In many ways Ivan Glasenberg makes a surprising evangelist for the green revolution. The former coal trader, who is the boss and second-largest shareholder in Glencore, has often taken a bullishly contrarian stance on coal.
Now Mr Glasenberg is pointing investors to forecasts showing the explosive growth of electric vehicles, which “will be a disruptive”. Glencore told investors this week: “The future needs our commodities.”
It is hard to argue. There is unanimity that there are not enough copper mines being built around the world to equip the electric vehicles and renewable energy equipment that use it so intensively. Glencore has 400,000 tonnes a year, or $2.7 billion’s worth at today’s prices, in latent capacity in the Democratic Republic of Congo and in Zambia. It shelves this capacity two years ago when prices hit a level that Mr Glasenberg had scarcely credited as possible. It upgraded its Katanga Mining division in the south of Congo while prices were low.
When the global market begins to feel tight, Glencore is best placed to get there fastest with the mostest. It may even be the largest copper producer in the world by 2019. On Monday Katanga Mining produced its first copper cathodes since 2015.
Another source of electric vehicle excitement for Mr Glasenberg is what Katanga and its other African copper operations produce as a byproduct: cobalt, one of the advantages of the copper belt that crosses southern Congo and Zambia. Cobalt ore is rare and in increasing demand for use in lithium batteries.
Glencore, which is already the world’s largest cobalt producer, aims to more than double its cobalt production by 2020.
According to CRU, the commodity consultancy, the growth in electric vehicles, and the consequent increase in grid infrastructure and charging kit, will require additional copper equivalent to 18 per cent of global supply and a fourfold increase in the amount of cobalt.
Battery makers will also need to find additional nickel, a metal of which Glencore has the equivalent of 56 per cent of global output today.
Deutsche Bank analysts reckon that, by 2020, nickel, copper and cobalt will produce 50 per cent of Glencore’s operating profit, compared with less than a third this year.
The market for zinc, which is part of Glencore’s portfolio, is also beginning to tighten because of mine closures and environmental regulation in China. It is used to galvanise steel and so is used more intensively in mature economies.
This leads us to the central point in Mr Glasenberg’s sales pitch to investors. Compared with its Big Four rivals — BHP Billiton, Rio Tinto and Anglo American — it says it has more exposure to the materials societies use as they become more affluent. Underlying this case is a concern that China is slowing its urbanisation and will not require the vast quantities of iron ore and coking coal that it has done.
That is slightly fallacious thinking: the reason BHP and Rio are dependent on iron ore is that their operations in Western Australia’s Pilbara are to steel-making what Saudi Arabia is to petrol. They make so much money out of it that it is politically problematic and that is not going to change any time soon.
And there is a final point of distinction for Glencore that does not stand in its favour. It needs to get its additional copper and cobalt out of the ground in Congo and Zambia. Congoloese is not eactly politically stableand Glencore has been forced to distance itself from Dan Gertler, its long-term partner in the country.
For that reason it remains a higher risk, higher reward prospect than its peers.
ADVICE Hold
WHY The group has rebounded spectacularly since 2015. Risks remain but it is positioned to benefit from copper and cobalt demand
La Compagnie des Alpes
The world’s biggest operator of ski resorts is in an optimistic mood despite claims that global warming threatens to limit snowfalls in its French Alpine base.
La Compagnie des Alpes, which is listed on the Paris exchange, runs 11 prestigious resorts, including Val d’Isère, Les Arcs, Les 2 Alpes, Les Menuires, Méribel and Serre Chevalier.
This week it reported a 5.8 per cent rise in sales to €762.2 million in the 12 months to the September. Despite low snowfalls last winter, its skiing activities registered a 4.2 per cent increase in revenue to €426.9 million. With snow arriving early this year, executives hope for even better performance.
The group’s resorts tend to be at a high altitude, offering protection from the impact of the rising temperatures.
Its leisure activities — from waxworks museums to fun parks — also performed well, with revenue rising by 8.4 per cent to €320 million. It plans to expand by investing in hotels at its Asterix Park outside Paris and by spending €70 million on its Walibi parks in central France and Belgium.
True, the group’s profits fell by 6.3 per cent last year, but this was because of a writedown linked to the sale of two unsuccessful waxworks museums in Seoul and Prague.
Dominique Marcel, chief executive, insists that the outlook is positive because he is confident of making inroads with Chinese skiers.
Fosun, the Chinese investment group that owns Club Med, the French holiday firm, is close to taking a holding of between 10 and 15 per cent in Compagnie des Alpes. This would set the scene for a partnership that Mr Marcel hopes will lead to Chinese skiers flocking to his group’s Alpine resorts, and enable the firm to open pistes in China.
Shares in the company have risen by about 65 per cent in the past year, and now trade at about €30.48, or just over 10 times this year’s earnings. It offers a dividend of €0.50, a yield of less than 2 per cent — modest compared with the 4 per cent on offer at Tui, the larger, London-listed holiday company, but set to grow in line with earnings.
ADVICE Buy
WHY A tie-up with Fosun is more likely than not, giving a foothold in the potentially lucrative Chinese ski market
