We haven't been able to take payment
You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Act now to keep your subscription
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account or by clicking update payment details to keep your subscription.
Your subscription is due to terminate
We've tried to contact you several times as we haven't been able to take payment. You must update your payment details via My Account, otherwise your subscription will terminate.
author-image
INSIDE THE CITY

Glencore’s new boss will have to dig deep

The Sunday Times

Ivan Glasenberg celebrated Glencore’s return to profit in 2017 by jogging four miles around Hyde Park with a group of City analysts. After three decades at the trading and mining giant, perhaps he wanted to prove he could still keep up with the youngsters.

Four years on, Glasenberg, 63, is preparing to jog into retirement. Fellow South African Gary Nagle will take over as chief executive of the FTSE 100 group by summer.

Nagle, 46, inherits a company seeking to shift its focus from fossil fuels to green energy. Glencore wants to reduce its total emissions by 40 per cent by 2035, and reach net-zero by 2050.

There is a long way to go: Glencore mined 140 million tons of coal in 2019.

As part of the transition, Glasenberg has laid out plans to invest more in “future-facing” metals such as cobalt and zinc. It is already a big cobalt supplier for Tesla.

Advertisement

The company aims to wind up its Colombian coal base by 2035, and already has lower “scope 3” emissions — from itself and its whole value chain — than rivals such as BHP and Rio Tinto.

There will be an update on 2020 production this week, and annual results are due on February 16. Analysts are predicting a 27 per cent drop in revenues to $157.2 billion.

There is reason to be cautious. Glencore has never delivered on the promises made at its float in 2011, when it was valued at 530p a share. It has not reached that level ever since and closed on Friday at 246.4p, valuing the company at £33.1 billion.

Part of the reason for this is a US Department of Justice (DoJ) inquiry into its activities in the Democratic Republic of Congo. Analysts at Jefferies say a fine of less than $1 billion (£730 million) would be a “positive surprise”. The US Commodity Futures Trading Commission, the Serious Fraud Office and the Swiss authorities are also investigating. The UK government is looking into a complaint over a waste-water spill in Chad in 2018.

Analysts want Glencore to sell off marginal assets and focus on the 14 big operations that generate 90 per cent of core earnings. It has sold its 73.1 per cent stake in Mopani Copper Mines after a dispute with Zambia’s government, which is paying $1 upfront with $1.5 billion to come.

Advertisement

The company cancelled its dividend for the second time in five years in 2020. The payout wil be reinstated if net debt falls below $16 billion. In August, it was $19.7 billion.

Glencore has the potential to dig up a few positives for investors in coming months: a reinstatement of its dividend, a potential spin-off of the coal business and a resolution of the DoJ investigation would all be welcome. Nagle has his work cut out. Hold.

PROMOTED CONTENT