Glencore earmarks $1.5 billion for probes amid record profit

Mutanda, the world’s largest cobalt mine, is responsible for a fifth of global output. (Image courtesy of Glencore.)

Mining and commodities trader Glencore (LON: GLEN) will set aside $1.5 billion to cover a series of probes into bribery and market manipulation, which it said it expects to resolve before the end of the year.

The amount, chief executive Gary Nagle told reporters on a call, is Glencore’s “best estimate” of what it believes the settlement amount will be.

News of the provision came as the Swiss company posted its highest-ever profit of $21.3 billion, almost double a year earlier thanks soaring commodity prices and said it would return almost $4 billion to shareholders.

Glencore’s earnings on metals alone ticked in at $12 billion, a 65% increase from a year earlier, while earnings in its energy unit rose fivefold to $5.6 billion.

Over the past four years, the company has been under investigation by the US Department of Justice (DOJ), the UK Serious Fraud Office (SFO) and Brazilian authorities for alleged money laundering and corruption. 

Glencore disclosed in 2018 that the US DOJ had requested documents related to the group’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela as part of a probe into possible corruption and money laundering.

Brazil also kicked off an investigation into Glencore and trading groups Vitol and Trafigura over alleged bribery of employees at state-run oil company Petrobras.

A year later, the UK’s SFO confirmed it was investigating suspicions of bribery by both the company and its staff.

The Swiss Attorney General followed suit, saying the probe was the result of a wide-ranging investigation by law enforcement agencies opened in early 2020.

“Not happy”

The full-year results are the first under new CEO Gary Nagle, who last year succeeded long-time boss Ivan Glasenberg

Speaking to reporters, he said he was “not happy” with the $1.5 billion charge but the noted company recognized there had been historic cases of “misconduct”.

“We have worked very hard to correct that,” he said in a call conference. “We are changing the culture. We want to complete these investigations, put a line under that and move forward.”

RBC Capital Markets analyst Tyler Broda said in a note to investors that quantifying the main investigations will likely de-risk the company from the “unknown known”, which has been an overhang for the company for years.

Glencore, which is still subject to investigations from Swiss and Dutch authorities, said the timing of those probes remains uncertain but would expect any possible resolution to avoid duplicative penalties for the same conduct.

The world’s biggest commodity trader is the first of the top global miners to report full-year earnings. The world’s largest mining company, BHP (ASX: BHP), just reported strong profits for its half-year.

The mining industry has been one of the biggest winners as the global economy rebounds from the pandemic, fuelled by trillions of dollars of government stimulus.

Those tailwinds have seen Glencore has climb to the highest price in almost a decade in recent weeks, jumping almost 50% over the past year.

Shares in the company jumped as much as 4.6% in early trading and were changing hands last at  £430, or 1.87% higher than Monday’s close.

(With files from Bloomberg)