Glencore is gaining ground on its trust issues

LONDON, Feb 15 (Reuters Breakingviews) - Glencore (GLEN.L) is slowly shedding its image as the miner everybody loves to hate. A $1.5 billion provision suggests Chief Executive Gary Nagle may settle long-running corruption allegations for less than feared. He’s also picked a good moment to pull back from Russia. But coal remains the curate’s egg in his nest.

The post-pandemic commodity boom has arrived at the perfect time for Nagle, who took over from Glencore patriarch and 9% shareholder Ivan Glasenberg last year. On Tuesday, the Switzerland-based firm reported a record $21 billion of EBITDA for 2021, almost double the previous year. Importantly, shareholders are giving more credit to its eclectic mix of assets, stretching from coal – basically, investor kryptonite – to green-economy metals like copper and cobalt. Since August, Glencore’s enterprise value has risen from 7.5 times trailing EBITDA to more than 9 times.

With coal generating $5.2 billion of EBITDA last year and Nagle flagging the potential for double that in 2022, it’s possible to see why shareholders are holding their noses and ignoring the cries of activist investors like Bluebell to ditch the black stuff more quickly. Soaring coal prices, partly caused by a lack of new mines, help vindicate Nagle’s energy transition strategy to use coal cash flows to ramp up copper and cobalt investment. His plan is to gradually shut down coal mines in order to hit net zero carbon dioxide emissions by 2050.

Walking such a tightrope between climate saint and sinner means credibility is key. That’s why settling differences with U.S. prosecutors over graft claims in the Democratic Republic of Congo, Nigeria and Venezuela matter. Prior to Glasenberg’s departure investors worried the hit from falling foul of the Foreign Corrupt Practices Act could be multiples of what Glencore just set aside. Selling out of its oil investment with Russia’s Russneft (RNFT.MM) for an undisclosed sum may signal a willingness to rein in its go-anywhere instincts.

The catch is that investors’ view on coal can change quickly. Anglo American (AAL.L) spinoff Thungela Resources’ (TGAJ.J) desire to increase coal output has highlighted the risk of simply selling mines, bolstering Nagle’s argument. But lingering in coal will look worse as voters and politicians fret more about climate change. Nor has Glencore actually had to start shutting down operations. Increasingly, Nagle may have to choose which tribe of investors to disappoint.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)


- Glencore said on Feb. 15 that it was setting aside $1.5 billion for settlements of investigations into bribery and market manipulation that have weighed on its valuation for more than three years.

- The probes by the United States, Britain and Brazil relate to alleged corruption at its operations in the Democratic Republic of Congo, Venezuela and Nigeria. Glencore said it expected resolution this year. Separate Dutch and Swiss investigations remain outstanding.

- The Switzerland-based commodity giant reported a record $21.3 billion of EBITDA for 2021, from $11.6 billion the year before.

- Glencore shares were up 2.9% at 434 pence by 0915 GMT on Feb. 15.

Editing by George Hay and Oliver Taslic

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Ed is Associate Editor of Reuters Breakingviews, based in London. He joined the London Breakingviews team in 2018 as Africa columnist. Before that, he was Reuters sub-Saharan Africa bureau chief, based in Johannesburg. During two decades at Reuters, Ed has reported from three continents, with postings in London, Edinburgh, Phnom Penh, Bangkok and Johannesburg. Along the way, he has covered everything from the dotcom bubble to the death of Nelson Mandela and fall of Robert Mugabe. He holds a degree in Classics from Cambridge University.