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Glencore board forms defence committee as DoJ subpoena looms

Jon Yeomans
Workers at Katanga in the DRC. The FTSE 100 company has formed a board committee to respond to a DoJ investigation - Bloomberg

The board of mining behemoth Glencore has formed a separate committee to handle a potentially highly damaging probe into its activities by the US Department of Justice.

The FTSE 100 company’s chairman Tony Hayward will lead the company’s response to the DoJ’s subpoena for documents, alongside two of Glencore’s independent non-executive directors, Leonhard Fischer and Patrice Merrin.

Mr Hayward, who was chief executive of BP at the time of the devastating Deepwater Horizon oil spill in 2010, said that “Glencore takes ethics and compliance seriously”. “The company will co-operate with the DOJ, while continuing to focus on our business and seeking to maximise the value we create for our diverse stakeholders in a responsible and transparent manner,” he said.

Around £5bn was wiped off Glencore’s market value at the start of the month when it revealed the DoJ had served a subpoena under US laws relating to corruption and money laundering. The US wants to see documents relating to Glencore’s dealings in Nigeria, the Democratic Republic of Congo and Venezuela dating back to 2007. Experts have warned a lengthy DoJ investigation could be highly disruptive and result in a multibillion dollar fine.

Switzerland-based Glencore, which has a market capitalisation of £48bn, is one of the world’s biggest traders of commodities, including metals, oil and grains. It also mines materials such as copper and coal across the globe, and has a reputation for operating in some of the world’s poorest countries, such as the DRC.

Markets Hub - Glencore

Its operations in the DRC have drawn scrutiny, in particular its dealings with Israeli businessman Dan Gertler, a former partner in two of its copper mines there. Mr Gertler is now under US sanctions for his role in alleged “corrupt mining and oil deals”.

Glencore had ceased paying Mr Gertler royalties he was owed after the sanctions were imposed last year, but raised eyebrows last month when it announced it would resume these payments in euros, not dollars, to avoid breaking US laws. The company said it had consulted with Swiss and US authorities prior to the move. Both Glencore and Mr Gertler have denied any wrongdoing.

The miner, led since 2002 by billionaire Ivan Glasenberg, has also skated around US sanctions against Russia: in 2016 it engineered a deal to help the Qatari Investment Authority take a large stake in oil giant Rosneft, which was put on a blacklist by America after Russia’s annexation of Crimea.

Ivan Glasenberg, chief executive of Glencore and one of its biggest shareholders

Nonetheless Glencore’s profits and revenues have soared in the last two years as demand for its metals has surged. Following news of the DoJ subpoena, it launched a £755m share buyback.

Ben Davis of Liberum, the only City broker with a “sell” recommendation on the stock, said the subpoena would be “hanging over them for some time to come”. “I don’t think this will be such a distraction for the day-to-day business, but for any M&A ambitions using shares, they have probably been put on hold.”

Hunter Hilcoat of Investec said: “The DoJ subpoena will be a distraction, perhaps for a number of years, but not one that I expect to have a meaningful impact on the company. In fact, setting up an independent committee to some extent insulates the business from the investigation.”

Glencore’s share price was down 3.6pc in afternoon trade at 314p, an 11-month low.