Glencore sets aside $1.5bn to settle UK, US and Brazil probes

Glencore expects to resolve bribery and corruption investigations in the UK, US and Brazil this year and has set aside $1.5bn to cover potential fines and costs.

News of the provision came as the London-listed miner and commodity trader announced record earnings on the back of soaring prices for its cornerstone commodities and said it would return $4bn to shareholders.

“The company presently expects to resolve the US, UK and Brazilian investigations in 2022,” Glencore said in its annual results statement released on Tuesday. “Based on the company’s current information and understanding . . . the amount of $1.5bn represents the company’s current best estimate of the costs to resolve these investigations.”

The US Department of Justice launched its investigation in 2018 when it ordered Glencore to hand over records related to its compliance with the country’s money-laundering laws and the Foreign Corrupt Practices Act in Nigeria, the Democratic Republic of Congo and Venezuela. Regulators in the UK and Brazil also launched probes.

Glencore is the world’s biggest commodities trader, shifting millions of tonnes of metals, minerals and oil across the globe. It is also a leading mining house, with operations from Australia to Peru.

The focus of the US investigation has become clearer in the past six months after a former Glencore oil trader pleaded guilty in New York over his part in a scheme to bribe government officials in Nigeria in return for lucrative oil contracts.

The company said it was also co-operating with Swiss and Dutch investigations, the timing and outcome of which remained uncertain. However, it said it expected the results of these probes “to avoid duplicative penalties for the same conduct”.

The regulatory scrutiny has hung over the Switzerland-based company. Reaching settlements would allow Gary Nagle, who replaced long-serving chief executive Ivan Glasenberg in July, to focus on streamlining Glencore’s portfolio and fine-tuning its operations.

Shares in Glencore are up more than 35 per cent since his appointment.

“We continue to co-operate extensively with the various authorities investigating Glencore in order to resolve these investigations as expeditiously as possible,” Nagle said on Tuesday. “We are committed to upholding a culture of ethics and compliance across our business.”

In the year to December, Glencore reported adjusted earnings before interest, tax, depreciation and amortisation of more than $21bn, up 84 per cent on a year earlier, on revenues of $204bn.

Strong cash generation allowed the company to declare a cash return of $4bn — made up of $3.4bn in dividends and the rest from a share buyback. Net debt stood at $6bn.

Under its dividend policy, Glencore will pay $1bn from the profits of its trading arm plus 25 per cent of the cash generated by its mining assets. It also has a top-up rule whereby all cash flows generated once net debt moves sustainably before $10bn are returned to shareholders.

“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,” Nagle said.

African copper and thermal coal, which is burnt in power stations to generate electricity, were Glencore’s main profits drivers in 2021.

The company’s trading business also thrived in volatile commodity markets, delivering record earnings before interest of $3.7bn.

Coal prices have soared in recent months, with benchmarks in Asia trading above $250 a tonne, boosted by strong demand and supply disruptions.

Glencore is one of the world’s biggest coal producers, mining more than 100mn tonnes of the commodity last year. It has pledged to run down production over the next 30 years, a strategy it said was supported by its biggest shareholders and was the right one for the world.

The company has faced calls to spin off the coal business from activist investor Bluebell Capital Partners.

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