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Glencore - Wikipedia, the free encyclopedia

Glencore

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Glencore International plc
Type Public limited company
Traded as LSE: GLEN, SEHK: 0805
Industry Commodities
Metals, Mining
Founded 1974
Headquarters Baar, Switzerland
(Head office)
Saint Helier, Jersey
(Registered office)
Area served Worldwide
Key people Ivan Glasenberg (CEO)
Simon Murray (Chairman)
Products Metals and minerals, energy products, agriculture products other raw materials
Revenue US$ 186.2 billion (2011)1
Operating income US$ 4.851 billion (2011)1
Net income US$ 4.268 billion (2011)1
Employees 57,656 (2011)
Website www.glencore.com

Glencore International plc (LSE: GLEN, SEHK: 0805) is a multinational commodities trading and mining company headquartered in Baar, Switzerland and with its registered office in Saint Helier, Jersey. Glencore is the world's largest commodities trading company, with a 2010 global market share of 60 percent in the internationally tradeable zinc market, 50 percent in the internationally tradeable copper market, 9 percent in the internationally tradeable grain market and 3 percent in the internationally tradeable oil market.234

Glencore has production facilities around the world and supplies metals, minerals, crude oil, oil products, coal, natural gas and agricultural products to international customers in the automotive, power generation, steel production and food processing industries.3 The company was formed in 1974 by a management buyout of Marc Rich & Co AG.3

Glencore listed on the London Stock Exchange in May 2011 and is a constituent of the FTSE 100 Index.56 It has a secondary listing on the Hong Kong Stock Exchange.7

Contents

History

1974 to 2000

According to an Australian Public Radio report, "Glencore's history reads like a spy novel".8 The company was founded as Marc Rich & Co. AG in 1974 by now-billionaire commodity trader Marc Rich, who was charged with tax evasion and illegal business dealings with Iran in the U.S., but pardoned by President Bill Clinton in 2001.9 He was never brought before U.S. justice before his pardoning, therefore there was never a verdict on these charges.

In 1993 commodity trading and marketing company Trafigura was "split off from" Marc Rich's group of companies.10 As physical commodities traders, along with Trafigura, Glencore's main rivals in 2011 were identified as Vitol and Cargill,11 amongst a number of others.12

In 1993 and 1994, after failing to control the zinc market, losing $172 million and nearly bankrupting the company, Rich was forced911 to sell his majority share in Marc Rich & Co. AG back to the company.13 The enterprise, renamed Glencore, is now owned and run by Marc Rich's secretive inner-circle of "lieutenants", including founding Glencore CEO Willy Strothotte and present CEO Ivan Glasenberg.

2000 to present

In 2005, proceeds from an oil sale to Glencore were seized as fraudulent, in an investigation into corruption in the Republic of Congo.14

In a 2011 survey of Glencore, Reuters reviewed an example of its opportunistic, contrarian, well-funded investment approach—focusing on equity participation, controlling interest, and working upstream from trading relationships:

The acquisition was the culmination of 18 months of deal-making in Congo... [including fighting off a counterbid by] former England cricketer Phil Edmonds.... [Starting i]n June 2007, Glencore and partner Dan Gertler, an Israeli mining magnate, paid 300 million pounds for a quarter-stake in mining company Nikanor, which was seeking to revive derelict copper mines next to Katanga Mining's properties. That deal gave Glencore exclusive rights to sell all Nikanor's output -- an "offtake" agreement.... [Then, o]n Christmas Eve 2008, ... [having] lost 97 percent of its market value over the previous six months ... in the depths of the global financial crisis and ... running out of cash, Katanga accepted a lifeline it could not refuse. [Glencore] wanted control. For about $500 million in a convertible loan and rights issue, Katanga agreed to issue more than a billion new shares and hand what would become a stake of 74 percent to Glencore. ... [By early 2011], with copper prices regularly setting records above $10,000 a ton, Katanga's stock market value [had reached] nearly $3.2 billion.... [Since the Glencore acquisition], Katanga ... is reaping the benefit of the surging markets and its wealthy, powerful owner. After losing $108 million in 2009, it posted an annual profit of $265 million in 2010.11

In the course of the Congo events, Nikanor was merged into Katanga in late 2007 in a transaction valued at $3.3Bn.15

In May 2009, Glencore announced it would manage Brazilian bankrupted agricultural products company Agrenco.16

In early 2011, the Reuters report included speculation that, after an IPO, Glencore could develop an interest in London/Kazakh Eurasian Natural Resources Corporation.11 In May 2011 the Company launched an Initial Public Offering valuing the business at $61 billion17 and creating five new billionaires.18 Trading was limited to institutional investors for the first week and private investors were only allowed to buy the shares from 24 May 2011.19

In February 2012, Glencore International Plc, agreed to buy Xstrata Plc for 39.1 billion pounds ($62 billion) in share. Glencore offered 2.8 new shares for each Xstrata share in agreed all-share "merger of equal". It is the biggest mining takeover and after approval for the plan would create an entity with 2012 sales of $209 billion.20

Operations

As of 2006 (updated 2011), assets fully or partly controlled by Glencore included:21

Production facilities

Area Facility Product Location Employees ('06) Glencore ownership ('11)
North America Evergreen Aluminum Aluminium Washington, USA 10 (plant idle) No interest indicated
Columbia Falls Aluminum Co. Montana, USA 145 No interest indicated
Century Aluminum Company HQ: Monterey, USA 44% economic interest (39% voting)
Windalco Jamaica 1,200 No interest indicated
Alpart 1,300 No interest indicated
Sherwin Alumina Texas, USA 550 ('11) 100%
South America Prodeco Coal Santa Marta (port) and Calenturitas (mine), Colombia 256 100% 1
Carbones de La Jagua (formerly Caribe) La Jagua, Colombia 350 No interest indicated
Los Quenuales Zinc, lead Yauliyacu, Peru 1,998 97%
Iscaycruz, Peru 1,271 97%
Perubar Rosaura, Peru 444 No interest indicated
Sinchi Wayra Zinc, lead, tin 5 mines, Oruro and Potosi regions, Bolivia 3,427 100%
Aguilar mine/AR Zinc Group Zinc, lead, sulphuric acid North west of Argentina 1,725 100%
Moreno Sunflower oil and meal Crushing plants: Necochea, Daireaux, Villegas and Grainer; Argentina 575 100%
Europe Portovesme Zinc, lead Sardinia, Italy 773 100%
Eurallumina Aluminium 575 No interest indicated
Kubikenborg Aluminium AB (Kubal) Sundsvall, Sweden 470 No interest indicated
Aughinish Alumina Alumina Ireland 472 No interest indicated
Africa Mopani Copper Mine Copper Zambia 8,848 73%
Katanga Mining Copper, Cobalt Democratic Republic of the Congo 6,400 ('11) 74.4%
Mutanda Mine Copper, Cobalt Democratic Republic of the Congo 930 (2010) 40%
Shanduka Coal South Africa 1,500 ('11) 70%
Eurasia OAO Russneft Oil Oil fields across Russia 10,000 40-49% in joint interests w/OAO
Rostov on Don grain export elevator and wheat flour mill Cereals Rostov on Don, Russia 470 No interest indicated
Kazzinc Zinc Kazakhstan 21,000 50.7%
Asia PASAR Copper The Philippines 1,047 78%
Australia Murrin Murrin Joint Venture Nickel, cobalt Western Australia 671 82.3% (effective)
Cobar Copper Mine Copper Cobar, Central Western NSW, Australia 267 100%

1 The Prodeco stake has been sold to XStrata as part of XStrata's 2009 rights issue. Glencore retains a 100% re-purchase option, it is expected to exercise this option in 2010;22 100%-owned by Glencore, per link in chart, April, 2011.

Other subsidiaries, participations and joint ventures

Name Activity Location Glencore ownership Notes
Xstrata plc Mining HQ: Zug, Switzerland ca. 14%, controlling 40%23 34.5% See also text above.
Minara Resources Ltd HQ: Perth, Australia 70.5% Operates the Murrin Murrin project.
Cerrejón Coal mining Guajira department, Colombia 33.3% up until Q2/2006 BHP Billiton plc, Anglo American plc and Xstrata plc each own 33.3%. In 2006, Xstrata acquired Glencore's share.24 See also text above.
Rusal Aluminium, alumina Russia 8.8% Announced merger / joint venture with RUSAL (66%) and SUAL Group (22%). World's largest aluminum and alumina producer with 110,000 employees in 17 countries.25
Katanga Mining Limited Copper and cobalt Democratic Republic of Congo 74.4% See also text above.
Chemoil Marine fuels and clean fuels Worldwide 51.5%

Controversies

Financial and accounting manipulations

Five NGOs have filed a complaint to the OECD against a subsidiary of Glencore over allegations that a mine it owns in Zambia may not be paying enough tax on its profits. The cause for the complaint lies in the financial and accounting manipulations performed by the two companies’ subsidiary, Mopani Copper Mines Plc (MCM), in order to evade taxation in Zambia. 2627

Dealings with "rogue states"

ABC Radio reported that Glencore "has been accused of illegal dealings with rogue states: apartheid South Africa, USSR, Iran, and Iraq under Saddam Hussein", and has a "history of busting UN embargoes to profit from corrupt or despotic regimes".8 Specifically, Glencore was reported to have been named by the CIA to have paid $3,222,780 in illegal kickbacks to obtain oil in the course of the UN oil-for-food programme for Iraq. The company denied these charges, according to the CIA report quoted by ABC.823

Investments in Colombia

Moreover, Swiss public television (TSR) reported in 2006 that allegations of corruption and severe human rights violations were being raised against Glencore on account of the alleged conduct of its Colombian Cerrejón mining subsidiary. Local union president Francisco Ramirez was reported to have accused Cerrejón of forced expropriations and evacuations of entire villages in order to enable mine expansion, in complicity with Colombian authorities. According to TSR, a representative of the local Wayuu Indians also accused Colombian paramilitary and military units, including those charged with Cerrejón mining security, of forcibly driving the Wayuu off their land, in what she described as a "massacre".28

Glencore/Xtrata's "huge coal operation in Colombia, Prodeco, was fined a total of nearly $700,000 in 2009 for several environmental violations [running in earlier years], including waste disposal without a permit and producing coal without an environmental management plan."11

A BBC investigation in 2012 uncovered sale documents showing the company had paid the associates of paramilitary killers in Colombia. In 2011, a Colombian court had been told by former paramilitaries that they had stolen the land so they could sell it on to Glencore subsidiary Prodeco, to start an open-cast coal mine; the court accepted their evidence and concluded that coal was the motive for the massacre.29

Investments in Bolivia

Through its Bolivian subsidiary, Sinchi Wayra (which it acquired in 2005), Glencore operates six businesses in Bolivia that mine and process tin, silver, gold and zinc.;3031 notable among these has been Empresa Metalurgica Vinto, reportedly the world's largest privately-run smelter complex, located in the department of Oruro, which was seized and nationalized by Bolivian President Evo Morales on February 9, 2007. At the time of the seizure there were no plans to compensate Glencore.32

Investments in Ecuador

"In Ecuador, the current government has tried to reduce the role played by middle men such as Glencore with state oil company Petroecuador" due to questions about transparency and follow-through, according to Fernando Villavicencio, a Quito-based oil sector analyst.11

Investments in Zambia

"[O]fficials in Zambia believe pollution from Glencore's Mopani mines is causing acid rain and health problems in an area where 5 million people live."11

Investments in the Democratic Republic of the Congo

The company's Luilu copper refinery uses acid to extract the copper. For three years after taking over the mine it continued to allow the waste acid to flow into a river. The chief executive, Ivan Glasenberg, was interviewed for Panorama by John Sweeney and said 'It was impossible to remedy any way faster' 33

They have also come under scrutiny for acquiring illicit "conflict minerals" 34

Associations with mining companies

Glencore is also noted for its association with the publicly traded Xstrata mining group, also headquartered in the low-tax11 Canton of Zug, Switzerland. Glencore is reported to serve as a marketing partner for Xstrata.2335 As of 2006, Glencore leaders Willy Strothotte and Ivan Glasenberg are on the board of Xstrata, which Strothotte chairs.36 According to The Sunday Times in 2005, Glencore controlled 40% of Xstrata stock and has appointed the Xstrata CEO, Mick Davis.2337 In 2011, Reuters put the ownership stake at 34.4%, and said that the Glencore IPO would facilitate a full merger between the two companies. Alternatively, if a merger were not consummated, "a messy competitive battle" between the affiliated companies could ensue, the report speculated.11 Relationships also exist with Century Aluminum Co. (CENX; 44% economic ownership interest)38) in the U.S.; Glencore partial subsidiary Minara Resources Ltd (AU:MRE), a 70.5% stake in one of Australia’s top three nickel producers38);39 and 8.8% in United Company Rusal (HK:486), the Russian aluminum giant that went public in 2010.38

In mid-2011, Century was called "one of the most harrowing stocks of the past few years" but identified as a risky but potentially profitable investment going forward.40

References

  1. ^ a b c Preliminary Results 2011
  2. ^ "Glencore: Taking over the world?". Aljazeera - Counting the Cost. 2011-05-29. http://english.aljazeera.net/programmes/countingthecost/2011/05/20115299504775782.html. Retrieved 2011-05-31. 
  3. ^ a b c Pidd, Helen; Glaister, Dan; Smith, David; Cobain, Ian (19 May 2011). "The rise of Glencore, the biggest company you've never heard of". London: The Guardian. http://www.guardian.co.uk/business/2011/may/19/rise-of-glencore-commodities-company. Retrieved 25 May 2011. 
  4. ^ "Glencore's share of global commodity markets". London: The Telegraph. 15 April 2011. http://www.telegraph.co.uk/finance/commodities/8451991/Glencores-share-of-global-commodity-markets.html. Retrieved 31 May 2011. 
  5. ^ "Glencore's shares flat on first conditional trading day". BBC News. 19 May 2011. http://www.bbc.co.uk/news/business-13451081. Retrieved 25 May 2011. 
  6. ^ "Glencore jumps into FTSE 100". The Independent. 25 May 2011. http://www.bbc.co.uk/news/business-13451081. Retrieved 25 May 2011. 
  7. ^ Thomas, Denny (25 May 2011). "Glencore's Hong Kong shares down 2.8 pct on trading debut". Reuters. http://www.reuters.com/article/2011/05/25/glencore-hkdebut-idUSH9E7G501O20110525. Retrieved 24 May 2011. 
  8. ^ a b c "Swiss link undermines Xstrata's bid for WMC". ABC Radio. February 11, 2005. http://www.abc.net.au/am/content/2005/s1300651.htm. Retrieved 2006-10-22. 
  9. ^ a b Ammann, Daniel (2009). The King of Oil: The Secret Lives of Marc Rich. New York: St. Martin‘s Press. ISBN 0-312-57074-0. 
  10. ^ Leigh, David (16 September 2009). "Inside Trafigura: Accusations, sour deals and friends in high places". London: The Guardian. http://www.guardian.co.uk/world/2009/sep/16/inside-trafigura-pollution-conservatives. Retrieved 2009-09-17. 
  11. ^ a b c d e f g h i Onstad, Eric, Laura MacInnis and Quentin Webb, "The biggest company you never heard of", Reuters, February 25, 2011 7:52am EST. Retrieved 2011-02-28.
  12. ^ "Glencore's trading rivals", Reuters fact box, February 25, 2011 2:42am EST. Retrieved 2011-04-14.
  13. ^ "Glencore Buys Out Founder". New York Times. November 10, 1994. http://query.nytimes.com/gst/fullpage.html?res=9C03E1D6113EF933A25752C1A962958260. Retrieved 2006-10-22. 
  14. ^ Allen-Mills, Tony (June 17, 2008). "Congo sapped of riches as Denis menaces Boulevard Saint-Germain". The Australian. http://www.theaustralian.news.com.au/story/0,,23873480-643,00.html. Retrieved 2006-10-22. 
  15. ^ Pagnamenta, Robin, "Nikanor and Katanga Mining merge to create $3.3bn African giant", The [London] Times, November 7, 2007. Retrieved 2011-04-14.
  16. ^ "Glencore to run Brazil's Agrenco in restructuring", Reuters, May 27, 2009.
  17. ^ "Glencore flotation values company at about $61bn". BBC News. 4 May 2011. http://www.bbc.co.uk/news/business-13277267. Retrieved 17 June 2011. 
  18. ^ White, Garry (5 May 2011). "Glencore float will create five new billionaires". London: Daily Telegraph. http://www.telegraph.co.uk/finance/commodities/8493830/Glencore-float-will-create-five-new-billionaires.html. Retrieved 17 June 2011. 
  19. ^ "Retail investors stay away from Glencore's flotation". Evening Standard. 24 May 2011. http://www.thisislondon.co.uk/standard-business/article-23953129-retail-investors-stay-away-from-glencores-flotation.do. Retrieved 17 June 2011. 
  20. ^ "Glencore Agrees to Buy Xstrata for $62B in Shares". February 7, 2012. http://www.bloomberg.com/news/2012-02-07/glencore-agrees-to-buy-xstrata-for-62b-in-shares.html. 
  21. ^ This list may not be complete. Unless otherwise indicated, the source is: www.glencore.com, Worldwide Operationsdead link, accessed October 23, 2006. To access details, click on the percentages. Each link checked on April 18, 2011; searched Glencore site by name; if no search results, then labelled "No interest indicated"; some updates of info, also. New Worldwide Operations page is here; all operations are in chart.
  22. ^ Glencore ahead on XStrata - Independent - accessed January 8, 2010
  23. ^ a b c d "Secretive Swiss trader links City to Iraq oil scam". London: The Sunday Times. September 25, 2005. http://business.timesonline.co.uk/printFriendly/0,,2020-528-1795993-9077,00.html. Retrieved 2006-10-22. 
  24. ^ Cerrejon - About Us, accessed October 23, 2006
  25. ^ "ALUMINUM MERGER - Rusal, Sual, Glencore to create world leader". Canadian Mining Journal. October 15, 2006. http://www.canadianminingjournal.com/issues/ISArticle.asp?id=61137&issue=10152006. Retrieved 2006-10-23. 
  26. ^ "Tax evasion in Zambia: Five NGOs file an OECD complaint against Glencore International AG and First Quantum Minerals for violation of OECD guidelines". http://www.corporatejustice.org/tax-evasion-in-zambia-five-ngos.html. Retrieved 25 September 2011. 
  27. ^ Ford, Liz (15 April 2011). "Mining firm under fire over tax payments in Zambia". London: Guardian. http://www.guardian.co.uk/global-development/2011/apr/15/mining-firm-tax-payments-zambia. Retrieved 25 September 2011. 
  28. ^ "Paradis fiscal, enfer social" (in French). Télévision Suisse Romande. 29 June 2006. http://www.tsr.ch/tsr/index.html?siteSect=370501&sid=6802947. Retrieved 2006-10-22. 
  29. ^ John Sweeney (16 April 2012). "Panorama questions over Glencore mines". BBC News. http://www.bbc.co.uk/news/17702487. Retrieved 14 April 2012. 
  30. ^ Glencore - Zinc, Copper and Lead
  31. ^ Mineweb.com - The world's premier mining and mining investment website HOMEPAGE
  32. ^ "Bolivian troops seize key smelter". BBC News. February 9, 2007. http://news.bbc.co.uk/2/hi/business/6347947.stm. Retrieved 2009-02-07. 
  33. ^ "Glencore linked to acid waterfall in DR Congo". BBC News. April 16, 2012. http://www.bbc.co.uk/news/business-17726865. Retrieved 2012-04-16. 
  34. ^ http://blogs.wsj.com/corruption-currents/2012/05/09/glencore-accused-of-opaque-dealing-in-congo/?mod=google_news_blog
  35. ^ "Die Erben des Marc Rich" (in German). WochenZeitung. December 13, 2001. http://www.woz.ch/archiv/old/01/50/7366.html. Retrieved 2006-10-22. 
  36. ^ www.xstrata.com, List of non-executive directors, accessed 22 October 2006 Archived August 21, 2006 at the Wayback Machine
  37. ^ See also www.xstrata.com, Investor disclosure, accessed 22 October 2006
  38. ^ a b c Lesova, Polya, "Commodities giant Glencore readies landmark IPO: Listing may value firm at $60 billion, give it cash for acquisitions", MarketWatch, April 13, 2011 9:35 a.m. EDT. Retrieved 2011-04-13.
  39. ^ "Glencore ist größtes Privatunternehmen Europas" (in German). Handelsblatt. 16 August 2005. http://www.handelsblatt.com/pshb/fn/relhbi/sfn/cn_artikel_drucken/strucid/200012/pageid/201312/docid/944770/SH/0/depot/0/. Retrieved 2006-10-22. 
  40. ^ Spain, William, "5 risky stocks with big potential payoffs", MarketWatch, May 27, 2011, 12:01 a.m. EDT. Retrieved 2011-05-31.

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