JOHANNESBURG (miningweekly.com) – The commodity price weakness from 2012 to 2015 was the result of an over-allocation of capital from 2006 to 2012, Glencore CEO Ivan Glasenberg told an American audience on Monday.

In an address to the BMO Metals and Mining Conference, in Miami, Glasenberg said that capital over-allocation in the six years to 2012 had concealed the reality of underlying demand actually remaining robust in most commodities.

He described 2016 as the turning point for the mining sector and emphasised that future performance would largely be dictated by “actions from here”.

Noting that sector commodities are key to facilitating future economic growth and better living standards, he made the point that it is capital allocation based on average net present value (NPV) that adds value and not capital allocation based on marginal NPV.

The London-, Hong Kong- and Johannesburg-listed company also emphasised that it is growth in cash flow that matters and not growth in volume.

“The supply we generate helps set the price we have to take as a producer,” said Glasenberg, who, in an article in Sunday’s Financial Times (FT), described Glencore as being “in the strongest position ever” in his 33 years with the company. 

The article also described as "dramatic" the mining industry’s overall 2016 turnaround.

“Anglo American, BHP Billiton and Glencore reported in their results that they had swung back to profit, fuelled by the rebound in commodity prices,” FT mining editor Neil Hume wrote.

In his address to the BMO conference, Glasenberg added that the lower industry capital expenditure now in place looked likely to persist in the medium term.

Standing Glencore in good stead at this time, he said, was the company's "genuine" diversification in what it regarded as being the "best" commodities as well as its ability to upscale production when appropriate.