Ladies and gentlemen, thank you for standing by, and welcome to the Glencore Interim Results 2021 Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I must advise you the conference is being recorded today, 5th August 2021. I'd now like to hand the conference over to Mr.
Martin Fuelings, Head of Investor Relations. Please go ahead, sir.
Thank you. Thank you for joining us today for our first half twenty twenty one results. Presenting today will be Gary Nagel, CEO and Stephen Kalman, CFO. Without any further ado, I'll hand over to Gary to start today's presentation. Thanks, Martin.
Hi, morning, everybody on the call or good afternoon, good evening wherever you are in the world. I'm particularly pleased to present a very strong first half financial performance. As you'll see on our first slide, We've printed some record numbers for our company for a half year and adjusted EBITDA of $8,700,000,000 and an equity Free cash flow of $5,400,000,000 and that's testament to our continued focus of our value over volume, which has certainly contributed towards a very strong financial result. We've seen materially higher commodity prices across our portfolio, Resulting in a very strong cash generation within the business. As a result of that cash generation, you'll see that our net debt It's now printed towards the lower end of our range.
The range that we've always put out is the $10,000,000,000 to $16,000,000,000 of net debt coming in at the low end of the range of $10,600,000,000 which is particularly pleasing and allowing us to provide additional top up dividends, special dividends to our shareholders Above our base of $1,600,000,000 an additional $1,200,000,000 special dividend to our shareholders. That dividend is split between a cash distribution of $500,000,000 and the remainder as a buyback over the course of the remainder of this year. Our marketing business has been particularly strong as well with $1,800,000,000 in the first half of the year. As you would have seen from our half year production update, we're guiding the top end of our range for the remainder of the year. Our guidance is normally $2,200,000,000 to $3,200,000,000 of marketing EBIT for the year.
So we're guiding towards the top To the top end of that range for the full year 2021. The pleasing another pleasing part of our strong marketing performance is we've seen a real broad based Performance across our commodities, each commodity performing particularly well. No single one as really outstripping the others. So it's been very, Very pleasing in that sense and conditions remain very favorable within the marketing division. Turning to our ESG scorecard and it's been a very strong first half of the year in terms of ESG and we presented a very strong scorecard here.
Safety, Unfortunately, we have lost one of our colleagues this year, an unacceptable outcome for us, despite improved metrics Across the board, that still is unacceptable to our business and we continue our unrelenting focus to become a fatality free business. As part of that, we are rolling out our relaunch SafeWork program. That program is the relaunch has been successful. There's still some way to go. And we are seeing some green shoots in terms of the new program that gets that we're rolling out.
On the environmental side, we have a sector leading approach. As everybody knows in terms of our climate change strategy, it encompasses Our Scope 1, 2 and 3 emissions, which does separate us apart from some of our competitors and peers within the industry. We've revised our targets recently. We've now put out a short term target of a 15% reduction in all our Scope 1, 2 and 3 emissions by 2026. We've increased our target for our medium term target of 2,035 from 40% to a 50% reduction And that is in accordance with the Paris Accord, the 1.5 degree scenario and we maintained our net zero ambition by 2,050.
With respect to on the governance side of our business, we have launched a newly refreshed code of conduct, which has been worked on over the last couple of years. And we continue to work on a very strong compliance program. We believe we have the best in class compliance program that focuses on ethics, compliance and ensuring we run our business as a responsible operator. We've also had a very Full transition in management, as you know, I've taken over from Ivan effective 1st July. Tony Hayward has stepped down and been replaced by Calidas And the new management team is operating well, successfully, and the business is well set up for the second half of the year.
With that, I'll turn over to Steve on the financial results.
Thank you, Gary, and likewise, good morning and good afternoon or evening to those on the call as well. Many of you that have been following Glencore over the years, some of the slides It would be very familiar in terms of format and contact allow for historical performance validation As well as giving the building blocks around our expected performance going forward, particularly reflecting the macro world as well as our production and cost operational statistics as we have. In terms of some highlights, Gary covered it on Page 7. But clearly, the most important number, which we do focus, is the adjusted EBITDA. That was up 79% to 87%.
It was a half year record. I expect it will be short lived as a half year record as we move forward over the next 12 months, that does allow the business everything hangs off that. That's ultimately translated into an equity free cash flow of 5,400,000,000 The key driver of being able to deliver and driving net debt down to $10,600,000,000 as of 30 June 2000 and Which we'll talk about later on and paving the way towards higher payouts as we look beyond the current period as well. If we go on to Page 8, that's our industrial makeup today, increasingly obviously a larger part of our business. It's the most Exposed to the cycles and the upside in prices as well and just where one is set out in portfolio allocation and portfolio mix.
We think we have the right commodities as well set up for some of the future emerging themes in economic development and energy transition as we do have. So the Industrial business was up 152 percent to $6,600,000,000 This is against first half of twenty twenty. You can see bottom right of that graph the transition or the trajectory from first half twenty twenty. Second half twenty twenty then was an improvement post Most COVID affected first half of twenty twenty. So we moved from $2,200,000,000 last year first half $5,200,000,000 We had a nice So progression, dollars 6,600,000,000 now.
And if we look at our spot annualized EBITDA, which we'll look at later on, That's running at $18,800,000,000 for industrial part of the business. Half of that for just looking at a 50% piece would be $9,400,000,000 So as we look forward, there should be a continued, based on current macros, a continued increase. If we would deliver 50% of that on our spot illustrative, that would be another 42 pickup within our industrial business and particularly that would come in the energy side. That's where we've been lagging in terms of coal prices and you'll see that on a Slide later on. So strong performances and strong EBITDA margins within the metals at 44%, the overall industrial at 38%.
Looking at the waterfall from last half twenty twenty to here, it's been primarily a price story, as you would expect, and you would see that across The sector as well, dollars 4,400,000,000 pick up, broadly spread. Most of it was in the metals during this particular period. Energy is lagging, and we're going to see that both on the coal and the oil pick As we move forward into the second half and into next year, of that $4,400,000,000 $2,300,000,000 came in our copper business. We'll see individual slides later on where it will make more sense. Within our copper business also have some of the byproducts, particularly cobalt, and we've seen some improved pricing there.
Our zinc business on pricing added €900,000,000 nickel, €400,000,000 And coal within that €4,300,000,000 is lagging. It was still up €500,000,000 But our overall coal business was broadly flat for the year because we had some of the FX headwinds in particularly South Africa and Australia. The volume was a slight pickup at 0.4, half of that was Antamina operation during the year, which It was quite affected within the extended COVID mandatory shutdowns last year in Peru during the April, May, June period. So a strong additional contribution from that particular operation. The rest of it was smaller ups and downs creating a net $388,000,000 pickup.
Costs, Gary mentioned some of the delays at Conne Amber, which we expect to restart the second line within the next So a month or 2, but there was additional cost due to the maintenance and repairs of that particular operation contributing part of the increase in cost and FX. As you would normally expect in higher prices, you get the stronger dollar coming through there, and That affects our cost structures, particularly in South Africa, Australia, a little bit in Canada as well. If we go into the individual slides, copper on Page 10, This represented 45% of our EBITDA for the first half. Production was slightly up as you can see period on period. The big increase was both pricing and cost in this business that allowed us to deliver $3,900,000,000 EBITDA.
The big turnaround In proportionate and in absolute terms was the African copper business, something we highlighted a few years ago in the ability to turn around cash flow in this business around some of the focus assets. There was a $900,000,000 turnaround in African copper. Clearly, most of that's to do with the Katanga operation. And we'll be looking at recommissioning Mutanda is underway. And as Gary mentioned, that's something towards the end of the year that we'll look to update at our Investor Day in December on some updated Future cost structures, CapEx and volumes to bring that operation back and more importantly the ramp up profile Bringing copper and cobalt and mindful of the particular markets that those products would clearly go into given the Discipline around value and volume as well.
The cost structure for our copper business is down to $0.85 for the first half. For a full year, We're looking at $0.80 so that's where that's part of the reason for a tick up in full year illustrative guidance as well for copper, and that's the exact cost structure We guided in copper earlier this year at $0.80 A key contributor going forward will be additional cobalt units As Katanga, that was the later part of its ramp up journey was some of the cobalt circuit. There'll be a significant pickup H2 of H1 As well as the pricing of cobalt has also improved. In terms of a spot illustrative off to the right, You can see $8,600,000,000 annualized for copper. We'll get into all the details of all the divisions later on, on pages 21 to 26.
But that's part of an overall business of $21,800,000,000 EBITDA generating $11,500,000,000 of free cash flow at current spot macros Calculated with build up in the normal fashion that we do as well. So copper business performed well across All its metrics during the first half and going forward. The zinc business, if we look on Page 11, that contributed 16% of our EBITDA. Production was up period on period, given specifically some of the Q2 last year LatAm Suspensions and COVID related production impacts, particularly in Peru and in Bolivia as well and some of those operations as well. We're looking at roughly a fifty-fifty H1, H2 production split with our revised guidance of 1.17.
Cost guidance, very similar to what we indicated earlier in the year at minus 0 point 1 $1 for the full year. We're looking to come in at slightly better at minus That's very influenced within the zinc business with significant byproducts across gold, silver and lead in this particular business. But given both productions cost structures in this business, it will pretty much double up for the year, dollars 1,400,000,000 on a spot basis at $2,900,000,000 We're looking for zinc growth coming into the future. We'll update our scenarios again in 3 to 6 months, particularly as Gyrum It ramps up as we say to steady state in Q2 2022. If we look at nickel, Production wise, H1 at 47,700 tons, That was impacted in 2 areas, one of which was Murren in Australia.
This was scheduled major maintenance. It happens every 3 or 4 years down there. We take down the operations for 5 or 6 weeks or so. So there'll be a big pickup period on period at Murren. And we're also looking towards The reestablishment of 2 lines at Konyama towards the end of this month, we have factored in Part of that with assumptions of running for part of H2 2022 on a two line operation, That's where you will see a 45%, 55% split in nickel production out to 105,000 tons for the full year.
Cost wise, we will we're holding costs pretty similar to where we said at the beginning of the year, slightly less due to the byproducts as Particularly in Canada, we get PGM byproducts and cobalt. Marin, we also get cobalt. So there's both the volume and the pricing benefits from that Relatively small share of EBITDA at the moment, 4% for the first half and probably similar for a full year Full year illustrative at $1,100,000,000 The key for this business is of course growing its production and byproducts and some of the capital we are spending, it's absorbing quite a big share of the CapEx as we have the major two projects in Canada that's extending the life of that particular operation both at Raglan and at Onopin dep Coal is probably one worth the sort of main focus is this is The key sort of expansion of both earnings and cash flows into H2 and hopefully beyond. For the first half, it was 11% of EBITDA, only a slight tick up from the first half of last year when coal We're still reasonable through the first half of last year. Then you've had numerous COVID effects, demand conditions, Displacement also from gas was a very tough year into H2.
The start of this year was similarly impacted. And we've seen a huge acceleration in pricing both in the thermal and the coking coal. There's always going to be a lag in the coal business, Both in terms of some fixed prices that would have historically been as part of the Japanese annual benchmarks. We rolled through Q1 this year in the 60s. Most all of that was repriced into the Japanese contracts.
Not as big a percentage of our overall business, but just that business moved from 60 in the mid-60s up to 110. So we were 912 For the first half, we put a full year or an illustrative spot EBITDA for this particular business of 5,900,000,000 And that's on the 104,000,000 tons and a cost structure of 56 And a portfolio adjustment of $20,000,000 You'll see the details on Page 21 or 26 later up. So that would indicate a margin of $57 a tonne on 104 Giving the €5,900,000,000 or close to €3,000,000,000 for a half year period, we will significantly be able to I mean, not all of that's going to be extractable in the second half because we do have now some JPU pricing at $110,000,000 Spot price is, of course, dollars 1 50 or so at the moment. We've assumed in an illustrative pricing of 6,000,000,000 and average Newcastle forward curve at that point of 133. So if we continue at spot prices, obviously, that's it's a volatile commodity.
It's not as liquid across the various curves. It's performing very well at the moment and generating very strong cash flow at the moment. So we think it's sort of middle of the fairway projection Where spot illustrative is at the moment, not exactly spot being a bit more conservative. But at $3,000,000,000 for a half year, We should be able to pick up the current spot prices. There's sort of substantial vast majority of that into H2 2021.
So there's going Significant pickup in our coal business, both into H2 'twenty one, which is why I said I think our record half year earnings for this particular half is going to be Short lived with a big pickup second half on the coal industrial side. Our volumes were down period on period. We'll see a 40 73% split is what we're looking at in terms of production. We'll see some pickup clearly there. And then what will come to the market in 3 or 4 months' time in December is more looking into our 2022 period in particular where we'll be able to Bring in the Serrahan tons as well.
You would have seen the acquisition of our sort of minority of our partners in that particular business, which although may looking to close in 2022, we are already economically Close to those volumes already with the effective date being 1 January 2021. So big tailwind in this particular business. No doubts or questions will come from this later on as well. Page 14, we've got our marketing returns for the year at $1,800,000,000 Very strong quarter, as Gary said very broad based and healthy contribution and strong participation across different businesses. 12 months ago, although we Track down slightly.
It was very much an oil story for the 1st 6 months of 2020 with exceptional dislocation in returns between that particular. So in some respects, the $1,800,000,000 is actually a better print than the $2,100,000,000 from the previous year. We're looking at a Top end of range guidance now at the $3,200,000,000 People would say, why don't you just times by 2? This was a very good performance, even €1,400,000,000 for the second half, which would take us towards the operating. I mean, the top of the range would on an annualized Basis 1.4 would be 2.8, which itself is within that top half of our range.
So don't want to get ahead of ourselves too much here. We think 3.2 is Sensible target and guidance aims to range at this particular point, but it's nice within that bottom chart on the right just to print another Yes, Prent hopefully towards the top of the range certainly for the half year and hopefully the full year as well around that 3.2, which is where we're looking at the moment. And there were many questions back 'fifteen, 'sixteen, 'seventeen through those peers. What's it going to take to be that top of the range, which we've held consistently We're putting some nice data points around that top of the range where you've got conditions and cycles that are supportive On Page 15, you can see the CapEx numbers, not much to say on this other than we're tracking Quite a bit below the $5,000,000,000 which of itself supports the equity free cash flow for this particular 6 months and To some extent, help get our net debt to where it is, lower than would have been the case had we spent CapEx at the 50% rate of our 5,000,000,000 So at this rate, tracking much lower, too early to think about whether a number may be lower than the $5,000,000,000 The underlying Data projects scheduling at work and the mapping of our various assets would still suggest That a $5,000,000,000 is appropriate.
We'll have the opportunity maybe at our Q3 production report, if there's See how we're tracking at that point as to whether that $5,000,000,000 needs to be brought in a little bit, but we still think $5,000,000,000 is a Sensible number to look for a full year CapEx forecast, but we are tracking quite a bit below that at $1,800,000,000 You can see the pie chart in the bottom right, most in copper, zinc, nickel and a bit in coal and oil as well within this particular business. Some of the major projects are obviously continuing at the top right, Caluasi, zinc and the nickel projects are some of the main Expansion projects. On the balance sheet on Page 16, probably the highlight of the presentation In terms of getting net debt to the lower end of the range, dollars 10,600,000,000 that includes the about $1,000,000,000 of marketing leases as well. On the net debt adjusted EBITDA, we're down 2.69 percent and actually on a spot basis, we're closer to 0.5%. So very pleased With these outcomes and the strength and the quality of the business in terms of being able to throw off this quantum of cash flow generation within relative short period.
It is showing its strength when the business comes together in all material respects. We had very healthy levels of liquidity at the end of June at 9,300,000,000 But we actually canceled certain portions of our RCF as being surplus to requirements to save some Commitment fees or otherwise not necessary within the scope of the business as well. In terms of net debt evolution, how do we get $10,600,000,000 We started $15,800,000,000 at the beginning of the year. The equity cash flow was the $5,500,000,000 as we spoke earlier on, which was $7,300,000 of the FFO, which EBITDA Less tax and interest, net CapEx 1.8%. We did generate 0.3% of non RMI and other Cash flow 0.3, that's a number as you know within the business can be a bit volatile depending on volumes and prices.
It was 12 months ago, we were speaking about The big outflow particularly around the oil business with lower volumes, lower prices, part of that came back second half a little bit is now, But that can turn around not in the sort of extremist of what we saw sort of 12 months ago, but that's obviously we need to Keep an eye on a minus 0.3 could sort of very easily in the business turn into a positive 0.3 as well. So we're obviously Mindful of how the working capital takes shape within the business, there was quite extensive increase in leases. This is primarily an oil business as it takes on Volumes with respect to shipping and various storage within that business as well. So $10,600,000,000 How might we see towards the end of the year on an annualized spot basis, which we'll look at later on, dollars 11 point $5,000,000,000 of free cash flow, that's not easily trans sort of that you can bank that within So H2, 2021, that's spot prices, spot volumes, spot costs and looking at annual taxes, annual interest and Annual CapEx, but half of that's $5,750,000,000 We said we got some CapEx catch up, which if you take the $5,000,000,000 we will need to spend an extra $700,000,000 In CapEx, if it was to come to the $5,000,000,000 So broadly, you can think about a $5,000,000,000 of equity free cash flow if you look at those numbers during H2.
Working capital, we'll see how that develops. Does a minus 3 turn into a positive 3. We always need to plan for some variation in the working capital. We have $2,000,000,000 of shareholder distributions or payments going out in H2. We've topped it up with $1,200,000,000 We have the $800,000,000 second half, 2nd tranche of the earlier distribution of the $0.06 as well.
So that does show us still generating Surplus cash flow, we can continue to deleverage through the second half of this year, but we do need to plan for a business that we've been through cycles in our net debt. We don't want that now that we're at 10, we want to stay in that obviously in that level. So we don't want to be here in 6 months saying 10.6 has gone up by x because of Prices or some other macros, we want to be a bit conservative in how we've applied our shareholder returns, which I'll talk about later on. We do know that if we when we get into February next year that mechanically we're generating very healthy levels of cash this year. We will have a base distribution next So if we roll Into Page 17, here's the basis of the top up distribution that we've announced today.
We've had our base distribution, the 1,600,000,000 From February, which is the $0.12 The top up is $0.01 2, which is the $0.04 a share, which is we say circa 500, but It's $529 based on the share count at the moment and the buyback of $650,000,000 So there's the $1,200,000 giving a full year $2,800,000,000 or 0.21 $0.21 a share. We don't want to be double dipping or prepaying for what's going to come in February. As I said, mechanically, If we're around the $10,000,000,000 we were $5,400,000,000 circa $10,000,000,000 $10,000,000,000 or so free cash flow equity, free cash flow current macros for the year. Mechanically, our base distribution policy, as you know, is going to be $1,000,000,000 for next year plus 25 industrial feet, so free cash flow. The split of that $10,000,000 might be 8.2.
So you're going to have a $3,000,000,000 base cash distribution coming in February. So that money we need to start thinking already is Coming out in terms of balance sheet allocation, we want the ability and flexibility to continue with buybacks also through that period. Obviously, part of the thinking was to make sure we stay at $10,000,000,000 and can progress towards the 100% payout Once we're at that level, and then generate through the 10,000,000,000 and then pay it out. I don't want to be At $10,000,000,000 go to $10,300,000,000 and then payout. I want to be going through $10,000,000,000 and then we can look towards our payout ratios as we go forward.
But we're in the position where, As we said earlier on, we didn't know the pace of the deleveraging towards 10. It's happened much quicker than one might have thought 6 months ago, which is great. And we have the ability Through this year and into next year to move the shareholder distributions towards the 100% where we're at. So just in terms of Just to close it out, some of the building blocks and details around that second half as well as the annualized free cash flow, Page 19 was just some of the half on half Production guidance for this year will come out towards the end of the year with where we see the next 3 to 5 years. There's going to be growth in I mean copper, we've got Matanda to look forward to.
Zinc, we've got gyrom into the future. Cobalt is also Matanda. Nickel, obviously, cony amber, We can update on that as well. And coal, is some of the recovery both in South Africa, Australia, as well as bringing in Cerrohan as we go forward Those particular businesses are something to look forward to across all those businesses. I think the cost structures are broadly covered on 2020 and given the reasons as to how that's tracked as function of volumes as well as byproducts.
And finishing up on 2021, you can see the buildup at the illustrative spot cash flows, dollars 21,000,000,000 EBITDA With $11,500,000,000 free cash flow, the industrious $18,800,000 There's more details on Page 26 At $3,000,000,000 of marketing, that's not where we'll hit marketing this year based on guidance. That's a spot annualized, which is middle of the range, dollars 2,700,000,000 EBIT plus Depreciation of $300,000,000 copper, obviously. The largest there is zinc as we spoke about nickel, that's coal moving to 5.9 Marketing and then we've got $5,200,000,000 of interest and taxes and $5,100,000,000 of CapEx holding at that line. So Very strong position through the first half and going forward in the business. So I'll hand over back to Gary to wrap it up.
Thanks, Steve. As you've heard, we've had a terrific first half, a
lot of hard work still
to do in the second half of the year, but the business is rightly positioned. We have a terrific industrial business with a portfolio of large scale long life, high margin assets. That business has the right commodities. It's in the commodities that are set up for the Green Revolution. We have all the we're on the bottom end of the cost curve across the business, which certainly sets us up for higher cash generation, higher margins as we go forward.
Complementing that, we have a very unique and world class marketing business that has not only countercyclical, but has Delivered year in year out within the range that we've guided to the market and continues to perform exceptionally well in today's market. We have a recycling business, which is growing in our business and really provides an input into this green revolution that we're part of And some an area that we continue to focus on. Our climate change strategy as we said is sector leading. It's something that has also been quite very well received by investor community and we believe we are doing the right thing The company and certainly the right thing for the world. As we go forward into the second half of the year, we'll continue our focus on Our unrelenting focus on safety to ensure we keep our people safe every day.
Peter and his team focusing on our operational excellence. And at the same time, we maintain a very strong capital allocation framework in terms of how we grow this business. As Steve talked about our balance sheet, delevered a lot faster than we thought. And as a result of that, very pleased to be able to
Thank you. Your first question comes from the line of Alan Gabriel of Morgan Stanley. Please ask your question.
Good morning, gentlemen. I have a couple of questions. Firstly, Gary, this is your first results presentation as a CEO of Glencore. Your messaging has Consistent so far, if I interpret it correctly, that you do not intend to make any radical changes to your predecessors' philosophy and how Glencore is run. But there must be Things that you are thinking about or doing differently, especially in the context of the new Board of Directors or changes to the Board of Directors, what will you do differently?
And as an extension to this question, what is at the top of your priority action list by order of urgency, of course, outside of health and safety? Thank you.
Alain, thanks very much. Look, I mean, Avan's left us a terrific base of assets, a terrific marketing business, And we certainly are not going to fix anything that's not broken. The business is set up and as you've seen generated Terrific cash in the first half of the year and we'll continue to do that. So in terms of doing things differently, I don't think you can expect radical changes because we're not going to fix what's I did mention safety. Of course, that's going to be unrelenting for us.
We need to watch that very carefully. We've got a couple projects on the go that we want to make sure we see through. We want to ensure that the ramp up of Xi REM And the recommissioning of Line 2 of Coniambo were done successfully and on time. So those will be key focus areas for us. We want to ensure that the climate commitment that we've made that we keep to that.
We ensure that We've put that commitment out to the market and we will keep to that and prove that that is something that we're serious about. And going forward, we'll make sure that we maintain the strong capital discipline and pay dividends to our shareholders. So I don't think, Alain, you can expect any major changes from a very disciplined way of running this business.
Thank you.
Thank you. Your next question comes from the line of Jack O'Brien of Goldman Sachs. Please ask your question.
Good morning, Gary. Good morning, Stephen. Just slightly following up on Alain's first question there. It Sounds like it will be, as you say, not to expect radical changes going forward. Perhaps you can just touch Somewhat more on the coal portfolio.
Clearly, the business looking extremely strong as we head into the second half. Would love just to hear Any thoughts you have on sort of how that market is looking, given the Current coal ban in China, where the majority of your coal is currently being shipped, how we can think about sort of portfolio mix adjustments Just if you could clarify on the proportion that is sold to Japan, so when we think about those contracts that are fixed.
Jack, thanks very much. The coal business is set up very well. As you know, last year we cut Production in response to the market, we didn't want to produce tonnes that were not adding value that the market didn't need. And We believe that the recent kick up in the market not only related to that, but that contributed to the tightness in the market We didn't oversupply the market with tons it didn't need. And as Steve mentioned, we've got some real tailwinds going into the second half of the year.
And You've seen some terrific prices out of Newcastle, out of Richards Bay. So the market is looking very strong and remains very strong. With respect to China, China is still not accepting Australian cargoes, But the trade routes have adjusted quite quickly. We through our portfolio both through the marketing business and through our industrial asset business have been able Fly coal into China out of places like South Africa, which historically hasn't taken South African coal for probably 7 or 8 years now is now taking South African coal and through our marketing traded book we've been able to supply coal into China from our Indonesian and Russian book. And as a result, the trade routes have adjusted quite significantly and quite quickly.
And our Australian coal replacing into alternate markets Markets where gaps have opened because the South African, Indonesian and Russian have moved into Australia leaving gaps for Australia into China leaving gaps Well, our Australian coal. So we've adapted very quickly. The market has adapted very quickly. And in fact, some of these disruptions and In the market have been quite beneficial for us because our trading business has been able to take advantage of these arbitrages that have opened up And it printed a good first half trading result. So we're very pleased with that.
Going forward, coal remains Coal outlook remains very strong. We've seen that on the supply side, very few new mines coming on Largely through licensing issues and regulatory issues and demand remains incredibly strong. High electricity generation particularly through the Asian region, LNG prices, which competes with coal on an energy basis and a usage basis in power plants across Southeast Asia, LNG prices much higher, which has given further impetus to current coal prices. So as we go forward, the coal portfolio is uniquely and well set up. We will continue to run down our production As per our commitment, which contributes even to a tighter market given the increased demand, and we look forward to healthy returns in that business.
Got it. Thank you, Gary.
Thank you. Your next question comes from the line of Liam Fitzpatrick of Deutsche Bank.
Thank you. Good morning, Gary and Steve. Two questions from my side. Firstly, on the ag business. Now if we look at ag returns, generally, they've improved materially over the last 6 to 12 months.
But it seems to me that because of the ownership structure, The market gives you very little value for that business. So what is the medium term strategy there? And should we be thinking about a further sell down or exit further down the line. And second question on Koneambo. I mean, how much longer can you persist with this asset given what we've seen over the last few years?
Thank you.
Okay. I'll answer the second one first and maybe Steve can talk on the ags. Coniambo is currently we have the 2nd line being rebuilt right now. Commissioning will take place towards the end of this month or early next month. And we're in a critical phase of that project.
We will assess how that ramp up goes, how production goes, how cost effective it is. And the next 6 to 12 months, We will be undertaking a thorough review of that asset, basis its performance and basis its latest The latest work being done and we'll be able to come back to the market to or back to you guys within in 6 to 9 months to let you know what our views are.
Thanks, Liam. I'm pleased you actually brought up the Ag business because I probably should have mentioned it on the call in terms of the actual performance through the marketing side because it does get A little bit sort of lost in the overall part of the Glencore business. We did report close to $200,000,000 just for the first half was our equity pickup. So that's after interest tax Net income within that business. So it is both annualizing and expected to be over $1,000,000,000 EBITDA within that business for the full year, which is at very strong levels as by the way the whole sector as you said is Performing well.
So it's clearly in our interest, both in the management of that business, but also in engagement with you guys in the investor community to sort of demonstrate and see how we can unlock and validate some of the And see how we can unlock and validate some of the equity value and get it properly reflected because it is it's not Cash flow in the business, yes, it's not something you can multiply or do something. They have largely since we closed that transaction at the end of 2016, Which was an equity value of sort of $6,250,000,000 there. So 50% was $3,150,000,000 or so at the time. They've reinvested that I mean the balance sheet is very strong. The earnings are very strong.
And that business It should certainly have a value at least what it's had at the time of that close in 2016 also given the strengthening in their own balance sheet and also the ability then to Participate hopefully in some industry consolidation. There's always chatter is never too far from people's minds in that Particular sector would be sort of keen party as a shareholder in sort of participating in some industry consolidation And probably that ultimately will be the validation of value within that particular business. At the moment, we can probably Stand on our heads and there's nothing more we can do other than to say that business is sort of performing well and you can reflect that somewhere as a pocket of value That will be unlocked and validated at some particular point in time, but it's a very pleasing performance and the full year is looking very good for that business.
Steve, could I just briefly follow-up on that? I mean, we've I think since that initial sell down, I think it was 4 or 5 years ago. So we've been It feels like we've been waiting for a period of time. I mean is there a degree of urgency there? Should we expect things over the next 12 months?
Or is it still very much
Certainly not urgency for the sake of urgency, but There is discussions on various fronts, absolutely, in that business. But you never know when things I mean, some things come quickly, some things can take years to Obviously present themselves. Even our Canadian partners, the whole structure for them, I think they're very long term partners. At some point in time, they could even call for an IPO in that business. I mean, that would equally sort of validate some of the sort of economics and value in that business through our 50% as well.
So very hard to say Liam, other than something in some way shape or form in that business will happen at some point.
Okay. Thanks, Steve. Good luck, Gary. Thank you.
Thank you. Your next question comes from Jason Fairclough, Bank of America, please ask your question.
Yes. Good morning, folks. Thanks for the presentation. Just a Fairly simple question on coal production volumes. So you've talked about why we have lower production volumes again this year for a variety of reasons.
But bottom line, If I look at 2021 production, it's going to be off about a quarter versus the 2019 peak. So you're now making changes to the portfolio you're buying in the rest of Cerrojon. But then we've also got these new targets on reduced scope 1, 2 and 3 emissions. So I guess simple question, How should we think about the evolution of coal production volumes, not just over the next 6 months, but rather over the next few years? Is this 120,000,000 ton a year business do we get back up to that 140 level?
I think, good morning, Jason. I think, look, the big move From 2019 to 2021 is obviously removing Prodeko out of our consolidated volumes and that won't come back. I think the best way to look at it long Short term, we'll always adjust our production up and down in accordance with what the market needs and chase the right Chase the right margins, we're not going to produce tonnes for the sake of producing tonnes. In the medium to longer term, the best way to model that is to just Modeled in accordance with our climate change commitments, where we are our 2019 base, where we'll be by 2026 is 15% down, Give or take that's where we'll be. And obviously by 2,035 we'll have halved our production of the 2019 base.
And that's probably your best way to model it in the short to medium term To understand where production will go.
So if I
I mean also hopefully, Jason, as it moves down there, you're obviously making more on less Tons also because you also should be managing a portfolio as well where there might be some brownfield extensions or a few leases or Some other CapEx that goes in, it's in the higher quality, higher margin business and you might see some domestic business decline, some other sort of Lower quality, these are things that are more likely to sort of decline at a steeper rate as well.
So as I'm thinking out to 2022, 2023 that would be 15% down on the 140?
No, I mean, not specifically that. I mean, on the EUR140,000,000 you know where we are this year. It's not a linear A reduction between now and 2026 of the 2019 numbers. As you know with these operations, Some of them come off, some of them sort of peak in certain years depending on what strip ratio is, depends on longwall moves, depends On qualities and the likes. So going forward, I mean, I don't know how much guidance we can give on that, but sort of Similar numbers to where we are at the moment.
And then you'll see of the 2019 base, you'll see us down 15% by 2026.
And mutation, you will see us obviously, in December, we will go out sort of obviously, 2021, You've got a good sense of that. We'll go out sort of 'twenty two for sort of 4 years or so. So you'll see that sort of 4 year period in this early sort of 15% overall business target and we're also being in a position to pro form a for sort of Cerrohon and you can see that trajectory as well at that point.
Okay. But the Cerrohone volumes are included ultimately in these target volumes and target reductions or you're actually moving the If you like, the base up on the back of that.
You move the base up, but it declines then with those targets. So you're not sort of You sort of go back to 'twenty nine, your pro form a for sort of as if you'd own 100% and Then you reflect the 15%, 50% ultimately to net 0.
Okay.
So we'll do all that as part of the December update as well as through the sort of bigger climate report, which we do on an annual basis that also sort of adjust For the Seraon pro form a and the adjusted targets and put some of the sort of graphs accordingly that can answer some of the questions exactly what you're asking.
Okay. Thanks, Steve. Thanks, Gary.
Thank you. Your next question comes from the line of Sergey Donskoi of GCIB, please ask your question.
Yes. Thank you very much. I have two questions. One about Muthandarista, if you could provide some color on your medium term targets In terms of production volumes? And also what sort of a mine life should we expect from oxides only?
And where will you be in a position to decide on expansion into sulfides? So that's First extended question. And second question is on RMI increase. There was an uptick, I think, of about $1,500,000,000 from end last year. Should we expect RMI's normalizing towards end of the year?
Hi, Sergey. Good morning. On the Montana restart, at our December Investor Day, we'll provide significant more detail on where we are. At the moment, we are starting to ramp up, starting to come back into production. There's a little bit of volume there in the second half of the year that's coming from existing Stockpiles that's being processed right now.
The team is working on the ramp up schedule, the ramp up plan. We'll be able to provide details on capital and costs and certainly the mine plan as we go along as we mine the oxides and then Transitioning to the sulfides. What we will be doing though is doing it pretty responsibly. We certainly don't want to bring volume into the market that isn't needed. So we will Take our time with the ramp up to ensure we can match the supply that comes from Rotonda with the demand growth that we see in the market.
Thank you.
And in terms of RMI, one point I mean, given the price environment that we experienced In the first half of the year, we've actually contained RMI increase to just 8%, I think is what the amount went off. But you've seen price increases Aluminum was 27%, zinc 9%, copper 21%. The oil spectrum was 45%. So So underlying actually RMI, we've got significantly less volumes actually we were carrying at the end of June already. It's sort of countercyclical.
Last year was a great year for contango storage plays. It works well. That's what contributed part of the returns both in the metals and the energy side. We were carrying Through last year and also at the end of last year, more than usual levels of oil and metal as well within the books, the actual volumes of that have come down significantly. But it's purely the price impact that then took that overall level up the 8%, which taking into account The price movements during the year, you can deduce from that that volumes are actually significantly down.
Now as we look towards the end of the year, If prices stay where they are, I would think broadly flat. If prices go up another 10%, obviously, I'd have to rerun our illustrative cash flow numbers, which would be materially higher, but the consequence of that, which is a luxury problem, the way I like to think of it is that RMI could even tick up a bit If prices go down a bit, then it may come down a bit. That's going to be the major driver now because volumes have there's still some volumes tied up that would be beyond the Sort of core, if you like, sort of commercial terms, so some of those could be less attractive and we may still deliver in and Reduce our inventory somewhat between now and the end of the year that in a stable pricing environment could maybe get back down to close to 20. But I think you just got to watch pricing now in terms of the major factor there.
Understood. Thank you.
Thank you. Your next question comes from the line of Danielle Chugimera of Bernstein. Please ask your question.
Great. Good morning, guys, and thanks for taking my question. A couple for me. Firstly, on ESG, it's great to see some more ambitious Reductions target, but you show in the appendix that the H1 emissions are going in the wrong direction. So how are you tackling this short term?
And secondly, just on marketing EBIT, I know you made some comments earlier, but clearly, you would need to fall about 20% sequentially So could you give some color on the headwinds that you're seeing currently, if any, in the second half?
Daniel, I'll answer the first question on the ESG. And yes, I mean ESG is critical. Maybe on the second question, if you can just clarify After I'm done on the first question, ESG is critical and front and center for us and we're very committed to our climate change commitment and we will keep to that Regardless. Obviously, there's a little bit of noise in the numbers when you compare first half to last year given the current situation. The first half Last year was severely impacted by COVID.
We had major production disruptions and restrictions within the business. And obviously, things picked up in the second half of this year in the first second half of last year, first half of this year. So on a half on half comparison, you would see Some variances which perhaps are not consistent with our longer term ambitions, but that's just a reestablishing the business of a very period as a result of COVID. Going forward, as I think we pointed out to Jason, we've got We've got our commitment of a 15% reduction in scope 1, 2 and 3 emissions by 2026 and we'll keep to that. And then obviously the improved 50% reduction by 20 20 by 2,035 of our 19 year base and that will be delivered without a doubt.
On the second question, perhaps you can clarify. I think we just missed some of the words.
Sure. Just on the marketing guidance, Mechanically, you'd have to fall over 20% half and half to get to your top end of the guidance. So what headwinds are you seeing to get you there?
I mean, there's no headwinds. It's just and again, sort of mechanically, we were at 1.8. If we hit 3.2, It would be 1,400,000,000 which we yes, I mean mathematically it's a reduction on H1, but also it is If you annualize $1,400,000,000 it's a $2,800,000,000 annual result, which is still a good result by historical standards and within the top half of our range. So it wouldn't be fair to just sort of just extrapolate or double 1.8%, 3.6%. I'm not saying I mean, it's not impossible.
But just where we are at the moment, of course, you're not going to reach that far in saying we're going to double up H1. It was a very good Year across the business, coal, Gary mentioned earlier on, was a strong performance there. The oil business continued Well, across all the metals businesses, they were all we said it was a broad based healthy contribution from all departments. Statistically, that doesn't always happen over periods of 6 months. So if all things Sort of step into line again, then yes, you can obviously do higher than the 3.2, but we think it's a sensible Guidance and a reconfirmation thereof and would still require a delivery in H2 in the upper half of our full year ranges for that year for that period.
Great. That's useful. Thank you. Thank you. The next question comes from Myles Alsop of UBS.
Please ask your question. Great.
Thank you. Just a couple of questions. First of all, on M and A more broadly and Sarah Hunt in particular. With Sarah Hunt, what are the potential issues? I mean, how The hurdles to get through always, do you think that deal is pretty much in the bag?
And how are you thinking about M and A going forward, will you still look opportunistically across the different commodities? Or do you see this more as a period of consolidation and cleaning out The portfolio. The second question is around cash returns. And obviously, you've gone for a balanced approach with the first half with a buyback and An extra dividend. What was the rationale behind that?
And how should we think about kind of returns going forward when you're generating so much more cash flow? Thank you.
Karl, I'll answer on M and A and Cerrohan. I mean, Cerrohan, obviously, The transaction was only signed at the end of June when we announced it and there's a number of regulatory approvals required. We don't expect or anticipate any material issues out of that process. As you know, it does take some time. There are a number of jurisdictions where we need to file Applications, so we expect closing sometime during the first half of twenty twenty two, but certainly no expectation of any issues around that.
So that's looking fine. M and A going forward, obviously, our focus in the business has been To delever the balance sheet, which we've done successfully, as we've mentioned in our presentation, we've got a terrific commodity suite Of assets or assets within the commodities that we want to be in, those that are powering the Electrification of Mobility and the GreenWave, and that's where that's the area that we want to remain in. Right now, markets are good. We're not looking at anything specifically on M and A. We're focusing on ensuring we run our operations Responsibly, effectively and kicking our cash back to shareholders as we stand today.
And Myles, just in terms of obviously cash It's no I mean, in some sense, it's obviously a judgment call. We have different shareholders So across our base, you got to sort of try and thread a reasonable needle across all that sort of stuff In terms of there is some people that would be massively clearly in favor and supportive of buybacks that the others that say pay me all Cash and I'll decide what I want to do with it in terms of whether it's reinvesting, which for them would achieve the sort of same effect In terms of equity value and they can get whatever accretion and that sort of comes from that. So it's a lot of engagement and you to some extent Broadly a half half here, just sort of feels a nice, coldy look approach, and maybe that's a good approach also going forward in that. The fact we're doing a buyback, I think, itself should be a signal that we're comfortable doing that. We see value not so much even cyclically because we'd rather the market have that call, but Just a general how sustainability, pricing of cash flows, the sort of delivery of operational Performance, the tons coming through the African copper business as well, the sort of coal margins, all those things in terms of So the other valuation factors and discount rates and comfort with different countries, these are things we're more comfortable clearly taking a call and Happy to take a call on in terms of what copper, zinc coal prices.
I mean, that's something we have a view on, but we're quite happy for the market to make They're on call, but I mean, the fact we're doing a buyback and we won't always be doing buybacks, but when we do buybacks, that should be a signal That we see some strong accretion, some good value and happy to be like an M and A transaction Meeting hurdle rates within that particular transaction, but I think mix and match is the way of the future and there will always be an element of buybacks Where we see that value and we're happy to be backed into that sort of decision. There'll be times where we go 100% cash If that changes in terms of the thought process around just a call on cycles.
Great. Thank you.
Thank you. Your next question comes from the line of Ian Rossou of Barclays. Please ask your question.
Morning. I've got two questions. Just the first one relates to the operational performance. I mean, Just wanted to get a sense from you, Gary, if you're happy with the sort of volume ramp up in operations. It seems like some of the I guess you're still downgrading volume guidance.
I know In coal, that's market related. But I guess specifically in the zinc business, it seems like the Xyrem ramp up is taking slightly longer. Maybe if you can just talk to that as well. And then just secondly on the marketing business and I guess Just wanted to get your sense of regulatory risk. We've obviously seen the news flow about one of your ex employees pleading guilty to corruption charges.
And just wanted to get a sense from you around the risks in that business and I guess how going forward you can ensure that, That doesn't happen within the business.
Sure. Hi, good morning, Ian. Thanks. On the operational performance, yes, Slightly disappointing in some of our commodities. And as you raised in particular zinc around Jarem.
Jairam, obviously, the project ramp up has been a little bit challenging. We had an incident where we had a fire at the DMS, Which effectively destroyed the entire structure. And in terms of rebuilding that, that coincided with the COVID Sort of shutdowns and like. So it hasn't gone according to plan. I mean, we've been in a bit of a strange Time in the world and the fact that it's really that's the main area that we've suffered in terms of project ramp up as a result of COVID It's not that bad, though we are disappointed with it.
Peter and his team are sending in a couple Sort of fixes and ensuring that we can turbocharge at ramp up and get it back to where it should be on the schedule. So we're not particularly concerned with it, but certainly disappointed that we didn't meet the target on Jirem. On the marketing business, yes, regulatory risk remains an issue for us. But where I get a lot of comfort on the marketing business going forward is Having spent a lot of time working with our compliance team on our compliance program, on our ethics program and the way we do business, We've really rolled that out extensively across the business to all levels of the business. We have a very Strong assurance program, a very strong monitoring program, raising concerns line, a KYC system that's best in class, Sanction screening that is real time.
So we've eliminated in many parts of the business intermediaries and agents and we So we are really strengthening the systems controls processes around our marketing business and It's giving me a lot of comfort that the regulatory risk is strongly managed, strongly mitigated going forward and still able to provide significant returns to our business.
Okay. So just on that, I guess the focus has always been on agency oil trading. Is that still something You will do going forward or without I guess agents and intermediaries as you say?
We don't have any intermediaries in our oil business. Our oil business doesn't rely on agents. It doesn't rely on intermediaries. It's an evolving business. It's A different business model to what perhaps was used even 5 or 10 years ago and it's a business model That's proving to be very successful.
We've made significant value gains over the last couple of years without the use of intermediaries and agents and we don't plan To use them again in our oil business.
Okay. Okay. Thanks, Gary. That's comforting.
Thank you. Your next question comes from the line of Sylvain Brunet of Exane BNP Paribas. Please ask your question.
Good morning, Gary and Steve. So first one to Gary as the new CEO. What equity market narratives So narrative, would you like to see change on Glencore? And then Steve, perhaps if you could Give us a bit more color around the higher corporate cost in the first half. Was there any one off we should restate for the full year?
Thank you.
Look, our equity market narrative is going to be one of consistency and our performance. We will no doubt have and we do have a very strong capital allocation framework within this business and we will allocate capital very, Very much in line with that and we'll be strict in terms of our guidelines. We will maintain a strong balance sheet. Steve talked about that in detail, but we will keep to the lower end of our net debt range, and we've achieved that already at 10,600,000,000 And in line with those two issues to the extent that we have additional cash, the idea is To kick that back to shareholders whether it be by way of cash distributions or buybacks as Steve talked to at length. Going forward, obviously, we'll focus on operational excellence at our business, safety and our very strong marketing business complemented by our recycling business.
And given that we have the premier suite of commodity assets across our business, where we touch on all The key commodities for the decarbonization of the world, I think our equity narrative remains incredibly strong and gets stronger as we go forward as we run down our coal business.
And Sylvain, in terms of corporate costs, that's often There's a layer of sort of bonus pool and sort of compensation across the group That gets brought through that line itself rather than the underlying business sort of performance. It's Cost within the business and it's a cash flow driver within the business, but there might be some lags from time to time Depending on when those are finalized and sort of determined post delivery of results, we tend to finalize a lot of the Some of the pools and compensations around the May, June, July period, which is around here. So in terms of the finalization, there can be a bit of catch up Sometimes in respect of previous years, we know the marketing was very strong in 2020. So it's lot of it's the wrap up of some of those and the different provisions and the ultimate settlement of those. But And you also will see it historically can be a little bit more weighted H1 over H2.
So We'll see a tick up in that level with the business performing better in both the industrial and marketing, but that's all built into our Illustrative annualized cash flow. So based off the sort of 21.8 number and Down to $11,500,000,000 it's in that sort of other category. We have sort of reset that to where we expect corporate sort of to be.
Okay, good. If I could just the one follow-up question on ESG and ferroalloys in South Africa, which as we know is a Pretty large share of Glencore scope 12. Is there any technology you're looking at leveraging there to that would help you Accelerate on the energy efficiency and scope production?
Yes. Look, I mean, obviously, It's quite challenged in terms of carbon content, our alloys business, largely on the scope 2 given Eskom's The supplier of 90 sort of virtually all the power in the country and it's largely coal fired. Fortunately Eskom is on a program now to Convert some of its coal fired power stations into less carbon intensive power and is looking at different forms of power, green energy, which We'll feed into our business and that should have some medium to longer term mitigation on our Scope 2 emissions. We're also looking at a number of initiatives within the business. Japi and his team have got some great ideas with the head of our smelting, Amanda, who's looking at off gas usage, Reheating, they're also looking at some virtual power arrangements of green power working with Eskom and Independent operators to look at what ideas we have around that.
So it's certainly front and center for us and the guys down in South Africa are focusing on implementing those medium to longer term strategies.
Thank you.
Thank you. Your next question comes from Tyler Broden of RBCCM. Please ask your question.
Great. Thanks very much, Gary. Just a question I have, I guess, is just Glencore has evolved in a different way than its peers. But now obviously the mining business is a core part of the business. The exploration spending is a lot lower than your peers.
You do have some organic growth coming through, but I guess how do you think about that more from a holistic perspective? And then I guess on the second question, just in terms of the asset tail, sort of how do you see how harsh do you think you need to be to get the business Into the right shape from a sort of asset structure perspective. Thank you.
Hi, good morning Tyler. On the exploration spending, look, I don't think you're going to see too much exploration spending for us because exploration spending generally leads to greenfield operations and I come from the same School is open with respect to greenfield operations. We don't like them and we won't be pursuing them. There's obviously exploration spending that gets Spent around existing operations where we can do smart brownfield expansions and we'll continue to do that. So Greenfield or exploration spending is certainly not an indicator for us in terms of growth of the business because we won't be building greenfield operations By simply spending money drilling around and seeing what we can find?
I mean, Tyler, it's not we don't specifically also Separated out, but we'd have tens of millions of near mine exploration in regional around our different operations. It would certainly be Where one is targeting obviously different businesses, but it's not it wouldn't be in the single digits. I mean, we're probably It would certainly be in excess of $100,000,000 at least annually that we're spending obviously around all of our operations, resource conversion Opportunities around in Kazakhstan, in South America, around Mount Isa, there's a lot of work that gets done in these regions as well. It's just not the Kind of the virgin exploration spend, if you like.
And then I think just to answer your question, Tyler, on the asset on the tail I mean, we've had a number of processes on the go already and we're reviewing all our portfolio to ensure We have the right portfolio, rightly structured, some sort of simplification, but it's not going to be a wholesale Cutting to our business, our business is a strong business and many of these assets provide significant value to us with Speak to our trading operations or complementary to existing industrial assets. Our idea is we're not going to give running commentary on individual Tail asset or whatever you want to call it disposals, we will run through a process of the existing assets We've identified and continue to identify that perhaps are not that core to our business anymore. And we will then So as they exit the portfolio and we'll report back as we go forward.
Thanks very much. No, on The expiration, Steve, I totally take on board all of that was more to what Gary answered very much at par for the course in terms of the outlook for Greenfield. So thank you.
Thanks, Donna.
Thank you. Your final question comes from the line of Chris Laffamine, Jefferies. Please ask your question.
Hey, good morning. Thanks guys for taking my question. Your illustrative EBITDA and free cash flow numbers are obviously very impressive and our commodity prices stay Near current levels, that's obviously a very good outlook for you, but we are now unfortunately seeing another wave of COVID globally and notably in China. So wondering first if you're seeing any evidence of demand weakness, especially in China? And then also wondering about Any impact at your mine sites from this current wave of COVID?
Are things getting worse or any operations being affected that weren't affected a couple of months ago? Thank you.
Good morning, Chris. We are not seeing particularly any particular demand weakness Or demand destruction as a result of COVID at the moment. Obviously, the delta variant is a concern for all of us and we are seeing various Sort of peaks or infection rates rise in different parts of the world. But from a demand perspective, we have not Seeing any demand destruction as a result of it. We've seen obviously some correction in certain commodities around more policy.
We've seen Chinese Policy around steel and its impact on iron ore. You've seen iron ore price drop from about $2.20 to $1.80 today as a result of the forecast steel cuts, but those steel cuts So related to economic measures and fiscal measures rather than COVID. So we haven't seen anything yet, but we watch it very closely because obviously it's a key part of our business. And in a sense sort of These kind of disruptions do cause do create opportunities for us in our marketing business. That's something that we remain very, very much abreast of.
On our mine sites, the impact has been minimal. We have some impact in South Africa With respect to absenteeism largely due to some of the restrictions in South Africa and some of The contact tracing where if we have somebody who tests positive and the contact tracing means a number of people can't come to work. So we do have a little bit of an impact in South Africa. But generally across the board even today in Australia you would have seen that the New South Wales Premier As a call for a shutdown in the Hunter Valley, however, the coal mines are exempt from that and our coal mines continue to operate at full production there. So we haven't seen anything material across the business as we stand today.
Great. Thanks, Gary. Good luck. Thank you.
Thank you. I'll now hand the call back to Gary to close.
I'd like to thank everybody for joining us today. I know it's maybe early or late for I'm in different parts of the world, but a very pleasing result that we've put out today. We're very glad that we could provide additional Returns to our shareholders by way of a cash distribution and a buyback and markets remain strong and we look forward to a
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.