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Glencore PLC Analysis: Insight Into This Leading Commodity Producing Firm – 2019 Edition

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Glencore

What is Glencore?

Glencore Plc is one of the largest commodity producing firms in the world. Its globally diversified portfolio consists of about 150 mining and metallurgic properties, oil production facilities and agricultural assets.

Glencore markets and supplies the commodities it produces to industrial buyers such as steelmakers, automobile manufacturers, power companies and food producers. It is an important link in the supply chain for products consumers use every day.

Sudbury Nickel Operations
Sudbury Nickel Operations – Image via Glencore

History of Glencore

Glencore began in 1974 when American, Marc Rich, founded the firm as Marc Rich and Co AG in the Swiss village of Zug.

Key Events in the History of Glencore

EventDateDescription
Acquisition1981Acquires Granaria, a Dutch grain trading company, which later becomes Glencore Agriculture.
Acquisitions1987
  • Acquires Peruvian mine and US smelter
  • Begins vertically integrated production of metals
  • Investment1990Firm acquires a stake in miner Xstrata (then known as Sudelektra AG).
    Name Change1993Rich’s colleagues execute a management buyout and rename the company Glencore (an acronym for Global Energy Commodity Resources).
    Acquisition1995Acquires Prodeco coal property in Colombia.
    Pardon2001US President Bill Clinton pardons Rich.
    New CEO2002Ivan Glasenberg is appointed the new CEO of Glencore.
    IPO2011Glencore raises about $11 billion in an IPO that values the company at close to $60 billion.
    Merger2013In 2012, Glencore and Xstrata agree to an all-share merger, which they complete in 2013.
    Attempted Merger2014Approaches larger rival Rio Tinto about a merger, but the talks fail to produce a deal.
    Market CorrectionAug 2015
  • Weak commodity prices cause Glencore shares to tumble below 159p (its IPO price was 530p)
  • First-half profit decline linked to weaker Chinese demand for commodities
  • RefinancingSept - Dec 2015
  • Glasenberg announces plan to cut Glencore’s $30 billion in debt down to about $20 billion
  • Plan involves issuing new shares, selling assets and closing mines
  • Shares move higher in response to plan’s implementation, but still remain far below IPO price
  • Tender Offer2016Announces plan to purchase up to $1 billion of outstanding Notes from investors.
    Investment/Disposition2017
  • Acquires a stake in the shares of Volcan Compania Minera
  • Disposes of stake in HG Storage International
  • EarningsFeb 2018
  • Announces a 44% rise in earnings due to higher commodity prices and cost reductions
  • Declares a higher than expected dividend
  • Company says it posted its strongest year on record
  • What Are the Glencore Business Segments?

    Glencore operates a vertically integrated business. This means that the company handles all stages of the commodity lifecycle including production, processing, marketing and distribution.

    The company operates in four distinct business segments, each of which produces and/or markets a variety of commodities:

    SegmentCommodityBusiness OperationOperating Region(s)
    Metals and Minerals
    Mineral Icon
    CopperMining and processingAfrica, Australia and South America
    Sourcing and recyclingNorth America and Asia
    Smelting and refiningWorldwide
    CobaltCopper mining byproductDemocratic Republic of Congo (DRC)
    Nickel mining byproductAustralia and Canada
    Recycling (e.g. batteries)Worldwide
    NickelProductionAustralia, Canada and Europe
    Zinc and LeadMining and processingAustralia, South America, Kazakhstan and Canada
    Smelting and refiningAustralia, Canada, Spain, Italy, Germany, the United Kingdom and Kazakhstan
    Sourcing and recyclingEurope and North America
    ChromeMining, processing and smeltingSouth Africa
    PlatinumMining and processingSouth Africa
    VanadiumMining and smeltingSouth Africa
    CarbonChar Technologies – produces electrode paste and char used in the production of ferroalloysSouth Africa
    Other MetalsProcesses and sells products from a range of third-party aluminium and alumina producersWorldwide
    Physically markets iron ore from third-party producers to customers worldwideCustomer base mostly in Asia
    Energy
    Fuel Icon
    CoalProducer and exporter of seaborne traded thermal and coking coalAustralia, South Africa and Colombia
    OilMarkets crude oil and oil products
  • Products sourced worldwide from marketing offices in New York, London and Singapore
  • Markets natural gas mainly in Europe
  • Agriculture
    Wheat Icon
    GrainsWheat (milling, durum, noodle and feed wheats)
  • Sources grains
  • Supplies them to customers around the world
  • Corn (GMO and non-GMO)
    Barley
    Sorghum
    Canola and OilseedVegetable OilsSupplies customers worldwide
    Protein Meal supplierEuropean Union, Australia, New Zealand and south-east Asia
    Biodiesel processingEurope and Argentina
    PulsesDirect origination and handling of:
    1. Dry field peas
    2. Chickpeas
    3. Lentils
    4. Edible beans
    5. Lupins
    Worldwide
    SugarMarketingNetworks in major exporting regions of Thailand and Brazil
    CottonSourcing and distributionOrigination offices in the United States, Australia, Brazil, India and west Africa
    Marketing
    Processing Goods Icon
    Physical commodities (listed above)
  • Physically source commodities
  • Transport them by sea, rail and truck
  • Store
  • Process
  • Deliver

  • Worldwide
    Prodeco Coal Train
    Prodeco Coal Train – Image via Glencore

    Who Are the Glencore Board Members?

    The Executive Board of Glencore consists of nine individuals who oversee the direction of the company:

    NamePositionCommittee Membership
    Anthony Hayward
    Anthony Hayward
    Non-Executive ChairmanHealth, Safety, Environment and Communities
    Ivan Glasenberg
    Ivan Glasenberg
    Chief Executive OfficerHealth, Safety, Environment and Communities
    Peter Coates AO
    Peter Coates AO
    Non-Executive DirectorHealth, Safety, Environment and Communities (Chairman)
    Leonhard Fischer
    Leonhard Fischer
    Independent Non-Executive Director
  • Audit (Chairman)
  • Nomination
  • Remuneration
  • Martin Gilbert
    Martin Gilbert
    Independent Non-Executive Director
  • Remuneration
  • Audit

  • John Mack
    John Mack
    Independent Non-Executive Director
  • Remuneration (Chairman)
  • Nomination

  • Patrice Merrin
    Patrice Merrin
    Independent Non-Executive DirectorHealth, Safety, Environment and Communities
    Gill Marcus
    Gill Marcus
    Independent Non-Executive Director
  • Audit
  • Nomination

  • Images sourced from: http://www.glencore.com/who-we-are/our-leadership

    Glencore's Main Peers and Competitors

    CompanyCurrent PriceDescriptionExchange
    Anglo American Plc.
    Anglo American Plc Logo
    A globally diversified mining company based in South AfricaLondon Stock Exchange (LSE)
    Archer Daniels Midland

    Archer Daniels Midland Logo
    Operates facilities that convert agricultural commodities into food, animal feed and energyNew York Stock Exchange (NYSE)
    BHP Billiton Ltd.
    BHP Logo
    Australian company that acquires, develops and markets natural resources worldwideNew York Stock Exchange (NYSE)
    Bunge Limited
    Bunge Limited Logo
    Processes oilseeds, wheat, corn and sugarcaneNew York Stock Exchange (NYSE)
    Rio Tinto Plc

    UK metals company that mines, processes and markets mineral resourcesNew York Stock Exchange (NYSE)
    Vale SA
    Vale SA Logo
    Brazilian company engaged in the production and sale of iron ore and iron ore pallets for steelmakingNew York Stock Exchange (NYSE)

    How Can You Invest in Glencore?

    The ordinary shares of Glencore trade on two exchanges: the London Stock Exchange and the Johannesburg Stock Exchange.

    Glencore Shareholder Facts

    CateogoryFact
    SymbolLondon Stock Exchange: GLEN
    Johannesburg Stock Exchange: GLN
    ISIN NumberJE00B4T3BW64
    Share Price
    Shares Outstanding14.42 billion
    Market Capitalization(Multiply share price by shares outstanding)
    Official Accounting CurrencyUS Dollars
    Latest Financial Resultshttp://www.glencore.com/investors/reports-results
    How Can You Purchase Shares?
  • Financial Adviser
  • Stockbroker
  • Bank or building society

  • South African shareholders must have a share dealing account with a CSDP or broker.
    Can Investors Buy Ordinary Shares in the United States?No
    When Does Glencore Pay Distributions?Glencore expects to pay distributions semi-annually, usually in May/June and again in September/October

    Glencore, through its subsidiaries, also issues bonds from time to time. These debt instruments are privately placed to qualified institutional buyers consistent with SEC Rule 144A.7

    Outstanding Bonds of Glencore

    CurrencyValueCouponMaturity
    USD500m2.125%Apr 2018
    USD250mFloating Rate Note (FRN)Apr 2018
    USD500mFRNJan 2019
    USD1.5bn2.50%Jan 2019
    USD1.0bn3.125%Apr 2019
    USD1.0bn2.875%Apr 2020
    USD1.0bn4.95%Nov 2021
    USD1.0bn4.00%Oct 2022
    USD500m3.00%Oct 2022
    USD1.5bn4.125%May 2023
    USD1.0bn4.625%Apr 2024
    USD500m4.00%Apr 2025
    USD1.0bn4.00%Mar 2027
    USD500m3.875%Oct 2027
    USD500m6.90%Nov 2037
    USD500m6.00%Nov 2041
    USD500m5.30%Oct 2042

    The pricing of Glencore’s debt instruments is determined by both market conditions and the company’s credit rating:

    Glencore Credit Rating

    Rating AgencyLong-Term RatingShort-Term RatingOutlook
    Standard & Poor'sBBBA-2Positive
    Moody'sBaa2P-2Stable
    Lomas Bayas Copper Mine
    Lomas Bayas Copper Mine – Image via Glencore

    How Can Investors Learn More About Glencore?

    Investors interested in learning more about the fundamentals that drive Glencore’s business, share price and bond prices may want to read the research reports of analysts who cover the company.

    Investment FirmAnalyst
    Clarksons Platou SecuritiesJeremy Sussman
    Credit SuisseJames Gurry
    Deutsche Bank SecuritiesLiam Fitzpatrick
    Exane BNP ParibasSylvain Brunet
    Goldman SachsEugene King
    HSBCDavid Pleming
    InvestecHunter Hillcoat
    Jefferies & CoChristopher La Femina
    JP Morgan CazenoveFraser Jamieson
    Liberum CapitalBen Davis
    MacquarieAlon Olsha
    Morgan StanleyMenno Sanderse
    RBC Capital MarketsTyler Broda
    RedburnSimon Toyne
    Renaissance CapitalJohann Pretorius
    Société GénéraleSergey Donskoy
    Standard BankTim Clark
    UBSMyles Allsop

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