Glencore plc

Glencore plc

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Glencore plc (GLCNF) Q4 2020 Earnings Call Transcript

Published at 2021-02-16 15:16:15
Martin Fewings
Good morning. Thank you for joining us for our 2020 financial results. Today on the call, we'll have Ivan Glasenberg, CEO; Steven Kalmin, CFO; and joining from Australia, we'll have Gary Nagle, our CEO designate. Without any further ado, I'll hand it over to Ivan.
Ivan Glasenberg
Okay. Thanks, Martin. Good morning. Turning to the slides. In the first slide, Slide 4, we talk about the investment proposition of Glencore. And as you are aware, with our commodities, we enable the transition to a low-carbon economy, and our business model has been responsive to take this into account. We are a leading producer, marketer and recycler of these transition commodities, and we'll talk about those actual commodities later on. We're sector-leading in our climate strategy. And as we announced in December, we're targeting a 40% reduction in our total CO2 emissions by 2035. And by 2050, net zero ambition for Scope 1, 2 and 3, to emphasize, including Scope 3 emissions. We believe we are a responsible stewardship of the declining coal business over time. And as the industry decarbonizes, we'll be running these assets whilst we deplete them towards the end of their life in 2050. But we'll talk about that in more detail later. We believe we got the right business model. The transition to a low-carbon future is overall positive for Glencore in view of our commodity mix. And we've got the right commodities for this decarbonization transition, which is taking place. Our high portfolio of these commodities, they're good high-margin commodities, large-scale mining and long-life assets, and we'll talk about the life of these assets, which Steve will give details later on in respect of these low-carbon commodities. The business is extremely highly cash-generative today. And if you have a look at -- if we do look at the EBITDA based on the spot prices, January prices, in fact, you'll see we talk about $16 billion of EBITDA with around about $7.2 billion of free cash. And if you had to use today's spot prices, that is more like $17 billion EBITDA and close to $8 billion of free cash. So the business model and the strategy and the asset mix creates a sustainable growing returns in this transition to the low-carbon energy. So if you look at the 2020 scorecard, if we have a look at the next slide, Slide 5, it's been a healthy cash generation of the business. Even with the difficult environment with COVID-19 existing and affecting some of our assets during the first half of the year, we generated EBITDA of $11.6 billion, which is flat, similar to 2019. And the Marketing and Industrial metals offset the weaker coal prices that existed during the year. Net income pre-significant items was $2.5 billion, which is plus 2% on 2019. And the equity free cash flow was extremely strong in view of this environment, $4.3 billion free cash flow, and that's up 65% from the previous year. And on the back of that free cash flow, we will be paying out a dividend of $0.12, which is around about $1.6 billion, and that's in view of our existing dividend policy. And Steve will talk about that later on how that is calculated and how that will be paid out during this year and the potential to increase it when we review it in the half year -- at the half year results. The Industrial assets, as I said, were resilient even under the difficult environment during first half of the year. And the Industrial assets generated $7.8 billion of EBITDA, which is slightly lower than the previous year. And this is mainly due to the strong metals performance of commodity prices during the year, outweighed by the weaker coal prices, as we all know, that existed during 2020. The metals business generated $7.3 billion; and the energy, $1 billion, which is 73% lower and, as I said, mainly due to the lower coal prices. The cost/margin performance was strong. And as you'll see, we've decreased our costs of production across the range of our assets. And our copper assets today produced copper at $0.94 during 2020, sorry, which is $0.15 lower than the year before; zinc, minus $0.07 post gold and silver credits, which is 35% -- $0.35 lower than the year before. And nickel, $3.76, which is $0.22 lower than the year before. And coal, we're producing at $45 a tonne during 2020, and even with those low coal prices, still generating a margin of $11. As expected, the Marketing performance was extremely strong during the year -- during last year. And we generated $3.3 billion of EBIT, which is up $1 billion of the previous year, 41% up. And there's been a strong performance from our major commodity trading units. Energy generated $1.8 billion of EBIT, which is $437 million higher than the year before; and metals, $1.7 billion, which is $578 million higher than the year before, and that was supported by market conditions and the difference in 2019 where we had the challenges on the cobalt, which we spoke about previously. The agricultural division performed well. And Viterra, where we equity account the 49% ownership which we have in Viterra, equity accounted $211 million there, $58 million the year before. So that is a good strong performance from our agricultural business. The company has an extremely strong balance sheet now. The net debt has been reduced to $15.8 billion, and that is successfully repositioned within the $10 billion to $16 billion target range which we set for the company. And we're targeting to get down towards the middle of that range and hopefully lower by the end of 2021. We have available committed liquidity of $10.3 billion, and we have the bonds maturing at maximum $3 billion every year. As I said earlier, the spot illustrative cash flow at today's spot prices would be around about $17 billion, close to $8 billion free cash, so the company is looking extremely strong going into this year. And as I said, hopefully, by the end of the year, we should generate that type of cash. Turning towards the sustainable performance of the company. Unfortunately, we had 8 fatalities during the year. Peter and his team is still working extremely strong on that, noting that we do employ 145,000 employees and contractors through our business. But we're definitely aiming to be fatality-free throughout our business. But you'll see the total recordable injury frequency rate is decreasing. Lost time injury frequency rates is also decreasing. So this is an area where Peter and his team are focusing on to ensure we become fatality-free in this company. If you look at, i.e., Scope 1 and 2 CO2 emissions, we talk about 24.3 million tonnes. And if you look at, i.e., Scope 3 CO2 emissions, 264 million tonnes. But we'll talk about that later, what Glencore is doing in this area to ensure we are reducing both our Scope 1, 2 and 3 emissions. So with that, I hand over to Steve to talk about the financial performance for the year.
Steven Kalmin
Thank you, Ivan. So we commence on Page 8 in terms of financial scorecard. We'll get to most of these main headline numbers later on in the presentation as well. Don't intend to dwell any. But just in terms of -- just from a statutory perspective, if you're trying to sort of tie it up, we obviously took some impairments in H1. It was taken primarily there. There was a strong profit performance in H2 given the headline numbers. But net income, pretty significant items, was up year-on-year by 2%. All the other debt and cash flow metrics, we'll look at in the coming slides. If we go to Page 9, just looking at the Industrial part of the business. As Ivan mentioned, there was a 13% decline, from $9 billion to $7.8 billion during the year. Very much a tale of 2 halves in terms of Industrial business with significant tailwinds for this business going forward into 2021 as well. Metals and minerals side was actually up by 31%. Particularly, there was a pleasing turnaround at the African copper business, essentially Katanga with a successful ramp-up, higher metal prices also in H2 contributing to the 2.5x performance half-on-half, H1, H2, and very healthy mining margins in that business at 36%. The energy business was the drag on earnings Industrial side during 2020, reflecting both oil and to a lesser -- I mean coal prices, to a lesser extent, the oil prices. We did respond to market dynamics by reducing supply out of all 3 of our jurisdictions, in Australia, Colombia as well as South Africa, seeking to rebalance markets. We did see some recovery in prices as reflected in the spot cash flow analysis, which I'll go through later on. It wasn't quick enough to materially change 2020's trajectory, so we finished the year at $1 billion. But really annualizing now just the coal business itself at $85 Newcastle or so is now slightly above $2.5 billion as well. I think the table on the bottom right is quite telling, showing the overall $7.8 billion Industrial EBITDA for the year is made up $2.6 billion in H1 and $5.2 billion. So you can see that recovery in H2 on prices and volume, somewhat COVID-related, particularly in the metals side. And as we move forward in 2021, we're now annualizing $13 billion just on the Industrial side. It was the end of January prices. So that's already comfortably ahead of the run rate in H2, which itself was a strong recovery period-on-period. If we look at Page 10, just showing the waterfall on the Industrial bridge from $8.9 billion to $7.8 billion. The pricing variance was the main factor, but had been narrowing progressively during the year. If you look back to the H1 presentation, just on price variance, we were $2.1 billion period-on-period. So now it's down to $780 million, so actually a positive period-on-period variance during H2. Within that pricing variance, energy was down $1.6 billion; of that, coal, $1.4 billion, and oil was $0.2 billion of that. Metals was actually a positive $0.9 billion within the price. And you can see some of the percentage -- average percentages, the precious space where we have exposure, mostly as by-product, but we also have the primary gold producer in Kazakhstan. You've seen prices up about 30% on the precious side. The PGM side, we also had by-product exposure in nickel and the alloys business as well. And you also have the pricing. We had a better second half, although the average was broadly similar in many of the base metals. The fact we had higher volumes in H2, we were more exposed to the higher prices. And you had some positive provisional price movements, particularly in copper. So strong pricing performance within H2. The volume was -- all these variances had narrowed during the year. Both volume and cost was higher at the first half, particularly both volume and cost impacts was felt in the coal business, reflecting both voluntary and involuntary adjustments to market conditions and COVID-related suspensions within coal and the averaging effect on the cost efficiencies that, that has as well. Within both those categories, the metal side of the business was actually positive, offsetting the weaker performance from particularly the coal business. There was a bit of FX relief, primarily on the South African rand period-on-period, was $165 million of that $243 million. But that's very much rearview. Going into 2021, all those bars, at least from a net perspective, is expected to turn materially green on a price and volume perspective as we go forward. If we look at, from Page 11, some of the individual scorecards for the various business as well, starting with copper on Page 11. Copper Industrial, $4.5 billion of EBITDA in 2020, representing 39% of group EBITDA. So starting to sort of leap in terms of overall mix, given current macros and the scale and strength of that particular business. Pleasingly, its cost structure, back in August, I think we've guided to $1.06 all-in cost in the copper business. They came in at $0.94 as a function of both efficiencies, production scale with also help from by-product pricing in silver gold. Also, zinc is a by-product that comes through the Antamina operation within these results. And cobalt started showing some improvements towards the end of the year, particularly affecting Katanga. That, in particular, has been the major increase in 2021. I think cobalt is up close to 50% already year-to-date, and we'll see that in some of the pricing benefits as well. So good performance on the copper side, particularly the turnaround in the African copper business, had a $1 billion turnaround, '19 to '20, from a $0.3 billion negative, in fact, in 2019, to $0.7 billion, with significant additional improvement expected in 2021. Later on, we'll look at the 2021 or illustrative spot scenario guidance. We haven't changed any production guidance from -- for '21 and beyond from where we were at the 4th of December when we gave the update. What we have rolled forward or reflected in each of the businesses is a roll forward of the cash costs within each business, reflecting macro development from 4th of December out to the end of January. So that would reflect by-product pricing, FX and fuel prices, where you've seen, obviously, energy prices generally through crude, and diesel has also increased. So we were showing $0.87 a pound in copper for '21 guidance back in February -- I mean back in December, and that's down to $0.80 a pound at the end of January. With cobalt improvements immense since then, that would have even moved down from then. So $6.7 billion, we'll show later on, up to 42% of group EBITDA as well. Page 12. If we look at the zinc side of the business, that delivered a little over $2 billion EBITDA 2020, representing 18%. We also saw big cost improvements over the year on a post by-product basis. Through middle of last year, we were at sort of $0.05 positive. It came in at minus $0.07 a pound. And again, that was a strong production performance in H2 and the increase in the by-product credit that gets allocated across that business. So for this business, gold and silver in particular, also significant lead producer, which comes in and quite a sizable negative H2 cost performance. For full year 2021, we're looking at negative $0.11 a pound, no change since December. We're seeing increased tonnage this year. We spoke about that also back in December, the main contributor being the commissioning expansion of the Zhairem complex in Kazzinc as we move forward as well. Just looking at nickel, came in at $600 million EBITDA, Page 13, 5% of EBITDA. The key focus for this business is getting the ramp-up of Koniambo over the next few years, both to drive scale around exposure to the nickel pricing, which is relatively strong at the moment, and to also manage average costs as we go through the next period and deliver some expansion within this business as well. Pricing, we've guided to 117,000 tonnes of production this year, no change since 4th of December. That's seeing some year-on-year improvements, which we hope and expect out of Koniambo as we move forward as well. On a spot basis, that business is doing a little over $1 billion of EBITDA. As I said earlier on, this does have some of the exposure to the higher PGM prices, particularly out of Canada, as well as cobalt prices out of Australia and Canada as well. Looking at coal on Page 14. This was the lag on earnings contributions in 2014, but we're starting to see a recovery in performance in this business as well. EBITDA at $1.2 billion, down to just 10% of group EBITDA. Costs and the likes came in as we would have expected. You can see through the table at the top -- the bottom of the top table just showing Newcastle average pricing. And you can see, if you like, that spreader damage was started through the period ['19]; average 2019 was $78, down to a little over $60. And we're running about $85 at the moment, generating a 2021 illustrative of $2.5 billion as well. We have seen some tick-up in cost in this business. We were guiding to about $47 in December. We're now a little over $50, and that's essentially the currency effect of producing in Australia, but producing in rand and the diesel intensity of this business as well with crude about $60 at the moment as well. You don't, of course, get any by-product relief within this business as well. On an illustrative pro forma spot basis, coal moves up to about 15%. Thermal of that would be about 12%. We do have a met business which would be about $500 million of that $2.5 billion as well. Moving to Page 15 and the Marketing performance. This cushioned the overall performance of 2020 to deliver the stable year-on-year EBIT performance of $11.6 billion. We saw an extra $1 billion on Marketing, up $2.4 billion to $3.3 billion, up 40%, and that's across the board, very healthy and strong performance, as metals and minerals up $578 million, somewhat flattered by the challenging cobalt market conditions, which we described and experienced in 2019. But net-net, a very solid and consistent performance across all the metals and minerals units. And then energy was $437 million, benefiting from the, as we said, exceptional price movements, dislocations and carry trade and volatility within that particular business as well, particularly through H1, although H2 was also a very solid performance. And pleasingly, Viterra, which is the former Glencore Agri and which we own 49%, that had a very strong performance in equity, pickup for us of a little over $200 million. That said, obviously, the 49%, grossing that all up to sort of 100%, you got a business at sort of around $1 billion worth of EBITDA. In terms of guidance, $2.2 billion, $3.2 billion, sticking to that range. And we've plotted some of the data points from 2020, going back all the way to 2008. You can see quite consistent sort of around that range. Occasionally, it dips a bit below, a bit above, but it's a consistent range, validates the range itself, and nice to have a data point now at sort of at the top end of that range as well, which is you got to go back to 2008 as well in that particular. Top right, you can see some of the -- normally, metals would be about sort of twice the energy in a sort of average cycle, cruising speed sort of period. Energy was sort of very much, obviously, an exceptional performance. If it's repeatable, we'll sort of wait and see, but that was very much a part of getting to the $3.3 billion as we did in 2020. We just go into the balance sheet. Generally, what was a very important market for us as we approach the end of the year was to get the debt back within the $10 billion to $16 billion range. That's been successfully done and repositioned at $15.8 billion or $15.2 billion ex marketing leases, which is the number that we primarily focused on for the purpose of that range. And particularly, the current strong levels of cash flow, as Ivan said, $7.2 billion on the $16 billion of free cash flow. It's probably ticked up close to $8 billion. That clearly provides the fast-track pathway towards our short- and medium-term targets around this year, getting back below the mid-range, so below $13 billion, and towards the low end, around the $10 billion, in a sustainable fashion, which is where we want to do; and clearly getting a net debt/EBITDA close to the 1x, which would ensure that through the cycle, a less than 2x is never reached even through this cycle. As you can see, in terms of net debt/EBITDA, we peaked at 1.8 in June. Having started the year at 1.5, we're down to 1.37 at the end of December. And on a pro forma sense now, we'd be, in fact, below 1 already with net debt $15.8 billion and EBITDA at $16 billion plus. So we'd be below that level, which is a good position to be in. Net funding was broadly flat, in line with a pickup in the RMI of around $2.7 billion. That was reflecting primarily the higher prices in -- from period to period, start to the end of the year, copper, up 26%; zinc, up 20%; Al, up 11%. There is some countercyclical still carry trades on the books that will work their way through the system in the next sort of year or so, both in the oil side and on the metal side. So you might ask, if prices keep going, does the RMI sort of materially go above the $20 billion? You will have some positive factors on pricing. But as we go through a more pro-cyclical period of the economy, tightening markets, backwardation curves of units that we're actually carrying will also come down. So you'll see that positive impact as we go through on the RMI. On Page 17, just on capital structure. As I said, we're now looking to get below the middle of the range. This year, that looks fairly straightforward on current metrics and business performance. And the bottom right is just an update on where we did finish up for the year and effectively a sort of the actual from where we were, Page 17, I think the slide of the H1 presentation, where we said here is the pathway from $19 billion credibly to below $16 billion, what did it need to do in terms of both the cash flow generation at the time, which was still strong, and also the fact that there had been a temporary buildup in working capital at the time, non-RMI of around $3 billion. It finished the year at negative $1.5 billion. So there was still an impact on a full year basis, but H2 delivered a part reversal of that $1.5 billion. And ultimately, ex marketing leases, getting to $15.2 billion with equity free cash flow now above $7 billion as we've started 2021. And we've already locked in, I guess, 1.5 months of that, which is showing through the start of 2021 as well. Page 18, just on the distribution analysis. The policy, as you all know, is $1 billion fixed out of the Marketing, reflecting the more sort of stable, highly cash conversion aspects of that business from EBITDA through to very little CapEx, lower effective tax rates in that business as well, plus 25% of Industrial free cash flows, setting the base distribution. And then on top of that, of course, the company and the Board would consider additional top-ups at any time, frankly, during the year, reflecting the state of its balance sheet, reflecting the cash flows, reflecting the outlook and the macro environment generally. We plotted on the bottom right the Marketing, Industrial and total equity free cash flows of the business as well for which to calculate that $1.6 billion, corresponding to the latter $1.6 billion, corresponding back to $0.12 a share. So that's what's being proposed at the moment. But I would highlight that we'll, certainly, as a minimum, get through the interim results in August. But frankly, at any time, if we felt it was appropriate to do some top-ups and some capital structure management, that would always be an option for the group as we go through, but a very strong position and a balance sheet in check. Net debt deleveraging target is clearly a priority still as well as well as paying healthy distributions as we go through. On Page 19, just an update on the CapEx where I'd finished up. The outlook is no change from the December update from 4th of December with $5 billion of CapEx Industrial expected for 2021, reflecting a little bit of catch-up in the sustaining area. You can see up to $3.8 billion. There were some project deferrals and COVID-related impacts on some projects and generally a more cash preservation mode early in the year, but that was probably $200 million of that movement. We do have a few fleet replacements that timing-wise has happened to be '21 impactful, but they're also there to derive strong operational efficiencies as well as high internal rates of returns and NPV, particularly at Lomas Bayas and Antapaccay, that South American copper business, we have some meaningful fleet replacements that are quite lumpy when they do happen. They don't happen very often, and they're looking good in terms of what cost structures we expect from those businesses going forward. Other than that, nothing to speak of. '21 guidance quickly, just to put the building blocks. We've got some of the production profile from '21 on Page 21. Nothing has changed from here to December. Copper just reflects the removal of Mopani tonnes from 2021 onwards. Zinc goes through a high zinc phase through the -- particularly Zhairem and Antamina zones. Cobalt, that's the progressive ramp-up of Katanga. Nickels and Koniambo tonnes, ferrochrome, back from some of the mandatory suspensions in South Africa. And coal, a little bit up as well from some of the market-related reductions that we're taking proactive measures in 2020, some COVID impact as well, and that's also with Prodeco out also in the copper cobalt business, and none of these numbers reflect any Mutanda restart, which there was a point earlier on that says we're obviously working on firming up the appropriate plans, both technically and financially. And we'll be able to report back during the course of this year on the plans going forward there. On 2021, you can just see the -- I mean, Page 22, you can see the cost structures. Copper, down to $0.80. And improving that position in by-products, that generates EBITDA of $6.7 billion. Zinc continues to decline as well with higher production. And the by-product benefits that come with that business, that EBITDA is up to $2.8 billion. Nickel, up to $1 billion as, again, you have a little bit of expansion and some higher by-product credits, PGMs and cobalt as well. Coal is still a first quartile cash margin position, but a tick-up in costs, which would be consistent with anyone producing in non-U.S. function at the moment, be it Australian dollars or any other currencies that's growing, and that's running at $2.5 billion plus at the moment. Just to finish up on Page 23, there's the illustrative group EBITDA of $16 billion, generating $7.2 billion of free cash flow. All the details for this, you can find on Page 36 later on, including the macro assumptions that we used on Page 40 at the end of January on that. So strong tailwinds going into 2021. And with that, I'll hand back to Ivan.
Ivan Glasenberg
Thanks, Steve. As you can see, if you look at the next slide, Slide 25, how Glencore is uniquely positioned with the goal of the 2015 net zero emissions, which we believe will shape our future. If you have a look at the slide, to lead the 1.5% pathway transition to net zero, the world has to utilize a lot less oil. And there's the graph showing how much less oil equivalent, billion tonnes of oil equivalent on oil, coal and gas as the world reduces consumption of these different commodities. However, what that will mean is an increase in the amount of metals required for the different types of electricity generation, electric vehicles, et cetera. And by our assumptions and assumptions, if you look at it, for copper, where the world is today, consuming around about 30 million tonnes of copper. It's going to increase to around 60 million tonnes per annum per year. By the year 2050, that's 2x today's consumption. And to give you an idea, therefore, we'll have to have to produce an extra 1 million tonnes of copper per annum going forward from 2021 to 2050. And if you look historically between 2010, 2019, we only increased 0.5 million tonnes per annum. So we're really going to double that to meet the demand for copper going forward with this transition to the different forms of energy. If you have a look at nickel, similar applies to nickel, especially with in respect of the battery, nickel, which is in the batteries for electric vehicle. Today, the world consumes around about 2.5 million tonnes of nickel. We'll have to go up to 9.2 million tonnes by the year 2050, 3.7x the amount consumed today. And to give you an example, we'll have to have nickel growth, production growth of around 225,000 tonnes as opposed 2010 to '19, we've only been growing at about 100,000 tonnes production increase per year. So we really got to double production every year going forward. Cobalt is a similar-type story. Today, the world consumes around about 130,000 tonnes of cobalt per annum. And by 2050, we'll be consuming around about 507,000 tonnes per annum. A large amount of that is the amount of cobalt which is put in the batteries for the electric vehicles. And the growth of electric vehicle going forward will demand a lot more cobalt. To give you an idea there, it also tells you that we'll have to produce an extra 13,000 tonnes of cobalt per annum to meet that target. And between 2018, '19, where there's been a lot of growth with more production in the DRC, we've only grown 7,000 tonnes per annum. So we've really got to double that. Similar numbers talk about zinc, where we -- 13.9 million tonnes going to 28.8. And we will have to grow by 500,000 tonnes per annum as opposed to around about 260,000 tonnes. So that clearly displays these are the metals which are required in the future for this energy transition. And therefore, the world mining industry is going to have to find ways to increase production. If you turn to the next slide, it's clear, if you look at demand of -- to meet this global demand for metals, there, we will have to increase supply, but you can see there isn't a large pipeline of new mines coming into the system. And if you have a look at the slide on the left, there's been limited investment and no new sources of discoveries. So the investment, if you look between 2001, when you had the big demand for commodities from China and there's a lot more capital expenditure in the mining sector where it ramped up during 2005, 2007, it has come down considerably now at '17 and '19. And therefore, there are not many shovel-ready projects. And as you can imagine, we're going to need a lot of shovel-ready projects to feed this demand that is coming into this part of the commodity sector. So therefore, we got to -- it's going to be more challenging. Hopefully, some of the mines will extend their lives with the higher commodity prices. You will need higher commodity prices to therefore extend the life of these mines. The new mines are in challenging locations, lacking infrastructure. Having governments there where it's easy to operate in those areas, that's getting harder. But these are the areas where we're going to have to go and that's where this -- the new mines will have to come in these more difficult regions, so it's going to be a lot harder. Also, we're going to have to get more technically advanced. So therefore, mine is -- these lower-grade materials and as where Glencore is leading in that area because we've got Glencore technology, which works on this all the time, and we've got XPS, so we're leaders in these areas where we can get more efficiencies and utilize the better technologies at these mines where there is lower grade. And that's where the mining companies are going to have to get smarter in order to mine these lower grades profitably in order to meet the supplies -- demand. So it's clear to meet this demand that we believe is coming with this energy transition is going to be difficult. And the mining industry is going to have to increase their production in various different forms and manners. But as indicated in this slide, it's going to be extremely difficult. We are a leading supplier in these particular metals. And if you look at our portfolio, as I said -- spoke about earlier, we're uniquely positioned. We're one of the world's largest copper producers in the world, producing 1.26 million tonnes per annum. And if you have a look at our reserve life, it's very large. We've got around about 23 years left on reserves. But if you include the resources, it's somewhat higher, and some of our mines can continue growing 50 -- producing 50, 60 years. If you look at cobalt, we're the world's largest cobalt producer today, producing 27,000 tonnes per annum. That will grow, as you've seen with the slides that Steve's given you earlier, we grew up to 40,000 tonnes per annum. We have a massive reserve life of about 50 years and even larger resources there. And as you can see, we are a large producer of that commodity. The world is only 125,000 tonnes. We produced 27,000 tonnes and, as I said, growing to 40,000. If you look at nickel, we produce 110,000 tonnes, growing to 125,000 tonnes. We have a 26-year life on our reserve over there. We've got a bigger resource base, so we can continue looking to expand in that area. And the same goes for zinc and vanadium and these commodities that are very much required in this new energy transition. So we're uniquely positioned with great assets in those areas, the lowest-cost producer in most of those commodities, as Steve indicated earlier, and if you look at copper where we're producing at $0.80 per pound. And as the by-product credits get higher, hopefully, that will even come lower in that area. So we're really one of the lowest cost producers of these leading metals which are required going forward. Turning to the next slide, just an idea of what Glencore has, a strong pipeline of brownfield and greenfield options. As you are aware, and I've always stated, I'm not excited about greenfield projects, but Glencore does have a lot of easy brownfield projects where we can increase production with expansions. But as I said, with Glencore, we'll always be extremely cautious. It's more about value over volume, and we'll not be expanding just for the sake of expansion. We'll monitor to see demand, what is required in the world and then decide how we increase and when we increase. What you'll see and we've spoken about are depleting coal assets. You'll have a look, as we move more into this -- these other commodities, we'll be growing our metals in those commodities whilst we deplete our coal production down to the year 2050, which I'll talk about in the next slide, as we support our decarbonization footprint going forward. So that bodes well for the demand of the various commodities. If you have a look at the next slide where we talk about the transition of decarbonization and our emissions footprint, as we said during our December presentation, we look at all 3 of Scope 1, 2 and 3 emissions, and we add that up. And as you can see, in 2019, we had 376 million tonnes of CO2 emissions at Scope 1, 2 and 3. And we said we will decrease that, both with our Scope 1 and 2, as our assets deplete. And we'll also, on Scope 3, as we deplete our primary, we run down our coal reserves and, therefore, will reach 40% decrease of our CO2 emission Scope 1, 2 and 3 by the year 2035. So we're one of the few mining companies who have put a clear pathway how we get to 40% by the year 2035 of our Scope 1, 2 and 3 emissions. And as you can see, a large part of that is our coal depletion. We've also said that we will achieve -- by 2050, we have set ourselves the ambition of achieving net zero CO2 emission by 2050. How do we get there? A large part, as you can see, is our primary coal depletion, and that is where we run down our coal reserves, and we get to a minimal amount by the year 2050. Colombia will basically be shut by then, South Africa and depleted a large amount of our Australian higher-quality coals over there. We will also reduce our Scope 1 and 2 by energy efficiency and fuel switching at our operations. And the other mines, besides our primary coal depletion, will also get there with offsets and efficiencies, primarily from carbon capture storage where we're doing a lot of work in that area. And we believe the world will have progress in carbon capture storage, whereby we'll get the benefit of that. And therefore, the consumption of our commodities and the CO2 emissions with the consumption of those commodities will decrease considerably. So we've got a clear pathway how we get there. Our medium term, 40% by the year 2035 and net zero by the 2050. So here, if you have a look at the next slide, it shows what we try to emphasize there. Our approach is unique in our sector. Our competitors are not in the -- have the same Scope 3 reduction, as we have said. If you have a look, we all talk about Scope 1 and 2, but the slide there gives you an indication that Scope 1 and 2 is very small in the total amount of our CO2 emissions from our products. Scope 1 and 2, in the case of Glencore, only represents 8% of our total CO2 emissions. Look, if you have a look at our peers, it's also similar, smaller mines, Scope 1 and 2, it's insignificant in amount of the CO2 emissions. And a large part of the CO2 emissions come from Scope 3 when the consumers are utilizing our products. So therefore, as I said before, by 2035, and I gave you the indication how we'll reduce Scope 1, 2 and 3 emissions, where we get down to 40% by the year 2035, that gives you an idea how our peers are also doing that. They're mainly being Paris aligned by Scope 1 and 2, and nobody is being -- getting Paris aligned in respect of Scope 3, and that gives you an idea how we are reducing in that area. If you move towards 2050 and our total CO2 emission ambition to be minus 100% by the year 2050. I explained earlier how we get there. And if you have a look at our peers, a lot of them are getting net zero Scope 1 and 2. But to get Scope 3, none of them are getting to net zero. So we believe we're unique in the sector, in our sector, whereby we are reducing and an ambition to be zero CO2 emissions by the year 2050. Turning to the next slide, the last slide, Page 32, giving -- we're uniquely positioned for the future. We believe we've got the right strategy. We are achieving net zero, as I said, global emissions by the year 2050. And we recognize our responsibility to support the achievement of the goals of the Paris Agreement by decarbonizing our own emissions footprint and, as I said, all 3, including Scope 3. We will put a plan to our shareholders for an advisory vote at our AGM in April on this strategy, and therefore, we will take it to them for the vote. So as I said and as you can see through this presentation, we have the right business model going forward. We're responsible and a flexible business model that adapts for these new commodities that is required in this energy transition. We are a leading producer and marketer and recycler of transition commodities. We have a large amount of smelters around the world where we can recycle a large amount of these commodities, which is also helping for the energy transition. And as I said and Steve pointed out, our quality portfolio is well populated with large-scale, low-cost, long-term, high-margin assets. So that's how the company looks for the future. We talk about coal and how we're going to be a responsible stewardship of coal and our policies going forward and how these policies have been set out. So I think the best person who can talk about the future is he's the guy who's going to be running this company and positioning the company for the future, and he can lay out his strategy, how he wishes to handle the company going forward. So Gary, you're on the line, your chance to tell the investors how are you taking this great company forward.
Gary Nagle
Thanks, Ivan. Thanks very much. And good morning to everybody on the line. I mean a terrific set of results, as you can see, we presented today. And just to put in a bit of context of where our climate change strategy that was announced on the 4th of December last year at the Investor Day, I was deeply involved in the development of that climate change strategy and the business strategy around it. And I firmly believe it's the right strategy for our company. Our plan is to, as you've seen, to decarbonize our total emissions footprint. That's all Scope 1, 2 and 3, which is unique in the industry. How we get there, as you've heard from Ivan, is a depletion of our coal business. And that really gets us to a ambition of net zero by 2050. It's the right pathway for Glencore. It's the right pathway for the world, and that's the way we're heading. I mean, of course, we'll listen to shareholders. We want to hear what the shareholders have to say. They believe in our strategy. So far, the feedback has been very positive, but we want to hear more. If there's a demand to do something different by the shareholders, we'll very -- we'll listen to this, and we'll focus on what the shareholders want us to do. But I strongly believe in the approach outlined in this presentation. It's the way forward for our company. It sets us up for the future, and I look forward to driving the strategy as we go forward.
Ivan Glasenberg
Okay. Thanks, Gary. Well, I hope you consult with me as a shareholder when I'm sitting in the outside of the strategy, and we will discuss this over time together with the other shareholders. But please make sure you keep paying me a good dividend.
Gary Nagle
Absolutely.
Ivan Glasenberg
Okay. Steve, I think that captures everything for today. So I think, Martin, we're open to hand over to questions. Thank you. Thanks very much.
Operator
[Operator Instructions] And our first question comes from the line of Alain Gabriel from Morgan Stanley.
Alain Gabriel
Two questions from my side. Firstly, on the capital returns policy, you have hinted at a top-up in the first half. Have your priorities changed? And in other words, where would you spend the incremental dollar? Would it be towards reaching the lower end of your net debt guidance or increasing shareholder returns? That's my first questions.
Ivan Glasenberg
Steve?
Steven Kalmin
I think this year, we've said we want to get below the middle of the range. So that's a priority. But I think just the extent of the cash flows at sort of $7 billion and even on a monthly basis, it doesn't take much to certainly get through $13 billion and get towards $10 billion as well. But I mean if we're carrying on with the sort of cash flow that we are obviously generating and the macro picture holds up as we expect it to do, then I think the probability or likelihood of some top-up come August, I would say, is obviously very high at the moment. So first priority, get below $13 billion and then see what -- sort of how to navigate still additional top-ups and the medium-term journey to get sort of $10 billion. I think they're not fully inconsistent. I think we can find the right balance in August.
Alain Gabriel
Okay. And the second question is, you seem to be actively managing the tail assets via the Mopani exit and then Prodeco. Where is your focus next? Which assets are you targeting next to exit?
Ivan Glasenberg
I mean there's smaller assets. We just look at them all as we move on. We've said we want to reduce the amount of tail assets, the one that takes a large amount of management time and doesn't contribute a lot to the profit. So we're just moving one by one through their process.
Steven Kalmin
I think most of you know what the tail looks like. So those are the areas that we're obviously focused on, those that don't necessarily add much to the terms of some materiality. Exactly as Ivan said, they do have a huge footprint in terms of day-to-day management from operational and safety and the likes as well in environment and the ones where maybe the price or the optionality long term is not like the core part of the portfolio.
Operator
And our next request comes from the line of Ian Rossouw from Barclays.
Ian Rossouw
Just to follow up on Alain's question on the tail assets. I mean do you have a sort of a size of an asset base in mind? Or -- and maybe just in terms of time lines and I guess quantum of sort of proceeds, if you can provide a bit of color on that would be great.
Ivan Glasenberg
Yes. Look, we're working one by one through them. You'd only be a genius, just look at those assets, the tail ones there, they don't generate much cash. We're getting a bit of interest from various parties. And as we get that interest and some of them will go through a formal process, I think we just wait for a reverse inquiry. And we're progressing well through that. How much cash generation? Steve, you can talk there.
Steven Kalmin
Yes. I mean these are not the ones that are going to inject multiple billions of dollars. I mean those are clearly the assets that we're happy to keep ourselves. I mean those are the core assets. So I wouldn't -- I mean we'd obviously want to sell for value and do things that make sense, both in structural or ongoing commercial ties. It can be a range of things that's part of the sale process. But I wouldn't start necessarily penciling in or sort of multibillions here nor carving out assets that make sense sort of for us to keep. You can see how quickly the sort of positive exposure is to sort of cycles and the good assets and the good commodities that you have at the moment. The last thing we want to be doing is 2, 3 years down the track is kicking ourselves on a few of these things. But certainly, some things that obviously makes sense, and those are the things like Mopani, like you've seen Prodeco. There's a few things maybe in the oil side, a few things in the zinc side. These are things we're looking at.
Ivan Glasenberg
And they're very much in progress at the moment, and there will be announcements over time. And as Steve said, they're not going to generate big amounts of cash that we're going to stand up about it, but they do make it easier to run the company. And as Steve says, for safety standards, et cetera, it's less work for Peter and his team. And for assets that don't generate much, it just makes it a lot simpler. So that will happen pretty swiftly.
Ian Rossouw
Maybe just to follow up on Prodeco. Do you -- obviously, you're rescinding the mining licenses there. Are you also giving the liabilities back to the government? Or do you still sit with the liabilities?
Ivan Glasenberg
Gary, I think you can answer that.
Gary Nagle
Yes. Well, we're not rescinding the licenses. We're handing it back under Colombian law, which is a process called reversion. We will be up to date with all our obligations to the government when we hand it back. Those are -- that covers the full suite of responsibilities, any outstanding royalty payments, any backlog in environmental work that needs to be done, we will do that to make sure we are up to date with that. Any work that we have to do in terms of rehabilitation, compensation outside of the mine, any of our social commitments with respect to our communities, all of those, we will be keeping to and doing. And we'll be handing back the mine to the government in a working phase. If the government decided to award the leases to somebody else, they can, but we will be handing it back and taking on all our responsibility and making sure we're up to speed -- up to date with all our liabilities.
Operator
Our next question comes from the line of Liam Fitzpatrick from Deutsche Bank.
Liam Fitzpatrick
Firstly, just on the DRC, you've mentioned you're looking again at Mutanda. Can you give us a potential time line there in terms of project approval and the construction period? And then linked to that, on the mining tax code, has it now been effectively accepted by the industry? And if not, what are the next steps in the time line from here? And then lastly, a question for Gary, just on the business structure. Do you think the business is too complicated? Glencore has got 2 to 3x more assets than major peers. So in this ESG-focused world, do you think simpler is better? And are you overall happy with the organizational structure as it stands today?
Ivan Glasenberg
Okay. I'll talk about Mutanda. As I said, Peter and his team are working on it. They're still working through the process. There's no exact time line. I think, hopefully, Peter will give us an answer soon when he's ready to pull the button on that, but we're still doing the work on it. So I'm not -- I cannot give you an exact time on that. The new tax -- the new mining code in the DRC, no, we have not accepted it. We are still in discussions with the government, and we'll continue to have discussions with the government. And we have not accepted the change of the old code to the new code. Gary, hand over to you on the structure, if you think it's too hard a job or not.
Gary Nagle
Certainly don't think it's too hard a job. It is a hard job, but not too hard a job. I wouldn't take it if I thought so. The asset -- the company is clearly quite complicated, but we have a terrific team of management at all levels managing the business. And sometimes, some of the complexity is what gives us our advantage. We're able to operate in jurisdictions where many people don't. We're able to -- our Marketing business, which is resilient through the cycle, that complexity brings with it returns for us and managed by a terrific set of management. Obviously, we've heard from Steve and Ivan, there is a drive to reduce some of the tail assets, which you know what those are. And that will, by its very nature, take out some of the complications and simplify the business generally. But overall, the organization structure is good, it's robust and there's no major changes that I believe are necessary.
Operator
Our next question comes from the line of Sylvain Brunet from Exane.
Sylvain Brunet
Congratulation on cost performance. Just had one question on nickel and Koniambo. If you could just walk us through the steps toward a ramp-up to nameplates, what's left to do on the technology side and so on. And as we're talking New Caledonia and in the context of a fairly tight ore market for nickel, are you considering any potential export of ore straight from New Caledonia through DSO?
Ivan Glasenberg
Okay. Peter is here. I can hand it over to Peter so he can give an exact update what's going on in Koniambo. Peter?
Peter Freyberg
All right. Thanks, Ivan. Just quickly looking back at last year, which was a disappointing year with only just under 17,000 tonnes, really driven to a large extent by COVID. And we obviously have to shut down the furnaces roughly on an annual basis, and COVID caught us in the middle of one of the shutdowns. And it had to be extended for several months because we couldn't get resources onto the island. Because of travel restrictions, that meant that we operate the other furnace longer than we would normally. And we're now moving from a one -- essentially one-furnace operation that we had last year, and we'll be stepping back to the 2-furnace operation by April this year. The key is that over the last 18 months, we've had some management changes and brought in some additional skills onto the island. We've looked at all of the bottlenecks, and we're reengineering all of the issues that we think will hold us up. And we're expecting a materially higher output this year and stepping up over the next 3 years towards the high 30s and early 40,000 tonnes per annum.
Ivan Glasenberg
Okay?
Steven Kalmin
And nickel ore?
Ivan Glasenberg
Oh, nickel ore -- export nickel ore...
Peter Freyberg
We know that doesn't exist in our plan...
Ivan Glasenberg
There's no plan for that.
Operator
And our next question comes from the line from Myles Allsop from UBS.
Myles Allsop
I think it's Myles Allsop at UBS. Just maybe a few questions. First of all, on the coal markets, obviously, we're seeing this very strong rally on the back of a cold winter in China. Do you think coal prices can hold at this level? Or do you think as we move into the spring, we'll see prices rebase back down to $50, $60? How are you looking at the market? And can you take advantage by lifting volumes from some of the [Mosbold] or assets in Australia? That was the first question.
Ivan Glasenberg
Okay. Yes, the coal market, it dropped during March, as you're well aware, with COVID. A lot of the industrial consumption, especially in India, got affected, Malaysia, different areas. So therefore, demand decreased, even in China. So that's how we dropped to $50. As you're aware, it's not just the cold winter. Industrialization has picked up in India and in different areas. And the world sort of got back to a better position, and that pushed up demand. And actually, the cold winter has helped. But you also got to remember, there is no new supply of seaborne coal in the market, okay? Indonesia picked up a bit slightly, not that much in Russia. You saw us in Colombia. Colombia decreased. You had problems at Cerrejón, and you had Prodeco shut. You also had us cut back in Australia. We'll bring back some of those Australian tonnes which we cut back, but nothing of a major amount. But we are decreasing in other areas. So yes, I think it should stay strong. And it's a matter of -- as the world industrial -- industry picks up again, there are new coal-fired stations being built around in Asia, and demand continues there, even though Europe is a lot less. But as you're aware, Europe demand is only seaborne coal, about 35 million tonnes. But the main thing, if you look at supply, supply is reducing all over the world on the seaborne side. And no new tonnes coming into the market.
Myles Allsop
So we should expect a higher price. And one thing with your responsible ownership strategy of coal, when you look at the total emissions reduction in 2020 versus 2019, you've cut emissions by over 20%. Almost that 2035 target is starting to look quite conservative. Obviously, there's a cyclical element to it. But do you -- are you going to set out any interim targets to, over the next sort of 5-year sort of time frame as opposed to looking out over a 15-year time frame, to add credibility and convince people it's not greenwashing?
Ivan Glasenberg
No. You can see us not greenwashing. We don't need to give a scorecard year-by-year. We said we're aiming to get the 40% by 2035. We are on that trajectory. And as you can see, we've reduced quite a bit already. So we'll just continue going on that trajectory. You can see it's not greenwashing. It's actual depletion of production of the actual tonnes, and that continues to go. We're not talking about massive carbon credits or other type greenwashing stories. This is real. As I said, it's not wishy-washy that we've heard some of our competitors talk about. This is real depletion of production and reducing our Scope 3 CO2 emissions with less production coming out from our coal mines.
Myles Allsop
One very last question on Glencore Agri, obviously, good performance. What's the kind of strategy with agri going forward? Is it a core part of the business? You obviously rebranded it back to Viterra, which created some questions as to where it sits medium term. But how are you thinking about agri as part of the portfolio?
Ivan Glasenberg
I think it's still an important part of our portfolio, and I don't see any reason why it shouldn't. It trades -- it has the same trading methodology of the rest of Glencore on the trading side. They also own a vast array of assets. And we've always said, we've got very strong partners in the business, the 2 Canadian pension funds. And that's a business we'd like to see growing going forward. So I'm sure Gary and the team and Dave Mattiske, who are running the business, will want to grow it. And I don't believe -- as you can see, it's contributing well to the company and will start paying out dividends. So I think it's something that should grow, and they're always looking for new opportunities to grow that business.
Operator
And our next question comes from the line of Jason Fairclough from Bank of America.
Jason Fairclough
Just a couple of questions. The first one is for Ivan or maybe for Gary. It looks like BHP is looking at selling some thermal coal assets. Could Glencore be a buyer of those assets? So -- or more generally, is the purchase of coal assets consistent with your emissions framework? So that would be the first question. Second question, just on your bubble chart on Slide 28, so the brownfield projects. Do you have any thoughts on the aggregate amount of capital that could be put to work here and the potential returns that we'll be looking at? So is this $5 billion or $10 billion of total CapEx that could go into these projects?
Ivan Glasenberg
Sorry, sorry, Jason. I mean, Gary, you can comment a bit, but I don't think we have intention of buying BHP's coal assets. As I said, we're depleting our coal assets, so nothing really to do on that front. On the other side, you said, if you look at -- Gary, I don't know if you want to add anything else on coal, but I think that covers it?
Gary Nagle
Yes, that covers it. I mean we're not going to comment just on individual transactions.
Ivan Glasenberg
Okay. On the other thing, if you look at Slide 28, no, that just gives you an idea. You know kind of why -- you can look at each asset there, and you can see some order of brownfield, easy expansions, not massive CapEx. Others would be large CapEx, as you say, the $3 billion, $4 billion type greenfield operations. As I said, I'm not excited to do those, but it's going to be up to the new management to decide. But hopefully, they'll follow my policy and avoid greenfields for as long as possible. But some of these brownfields, Collahuasi is well known, you can expand that. The exact amount of billions, I don't know. Peter and his team always look at that. But that is an easy expansion. Lomas extensions is also pretty easy. We've spoken about Mutanda, the copper-cobalt restart. We're looking at that. But yes, most of the brownfields are not massive projects. Greenfield, yes, are those big projects, and we're going to think twice about that.
Jason Fairclough
Okay. Can I just come back to the first question? I just want to make sure that I understand the answer. So you're saying that you will not be buying any coal assets as part of your ongoing strategy around coal and the rundown?
Ivan Glasenberg
Look, we can't talk about particular transactions, but we are running down our assets. That's our intention. I mean I don't know what else is coming there. We can't talk about any particular transaction. We'll wait and see.
Steven Kalmin
Jason, nothing that one does would jeopardize those medium- and long-term goals. So I mean it's not going to be a straight-line journey. I mean even within our sort of existing portfolio, there's going to be periods of declines. It might go up a little bit. If there's an extension here, it goes down. But that line and the end goal is absolutely sort of locked in the exact path and trajectory with sort of which you take will be sort of determined with, obviously, emissions, economics, social responsibility, all those sort of things in mind. But that's not going to be compromised in any way, shape or form.
Ivan Glasenberg
Yes. How you get that linear line and how that line is going down within different mines will be different. Some mines maybe expand, other mines may be depleting, other reserves may be developed, other reserves depleting. So we've got a lot of mines. I don't know...
Steven Kalmin
Or it could be a swap of that...
Ivan Glasenberg
A swap. And so we may swap, as you say. When something comes available, we may look at it and get rid of something else. So we will work within our portfolio of coal assets following that trajectory, the 40% and the 0% by 2050, following that trajectory, we will get there, working with the various assets within our group, plus could look at other people's assets and doing swap-type arrangements.
Operator
Our next question comes from the line of Sergey Donskoy from Societe Generale.
Sergey Donskoy
First question is actually maybe a follow-up to Jason's. Could you remind us, please, what would be the volume of coal output by 2035 consistent with the same of reduction of your Scope 3 emissions by 40% in tonnage?
Ivan Glasenberg
But on the exact number...
Steven Kalmin
You're not going to be far -- I mean take out 2019 and chop 40% of that, that's a pretty good number.
Ivan Glasenberg
Yes. Close enough. You can see if you look at that Page 29, it shows you most of it is primary coal depletion. The rest is small.
Steven Kalmin
And that's the minimum. It doesn't say you won't exceed it. It's also -- there's a bit of oil in the mix, which also disappears over that sort of profile, but that would be a pretty good base assumption.
Sergey Donskoy
Understood. Now second question. On your copper revenue, I think that -- well, it seems that the average realized price was pretty strong, especially in the second half of the year, on my numbers, by as much as maybe 9% versus average spot. The question is, was it because of inventory release? Or was it effect of provisional pricing or timing of shipments or something else?
Steven Kalmin
Provisional pricing would be the biggest component. Timing of shipments would be the second in that. So obviously, you saw that increase accelerate towards Q4. There was more sales. We were stronger in production also at Q4, so you get the benefit of obviously higher prices rather than linear, but PP was important in November and December.
Sergey Donskoy
Would it be possible to quantify the effect of provisional pricing? Or is it something that can be worked out from the numbers?
Steven Kalmin
I think without provisional pricing, you would have been close to an average realization. But you do have the timing of -- I mean if you look at our quarterly production, it was obviously stronger H2 on H1, particularly an operation like in Antamina was down for about 6-or-so weeks. You saw a continued ramp-up at sort of Katanga. So just timing of production would have been the smaller component. PP would have been the majority.
Sergey Donskoy
I see. And lastly, the Dolinnoe-Obruchevskoye zinc project in Kazakhstan, what is the expected capacity? And when do you think the mine will become production accretive?
Ivan Glasenberg
Peter?
Peter Freyberg
Well, as you know, we're running those operations at the moment through the Ridder concentrator. And as those ramp up, we're replacing tonnage there. So there are decisions going forward as to whether or not we expand concentrator capacity. But as they come in at the moment, I would say the same level that we are at the moment.
Sergey Donskoy
I see. And when this CapEx is going to be spent?
Peter Freyberg
The mine will start running down in 3 or 4 years' time, so the expenditure will be over the next few years.
Steven Kalmin
And that's in our numbers, Sergey, in those CapEx guidance. That's part of [indiscernible].
Operator
Our next question comes from the line of Chris LaFemina from Jefferies.
Chris LaFemina
Just 2 questions actually: one, on the outlook for your key markets; and secondly, on strategy or capital allocation. So first, on the outlook, you make a pretty compelling case about major supply constraints, the structural demand drivers due to decarbonization. Markets are tight already. Looks like commodity markets are only going to get tighter, which means prices, I would assume, go materially higher. So the first question on the outlook is, how would you compare the outlook today to the early 2000s, like the beginning of the China super cycle? That's the first question.
Ivan Glasenberg
Yes. Look, the China super cycle came at the time people did have potential projects or reserves they could develop. They weren't ready for the boom, and that's why we got the boom because it took them time to develop them. But by the time 2008, 2009 came, they had developed them. So that is the difference. The demand was there. The demand was very strong, but the supply was also there. Just a little bit delayed. You remember that time, you couldn't even get Caterpillar equipment. You couldn't get ties. So you're a bit delayed, but there was the mines and potential mines to increase and new mines to open up. The difference today, now how is demand outlook? Okay, a lot depends, as I said earlier during the presentation, it depends what's going to happen on infrastructure development in the United States. China, we know, is strong. 50% of the world's commodities are consumed in China, as you're aware, and demand is strong there and looks like it will remain robust. How the rest of the world develops and when does the fiscal spending occur in the U.S. in infrastructure spending, if that does kick in, then demand is very strong. And as you can see, besides the actual infrastructure spending, the new generation of commodities that are going to be required for the new energy mix, and these are these commodities which I've spoken about, demand will, I believe, also be strong there and the outlook does look good. The difference this time to 2002, and as I clearly set out in the one slide, I think it's Slide 26, we're not ready for it. And even though they weren't ready for it in 2002, the projects were there. Today, I don't believe we have those projects, and it's going to get more difficult. So I think the supply response this time is going to be harder than before in a lot of these more difficult commodities, especially if you talk cobalt, copper, those are the main 2 ones where the world is going to struggle. Nickel, yes, they can pick up supply because NPI in Indonesia can continue growing, and the ore and the reserves are there. It's more difficult in copper. It's more difficult in cobalt. Zinc, there aren't major big projects that are also occurring, so that can be difficult. And coal, it looks good on the supply side because no one's going to finance new projects. And there are no new projects with the negativity around coal, and therefore, new supply seaborne coal is going to be more difficult, even though demand is picking up because there are new coal-fired station we built. I know a lot of others are closed. But even if coal demand stays flat, supply seaborne coal is going to be difficult.
Chris LaFemina
So basically, you're currently within your net debt target range. You're doing $8 billion of mark-to-market free cash flow. The outlook for commodities appears to be pretty compelling. You're going to generate lots of cash in the years ahead. I guess the question then is, why would paying net debt down further be a priority? I mean it seems like, if anything, a big buyback or even acquisitions would be a pretty compelling strategic use of capital at this point of the cycle. I mean your shares are obviously materially lower than where they were when you IPO-ed, but the outlook is probably better now than it was then. And again, the balance sheet being at less than 1x net debt to EBITDA, it seems like you're in a pretty good position now to go out and actually put capital to work to actually create longer-term value by making investments now. Just what's the overall philosophy around that?
Ivan Glasenberg
Okay. Steve can talk about the debt, why was bring the debt closer towards the low end of the range, towards the $10 billion. I think I can answer part of that question, but I'll leave him to answer. I think we've been through enough cycles to have the balance sheet in a lot stable a place, and $10 billion net debt is a nice place to have it there. But if you are -- the other idea that you say, go buy things. There's not much to buy, and I don't see anything to buy right now. But I'm sure Gary and the team will be opportunistic. And if opportunities come and are there, they will look at it. But right now, I don't see anything that they can go look at to buy. There are some brownfield expansions. They can look at that. I'm sure that's where capital could potentially be deployed. But as you know, Glencore is very cautious on that. And we don't want to be the one who adds new tonnages into the market that pushes down prices. We'd rather, as you say, let's generate the cash. Let's get this $8 billion free cash. And hopefully, it gets -- grows more as commodity prices go higher and then just kick out dividends to shareholders. Steve's got a note there, whether we do buybacks or not, I think I rather leave that, with the commodity price and the way commodity prices change, rather leave that to shareholders and kick up divs, but I think I'll leave it to you to comment on that, Steve.
Steven Kalmin
Yes. I mean, Chris, I mean we were sitting here 12 months ago before kind of the world sort of fell apart for sort of 3 to 6 months. So I mean these things can turn around pretty quickly positive. They can turn around pretty quickly negative. And we've seen -- I mean, most companies, including ourselves, have the scars of having too much debt in the sector. Without precipitous, you can go from an EBITDA of $16 billion or $17 billion to $8 billion, $9 billion or $10 billion. We were in that same position sort of 12 months ago. We were here. I mean we -- so we're talking about a dividend last year that we paused for sort of 2020. So we never want to be in that position again. I don't think anyone enjoyed that necessarily. What's the right number? We've intended the number. If you got better ideas, sort of feel free to contribute in, but we feel that's sort of a good number around sort of where we are at the moment. A little bit of debt is fine. It's perfectly good. In fact, it's probably helpful. And then sort of put this balance sheet beyond any sort of doubt, there are some people probably sitting on this call that at $16 billion would not be comfortable investing and at $10 billion would jump in with sort of 2 feet and 2 arms. So we think that that's the right thing. The business obviously generates the cash. Ivan said, not -- obviously, not averse to other forms of investment provided they reach the return, but it's a competitive environment out there for good assets. So I don't think anything is going to come cheap. Maybe equities is a bit cheaper, but that's not our business. This buying equity, that's your job out there. But going out and buying assets in copper or nickel or whatever the case may be, maybe coal is the one area, but you've just sort of heard our discussions obviously in that. So I think it's the right sort of balance in terms of the both balance sheet and debt levels and capital allocation.
Operator
Our next question comes from the line of Dominic O'Kane from JPMorgan. Dominic O'Kane: Just a few quick questions. On cobalt, you've given us your production guidance. I wonder if you could give us your sales guidance for 2021. Would it closely mirror the production? Or should we be expecting a greater volume of cobalt sales this year? Second question, just -- I mean whether a question for Ivan or Gary. Just if you could maybe just give us some insights on how you're thinking about country risk with respect to future projects. Does your experience in Zambia and some of the other sort of frontier jurisdictions lead you to pursue a slightly more conservative attitude to country risk exposure longer term? And then final question, just on marketing. It's relatively early in the year, but is there any insight you can give us into how current market dynamics are shaping your expectation for commodity trading through 2021?
Ivan Glasenberg
Okay. On the cobalt, I think production and sales should be similar. Gary can talk about other jurisdictions, what he feels about it. On the marketing, it's only been 2 months. And as Steve said earlier, I think he mentioned earlier on the call, the marketing looks good. Is the market well set up? Yes, I think it's not bad. Will oil be -- will we get the volatility and the opportunities that we had in 2020? We'll wait and see. It's early in the year. But so far, the marketing has performed well. Gary, you want to comment on other jurisdictions?
Gary Nagle
Yes, sure. Look, I mean we're a company with experience operating in, let's call it, more difficult jurisdictions. But as Ivan pointed out earlier in the presentation, the world is going to need a lot of commodities, in the commodities we're in. And they're in -- they're no longer in the Tier 1 first-class jurisdictions. They're in the slightly tougher ones. So if the world needs that we -- that's where -- not only us, but everybody is going to have to go. So of course, we're not going to be cowboys and go into jurisdictions that we don't believe our assets are safe. We'll go into jurisdictions where there's a good regulatory environment, where there's a good judicial environment, where we can operate effectively and efficiently, bring our safety systems and our way of working efficiently. But if you want to be in the resources game and you want to develop and we need -- and grow in the commodities that we're in, then unfortunately, we can't -- one can't stay in the first-world jurisdictions because that's not where the growth in supply from these commodities is going to come from. So we'll be careful how we operate and choose carefully which jurisdictions, but we certainly will need to be in those sorts of countries.
Ivan Glasenberg
And I think the rest of the mining industry is going to have to look to those jurisdictions. They have no option. If the world is going to meet the supply -- the demand, which we believe is going to occur, and the supply in the easy countries is getting more difficult and the material is not there, and we're running out of material there, you've seen, look at our competitors, they are starting to go into these more difficult regions, exploration projects, et cetera, teaming up with the smaller operators going into these areas. So I think we have no alternative, and that's going to happen if the world is going to have to get these commodities for the future.
Operator
Our next question comes from the line of Myles Allsop from UBS.
Myles Allsop
Just a couple of quick follow-up questions. First of all, on Prodeco, are you retaining ownership of the port? Is it feasible for Prodeco to restart under new ownership? And do they have a route to market? And then secondly, on working capital, we have the $3 billion build in the first half on the back of net payables lifting. Half of that is reversed. Should we expect the other half to reverse during the course of 2021, so we should be looking at a kind of flat or even slightly lower sort of net working capital balance sort of in 2021?
Ivan Glasenberg
Gary, you could take the Prodeco.
Gary Nagle
Yes. On the port, yes, we are retaining ownership of the port in Colombia. Any new buyer of -- or operator of kind of treat this similar hardware will have access through that port. It's a public port for public use. There are access arrangements in place. It's a regulated tariff, so they will have access to market.
Ivan Glasenberg
Steve?
Steven Kalmin
The amount of working capital, obviously, net outflow 1.5 for the year, a part reversal of second half. I would -- I think going forward, I would tend to sort of be more on the conservative side, assume that that's not necessarily going to further sort of unwind, that we just manage it around the new levels of working capital in terms of payables and receivables and sort of days. Clearly, where -- compared to where we were sort of last year, it is more sustainable. It's more sort of conservative in terms of -- sort of in terms of trade. And it may well -- I certainly wouldn't assume any further sort of release or unwind. I think it's not a bad thing that it happened in terms of overall sort of balance sheet levels and the like. It's delivered the $15.8 billion, and we sort of go forward. And it will correlate with commodity prices and some other sort of opportunities or volumes that happen, and we'll obviously comment on that as when it happens, but I wouldn't assume a further unwind.
Operator
And our final question comes from the line of Ian Rossouw from Barclays.
Ian Rossouw
Maybe just to follow up on Jason's question on the sort of coal assets. Would you -- I mean in terms of your comment around asset swapping, would you be willing to increase your exposure on the Atlantic coal market? Or is your idea of swapping more focused on Pacific, in the Australian assets?
Ivan Glasenberg
I don't know. With prices in the Atlantic, I don't think we'd be too excited, not much. The market is not looking great in the Atlantic. But Gary, do you want to add something there?
Gary Nagle
Well, there's not really much in the Atlantic to swap for years. I mean South Africa and our supplies into Asia, there's not much left there.
Ivan Glasenberg
We're at least trying to get to Colombia, I'm sure.
Gary Nagle
Cerrejón. Yes.
Ivan Glasenberg
Cerrejón, that's where he's going, Gary.
Ian Rossouw
I think BHP and Anglo gives you the assets for free when you...
Ivan Glasenberg
Exactly. Because...
Steven Kalmin
He needs to decline.
Gary Nagle
I think the first question you got to do is go ask Anglo and BHP what they're going to do.
Ivan Glasenberg
And as Steve says, a managed decline. Okay. I think that's everything. Thank you very much. Thanks for the call.