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Glencore

Glencore
Based in London, Baar (Switzerland)
Active in Colombia, Peru, South Africa, Bolivia, Argentina, Western Australia, Australia, Russia, Kazakhstan, DR Congo, Peru, United States, Italy, Indonesia, Greenland, Canada, France, Norway, Guinea, Burkina Faso, Zambia, Iran, Republic of Congo, Dominican Republic
Targeted agriminerals, base metals, deep sea minerals, coal, construction minerals, energy fuels, copper, precious metals, gold

Mine, all mine!

On 24 May 2011, the world's biggest commodities trader sailed into the London and Hong Kong Stock Exchanges with two Initial Public Offerings (IPOs) following the priority issue of shares to its so-called "cornerstone investors" shortly before.

Under its Chief Executive Officer (CEO), the South African-born, Swiss-resident, Ivan Glasenberg, Glencore leaped straight into the FTSE 100 list of the UK's premier companies. With a market capitalisation around £36 billion, it became the fourth biggest mining company traded on the London Stock Exchange's premium main market.

The IPO had tapped the pockets of many investors, including hedge, sovereign wealth funds, and so-called Tracker and Pension Funds whose portfolio managers would have felt duty-bound to buy a stake on behalf of their clients. This was regardless of any personal animosity they might feel towards the company (let alone any disquiet expressed by the clients whose pensions they supposedly safeguard).

Nonetheless, the hype, the investor road shows, and the glut of media attention, preceding this unique listing (the largest ever made in Britain) failed to work consistently in Glencore's favour. Although the notoriously secretive enterprise now enjoys access to sizeable chunks of new capital, this sprawling conglomerate was also forced to open its books to greater scrutiny than so far received in its 37-year history (See below).

Of the 1,600-odd pages contained in Glencore’s pre-launch Prospectus, three quarters was devoted to "competent persons'" reports on the firm’s Colombian coal assets, the Mutanda and Mopani mines in Zambia, and on Kazzinc, the rising Kazakhstan zinc, copper and gold miner. Nearly a fifth of what Glencore raised ($2.2 billion) had already been earmarked to increase its stake in Kazzinc to 93%.

On 20 May 2011, The Times Business Editor, Ian King, voiced little doubt that “small” investors, at least, should steer clear of carving out a stake for themselves in this particular golden calf.

In a remarkably robust comment, King damned Glencore as "...a business with dubious morals. It trades grain amid food riots and has been accused of profiteering and environmental offences in numerous poor and war-torn countries”. He went on: "Most of those signing up to buy shares in Glencore's flotation are major Middle Eastern and Far Eastern investors. Few of the traditional City institutions will touch the shares with a bargepole. The question is, should you?"

Some nine hundred different accounts did indeed put out the boat for Glencore’s pre-IPO. According to Reuters IFR, orders were received from around the world including the UK, US, Asia, Middle East and Brazil. "About 10 per cent went to high-net worth individuals and private banking clients, about a third to hedge funds and the rest to institutions and sovereign wealth funds. Hong Kong retail took just 2.67 per cent of the offering" [Thomson-Reuters International Finance Review, 19 May 2011].

Nonetheless, there was marked scepticism on the part of a few funds which would normally have been expected to join the scramble. The fund manager for Schroder’s UK equities team (part of Schroder Investment Management Ltd) , along with Aviva Investors' UK equity manager (part of Aviva Plc), warned investors to look to other mining companies with a long history as listed businesses.

Commented Aviva's Chris Murphy: "If we want exposure to the mining space we can buy Rio Tinto, where we know its track record and have visibility on management. We feel there is more value there than the likes of Glencore." [Reuters, 23 May 2011].

Old game over?

"Why would a giant secret society like Glencore, with a dark past, want to come into the light of day and relinquish the private, backroom-dealing business model that made its partners and founder fabulously wealthy?".

That was the question raised by US investment guru, Shah Gilani, on 18 May 2011, and his answer was terse: "Because the old game is over and commodities prices are about to break down – and in a big way… By utilizing its newly tapped source of capital – its own stock, the [Glencore] partners will eventually be able to cash out (they have a lockup provision of four to five years)”.

Those principally profiting from Glencore’s newly-tapped capital (courtesy primarily of the London IPO) were its 485 owner-partners and 2,700 associated traders. In theory the partners are restricted from cashing out their shares for another five years. In the meantime, thanks to the floatation, several of them became overnight millionaires, while CEO Ivan Glasenberg’s private wealth is now valued at $8.8 billion, according to a survey by Australia’s Business Review Weekly in early May. See: http://www.minesandcommunities.org/article.php?a=10948

However, the firm's move on London and Hong Kong was certainly also motivated by a need to reduce its dependency on commodities trading per se through increasing vertical control over oil and mining companies beyond what it currently exercises. Owning minerals in the ground, and controlling related infrastructure, is arguably less risk-prone than sending them across oceans, or tying them down in warehouses.

As Australian financial commentator, Stephen Bartholomeusz, wrote a week before the IPO: "What has changed within Glencore in recent years has been the size and contribution of [its] industrial assets – its interests in mines, oil wells, logistics businesses and port facilities" [Business Spectator, 27 May 2011]. Bartholomeusz anticipated the conglomerate would transform itself "from a trader with some resource production, to a mining house with some trading activities…In fact it would look very much like a BHP Billiton, which might be the point."

And, while Glencore's foodstuffs trading remains a key component of its global reach (attracting bales of criticism in recent years) the conglomerate’s biggest profits derive from its exploitation of oil and minerals.

Damage, dirt, deceit and death

On 19 and 20 May 2011, the London Times lashed into Glencore with several exposes of the company's current operations, following a special investigation. (The Guardian followed suit with several additional indictments.)

The Times alleged that a Glencore subsidiary “had procured lucrative market-sensitive information from a European Union ‘mole’” which, the paper argued, “threatens to undermine the EU's Common agricultural policy.”

The newspaper went on to claim that Glencore's Colombian subsidiary (Prodeco) has been operating on government-owned land “that was forcibly taken from its previous residents by paramilitaries; at least 18 people were murdered in a six month ‘campaign of terror’ at El Prado, northern Colombia.”

In February 2007, residents close to Prodeco’s La Jagua de Ibirico coal mine in Colombia’s Cesar province set up barricades to protest at environmental damage and respiratory illnesses which, they claimed, had been inflicted by these mining operations. In response, police attacked the strikers, reportedly killing one man [The Times, 19 May 2011].

Six months later, on 22 September 2007, Glencore was accused of implementing an aggressive anti-union policy at its Minera Los Quenuales lead-zinc operations in Peru where, a month before, a worker had died when crushed under a heap of ore.

The work force began an “indefinite general strike“ to draw attention to their unmet demands, and another person was killed, with dozens reportedly injured, when it barricaded access to the mine site. [See: “ Reparos a un megaproyecto carbonífero de Drummond en Cesar” by Herminso Ruiz in El Espectador, 10 February 2007: http://www.elespectador.com/elespectador/. See also : http://www.minesandcommunities.org/article.php?a=150 ].

According to The Times, Glencore has also been guilty of causing river pollution at its operations in Bolivia. Members of the Wutha Native (Aboriginal) Title Claimants Group in Australia were “cheated of an agreement made with Glencore in 1996, under which the company guaranteed to employ some of them in return for mining nickel on their land. (The case was settled only recently out of court.)” [The Times, ibid].

Furthermore, Century Aluminum of the USA (with Glencore, at 44%, its biggest shareholder),is “being pursued for damages caused by its operations, in a string of cases brought by environmental agencies, local residents and other companies.” {The Times, ibid].

Pollution and tax evasion – Zambia

It is the impacts of Glencore’s mining and smelting operations at its Mopani copper-cobalt complex in Zambia which seem to have provoked the greatest ire just prior to its IPO.

In a May 2011 article, entitled "Billionaire ignored children's pleas to stop toxic pollution from mine", The Times’ Environment Editor, Ben Webster, dclared that Ivan Glasenberg had – a full year before – "received a bundle of letters from children at a school exposed on a daily basis to sulphur dioxide pollution from the nearby Mopani Copper Mines (MCM) complex.

"In the letters… the children described how clouds of toxic particles made them choke, burnt their throats, poisoned the school's fruit trees and forced teachers to close windows, leaving them sweltering in their classrooms" [The Times, 20 May 2011].

In 2009, The Environmental Council of Zambia also reported that sulphur dioxide emissions from parts of the plant had reached up to 70 times the maximum health limit set by the World Health Organisation. Webster pointed out that "[a] mineral expert's report, published in Glencore's prospectus also confirmed that "sulphur dioxide emissions from MCM were "consistently exceeding" environmental limits.

"It said that the breaches were a 'significant risk' because MCM had missed even the extended deadline for reducing the pollution. Three monitoring stations outside the plant repeatedly recorded breaches of air pollution limits."

The report "described various illegal discharges of hazardous fluids into rivers, including an acid leak that had contaminated the town's water supply and resulted in 'hospitalisation and treatment of a number of people'" [The Times, ibid].

However, Mr Glasenberg had ignored the children’s plea, and his company allegedly did virtually nothing to introduce stringent anti-pollution measures to the area. [The Guardian, 20 May 2011].

Mopani Copper Mines (MCM) is co-owned by Glencore and another London-listed mining company, First Quantum Minerals. In April 2011, five prominent international NGOs filed a complaint against both companies, alleging they had violated OECD Guidelines for Multinational Enterprises.

The NGOs based their case on the results of a 2009 audit, performed at the request of the Zambian government, with support from the Norwegian government, by international accountants Grant Thornton and Econ Pöyry [ “Five NGOs file a complaint against Glencore International AG and First Quantum Minerals for violation of OECD guidelines” MiningWatch Canada Press Release, 12 April 2011, along with Lausanne/Zurich/ Paris/Lusaka - SHERPA (France), the Center for Trade Policy and Development (Zambia), the Berne Declaration (Switzerland), and l'Entraide Missionnaire (Canada). See also: http://www.minesandcommunities.org//article.php?a=10842 ].

Among the anomalies revealed by the report were: “an unexplained increase in the company’s operating costs in 2007 (+ US$380 million); stunningly low reported volumes of extracted cobalt when compared to similar mining companies operating in the region, and manipulations of copper selling prices in favour of Glencore which constitute a violation of OECD's ‘arm's length’ principle…The result of those various processes was to lower by several hundreds of millions dollars MCM's net income for the 2003-2008 period.”

These actions, declared the NGOs, “are all the more deplorable when one considers that the Mopani consortium operates in an already attractive fiscal environment, one highly favourable to foreign investment, and that Mopani also enjoys the effects of a 2000 development agreement with Zambia that provides massive financial and tax exemptions.”

Pollution and rights abuses -DR Congo In March 2011, two Swiss NGOs, Bread for All and the Catholic Lenten Fund, accused Glencore of a range of human rights abuses, including employing child labour, causing pollution and evading taxes in the Democratic Republic of Congo [1]

The accusations centred around Glencore’s operations in the province of Katanga where it has a $250 million, 77 per cent share in Katanga Mining Limited (KML), a major copper and cobalt producer.

According to the NGOs, mining is “driving the locals away from their traditional farming activities, which in turn has led to less food on the market…There are often no safety measures in KML sites. Miners are not protected from uranium radiation.” (This radiation allegedly persists in local streams from earlier mining operations). “Many have short-term contracts and less training, so the accident risk increases."

Houses were also reportedly damaged by explosive charges and the air polluted by emissions from the mining operations. "And all this in total impunity," declared the report. The NGOs say they contacted Glencore both before and after the report's publication, “but to no avail.”

On being contacted by swissinfo.ch (part of the Swiss Broadcasting Corporation) Glencore denied the allegations. Its spokesperson, Simon Buerk, reportedly argued that: "Some [sic] of the environmental problems revealed in the report are inherited from Gecamines, a company active in the region for more than 50 years." [“Glencore accused of rights abuses in DR Congo” by Stefania Summermatter, Swissinfo.ch, Bern, 12 March 2011].

“Glencore won’t change the way it operates…”:Ivan Glasenberg

There is a great deal of “unfinished” business associated with Glencore’s past and continuing operations (See below for furthe details). Many issues, along with the questions they raise, were neglected in the company’s pre-IPO Prospectus (despite its being one of the longest on record).

To give just one example: in late 2009, four men were convicted by a French court of supplying weapons to Angola in the midst of its 27-year civil war, and in defiance of an arms embargo imposed by the United Nations.

In January 2012, Intellidex published its "Rich List", showcasing South Africa’s wealthiest business men and women.

Topping the list for 2011 came Glecnore's Ivan Glasenberg from Glencore International with an estimated net worth of R61.48 billion.

(Second on the wealth list for men is former De Beers owner Nicky Oppenheimer with an estimated net worth of R50.44 billion, while mining magnate Patrice Motsepe is placed third with a net worth of R26.68 billion) [Reuters 19 January 2012]


Pierre Falcone, Arcadi Gaydamak, Jean-Christophe Mitterrand (son of the former president) and Charles Pasqua were all found guilty, but it was Falcone and Gaydamak who had played the dominant roles. [The Guardian 1 November 2009]. Falcone was packed behind bars for six years [The Times, 28 October 2011].

Ken Silverstein of the highly-respected US magazine In These Times reports that, in November 1993: “Falcone and Gaydamak helped arrange the sale to Angola of $47 million in small arms. A second deal for $563 million worth of weapons, including tanks and helicopters, got under way early the following year…Angolans paid for the weapons with oil, which Falcone and Gaydamak sold with the help of Glencore…” [Ken Silverstein, In These Times, 22 December 2010. See also: http://www.gaucherepublicaine.org/lettres/respublica_lettre-655.htm ].

So long as Glencore remains a gigantic, globally-spread, commodities trader, rooted in the wheeling and dealing of a close clique of its highly-paid managers, along with thousands of its proprietary on-line traders, manifold opportunities for graft and corruption will continue to present themselves.

Ivan Glasenberg has virtually admitted this himself. On 15 April 2011, five weeks before the IPO, The Financial Times commented: "The... financial heft that will result from [Glencore's] initial public offering...will allow the company to vertically integrate through acquisitions, becoming a bigger producer in markets in which it trades." The paper went on to warn that: "This makes an oligopolistic market structure likely...[whose] cost is borne by consumers the world over."

When interviewed by the FT, Mr Glasenberg displayed no scruples about defending his conglomerate's past practices, nor boasting that business will remain the same after the flotation.

"Unfortunately, God put the minerals in different parts of the world," he said. "We took the nice, simple, easy stuff first from Australia, we took it from the US, we went to South America and we dug it out of the ground there. Now we have to go to more remote places."

Just in case we don't get the point, Glasenberg added: " We are not going to change the way we operate. Any talk that going public will hinder us is not true. It will not affect us at all...Being public will have absolutely no effect on the business." [Financial Times, 15 April 2011].

A little Glencore history...

Until 2010, Glencore International AG did not ts publish financial results. This was scarcely surprisng considering that the conglmerate inherited the assets (and much of the operational style) of Marc Rich and Co in 1993, when Rich fell out with his trading colleagues [FT 20 September 2006]. Rich was a notorious fraudster, wanted in fourteen countries until he was pardoned by Clinton during the US president’s last week of office.

Its most important single investment remains the 34.5% it holds of Xstrata PLC,the world’s fifth largest mining conglomerate, followed by the 16% it enjoys in United Company RUSAL [see Oleg Deripaska] and below].

As of 2008, mines, associated assets and processing plants, fully, or part-controlled by Glencore included:

Glencore’s Mines:

  • Prodeco and Calenturitas (coal), Colombia - 100%
  • Carbones de La Jagua (formerly Caribe) (coal), Colombia - 100%
  • Los Quenuales (zinc, lead), Peru - 97%
  • Iscaycruz (zinc, copper, lead), Peru – 97%
  • Yauliyacu Peruba (zinc, lead, copper), Peru - 97%
  • Shanduka Coal, South Africa – 70%
  • Sinchi Wayra (zinc, lead, tin), Oruro and Potosi, Bolivia - 100%


Empresa Metalurgica Vinto, located in Bolivia’s department of Oruro, was seized and nationalised by president Evo Morales on 9 February 2007. ["Bolivian troops seize key smelter", BBC News, 9 February 2007].

The country’s president, Evo Morales, in September the following year during a speech to the UN General Assembly, claimed that his government’s reversal of the earlier privatisation process was “a rebellion against misery and poverty” [MJ 2-9 January 2009].

Glencore’s Vinto smelter had been singled out as a prime example of such rebellion and the company was accused of failing to conduct proper maintenances well as being involved in corruption with the complicity of the former government.

However, although Morales then threatened to take over Glencore’s Porco, Bolivar and Colquiri mines, by early 2009 the government’s mining company, Comibol, was negotiating joint venture contracts with Glencore to run the operations. An agreement with the company over compensation for the Vinto nationalisation also appeared to be close [MJ ibid].

  • Aguilar mine (zinc, lead, sulphuric acid), Argentina
  • Mopani Copper, Zambia - 73%
  • Murrin Murrin Joint Venture, nickel, cobalt, Western Australia - 70.3% (effective interest)
  • Minara Resources Ltd, Perth, Australia (operator of the Murrin Murrin project)
  • Cobar Copper Mine, Australia
  • El Cerrejón Coal, La Guajira, Colombia – 11.65% (held through Xstrata PLC)
  • United Company RUSAL, bauxite/alumina/aluminium, Russia - 16%

(The merger between RUSAL (66%) and SUAL Group (22%), with some of Glencore’s aluminium facilities was announced in 2006 ["ALUMINUM MERGER - Rusal, Sual, Glencore to create world leader", Canadian Mining Journal, 15 October 2006], and completed in March 2007 – see supra).

In January 2009, Glencore provided a loan of US$ 100 million to Katanga Mining Ltd, supplementing an early tranche of US$ 165 million, which could see Glencore controlling 88% of the DR Congo-based company [MJ 2-9 January 2009]. In April 2009, Glencore provided another US$50 million bridging loan to Katanga, along with a rights issue [MJ 1 May 2009], which resulted in the trading company holding 77% of the shares in Katanga by July 2009 [MJ 10 July 2009].


Glencore’s Plants (as of 2008)

  • PASAR (copper) Philippines - 78%
  • North America Evergreen Aluminum, Washington, USA - 100%
  • Columbia Falls Aluminum Co. Montana, USA - 100%
  • Sherwin Aluminum - USA
  • Century Aluminum Company, Monterey, USA - 29%
  • Portovesme (zinc, lead) Sardinia, Italy


Glencore Investments BV is a wholly-owned subsidiary of Glencore (qv) which, in late 2006, was reported to be negotiating a joint venture with Copper Resources Corporation to “develop” the Hinoba-an project in the Philippines [Piplinks 2007] . In 2007, it was the largest shareholder in Zambezi Resources Ltd, an Australian company with five gold, copper and uranium projects in Zambia.

In May 2007, Glencore International AG set up an SPV (special purpose vehicle) with RP Capital Partners and others, to attempt a buy-out of Nikanor PLC, a company with a lease (currently under review by the DR Congo government) on one of the largest copper-cobalt deposits in the world. (For more detail – see RP Explorer Master Fund).

Kazzinc. a subsidiary of Glencore International AG, was in late December 2008, in a joint venture with Highland Gold in a gold-polymetallic prospect in Russia’s Chita region and a gold venture in the country’s indigenous Chukotka region [MJ 12 December 2008].

In May 2009, Ivanhoe Mines signed a marketing agreement with Glencore for production from Ivanhoe’s 85% owned Mamahak coking-coal project in East Kalimantan, Indonesia to which Glencore would provide both river-barging and vessel-loading “logistical services [MJ 22 May 2009].

At the same time, Glencore signed an initial memorandum of understanding with Trevali Resources Corp, which envisaged Glencore not only selling all production from a Trevali’s planned Peru silver-lead-zinc mine; but also providing “mining experience” and further pre-start up finance [MJ 22 May 2009].

Shortly before these deals were sealed, Glencore’s profits had tumbled by more than two-thirds, forcing the company to sell its Prodeco coal mines in Colombia to Xstrata in March, while suspending some other mining operations [Bloomberg, 19 May 2009].

The crisis spurred Glencore to seek out massive tranches of new bank loan and revolving credit. It is also resorted to credit default swaps (CDSs) – ironically, one of the key toxic "derivative instruments" which lay at the heart of the 2008 credit collapse.

In July 2011, Glencore announced it had secured a 70% interest (for US£475 million in cash) in the Marcona copper project in Peru, to "ideally complement Glencore's existing polymetallic mining ooperation in Peru and add significant value to our worldwide group of copper mining assrts" [ MJ 22 July 2011].

Meanwhile, the world's largest minerals trading company had also acquired a 17.9% share interest in PolyMet Mining Corp - the huge Russian gold producer - with rights to increase the stake to nearly 25% [MJ ibid].

In August 2011, Glencore said it would bid for the minority (26.6%) share in Australia's Minara mining company that it does not currently own, in order to gain control of that company's Murrin Murrin mine in Western Australia. Glencore's offer was set at US$280 [MJ 26 August 2011]. This mine (in which Glencore currently owns 40%) reportedly accounts for around 2% of global mined nickel output [Wall Street Journal, 24 August 2011].

The same month, Glasenberg announced that Glencore was negotiating a merger between its Mutanda and Kansuki assets in DR Congo, while wanting to increase its shareholding to 50% from the current 40% and 37.5%, respectively.

The company chairman also said: “We will look, as we proved in copper and zinc and coal etc, if opportunities present themselves to Glencore, we will become a (iron ore) miner” [MJ ibid]

Marring this optimism, on 8 September 2011, the company divulged in its CSR report that, over the period 2008-2010, no fewer than 56 contract and full-time employees had gone to their deaths while working at its global operations [Guardian environment, 7 September 2011].

The report Glencore revealed that Glencore had paid $780,000 in major environmental fines in 2010-2011 (compared with BHP Billiton's environmental fines of $35,057 for its 2010 financial year and Rio Tinto's fines of $540,328 during its financial year).

Glencore also paid $575 million last year in tax and royalties to various governments on revenues of $10.8 billion. In comparison, BHP Billiton paid $7.1 billion in company taxes on $71.7 billion in revenues and Rio Tinto paid $7.45 billion in net taxes to governments on gross revenues of $60.3 billion [Reuters 7 September 2011].

At the beginning of September 2011, the firm said it was planing to offer US$1.2 billion to acquire South Africa's Optimum Coal Holdings (in which it had earlier secured a 14.15% stake): a deal which, if it went through, would complement its existing holdings in Shanduka Coal [MJ 2 September 2011].

Since September 16, Glasenberg himself is reported to have measurably built up his personal stake in Glencore, starting with the acquisition of 2.25 million shares (worth just under £10 million), with the prospect that he may end up with US$54 million worth of shares in the near future [MJ 23 September 2011].

In Janury 2012, Intellidex published its 2011 South Africa Rich List,showcasing South Africa’s wealthiest business men and women.

Topping the list was Ivan Glasenberg with an estimated net worth of R61.48 billion [US$1 = R8.15].

(Second on the wealth list for men was former De Beers owner Nicky Oppenheimer with an estimated net worth of R50.44 billion, while mining magnate Patrice Motsepe was placed third with a net worth of R26.68 billion [Reuters, 19 January 2012]).

Ironbark Zinc Ltd, which has proposed a zinc-lead mine in northern Greenland is 12% owned by Glencore (with 26.5% owned by Nystar NV) [ MJ 14 October 2011]. In October 2011, Ironbark secured a US$50 million funding facility from Glencore, to "fund an acquisition strategy"; the company also agreed an "offtake" and product marketing deal with the premier commodities trader [MJ 21 Octoner 2011].

However, in November 2011, London-listed Highland Gold appeared to be about to gain control of another important zinc, gold, lead and silver asset from Glencore's Kazzink subsidiary, when it took control of the Novoshirokinskoye mine in the Chita (Indigenous) region of eastern Siberia [MJ 25 November 2011].

Later that month, Glencore also announced that it was pulling out from its planned acquisition of Peru's Mina Justa copper mine, since Marcobre (the seller) had "failed to satisfy necessary conditions" [CityA.M.,1 December 2011; see also MJ 2 December 2011].

In the first half of January 2012, the London Daily Mail reported that Glencore was facing legal action over pollution caused by its Mopani Copper Mines subsidiary in Zambia.

Commenting that the operations had "been a thorn in the firm’s side since its £6 billion float in May last year, throwing up allegations of environmental recklessness and tax avoidance, which the company denies", the paper said the firm could now "find itself dragged through the courts after Zambian campaign group the Centre for Trade Policy and Development (CTPD) demanded the company explain itself or face a lawsuit" [Daily Mail, 15 January 2012].

In a letter obtained by the Daily Mail, lawyers for CTPD claimed that the ‘leaching’ process used in copper production was causing sulphuric acid to leak into water used by communities living and working near the mine, and that the high level of sulphur in the air says has caused respiratory and skin problems [Daily Mail, ibid].

A month later, Glencore announced it was discussing a merger with 34%-owned Xstrata which, if successful, would create a mega mining outfit to match Rio Tinto and even BHP Billiton, worth around US$90 billion.

The announcement was greeted with hyperbole across the financial newswires but, as a closure of the deal edged closer, a number of Xstrata shareholders were expressing opposition to the terms of the deal, claiming it undervalued their company's value [Reuters 8 March 2012].

At the beginning of March 2012, the Zambian government announced it would shut down Glencore's Mopani copper plant, citing unacceptable emissions [Reuters 5 March 2012].

Shortly afterwards,Glencore said it had built up a 6.49% stake in Australian gold and copper developer YTC Resources [Business Spectator 9 March 2012].

In early March 2012, Glencore announced it would raise a US$6 billion syndicated loan to back its $37 billion bid for Xstrata, as well as extending US$11.85 billion of existing loans. It is said to have asked its so-called "relationship banks" to join the new loan with commitments of $300-350 million each.

The $6 billion loan was underwritten by Citigroup and Morgan Stanley, and designed "to show regulators that Glencore has enough working capital to fund the merger" [Reuters 7 March 2012].

On 21 March 2012, Australia's Business Spectator commented that "Glencore appears to have realised the first and smaller of its two major ambitions for this year with the overnight announcement of an agreed $C6.1 billion bid for Canada’s dominant grain marketing and distribution company, Viterra" [Business Spectator 21 March 2012].

The deal "is a key element to Glencore’s plans to grow its agricultural commodity trading business, which at present has relatively modest revenues of about $US17 billion".

According to the Business Spectator, the acquisition "will give Glencore a major position in the deregulating Canadian grains market – the market will be opened to competition in August, ending a 70-year-old monopoly held by the Canadian Wheat Board – as well as the platform in Australia, the world’s third-largest exporter of grain..." [Business Spectator, ibid]

Glencore has also agreed to on-sell some Viterra assets to another big Canadian agri-business, Agrium, and a privately-held company, Richardson International,a company that handles about 45 per cent of Canada’s grain trade.

Said Business Spectator: "Underlying that scramble to consolidate was a long term view that after the hard commodity producers benefitted from the first big wave of industrialisation in China and India the next generation of beneficiaries would be the soft commodity producers as rising living standards in the big developing economies flow through to higher-value food consumption".

In May 2012, Glencore was also accused of using warehouses, controlled or monitored by the London Metal Exchange (LME), to store stocks of zinc, thus articially increasing its price.

According to Reuters, the firm had been "tightening its grip on the global zinc market by moving material to inaccessible locations, forcing industrial users to pay high physical premiums for a metal that is in surplus" [Reuters 16 May 2012].

Disturbingly, what Glencore is doing isn't illegal under LME rules [2].

In July 2012, Glencore announced that it was entering the managanese market for the first time, after agreeing to purchase manganese ferroalloy operations from Vale (the Brazilian iron ore giant), which are situated in Norway and at Dunkerque (France). The latter is claimed by Vale to be "the largest ferroalloys furnace in the world" [MJ 13 July 2012].

The same month, Blackthorn Resources - which has gold, zinc and copper projects in Africa - announced a new issue of shares, to which Glencore had committed to purchase sufficient stock, to maintain its existing 14.2& holding in Blackthorn. The new funding would go towards the mining company's Mumbwa iron ore project in Zambia and further epxloration work in Burkina Faso [MJ 20 July 2012].

In August 2012, UK-listed Bellzone agreed to sell all of its share of output from the Forecariah iron ore mine in Guinea to Glencore, in return for which the commodities trader will grant Bellzone a $15 million early payment facility, available on shipment of 750,000 wet metric tonnes of a 58%-grade iron product.

According to mining.com, Bellzone's partner in the project, China International Fund, has "tag-along" rights- meaning it could also sell its part of the production to Glencore.

"The agreement, which covers the life of the mine, will allow Glencore to profit from a probable expansion to 10 million tonnes." [mining.com 9 August 2012].

In early 2013, Glencore announced that its majority (50.1%) owned Perkoa mine in Burkina Faso ("considered one of the biggest zinc deposits in Africa", according to Africa Mining Intelligence [AMI, 2 January 2013]) was about to come onstream.

In February 2013, Glencore-controlled Kazzinc, along with the Kazakh investment company, Verny Capital, purchased two gold deposits in northern Kazakhstan with combined reserves of some 70 tonnes, for about $200 million. In 2012, Kazzinc produced 301,237 tonnes of zinc and 497,086 ounces of gold, according to its production data [Reuters 19 February 2013].

At the beginning of March 2013, Glencore announced it was delaying the closure of its merger with Xstrata merger - although, shortly afterwards, the Chinese authorities dropped their own objections to the deal.

Meanwhile, Glencore was facing claims of having aided Iran's nuclear program. According to Reuters, Glencore supplied thousands of tons of alumina to an Iranian company that has provided aluminum, a key ingredient in the manufacture of tubes used in uranium enrichment centrifuges.

A diplomatic source allegedly showed Reuters a "Western intelligence report" describing how Glencore "provided Iralco [Iranian Aluminum Co.] with thousands of tons of alumina during 2012, in exchange for a lesser amount of aluminum metal. The report's authenticity was confirmed by U.N. diplomats [Reuters, 1 March 2013].

Although Reuters clarified that it did not know whether any of the raw alumina, sent to Iran, was actually used to make the aluminum tubes, it did claim that the terms of the deal imply that, for every five tons of alumina supplied by Glencore, the trading house received just one ton of finished aluminum.

Said mining. com: "Typically it takes just two tons of alumina to make one ton of aluminum. So the big question is where the rest went. Glencore acknowledged the deal was struck in August 2011 and said it first learned of a relationship between Iralco and Iran's nuclear centrifuge maker in December of 2012 and stopped further shipments immediately. The last actual shipment was made in October 2012..." [mining.com, 1 March 2013].

As Glencore's prospective merger with Xstrata created increasing animosity on both sides, in Spring 2013 the weight and (one might say) sheer bullying on the part of the larger of the two firms saw Xstrata reluctantly accept defeat, with the departure or dismissal of virtually the entire Xstrata board and many of its staff.

In June 2013, Glasenberg and his associates began steering Glencore in a new direction (literally so) by bringing onto its board two new independent directors, and one executive director, closely associated with the banking and investment sector.

These appointments marked a clear attempt to improve the company's lacklustre performance, and help it face the fiscal and reputational risks that lay ahead.

Although the now-combined Glencore-Xstrata has still to appoint a new chairman, it has recruited John Mack, former head of Morgan Stanley, as an independent director (he also acts as an advisor to the US private equity group KKR; along with a man called Peter Grauer.

The choice of Mr Grauer appears quixotic, if not controversial. He not only formerly work for investment outfit Donaldson, Lufkin & Jenrette - which went bust - and with CSFB Private Equity (part of CS). He is also the chairman of global news service, Bloomberg [Reuters, 12 June 2013].

Thus, there would appear to be a potential significant conflict of interest in his new role at Glencore, since Bloomberg is one of the most important - and well-heeded - of all the media services which analyse and report upon mining issues.

Just a day or so before these appointments were announced, Glencore faced yet another accusation it could ill-afford to deal with. As the world’s largest exporter of power station coal, it is being investigated by Italian tax police, which claim it has evaded more than 120 million euros (US$158 million) in taxes.

According to Bloomberg (the very same!): "The authorities are reviewing some transactions between [Glencore's] Portovesme unit, a zinc and lead smelter on the island of Sardinia, and the larger group [in] Baar".

The Rome financial police said that Glencore "allegedly hid profits by paying other units of the Swiss company above-market prices for raw materials" - a form of transfer pricing. Their attention had been "aroused because the company [Porovesme] was created through an extraordinary operation and since its creation has never declared profit, only fiscal losses, a situation that seemed strange given the important international role it had taken on and given the profits registered by the Swiss company that it belonged to”.

Glencore has retorted that all these transactions "were conducted in accordance with applicable Italian tax laws and on an arm’s length basis between Portovesme and the Glencore group. Portovesme continues to engage with the tax authorities to ensure a swift conclusion to the review” [Bloomberg 10 June 2013]

Just a day later, Bloomberg also announced that Glencore-Xstrata was "studying a plan to combine some of its Australian coal operations with mines run by Rio Tinto Group, according to two people familiar with the matter". The anonymous informants told the news service that: "Glencore and Rio own some of the largest thermal coal mines in the Hunter Valley region of New South Wales and have held initial talks on ways to share mines and infrastructure to cut costs",

Acoeding to the Wall Street Journal, Rio Tinto’s Coal & Allied unit has hired Deutsche Bank AG (DB)to sell as much as 29 percent of the unit to reduce its stake to as low as 51 percent...Glencore Xstrata’s Australian operations produced 11 million metric tons of the fuel for shipment overseas in the first quarter this year"[WSJ, cited by Bloomberg, 11 June 2013].


n August 2013, Glencore Xstrata had to write down the value of Xstrata's assets by US $7.7billion, as metal prices fell by 15% on average during the first six months of the year, while demand from Chia "softened". In addition to the Xstrata write-down, the firm also took a $452m hit on nickel operations in Australia and a £324m write-down on its share in Russian aluminium firm RUSAL.

It also announced that it had begun the sale of its Las Bambas copper mine in Peru to comply with demands from the Chinese authorities before they consented to the Glencore-Xstrata merger [BBC, 20 August 2013].

In mid-September 2013, Glencore Xstrata and a junior partner, London-listed Zanaga Iron Ore Company decided to move forward with the assessment of their vast iron ore mining project in the Republic of Congo, which may cost as much as $3 billion. Zanaga entered a supplemental agreement with Glencore which grants the latter a 50% stake plus one share in the project, while Zanaga holds the rest.

This news comes just two days after Glencore Xstrata decided to put its massive $6 billion Wandoan thermal coal project in Australia on hold, mainly due to depressed coal market prices approaching three-year lows [mining.com 13 September 2013].

The year 2013 proved relatively profitable for Glencore Xstrata, with an increase in copper output having risen by 26% to 1.5 mllion tonnes, driven by its operations in Africa, Latin America and Australia. Its coal deliveries increased 4% to just over 138 million tonnes, although those of zinc and lead fell (by 9% and 2% respectively). Its nickel output also declined by 4%, "mainly due to the Falcondo operations in the Dominican Republic being placed on maintenance in response to poor nickel prices" [Mineweb, 11 February 2014].

In May 2014, Glencore linked up with the AIM-listed, British Virgin Islands-based, Zanaga Iron Ore Company Ltd in applying for a licence to operate a 12 million tonnes a year iron ore mine in DR Congo, producing a 66% pellet feed product, possibly later being expanded to 30 million tnnes. Total cost of the prject is put at US$4.7 billion [MJ 9 Msy 2014].

In June 2014, Rio Tinto completed the sale of its 50.1% interest in Australia's Clermont thermal coal joint venture to GS Coal Pty Ltd - a company owned jointly by Glencore and Sumitomo Corp, for just over US$1 billion. Glencore then took over management of the mine [World Coal June 2014].

At around the same time, Glencore dropped "Xstrata" from its title and announced in June 2014 that it had refinanced its credit lines for US$15.3 billion with 69 banks (sic) in order to boost its capital and financing costs [MJ 14 June 2014].

In August 2014, the Queensland state government in Australia named Glencore as its "preferred developer" of the Aurukun bauxite deposits on the Cape York peninsula. If Glencore proceeds, it could mark the opening of a mine which has been the target of Aboriginal opposition and suffered various delays for over four decades [see: http://www.abc.net.au/4corners/content/2011/s3205620.htm]

2015 - the descent of Glencore?

In May 2015, Glencore lined up no less than US$15.25 billion in order to refinance its existing loans, enlisting the support of no fewer than sixty banks for the purpose, including 34 mandated lead arrangers and bookrunners. According to mining.com: "The new and amended facilities comprise an $8.45 billion, 12-month revolving credit facility with a 12-month term-out option and a 12-month extension option and a $6.8 billion five-year revolving credit facility with two 12-month extension options.

"Initially launched at $14 billion, Glencore’s credit facilities ended up closing significantly oversubscribed at $17bn, after the company’s broad group of relationship banks showed strong support".

Among the banks were BBVA, HSBC Investment Bank, Lloyds TSB and Rabobank [mining.com 29 May 2015].

But this could not conceal the degree of debt and the impact of an across-the-board commodities' downturn which had been occurring since the beginning of the year. At the end of August 2015, it confirmed a long-anticipated withdrawal from the highly-contested Tampakan copper project in the Philippines [see: http://www.minesandcommunities.org/article.php?a=13081].

Three months later, it announced that its overall coal production to the end of September that year was 8% down on the previous year at 102.7 million t, as against 111.4 million t over the same period the previous year, the company decided to scale back production in Australia and close the Optimum opencast operations in South Africa, as well as reduce output at Prodeco in Colombia to meet railing restrictions.

Australian thermal coal production fell to 41.7 million t from 46.6 million t last year as the company limited production as a response to softness in the market. South African thermal coal was also down at 31.8 million t – an 8% drop on 2014 – while production in Colombia was 22.3 million.

On the metallurgical side, Australian hard coking coal production was 4.2 million t – 0.4 million t lower than 2014.

Nonetheless the company reported “significant progress” on the delivery of its debt reduction plans, raising US$2.5 billion in an equity placement on 16 September and savingd an additional US$2.4 billion after suspending its 2015 final and 2016 interim distribution.

It also raised US$0.9 billion from its first precious metals streaming transaction with an additional streaming transaction in progress expected to be announced by the end of the year, as well as putting stakes in its agriculture business and Lomas Bayas and Cobar copper operations in Peru up for sale [World Coal, November 2015].

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