Ivan Glasenberg - CEO Steven Kalmin - CFO

Sylvain Brunet - Exane BNP Paribas Jason Fairclough - Bank of America Liam Fitzpatrick - Credit Suisse Sergey Donskoy - Societe Generale Menno Sanderse - Morgan Stanley Myles Allsop - UBS Heath Jansen - Citibank Alon Olsha - Macquarie Tyler Broda - RBC

Good day, and welcome to the Glencore 2016 Half Year Results Conference Call. Today's conference is being recorded. [Operator Instructions] At this time I would like to turn the conference over to Mr. Ivan Glasenberg, CEO. Please go ahead sir.

Good morning. Thank you. Thanks for attending our first half presentation today. As you will see on the presentation we've had a solid first half performance and a difficult commodity market conditions. However, even with these lower price commodities, we have generated strong cash during the first half and our EBITDA is $4 billion. That is 13% lower than the first half last year. Industrial EBITDA $2.7 billion, 20% down than last year but once again our marketing business has been resilient and during the first half, we had an EBIT of $1.2 billion which is 14% up on first half last year. We generated solid free cash flow during the first six months of around about $2.8 billion and like all other mining companies we have reduced our CapEx significantly during the first half of this year. And our CapEx during the first half of this year is $1.6 billion which as you can see is 51% lower than the first half last year. We’re pleased to say during this tough commodity environment, we have worked very hard on reducing our operational costs at all our operations around the world. And we're proud of a drop in our production costs and as you will see we definitely have mines in the lowest quartile Tier 1 good assets and today we're producing copper all in cost set $0.97 and Steve will take you through the actual cost structure of our corporate divisions later on. We are producing Zinc at negative $0.03, if we take the gold credit excluding the gold credit at $0.15 and nickel at $0.246 and copper - and thermal coal at $37 and this definitely is a unique cost structure of the company. Our marketing as I said is very resilient to fall in commodity prices and even with lower commodity prices we still maintain our profile of $2.4 billion to $2.7 billion for the year and as I said $1.2 billion during the first half of the year. Markets are looking at the trading business over the first few months of this of the second half is not bad. So we are pretty confident on reaching the $2.4 billion to $2.7 billion on the marketing which we indicated at the beginning of the year. We have strong liquidity and we have available credit lines of $15 billion. We were as you are aware we have been selling certain assets and definitely in respect of our gold assets and the amount of gold stream that we have available and we're happy to say that we have exceeded, we're reduced that we expect the debt levels at the end of this year and we will reach around about 16.5 to 17.5 net debt on 31 December. And what we were – we've also doing well on our asset disposals and as we indicated last year we intend having asset disposal between $4 billion to $5 billion. We have already disposal of assets of $3.9 billion. So we’re successfully delivering on this profile of $4 billion to 5 billion. We can now be selective on the balanced assets which we have available to sell, we've been talking about GRail, Cobar and doing something on Bayas gold whether we do a streaming or sell we’re looking at opportunities there, so we very comfortable on reaching these net debt levels at the end of the year. What is also interesting at current low commodity prices and the commodity prices at which we have today, the EBITDA of the company will be around about $10.5 billion and that should generate free cash flow generation of the CapEx etcetera of around about $4.5 billon. So even at current commodity prices today the lower price commodity, the company is very cash generative and will be generating around about $4.5 billion free cash flow. Regrettably, we’ve had 12 fatalities from four incidents at our mines and once again these fatalities have occurred at our focused assets and while these are Kazakhstan, Zambia and DRC. And we’re already putting in maximum effort to improve the culture and the mining operations in these focused assets and we're already working hard to ensure we have zero fatalities across the board. As you will see, we have reduced our LTIFR's from 2010 to June 2016 and this has decreased 53% from 2.74 to 1.28 and this is an area where the company is very focused to reduce the fatalities at these focused assets in these difficult countries where we operate with difficult safety cultures. And with that I hand over to Steve to take you through the financial details of the company.

Yes, thank you, Ivan. Just the financial summary on Page 7, many of these points would have been already covered by Ivan. So I'm not repeating, EBITDA 4 billion, just down 13% which was a mixture of marketing clearly being up to 14% and industrial down 20%. So within that market backdrop having held EBITDA to within 13% of the first six months of last year shows the strength of both the industrial, the marketing and the diversification there. For the first time in a while as Ivan mentioned, and nice to be able to report positive earnings momentum going forward. So as we move forward that sort of contraction against the prior period is of course can reduce and ultimately turn positive. We've spoken about an EBITDA of around $10.5 billion today at spot commodity prices which implies sort of the half year EBITDA in excess of $5 billion the run rate going forward. So we should stop seeing positive earnings and positive cash flow trajectory going forward. The net income was at $300 million and that's reflective of the still relatively high but fixed depreciation charge running about $6 billion for us. So that's at trough levels given headline earnings and that also should start some materially improving going forward. And the percentage terms of the lower base is also going to start looking fairly striking as well going forward. Industrial CapEx at $1.5 billion down more than half from the first half of 2015 clearly underpinning a strong cash flow performance and incredibly coming in below the run rate of our guidance of $3.5 billion this year. We haven't changed that as we will look at the slide later on, but clearly tracking comfortably at those low levels. Ivan mentioned the industry-leading cost performance and high-capacity low-cost operations generating good margins in cash flows today obviously and going forward there are some slides later on we’ll show graphically how that is on Page 12 and some details on Page 23 which fully reconciles the cost structures as well. All that implies with the EBITDA and the CapEx that we have been able to bring debt even further down not much asset disposal proceeds coming through yet that's a story for the second half 2016. Notwithstanding all that we brought debt down net funding and net debt down by $2.3 billion this year that was with free cash flow 1.3, FFO 2.8 billion and the CapEx of 1.5. And the free cash flow was also somewhat suppressed in the first half against the second half in the interest [claims] [ph] that we do as well. So we’ve got a lot of our bond coupons that [happens] [ph] first half compared to second half. So that 1.3 of free cash flow you'd recall back in December last year we spoke about the business generating mixes of 2 billion of annualized free cash flow in March, it was up at 3 billion that's clearly starting to come through and at this set spot prices today that we’re in excess of 4.5 billion. Committed liquidity is maintained at levels that we were at the end of December still very comfortable 15 billion and that's in advance of all the cash flow that we’re expecting to generate and the asset disposals of the 4 billion to 5 billion range which is largely delivered including the Ernest Henry announcement that we made this morning. So on the financial metrics side just reaffirming targeting the upgrade to the strong BBB Baa in the medium term with BBB minus Baa3 stable outlooks currently and confirm during the first half of this year from the two major agencies. And clearly if you look at our debt trajectory and the earnings momentum, we will see the net debt EBITDA falling comfortably towards our new two times closer to two times which were historically three times. Even last 12 months we're at 2.9, I think one of the few companies who have been able to mitigate flow through solid cash flows and solid earnings, as well as bringing down debt to have kept a debt coverage ratio not from going up on the last 12 month basis. And on a spot earnings basis against out debt targets, we’ll be comfortably below two times as we as track forward on spot earnings and our debt trajectory. In terms of the marketing result on Slide 8,an improvement of 14% again reflecting the diversified business model. And to some extent while we were always comfortable giving ranges of the 2.47 - 2.4 to 2.7 this year and historically greater than 2.7 billion because it is such a diversified and an extensive platform around the broad segments of energy metals and agricultural and even within those you have many, many more commodities contributing to that particular level. So second half - first half performance was 1.2 we've reaffirmed guidance of 2.4 to 2.7 underpinning in confidence by clearly the agricultural side, we expect a much stronger second half performance. That is our one business that does exhibit certain seasonality around the harvest, particularly in Australia and Canada and the old material business that is a big engine is the handling and procurement infrastructure in Canada and Australia. The harvests are very much second half way to the earnings generation follows accordingly, so expecting a big pick up there. And if you look at historic earnings of that particular segment, you'll see the range that could come. So that also is going to see a big half to over half one performance there. The metals and minerals very strong performance, consistent with the second half of last year, maybe looks a bit the year-on-year increases somewhat flatted by the prior year period, which did have some headwinds particularly around the aluminum premiums and difficult to stay in the steel markets. But now it's at the level that is performing without incident. And even the old business to some extent as we’ve headlined we've said it reflects some normalization of trading conditions that impacted last year most particularly [Barrington] [ph] in the first half of 2015. The various starts were broadly around but if you take oil and coal combined, these sort of levels that still performing sort of below to historical average is for us and really expect some improvements across the segment going forward. So a pleasing performance within the annualize range where we expect and particularly agricultural we expect the strong second half performance as we move forward. You'll be familiar with the Slide 9 where we plucked that marketing earnings all the way back to 2008, and you could see the more broad consistency and where we are within those ranges historically. Some of the strengths of that unique, its low risk defensive earnings driver, highly cash generative. There is no CapEx required in this business relatively low tax rates. So it does convert free working capital into strong free cash flow. The working capital in fact is a positive correlation with commodity price essentially is cash flow insulate in period of low prices, lower prices releases at working capital which we have seen high prices. There is a potential for some of that to go up, but in that environment it's obviously good problem to potentially have in [VAR] [ph] and risk levels are being contained comfortably within broad levels. It is important to know that we will update from the December Investor update that we have and at least upon closing of the various transactions the 2.4 to 2.7 range does include 100% of the Ag business. Later on we'll have slide on how we expect to account for that business going forward on a proportionate, it will deconsolidate at the 100% and we'll proportionately consolidate that business going forward. So we will have to reflect the loss of 50% of expected earnings going forward under that business and come up with a new range, but of course that will reflects a much lower balance sheet and funding base and overall the blended loss of cash flow against the debt benefits and the earnings benefit that we expect to get is net-net positive for Glencore as well. If we look just to Page 10, we've got the industrial asset performance at the EBITDA level down 20% and I'll provide a waterfall slide on the next page showing the bridge between the 3.4 and 2.7 of course prices having a big impact. But just looking across metals and energy and the agricultural side, metals and minerals has been able to hold almost flat EBITDA performance notwithstanding prices generally down about 20% that's a very good outcome. Given significant operating cost reductions along with favorable FX and in fact the EBITDA margin improved on the mining side blended from 24% to 28% very strong business. You'll see our cost structure in copper and zinc and across the board general even copper and zinc we're able to increase period-on-period earnings from 5% in copper and 15% in zinc. The energy side of the business made up of our upstream coal and oil businesses was impacted by much lower prices particularly in Q1. We have seen both in coal and oil we have seen some strong sequential improvements each month in fact since March. So we expect that business to have dropped in terms of earnings going forward. What is worth just noting in terms of the energy business just on the coal side, and you would have noticed in the second half of the year in the second quarter of 2016 once we've seen a really a strong replacement in coal prices from Q1, we saw strong flattening in the curves of the forward margin environment was looking good. Our cost structure was suddenly preserving and protecting and locking in some strong cash flows. We did lock in and hedge pricing of about $15 million tonnes of our coal just out for the next 12 months, so that's the six months ended December 2016 and the first half of 2017. It's still very good margins for us. There might be a bit of opportunity cost in having taken some of those hedges through the April to May period or so, and you can see in our accounts on those derivative contracts we have reported a mark-to-market on those 395 which has some potential opportunity cause net-net we'll still be ahead because there is still a lot of un-sell tonnage but assuming prices of coal as they might have been at the end of - at the end of June that 395 is obviously staged and staggered over second half 2016 first half 2017, so split the difference there you have a potential 200 impact on the overall group EBITDA of virtual having head some of those future sales. The cash flow impact is no future cash flow impact, it will just be an accounting entry that’s going to go through EBITDA because of course we've margin and fully collateralized those hedging contracts as we work through. So there is no impact on the cash conversion as we move forward on that. And we felt that it was prudent to do back in Q2, we're at clearly wanting to ensure we de-risk the degradation program that we locked in the free cash flow that we expected over the next 12 months, and that’s certainly the cases where we stand at the movement we've seen a pickup, we've seen Chinese government action in terms of call domestic reduction process of increase but there is a way some nervousness that may be it comes back. We now locked in, if price go back to where that were earlier in the year, we’ve got that downside protection if there were in Q2, then we deliver good margins if they go up of course as a little bit of opportunity cost and we back in the normal spot environment next year. So, it's just 200 a piece or so as we move forward. The agricultural side as well, it’s a small business for us but again the strongest second half performance as what we expect quite significantly on the back of improved processing margins particularly in Europe both in crushing and the biodiesel environment. The waterfall bridges I mentioned on Page 11, in fact 66% of the negative price impact was offset by cost reductions and favorable FX movements quite a significant reduction that was able to cushion the overall reduction. That $720 million you can see the real cost reductions to lower field and energy cost, operational efficiencies, restructuring procurement, whole range of things that’s a very strong performance, quite a big percentage across an overall industrial base. We did guide and note toward the $400 million reduction towards the end of last year that we expected in cost, that sort of a period on period. So that’s pretty much been - this shows first half of this year to first half of last year, so of course we already starting to bring down cost second half of last year but we made very good progress towards that $400 million, and there is still advancements that we can make in terms of cost reduction and that is something that we're clearly focusing on as well. In terms of the pricing impact of the 2 - little over $2 billion, $1.25 billion was in metals, copper down 21% or so year-on-year, average prices was $515 million of that $1.25 billion and $800 million impact in the other commodity, $675 million of which was coal. In a volume sense, we actually improved margins notwithstanding that the overall weighted average margin of Glencore was broadly flat. We were able to increase where there is very strong variable in margin contribution. Antapaccay actually increased in copper production 21%, Alumbrera through a sort of more period where they have been going through, there was a significant variability in gold, but gold was actually up 46%, very strong contributions there. And Mutanda over in Africa performing very well in copper improved its cobalt production, it's a big by-product there, 73% increase in cobalt production to 10.9 thousand tonnes there as well. And of course the currencies gave some benefit particularly in Kazakhstan, South Africa, Argentina, Colombia, Canada or other important markets for us. If we then move onto Page 12, this is for us one of the key slides fully reconciling and explaining how unit cost performance in our main industrial upstream contribution that both allows and shows trajectory in where we guided initially where we actually were at the first half where expect to be for the full year. And if we combine this with the appendix that goes hand in hand with Slide 23 which fully reconciles all the cost after the volumes, the margins that we're in, this is the way you can very transparently build up the EBITDA spot cash flow generation that we have as well. So very strong performance as Ivan mentioned in copper. We're originally back in March the earlier guidance was at 104. It's now come down to $0.97 a pound that's as we said is a fully inclusive cost structure across the entire business with by-products, also some custom smelting credits, we showed the average of the 97 excluding gold as you can see the blended average of the91. Very good performances across the Board, starting from Mutanda at 105 all the way down to Cobalt at 128, blending out to 91. So with scale and that sort of cost structure, that continues to be a highly cash generative business, which generated $1.3 billion of first half EBITDA. The zinc business of course as well has with the zinc operation has a lot of gold including a primary gold mine coming through which is treated for unit cost purpose as a by-product that in fact goes into negative from the primary zinc perspective, we included as gold credit. So $0.15 excluding it and again a very good first half zinc performance of $770 million. Nickel also has strong first half performance with increase in the -- these all down on the earlier guidance, nickel has a slight tick up from second half to first half by virtue of the nature of grades coming through particularly in subprime in Canada as well. And the thermal coal business as well, overall we were looking at an $8 per tonne margin is what it delivered, $500 million of EBITDA and we've shown how that offer [GC Nuke 51] [ph] with a blended discount of 45. Showing that's all the domestic tonnes and a build of some coking margin in there. We were $8 a tonne of margin coming through that particular business as well. As I said, this does allow you it fully proves after reconciles the cash flow generation in first half, which is good in the industrial side but also allows one to prove up and bring some transparency around the full year annualized cash flow at spot and the $10.4 billion that I've been mentioned if we take current spot prices in those cost structures and the volume, if you annualize all that, you'll come up with copper at about $3 billion of EBITDA, which is a bit higher on the producing asset that even takes off the care and maintenance on the ongoing operating cost that we have in Africa. The zinc business will be a touch over $2 billion at spot prices. Nickel will be a touch over $400 million the coal at spot prices today with an $18 per tonne margin is around $2.2 billion and the various other businesses of Glencore net out to about $100 million of oil, for alloys less some overhead, bit of Agri or so. So that $7.7 billion spot on the industrial side, the marketing at the midpoint is $2.7 billion EBITDA. So you get to $10.4 billion, $10.5 billion spot EBITDA. Interest and taxes has obviously ticked up. Now with the high EBITDA, we'll pay more tax particularly at the industrial business and roughly margin tax contribution of 30% across the country. So we're now $2.2 billion interest and tax. On the interest side, we do reflect in that an average 50 basis point increase in potential fed fund increases over that period of time. So at current interest rate, spot interest rates, we've actually build some padding to that number and then the CapEx of $3.6 billion. That's how you would come down to $4.6 billion that we have as well. If we then go into our half year metrics, the actual and trajectory is going forward Page 13, you can see where we've come from in terms of funding debt and the various coverage ratio. So the $39 billion net funding it ticked obviously much higher levels back in 2013, 2014 when CapEx was obviously much higher as well and before the overall repositioning of the business, the $39 million will provide a leverage later on moving to $31 million to $32 million, so steeply declining in the next six months. Net debt similarly down to $23.6 billion now, peaked in the $30 billion during that same period. That will be steeply moving down to $16.5 to $17.5 and clearly the two ratios that we track FFO net debt, net debt to EBITDA are going to be making based on spot prices, but even where we were first half of the year on the last 12 months basis is going to start making very sharp turns in a positive direction. Very strong liquidity, $15 billion as I said improving credit metrics, public market spread, CDA substantially normalized. I am sure that's very clear to everyone on the call as well as we follow that. We successfully did some financing transactions in the first half both in refinancing, some RCFs, a small Swiss bond as well that we did back in April and as we've noted that the targets show high probability that the net debt was closer to two times and in fact below that and that the price is based on spot or even on first half annualized. They start falling comfortably below $2 billion. Clearly achieving the strong triple Bs target in the medium term and there is no financial covenants across the various facilities repeating some comments from previous times. Page 14 is just the CapEx slide as well. Huge reduction $1.5 billion compared to first half last year. This is an overall trend as we've been dealt with whatever wave of projects and acquisitions that once made but just getting it down to more sustaining levels of capital with a few selective brownfield projects and expansions that make sense in finishing up things. No approvals of any note that have come online in recent periods. So 1.5 billion is still tracking for now below the run rate of the 3.5 billion guidance but now we still sticking with 3.5 billion. We’ll update towards the end of the year. But again there is potential for that to come in a little touch below that 3.5 billion which will clearly help the cash flow. Some of the reductions in CapEx has clearly come from the reduced spending profile with the limited expansions, the lower sustaining CapEx through the proactive supply reductions that we made as well, that's across copper, zinc, led, coal, oil. And the same factors that have led to OpEx saving, also seen earlier and also featured in some of the CapEx savings, FX support and just the general overall procurement benefits that flow through the business. Just to reiterate that sustaining level 2.7 billion, that is a level that we are comfortable guiding the markets is sustainable itself for the foreseeable future at current production levels. Now of course if any of that latent capacity or rather growth parts of the business start working it back in, you will have some tick up in CapEx to reflect that additional volumes but that will be compensated, we would hope by having made some good decisions around when that growth was ultimately delivered to be net-net significantly cash flow positive as we move forward. If we just move over to Page 15, that's where we are on the disposal process. So $45 billion was at our disposal target back in March that was incremental, ready to the 500 million Antapaccay streaming transaction. We have now announced just in the last 3, 4 months that we have, since we last updated the market we have now signed and delivered on 3.9 billion. So in touching distance over the bottom end of that range, that's made up of clearly the Glencore Agri transaction, the 3.125 billion for 49.9%, you will see a slide later on, on the potential accounting going forward which I will cover in the next slide. What we have just announced overnight is AUD $880 million which is the sales process disposal in respect of our Ernest Henry Copper Goldmine over in Australia. The structure of that particular transaction in that we have effectively created a joint venture there with evolution, so we have sold effectively 30% of the mines full economics, so we will still retain 70% there. But in respect of our remaining 70%, we have also effectively solved forward the gold production in respect of that remaining 70%. So it's got two sort of components to it and the accounting will actually reflect those two components, part of the proceeds will actually treat as a sale off 30% of that business and effectively creating that JV and then the remaining proceeds in respect about 70% will have deferred revenue there in respect of the gold payable from the 70% concentrate which will be deferred revenue and not too dissimilar from how we look at the Antamina and the Antapaccay streams. So that was announced overnight which is another about 0.7 million in terms of U.S. and that’s how you get up to your 3.9 billion. A few processes just to confirm currently, still ongoing that could be part of any additional movement up to obviously within that range. And as Ivan said, we have the opportunity to clearly be very selective around remaining processes including Vasilkovskoye gold, very low cost cash generative gold operation in Kazakhstan that we're exploring sales around - options around sales or streaming some form of gold monetization which we've eluded to before. And of course the GRail process where we own fleets and operations around our haulage coal down in Hunter Valley. We are not necessarily a natural owner of those assets so there is a process underway all of which could be announced and concluded potentially before the end of the year. So that's it in terms of asset disposals. I think we made some very good progress there, and all of which is focused around more than non co-areas and none of which changes the prospect, the profile, the platform, the franchise of Glencore going forward. Just in Page 16, and before we wrap up, probably the most important slide is then the debt trajectory how we do get to our new targets which is just mathematically how things flow through. So we put the June 2016 numbers over there and ultimately how we get to December '16 and December 2017. Just to spend a couple of minutes on the Glencore Agri, which is feeding into that pro forma December 2016 with our 50% or slightly over 50% of which of the governance structure we have with CPP. There is a various key aspects of that business that do require unanimous approval going forward around major investment decisions, items of strategy, items of sort of the employee appointments and the likes going forward. So with that government structure in place it's been determined that we have lost unfettered control over that business and we effectively have joint control with CPP going forward. So as an entity it starts looking quite some of our other JV operations the bigger ones we have Collahuasi, Antamina, Cerrejon we have as well where the entity itself accounting standards we don’t have control. We will have to deconsolidate those but from an underlying performance from the segment performance from a debt perspective we will proportionately consolidate the Glencore Agri business going forward. So if we take the June 2016 at first bar is reflecting the fact that 1.7 billion of net funding will reduce given the Glencore Agri entity itself if it gets deconsolidated has around 3.4 billion or had 3.4 billion of gross debt on net funding at the end of June. There was also around $1 billion of RMI in that entity as well leaving that's 50% so it’s got about 2 billion so the net effect for us at the Glencore level is that it will reduce net debt by 0.7. And that's been reflected in these numbers and you'll see a slide later on. Of the sale prices we still got the 4 to 5 billion we’ve already done 3.9 billion. We put in here actually increase potentially in working capital. It's been on a downward trajectory in the last two or three years as a consequence both the pricing but also a real focus on the business in terms of optimizing and ensuring that that was managed down to as low levels as we could. And ultimately reflecting where the debt trajectory is now reflecting the state of the company and the financial position. We've now assumed that some of that we will give back some of that. So we put $1 billion of potential increase in working capital which sort of neutralizes the full year we actually reduced working capital 1.3 billion or so for the first half and this effectively reverses all that out. And of course for six months there will be some good, there will be some positive free cash flows while coming through the business that's a half year at the 4.6 billion of spot which is broadly where we should get at the moment. All of that translates into the new target of 16.5 to 17.5 and some of the wording explains how we get there. We clearly remained focused on preserving the current investment grade credit ratings and obviously returning to strong BBB Baa in the not too distant future. I think we’ve given all the ammunition, the financial policies, the numbers, the trajectory mostly we’ve made it easy for others that determine how quickly and how far we go in that respect to get the building blocks to be able to agree with our assessment of where we’re heading on the credit side. So with that I'll hand back to Ivan for some concluding remarks.

Yes, thank you. As you can see we’re focused and confident on delivering the debt reduction plan which we spoke about last year and we’re very much on track to get down to the $16.5 billion in net debt. As you can see even at current low commodity prices, we’re very cash generative and as I stated earlier at these prices we will be generating $10.5 billion EBITDA which will generate free cash flow around about $4.5 million. We’re very focused and we have changed the strategy of the company whereby we will not run the balance sheet at a 2 to 1 net debt to EBITDA and this will ensure that the company is in a very strong position going forward and even if we do have fall in commodity prices even if commodity prices fall from current levels at 2 to 1 net debt to EBITDA we’re in a very safe place. So that has been a change in strategy of the company. We will not run the 3 to 1 net debt to EBITDA anymore and we would run to 2 to 1 base on the – there’s a sentiment which we had before where people believe commodity prices can drop even further. This will really protect the balance sheet. We are supported by a very good set of assets Tier 1 assets and as you can see we’ve worked extremely hard to cut the costs across the board of all our assets and we’re now really in the lowest quartile. Steve took you through details of where we’re producing copper at an all-in costs of $0.96 and zinc as I said negative $0.03 if we take the gold credit excluding the gold credit we’ll average for the year around about $0.18. Thermal coal will be around about $39 and nickel $0.273. So we’re in a very strong position on the cost curve and at current commodity prices all our assets generate very good free cash flow. As we stated earlier we’ll generate around about $4.5 billion including the trading business. Once again and we’ve emphasized this before the marketing business is very resilient and even with falling commodity prices we once again have proved that this generates good cash flow and good EBIT and we’ve generated $1.2 billion during the first half and we very confident of generating between 1.2 to $1.5 billion in the second half. And as Steve said the diversity of the marketing business really helps and if we ever know oil, in 2015 oil had a very good results, 2016 oil and coal not as good as 2015. However the metals is performing very well during 2016 and as Steve said the ags we should have a much better second half but the diversity of having the agricultural, the oil business and the metal business really helps and you'll see in different years they all perform in a different ratio. So that really proves the resilience of the marketing business and over the past nine years where we showed on the slide it is pretty resilient and we’ve hit the targets which we've indicated. Once again very important for us to reduce the debt and we’re very much on track to the 16.5 to 17.5. Steve has given you a note of the asset disposal which we’ve done which has generated $3.9 billion already. We now can be selective we do have various other assets we are looking at. We've indicated GRail should the sale of GRail should take place during the last quarter or should close during last quarter of this year that should generate further cash. We're looking across Komarovskoye gold that will also generate further cash. So we’re very much on track to reach these levels and should get to the lower end towards the 16.5. As we said before there is a lot of growth optionality within our business. We have reduced production it was well documented advised last year. We cut 300,000 tonnes of copper out of our capacity 500,000 tonnes of zinc,100,000 tonnes of lead and 15 million tonnes of thermal coal. This can be brought online if and when we wish. The copper is a bit restrained towards when we finish the production profiles and the upgrade of Katanga and the sinking of three new shops at Mopani. This will occur during they'll come back on stream during 2018. Katanga towards the first half of 2018 and Mopani will be ramped up at third quarter 2018. And that's in line with our strategy we delayed the CapEx expenditure there, we had a few problems with vet to import the equipment into the DLC but that is comfortable with the way we would like to bring this copper back into the market looking at the supply demand profile. The same relates to our zinc when we will bring it back, we will monitor very closely the supply demand profile like we did when we pulled it back but then we felt that was the right time to leave the material in the ground and not to get out with lower zinc prices and at the right time where we believe supply demand justifies bring it back into the market we will do the same there. So that gives thermal coal the same relates to that we’re closely monitoring what goes on in China and how the profile lease of the production coal back in China and the 265 day work weeks which they’re putting in there which has helped the imports of coal into China. And we will closely monitor what the Chinese do on that side demand around the world, what's happening on the supply and then we'll decide when we bring back further coal production. But we will be very cautious on that and we don’t want to bring back the production which will have a negative effect on the market. So I think that wraps it up that gives you a summary where the company is today. The strong balance sheet we are moving towards and we believe with an EBITDA of $10.5 billion, debt on at $16.5 billion the company is in a very strong position going forward. And I think we now open for questions.

Thank you. We will take our first question from Sylvain Brunet of Exane BNP Paribas. Please go ahead. Your line is open.

Good morning gentlemen. May be first if you could elaborate for us on the sensitivity, the $10.5 billion just to clarify that number includes the - reflects the $395 million opportunity cost let's say, from the coal hedging. Second, if you could give us a bit more color on what would be the conditions for you to explore the restart of zinc production? And lastly if you could also give us some context on what would be the sort of debt free cash flow outlook you would need to see to consider the restart of the dividend piece. Thank you.

Hi, thank you. The 10.5 free cash flow spot is - that assumes there is no sold or anything hedged, so that's just what spot generation is unpunished by any other things reflecting, obviously reflecting spot prices and cost and FX and fuel price and these things obviously at a point in time. So the 395 opportunity cost will have to - that go from an earnings perspective or EBITDA perspective. Non-cash, as I said before because from the cash perspective that has all been collateralized but in terms of the recycling of that 395, if we assume prices away that were at the end of June and about half, half split, you will see sort of $200 million of allocation of that mark-to-market loss will come through second half 2016 and about 200 in first half of 2017 if it was assuming 50-50 split on that. So, that’s not part of the EBITDA cash generation of spot clearly. So that said, the 10.4, 10.5 included call at 18 margin and 125 about $2.25 billion of that number that is, that's without any considerations around hedging or locking in prices. Just on the dividend and I think there was a third element then I'll hand back to Ivan on that but yes now the dividend is very much going to be front in center of mind as we move into the full year results next year in February, March, looking to see when, if, how and what basis we should look to reinstate that. We announced the debt reduction plan last year. We just talked about a suspension of dividend cash wise for the 2006 period. So that's now obviously gone through and that supported one of the elements that's contributed efficiently towards the debt reduction. So February next year given where the balance sheet is the net debt reduction targets 16.5, cash flow generation of course where it's spot price let's see what the world looks like, but there is every likelihood, every confidence that given metrics generating a starting point in leverage repositioning and the business generating more than $4.5 billion to free cash flow that we would be comfortably in a position to look to reinstate the dividend, and clearly communicating TSOs and investors like the basis, the appropriate basis to it, the link to leverage cash flow. These are various things that we clearly need to look at. And we have also got time over next sort of four to six months to obviously engage on the topic, get some feedback and we will come up with some recommendations and ultimately we will conclude together with the board in February, March next year.

Yes, and on the zinc side like I said that I mentioned on coal, zinc, copper, where copper is sort of locked in to when we bring the production up again based on the assets when we finish boarding the assets, but zinc we can bring it back, we will just keep monitoring market, see supply demand as we always said, we don’t want to be the ones to bring new supply into the market, when the market does not require it and we will closely monitor the market and bring it up, when we believe the increased demand and it needs to be put into the market. But we will only dig the material out of the ground and we believe we make very good margins and it makes sense to bring it up.

Thanks so much.

We will take our next question from Jason Fairclough of Bank of America. Please go ahead. Your line is open.

Good morning, guys. Just a couple of quick question on coal. First on the markets, I mean the outlook looks a little bit interesting given the development of supply discipline in China with the 276 days of production policy. I was just wondering if you could give your outlook for thermal coal for the next 12 to 24 months. And then just secondly on the coal hedging, I was wondering if it's possible Steve to discuss a weighted average price of which you forward sold? And then just with that I understand these losses coming through as a financial expense but philosophically I am wondering if somebody in coal marketing shouldn’t be wearing these losses?

Okay. Let’s talk about your Singapore coal marketing really losses, no, there was a decision taken when we sell some coal, you sell a lot of coal on an index base level which we do and [indiscernible] sold on index - and re-hedge out the index at the relevant time. The same goes, we look at the margins, we were reducing debt, we decided we were getting very good margins in coal at the particular price, I think the average for - I can’t remember exactly where we were sitting there round about 50…

It depends because we have hedged, sorry just on that, I mean obviously it’s a mixture of all origins. You got Newcastle, you got South Africa, you got Colombians, so it’s a mix between the various options and different products. So it’s hard to give sort of the average price that has been given, but in terms of the movement between when it was hedged and just what the 30 June pricing was, it was about $7 opportunity cost which is unrealized and that’s all to say at point in time. So of course there was some Asian, some Rotterdam, some Newcastle and some other methods to manage. So you have had some opportunity cost effectively of $7 a tonne there that’s significantly better having locked in, in what we saw in Q1. We also saw a huge flattening of the curve, we provided I think one of the slides towards the end that shows how that developed over the period. You saw big backward aided curve back in January/February, things started improving already to do with the energy complex itself back in April/May. We were up about $14 just on the sort of 12 months out, just in that period that had flattened out and we thought given locking in cash flows and the delivery of debt and still at the time not being bearish call but not being particularly bullish, China was still sort of not necessarily front and center we thought it was prudent to obviously lock in some time. So across the thing it was about 7 bucks opportunity as at 30 June.

Yes, it's about $200 million a year, so not a significant amount, $200 million does show opportunity loss, not a big issue. So it is more a financial decision to lock in the cash flow, guarantee the cash flow while we are reducing the debt portfolio and that was the reason for doing it. And we do it from time to time, and a big part as I told not of tonnes of sold on index and it’s time to, when you do the sale take place in HRD index. And as Steve said, it’s an opportunity loss of $200 million not a big issue, but guaranteed free cash flow which we needed to ensure we are reducing the debt profile of the company. Where do we see coal going forward over the next 12 to 24 months, the big thing we got to look at in coal is no new supply in the world which is a very important issue. You don't see anyone building new mines or increasing production of mines, so I would say we've got to look carefully at supply. You don’t see new supply coming into any of the markers, okay, China we will talk about separately but you do see Indonesia and countries like that producing the export of their coal, and we see in Indonesia reduce from the top 421 million tonnes of exports during 2014 and they dropping this year on to 350 million tonnes. So a significant decrease coming down from Indonesia, no new supply from Australia, from Colombia, South Africa, et cetera, that’s all relatively stable and no new big mines being built anywhere in the world. Now a lot of it all depends upon Chinese import and how much China is going to import based on this 265 day work which they have done in China and yes, China 2015 imported round about 140 million tonnes of coal, 2016 we all did expect a decrease while they maintained the 365 day production with a 365 day production being reduced considerably we know - there is all annualizing around 150 million - 160 million tonne import. So that’s still relatively strong. So where do we see it going forward, no new supply that is good for the market, demand generally increasing in Asia, in the Pacific World, demand increasing for new coal, India has been relatively strong and maintains its strong import round about 175 million tonnes but the big factor is going to be what China does and will they continue importing 150 million tonnes or they produce, if they do start increasing production, so that's got to be monitored carefully.

Okay. And just so that I am clear here on the hedging guys, so if we said that the mark-to-market was $7 a tonne at the end of the half, it sounds like you have sold the stuff round numbers at about $53 a tonne, and so if coal is 70 at the time you were actually delivering and it’s not like we are going to see any losses. It's just you're not going to see the upside yes.

Well you would have given up some upside in respect of those time, which obviously roles off each month. We've already had July August to operate through. Yes, so in respect of those times, we've locked in a certain price and you won't see net, net, you won't see the upside of it.

And it has no cash flow effect because the cash flow is already taken care of and you will be getting the cash flow of $70, but you're not getting the full amount on this side. But one thing you got to remember one other thing, you can't take the $52 because it's very we would now hedge out different coals whether it's Australia, Columbia, South Africa, it's a mixture of hedges.

Okay. Thanks very much Ivan and thanks Steve.

We will take our next question from Liam Fitzpatrick of Credit Suisse. Please go ahead. You line is open.

Good morning, Ivan and Steve. Three questions for you. Firstly, just to clarify on the mark to mark coal position because it was 395 at June, but since then coal prices are up $5 to $10 a tonne. So obviously you've delivered some volumes, but I am assuming that the mark to market losses and cash outflow in relation to the hedges will actually keep going up as long as spot prices go up. So could you just clarify that and perhaps give us what the current mark to market losses for the second half? Secondly, just on the reason for doing the hedge, there are some arguing that this is a trading position gone wrong. So are you saying that this was a decision taken at a corporate level entirely outside of the coal trading business? And then thirdly just on copper, it looks like you've delayed Katanga and Mopani by around 6 to 12 months from your guidance at the start of this year. Is that a market decision or is that just issues that you're encountering at the actual projects. Thank you.

Liam in terms of the mark to market now, it's not that far from the 395. It's ticked up a little bit, but also the curve has -- might have picked up a little bit from, but the curve has flattened, has gone a bit backward dated. So you've also got some 16, some 17 stuff. So net, net, you've had a curve shape also change and saw some materialize and we've got obviously at Ivan said, you've got the different indexes working out. So it's actually not too far away from the 395. Of course it changes from day to day and obviously if prices go back to where we were in second half, that will all flatten out to it will stay at 395. If we go back to Q1, it will have proved to be a smart thing to do clearly and the worse is that you've given up some opportunity cost in respect of part of your unsolved times. We also have quite sizeable upside participation still beyond that in terms of upside times both in steaming side and of course in coking side, which has seen some spot price appreciation. This from Q2 is totally corporate decision around the hedging obviously in consultation with coal markets around their view and we've been through a rough period in Q1. Prices have materially improved and we thought it was a sensible and prudent decision to go and go lock it in. As I said, obviously you wouldn't have done it if you are massively bullish at the time, we were kind of neither bearish not particularly bullish. We've just seen more neutral. It should seem like a sensible decision it was on the trading position at that point or anything. Obviously you don't do it outside of the input from the department that's facilitating decision making. So it was a corporate risk management decision in consultation with coal around a sensible thing to do and let's see how it plays out in the next 12 months.

See it's still going to be 12 months to go. It's only right now $200 million per year, so not a big issue. It was a few month by month and as Steve said, the 395 it went up, it came back down again, it's coming back down a little. So the 395 is round about there. Please wait to see where it ends up, but as we say from a corporate point of view, we were on a general guarantee that generated cash flow. That's what we did and as Steve said, it's got nothing to its trading. It's purely a corporate decision to bring in that guaranteed cash flow of the company. We've done this from time to time many times in the past. We've done it on copper. We've done it on aluminum in the past, fourth century aluminum for different assets we have around the group and that's what we've done.

They're all short term.

Short term, we don't do it for a long time and we don't do it for a vast demand, a bigger and massive amount of our tonnes at it's a certain month of the time for the particular year. Regarding Katanga and Mopani, yes Katanga is a more delayed than we anticipated previously. A large amount of the reason we've had some issues on that to bring in equipment to not pay the VAT on it. So therefore we delayed some of those also from a corporate point of view to delay the CapEx and looking where the market was shifting there was no rush to bring this production back in the market and therefore we feel comfortable to bring Katanga back during first quarter '18 and Mopani obviously, there was no rush to work on the short that much quicker where current copper market was shifting so therefore we will bring that into production during third quarter 2018.

Okay. It’s very clear. Thank you.

Make sure the market, make sure no reason to spend the CapEx smoothly while we're trying to delay cash flow and as you can see during the first six months, we spend CapEx of $1.6 billion that should be around for $3.5 billion of the year.

We will take our next question from Sergey Donskoy of Societe Generale. Please go ahead. Your line is open.

Yes, thank you very much. I just have one small question on the wait-and-see attitude towards zinc. You're having the unique position in this market and the only other big supply of that with the significant market qualities China. Do you think there is a risk of that by a sitting on the sidelines for a time being and watching the market develop the Chinese mine as opportunity to step up production and deliver into this strong market and effectively may be deny you this opportunity to increase your production make. Thank you.

Look the Chinese produces certain amount of tones, I think the Chinese production is round about 6 million tonnes somewhere 8. We don’t think they have ability to expand significantly because there is the lot smaller mines but we constantly worry about China does or doesn’t do, what we going to do, we look at our operations and we say, you know unless, we see a data price it doesn’t make sense to dig the material out of the ground, it will take us time when we do decide to ramp up, we can't do it immediately it will take a few months but it's got no significant about China or other suppliers may or may not do. We look at the market and say, unless we're getting a good price for our tonnes, why dig it out the ground today, we have got limited amount of reserves in the ground and I have always said this about in the commodity space don't dig it out when it doesn’t make very good economic sense and we got to have a good return on our investments before we dig it out.

Okay. Thank you.

We will take our next question from Menno Sanderse of Morgan Stanley. Please go ahead. Your line is open.

Yes, good morning, two questions please. First on agriculture, the company noted that it is contributing quite a lot of diversity and has great growth potential. How quickly can the group start consolidation in the market post M&A and how should we think around the 50% equity stake, what preference do you have keeping that 50% or diluting down further and how far which will be to dilute down. And secondly given the more comfortable balance sheet and the slightly improved free cash flow outlook, are there - do you see other opportunities now that can add to the platform either in marketing or industrials that you can now start to pursue where you were not able to do so in the last 12 months?

In the Ag side we always said the whole idea of selling 50% of that was Ag side naturally on the debt reduction plan was important also to get the $3.1 billion cash into the company but the real reason and we have always said as even before we are in the debt reduction plan, that we believe consolidation of this industry can take place and we believed our balance sheet on our own will be difficult to really grow significantly and it was a good chance to bring in a partner, a strong solid partner who would have the financial muscle that allowed us to grow the business. Serving a 50-50 type partner there, we got leverage, we can put in the company as well but together with the partner contributing that part of the equity, and nice contributing our part of their equity, we can look at fairly substantial side assets and look to consolidate the industry further. Would we want to say the 50% of diluted right now we are very happy of 50% no reason to dilute. And we will just see what opportunities come and how we go to look at it and whether you got to dilute the process or not, we will be open to any type of opportunities. Regarding other assets in the sector or grow the marketing with a bit of balance sheet, marketing we have always managed to you know, we have always said we have got the liquidity, we can do it, whatever we want - where we want it to grow we were able to grow, even before when the balance sheet was being run at a 3:1 net debt to EBITDA ratio, today at 2:1 yes does give us little bit more flexibility but it's never really hindered our marketing as Steve said, some of the tail stuff we wanted to reduce working capital, we dropped some of the tail stuff marketing but that didn’t contribute a big amount. We don't see anything particularly [indiscernible] that’s available on the market. You know we always look at everything. We keep seeing what comes on the market for sale and we will keep monitoring what's out there but we don’t see anything right now that we are seriously looking at.

Thank you. So listening to those statements it seems that the excess cash that the company may have come February/March, the decision is really how much to return versus how much to reinvest in agriculture. Is that really the decision set that's in front of the company?

No, we look at everything at the time, agriculture we will just be opportunistic, see what is there, no guarantee we are going to do anything, the idea is to grow that business so we will always be looking at that. And as Steve said, when the cash gen comes in, yes, we will look at the balance sheet as we said, 2:1 net debt to EBITDA and therefore yes we would like to reinstate the dividend.

Thanks.

I mean those are obviously the factors. Some things are - it’s not like there is a capital that's being set aside to invest in the agri that’s sort of being reserved per se that you kind of mentioned. So obviously we will be - together with the other shareholders for the right opportunities, we would be willing to support transactions. It’s been set up initially business with quite a conservative financial profile. It will generate cash that will have organic sort of capacity if it looks at smaller things, bigger things, may need equity, could dilute back to your point it further as well. So may not necessarily always require an equity check and stuff, so we need to think about what the opportunity set, but we will be in a position to be able to have a position of strength, to be able to look at supporting that business in terms of growth and there is a lot of free cash flow. I think the yield is pretty high today, which is starting to look attractive as well.

Okay. Thank you.

We will take our next question from Myles Allsop of UBS. Please go ahead. Your line is open.

Great, thank you. Just a few quick questions, first of all on divestments, could you give us a sense what sort of implied copper price Ernest Henry beside 8% stake was sold out, it looks a reasonable price for them able to do when I was associate? And then just in terms of Lomas Bayas and Cobar you did mention those as some stories that Lomas Bayas you have decided not to sell. Cobar, I’m not sure is still out there. But I mean the reason you didn’t change the target proceeds 4 to 5, is that because you are likely to be more selective, or is it because you may hold back on this upside potential in terms of whether net debt gets to the end of the year. And then secondly just on marketing, Ivan you kind of sounded very confident back in March that you could get to the top end of the $2.4 billion to $2.7 billion range. It doesn’t sound quite so confident today. Am I kind of misinterpreting your tone? And then finally just going back to the zinc and restarting the multiple capacity, say you need a good price and prices are up already 50%. Are we talking that we need the zinc prices to be at $1.50 so the level before you think about it or is it just seeing prices hold at this level and you feel the market can take the incremental terms? Thanks.

So, lot of questions, okay Myles. So basements, Lomas looks like likely we will do that, Cobar we are still looking at, if we get a decent number on Cobar, we will look at that. We will be selective as I said before, we haven't sold any assets, the good thing is we haven't had to sell any assets looking at depressed market. The Ags we sold were not in the depressed market. The gold stream we did at a fairly strong gold price. We've just done Ernest Henry with the big gold stream, fairly good gold price and a 30% of the copper we sold - it’s so small…

The copper exposure, it's less than 20,000 tonnes of copper, I wouldn’t worry about the copper sort of, it’s mostly a gold monetization.

Yes, it is 30% of 50,000 tonnes, you know - is really insignificant, so it’s really just the gold stream we sold. So we haven’t sold any copper assets in the current depressed market where you are selling assets at a low copper price. So that's maybe why Lomas Bayas say the sale hasn’t taken place. So we were not prepared to sell it. Cobar, unless we get a reasonable number, that what takes in to step a higher copper price, we would not be selling that. So as I said, we've been selective. But as gold, we will look at because we are at a better gold price and we will be looking at that and [GUL] [ph] has nothing to do at commodity price. So we haven't sold any asset at a depressed price because of a depressed commodity price and that we're pretty happy about.

And non-core.

And they're non-core selling gold streams or selling gold as its non-core, it's not the commodity that we trade and we like to own where we trade that particular commodity and gold is not a traded commodity and it doesn’t do much…

We keep all the product.

All the product comes to us whether the gold or even the copper, the 30% of the copper that they own that comes back to I think comes back into our marketing division. Regarding marketing and I was once bullish on $2.4 billion, $2.7 billion, the top end I can't remember that, but if we did say the top end maybe it was during the first three months when oil was still having a very great year. So based on the same as we were having in 2015 it has dropped off during the second half, let's say the second quarter. So let's see where that goes, but it was -- it started picking up recently. Metals is good and is still looking very good. So sitting here I have said and here let me say, we expect second half to be between 1.2 to 1.5.

So that's not a big pick up in Ag.

That's a big pick up in Ag and as we say there is a very good crop in Canada and that should help the rate in Canada. So let's see. I have said, we're comfortable on the 2.4. So comfortable to keep the rates 2.4, 2.7, let's hope it's towards 2.7 in the top end, but as I say, it's difficult to predict whether you will hit the top end and that's what commodity is and what happens there. Then your last thing on zinc, well we didn't say I've answered this question many times now and you're trying to pin me down to a price we've stored up there. We're not trying to be pinned down to a price and we just got to monitor markets when we think it's the right time and we don't believe that that production coming into the market it will really significantly affect pricing and it's a matter of just monitoring supply demand and being cautious, bring the commodity out of the ground where we believe we get really decent returns on that asset. And this is the policy that Glencore has always used. We did it on coal when we cut 15 million tonnes of coal out of the market. We still believe in that policy met supply with demand and don't bring new supply into the market, which will cannibalize your own existing production. That's something we've always spoken about and we don't want to do that and hurt our own existing production and push down the price -- the prices of where we are producing a lot of tonnes. Today we are producing lot of zinc. We're getting decent margins and we don't want to kill those margins by putting on new production.

So just to close it out on disposals, of course 4.5, we're not going to be micro managing that target in terms of saying 4.2 to 5.2, we've said 4.5 at the beginning of the year. We've done 3.9. So clearly with still some processes ongoing there is upside that you actually go through the top end of that range yes and then that would even bring down your debt even further, but it's got down to the point that we don't need to for the sake of having a target, we're beyond having a target now. So it's about what we may actually deliver more than that, but 4.5 is still the target and we're pretty much done.

Great. Thank you.

We will take our next question from Heath Jansen of Citibank. Please go ahead. Your line is open.

Good morning, guys. Just a couple of questions. just in terms of energy marketing earnings obviously a big full half on half and year-over-year down at $253 million, can you give us a breakdown whether that was principally in oil or in coal because my understanding is that your hedges in the last year was taken at the industrial level not through the marketing line. Just a second question for Steve in terms of working capital swings, as you proportionally consolidated Ags going forward, are we likely to see a magnitude reduction in terms of the swings between first half, second half because obviously you've got close to $0.5 billion of working capital back in the first half and you're expected to build in the second half. I am just wondering how much can we attribute to Ags going forward and those swings? And then maybe just a final question for Ivan, just in terms of metals markets heading into the end of the year and into next year, obviously we're seeing LME prices go up, but we're seeing physical premium come down 40%, 50%, which seems to be contributing each other that the physical market potentially is going to be hard as what you're seeing in the paper market. I was wondering from your side what you're seeing on that and whether that's sort of impacting your ability to make money in that metals trading business. Thank you.

Steve, can you take the first one?

Yes, in terms of the energy performance, the difference was as you mentioned on a few occasions was pretty much in oil against a very strong base first half 2015. So the reduction was in oil. Coal was pretty low in both periods, but not a particularly big movement in terms of variation between the two periods. So oil was essentially the reduction in metals, but both -- but clearly as an energy complex itself including both the size scale of our oil and coal businesses, that given away coal has been a loss year or two and oil is generally okay, but the combined energy complex has played a potential to increase its overall contribution to the mix of our marketing business as we go forward. Working capital, yes, the ags will come out from a proportion. It's 50% when we look at the overall working capital. The ags itself had a slightly positive working capital carry between inventory which I said was about $1 billion receivable, payable call it broadly flat. So that will of course come out proportionally. That's not a big that hasn’t explained or done anything much in terms of the movement this half. ags is obviously a component, but it gets a bit drowned out with metals and energy within the overall working capital. So the reduction of about $1.3 billion, which included the ags business itself did come down a bit in the first half, but so did metals, coal, energy sort of across the Board, there was a pretty broad contribution to that $1.3 billion reduction and now we've modeled or at least guided towards a potential reversal of that, even the first half of the year. So it will be increasing by about $1 billion and yes you'll have to pull out the Ag proportional effect, but I think it's broadly balanced in terms of receivables, payables on the Ag side.

Okay. On the metals marketing during the second half of the year, as you saw first half was very good on the metals marketing. Second half we also feel comfortable on the metals marketing and as we said, the thing that will take us towards the '17 an earlier question, I think a lot of that is going to depend on the Ag space and the energy space what happens in the oil market. In metals side, I am very comfortable we will still maintain strong solid results. As you got to remember, if you talk about the premiums, we feel a lot smart, we feel a lot long term and how we sold and where the book is sitting on the premium, we feel pretty comfortable we're in a good position. Your question that the markets have come up on the commodities, but the premiums are not so good, remember a lot of premiums they don't look as high as they were before because you got to remember, the freight form, the element delivering the premium LME delivered to China whatever it is and the premium to the LME is affected a lot by freight and freight has come down considerably. So as much as you believe premiums are down they're really down because of the freight element and not really due to the tightness of the commodity in the market.

Great. Thanks.

We will take our next question from Alon Olsha of Macquarie. Please go ahead. Your line is open.

Hi. I just had two questions. Firstly on African copper, thanks for giving that revised guidance, but could you give a bit of color on way you think cash cost will settle when those operations, both Katanga and Mopani are brought back on line and in 2018 and then ultimately at steady state in let's say 2019? And also what your CapEx spend has been on those operations so far this year and what that schedule looks like for the next 12 or 18 months? And then just a second question, on marketing EBIT guidance, your long term guidance stands at about $2.7 billion to $3.7 billion. We're obviously in a very different market environment today, but what really needs to happen to get us back well within that range? Is it just equation of market tightening up significantly, or are there other levels that you need to pull and is that guidance still realistic? Thanks.

Okay. On the copper production at Katanga when 'The Whole Ore Leach' program is finished and as I said we are doing production on in early 2018, whatever cost around about $1.20. This is similar you know if you have a look at Mutanda and you've seen we break down Mutanda cost. It's almost similar to Mutanda. It's a same process, so we don’t get as much of the Cobalt and that's all we have 120. At Mopani when the [indiscernible] we - here we don’t have all transfers points et cetera, the copper production will be around about $1.35. On the CapEx figures Steve you…

We talked, I mean you can see in the financial African coppers got 190 million of expansion CapEx for the first half, which would be largely to do with these projects and then 153 sort of sustaining CapEx. So 343 was spent across African copper.

Okay. And then talking about the marketing the 2,7,3 seven year we still at that level will adjust now that was the Ag business when we go to deconsolidate part of it then we’ll have to give an adjustment of the day. However, market just to get tighter. As we say right now we are still round about the 2.4 to 2.7 to get up to that higher level you need tighter marker as we say, bit of arbitrage opportunities around the world whereby we can ship material and take advantage of these arbitrage opportunities. We headed in oil last year in 2015. It's not day to day, other commodity and metal is still pretty good, but we need higher freight rate and things like that definitely help on the arbitrage opportunities to increase the marketing.

I mean also key there is obviously just the financial capital structure and interest rates that go into sort of EBIT. So we have been in a zero interest rate environment pretty much the last few years. So what we do is - there is flow through model when you sort of borrow floating LIBOR, fed funds whatever the case maybe that get passed through transactional terms as and when any tightening cycle inevitably starts occurring and we don’t know how far and how slow and whatever the case maybe. But if you had a repeated time, you had let's say 2% so the increase in sort of base rates that on the short term side, on working capital $10 billion or so where we are at that itself takes you up sort of 200. It doesn't have cash flow or whatever, but it just does more normalized sort of way you are. And also we've obviously pulled back some of our low returning working capital that was part of our debt reduction plan. We said there is always some older marginal, some of the funding, storage, funding of balance sheet that. And we set the more marginal I think there was last year this time we said we could bring working capital down $5 billion and people said well that's clearly is going to sort of have a massive impact in any business and we said, no this is more marginal and you sort of go to average return on equity as it works its way 25%, 30% whatever that comes up. But we pulled back sort of $5 billion of working capital and I said the hit to EBIT might be 200 million. And sort of take out the funding cost on that of sort of 100 million, so your net cash flow impact was sort of 100 and you are sacrificing that. So as and when your balance sheet, working capital, the general markets side, the pricing increases or you just felt like you could return the working capital to have back on, obviously the return on equity sort of margin wise is - it's sort of dollar because the core business is still intact. But that itself takes you up sort of 200 million there. So it's a variety of working capital market is getting better, interest rates, volumes growing of course that we have. We've obviously curtailed even industrial volumes and these things, so you got latent capacity, let's grow zinc volume grow, copper volumes grow, coal volume all these things is going to help the marketing business going forward.

All right. Thanks very much. Just to clarify just on the CapEx spend at African copper is that 343 million expense in the first half, what's left to spend on those projects to complete them?

I can't be specific necessarily on this call because Katanga is also a public company. So there is no much we can say beyond that. And but what we've - that's getting down in the niche of those projects, about 3.5 billion that we have this year, 2.7 maybe we can finish below 3.5 billion, but if we kind of run that in perpetuity that certainly captures whatever is left to spend from a Glencore perspective for the delivery of these projects. But the specifics of it will give towards end of the year when we do the big Investor update around CapEx and projects and volumes and whatnot.

Okay, great. Thanks.

It's not a big amount - Katanga will talk about it, it’s not a big amount going forward, most of the process has been done, it’s just the balance of 'The Whole Ore Leach' program and that’s not $7 million, that was a $400 million total CapEx on that and I think we would have spent round about [12.5] [ph].

We will take our next question from Tyler Broda of RBC. Please go ahead. Your line is open.

Hi, thanks very much for the call. I think you touched on this in the last question. But just in terms of the ideal level of RMIs, I’m just trying to think of where different uses of cash can go going forward. Is the 15.3 billion for this market environment at the right level? And then secondly the exploration spend is significantly lower than that of some of your peers, I am just wondering how you are looking at exploration at this part of the cycle where CapEx has been cut back as sharply as it has across the board and we are starting to see a bit more balance in markets?

Just on the RMI, the 15 in sub-change that’s fine for this obviously this price environment between our carrying inventories and the nature of obviously profitable opportunity. So I think it’s sort of a comfortable level for this pricing environment. So I think volumetric wise we are sort of comfortable if there is a tick up in prices if you had oil to obviously tick up a bit and zinc and copper and aluminum and whatnot. You will have a proportionate, sort of increase purely as a pricing impact but I think it’s comfortable and - which is where we have sort of kept a long term range around the 15 billion in this sort of part of the cycle.

Yes, regarding exploration as you know we are not lovers of Greenfield projects, so we don’t have an exploration team going out there, exploring and looking for new discoveries, that’s definitely not part of us. Where we do have a bit of exploration is around our existing asset base to ensure that we always got replacement and we are not losing production at our existing asset base and extending the life of our existing assets and that’s what we are always looking to do and we know around our existing assets there is a lot of reserves around which haven’t been fully explored and that’s where we will really do the exploration. So it’s obvious that’s why we have a lot lower exploration costs than our peers who are looking for big and new discoveries, that’s not part of our game because we have no intention of developing a new Greenfield project.

Thank you.

We will take our next question from Myles Allsop of UBS. Please go ahead. Your line is open.

Yes, thanks, just a quick follow up question on the balance sheet and the dividend reinstatement potentially in March. The two times net-to-EBITDA target is that sufficient do you believe to get back to a BBB flat credit rating? And do you have to see the credit rating back at BBB flat before you reinstate the dividend or that will flow through obviously in due course and that’s not going to be a key element at the timing for the dividend? And just in terms of - I think you mentioned before when you stopped the dividend that you raised that as a payout policies, some time I was right remembering that? Thanks.

Yes, thanks, Myles. I mean the two aren't necessarily linked clearly per se. Of course, agencies as they opine on your long term credit will take into account financial policies and dividend policies. So they will clearly reflect on what you have communicated to the market and how you set the business and how they have modeled cash flows going forward. So we will take into consideration the dividend levels, payout structure, how we communicate going forward, so as that is consistent with our ambition to get to the strong BBB in the sort of medium term. So there will be a consideration as to how to do it taking account of balance sheet repositioning, strengths, targets and the likes but it’s not like one needs to happen before the other absolutely. It's just taken into account in these things. So I think that’s not something that you need to - sort of already having got, so it’s clearly going to be one of the items as it applies to anyone in this industry that they look across the uses of capital, financial policy targets and the like. So we will take that into account. I'm not sure we mentioned any specifics in the past other than to say we will look to sort of intelligently and do something that makes sense for Glencore and now sort of shareholder base and we still have a period of time in the next three to four months to consult, discuss, think and come up with some metric ratio that makes sense because payout clearly makes some sense around sort of cash flows but it's not all operating cash flow that you have. You have CapEx, you have other things that can be a bit lumpy and not so much in our business, I think others may be grappled, but add a little bit more than we would necessary grapple with it. But it needs to be something that’s sensible and somewhat predictable and has a certain amount of flexibility as well. But we are all is, if people have got some good ideas and reflecting some shareholders views on this sort of stuff, then next 12 months let's have a discussion on it.

I mean you valuate kind of dividend versus buybacks.

I think you can think more around the dividends as a form of distribution at the moment. People can choose what to do with their cash.

If they want to buyback, they can buy it themselves.

Okay, thanks.

We will take our next question from [indiscernible] of APG Asset Management. Please go ahead. Your line is open.

Thank you. My question has been answered.

As we have no further questions in the queue that will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.