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Smelters work at a former Glencore plant in Oruro, Bolivia.
AP Photo/Dado Galdieri
Meltdown.
ROCK BOTTOM

Mining giant Glencore’s shares just got Volkswagen’d

By Melvin Backman

Just as they had jitters about the fate about the European car market, European investors are fretting over the mining sector—and Glencore is the latest to take a fall.

The stocks of European carmakers fell after news broke of Volkswagen’s deceptive diesel emissions testing—which sent the stock down nearly 20% in one day.

Today (Sept. 28) Glencore’s stock fell more than 20% in London to an all-time low.

The trigger for the slide is being widely attributed to a note from Investec Asset Management that predicted Glencore, which has more debt than most major mining companies, might soon be unable to keep up with its debt payments due to depressed commodity prices (it also discussed similar problems at mining firms Anglo-American and BHP Billiton).

“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate,” the report said.

Prices for mined metals have been tumbling thanks in part to oversupply and falling demand from China.

Glencore has already lost more than three quarters of its market value this year.

Three weeks ago, the company announced a debt reduction plan (pdf) that would involve raising $2.5 billion in additional stock, suspending two dividend payments, selling $2 billion in assets, and other cost-cutting measures. Apparently, that wasn’t enough to appease investors.