Good morning. Welcome to our first half results for 2019. Thank you for joining us here today and by webcast. This morning we have our CEO, Ivan Glazenberg our CFO, Stephen Cowman and our Head of Industrial Assets, Peter Freyberg. I'll hand over to Ivan to commence the presentation.
Okay. Good morning. Okay. To give you a summary of the results for the first half, as you can see, EBITDA is CAD5.6 billion which is down 32% from the previous half last year, would be $5,900,000,000 pre the $350,000,000 which we mentioned during the production results in respect of the cobalt loss on the mark to market on the non cash part of that. Cash generated by operating activities before working capital changes is CHF5.4 billion, which is down 21% from the previous half first half of last year.
And net cash flow is DKK2.2 billion. The ramp up development assets, which we all know about and talk about, which is Copper Africa and Koniamba has weighed on our earnings and that created a negative EBITDA of CAD400 billion during the first half of the year. These assets offer significant upside when we hit steady state of production levels. And as you know, with ramp up assets, you always have these problems And we continue to have these problems in both Katanga and Coniyama. But that's why we have Peter Freyberg here today, and he will take you through the process and where we are getting on those 2 very important assets to the group, which will be major producing assets, both nickel, cobalt and copper, which will be generate for the future battery car industry.
We have a strong cost position for our key commodities. And if you look at it, the first half cost performance on these key commodities, if you just look at copper alone, excluding the African copper, our production costs are CAD0.72 per pound. And as you know, that is extremely low compared to our competitors, etcetera. So we're really at the low end of the cost curve on those assets. And those are long term copper assets.
Looking at zinc, you can see our costs are low, dollars 0.03 including the gold credit, excluding the gold credit, dollars 0.40 per pound. Nickel, excluding Konejamba, once again one of our ramp up assets, dollars 3.29 per pound and thermal coal, our average costs across the border of CHF46 which leaves healthy margins with the coal prices during the first half of CHF32 margin. Marketing, as we always say, a diversified part of our earning activity. It's a constant earner. We always say it even in difficult times, it's between $2,200,000,000 to $3,200,000,000 And as you'll see in the first half of the year there, it's $1,000,000,000 It's down 35% on the previous first half.
But if you exclude the cobalt and we explained the situation of the cobalt where we transferred the cobalt from the mine into the trading operation and we took it at the market price at the time and thereafter we got a mark to market. But if we exclude that, we would only be down 13% on the marketing during the first half. The balance sheet in extremely strong shape. And as you know, we have tried to operate with a much more conservative balance sheet. And all our debt facilities have been renewed in March, April, and bond maturities continue to be kept at $3,000,000,000 maturing every in each year and not more than that in any particular year.
The net debt of CAD16.3 billion that's at the upper end of our target, which we mentioned, we would like it at roundabout CAD16 1,000,000,000 but that is after the CAD1.1 billion of leasing liabilities, which were recognized as reported during the first half of 2019 in terms of the new leasing standard accounting policies, we've got to capitalize the leases and you put the debt on your balance sheet. And that was previously treated as operating leases, but Steve will talk in more detail about that later. Planning, we're planning to reduce a healthy 1.4 net debt to EBITDA ratio towards the 1 range, which we've always said, we'd like to keep it within the one range and we'll get it there, we believe, within the next 6 to 12 months. And that's why we'd like to keep it in the current uncertain economic environment which we exist today. Looking forward, full year marketing adjusted EBIT is tracking towards the middle of our range 2.2 to 3.2.
We should be within halfway of that range and that's the guidance which we believe we'll get. That's excluding the CAD350 1,000,000 cobalt loss, which we spoke about earlier. Forecast industrial production is weighted towards the second half of the year. We will be increasing production in both copper, zinc, nickel, coal and oil, and that should increase the production in the second half of the year. And Peter will talk about where we're sitting there on the ramp up assets to ensure we get those larger increases during the second half.
Extensive operational and cost improvement initiatives are underway, and we think we're getting there in most of these assets. But once again, we'll get more detail of that later. Safety, year to date, it has not been good. We had 11 fatalities and 8 incidents. That's not a good level.
Most of these are at the focused difficult assets, but a lot of work has been put on that to improve it. We've restructured our HSEC and human resource teams, and we're reviewing the group approach to safety. And that's another point that Peter will give further detail, how we are addressing these issues and what we're doing to ensure that we get 0 fatalities at our operations around the world. Integration of sustainability is a strategic priority of the firm. We act on this commitment through transparency reporting our performance and progress.
And over the first half of twenty nineteen, we have released and published our human rights report, new water report, payments to governments in 2018, declaring all the mines taxes we're paying to the various governments and including part of our trading activities with government organizations. Sustainability report, modern slavery statement reports, so those are more detailed reports which we're releasing within the company and continue to do more of that going forward. So with that, I think Steve will talk about the financial performance of the company and in more detail how we performed. Thanks.
Thanks, Ivan. Thank you all here this morning and for those that may be listening in on the call as well and through the webcast. Just on Page 6, a few of the headline financial relevant details as well. I'll get into more detail on some of them going forward. But unfortunately, we don't have iron ore.
So hence, you see this picture as opposed to some of our some other industrial mining companies that we'll be showing year on year improvements as we go through. I'll show the various variances down the track. But as Ivan said, 5,659, reflecting the 3.50 cobalt down 28%. The commodity lower prices for our basket of commodities was the main drag during this particular period, particularly coal and cobalt. And obviously, we've made some moves in terms of cobalt with the announcement of Wotanda Roll.
So, I'm sure there will be questions on that later on and Peter will talk about that in trying to arrest the lower price environment and the oversupplies we've seen in that particular market. Marketing, Ivan has spoken about that as well. I think a pretty solid performance outside of Cobalt, which has been well flagged during the last 6 to 9 months as well. I'll talk about that on the marketing slide. I think the middle right hand side is quite relevant.
I'll put that up, something you may not normally see cash generated before working capital changes as a more as a better cleaner proxy for the cash flow generation in this particular year or this particular period, which, a, irons out the non cash elements the cobalt and the like. So you can see that only down 21% compared to maybe 30% down in EBITDA. And it also normalizes or avoids the mismatch in our tax payments in this particular period during H1 twenty nineteen, which would affect the funds from operation number of that 3.54. Percent. We did have some catch up taxes that we had to pay in respect to 2018 earnings, particularly Australia, a little bit in DRC as well.
You'll see that on Page 30 of our financial statements where we had a tax liability of $1,100,000,000 at the end of last year. It's down to about 500,000,000 dollars So the overall funds from operation reflecting both interest and tax should normalize going forward as that lag effect of tax now works its way through the system. But the 5.4 percent despite all those commodity prices and despite everything that we've come through and some volume weighted more to the H2, a 20 odd percent reduction in that has driven a pretty good cash flow generation performance and we'll look at the net debt movement as we work our way through the system as well. CapEx, there's a slide on that later on, but that's tracking well within our annual guidance of around $5,000,000,000 with $2,200,000,000 at the half year. Net debt, as Ivan said, obviously impacted by $1,100,000,000 of the lease standards.
That's a standard that's been brewing for a while around effectively converting all lease type obligations, including for us. It's not just about certain within the industrial and maybe a handful of trucks and a few other pieces of infrastructure that may be in there, but it's also affecting some of our chartering commitments, shipping leases and these things, which may present themselves. So, dollars 1,500,000,000 for our businesses of our scale and diversity is a relatively small number I would have thought against what people may have thought would have presented itself there. And dollars 4,700,000,000 of distributions this year and continuation of the base distribution plus the buyback of DKK2 1,000,000,000. So where did things present themselves within both the industrial and then we'll get to the marketing component.
This is the largest component. We're just a warm up for the keynote speaker later on, Peter Freyberg, who'll be talking later on through the business. A big part of Glencore's overall portfolio, clearly resides within his mandate. And it will go into and stress the work that's happening and obviously, confidence in the pathway towards going from negative cash flow around Copper Africa, Conihamba towards quite material positive cash flow in that during the next 24 months. But the base business outside of that, I think if we look at some of the numbers on the extreme right in terms of EBITDA margins there, they've held in and they have very strong cash flow margins reflecting the competitive cost basis that we have within those particular businesses.
So Copper ex Africa, 52% margin unchanged from where it was previous year, obviously dragged down overall with Copper Africa itself. Zinc held in pretty flat as well, including byproducts that we have within that business. Nickel as well. That will is somewhat volume weighted. We'll see a big tick up in the nickel business as we go the full year.
So those EBIT margins would be expected to increase and coal has held in at about 40% as well. So of course, commodity prices, I'll show the bridge on the next page, has been the major variance period on period, maintain strong cost performance and margins within our base business. And clearly, Copper Africa, it's not just about prices, it's also cost, huge cost pressures that we've faced, particularly in this particular period. Some should be temporary around regional pricing structures around reagents, consumables, asset price and the likes. I'll talk about that later on as well.
That also reflects the current margin pressures and sort of economic situation of Matanda. It's not just about pricing and tax and the like, it's also asset prices and consumables in the region as well. And coal, we've been able to hold pretty flat for the year at around $2,100,000,000 a little bit lower on pricing, but offset by additional volume contributions from some of the acquisitions we've done in the last couple of years. If we do look at that just the industrial bridge, the biggest bar by far will be the price of $2,200,000,000 half and half. We've shown some of the price reductions, obviously, cobalt at nearly 60%, period on period, 6 out there as well.
Coal in its various skies is mostly thermal coal across both the Atlantic as well as the Pacific. What's missing as well is lead was also down 20%, affecting the zinc business, quite a lot of production in lead as well and increasing our position there. What made up that 2.2, about 0.5 was coal. On the pricing impact, dollars 1,800,000 was then metals. And of that copper Africa itself was $800,000,000 of which $600,000,000 was cobalt.
So by far, the largest impact there zinc lead was about $400,000 most of that half of that in Australia nickel 0.2 including some cobalt and other was the rest of copper and some chrome as well. Hopefully, some of those commodities will see some improvements going forward. Cost was largely a nothing period on period. Obviously, some ups and downs, but largely offset each other. FX provided some relief in Australia, South Africa and Canada are some of the bigger examples of that.
That is providing additional tailwind as we speak at the moment. And I'll go through a bit of a mark to market at the end. We cut the books off at the end of July for our 12.8 current spot. If we mark today, it's not very different from that. There's been some metal price reductions.
But equally today, you've got the rand close to 15%, big benefits to our chrome and coal businesses down there. You got the Aussie dollar dip below 67 or so overnight and the oil prices, which is a big consumer in diesel going into our various businesses. And we've segregated for you just the cost volume impact of copper African condominium, that's not the price impact, which was a negative 400. Dollars A lot of factors are feeding into that and Peter can cover those in more detail later on. But we've almost on Katanga, which feeds in there, we've had almost no cobalt sales.
We're still working through the uranium issue. We are producing, but we're not selling the cobalt. We'll eventually be sold. That will manifest itself within that particular variance. The reagent costs through acid lime and the likes, and I'll talk with how extreme some of those movements have been.
Extra maintenance also carried out in Mopane, particularly through the smelter. The first period of the DRC mining taxes also have come through. It effectively was effective around 1 July, 30 June last year. So we didn't have any of that in the first half of twenty eighteen. All that's come through the first half of twenty nineteen, so a big increase there.
And of course at Motanda, we've had some lower copper volumes come through. So how does that look in a slightly different way of industrial contribution, cost developments and volume developments? We provided on Page 42 later on, you'll see some of the detailed bridges between some of our guidance expected contribution in EBITDA for the first half compared to actual. And I would say we were across broadly in line on zinc, nickel a little bit behind on mostly on cost due to byproduct credits, coal. We would have been a bit on some costs to do with currency as much as anything else.
Copper would have been the miss around costs in particular, where Africa in particular has been a large drag. As you can see through the bottom right, hopefully, that drag has peaked around sort of maximum cash flow consumption within those businesses, and we'll look to restore those to increasingly to breakeven through paying for themselves and ultimately being a significant cash generate as we go through. So in the $1,300,000,000 copper, dollars 1,600,000,000 was ex Africa, dollars 0.3 negative on Africa. And the unit cost, whether you look unit cost ex Africa or including Africa, the low cobalt prices was clearly a major effect. To give you some sense of cost pressure within that business, which would have affected both Motanda and Katanga, asset prices for the were up 31% period on period and we consumed a lot there and that was one of the catalysts for obviously building our own asset plant there, which we should have up and running through the first half of next year.
Once we've got the asset plant up and running, the pricing will be a it will drop to 1 third of current prices. That's the sensitivity that we have. So there's a 35% increase in asset prices. Lime prices are up 75%. These are some key price consumables within those particular business.
And also through the genesis of the power upgrades of the Inger and the transmission lines, you still got a period where we're having to have a mix of some imported power into our business as well, which is twice as expensive. We should be within the next few months, we should be able to function within DOC 100% on domestic power situations. So you could double power prices on about 1 third of our power had to be imported at Katanga during the period as well. Within zinc as well, you'll see a partial timing differences during the periods on some buildup in inventories. We had 59,000 tonnes lower sales against production within the zinc business as well, which we should catch up some of that as we go through.
Within the marketing, Ivan, obviously, touched on this. Very strong performance on the energy side. Oil was the standout over there during the 1st 6 months, a very strong performance year on year. Coal, actually weaker year on year, somewhat offset by particularly a weak Atlantic basin around competition with gas, carbon taxes and the like, which weaken both demand and the general structure of that particular market. All these things should turn around, obviously, at some point.
2018, I would categorize as a very as quite a tough benchmark of relatively high watermark, both within the metals and in aggregate at 1.5. You annualize that, you're very much at the top end of our range as well. And even last year, as much as we were 1.5. At the beginning of the year, we closed more around 2.5. So I think for a full year, tracking against last year and tracking comfortably within our range as well.
What's somewhat lost in all this, which is just worth giving a little insight into that other color that the bottom is our agribusiness, which really is a share of net income now, which was peanuts for the year around $20,000,000 $20,000,000 There's a share of net income after interest, after taxes, after some big amortizations on some revaluations of that business was done based on sale. The underlying business was actually at EBITDA level, was up 6% period on period. So quite a strong performance at the Glencore Agri Business, meeting budgets within that business, which is pleasing after quite a tough 18 month or so period within that business and that does herald the prospects of starting we haven't paid dividends out of that business since we set up the Glen Quaggery JV a couple of years ago, The prospects of dividends coming through into the future and obviously increasingly material nature has improved and we should start being able to access that subject to whatever their own development and growth objectives may be. And that's something I'm sure none of you have got in any of your models necessarily as we go through. That would feed itself through into cash flow FFO and the likes as we work through.
So don't forget about Glencoeagri, it's still bubbling in the background, it's actually performed quite well during the 1st 6 months of this year. CapEx, very little to say on this other than as you were, full year guidance still unchanged at the $5,000,000,000 and the $4,800,000,000 or so average over the next 3 years. Bottom left is just some of the projects being worked on in the respective businesses. In 6 months' time, we'll come back and just update on what the production profile then looks like over the next 2 to 3 years as well. So tracking obviously just 2.3.
If currencies stay where they are, as I said, that provides a bit of a tailwind, not just at the OpEx line, but also CapEx because a lot of CapEx today is really capitalized OpEx around anything you spend money that has an enduring benefit beyond 12 months. So a lot of underground development across the business, all the stripping and the overburn removal just gets capitalized as part of these numbers as well. A lot of that spend is in Aussie dollars, it's in pesos, it's in Peruvian, it's in rand, it's in these currencies. So we haven't reflected that yet. In a real mark to market, if you sort of say we're going to show later on, I'm at $8,000,000,000 mark to market maybe with $12,600,000,000 $12,500,000,000 at the moment, CapEx as well.
Taxes and interest would be lower. It doesn't change the net cash flow. Balance sheet, a few numbers over there. So, dollars 16,300,000,000 net debt around the top end of our range as well, influenced quite a bit by the new leasing standard, dollars 1,100,000,000 Page 9 of the financials provides the full bridge between the periods from the cash flow generation, the CapEx, working capital, buybacks and some noncash movements, leasing effectively noncash And the assumption of some debt in a couple of acquisitions we did as well, the Astron Refinery down in Cape Town took on about $200,000,000 or two times through the cycle within the 10 to 16 we'd committed or noted about 6 months ago to try and hover or be closer to the one times that still remains the nearer term objective looking to get there in the next 6 to 12 months. It's not an absolute die in a ditch target.
We just like the 1.24 to be heading south as opposed to north as we manage the business going forward as well. Liquidity is very strong, freshened up all facilities, so a good position there. Capital allocation slide is unchanged. Just a few points to note there would be the non core targeted asset disposals still remains something we are working on, progressing a range of options with the goal to deliver, as I said, still at least $1,000,000,000 of long term asset monetizations for the next 6 to 12 months. Just post June, we've done a couple 100, $150,000,000 to $200,000,000 of smaller things that have aggregated many things.
I mean, even there was a close of a small Brazilian iron online, Ferris Resources, which Vale brought. We had 3.4 percent of that, that generated $30,000,000 $40,000,000 the other day. There's some vessels, some shipping that we've accumulated over the years. We're monetizing some of those. There's potentially a couple of 100,000,000 there.
We're halfway through that process as well. Some U. S. Infrastructure still on the West Coast of U. S.
Is something that we're looking to progress. We're looking at potentially getting out of the upstream business in Chad. There was some noise on that, so process on the go there. And just long term loan monetizations is also something I would put into that. We have some longer prepayment structures to that have been at levels higher than we think that they make sense to be in a long term fashion.
I think there's going to be some reductions there, all of which could look to meet the $1,000,000,000 target and reduce debt accordingly. So if we can now get into the building blocks for a spot or a 2019 type number, we're on Page 15. Let's skip quickly to Page 16. I think it's quite important on the which is the volume and some of the weighting from H1 towards H2. So we've shown actual production guidance 2019 for our respective commodities.
We're going to see a pickup in Copper ex Africa, 75,000 tonnes. So we were 475,000 first half, you can see. So that means mathematically 550,000 in the second half, where is it coming from. Caluasi will bring about another 20,000 extra tonnes period on period, a combination of grades and timing of maintenance and the likes in North Queensland, which is where we had severe flooding impacts across our Mount Isa operations, where effectively you had 6 to 8 weeks of no product moving towards the refinery. That can pick up 30,000 tonnes and then some other bits and pieces.
Zinc, you've got quite a big increase, H2 on H1 as well. To meet the 1195, you're going to have to do 659,000, an extra 100,000. So Kaczinc will bring about $20,000 Again, that was to do with timing of treatment of third party material and some safety stoppages that we allude to ISA again, which is Lady Loretta as well as George Fisher will bring another 30,000 Some of it's just ramp up of Lady Loretta. It's also to do with the North Queensland flooding and the entire system being down. McArthur River as well, generally due to seasonality and weather tends to have a better second half as well over the first half.
Nickel will also pick up a lot, 73 H2 over 55, hopefully delivering those tonnes in a better nickel price environment, which is one thing that has responded quite well. It's not just Koneyama, as Peter will talk to later on, that's less than half of that. But you've got I and O Canada, again maintenance shuts and Murren itself through a maintenance shut that was shut during most of April will bring another 4,000 or so. So nickel is the biggest, at least in percentage terms and in absolute terms. It's looking to go from $100,000,000 or so in the first half towards $700,000,000 or $800,000,000 EBITDA contribution.
Coal will bring an extra 9,000,000 tonnes second half. Colombia, Australia, South Africa all contributing, but some of it M and A, some of the timing. And then oil is quite a big step up due to Chad results of drilling program that we have down there. So all of that does explain quite a bit as we then go back to Page 15. Well, where are we in a full year sense?
Maybe right to left coal, 3.9% full year. That's a slightly lower second half, reflecting macros, coal price, the like. So 2.1% first half, but we're doing better volume. It does reflect a lot of fixed pricing that we already have within that business. And some updates, whether it was yesterday or last week that we did this as of last week, the coal team is pretty confident that that's still in where they project that business roughly to finish for the full year as well on the coal side.
Nickel is the big jump, as I said, 0.7, up from 100, which is really a function of volume coming through in Canada and Australia and Kearny Amber being less bad, hopefully in the second half than it was in the first half as well and higher nickel prices, one of which is in fact, even nickel price, you mark to mark that today, you can add another $100,000,000 potentially onto that as well. Zinc will be pretty much as it was, 1.9% for the full year, 0.9% plus 1%, higher volumes coming out of zinc. Macros have taken that down clearly a bit, but also we produced a lot gold and silver within that business, which has increased 10% to 15%. So don't forget some of the precious byproducts that we have as well coming through. And copper is goes from 1.3% to 3.1%, so 1 percent.
Africa is broadly the same, 0.3 percent, another 0.2 percent maybe in the second half. There will be a step up from the rest and that's still with North Queensland, Calawasi and cost generally still looking good in the rest of the business as well. So putting all that together in a what is the cash flow generation, what might be the prospects and the equitizing and the debt movement and the shape of everything going forward, Adding all that together, marketing at the midpoint of the range, you got $12,800,000,000 EBITDA at the spot, so slight recovery from the $6,000,000,000 or so pre cobalt this year. CapEx still at 5.1, maybe there's some there's a bit of buffer in there. We'll see how we go on the CapEx and that's cash tax and interest on a more normalized basis as well as we seek.
So, dollars 4,800,000,000 of cash flow, we've given all the building blocks to that. I think the big bold thing and that's a good segue eventually into Peter's presentations, will be the free cash flow temporarily impacted in that 4.8% to do with African copper, which itself Mopani Katanga is running negative around $1,200,000,000 in this particular year. So you got about 0.5 negative EBITDA and about 0.7 of CapEx as part of our $5,000,000,000 So you got 1.2 negative and with steady state production and plans accordingly, we should get to comfortably more than $1,000,000,000 of positive free cash flow out of around $1,600,000,000 of EBITDA of those two businesses 2 years down the track are not particularly heroic assumptions. We've used 6,500 forward copper and 15 pound realized copper to realized cobalt to derive. So there's a $2,250,000,000 cash flow turnaround story, which is clearly the first thing is just to stop the red, which will add $1,000,000,000 or so and then to deliver the positive cash flow.
And that's the big potential as we have going forward there. And to give some bit more in-depth analysis behind that and hopefully the confidence that the plans can get there. I can hand over to Peter at the stage. So thank you, Peter.
Thank you, Steve. Thanks very much and good morning to everybody. So I'd just like to introduce myself. It's the first time in this forum with Ivan and Steve, Peter Freiberg, who heads up the industrial assets within Glencore. I think you're all very familiar with the commodities that we manage.
And my role is to manage the industrial assets that fall under those. The overarching strategy for the way that we run the business really remains the same in the sense that each commodity department working together with their marketing and trading leads establishes strategies for those businesses that are appropriate for the markets that they operate in, whether it's in terms of volumes or the types of products that they produce. And my role within that is to make sure that within the industrial side, we have the right structures and strategies to deliver what we need to deliver. Also looking across the business, making sure that we have the right capabilities and skills and systems to make sure that we deliver what we say we're going to deliver in a reliable fashion. The intention certainly isn't with establishing this new role to build a large overhead in the business.
The intention is to make sure that each of these commodity departments can do what they're designed to do and deliver what they have to. At this stage, I have a very small team working with me principally today on HSEK. We've also got some people working on operational excellence projects and systems development, most of which at this time have actually been parachuted into assets where we need them. So it is rather a small team and the intention is to keep it that way for now. Part of what you see there as well is the fact that we do have technology groups with Glencore Technology working underneath the copper department and Expert Process Solutions, XPS, working under the nickel department and although they fall underneath those specific commodities, they work across the business in terms of support.
And this year, in particular, they've been of great value in terms of the way that I've used them in areas where we've needed them. So just talking about that and just quickly looking at what is happening in technology. There tends to be a focus on some of the challenge assets that we have and we are going to spend most of this morning talking about the challenges and how we're addressing those. But Glencore does have a technology capability in minerals and metals processing and we've been doing it for a long time. And it's quite interesting to actually see that 22 of the 26 ICMM members actually are using our technologies that we've developed, whether it's ISA Mills or ISA smelt or processes that are developed by XPS.
We are seeing and the philosophy and approach going forward will always be the right technology applied in the right applications for the right purpose. And we do make sure that the underlying fundamentals of the business are right to support the technology applications that we do. We're seeing some of these processes rolled out to businesses today. I was at one of the assets in Kazink where we're seeing some of the work on atmospheric leaching with some of the more complex lead zinc was there and certainly in terms of support, we're seeing a lot of work in the challenge assets. I spent most of the last 7 months actually traveling around and trying to kick the tires and meet the team.
The fact is that there are over 150 assets across Glencore. We are highly diversified business, both in terms of commodities and geography. That presents some tremendous opportunities for us and is a big part of the value component of the business. I have managed to cover, I think, most of the South American copper and zinc assets. Not that long ago, I was up at the nickel assets late last year, having a look at what's happening in Canada.
I have sampled the alloys assets in South Africa, looking both at Vondakor smelter and the vanadium works that we're doing there. And I've obviously spent a bit of time at Konyamba and Kazzink. But also in that time, I've probably spent I probably had about 5 or 6 visits to both the Congo and Zambia, which is areas that we have a lot of work going on at the moment as Steve and Ivan alluded to. What I have seen across the business is some excellence in terms of some of the assets and the way that they operate. We've got some world class mining practices and safety practices and some of the best processing operations that you get anywhere.
We have a very dedicated team across the business, a lot of driven people as well. But what we do have are some anomaly areas that do need addressing and perhaps one of the things that I have seen is that there remains a strong correlation between safety performance and operating excellence. So generally, where we have safety issues, we probably have operating issues as well. And that's certainly been the case in Africa. The focus assets at the moment and what I'd like to talk about today is what's happening in copper Africa and also the work that we're doing around Koniambo to improve performance there.
Just starting off in Africa, Mopane, we had an absolutely horrible start to the year and in the 1st few months, we actually had 6 fatalities at the Mopane operation, occurred in 3 incidences and result in us actually suspending the operations and bringing in a team, a very large team to try and help us understand what had gone wrong there. The fact is that Mapani 2 years ago had operated fairly well and had improved its safety very markedly. But in the recent history has lost control of that. We have got a team, we've made tremendous progress and I'll talk you through that a bit later. But it wasn't just the underground and the safety.
We also had a shutdown of the smelter. As you're aware, in June, we shut the smelter down and we brought forward a re bricking of that smelter that was actually scheduled for next year. So the second half of this year essentially is no metal production at Mopane and we're looking to start that up and ramp it up towards the end of the year. What I can tell you is that we have made progress with the safety. We do understand how we want to operate the mine.
We've got the right people doing the work right now. And we have a plan and we will be able to take that forward and get to the production levels we've invested for and what it's supposed to do. Katanga, Last year, Katanga was in ramp up mode, it produced 150,000 tonnes of copper and we had indicated to the market earlier this year that we were targeting around 285,000 tonnes. But as we ramped up, we've identified some bottlenecks, some maintenance backlogs and we've readjusted that plan to the point where now we're expecting to get around 235,000 tonnes this year. Obviously, there are issues and there have been challenges with the cobalt qualities and the cobalt production.
As early as February this year, we'd already identified solutions that didn't require the Ags plant, so we started producing on spec cobalt at perhaps a lower quantity than we would like. But we are progressing those plans and then ultimately, we'll build an IX plant there to make sure that we can deliver fully. But again, this is not a particularly large operation. It's certainly being ramped up and has all of the normal ramp up issues you would expect. But the plans we have in place and the team we have in place will enable us to get it to the 300,000 tonnes per annum copper, 30,000 tonnes cobalt at a sub-one dollar with byproduct credits cost of copper.
Then talking briefly about Mtander, you would have seen the announcement this morning. I'll just take you through some of the issues there and how we see its future playing out. But we are transitioning that to a care and maintenance phase later this year and it will be shut before the end of or at the end of the year. And then on Coniambo, we had a tough very, very tough, a very difficult first half. We produced under 11,000 tonnes of metal.
And we were certainly targeting significantly more than that. So we fell short by 8000 or 9000 tonnes of what I would have liked to have seen come out of that operation. But there are some things that we understand in terms of the fact that we ended up taking both furnaces down during that first half. We continue to have some power problems, but we are working through these. And we've got 3 initiatives running there at the moment that again make me reasonably confident that we can get that moving forward and that we can have a business there that delivers reliably what we invested for and what we designed it to do.
Looking at focusing in now at Katanga and Mopane, Steve would have taken you through the numbers of where we are and where we possibly could be. Certainly, the first half this year with only 109,000 tonnes of copper and 6,000 tonnes of cobalt at Katanga, you end up with a very high unit cost, driven by 2 things obviously, one is the denominator and determining that, but also very high input costs. And when you have these huge asset prices that we've seen and these increases in the asset prices and we're importing asset, as we indicated, the asset plant will only be built next year. We're talking literally 100 of 1,000 of dollars a day that we're paying for the asset that we could be saving once we run that ourselves. The 109,000 tonnes, we're targeting 235,000 tonnes, The chief bottleneck that we found this year was around the Electra winning plant.
It's a very straightforward maintenance catch up that we have to do there. So for us to start talking about $260,000,000 next year going up to $290,000,000 the year after that, we don't see major bottlenecks between us between now and then in terms of how we deliver that. I will take you through some of the work that we're doing across the different parts of the operation. But we are we do see 300,000 tonnes being quite achievable, 30,000 tonnes of cobalt as a long term steady life of mine. In fact, in the short term, we may exceed that tonnage because of the grades in the areas that we're mining.
There are certain costs out that are required and you would have seen that in the notes to this page to get to the $165 a pound. We've been through very detailed processes to understand our business and we have already identified very significant costs out that we can take through diagnostic phase. Mopane, Mopane is the numbers in the first half are just the unit cost is where it is simply because there are no tonnes there. And certainly for the year, it looks worse as we won't be producing in the second half and we're carrying all of those costs. But it is we're in a phase where we are rebuilding the smelter and we have the right work happening on the mine.
And we are positioning for a restart next year. There will be a small shutdown in the smelter next year to do some work that we couldn't bring forward to this year. But the smelter will be operating from the start of next year. We should be able over a steady life of mine and you can see that we've got 2 different levels from Mopane there. We believe that 140,000 tonnes is a doable proposition.
We have the hoisting capacity, we're building a new concentrator. The smelters oversee can easily accommodate that. In fact, we continue to smelt other people's concentrates as well. So 140,000 plus some additional tonnes if we optimize the underground the way that we would like to. And that swings us long term to a positive $300,000,000 EBITDA out of that operation at this prices that Steve was indicating, the $6,500,000 copper.
That would put both those African assets around $1,600,000,000 and obviously you got to allow for some tax and capital. But as we indicated this year, the cash position out of those 2 assets alone is in the order of minus 1,200,000,000 dollars So well in excess of the $2,000,000,000 turnaround is what we're looking for there and which is an achievable proposition. So just looking at Katanga, we implemented a review amongst other things when we started to see that we're struggling, but certainly part of my role and coming into this position was absolutely clear that we had some focus areas across the business, there's a crystal clear understanding that turning these two assets around, Katanga and Mopane and then on top of that, making sure that Koni Ambo delivers is probably the highest value thing that we can do in Glencore right now. But Katanga obviously also started to show the stresses and strains of the lower cobalt prices and wearing the increased taxation coming out of mining code 18. And then with the increase in the input costs, whether it was lime or acid brought this business under particular pressure.
And it's certainly as an operator, sometimes those things are good for having a good look at your at the operation to understand what we can do better. The thing that pleased me is that we decided to address it by utilizing in house expertise to a large extent. We brought in some of our mining specialists and I think a lot of you know that certainly the business that I used to be involved in previously in Glencore, moving dirt is something that we do in very large quantities. So the coal business moves around 3,000,000,000 tonnes a year and bringing an expertise to understand how we can mine and sequence and plan the mining operation better. We had people that were available And we've done a very full and detailed diagnostic.
I'll take you through some of the work that and some of the findings that we had and what we have to do to take the mining forward. But it's not a particularly big mine. It's in difficult conditions in terms of the materials and the geotech and the high rainfall levels and the groundwater that we have to deal with. But it's something that you can engineer your way through and manage your way through. Processing relied very heavily on Glencore Technology to come in and have a look at what was happening.
And we actually see ourselves improving recoveries, getting the electro winning plants working to at an optimal position and getting back to the getting onto that 300,000 tonne per annum trend. But for both of those activities, mining and processing, asset management will be key and again, we brought people in that we have in house to work through that with us and establish the right asset management strategies and make sure that we're doing the maintenance so that the systems and equipment can operate reliably and deliver what we have to deliver. 1 of the bigger levers that we've seen there is making sure that as a business, we've got the right team and organization in place. And we've done a lot of work. We did get some external help with that to help us do the diagnostic and go through every single department and every single activity and every single function to see how we can address that and make it fit for purpose.
And we do see material savings coming through that area. But also we see some opportunities such as making sure that we're utilizing the national workforce to the best of capability. And we're at a stage now we're actually getting into the change management, certainly on the organizational side and going through the detailed plans prior to implementation or as we start to implement. But the target remains to consistently deliver life of mine annual production of that 300,000 tonnes together with the 30,000 tonnes of cobalt, hopefully well sub $1 a pound. So just talking about the mining, excuse me.
If we break the business down into its fundamental components, it's a mine and together with some processing and some maintenance and you got to have the right team managing it. We have gone in, we have opened up the life of mine plan and looked at it in detail. They're quite high ratios at Katanga, making sure that you get the sequences right and the pushbacks right and you move the waste material into the right areas is critical. And we are well advanced for that work. And that I think once we've got that in place, that's fine.
To achieve that longer term plan, we've got to get the pit working properly. And you will know that historically we've had geotechnical problems, that drainage in the DRC in that type of geology is complex with a high rates of inflow. But with proper design of the drainage system, pit bottom layout, getting the drill and blast right, setting up the truck shovel operations properly, making sure roads and ramps and these sound like pretty 101 stuff, they are, making sure those things are done properly that the team understands what the expectations are is what will get it there. So making sure that you have a pit management team that can deliver that. We are well advanced for this work.
The designs are there. The understanding is there. We've changed the drilling blast totally. We've moved diggers around from configurations where they shouldn't have been to where they should be. We've done a huge amount of work on the roads.
So the productivity goes up, the costs come down and the reliability is there. On the processing side, there are key areas of focus. The asset plan absolutely critical that we get that going as soon as possible. As a project, we have added additional resources to make sure that we understand all of the moving parts in that project and that we can deliver it as we're supposed to. And that now we have a good understanding of the risks and we're tracking that very, very accurately.
Quarter 2 next year, it will be in ramp up mode and certainly by Q3, full operation. Restoring the electro winning, the setback this year was that. As the mine was developed, I think there was perhaps a lack of focus on some of the maintenance in electro winning plant. We've taken basically parts of the electro winning plant down, refurbishing them, getting them to the right standard and operating now. And it's looking very, very good.
I was there just 2 weeks ago again and the work is on track. Cobalt, as you know, we identified a problem late last year with uranium in the product. Our immediate response was to look at putting an IX plant in, which is ultimately the long term solution in terms of cleaning that up. But by February, we'd already identified that we could rejig the plumbing in the process and essentially brought some additional thickness and we started adding phosphoric acid and we're able to drop out the uranium within that process. We are still adding some additional thickness that we have to bring that to full capacity and that will actually see us producing proper full recovery of cobalt by the end of the year on spec.
And the IX plant will be brought in to fully clean that up and make sure that we can do on a 100% basis. At the moment, we tend to run on average in the low 90s being on spec. So we do have the odd parcels that still aren't quite there. So we will redesign that process, add the IX plant to make sure that the product that we produce is exactly what the market wants. In terms of the asset management, again, pretty safe straightforward stuff.
We do this exceptionally well in many parts of the business. And it's making sure that we've got the right capabilities on-site and the right plans and strategies on-site and that the work is followed in the manner that it needs to. We do see in various parts of our assets where we aren't performing the way that we should and that obviously adds more to the costs, means that we aren't producing as reliably as we can. And we have a straightforward plan that will sort that out in the future. We're also leaning on the OEMs somewhat to make sure that they work closely with us and participate in that and ensure that we're not forgotten in the long chains that they have going into the DRC and that we have the right componentry, the right service levels from the OEMs.
But there's nothing there that can't be sold on the maintenance side. So that's, I believe, well in hand as well. On the organizational side, restructure and rightsizing within the business is something that we need to do. It's grown over the years. There are opportunities to address that.
And we're at
the next
at the change management stage. We've done the diagnostics. We've identified what is in the universe or the possible there. And we're now going through that change management process to make sure that we do the right things to the right parts of the organization to deliver what we have to. There has been work done around the governance side with SAP implementation.
Today, we have a much better understanding of our numbers. Our procurement side has improved dramatically. We've got better control over the volumes and the cost of materials going into our business. And now that we sorted the SAPA, the reporting and the details that we can manage by are something that means that we can be efficient managers going forward. If you don't see the numbers, it's very hard to navigate.
And then partnering with key stakeholders and this is fundamental, if we're going to be successful there, we've got to get a few things right. Certainly, at Katanga, we have a partner and working very closely with them is fundamental to making that go off making the business a success. But also we have some very significant community and other challenges and working with the government, both national and local is key to solving some of those issues. I think everybody in the room and everybody watching this webcast is aware that we had some very tragic events on the 27th June with illegal miners in the operation, where there were 2 collapses and a number of people were killed. This is a problem that is across a lot of operations in the DRC.
We're working very closely with the government to try and find long term solutions towards this.
But at
the same time, we are making sure that we control our site that we've got perimeter controls in place that we improve the security and working with the community itself in terms of improving what the situation is there. And long term, we will have a site where we don't get these sorts of invasions that we've been experiencing over the last 12 months. And that in itself brings a new stability to the business and allows people to concentrate on actually taking the business forward other than dealing with some very, very difficult problems that we've had to deal with in terms of those invasions and the terrible things that can happen with them. Just to look at some detail and we don't normally share this level of detail with everybody that's on the outside of the business, but we have put together a very comprehensive plan for Katanga at this stage. And as I said earlier on, it's not particularly large business in terms of the mining, it's 45,000,000 tonnes a year of waste.
And we're feeding into the plant around 13,000,000, so 12,000,000 tonnes putting a bit on stockpile. We are mining a little bit from the underground and that will ramp up over time. We're still thinking about how we right size that. We want to get if we can make the open pit more efficient, we can get more economic pushbacks and we probably won't have to chase the underground quite as hard. There are some benefits to operating the underground at the moment in terms of asset credits.
But we've done the detailed planning. We're running this option at the moment. We're very comfortable that we can get up to the 260,290,000 tonnes. The capacities are there throughout the system. We will see increase in copper grades.
Interestingly enough that some of the low copper grade this year is because of the artisanal mining. So we've lost copper and cobalt out of the mine because of those invasions that we've had. But there is a natural increase over the next couple of years anyway. So those that gives you the detail of the plan. We talk about a long term 30,000 tonne cobalt, as I indicated earlier on and foreshadowed was that we'll actually go through that average mark in the next couple of years, but then settle long term around 2,500 30,000 tonnes a year or 2,500 tonnes per month and on the copper side heading towards the 300,000 tonnes per annum.
Mopane, we talked about the 6 fatalities, 3 incidences, very, very difficult situation. I've been to each of the sites and obviously spent a lot of time with the team looking at what we can do to turn that around. As with the other incidents across Glencore and I will be talking later on about safety in general, absolutely unnecessary, none of those incidents should have happened. And there's a fundamental as an operator for 40 years, it's a loss of I'll tell you, it's a loss of control and we can bring that back into control very quickly and sort that out. We have implemented a program to we did implement a program to identify the underlying causes and address those in an immediate fashion.
We brought in the 23 persons that came from a wide range of places. And it's quite interesting when you go to Mopane, the Mopane team actually refers to the Copper Brothers, which are the guys that came in to help them. We're down to half a dozen or so people now that continue to work there. And it's the mood there is quite different, everybody is very positive. It's quite a challenge shutting a business for 6 weeks in operation.
But after my visits and after having had a look around the mine, we decided that was absolutely necessary. The working conditions weren't something that we wanted to have for continue and we have addressed that. And we've addressed it by changing out the leadership of that business. We've essentially taken up the top two levels and replaced them. And the level below that, we have totally restructured and we are still going through a restructuring process to make sure that on a shaft by shaft basis, we have the right people doing the right work.
It's involved a lot of training and taking all 16,000 employees through a process to make sure that people understood what we expected and making sure that they understood that we will be working with them to get the right results. So we're ramping up now and although the smelter is down, the mine is looking in a much better condition. We've got if you go into the working places today, they're quite different to what they were what I found there 4, 5 months ago. We've started to shut down some of the old infrastructure, we've in fact closed around 7 shafts. There were announcement of 2 shafts because those are sort of the shaft complex working areas, central and north shaft.
But we've actually closed down 7 shafts, including some sub verticals, taken out a lot of underground conveying systems and simplifying the operations. The impact overall on employees is that we're reducing that number by about 2,000. But as we start to commission the new infrastructure, we expect productivities to continue to increase. And speaking of which, there's some great stuff there. I mean, there's some 3 new shaft complexes.
We've got the Synchronoreum shaft, the Mufflera shaft, Mendola shaft, both Synchronoreum and Mufflera are hoisting and are in ramp up mode. And they're excellent installations. And they are the future of that business. There is the 2,000,000 tonne per annum mandala shaft that should be finished sometime next year and then we start ramping that up as well. So the basic infrastructure is there, we've got a concentrator that we're building that will be finished sometime first half next year.
So we can then take out the old Enkana concentrator and it'd be quite a different business to the one that was a couple of years ago. But to make it make money, we've got to mine the right stuff and we've got to do it in the right way. So there's a very, very detailed review of the mine plan that's on the go. It's an incredible ore body. It's very large, very extensive.
But what we're doing is making sure that we are mining the right ore at the right time in the right sequence, making sure our recovery of the ore body in those areas that we mine is maximized, eliminating the dilution that we're getting, reducing development ratios, again, very much 101 stuff, but it takes perhaps a fresh set of eyes and the right tools to look at it to get us to where we need to go. It's quite a detailed piece of work that we're undertaking and the immediate short term gain, we'll hopefully see in 6 to 12 months as we start to mine perhaps a bit smarter in terms of how we tackle the ore body, But actually having a better down optimized life of mine plan probably take a bit longer around 24 months. Within that, we will see our head grades improve. We are hoisting often and putting into the plant well below 2% and the ore body can do a lot better than that with improved mining methods and selectivity and sequencing. So a lot of the kick we should be getting out of improved head grade at Mopane.
In terms of the plant, the acid plant in the smelter started giving us problems late in 2018 and certainly the beginning of this year, we were having a lot of outages, some driven through the acid plant, but we certainly saw it manifesting as accelerated brickware in the Isa smelter and we're also having problems in the mat settling furnace as well. And we've had to shut those down and have accelerated the re bricking work. But what we have done is we brought in capability out of our North American smelting business together with guys out of Glencore Technology to work with Mopane. And we now have a very detailed project to take that forward, get it rebuilt. But beyond that, to work with the team, when we recommission to make sure that we're operating in an optimal manner and that we get maximum campaign life out of each of the rebricks and that the asset plant does what it's supposed to do.
There will be a small shutdown, as I mentioned earlier on in the second half of next year. And that's just focused on some of the work that we've been unable to bring forward with this unplanned shutdown that we're currently experiencing. But in summary for Mupane, the right mine plan underground, the right management processes and system, the right leadership and running the smelter properly, feeding it with concentrate from our new concentrator, there's no reason why we shouldn't get to that 300 $1,000,000 EBITDA a year at all, no reason whatsoever. Mtanda, You've really heard about us phasing it out and we're coming to the end of the oxide ores. There is some left at higher ratios, but it's not economic at the moment with cobalt prices and copper prices where they are and with acid and input prices where they are at the moment.
So this is the right thing to transition this into a care and maintenance phase. But we are working hard on the sulphide plant. The study shows that there's tremendous potential there, there's in the order of 100,000,000 tonnes of open pitiable sulphide reserves with decent copper grades, 1.7 high cobalt grades of 0.5 percent of cobalt. So we do see that as a strong option for the future. That doesn't mean that we stop looking around to see whether there are oxide ores within the area that we can develop and in some of the leases that we have as a potential alternative path or second path to continuing to have value out of Matanda business.
But right now with prices where they are and having a cobalt market that is clearly oversupplied, this is the right thing to do. We got to this stage after discussions with the government. There are obviously discussions with the site. We are going to continue to employ the national force, the national employees in the operation as we go through the care and maintenance phase. We will continue to run the asset plant because there is a market for that asset.
And we will use the opportunity to upskill that workforce to make sure that when we do restart, we can do it maximize the number of national employees. On Koniambo, said earlier on that we had a very disappointing first half and certainly was challenging for the team. We lost a lot of tonnes, a lot of metal through the same causes and the same issues that have been challenging us in the past. So one of our larger losses, probably around 3,500 tonnes of metal was lost as a result of it was because of issues we had in the power plants. But we've made real progress there.
Where we had previously cracking boilers, where we didn't have proper ash handling capability within those boilers, where we've had expansion issues around expansion joints. We've done a lot of work there and a lot of repairs and we've got those boilers to condition where they are significantly more reliable than they have been in the past. And we're now in a run-in the second half where they are operating. And they one of them has been operating very, very consistently now for a couple of months. The other one we've just ramped up as we've taken a furnace out of shutdown.
And again, all the indications are that we can have steady state boiler power plant operations there. We've continued to have some losses through shutdowns within the plant itself. And they come in different areas. We've had agglomerations in the fluidized bed reduction zone of the plant. We've had feed problems.
We've had some problems around the hammer mill flash dryers. But the team is very focused on engineering these outsides. We come across them, we identify solutions and we make sure that we as much as we can that we don't get a repeat of those. And we probably lost easily 3,000 tonnes of metal in the first half against those sorts of issues, which we hopefully will see occurring on a less frequent basis. But in terms of how we manage it, we have put 3 initiatives in place.
The first one is a new level of technical oversight of the Koneyama. We've put in what we call a ramp up control group. This is based on successful projects we've had elsewhere across Glencore, where we have a complex project either because it's a very large capital project or it has large technical complexity. And we bring in sets of experts, some internal and if necessary, some from the external to people that can assist them and help them prioritize the work to people that can assist them and help them prioritize the work that they're doing. And this is already showing, I think, benefits and identifying some of the things that we need to do to take that business forward.
But some of the issues we had are probably self inflicted. So we've undertaken a study on the maintenance side and we've identified opportunities for improving the maintenance. So that we plan the maintenance better, when we do it, we execute it better and that it is that the outcomes we have from the maintenance is what we're looking for rather than that we have breakdown shortly thereafter or repeat repairs and those sorts of things. And then we've also brought in some people, some resources to help us look through the costs because as much as we're going to ramp up the denominator and get the tonnes up, if we can take costs out of the numerator that will help us get to the sub $5 a pound that we need. So those initiatives are being progressed.
Steve did talk about a better second half, we don't have any major shutdowns planned in the second half. And it is now about reliable operations. And I think we're reasonably well positioned for it. This very complex piece of infrastructure will continues to give us some challenges. But I think we've got the right processes in place now to manage it better, more on the planning, more on the predictability of what can come up next, better quality repairs when we have to do them.
And I think the power plants are in a lot better place than they were 12 months ago or even or 24 months ago. They're coal powered thermal generators, we should be able to get that right. Safety and I'm going to end on this before we go to Q and A. We had 11 fatalities, copper, we had the Mopane 6 fatalities that I talked about, we had 1 in the DRC. We've had 3 across zinc and one in alloys, which was a fall of ground.
What we've done is and how we're addressing it is not overly complex, but is essential in terms of the work and how we go forward. The first thing we did is we looked at the corporate structure and the work that was done corporate in terms of how they provide leadership, how they provide direction, how they provide advice, how they provide assurance. And we have restructured and rejig that team and we're still bringing in some additional resources. But it is a different style and different approach to what we've had with increasing rate of fatalities, unless we do something different, we're not going to change the result. We've developed a very detailed plan, strategy and plan for the business that addresses key areas that and gaps that we've had and that we've identified.
And we are in the process now of cascading that plan through all of the departments and down to each and every one of the assets. Within that plan, we've also identified the essentials of having safe outcomes. And as Ivan indicated, these are areas where we're getting these terrible, terrible results. We have many areas where we're getting great results and leveraging off those areas and identifying what they do well and what works well and what really positions the business for long term 0 fatality outcomes is what we've made that element list up over that strategy and plan of. But having a strategy and plan and understanding the key elements is just the first step.
And if you look there, you can see that the two areas that stand out obviously are copper and zinc, where we have a lot of work to do. And even within that, it's not just one site, we obviously had issues at DRC. And if we look back just beyond the 1st 6 months of this year, last year as well, certainly it was copper and zinc. So there's a full recognition that the structures and the staffing and the skills and the capabilities in those departments relating to the HSEQ side has to change. And we're in the process of working through that with those departments, bringing the right people in, putting the right systems and making sure that the right work is done in the right places to deliver the safe outcomes that we need.
Within that, we have to address the accountability model as well. And for the right accountability model, you do need some process that governs those operations and it's making sure that those strategies, plans and elements that we talk about has been key for that safe outcome are in place and people are held accountable for keeping them in place and making sure they are there. We're also doing some work around the assurance process. We have a very structured assurance process within the HSEQ area. The expectation is that mature assets can manage that themselves and there is a verification and oversight process that make sure that's okay.
But the less mature assets and the focus assets, we are injecting an additional level of assurance that is tuned to helping us understand what works, what doesn't work and whether the controls we're putting in place and whether management is being as effective as they should be to deliver what we need to deliver. We will get there. Thank you.
Okay. Thanks, Peter. Just to give the outlook and a bit of a summary where Peter took us and what we've done and Steve's results. But looking at the fundamentals and the short term fundamentals going forward in the commodity prices, the short term fundamentals, as I said earlier, still remain positive, supportive. If you look at the inventories of our major commodities, which we have which we produce mainly, the stocks are at extremely low levels.
So if you take LME, you take shepher, you take bonded warehouses, etcetera, some of off LME material, you got copper at 13 days supply, you got nickel at 25 days supply and you got zinc at 6 days consumption. These are really low levels that we've seen over the years. So demand growth remains positive in most of these commodities. And as we've all seen, mine supply, even us, as Peter's just gone through, we got our ramp up assets. Our competitors all have the similar problems with ramp up assets.
You've seen what's happened on a lot of these new mines. So they're all underperforming. So even if you look at besides the inventories at extremely low levels, the other part is if you look at the deficits, if you look at take copper, for example, if you take new supply that's coming in the market this year and next year, you take the tons that are coming out of the market or that came out of the market this year, you've got deficits in most of these commodities in both copper nickel zinc in 2019. Going forward, in some of the commodities zinc, even next year, there's a deficit. Copper, not a big deficit, but let's see, that's just actual production tonnages.
But if you've got increase in demand 2%, 3%, it will be hard to meet those tonnages. Demand for high premium energy coal, the better quality coals which we produce remain strong, even though in Europe, in the Atlantic basin, it's not that strong, which we had with the low gas prices, which affected the price of coal in Europe. But in Asia, Southeast Asia, demand continues to increase. There's still new power stations being built in various countries in Asia and demand for the product increases. Supply in some of those countries, if you talk coal India, you talk China, it's not meeting what they anticipated and therefore they're starting to import a bit more.
So it looks like the import of coal into that part of the world will continue growing. The long term outlook, where we see the outlook and where it looks good for our commodities, we'll talk about the electrification of mobility. And if you look at the mind vehicles that people are talking to be on the road by 2,040. If you talk right up to 620,000,000 vehicles on the road, the amount of the commodities which we produce to produce the batteries which are required in those vehicles, the charging points is required for copper, It bodes well for both copper and nickel and cobalt, which we have. And as I said, I spoke about thermal coal.
We still believe it's important for baseload and with the demand growth in Asia, we believe with the better quality coals, which we have, the outlook still remains pretty good for coal. Looking at urbanization, where demand grows for most of the commodities, both for early cycle, late cycle commodities, You have urbanization and the rising living standards, 2,400,000,000 people increasing the world in the population by 2,050. The demand for commodities will continue. And even for coal, with the demand for electricity, coal still being baseload, cheaper electricity production is still going to be required in those countries. So it's clear and we can see with the commodities what is therefore with the demand growing and whatever percent we agree to grow, whatever percent growth we believe will continue in China, Putting new supply in the market is getting more difficult.
Social license to operate, we can see is extremely difficult. We're going to more difficult regions to produce these commodities. And it's clear with these commodities, it's volume. Volume affects the pricing we've seen when we had the disruption in iron ore. Look what happened to the price of iron ore with the disruption when we took some zinc out of the market.
And if you're not putting new supply in the market with new mines, which as I said is difficult, or even existing mines reducing tonnes, etcetera, it has a major effect on pricing. But that's what I'm trying to point out here. It's getting more and more difficult to put new mines into production. You're going into more difficult regions, so it's getting more difficult to add tonnes into the market. And if demand keeps growing, it should bode well for the price of the commodities going forward.
So I don't want to talk much on this. Just giving a summary really. Most of the stuff was we got a compelling mix of assets. I believe commodity mix, we got the right commodities in this mobility for transition to battery vehicles, electric vehicles. We are a leading supplier of high energy coal.
Our business is well positioned, as you heard from Steve and Peter talking you through the operations. If you look at our operations, our cost of production and our forecast for the full year is extremely low, copper at $0.80 zinc at $0.10 nickel at 2.88 dollars We swing into better production in the second half of the year, marketing tracking well towards the between the mid range of the 2.2 to 3.2 ramping up of our developing assets. I think Peter gave you a pretty good outlook. How he's going to get this right, the work that's been done. And we feel very comfortable.
And he's made us all feel comfortable what we're going to do at Mopane, what we're going to do at Katanga and Conyamba ramping up nicely. So I think we'll get those last 3 ramp up assets which we've got in our portfolio performing well. And we also shouldn't lose sight. If you look at it, Our existing assets besides the 3 ramp up assets which we focus on, we missed production targets, etcetera, our existing assets are all performing extremely well. If you look at our copper throughout the book performing well, if you look at our coal around the world performing well, zinc performing well, doing very well in Australia.
So non ramp up assets are performing well and we're doing well in that area. And I believe in a short space of time, Peter has given you the outlook where the volumes will be. When the ramp up assets are performing, we'll have a great range of assets. And I know we've got a lot of assets around the world, 150 sites, but we're performing well at most of them. And when these ramp up assets get there, we'll be in a great position.
Balance sheet is strong. Steve took you through the balance sheet. Where we're looking, we want to take our net debt to EBITDA down to a one time, which is strong position. We believe we'll get there in the next 6 to 12 months. So I believe the fundamentals are well for the company going forward.
We've got the right commodity mix. Our assets will be performing well, strong balance sheet, so things are looking hopefully well for the future. Thank you. Martin?
Jason Fairclough, Bank of America Merrill Lynch. Just Peter, thanks a lot for the great walk through on the path forward in the particularly in Africa. But could we just talk a little bit about how we got here with the particularly with the African business? I mean is this and the word I've heard from you a couple of times there Peter is control. Is it just we didn't have the right people, we didn't have the right plan?
I mean, these on the one hand, they're ramp up assets. On the other hand, they've been there for a long time.
You can talk. He's reviewed it more. But all I can say, if you say they've been there for a long time, yes, Mapani is an old asset. It's been there a long time. Tang is an old asset
as well.
And even at the time of the IPO, I visited Mutanda. I mean, these are not new assets.
Mutanda, you visited Mutanda and Mutanda ramped up pretty quick to 200,000 tonnes and it got there pretty quickly producing 30,000 tonnes of cobalt. So, Matanda was a well performing asset. Unfortunately, Matanda didn't have enough oxides and it performed well. The Mertanda was giving us $1,300,000,000 EBITDA per year, for the 3, 4 very good years at Mertanda. So it did perform well, the actual plant.
Where we did, the idea was to go into the sulfides later on. The oxides depleted quicker than we thought they were going to deplete. And we rather took the view, instead of moving into the sulfides immediately, we'd rather do a better study on the sulfides before we go there. The cobalt price isn't helping us today, so why rush it? Let's be sure of when the mine can be economical and viable.
And that current cobalt price is not that viable. We also had the tax put on us the extra mining tax, which affected the profitability of that mine. So we've taken a more prudent decision and said, okay, Muthanda, let's wait, let's get the sulfide in line, make sure we got the sulfide plan correct, When we've got it correct and the cobalt price is viable and subject to where the mining code will end up being, then we must make the decision to go forward. So Mutanda not that bad. Katanga, we had to develop the whole ore leach and we had to develop the whole ore leach program, which we did, ramped up pretty well, got built on time, pretty much on budgets, not too bad.
Where there were issues at Katanga, the mining code affects us also because we're paying the higher taxes and royalties over there. Peter alluded to the maintenance. Yes, dropped the ball a bit on maintenance, no doubt. And that was the issue. So instead of producing the €285,000,000 that we indicated this year, we'll produce around about SEK235,000,000 Peter is talking about.
A lot of that to do with the maintenance of the SX EW plant. So that's where we are. So that's the reason. Mopane, as I say, is an old plant. They're sinking the 3 new shafts.
They did the work on the 3 new shafts. And that's pretty much on time, a little bit over budget, not too bad. And then the other delay is basically the problem we had at the smelter.
So how much of this is the ramp up of the projects versus not having the right people and controls in place versus the more general operating environment?
Jason, it's a combination of those. But right now, we are putting in the structures, the processes to make sure that we can deliver long term reliably. So that we don't have the situation you had with the EW where whilst they're focusing on delivering the whole oil lease plant, which they did a great job with, somebody doesn't take the eye off the ball in different part. So we've got the right systems across the business with the right people, we'll give you the right outcomes. And as I said, these are not complex assets.
I have spent most of the 1st 6 months trying to look forward with the business and getting the right people in place to give us what we need to. And people really enjoy working there because they know we're heading in the right direction. So we are comfortable that we will take it where it needs to go.
You also got to remember, Jason, if you look at Katanga, you look at Matanda, you look at Mapani, etcetera, not big cost overruns and not far off time production off Katang of course on the 30,000, 40000 tons where they didn't get it as Peter says with the maintenance. But what is pretty impressive is the CapEx spend and the time to ramp up to get it where it is, not too bad. We've got the full first line running at 150,000 tonnes very quickly at Katanga. The second line is ramping up very nicely. Unfortunately, we lost the 40,000 tonnes because of the maintenance.
But CapEx, not too bad.
So Myles also from UBS. A few quick questions. First of all, with the cash returns and this focus on getting net debt down below onetime, which I think is around $3,000,000,000 does that are you going to continue the $2,000,000,000 buyback, complete that off in the second half? Or is that going to be paused? And should we assume any disposal proceeds are now used to delever Ryals and to kind of extend the buyback by €1,000,000,000 Maybe secondly, on Jason's question, I mean, you guys don't really seem that patient just generally.
And if this if Africa keeps burning $1,000,000,000 of cash, so if we if it's one of those assets that just cannot be fixed, how long do you give it before you get more radical? I guess you're getting pretty radical anyway with Matanda. And then maybe a little bit more on coal and realized pricing would be helpful.
Steve, the first part?
Yes. I mean, no, we would absolutely finish the existing CHF2 billion buyback. There's around CHF700 billion or so ready to go. So that will be done during the course of 2019. The way I look at, I mean, if we're starting now at, say, 2016 or so net debt, Lease accounting aside, let's assume that's all we're not going to sort of change bands and stuff to reflect a pro form a of these things.
So we'll take that on the chin around the leasing. So we're $16,000,000 Cash flow at spot, we said $2,400,000 I think there's some tailwinds in terms of CapEx and some tax yields and various things, but that's an illustrative thing. So take half of that $2,400,000 So we got the second half of the distribution, the $0.10 So that's next year and that's next month, dollars 1,300,000 so that's the $0.20 and the rest of the buyback is the $0.8 So that's $2,000,000,000 coming out of that $2,400,000,000 That's without any disposals and any other working capital or other areas. So that should allow us to finish the end of the year sort of below 16 and start sort of trending down. And then as we say, the 6 to 12 months and then into first half next year, the capacity to do incremental buybacks would then play second fiddle to the heading south on that leverage in the short term.
But again, then you're starting the year 2.4 again, you take the half, the base distribution 1.3. Dollars There I would put in sort of back end some of the disposal proceeds and I'm putting in $1,000,000,000 in there and that yes, it would get prioritized then towards that debt reduction. So you're generating $3,400,000,000 for first half next year. And then you're covering the first half of next year's distribution assume the same $0.10 just for modeling purposes. So you're able to bring your debt down 2 in a bit.
So in 12 months' time, you're then dropping just a little bit below the just a little bit below the 14 and your ratio is sort of 1 and some change, so the 1.07. So that's sort of a obviously, there's a lot of variables that go into what the next 12 months can look like in terms of disposals and macros and working capital and timing of some other payments on these things. But absolutely finish out the existing buyback, the base distribution is well covered. Those would take sort of priority. As I said, I'm not going to it's not the one is a do or die have to meet that by a certain point.
I just want to sort of trend towards the one and that's having hopefully peaked now at 1.25 to start sort of heading south and responding to markets and how all that works out.
Okay. The other part of your question. Yeah. What is our patience in Africa, etcetera, it's been probably well, as I said, we're getting $240,000,000 to $35,000,000 this year, we should get $285,000,000 You heard Peter's presentation, he's pretty confident we're going to get the $285,000,000 He doesn't foresee any issues there. It's just the maintenance of the SX EW plant, which he feels comfortable on.
You saw his graphs, which he showed you, we would get up to 265 next year and then hit the €300,000,000 pretty soon thereafter. I think in September, we start to annualizing at €300,000,000 So he feels comfortable on that. Peter, correct?
I think we got it's a mine, a concentrator in the whole leach plant and together with an asset plant. And there are some parts that we have to commission, the asset plant has to get up and going. The cobalt side, we have got the fix for uranium and we're putting the thickness in to drop that out. We will do the IX overlay next year that make sure that we can do that 100% of the time we get on spec product. And we've got the right people involved in the business.
So it's the plan is there and the team is there and there's I don't see any reason we've risk assessed that we believe we should produce.
Okay. The third on coal, what is your question on coal?
In terms of realized pricing, are we going to see another step down in the second half, just the nature of the sort of contract structure out of
The figure there, we put the figure in the forecast. I think the margins are
Well, it would, I mean basis some macros over the last sort of week or so based on our book as it currently rolls off and quarterly lock ins and fixed prices, there would be 2.1 does step down. I mean, with 2.1 in the first half, 3.9, so it's a 2.1.
So the margins have dropped, I think, from 37 down to 27 or something in that period. So we've dropped the margins down there. Now let's see what coal does in the second half, actually does with the supply side. So it looks interesting, the coal side right now.
Good morning. Liam Fitzpatrick from Deutsche Bank. Two questions. Firstly, on the portfolio, probably one for all of you. You own a lot of assets.
I think the figure quoting was 150 or over that. Do you think the business is just too complex at the moment? And is there scope to upscale the €1,000,000,000 divestment target that you have? And then secondly, linked to that, the ag business, it's deconsolidated, the former head recently left. Is it still a core business?
Yes. The first, look, we're always looking at the tail assets. Do they bring much to the business? Does it help the trading book? Naturally, they're having the smelters, the refineries do help the trading business in a way, so you'd like to keep them.
But naturally, we always look at the tail end of the assets and see what is potential to sell. Does it move the needle much for the company? So you could dispose of them and yes, the SEK1 1,000,000,000 could increase. So that's something we look at all the time. And if there's demand for them and someone really wants them, like Steve said, we're still doing some disposals on the oil side, some of tankage of the storage facilities we look at doing.
So we're always reviewing that. So yeah, having 150 assets is a lot to manage. And if things don't move the needle and not important for the group, we will disclose of that. The second point, yeah, the Ag business is important. We think, as Steve says, it's performing well this year.
It's picked up this year. We got the partnership there. The head, Chris, left. We've got David Matista, who we were grooming along the way to take over from Chris. He was planned his departure well in advance.
So it was all well planned. And I think it's a business that still works well for Glencore and performing quite well this year. And it is a business they would like to grow over time. We've always said it is a business that needs a bit more growth. So they will keep looking for opportunities.
Just on the Glencoeagou, we'll need to hopefully spend a little bit more time in it, maybe not now, but at other times just to bring more visibility about, obviously, how it's performing as because it's coming through almost immaterial through the numbers, but it still is at the time of the divestment. It was obviously at a value at sort of $3,500,000,000 for 50 percent of the underlying infrastructure and the assets. There's very strong positions in, obviously, different regions. And that business should be comfortably at 100%, sort of an 800 $1,000,000 annualized EBITDA, not much CapEx, not much sustaining like a mine or whatever is. So a lot of that should generate some pretty good cash flow.
It should be quite ultimately, let's see how that market develops in terms of consolidation and multiples and these things. But there's a good value to unlock there down the track. And don't sort of, I mean, obviously, make sure it's covered somewhere in the Glencore sort of some of the parts there at the moment because I assume it's not at the moment.
It generates cash, it should be kicking out dividends. So hopefully, it should be pushing cash into Glencore.
Sergey Donsko, Sergey. A couple of small questions on Ketan, couple of small questions on Motanda. On Motanda, I understand that the mine is being put on care and maintenance partly because the oxide ores are getting depleted. But it's also because of the adverse market conditions. Is it possible to give some guidance or idea what were the costs in the first half so we could understand under what conditions the mine could return to production?
And second question on also Matanda. The decision to suspend production at the mine has it been discussed with the authorities in DRC? And how was it received?
Yeah. The authorities, our team went on, had meetings with authorities, explained to them that we were taking this decision. We had no it made sense. So they were informed fully about it.
So you don't expect any opposition on this front?
I don't expect it. They've come out with a statement, they're aware of it, they were advised of it and they said they had no comment further. Regarding the costs, what are costs this year will be about?
It's probably fairly breakevenish at sort of EBITDA, but you've still got then the ongoing investments that need to go as you deliver on future projects. So it would be post CapEx, would be negative from a cash flow and that was influenced obviously cobalt more of a cobalt exposed operation at the 100 and 25 type scenarios. The input costs as we mentioned on things like import, lime and asset was incredibly dramatic on that business as well. So it's a pause now to work on sulfides. It may come back under an entirely different sort of cost mindset structure as it goes forward.
For the CapEx to bring in the sulfides, you've got to build the concentrator, you've got to build different type, whether you build the Alwin or Roaster, we look at the various things. P and L team is working on that. And once we've got the full understanding what it costs the capital involved and what numbers are required for both cobalt and copper to make it viable, then we'll bring it back.
All right. And thank you. And on Katanga, also 2 small questions. Is it possible to give an idea what was the impact of this inflation in asset prices and in other materials on first half cash costs kind of isolate this particular effect? And second thing, do I say correctly that radioactivity is no longer an issue, so this iron exchange plant is simply now a backup option?
So
I think the IX plant is we're obviously in the polishing also want to retreat some of the hydroxide that we've got there that's got uranium in it. So I think it gives us a very robust process that ensures that we have the right quality product, but also can allow us to reprocess some of the hydroxide that's got uranium in it.
And also scale, being able to treat when you're at 30,000, I don't think you'd need that plant to be able to treat it. In terms of asset plants, compared to I mean, when we're up and producing asset itself, we should be at about 185 dollars a tonne. We were paying just over $200,000 last year. We paid close to $600,000,000 during the 1st 6 months of this year. I think it's something like running at incremental cost of $20,000,000 a month just on asset alone.
So you can times by 6 or 12 or whatever you want to do on that. That's just incremental. It's a huge cost component of the business. Thank you.
Good morning. Sam Catalano from Credit Suisse. Two questions. Firstly, just on marketing division. You've explained very well the issue with cobalt inventory.
But if we go back, there was the coal hedging a few years ago, an issue with cotton last year or the year before. You've talked in the past about the risk management structures in the marketing business, but how can that change, I guess, to minimize these series of one offs effectively, if you want to look at it that way?
The coal, we know what the hedge was. We explained it at the time. The cotton was an issue. We explained it, etcetera. This on the cobalt is a little bit different because you got to remember, this is moving it from producing assets into the trading business per the agreements.
And because the market was extremely weak, so it's just from the one hand to the other hand really came from our assets into the marketing and that sort of came at a high price. Because the market was extremely weak, we couldn't move it out, you couldn't sell it. So it had a state at the asset, you would have just sorry, and you can't hedge it because you know, that amount of times you can't hedge. So you had to sit with it there at the price you're taking it from the asset at the time then you had to mark to market and that's where we got the $350,000,000 loss. Had it set at the asset, then it will be at the low cost or net realizable value and cost was somewhat lower.
So you wouldn't have had that type of price movement. So it was just because of the market as it is. Now if the market was better as soon as it comes into the trading book, it moved out and it would have moved out at the price of the day and similar to the price at which you bought it from. So that is just the way the contracts are set up in that part of the way we've got it set up.
It's not dealing with 3rd parties, which is I guess It's not
a third party that we bought Cobalt from someone, we're sitting on a long position, just moving from one of our own assets into the trading book, etcetera.
And the second question is just back on
Of course of Matanda eventually as that accelerates some rebalancing of that market, it should allow us to bring down that position as well.
With regards to that, why wait till the end of the year to shut down the tent? Is that sort of regulator authority thing or why not shut it down today?
I think it's just it's a logical transition. We looked at what was economic there. We've got to actually transition to that. We've got the people that it affects. And we're looking at that the asset supply, the input costs.
But as Steve indicated, we are running just slightly better than breakeven at that business and it's a logical stopping point.
Hi, it's Grant Spohr from Macquarie. Just sorry, can I ask the two questions? The first one is just asking the sort of the cost question slightly differently. Just for Matanda, once it's shut down, what's the sort of ongoing fixed cost going forward? And perhaps if you can just give us a broader sense of fixed versus variable cost at African copper?
And then lastly, just on the coal strategy, Arvind, are you still sticking to your 150,000,000 tonne cap?
Yeah. Coal, I'll answer that and then pass on Peter. Yeah, coal is on the 150,000,000 cap. That's what we've said we will stick by and we're sticking by that, which is at the end of the day is good for the coal market. No one is building new coal mines.
You see no new coal mines being built or being financed besides coal India
are keeping it on care and maintenance. We are going to try and offset some of those by running the asset plant. So it's not really a material level. Plus there's going to be advantages for the future project through the upskilling and the training that we're going to do in that workforce. So I think in terms of holding the asset and social responsibility and having the right conversation with stakeholders including the government, we are going to incur some costs, but I don't they're not that high.
Sorry, just a quick follow-up, just on the asset plants in the DRC. Just can you remind us how those are fed? Are they local sulfur deposits that you feed them or how
Sulfur. Sulfur. The ratio in terms of logistics of number of truck movements is sort of moves from, it's sort of half or something, Which even logistics is actually a very challenging, I mean, what are we, even the asset supply, how many trucks need to offload each day? 100. 100.
So it's a huge logistics exercise today.
Good morning. Sylvain Brunet with Exane BNP Paribas. First question on cobalt and maybe your sense of how advanced your customers are on their destock? I'm thinking of the GM of this world. 2nd question to Steve maybe on debts.
If you see still some room to bring some working capital down, whether that would be on the industrial or marketing side? And my last question maybe to Ivan. As the management team is changing, are you also taking this opportunity to have a fresh look at KPIs across the organization as priorities are changing a little bit in the organization and outside?
Yes. I mean, of course, with the management team changing, we're always assessing how we value the performance of our people and how we're setting KPIs. So that's an ongoing process, which we continue to do in the group to monitor it in a better way and more professional manner. So that's an ongoing process. Yes, we're doing that.
The other part of your question on cobalt, I think where do we see cobalt based on having us remove these tons. Is that your question?
No, it was well, partly yes, but like what is your assessment of the level of destock or how advanced customers are in their destocking?
I'm not sure exactly where they are on the destocking phase, but it looks where these tonnages are at the market, we believe that should start getting the market fairly well balanced and it should have a positive effect on the price of cobalt. But the market with these tonnes taken out 30,000 tonnes or whatever, really should put the market back in balance and maybe slight deficit.
I mean, encouragingly, our actual sales volume during the 6 months was actually stronger than we were expecting as well. So that's why even our 10,300 tonnes in terms of exposure, we even it was pleasingly that it didn't go up in that environment. We're producing we had some offtake commitments and we were able to keep it at that same level. So sales was much stronger this period even than the 6 months in the previous 6 months. So I think that's encouraging in terms of sort of demand and needs and general stock levels.
I think
the electric vehicle production in China during the second half during last quarter should start picking up and that should make people to start restocking more cobalt because the requirement of the batteries. You also have the European car manufacturers during the second half start coming out with some of their electric vehicles more towards the latter end of the year. And that should therefore make more inventory people starting to purchase more cobalt.
I mean working capital inventory, I think there's probably scope to bring that down through the RMI, even the non RMI part. Obviously, just having held more cobalt than we would have normally held in terms of levels, we certainly see capacity to bring that down. So that will inject some cash back in the business as well. I wouldn't on receivables, payables, call it as sort of as you were. There's always scope to do it.
I don't think I think we're in a comfortable position more broadly there, both RMI and non RMI inventory. I think there is scope to bring that down within the business and would naturally come down anyway in a lower price environment as we've seen through the different cycles in 'eight, 'nine, 'fifteen, 'sixteen.
Just two quick ones. Ben Davies from Liberum. Firstly, just what's the current situation with the illegal artisanal miners at Katanga? What sort of long term practical solutions are being cooked up? And then secondly, I might have missed it, but what's actually caused this massive rise in acid prices?
Was it supply demand on that side of thing?
Yes. It's supply demand, of course. New production in the BRC in
It didn't help with the smelters going down in Zambia.
Yes. It didn't help with the Pani going down. It didn't help with Vedanta going down, which is producing acid, both of them went down. So therefore, you lost the asset there. You've also had more demand of acid in the DLC, new mines coming up and more Chinese production where they needed assets.
So that's where it just tightened the supply. Regarding the second part, Peter?
On the artisanals, it wasn't just Katanga that had the issue, it was across the province with an inward migration, I'd say, of thousands of people that were starting to mine illegally on sorts of leases such as ours. The government took a view on this and they brought in there is a presence of military, obviously. We that's not the best way to start addressing it. And we believe that there are long term social solutions that need to be worked on to try and address that. We talk on a very regular basis with government at all levels and obviously emphasize issues such as human rights and voluntary principles and make sure that there's a mutual understanding of what the risks are and how to manage those.
But their presence has resulted in a massive decrease in the activity. We are working very closely with the governor and the government there to look at longer term solutions in terms of how we can invest socially, what the government can do to try and address this. And at the same time, we are addressing perimeter control around our business to enable us to have better security and control the sort of influx that we've had in the past. These are very complicated lease boundaries that we have together with entities such as Jekamine there. And we are working together with them and others to sort that out.
But we are going to control the site, but at the same time, work very actively in the communities to try and find some offsetting developments, some training, some enterprise development and the like to depressurize that. And the community, the unions and the government actually all being very supportive.
Myles, just a couple of follow-up questions. Could you how's your relationship with the new government in the DRC? Do you think Tushiketa is going to be prepared to consider sort of changes to the mining code for existing operators? On the free cash flow of Agri, what's you say normalized EBITDA, your shares are 800,000,000. What sort of dividend could we assume in a normal world for the agri JV going forward?
Maybe on coal as well, what gives makes you bullish? Do we have to wait till gas prices recover before we can get bullish coal? Or do you think what could drive the recovery sooner?
Okay. So the first part of the question, with the government, how do we think we're doing on the mining code? The new government is in power, the new presence in power, he still hasn't appointed the cabinet. We're still awaiting for the new appointment of the Mining Minister and then we can have further discussions. The mining code, we have said clearly, we don't accept the new code.
We will challenge it. So we're just waiting for the new government to be in place and then to have further discussions on it. We've had initial discussions with the President about it and where we sit and our feelings about the new mining code. And as you can see, the effect it has on our operations and it had a big effect on Rotunda, it has an effect on Katanga with the new code. So it is still being disputed.
This part about the second part, dividends that your cash will get from the AG, Steve?
I mean from 800 EBITDA, you would derive free cash flow sort of circa 400 for that sort of business?
No,
that would be 100%. So we'd obviously take we'd be 50% proportionate in that. I mean, if it was a full payout and things were delivering at that level. It's obviously during various years, it's been at over $1,000,000,000 in 2014 and stuff, it probably troughed around sort of 6 ish or something during the more difficult period the last couple of years. That business has invested in various sort of strategic ports and expansions in Brazil and various other bits and pieces.
It's also consumed some capital within the Glencoeagari in the last 12, 18 months. So if they were just steady and of payout ratios and a very comfortable debt position is where they're at because the business was set up initially with a reasonably conservative structure and we haven't taken any dividends out over the last 3 years. So anything that's been generated has either been invested or retained within the business?
Yes, coal, I mean, bullish, let's see. Europe imports roundabout 100,000,000 tonnes of coal. So what we've got affected in Europe with a low gas price did have an effect on the overall coal market, but it's not a big part of the coal business today. Most of the coal goes into Asia. What have we seen in Asia?
You've seen very strong demand in India, stronger than people expected. I think India is going to import around about 180,000,000 tonnes. China imports are still very strong. New countries which are importing more Bangladesh, Pakistan, Vietnam is becoming a big importer, even Japan is increasing slightly. So demand is increasing up in a lot of these countries today and you don't have new supply coming into the market.
So China, of course, is increasing. Coal India, where they do need more coal locally, Coal India is not increasing to the expectations. You've seen what Coal India's recent results came out. They're not reaching the levels they wish to. So that's creating the market look a bit better.
The lower prices naturally will force the Americans out of the market. The Americans, I think, are exporting right about 45,000,000 tonnes. That will go down to 30,000,000 tonnes, so that's going to reduce the amount of coal coming out of there. Russia is struggling to increase big at these levels because the coal price is not that favorable for them at these levels. So the increase in Russia, I don't think is big as people anticipated.
So the supply is not there and demand is growing, as I say, in Asia, not in Europe, of course. So it's looking a bit better.
Could we get the turnaround before the end of
the year or was this a 2020?
We wish to predict that precisely. It looks like it's getting tighter on the supply. As I said, when the Americans move the tonnes out and they reduce 15,000,000 tonnes, Russia is not increasing its export as people expected. Demand is there, it can turn. I don't know exactly where the worldwide inventories are sitting at these various power stations around the world.
Of course, is it going to be how much inventory sitting around and when people want to restock and that's why it's hard to call exactly when you're going to get the turnaround. But if you look at the demand supply figures, it looks like there's a deficit coming on the seaborne market. Good. You're done Martin? Thanks very much.
Thank you.