Glencore-Backed Zinc Miner Is Getting Crushed in the Debt Market

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A Peruvian zinc miner has seen its bonds tumble to an all-time low as investors grow increasingly concerned about its ability to refinance maturing debt and Swiss commodities giant Glencore Plc looks to sell its controlling stake.

Volcan Cia Minera SAA’s dollar-denominated notes closed as low as 49.5 cents on the dollar last week, then edged higher to around 57 cents this week, after trading closer to 90 cents in early February. The miner has posted losses in four of the last five quarters and seen cash levels drop as zinc prices have slumped in a global economy where growth is slowing.

Glencore last year started looking into selling its 23% stake in Volcan, amounting to 55% of its class A voting shares, as the Swiss firm looks to simplify its business. That potential for a change in a key owner adds uncertainty to the outlook for Volcan’s debt. Futures have risen in the last few weeks but have still fallen by about 30% from a January peak because of China’s uneven recovery and the prospect of more supply coming on line. Volcan in July said it was suspending its Islay mine in central Peru, joining a string of producers to curtail production amid weaker prices.

 

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