlements of bonus accruals and calculations get finalised. This year we had more of it going into H1 so that again should be a positive timing difference as we roll into H2 and beyond. What we provided for the next four or five pages is just a one-page scorecard across the various businesses. So page 10, we've got copper performing very well in a cost perspective. You can see down at 109, full year down to 106, and even trending closer to $1 a pound as we go into 2021. You've got some African copper turnaround, so as we've said, further improvements. On a half-yearly basis, $1.3 billion of EBITDA, which... very consistent with Martin's modeling guidance. I know that he sort of gives you all, and we've sort of compared guidance against actuals, and it was bang on 1284, so that's pleasing on that front. If we do look, and we'll get to some of the spot cash flow generation around both cost, production, and current price on page 21 as we go forward, but on the spot basis, copper is around $4.1 billion. So compared to the first half, we've got a more than tripling of... EBITDA as we roll forward from the copper business, which is both copper but also the significant byproducts across gold and silver and cobalt that we have coming out of their business. It has increased its share of the overall EBITDA from 24% up to 20%. and decent both demand as well as primary supply losses in scrap and the likes that's keeping the market reasonably tight in terms of inventories and overall supply. If we go across to zinc, also we've got strong momentum. There's a lot of silver by-product in this business and gold and lead as well. 648 of EBITDA for the first half, which comes in well also against the guidance that we provide as well. But again, you've costs. We've got a near tripling of that EBITDA up to close to $2 billion if we look at that business on an annualized cash flow generation business or as well for H2 in that business and in fact we go into a negative cost structure post byproduct credits, gold and the like. So we're with $0.28 was the first half, four year gone, guidance $0.05. So clearly got a big negative As we go through that particular business, you've seen a lot of mine supply reduction, particularly in this area, including ourselves. We've calculated around 1 million tonnes, which has kept this market reasoning check and has more than offset initial supply growth that we're expecting in zinc. If we go across to nickel, we have alerted to some ramp-up timing factors over at Conneambo where we're running single-line operation for the balance of H2. And that was essentially the main factor in taking down guidance by 8,000 tonnes for the full year. But again, due to higher volume, we've got some recovery in both the Canadian and Australian business production second half. And due to higher price in nickel, you're still going to see EBITDA at first half a little over 200 million. On an annualised basis, you've got more than sort of two and a half times that, sort of more than doubling up to 539 as we look at. to see ConAbra, of course, getting its strides as the one asset today that operation is clearly lagging expectations. In terms of coal, this is the business that's been the most materially impacted by lower prices and sort of demand supply is trying to rebalance. We're trying to do our part, but clearly China and Indian lockdowns has had an impact across pricing and some of the European competitive energy markets. energy landscape. Cost structure has been stable at 46, 46, 46 against guidance and the like. But realizations and pricing both in Asia and the European market has seen us come in at 869 EBITDA against 2.1 billion in the prior period. As we said, we have taken full year production guidance low 18 million tonnes in last week's production guidance. That's with extended care and maintenance and also taking out tonnage out of various Australian operations also to rebalance It's not going to take too much to see that market hopefully find its floor and potentially move up at some point. If we look then at marketing on page 14, it's nice to see the big bar on the graph at $2 billion. So you've got it up and you're doubling up at 108%. So the metals and minerals side, it really belies the increase. $7.85 is a more normalized performance anyway. Last year, had we excluded the $3.50, we'd be up $88 million, but that's still a strong performance across metals. The energy side is where we've clearly seen the big increase, 92% from Allian Oil with exceptional market conditions, dislocation structure. and the ability to go and see some contango and carry structures, which we have loaded up quite materially in that particular area. So we are now guiding to the top end of that particular range of marketing. Also worth highlighting the strong agricultural performance. It does sometimes get crowded out within our overall business, but we've gone from pretty much zero. This is our share of their net income, ever done, appreciation, interest, and the likes at 50%. That was $118 million for the half-year period, which is a very strong underlying performance from that business. It's continued for the second half, and so augurs well also for the sort of valuation and the general monetization of that business to start materializing. If we move into page 15 on the CapEx side, it's trying to hold one's hands through the leases, the cash CapEx and the different effects, but we're around $1.7 billion across the business net cash on CapEx. You can see the industrial CapEx at $1.777. Marketing CapEx is But that's all, if you like, non-cash capitalized capitalization of vessels, tankage, supporting the carry trades. And from both the balance sheet and cash flow perspective, that all works its way out of the system within a couple of years. I think that was potentially one of the unintended consequences out of those new IFRS 16 standards. We're clearly not the owners or we're short-term renters of that and it does work its way out of the system relatively quickly as well. So 1.7, we've revised down the... Full year CapEx guidance, we were four to four and a half was the last update back in April, was the range we're now going to be, where it's comfortable to be by the end of that range at four billion. Tracking at 1.7, we'll obviously come back to you all in end of November, early December, with an eye on CapEx for 2021 and 22. The last update towards the end of last year or February this year was around five billion. I would think that none of the reductions this year is going to impact where we finish up. At least we should be able to have CapEx well contained within that $5 billion. Notwithstanding, there are some deferrals, but some of the longer-term care and maintenance factors around places in Chad, Conecum or Piney has taken out longer layers of capital out in some of the projections that will only ever come back with some incremental cash flows and EBITDA if those volume growth was to was to materialize as well. So that's on the capex side, the last two slides in terms of balance sheet. As I said, net debt temporarily higher just mathematically. We're tracking $2.8 million above our target range of the 16 cap and that's just 19.7 where we're at 0.9 of the marketing leases that we take out for the reasons that I've just mentioned. That's the 16, so that's the 2.8. That has been – and we'll see there's been strong free cash flow generation at an operating level. It's all been consumed in some net working capital which has taken us up to the 19-7. That's all been through the working capital reset in the oil business through the significantly low oil prices and demand environment as well. That part of our business – the overall business runs – it can run slightly positive working capital, net receivables over payables or slightly payables over receivables, but oil or payables over receivables. That tends to be the structure, the terms of trade, the discounting of receivables. And as we noted last week, we were around 45 days on payables and 20 days on receivables. Not too dissimilar from our integrated oral peers without naming any ones. You're obviously sort of a fave with some of the large integrated oral plays. They don't necessarily separate their marketing and training business, but if you look without fail, all of them are very, if you look payables, receivables, much larger on the On the former, every one of them in this lower oil and market environment have had some reductions in their payables, i.e. an increase in working capital and some numbers of one of their peers out there, if you look, was $6.7 billion, one was $4.2 billion, one was $3.6 billion, and you can certainly go and find them as well. There's also the additional margin calls, as I said, $0.5 billion in respect of some of the carried inventory and costs. their way out over time. So clearly still committed around the, as we said, the strong BBB ratings and against our targets. Still, even though 1.8, still comfortably within our through the cycle less than 2. And as we project ourselves forward, we're pretty comfortable and there's a credible pathway towards getting back below 16 by the end of the year. And on a pro forma basis, when we're at 16, with the EBITDA at spot around the 10.5 and potentially higher today, and I'll give some indication of that, then we're back down to 1.5 times or slightly below 1.5 times. So we'll be back, by the end of the year, we'll be back below in terms of both absolute and leverage ratios, and that'll happen by the end of the year, and we're already sitting in August, so we're one sixth of the way towards that as well. So those are the The liquidity is still strong at $10.2 billion, a very manageable profile and a business that's throwing off healthy levels of free cash flow generation as well. Page 17 I think is an important slide then as well as we look at the cash movements in net debt in H1 2020 top right. So you can see even that was $2 billion of free cash flow even in a low price environment and a COVID backdrop, strong performance free cash flow. Where has it ended up in terms of net debt and balance sheet? Clearly it's still there in the business. It hasn't gone. It hasn't disappeared. It's gone towards reduction in payables and creating more working capital flow than they otherwise would have been at the beginning of the year. So there's $3.1 billion there. And that was a function of both those margin calls as well as the payables and receivables in the oil business. We've then said, well, how do we – we want to sort of get back below the 16 in whatever environment we are as soon as we can. And mathematically, that does require the $2.8 billion reduction. The bottom right there says, what's the pathway? How do we get there? What assumptions are needed to get below the 16? And as a minimum, have debt reduction of $2.8 billion. which again, and we'll look at page 20, 19 to 21 later on, on the free cash flow at spot prices, which we've used that to post a number here as well. So that's $2 billion, which is half the $4.1 billion or so we're generating at the moment. We put it down $2.3 billion at CapEx, which is just mathematically $4 billion for a full year, and there's the $1.7, which we are at half here, at $4.3 billion in funds from operation to give the $2 billion. There is a step funds from operation of 4.3, just industrial metals alone will clearly get us there. I've spoken about how those prices. And then again, mathematically, this is not a target necessarily. It's saying how much of that $3.1 billion of working capital outflow in H1 would need to reverse back through high oil prices, margin calls coming back, additional volumes. And you just need 0.8 of that, which is about a quarter, so it's 25%. then that gives you a 2.8. Now, clearly, if that number's bigger, we're going to blow significantly below the 16. If we do this potential, still some long-term asset monetizations, there's some stakes of companies that we have. If any of that gets executed during the year, again, that's going to start making material inroads, getting us below that 16. So that's the pathway. It's tangible. It's near-term. It's credible. It's real. And we're very confident about that, that that should help both aesthetic sort of net debt It will get us much closer to being able to commence distributions again when we reunite back in February next year. But clearly the key thing, what's the underlying business doing? What's the quality of the earnings? How does that get capitalized and reflected long term? This is a very short term manageable phenomenon as we're going through the business. In terms of 220 modeling, modeling guidance, the building blocks the last two or three pages that we give as well. So that's across our main businesses, first half, second half, and there is some volume pickup that we expect second half. COVID was clearly a factor that suspended and had an impact on some of the fluency of operations during first half. So in copper, you can see 588 first half production, 667 at the midpoint, so we've got a pickup of 79,000 tonnes of 13%. Antamina was a big factor, that was out for the best part of six weeks, we got some extra Kazakhstan and Canada and their operational rates due to maintenance and activity levels in Australia and copper will get a better second half performance there. Cobalt broadly flat because that's primarily contained or anywhere that's performing well. Zinc will pick up 60,000 tons. That's a lot of that. That's amina as well. A lot of the South American smaller assets that we have are all out for extended periods of time in Argentina, Bolivia, Peru. Nickel will pick up 4,000 out of Canada and Australia. Australia, there's no expectations on the new reset that you can have a better second half of Konyamba that's running one line. Ferrochrome recovers somewhat but still taking it easy given market conditions down in the Ferrochrome market and coal actually declines because of some of the reductions that we're putting in Columbia and Australia. So back on page 19 reflecting both production unit costs and and current pricing, you have a copper business keeps on declining in unit cost, improving the overall cash flow and quartile position of that business. One of six full year guidance should get to closer to one when we've got Katanga up and running in terms of both copper and cobalt is getting there. That's ever dark spot prices in 4.1 billion on current production. We'll roll into next year, there'll be high production and even our spot 10.5 will be higher in 2021. Zinc $1.9 billion, Nickel $1.5 billion and the coal business $1.3 billion in the current margin environments as well. Then finishing the last slide then is page 21 showing that EBITDA spot price of $10.5, culminating in $4.1 billion of free cash flow. That's now copper and zinc taking top two on the podium across the current cost structure. These were also prices that were cut as of last Friday. There's generally increases across particularly zinc, cobalt, gold, silver and the likes. If we recap these numbers as of today, there'd be around another $300 million of EBITDA and free cash flow. That's the nature of the beast, the nature of the industry. So $10.5, $4.1 billion. The mix and the composition has sort of changed a bit, but I look back even into February February's results and we were $4.3 billion of free cash flow. So it's almost sort of as you were against February having been through a very interesting six-month period. So that's sort of where we're at and that's got the business obviously in a strong cash flow generating position, marketing most businesses humming pretty well at the moment. And with that, back to Ivan.

Okay, thanks, Steve. We talk about, if you look on slide 23, we talk about our priorities during the year, and the first thing which is important for us, the health and safety, to deliver a step change in our safety performance. We are enhancing our performance there and our operations all around the world, and an enhanced fatality reduction program is being implemented, and hopefully we will reduce the fatalities which we've been having in the past. Ongoing precautionary measures, we've got to ensure across all our offices and industrial assets in response to COVID-19, and we're ensuring we are handling that correctly without issues across the board. On our ramp-up development of our ramp-up assets, we always talk about these. The last two that we got ramping up is Katanga and Konyamba. And I'm pleased to say that Katanga is performing very well this year. We will hit our guidance levels of 270,000 tons copper and 26,000 tons of cobalt. And I have no doubt we will get this next year to name plate capacity of around 290,000, 300,000 tons of copper production. So we're pleased to say that Katanga is It is a new asset. It has been ramped up, and it is achieving the goals that we set it with during this year. And no doubt it will be delivering strong cash flow with the copper and cobalt price starting to move up and coming to the levels where it will be a big cash generator for our company. We're also commissioning the asset plants at Katanga. We had a bit of issues during COVID-19 getting people into the country, but I'm pleased to say it is ramping up well now and it should start operations on the 2nd of September this year. Conny Amber is still an issue. We are only running one line at Conny Amber. We're making sure that that line is running well. Also having issues of getting people onto the island. In New Caledonia, when that's in place, we'll be able to ramp up and start moving on line two and hopefully get that asset up to nameplate capacity, and that is the last of our ramp-up assets. Then we move to operational efficiency and capital discipline. We deliver, as we say, to now push all the existing assets to ensure that they operate efficiently, and as you will see, and Steve's gone through the numbers, Most of our assets are first quartile, extremely low-cost producers, especially in copper. We have three great copper assets. If you look at Katanga, if you look at Kalawasi, and you look at Antamina, we have three of the best copper assets in the world, low-cost producers, and we should be generating strong cash flow on those, especially as the copper price moves up. to ensure that we will get this free cash flow, keep those costs down, and we will maximize the free cash flow and focus on the portfolio NPV of all these assets and therefore moving into the share price. We have a strong balance sheet. Steve's spoken enough about that, the commitment to strong BBB. We spoke about the net debt. We have to get it below our target of $60 billion and keep it within the range of 10 to 16. and distributions will occur once the balance sheet allows and we've got it in the right place. Management, we've spoken about this in the past, the transition to the new generation of leadership is taking place. It's taken place over the past two to three years with most of the senior managers having left and the new management team in place. One or two more changes and then we will have that transition to the new leadership in place to take the company forward for its long-term future. Confidence. We have stability and consistency with operational and financial performance, which I've spoken about. Return, then, it is a matter of returning excess capital to shareholders. We'll continue being disciplined with our capital allocation framework. We do have potential brand field expansions, which the company can do. We'll do that at the right time. And as you are aware, and we believe it's always been the right approach within Glencore, we'll manage these brownfields. We'll bring back any assets which are of care and maintenance at the right time. We don't wish to add new terms to the market, which the market does not require. And as you'll see, what we said we did this year, We reduced the production of our coal production. We've reduced in both Colombia and Australia to ensure that we are not bringing tongues into the market, which it does not require to bring stability to the market. So I think that gives you an idea of how Glencoe looks going forward. And with that, we open for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be taken by an operator. If you wish to cancel your request, please press the hash key. Once again, if you do wish to ask a question, please press star 1 on your telephone. Your first question comes from the line of Liam Fitzpatrick from Deutsche Bank. Please ask your question.

Thank you. Two questions from me on the coal market and just your latest strategic thinking. So firstly, on the market, you've made some pretty material shutdowns. Do you think these are going to have to be semi-permanent in nature? And has your structural view on the coal market changed compared to where you were one to two years ago? And then secondly, strategically, what is your latest thinking on potentially separating the coal business over the medium term?

Thank you. Okay, thanks, Liam. Yeah, look, the coal market has been hit this year because of COVID. It affected the demand in part of the major importing countries, India, for example, which normally imports around about 180 million tonnes of coal, we believe is reducing the imports around about 35 million tonnes. You have China will be reducing imports around about 33 million tonnes. So we think the demand is has been cut by COVID in the 985 million ton seaborne market by about 133 million tons. However, with that, the coal prices come down, so certain countries have cut production. We believe Indonesia could be down around about 50 million tons. So our calculations, the market's lost about supply about 120 million tons. So demand has reduced more than the supply reductions, and that's where we're getting a bit of this excess supply. It could correct itself with the lower prices. You will have further shutdowns around the world. No doubt Indonesia, who are cash negative today, will reduce some of their production. We've reacted like we always do when you have falling commodity prices and oversupply in the market. And as you've seen, we put Pradek on to care and maintenance. And we've cut 7 million tons out of Australia. And hopefully we believe these actions are by ourselves. And the Indonesians, the market will be back in rebalance. And you will have an upward movement on the pricing. I don't work for a regional belief in the past. We are still having a lot of new coal-fired stations being built around the world, the new developing relations, Pakistan, Bangladesh. India, China continue to, what you call it, to build new coal-fired stations. So demand continues to grow in those areas. Naturally, in Europe, it is decreasing, and Europe has gone down considerably, down to around about 40 million tons of coal. So the overall scenario on the seaborne market, we think, is still okay and should bode strong for the future. And in fact, we look at future years and believe there will be a shortage because there is no new supply coming into the market. So that's where we look. Regarding our coal business, it's still a good business for us. It is a cash generator, not as high as it has been in the past with the falling coal prices. However, even at these lower prices, it still generates cash for the company. And Steve gave you an idea of the EBITDA. What's it about? $1.4 billion at current prices. So it's still a good EBITDA generator and a cash flow generator for the business. So we'll continue assessing it, but the call still should remain within Glencoe right now.

Okay, thank you.

Thank you. Your next question comes from the line of Ian Rosso. Please ask your question.

Hi, good morning. I had a couple of questions, especially on the safety performance, which still remains quite disappointing, and it's obviously something you've spoken about quite a bit around prioritizing that and delivering a step change in the performance with some of the appointments and focus from Peter as well. I sort of wanted to get a sense of how that is progressing. Obviously, the performance in the first half is still disappointing and whether down the line you would be willing to shut down assets or dispose of assets if you can't actually improve that safety performance. That's the first question. And then Second question just for Steve around the balance sheet. Obviously, the stock prices, as you mentioned, should drive net debt down quite meaningfully in the second half. But I was just sort of curious if you see stock prices fall, how much flexibility do you have in the business to deliver or bring net debt down further, whether it be further working capital releases or asset sales, which I guess you didn't mention this time. maybe just to get an update on that as well.

Okay, I'll handle the first part of the question, Jack. Safety is not ideal. However, you know, having six fatalities is concerning at five incidents. Peter Freyberg and his team is working extensively in this area. And as we said, if you look at slide four, they're identifying and targeting areas of underperformance with clear plans how they are going to get this right. Intervention is taking place at all the assets where it is required. However, you've got to remember, we do employ 150,000 people, 150,000 employees across the group, different to our competitors, our peers in the mining industry. I think we are the largest employee of the major mining companies. Even the bigger ones have far less employees than us. However, this is no excuse, but we do have a lot of assets around the world. As you correctly say, some of the acids, what we call the tail acids, which do give us a lot of management time to ensure that they operate under the same standards that Glencoe would like at all its operations, of course will have to be reviewed over time. So we continue focusing on that area. You know, up until June, we did only have two fatalities. two is already too much, but we were performing well. Unfortunately, in the last month, we did get four over various incidents, but we think we are on the right track, and we believe we will improve considerably over that, and hopefully next year we'll report much better figures.

If we look at plates 17, that's probably a good one to clearly look at in terms of the path to below 16. Now, of course, things... can flex across those three graphs. So we've got funds from operation, we're saying sort of two billion there, only requiring a, now we're not saying, as I said, foreign aid's a target. Now, if we assume, I mean, if we said, let's say half of that working capital through the sort of carry trade margining and the general slightly better price than average prices in oil in H1, which would be a reasonable assumption given what happened in sort of the double whammy of those markets, then certainly a number of greater than 0.8 would just passively materialize as well. So there is fat just on that alone clearly as well. And against the 4.3 to 2.3, now we sort of, obviously we're one month or one and a bit already, so you can say, well, let's bank that. Obviously pricing doesn't start from 1st of July, so that sort of materiality of lower prices gets less and less as we head towards the end of the year. So I think the pathway towards 0.8 being conservative and working capital. The cash flow operations are already low relative to the prices in the last week or so, particularly on the pressure side. And yeah, I think there certainly can be some long-term asset monetizations. We don't want to, we're not promising in this particular area. But again, on page 29, we update on some of the, some of those stakes as well. There's sort of Rosneft's stake, which is still there at about $300 million. At some point, that will monetize as well at some point. The sale of that Mototola one down at the bottom, that's a deferred consideration from the sale of that asset to Anglo Platts a couple of years ago, which is certain volumes. It's unrest on volumes. It's only price participation around some PGM, Rhodium, Platinum, Palladium at current spot prices. That is... 200 to 300 million and over the next three or four years we'll start banking 100 to 150 a year on that. We're already six, seven months in so you can actually bake in some of that that the cash flow comes in installments over the next three or four years. There's still some old US oil infrastructure which is quite valuable today around the Californian side as well. There was a piece that wasn't sold into that HG storage. That could work its way through. There's certainly a few hundred million there. So a variety of potential opportunities there. We also announced a purchase of an asset, Orsted, towards the end of last year, which takes on some rental storage commitments for import NatGas and LNG into the European market, which will be a good opportunity for us in that business. our business, we're actually going to collect about 300 million euros. That should close Q4, so there's some proceeds coming in. So there is a few bits and pieces that could be in aggregate a reasonable size. We haven't baked that into that slide in 2017, but let's see how we go. I think the pathway and the sort of risk attached to it, or the de-risking attached to getting below 16 is pretty comfortable, notwithstanding almost any price environment that you may think in the next four to five months

Okay, so maybe just to follow up on the marketing performance, I see in this spot illustrative numbers, you're still using the midpoints of the range. I mean, obviously, if you're pointing to the topping of the range, which implies a pretty conservative second half on the marketing performance. I mean, is that reflective of how markets dynamics have changed? Or is that just you being more conservative and there is a chance you'll actually be above the topping of the range for the whole year?

Yeah, look, as Steve said, we'll be towards the top end of the range. We said that previously. That's the way we see it. You know, looking at 3.2, we've made 2, so you should get 1.2 in the second half. We want to be a bit conservative. Markets do different things over the next six months. We're not sure. So we still want to stick within the range, but as we have indicated, we should be towards the top end.

Yeah, I mean, it might be conservative a little bit for an H2 performance. When we're always doing our spot annualized, we're never going to go bottom or top. I think a midpoint is where we position it just for a spot illustrator point. But hopefully sort of from a top end that the people that obviously the marketing people haven't said, you know, it's a great sort of six months, we're off to the beach. We should keep going.

Okay, that's clear.

Thank you.

Your next question comes from the line of Sylvain Brunette from Exane BNP Paribas. Please ask your question.

Good morning, Ivan, Steve. First question on specific costs you could highlight related to anti-COVID and treat as one-off innate one, if you're able to measure that across operations. My second question is on marketing. Clearly still your best business. Is there still growth opportunities in that business in your view? My third question is on zinc. What would be your criteria to revive the Xyrem project? I mean, we don't see much capacity additions. Prices have recovered, even if the automotive outlook is still pretty subdued. My last one on call, in the context where you're clearly making some portfolio changes post-COVID, what is the future for Celeron, where we can sense both your other partners are potential sellers? Please, thanks.

So then in terms of absolute COVID, costs, I wouldn't categorize them as potentially material. It was really opportunity cost of having lost production and the unit cost effect of it. I mean, of course, there is added costs and additional shifts and protocols and the likes, but it's not one that we would want to sort of blame COVID on some big sort of cost increase. Some of that will And we still stuck with it. I mean, we still got these extra protocols and hygiene and cleaning and sort of some inefficiencies. So for as long as we're in an environment where we're having to have these sort of precautions, I don't think we're going to be out of it any time soon. So I wouldn't say it's necessarily hugely material that we'd wish to highlight that side.

Yeah, opportunities on trading still, Ben. What are the opportunities? I think we're still in the same commodities. We take the opportunities when they come.

The LNG side of it.

Yeah, LNG should grow. As Steve said, we've got this new Orsted terminal. Hopefully that will assist the LNG business to grow there, so that should grow. But as I say, we look at opportunities on the pricing and the modelling. We also have... a bit more of our downstream oil in both Brazil and South Africa. Hopefully that will allow the oil business to grow, that they got the short on that. And then we just see what opportunities come. Luck happened in the first half. Various opportunities came, definitely on the container plays in oil. We took advantage of that, and that's why they've done well. You know, we're there. We're very active in the market. We've got the balance sheet that can handle it. And as Steve's explained clearly, because of our balance sheet, we're able to take advantage of the container plays, their margin calls, et cetera, when you do hedge out those trades, and not everyone can do it. You need a decent-sized balance sheet to be able to do it, so it does give us opportunities which others may not have. On your question on zinc, Jaren, no, I think we'll still keep Jaren for next year. We said we're going to delay the start-up of Jaren until 2021. No reason to start it right now. Yes, zinc prices have recovered nicely to $2,400, but we don't want to be the ones to push down prices. We'd rather be the ones to bring it on stream when the market needs it, and therefore Jaren will come on in 2021. Regarding coal, Sarah Hahn, I can't talk about my competitors. You know, Ceron still performs. Tannage has been reduced because of COVID this year. It's clear the markets which Ceron sells, the call into the European market, is more difficult. But we'll wait and see what IA partners wish to do with their stakes. We cannot comment on them right now.

Thank you.

Your next question comes from the line of Jason Fairclough from Bank of America. Please ask your question.

Good morning, gents. Thanks for the call. Just two quick ones for me, one on succession, the other one on Volcan. First on succession, over the half we had the announcement on the departure of Daniel. I'm just wondering how COVID has impacted succession planning at Glencore. Do you have any of the new generation on this call? And if not, why not? And secondly, just on Volcan, it's a relatively recent acquisition. Can you really sort of talk us through a little bit what happened in terms of the impairment?

Yeah, okay.

On succession, you know, we've said clearly what will take place, and we're moving through the succession plan. And as you say, Daniel has departed last month. The old generation, we are, you know, there are not many of us old generation left, and We're working on it, and it will happen at the right time. COVID, does it affect it? Yeah, it affects travel a little, or people when they're introducing the new guides, it may affect it, but we can still work through it, so I don't think a major impact. Steve, you want to talk about Volcan?

Yeah, I mean, Volcan, like you said, a fairly recent acquisition. I think it was sort of two or three years ago. I mean, our share of all this impairment... was about $3.50, Jason, because we need to consolidate it. There's sort of higher headline numbers, and then you take out tax and minority interest, and you get to about $3.50. The $3.50, which is discussed in the financials somewhere, was effectively the original, I would say, call it premium, but the surplus of purchase price over Volcans book value themselves that we ascribe value to. It's a very rich... resource sort of prospective company across South America having a lot of opportunities in not just zinc, but the full polymetallic, the silver, there's even copper deposits and the likes. And having gone through sort of COVID and trying to sort of read the tea leaves on any sort of scenarios around macroeconomics and growth and these things. So this did come out of sort of allocating both probabilities, confidence around how you would go, proving the next wave of potential projects there, some brownfields, some sort of greenfields. So what we've done just from an accounting side is just push some of those out, reduce the likelihood confidence which is our general approach to this thing and that did ultimately result in that net net, the 350 charge for us on the Volcad side. But the base business is the sort of two operating units. They perform okay. Obviously, zinc and silver in the last while would have sort of helped their course. I mean, we're just a 23% economic shareholder. We have certain voting control. They'll have to sort of deliberate at their own entity how they want to take their business forward. But it was an appropriate accounting adjustment to take this period.

Just to follow up, if I could, and back to Ivan, I guess. Sorry for the noise in the background. Do you have any of the new guys on this call at all, Ivan? Just checking.

The new guys? Just Steve and me on the call, basically.

Okay. Thank you.

Thank you. Your next question comes from the line of Miles Olsup from UBS. Please ask your question.

Great, yeah. Just on a few assets first. Mpani, you know, with the copper price recovering, are you reconsidering whether to moscow the mine? And, you know, with Matanda and, you know, the potential restart in house, the kind of negotiations going with the DRC government around the sulfide processing investment, are Secondly, on Connie Ambo, it's still EBITDA negative. You seem to be incredibly patient with the asset. Is your patience wearing thin, or are you still very confident that once it's running with two lines, you'll be making a more meaningful contribution? And then maybe going back to Sir Jason's question around management transition, do you think this is one of your last calls, Ivan?

Okay, let's talk Mopani. As we said on Mopani, we applied to put it on care and maintenance, the 90-day proposal, which we've worked through. We are now in discussions with the government, and we're trying to see where we end up there. But I think, you know, we would like to go that direction, but we'll see where we get to with the government. But right now we are operating. Regarding Connie Amber... So, of course, our patience is wearing thin. It's a long time to try to get that asset up to an eight-plate capacity. It's in a difficult part of the world. It has its issues, but we are running one line now, which is running well. Unfortunately, we're struggling to get enough people onto the island because of COVID-19, so it doesn't make sense to start up the second line right now. So I think until the end of the year, we'll just keep the one line running and make sure we get great operational performance on the one line. Hopefully, when we get the second line up and running, it will work as well with two lines running as the ones working, and we'll eventually get it to nameplate capacity. If we do get it to nameplate capacity, it should be a decent cost producer. Its cost should be low enough where it should generate decent cash. And therefore, hopefully, we will be comfortable with that asset going forward and with the demand for nickel potentially picking up. And as you heard with Elon Musk's statements about the demand for nickel in batteries, et cetera, hopefully demand is there and this material will be required in the market. On management change, as I said before, and as I just said to Jason earlier, we're working through it. We've still got one or two guys which will change of the old generation, and then it's time for me to move on exactly when that will be. We'll see.

Just on Matanda and the discussions with the DRC government around investment now, is there any progress there, or should we assume it's not for a couple of years or so?

Well, Matanda, we've always said we'd shut it down. Once again, the Glencoe policy, if we believe a market is oversupplied, we don't need the operation running. We also have the issue of the oxides and the sulfides, and we have to understand the level of oxides and sulfides and the costs of processing the sulfides. Pete and his team are going through that operation right now. and assessing it, no major rush, because we do want to only bring it onto stream when the cobalt market requires it to come back. And as you can see, the cobalt price is not great at the moment. Naturally, with more electric vehicles being produced, and especially in Europe, more cobalt will be required, and then we will assess it at the time. But right now, it makes clear sense to keep it on care and maintenance, finish the studies on the sulfides, And when that is done, we'll assess the market and then decide when to bring it into production.

Well, it's actually mostly sensitive to cobalt prices, not copper prices, in terms of its mix of revenue. Maybe it's sort of 50-50, whereas you've got other operations that are more geared towards copper. So cobalt is a key catalyst there. And, of course, at some point, when you look at demand profile, the world's going to need some cobalt, and hopefully the prices are going to have to respond accordingly.

There's no doubt that mine is going to be needed to fulfill the shortage of cobalt exactly when required with the electric vehicle and how fast that occurs, but our assessment is it definitely has to come into production at some stage, but we've just got to time it correctly. But as Steve says, it's an operation that will most probably produce 150,000 tons of copper, but potentially 30,000, 35,000 tons of cobalt, so that is the key element of that operation.

Great, thank you.

Your next question comes from the line of Alan Gabriel from Morgan Stanley. Please ask your question.

Good morning, gents. One final question from me is on the dividend. How are you thinking about that going forward? And are you looking to revamp your dividend policy to perhaps shift it into a formula that can better withstand the market volatility? Thank you.

I mean, I think our dividend policy sort of per se around the... paying out of cash flows being the billion dollars for marketing, minimum 25 cents of industrial is still an appropriate one and there's no change, but that always is a sort of dividend policy that's subject to, because that's a pre-working capital. So we can't ignore working capital, nor can one ignore if there's sort of M&A. So you need to look at the other elements of what may be consuming cash flow and what your net debt and ratios are potentially sort of looks like. So I'd say the working capital has that temporary build and how that sort of developments is sort of jump the queue in terms of capital allocation. But we'll get to February, we'll get below our 16. And I think it's still, I mean, the real test of the business and the stress and the scenarios, I think COVID COVID-19 was obviously a great test of your free cash flow generally in assets and performance and marketing, which has stood up pretty well in six months from a cash flow pre-working capital. We're just having to sort of prioritise, and for good reasons and for good consistent marketing earnings, having to pause for now, consider that back in February, but I think the base policy is still sensible. And we'll get together in February. Thank you.

Your next question comes from the line of Dominic O'Kane from JP Morgan. Please ask your question.

Good morning. Two quick questions. Just going back to Mopani, obviously the decision to mothball was made at a copper price about 30% below where we are today. Is Mopani cash flow positive at today's commodity prices? And I wonder if you could just enter a bit more details in terms of the the driving force of the decision to put on extended care and maintenance? Is it kind of economic or is it slightly political? And my second question goes back to your previous $2 billion disposal target. Obviously, probably a more favourable commodity pricing environment for hard asset disposals. Are there kind of hard asset disposal opportunities that you are considering? And the one that I guess particularly interests me is gold. You produce about 600,000 ounces of gold. At the time of your IPO, you talked about a potential gold IPO. Are those ounces of capping unencumbered? And is there sort of a potential gold flotation or listing a potential option for you guys?

Okay. On Mapani...

As we said, we still got some CapEx programs over there which have to complete. We just felt it was the right thing to rather put it on care and maintenance now with the copper price. Okay, it has improved recently at $6,400, but I think it's the right thing to do while we assess the asset. However, as I say, we are in discussions with the government for certain issues are taking place where we may find a solution, but we'll wait and see. But right now, care and maintenance is our best option, we believe. Regarding sale of assets, look, we're always looking at potential sale of assets. Steve spoke, it was not $2 billion, I think we spoke about $1 billion. Steve spoke about the liquid assets, the listed companies which we own, which we could potentially do some sell-downs there. There's a list of them. Some of our tail assets, of course, the market environment is a bit better today. We will look at the sale of some of our smaller assets. I don't know, you know, if you talk about hard assets, which those may be, there are certain people in certain countries who are prepared to look at those smaller assets and it takes less management time from us to look after them, so we will look at that. They don't contribute large amounts to the avatar of the company, so it may make sense from a management point of view. If you talk about gold, I think we produce across the board about a million ounces of gold, not 600,000 ounces. The main gold asset in the company is KaZing. It does generate. You can imagine that the current gold price today, 2050, it does perform exceptionally well. There have been various offers over the years, gold companies who wish to buy them. We clearly understand gold companies trade at higher multiples than we trade within ourselves. So we always open any of our assets. If we get a favorable bid, we can look at it. Would we spin off gold separately into a separate vehicle? I don't think so. And it's a good cash generator for the company at the moment, an exceptionally good cash generator. But at the right price, if a gold company wishes to own it, we're happy to discuss any of our assets in that frame of mind.

I mean, Dominic, just in terms of encumbering or unencumbering, I mean, all of Kazink is also unencumbered from a sort of gold. We were sort of exposed. We did some... We did one silver stream, one gold stream back in 2015 or so, but that doesn't affect the operation. That's all sort of done above the operational level and it's sort of not attached and of course, and we still have pretty good participation both in volumes and in price even in those streaming transactions, but it has a declining profile that probably takes about 150 or so relative to spot out of the at the moment but for the most part we're still positively exposed to sort of copper, zinc, unincumbent, I mean to sort of gold and silver and obviously as Ivan said we did, there was the M&A, the gold frenzy, these things, I mean obviously Vasilkovsky is a very attractive asset out there, there has been quite a bit of reverse inquiry and people have logged sort of interest in there and Fortunately, we didn't action any of those today because the price would have been sort of $1,500 when some of those level of interest came in and we're sitting at sort of $2,100. I mean, there is a certain counter-cyclical natural hedge argument around the business as well. It is a bit non-core. If someone clearly came and sort of throws a knockout punch, then who knows?

If someone uses the BAML price of $3,000, we could look at it.

There we go.

I mean, just on the million ounces of gold that you mentioned, I mean, theoretically, is all of that available for streaming opportunities if you strategically decided to go down that route?

It would all be available except what's been streamed already, which is, I don't know, sort of a fraction of that, maybe 10%, 15% or so. Thank you. Okay, thanks.

Thank you. Your next question comes from the line of Sergei Donsky from Society Generale. Please ask your question.

Yes, thank you very much. Three questions for me. First, Katanga, you mentioned that it has performed in line with expectations but without providing any details. Katanga being such a focused area for many investors, it would be helpful if you could provide some granularity in terms of EBITDA and cash cost, now that we don't have any other source of information on this particular asset. Second question, your illustrative coal division economics, you use $60 coal price, which is, I think, about $10 higher than sport. Does it mean that in today's environment, business is generating basically zero EBITDA? And lastly, just conceptually, it looks a bit counterintuitive. You log a strong year-over-year improvement in cash flow, including very strong performance in marketing. And at the same time, you have to mix dividends to... counter increase in net debt. Is it conceptually that free cash flow is the wrong way of looking at Glencore? Maybe we have to use some adjusted free cash flow to account for such events like this? Thank you.

Okay, so it goes quite a selection there. Let's start on the coal one first. In terms of spot, the 60 is a sort of an average over the forward curve. So already you've got, we're at about 53 and a bit or so spot, but you're already into Q1 towards the end of the year, you're crossing into 60s and almost 63, 64. So it's an average forward across that curve as well. And that And that yes spot, if you say what are we generating today, we've also got fixed price contracts with a lot of Japanese sort of JPU stuff at 68 that's also working its way through the system. So that's how actual H2 will clearly play out in terms of cash and domestic business. That's also sort of unhinged by that. So that's the one we sort of take a curve approach as being a reasonable sort of benchmark over a period of time. You'll have your own views on these sort of things and it will play out as it sort of plays out. But I think that's a reasonable stab at a sort of cash flow 12-month period on that particular business and it will sort of move around hopefully in a positive direction as we move. So that's the logic and that's actually consistent with how we've sort of looked at that. It is quite a contango and steep curve in coal across the various indexes as well. Katanga is, yes, it's sort of, it's true, it's sort of left the list, that 0.5% listing in Canada was, has finally been resolved, which is good. So I think maybe let's, if we pause till the end of the year when we give our updated, because it's still, we got quite a cost reduction process coming through the acid plant as Ivan said, gets commissioned 2nd of September. That's a huge downshift in terms of their sort of cost. So they've moved from negative EBITDA. Last year it was quite positive. I mean, the whole African copper, I think, was small positive from a large negative. Next year, Katanga has moved from negative into quite a reasonable positive, and it will move into the low $100 million into the high $100 million and ultimately into the sort of $1.5 to $2 million at some point as the sort of pricing. So I would think when we come to the end of the year and we give the updates on copper costs looking for $21, comparing that to $20, we can give some granularity on that business specifically because we want you to have that granularity because it does show that was part of the turnaround, cash flow stories of 12 months ago. obviously performing well. I mean, we went through, in terms of working capital swings, I think we were in a sort of pretty uncharted territory in the last sort of six months. I wouldn't necessarily say COVID sort of throw the baby out for the bathwater here about what working capital should do under any sort of normal horizons. We had some demand fall of a cliff around our normal kind of business into certain markets. We saw pricing drop. even dropping to negative for some periods. We're loading up on contango storage, which relative to normal holding levels of inventory, particularly in the oil, is sort of factors of multiples, the size in terms of barrels that we have, either tankage, onshore, offshore, that's sort of part of that. So we've shown on that page 17, some of that should obviously... clearly unwind. There's the projection towards. I'd much rather take a temporary working capital sort of adjustment and if we can get a permanent step up in marketing that you can capitalise for the long term, that's certainly more positive in terms of cash flow. We all need to sort of manage the short period around some of these temporary factors and COVID doesn't happen every sort of period of time. I don't think it's necessarily the sort of catalyst or sort of back to the drawing boards on any of these things.

I see. Thank you.

Okay. Thanks.

Your next question comes from the line of Tyler Broder from RBC Capital Market. Please ask your question.

Great. Thanks. This one's probably for Steve. With the transitory nature of the balance sheet seen in that debt hire, strengthening commodity prices coming through. But then also, as you mentioned, the coral supply, we're seeing a steep supply response. We've seen this before prices start to come back. I guess with the 2020 dividend effectively coming out of 2021 cash flows, does this kind of indicate that you want to move lower into the 10 to 16 net debt range by canceling the dividend for the full year? Or is there a potential that you could potentially at that point reassess, I guess? Secondly, as well, some marketing, I guess, with the working capital effectively full at this point, with the focus on the balance sheet. Is this impinging your ability to transact at all in H2, or how should we think about that from the sort of balance sheet versus opportunity perspective?

Thanks. No, it's not impacting at all in terms of impinging business. Liquidity is obviously very strong. I believe we've peaked in terms of working capital. outflow and we can start clawing back some of that as we move into obviously into H2 but it's not and as long as the underlying business is sort of demonstrating that we're not that you're generating the sort of ROEs and returns and that sort of performance and marketing I think if you had one without the other maybe it starts breaking down a bit but if you've got that working capital deployment and having put 2 billion of of earnings on the table, which is the ones permanent, the ones temporary, or at least it sits within the balance sheet as creating a working capital flow to more conservative structure. I think that's a healthy sort of dynamic that's obviously at play there. In terms of balance sheet, I think it would be, I think one would sort of collectively would be better to at least be in the mid part of that range, whether we tend to sort of, we talk 10, 16, so if we were 13, by definition, your ability to sort of navigate cycles, have more cushion, have more sort of headroom, you don't want to be bumping up against some levels that we've set internally and put financial policy around because your flexibility clearly reduces and your and your predictability in other scenarios like we hear is also clearly reduces. So I think in the short, maybe medium to longer term, I think being in the mid to maybe lower end of that range would allow you to have a lot more sort of flexibility and tools as you navigate different cycles. So I think it does make sense to building some headroom over time. But I think you can both, with the sort of cash flow the business is certainly generating, the first priority, get into the 16 and then sort of deliberate out of those sort of cash flows and capital allocation in early sort of 21, how much continued deleveraging is appropriate, what the distribution out of those cash flows, what the macro picture looks like at that point. These are all deliberations that make sense. But yeah, I don't want to be bouncing around the 16. I want to be certainly I would have thought in the middle of the range, mid to lower part of the range. And I think you'd see an equity re-rate if that sort of came over time. I think it's not something, it's sort of left-hand, right-hand, where the money's in the business and can equitise and get valued, or it's gone out in the form of some sort of distribution. I think it hasn't gone anywhere except sort of sitting there as part of the capital buffers, and I think there's a potential re-rating if we can have some strong, I think it's unquestionably a strong balance sheet but it could be even stronger and if there's a constituent that is comfortable we would probably, it's not 100% but let's take a great proportion you would be able to make even that sort of greater distribution out there people that can sort of come in and say this is what I like in terms of leverage for cyclical companies so I think it makes sense.

That's great, very clear, thank you.

Thank you. And your final question comes from the line of Myles Olsup from UBS. Please ask your question.

Great. It's another one on the management transition. But for Steve, Steve, I presume you're kind of more of a second, third generation hybrid and you are kind of here to stay. I just want to clarify that. Thank you.

I mean, there was probably what the sort of generations 1, 2, 3. I think Ivan spoke of the 3. That was probably a 3.5 maybe. He's a mixed generation. We're trying to work out. Somehow I'm not part of the old guard, but I'm not part of the new guard.

He moved from us and he went to Australia and he came back to us. So we're still trying to work out which generation he fits in. Not going anywhere. But he ain't going anywhere.

That's good. Thank you. Okay. See you.

Thank you. I would now like to hand the conference back to Mr. Blassenberg for closing remarks.

Okay. Thank you very much. Thanks for attending the call. I think we've given an outline how we look for the first half and a good idea where we look for the second half based on spot prices. Let's hope the tonnage cuts which we're doing, especially in coal, has a positive effect and the market looks better for coal, which I think is a key for the balance of this year. But as you can see, The avatar for the U.S. spot price is looking very good, as Steve said, right about 10.5 with an extra $300 million pickup with a recent movement on some of the commodity prices that we've seen in the last few days with gold, silver, and zinc and copper moving. That's advantageous for us, and hopefully we'll get more of that in the second half. So I think that covers everything. Thank you very much for attending.