Ladies and gentlemen, thank you for standing by, and welcome to the Glencore Half Year Results 2020 Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I must advise you that this conference is being recorded today, Thursday, 6th August, 2020. I would now like to hand the conference over to your speaker today, Ivan Gothenburg. Please go ahead, sir.
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 twenty twenty half year scorecard. And as you will see, it's a strong performance under challenging conditions because of the COVID-nineteen situation. As you'll see, our business model once again has a resilient cash generation.
Group adjusted EBITDA is $4,800,000,000 which is down 13% and this is basically in line with lower prices and some production issues around COVID-nineteen and the cost impacts thereof. This is offset by strong marketing performance, which we will talk about later, but and cash generated from operating activities before working capital changes is $4,300,000,000 which is down 20% from the first half of last year. Net CapEx cash flow is $1,700,000,000 which is down 22% from the same period last year and you will see the free cash flow is up 50% up to $2,000,000,000 for the first half of this year. As I said, this is supported by a record marketing results for the 6 months and marketing EBIT is at $2,000,000,000 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 $2,200,000,000 which is down only 16% from the same period last year.
And the mining margins are running relatively similar roundabout26% as opposed to 27% last year. Energy assets was 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, or 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 $700,000,000 which is down 65%. The full year cost margins forecast in our key commodities, we've given a few 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 round about $0.106 per pound zinc, dollars 0.05 nickel $2.57 and thermal coal even under the COVID type where we had to cut a bit of production across the board.
Our costs are still $46 The balance sheet, Steve will talk more about that later and give the details, but the net debt is 19 point It's been temporarily affected with the increase slightly because of the Oil Department working capital we set, 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 EBITDA of around 4, free cash flow, sorry, or $4,100,000,000 under the current spot environment could be a bit higher with recent increases in copper, gold and silver prices and our EBITDA at these levels spot prices around about $10,500,000,000 for the year. As we said, we always will target net debt between $10,000,000,000 to $16,000,000,000 We would like it down to $16,000,000,000 by the end of the year. At a preferred range, we can we should with this type generation of cash flow get to those levels by the end of the year. We have a large amount of committed available liquidity $10,200,000,000 and we only have maximum maturing bonds of $3,000,000,000 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 6 fatalities over 5 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 aligning our business with the Paris compliant pathway and we're focusing on our Scope 3 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 prioritizing iCapital Investments to align ourselves with this transition while maintaining strong operating standards. And as you will see, the expansion of the 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 decision 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 2,035 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 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 2,035. 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 7. And good morning to all those on the call. On page 7, 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 $4,800,000,000 as Ivan said, down from 5.6%, down 13%, relatively small percentage considering the backdrop that we experienced in H1 and that was as much as marketing increasing 1,100,000,000 dollars Industrial 1,900,000,000 primarily due to lower prices, but now set up for a much stronger second half twenty twenty as well as annualized performance, which will show some of the cash flow going forward.
We will provide the industrial bridges as we normally do later on as well as marketing comparisons. So industrial 2 point 6, be 4.5 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 at 2,000,000,000 dollars We've noted the oil stronger performance and conditions. There was also a more normalized metals performance where the base period, as you would recall, was impacted by 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. We're now settled into sort of the $4,000,000,000 range in terms of CapEx, which is also driving free cash flow through the business. And CapEx, as I said, $1,700,000,000 tracking comfortably within and in fact below the $4,000,000,000 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 in the oil business. The marketing leases also have increased 400,000,000 dollars 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 $500,000,000 We'll talk about that later on. So jumping then into Page 8, this is the Industrial, dollars 2,600,000,000 comparison 'twenty against 'twenty one.
Worth noting that $2,600,000,000 for our half year prices and volume affected as well, we are annualizing at $7,500,000,000 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. So where has it impacted us?
The metals and minerals has been the sort of the more stable contributor, just down 16%. Good cost performances and improved Katanga contribution. We spoke 12 months ago about the turnaround and 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 the both the volatility and lower prices that we have seen is both on the upstream, the E and P 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 9 sheds more light on that pricing has been pretty much the and has been the dominant driver, dollars 2,100,000,000 spread, dollars 1,200,000,000 across energy, within energy, dollars 1,000,000,000:0.2 on the oil side, metals, dollars 832 and that's a function you can see of average prices in copper, zinc.
Precious has helped us of course on gold up gold and silver 26%, 13%. 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 twenty twenty two, there's material increases. And that's getting, as I said on the industrial side, dollars 2,600,000,000 in the first half on a sort of annualized spot basis, tracking about $7,500,000,000 So copper price was $5,502 for the first half average realized against spot to date 18% higher. Zinc, the spot price today is 17% higher against first half average. Gold is 24% higher.
Silver, the standout today, it's 60% higher at over $26 $27 a pound against $17 with significant producers 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 payabilities, 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, dollars 2.73 negative, mostly COVID related as we had suspensions, either short term or extended.
Of course, the Antamina was well was pretty well chronicled during the period. It had lower zinc production period on period of 32%. That's now ramping back up. Colombian coal was down 43 percent in volumes, ferroalloys with the South African lockdowns and shutdowns was 42% lower on ferrochrome and some expected lower grades as MacKay also on 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 alloy including high electricity prices. And Australia through both just the mine sequencing and also how we manage supply, you've had some long haul and some strip pressure impacts through the first half of twenty twenty 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 ex price of the volume cost impacts of the African copper business has been a 4 23,000,000 turnaround there, reflecting the positive EBITDA generation and turnaround, particularly at Catanga. And the other is some SG and A.
That's mostly timing. There was a bit more that got expensed into the first half, given timing of when such settlements of bonus accruals and calculations get finalized 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 4 or 5 pages is just a 1 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 turnarounds, as we've said, further improvements. On a half yearly basis, dollars 1,300,000,000 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 a spot basis, copper is around $4,100,000,000 So compared to the first half, you'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, silver and cobalt that we have coming out of that 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 byproduct in this business and gold and lead as well, dollars 6.48 of EBITDA for the first half, which comes in well also against the guidance that we provide as well. But again, you've got relative to current prices and production and costs, we've got a near tripling of that EBITDA up to close to $2,000,000,000 If we look at that business on an annualized cash flow generation business, all goes well for H2 in that business. And in fact, we go into a negative cost structure post byproduct credits, gold and the likes. We read $0.28 was the first half, Full year guidance, dollars 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 1,000,000 tons, which has kept this market reasonably in check and has more than offset initial supply growth that we were expecting in zinc. If we go across to nickel, we have alerted to some ramp up timing factors over at Conneganba 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 tons for the full year. But again, due to higher volume, we've got some recovery in both the Canadian and Australian business production in second half and due to higher price in nickel. You're still going to see EBITDA at first half for a little over 200,000,000 dollars On an annualized basis, you've got more than sort of 2.5 times that, sort of more than doubling up to 5.39 as we look later on and that price has been pretty strong lately as well. Costs are reasonably under control.
We'd like to see Conne Amber of course hitting its strides as the one asset today that operationally 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 rebound. We're trying to do our part, but clearly China and Indian lockdowns has had an impact across pricing some of the European competitive 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 2,100,000,000 dollars in the prior period.
As we said, we have taken full year production guidance low 18,000,000 tons in last week's production guidance. That's Prodeka with extended care and maintenance and also taking our tonnage out of various Australian operations also to rebalance the market as well. 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 see the big bar on the graph of $2,000,000,000 So you've got an up and you're doubling up at 108%. It's somewhat clearly assisted by the comparative base having been impacted by that $350,000,000 of largely non cash cobalt mark to market losses.
So the metals and minerals side, it really belies the increase. Dollars 785 is a more normalized performance anyway. Last year, had we exclude the $350,000,000 we'd be up $88,000,000 but that's still a strong performance across metals. The energy side is where we've clearly seen that. The big increase, 92%, primarily in 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 in 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 0. This is our share of their net income, EBITDA, depreciation, interest and the likes at 50%. That was $118,000,000 for the half year period, which is a very strong underlying performance from that business.
It's continued for the second half. And so, August will also for the sort of valuation and the general monetization of that business to start materializing through dividends or the likes that can come from that business as well. So to those that maybe haven't quite grabbed it in the models, it's certainly it's back performing and this is the best period we've had since about 2014, which was a record, but this is not too far away from that as well. If we move into page 15 on the CapEx side, just trying to hold one's hands through the leases, the cash CapEx and the different effects, but we're around $1,700,000,000 across the business net cash on CapEx. You can see the industrial CapEx at 1,777 marketing CapEx is plugged in at sort of 474, 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 one of 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 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 have 4 to 4.5 was the last update back in April, was the range we're now going to be we're comfortable to be bottom end of that range at 4,000,000,000 dollars 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 2022.
The last update towards the end of last year or February this year was around 5,000,000,000 dollars 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 $5,000,000,000 notwithstanding there are some deferrals, but some of the longer term care and maintenance factors around places in Chad, Prodeka, Morpani 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 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 $2,800,000,000 above our target range of the 16% cap, and that's just 19.7 percent where we're at 0.9 percent 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 being 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 slight payables over receivables.
But oil within that component is significantly higher 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 in payables and 20 days in receivables, not too dissimilar from our integrated oil peers without naming any ones. You're obviously sort of a fave with some of the large integrated oil plays that don't necessarily separate their marketing and training business. But if you look without fail, all of them have very if you look payables receivables much larger on the former or every one of them in this lower oil and market environment have had some reductions in net payables I.
E. An increase in working capital and some numbers of one of the peers out there if you look was $6,700,000,000 one was $4,200,000 one was 3 point 6,000,000 and you can certainly go and find them as well. There's also the additional margin calls, as I said, dollars 500,000,000 in respect of some of the carried inventory and the contango structures that we have as well. That will just come back as those structures work 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 form a 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 won 6th of the way towards that as well. So those are the factors. Liquidity is still strong at $10,200,000,000 and very manageable profile at 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 $2,000,000,000 of free cash flow even in a low price environment and a COVID backdrop, strong performance free cash flow.
Where 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 $3,100,000,000 there. And that was a function of both those margin calls as well as the payables 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 $2,800,000,000 reduction. The bottom right there says what's the pathway? How do we get there? What assumptions are needed to get below the $16,000,000,000 and as a minimum have debt reduction of $2,800,000,000 which again and we'll talk we'll look at page 2019 to 2021 later on on the free cash flow spot prices, which we've used that to post a number here as well. So that's $2,000,000,000 which is half the $4,100,000,000 or so we're generating at the moment.
We put it down $2,300,000,000 net CapEx, which is just mathematically the $4,000,000,000 for a full year less the $1,700,000,000 which we are at the half year at $4,300,000,000 in funds from operation to give the $2,000,000,000 There is a step change H1 to H2 of $3,700,000,000 on 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 at saying how much of that $3,100,000,000 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%, and that gives you a 2.8.
Now clearly, that number is bigger. We're going to blow significantly below the 16%. If we do, there's potential still some long term asset monetizations. There's some stakes with 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. And that should help both aesthetic sort of net debt. It will help in terms of some of those ratios as well. It will get us much closer to being able to commence distributions again when we reunite back here in February next year. But clearly, the key thing, what's the underlying business doing with 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 guidance, the building blocks the last 2 or 3 pages that we give as well. Maybe Page 20, we just start on the production side of industrial. 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 tons or 13%. Antamina was a big factor that was out for the best part of 6 weeks. We've got some extra byproduct copper coming out of the zinc business, in particular Kazakhstan and Canada, and better operational rates due to maintenance and activity levels in Australia and copper. We'll get a better second half performance there.
Cobalt broadly flat because that's primarily cotangoa anyway and that's performing well. Zinc will pick up 60,000 tons. That's a lot of that's Antamina 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.
There's no expectations on the new reset that you're going to 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 Colombia and Australia. So back on Page 19, reflecting both production unit costs 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. 106 full year guidance should get to closer to 1 when we've got Katanga up and running in terms of both copper and cobalt that's getting there. That's EBITDA at spot prices at $4,100,000,000 on current production.
We'll roll into next year, there'll be higher production and even our spot $10,500,000,000 will be higher in 2021. Zinc $1,900,000,000 nickel $500,000,000 and the coal business $1,300,000,000 in the current margin environment as well. And then finishing the last slide then is page 21 showing that EBITDA spot price of 10.5 culminating in $4,100,000,000 of free cash flow. That's now copper and zinc taking top 2 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 recut these numbers as of today, there'd be around another $300,000,000 of EBITDA and free cash flow. But that's the nature of the beast, nature of the industry. So $10,500,000,000 $4,100,000,000 The mix and the composition has sort of changed a bit, but I look back even into February's results and we were $4,300,000,000 of free cash flow. So it's almost sort of as you were against February having been through a very interesting 6 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 got to ensure across all our offices and industrial assets in response to COVID-nineteen 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 just talk about these, the last 2 that we got ramping up is Katanga and Conyamba. 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 nameplate capacity of around 290,300,000 tons of copper production. So we're pleased to say that Katanga is a new asset, it is being 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 also commissioning the asset plant at Katanga. We had a bit of issues during COVID-nineteen getting people on into the country, but I'm pleased to say it is ramping up well now and it should start operations on the second of September this year.
Conyamba is still an issue. We are only running one line at Conyamba. 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 2 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 1st quartile, extremely low cost producers, especially in copper. We have 3 great copper assets. If you look at Katanga, if you look at Kalawasi and you look at Antamina, we're 3 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 spoken enough about that, the commitment to strong BBB. We spoke about the net debt. We have to get it below our target of $60,000,000,000 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 spoken about this in the past, the transition to the new generation of leadership is taking place.
It's taking place over the past 2 to 3 years with most of the senior managers having left and the new management team in place, 1 or 2 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 excess capital to shareholders. We'll continue being disciplined with our capital allocation framework. We do have potential brownfield 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 brine fields. We'll bring back any assets which are care and maintenance at the right time. We don't wish to add new tons 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 tons into the market, which it does not require to bring stability to the market. So I think that gives you an idea of how Glencore looks going forward. And with that, we open for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. 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 1 to 2 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. Yes, 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 180,000,000 tons of coal, we believe is reducing the imports around about 35,000,000 tons.
You have China, we'll be reducing imports around about 33,000,000 tons. So we think the demand has been cut by COVID in the 985,000,000 tons seaborne market by about 133,000,000 tons. However, with that, the coal prices come down. So certain countries have cut production. We believe Indonesia could be down around about 50,000,000 tons.
So we our calculations, the markets lost about supply about 120,000,000 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, 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 Prodeco into care and maintenance and we've cut 7,000,000 tons out of Australia. And hopefully, we believe with 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 what for our original 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 40,000,000 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 still generates cash for the company. And Steve gave you an idea of the EBITDA, which is about $1,300,000,000 $1,400,000,000 at current prices. So still a good EBITDA generator and the cash flow generator for the business.
So we'll continue assessing it, but coal still should remain within Glencore right now.
Okay. Thank you.
Thank you. Your next question comes from the line of Ian Russo. Please ask your question.
Hi, good morning. I had a couple of questions. Just firstly 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 spot 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 spot prices fall, how much flexibility do you have in the business to deliver or bring Med Den 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. Yes, safety is not ideal. However, having 6 fatalities is concerning at 5 incidents. Peter Freyberg and his team is working extensively in this area.
And as we said, if you look slide 4, 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 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. However, this is no However, this is no excuse, but we do have a lot of assets around the world. As you correctly say, some of the assets, what we call the tail assets, which do give us a lot of management time to ensure that they operate under the same standards Glencore would like at all its operations, of course, will have to be reviewed over time.
So we continue focusing on that area. Up until June, we did only have 2 fatalities. 2 is already too much, but we were performing well. Unfortunately, in the last month, we did get 4 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.
Yes, Ian, on the I mean if we look at Page 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 $2,000,000,000 there, only requiring a no, we're not saying, as I said, 0.8 is 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, which is passively materialized 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 1 month or so 1 and a bit already. And so you can say, well, let's bank that. Obviously, pricing didn't start from 1st July.
So that sort of materiality of lower prices gets less and less as we head towards end of the year. So I think
the pathway
towards 0.8% being conservative on working capital, the cash from operations already is low relative to the prices in the last week or so, particularly on the pressure side. And yes, I think there certainly can be some long term monetization. So we don't want to we're not promising in this particular area. But again, Page 29, we update on some of those stakes as well. There's the sort of Rosneft stake, which is still there at about 300,000,000 dollars Some point that will monetize as well at some point.
The sale of that Motorola one down at the bottom, that's a deferred consideration from the sale of that asset to Anglo Platte a couple of years ago, which is certain volumes. We unrisked on volumes. It's only price participation around some PGM, rhodium, platinum, palladium. At current spot prices that is at least sort of $200,000,000 to $300,000,000 and if that's sort of over the next 3 or 4 years, we'll start banking $100,000,000 to $150,000,000 a year on that. We're already 6, 7 months in.
So you can actually bake in some of that, that the cash flow comes in installments over the next 3 or 4 years. There's still some old U. S. Oil infrastructure, which is quite valuable today around the Californian side as well. But again, there was a piece that wasn't sold into that HG storage.
That could work its way through. There's certainly a few 100,000,000 there. So a variety of potential opportunities there. We also announced a purchase of an asset 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 given the sort of structure of that business. We're actually going to collect about €300,000,000 that should close Q4.
So there is some proceeds coming in. So there is some there is a few bits and pieces that could be in aggregate a reasonable size. We haven't baked that into that slide of 17, but let's see how we go. I think the pathway and the sort of risk attached to it or the derisking attached to getting below 16 is pretty comfortable, notwithstanding almost any price environment that you may think in the next 4 to 5 months.
Okay. Sorry, and maybe just a follow-up on the marketing performance. I see in the spot illustrative numbers, you're still using the midpoints of the range. I mean, obviously, if you 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 top end of
the range for the whole year?
Yes. 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, looking at 3,200,000,000, we've made 2, so you should get 1,200,000,000 in the second half. We want to be a bit conservative.
Markets do different things over the next 6 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.
Yes. 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 illustrative point. But hopefully sort of from a top end that the people that's obviously the marketing people haven't said it's a great sort of 6 months roll for 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 would you could highlight related to anti COVID and treat as one offs in H1, 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 your automotive outlook is still pretty subdued? And my last one on coal, in a context where you're clearly making some portfolio changes post COVID, what is the future for Cederon where we can sense both your other partners or 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 that. 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're still stuck with it. I mean we've still got these extra protocols and hygiene and cleaning and sort of somewhat some inefficiencies.
So for as long as we're in an environment where we're having to be having to have these sort of precautions, I don't think we're going to be out of it anytime soon. So I wouldn't say it's necessarily hugely material that we wish to highlight that, Simon.
Yes. Opportunities on trading silver and what are the opportunities? I think we're seeing the same commodities. We take the opportunities when they come.
On the LNG side of
Yes, LNG should grow. As Steve said, we've got this new terminal. Hopefully, that will assist the LNG business to grow there. So that should grow. But as I say, we look at at 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. Like happened in the first half, various opportunities came definitely on the contango plays in oil that we took advantage of that and that's why they've done well. So we're there, we're very active in the market. We got the balance sheet that can handle it.
And as Steve has explained clearly, because of our balance sheet, we're able to take advantage of the 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 Gyron, no, I think we'll still keep Gyron for next year. We said we're going to delay the start up of Gyron 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, Xyron will come on in 2021. Regarding coal, Cerrohon, I can't talk about my competitors. Cerrohon still performs, tonnage has been reduced because of last part because of COVID this year.
It's clear the markets which sell and sell the coal into the European market is more difficult, but we'll wait and see what our 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.
Yes. Good morning, gents. Thanks for the call. Just two quick ones for me. 1 on Succession, the other one on Volcan.
First on Succession, over the half we had the announcement on 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 Vulcan, it's a relatively recent acquisition.
Can you really sort of talk us through a little bit what happened in terms of the impairment?
Yes. Okay. On succession, we've said clearly what will take place and we're moving through the succession plan. And as you say, Daniel had departed last month. The old generation, we are there are not many of us old generation left and we're working on it and it will happen at the right time.
COVID doesn't affect it. Yes, it affects travel a little or people when they're introducing the new guys, 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?
Yes. Volcan, like you said, fairly recent acquisition, think it was sort of 2 or 3 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 our tax and minority interest and you get to about 350. The 350, which is discussed in the financials somewhere was effectively the original, I would say, call it premium, but the surplus of purchase price over Volcan's book value themselves that we ascribe value to it.
It's a very rich resource, some prospective company across South America having a lot of opportunities and 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 $350,000,000 charge for us on the bulk hand side. But the base business is, there's sort of 2 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 a follow-up, if I could. So 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 Myles Alsop from UBS. Please ask your question.
Great. Yes. Just on a few assets first. Lipani, with the copper price recovering, are you reconsidering whether to Mossbore the mine? And with Matanda and the potential restart in house, the kind of negotiations going with the DRC government around the sulfide processing investment?
Secondly, on Connejambo, it's still EBITDA negative. You seem to be incredibly patient with the asset. Are you is your patience wearing thin? Or are you still very confident that once it's running with 2 lines, you'll be making a more meaningful contribution? And then maybe going back to 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 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 Koneamba, of course our patience is wearing thin. It's a long time to try get that asset up to nameplate 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-nineteen. So it doesn't make sense to start up the 2nd line right now. 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 2nd line up and running, it will work as well as the one with 2 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. We 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 a lot of nice statements about the demand for nickel in batteries, etcetera, hopefully demand is there and this material will be required in the market. On management, we're working through it.
We still got 1 or 2 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.
Okay. And just on the tender and the discussions with the DRC government around the 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 shut it down. Once again, the Glencore policy, if we believe a market is oversupplied, we don't need the operation running. We also had the issue of the oxides and the sulfides and we had to understand the level of oxides and sulfides and the cost of processing the sulfides. Pete and his teams are going through that operation right now and they're assessing it. And as you can see, the cobalt price is not great at the moment.
And as you 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. It's actually mostly sensitive to cobalt prices, not copper prices in
terms of its mix of revenue. Maybe it's sort of fifty-fifty whereas you've got other operations are more geared towards copper. So cobalt is a key sort of 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 price is 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 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 Alain Gabriel from Morgan Stanley. Please ask your question.
Good morning, gents. One final question for 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 sort of $1,000,000,000 for marketing minimum 25% 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 it, this sort of M and A. So you need to look at the other elements of what may be consuming cash flow and what your net debt and ratios potentially sort of looks like. So I'd say the working capital has that temporary build and how that sort of developments has sort of jumped 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-nineteen was obviously a great test of your free cash flow generally in assets and performance and marketing, which has stood up pretty well in 6 months from a cash flow pre working capital. We're just having to sort of prioritize 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.
Your next question comes from the line of Dominic O'Kane from JPMorgan. Please ask your question.
Good morning. Two quick questions. Just going back to Bhapani. Obviously, the decision to mothball was made at a copper price about 30% below where we are today. Is Mapani cash flow positive at today's commodity prices?
And I wonder if you
could just go into a bit more details in terms of the kind of 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 $2,000,000,000 disposal target. Obviously, a more probably a more favorable 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 are having 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. 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 $2,000,000,000 I think we spoke about $1,000,000,000 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. 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 takes less management time from us to look after them. So we will look at that. They don't contribute large amounts to the EBITDA 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 1,000,000 ounces of gold, not 600,000 ounces. The main gold asset in the company is Kaizinc. It does generate, you can imagine that the current gold price today, $2,050 it does perform exceptionally well. There have been various offers over the U. S.
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. So 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 framework in mind.
I mean, Tom, just in terms of encumbering or unencumbered, I mean, all of Kazink is also unencumbered from a sort of gold. We're sort of exposed. We did some we did 1 Silverstream, 1 Goldstream 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. It probably takes about 150 or so relative to spot out of the EBITDA to cash flow bridge at the moment. But for the most part, we're still positively exposed to copper, zinc unencumbered, I mean, that occurred to gold and silver. And obviously, as Ivan said, we did there was the M and A, the gold for these things. I mean, obviously, Vasylkovski is very attractive asset out there.
There has been quite a bit of reverse inquiry and people had logged sort of interest in there. And fortunately, we didn't action any of those today because the price would have been sort of $1500 went some of those level of interest came in and we're sitting at sort of $2,100 It is I mean there is a certain countercyclical natural hedge argument around 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.
Yes. I mean, just on the 1,000,000 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. Okay. Okay. Thanks.
Thank you. Your next question comes from the line of Sergey Donsky from Societe Generale. Please ask your question.
Yes. Thank you very much. Three questions from me. First, Katanga, you mentioned that it has performed in line with expectations, but without providing any details. Katanga being such a focus 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?
2nd question, your illustrative coal division economics, you used $60 coal price, which is I think about $10 higher than spot, does it mean that in today's environment, coal business is generating basically 0 EBITDA? And lastly, just conceptually, it looks a bit counterintuitive. You log a strong year over year improvement in cash flow, including a 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 make to account for such events like this?
Thank you.
Okay. So guys, 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 it's forward curve. 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 yes, spot if you say what are we generating today, we've also got fixed price contracts. We have 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 as sort of 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. And it is quite a contango steep curve in coal across the various indexes as well.
Contango is yes, it's sort of it's true, it's sort of left the list at 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 ours updated, because still we got quite a cost reduction process coming through the asset plant, as Ivan said, gets commissioned 2nd September. That's a huge downshift in terms of their sort of costs. So that 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. Catangar has moved from a negative into quite a reasonable positive and it will move into the low 100,000,000 into the high 100,000,000 and ultimately into the sort of 1.5 to 2,000,000,000 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 cost looking for 2021, comparing that to 2020, 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 story as of 12 months ago. So it's obviously performing well. The 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 6 months.
I would 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 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 capitalize for the long term, that's clearly more positive in terms of cash flow. We all need to 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 Your
next question
comes from the line of Tyler Broder from RBC Capital Markets.
This one's probably for Steve. With the transitory nature of the balance sheet, seeing the net debt higher, strengthening commodity prices coming through, but then also, as you mentioned, the coal supply, we're seeing 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 as some marketing, I guess, with the working capital effectively full at this point and 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 a sort of balance sheet versus opportunity perspective? Thanks.
It's not impacting at all in terms of impinging business. Liquidity is obviously very strong. Hopefully, we've peaked in terms of working capital, so 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 in 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 $2,000,000,000 of earnings on the table, which is the once permanent, the once temporary or at least it sits within the balance sheet is 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 and I think one would sort of collectively say would be a 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 navigate cycles, have more cushion, have more 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 ability to 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 build in 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 2021. 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 yes, I don't want to be bouncing around the 16. I want to be certainly, I would have thought in the mid of the range, mid to lower part of the range.
And I think you 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 is in the business and can equitize and get value 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 rerating 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 constituents 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. Thanks, Steve.
Thank you. And your final question comes from the line of Myles Alsop from UBS. Please ask your
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.
Yes. I mean, there was probably what the sort of generations 1, 2, 3. I think I haven't spoken for 3. That was probably a 3.5 maybe in that sort of
It's a mixed generation. We're trying to work hard. We're switching between each
I'm sorry, I'm not part of the old guys, but I'm not part of the new guys. He moved
from us and he went to Extrard and he came back to us. So we're still trying to work out which generation he fits in.
Not going anywhere, Mark.
But he ain't going anywhere right now.
That's good. Thank you.
Okay.
Cheers. Thank you. I would now like to hand the conference back to Mr. Glassenberg 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 EBITDA for the U. S. Spot price is looking very good, as Steve said, around about 10.5 with an extra $300,000,000 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.
That does conclude our conference for today. Thank you for participating. You may all disconnect.