Glencore has announced that it will set aside $1.5 billion for probes into bribery and market manipulation, which it hopes to get resolved this year.
The company is facing probes in the US, UK, and Brazil over corruption at a number of its operations in the Democratic Republic of Congo (DRC), Venezuela, and Nigeria, dating back to 2018.
The Company also recently announced record profits, promising a payout of $4 billion to shareholders over the last year as mining commodity prices boom and profits soar, with Glencore’s underlying earnings rising 84 per cent to $21.3 billion.
The $4 billion payout to shareholders announced on Tuesday, February 15, 2022, including dividend payments and a $550 million buyback, compares with the $2.8 billion Glencore said last August it would return to them.
CEO Gary Nagle commented: “In spite of the ongoing challenges of Covid-19, 2021 was an extraordinary year for Glencore, reflecting rising demand for our metals and energy products, record adjusted EBITDA and the transition to new leadership.”
Tyler Broda at RBC Capital Markets said: “Although the Swiss and Dutch investigations are expected to remain outstanding, we believe that with the main investigations quantified, this will likely de-risk the company from this ‘unknown known’ which has been an overhang for the company since 2018.”
Speaking to the media, Nagle said: “We recognise there has been misconduct in this company historically, we’ve worked hard to correct that…We want to complete these investigations, put a line under that and move forward.”
Fresh Investigations to Hit Glencore
Apart from these ongoing investigations, Swiss and Dutch entities are also waiting to begin their bribery and corruption investigations into the company, however, these will reportedly remain outstanding.
According to the Office of the Attorney General of Switzerland, these investigations began after a complaint was received in 2017 containing allegations of foreign public officials being bribed in the DRC.
The company owns more than 150 operating sites, and has highlighted that it will review 27 assets, 14 of which are being sold. Glencore, which mines battery metals copper, nickel, and cobalt, is refocusing its portfolio on what it terms “commodities of the future” needed for the transition to a greener economy.
The company’s strategy of depleting its coal mines by the mid-2040s rather than selling them or spinning them off diverges from other diversified miners including BHP and Anglo American.
“Coal does play an important part in this business. In the discussions I’ve had with shareholders, they’re very supportive of our strategy, they’re very supportive of coal in this business,” he said.
Glencore’s biggest shareholders are Qatar Holding, a unit of the Gulf Arab state’s sovereign wealth fund, and ex-CEO Ivan Glasenberg with a combined 18.5 per cent.
Prices of thermal coal, the most polluting fossil fuel, which are close to all-time highs are due to expectations of scarce supplies caused by Chinese power shortages and a European gas squeeze.
Also, surging fuel prices and other materials needed in mine processing, coupled with tightening labour markets, drove Glencore’s costs up in 2021. Although metals prices have outpaced inflation, costs can still lead to reduced supplies.
The company put its zinc sulphide operation in Italy on care and maintenance until there is “a meaningful change in power market prices,” Nagle said.
“We’ve cut back production at our smelters in Europe because of these high energy prices”. The company has no plans, at this stage, to bring that production back, he said.
Asked about fears of an impending conflict between Russia and Ukraine, Nagle said Glencore’s investments in Russian companies are “immaterial” and the company does not have major concerns about them.
“If there is some sort of activity in the Ukraine and Russia, it will cause severe disruptions in various commodity markets… and in those instances, that’s where our marketing business really thrives,” adding that, “so, we are watching carefully and we will see how we can capitalise on the situation.”
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