|Bid||180.58 x 0|
|Ask||180.58 x 0|
|Day's Range||173.52 - 181.10|
|52 Week Range||1.41 - 2,334.50|
|Beta (5Y Monthly)||1.73|
|PE Ratio (TTM)||N/A|
|Earnings Date||Aug 06, 2020|
|Forward Dividend & Yield||0.15 (12.82%)|
|Ex-Dividend Date||Sep 03, 2020|
|1y Target Est||4.95|
(Bloomberg) -- Glencore Plc said trading profit will be at the top end of its target this year as the commodities giant joins big oil companies enjoying a bonanza from volatile price swings.The company made nearly $1 billion in earnings before interest and taxes in oil trading in the first six months of 2020, similar to what it made in the whole of 2019, Bloomberg reported last week, citing people familiar with the matter.Oil trading profits have bailed out the energy sector so far this year. Royal Dutch Shell Plc said Thursday that the last quarter was the best on record for its trading business, while French rival Total SE said it was able to exploit extreme price volatility during April’s record supply glut.“Our marketing business has also risen to the challenge, delivering robust counter-cyclical earnings,” Glencore Chief Executive Officer Ivan Glasenberg said in a statement Friday. “A very strong first-half performance allows us to now raise our full year 2020 EBIT expectations to the top end of our $2.2-$3.2 billion guidance range.”In March and April, as oil prices plunged, traders were able to buy and store huge amounts of cheap crude before selling it on later for higher prices, a trade known in industry jargon as a contango play. Still, putting more money into these trades led to an increase in net debt, Glencore said.The trading profit will be a relief for Glencore. Once again, the miner and trader has missed out on an iron rally that has provided bumper earnings for its biggest rivals, such as Rio Tinto Plc and Anglo American Plc. Glencore’s mining profits are driven by coal and copper, but it has no exposure to the steelmaking ingredient.While copper prices have been resilient through the pandemic, thermal coal has crashed, falling to the lowest levels since the commodity crisis five years ago.Glencore responded today by saying it would mine less of the fuel, cutting its target for the year to about 114 million tons, a 14% reduction on its earlier goal. The reductions will come from its Colombian mines, which are struggling because of weak demand for the product in Europe, as well as some lower production from its Australian business. The company said it wants to keep its Prodeco mine in Colombia closed for now.Glencore is the world’s biggest shipper of the fuel and has previously taken steps to defend the market. In 2015, when prices were crashing, the company made big cuts to its output, ultimately helping the fuel rally as demand recovered.The company has a long tradition of cutting output to support prices, having held back production in commodities such as zinc and cobalt in recent years after prices weakened.Glencore’s shares rose 1.4% to 179.48 pence by 9:24 a.m. in London. The stock has lost nearly a quarter of its value this year.(Updates with shares in last paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Glencore <GLEN.L> expects its trading arm to hit the top end of its operating income target this year, the commodities giant said on Friday, after it took advantage of oil market gyrations caused by the COVID-19 pandemic. A large trading division makes the Switzerland-based group more resilient than most miners during commodity downturns. The trading arms of oil majors such as Royal Dutch Shell <RDSa.L>, Total <TOTF.PA> and Eni <ENI.MI> have all reported bumper profits by storing oil when prices plunged earlier this year and then selling later at higher prices, profiting from what is known as a contango market structure.
Moody's Investors Service (Moody's) has today downgraded RussNeft PJSC's (RussNeft) corporate family rating (CFR) to Caa2 from Caa1 and probability of default rating (PDR) to Caa3-PD from Caa1-PD. Today's downgrade of RussNeft's PDR to Caa3-PD reflects a significantly increased likelihood of default, including a potential debt restructuring, over the next 12-18 months on the company's financial debt represented mostly by a bank loan of total outstanding $1.17 billion as of year-end 2019, because of the company's persistently very weak liquidity, which has been amplified by the severe drop in oil prices and aggressive liquidity management.
(Bloomberg Opinion) -- Sharp swings in the crude price have been an unmitigated pain for the oil industry, right? Not entirely. The silver lining has been a lucrative environment for the oil majors’ trading operations. This was on stark display in the second-quarter performance of Royal Dutch Shell Plc. But it creates a challenge for investors. How do you value this unpredictable and opaque source of income?Shell warned last month that its three-month earnings, released Thursday, would include a colossal impairment charge reflecting the impact of the pandemic on energy demand and prices. That writedown came in at $17 billion after tax. Strip this and other one-offs out of the equation, and Shell made a $638 million net profit, confounding predictions of an underlying loss.Oil and gas prices fell but this was offset by aggressive cost and capital-expenditure reductions plus a “very strong” trading result. Shell doesn't gather trading profits across divisions into a single number. But earnings from refining and trading in its oil products unit were $1.5 billion in the second quarter. That compares with just $52 million in the same period last year. That’s pretty indicative. The result reflects the fact that Shell has the physical resources to exploit a disconnect between cheap spot prices and more expensive future oil prices. It has the storage capacity to stockpile crude and capitalize on this arbitrage, as Bloomberg News’s Javier Blas explains here.Having access to a wealth of oil-market data should give Shell a nose for when trading counterparties can't afford to negotiate too hard, and a feeling for the state of supply in all corners of the market. It’s that kind of expertise that lies behind the success of trading houses such as Glencore Plc. It translates into the ability to be a price maker in trades, rather than a price taker. Shell’s results suggest it has more of this capability than the market envisaged.How beneficial is this for shareholders? They don’t invest in Shell because it’s a trader. Clearly, it made a difference this quarter. Shell’s free cash flow, adjusting for a big working capital swing, was about $4 billion. The group’s quarterly commitments for shareholder payouts and debt interest payments were about $2.5 billion, after Shell cut its dividend in April. There’s some headroom there in case Brent crude slips back below $40 a barrel again. But the volatile trading result makes it harder for investors to believe that this reflects a new steady-state performance.Suppose trading income were to revert to more normal levels this year, could cost and capex cuts pick up the slack? Probably not by much. Shell’s underlying operating expenses in the quarter were 20% lower year-on-year. That comes after a multi-year efficiency program. Cash capex fell by a third. Much more and Shell surely risks cutting into bone, and falling behind in investing in the transition to cleaner energy.Shell has proved it can make a profit even in this environment. But shareholders can’t put much value on the trading arm without more clarity on the moving parts. The shares were little changed after its surprisingly good result. Small wonder investors aren’t betting this will endure.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- In March and April, as oil prices plunged to their lowest in a generation, Norwegian energy giant Equinor ASA was busy doing the opposite of what oil companies usually do: pumping as much crude as possible underground into giant caverns on the nation’s North Sea coast.Equinor also filled oil tankers with crude, turning them into floating storage facilities, and put even more barrels into onshore tanks elsewhere. Its traders were trying to soften the blow of rock-bottom prices by buying cheap crude, storing it, and simultaneously selling it on the forward market at higher prices.The trade, known in industry jargon as a contango play, combined with other oil trading activity delivered a record of about $1 billion in pre-tax adjusted earnings in a single quarter. And the Norwegian oil company wasn’t alone: it’s a pattern likely to be repeated throughout the industry from oil majors such as Royal Dutch Shell Plc to independent commodity trading houses like Glencore Plc.The price difference between a Brent contract for immediate delivery and the six-month forward contract -- a key measure of the contango -- plunged to a record of nearly -$14 a barrel in early April, surpassing the contango witnessed during the 2008-09 financial crisis.Equinor on Friday said that its midstream business line, which includes trading, made adjusted profit before taxes of $1.16 billion in the second quarter, an increase of $951 million from a year earlier. “The increase was mainly due to contango market during the quarter and good results from liquids trading,” the company said.The key to the contango play is access to a place to park millions of barrels of crude, perhaps for as long as a year. And Equinor had plenty. “We have storage at Mongstad,” Eldar Saetre, the company’s boss, said in an interview, referring to the underground caverns able to hold almost 9.5 million barrels of crude under the country’s west coast.“And we have storage capacity that we rent in Korea, we’ve done that for many years, and some other storages here and there,” he said. As onshore storage ran out, oil companies turned to tankers. “We have a lot of floating storage for this purpose,” Saetre added. “We have increased capacity for this purpose, increasing our shipping capacity for storage use.”Others in the oil industry were doing the same. Although better known for their oil fields, refineries and filling stations, Shell, BP Plc and Total SA also run huge in-house oil trading businesses that dwarf independent commodity trading houses.The three companies are expected to deliver strong oil trading results when they report their quarterly earnings over the next two weeks, according to people familiar with their business. Some of their so-called trading books made significantly more money in the first half of 2020 than they did in the entirety of 2019, the same people said, asking not to be named because the information isn’t public.Shell in particular made huge amounts of money on its jet-fuel book, one person familiar with the matter said.The trading units of Shell, BP and Total handle more than 25 million barrels a day of crude and refined products -- equal to a quarter of global consumption. The trio don’t disclose their trading results separately, and many investors consider the operations essentially black boxes. But in the past they have said that contango plays are extremely profitable, able to give a $500 million boost in a single quarter to their trading businesses.The three oil companies declined to comment.Few other publicly-listed oil companies trade at the scale of the European oil majors and Equinor, although Eni SpA and Lukoil PJSC also have trading desks. While the extra profits from trading are unlikely to offset much larger losses of revenue from lower oil prices, they could help the three majors to weather the crisis and, perhaps more importantly, beat analysts’ estimates.The independent traders also enjoyed a bumper period. Glencore, which earlier this year hired the world’s largest oil tanker to play the contango, made nearly $1 billion in earnings before interest and taxes in oil trading in the first six months of 2020, similar to what the company made in the whole of 2019, according to people familiar with the matter.Glencore, which declined to comment, reports results in early August.Other independent oil traders, including Trafigura Group, Mercuria Energy Group Ltd and Gunvor Group, have already announced bumper trading results. Mercuria, one of the top-5 independent oil traders, told bankers it enjoyed record profits for the first six months.Likewise, Gunvor told employees it made bumper profits thanks to its tankers, whose value surged as companies rushed to hire the vessels for storage.“Given our sizeable fleet of ships under management, this allowed for substantial earnings for the quarter,” said billionaire Torbjorn Tornqvist, the co-founder and head of Gunvor.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Elon Musk may help sanctioned Israeli billionaire Dan Gertler get a little richer.Tesla Inc., the company Musk runs, struck a deal last month with Glencore Plc to buy as much as 6,000 tons of cobalt annually for use in the rechargeable batteries that power its electric vehicles. Glencore, in turn, is obligated to pay Gertler about 2.5% of sales from its mines in the Democratic Republic of Congo – royalty rights he acquired from state-owned miner Gecamines.What makes the arrangement eye-catching is that Gertler has been blacklisted from the U.S. financial system since December 2017. Now he stands to indirectly benefit from an American company’s payments, if only by a few million dollars a year, since most of the cobalt Tesla is buying will come from Glencore’s Congolese mines, according to people familiar with the matter.Tesla has said it aims to eliminate cobalt from its batteries to reduce costs. That would also remove reputational hazards associated with sourcing minerals from Congo, including human rights challenges posed by artisanal mining, which provides income for millions but where fatalities and child labor are common. While Glencore assures buyers that no hand-dug cobalt is treated at its mechanized mines, the contract signals that the metal remains key to Tesla’s expansion over the next few years, even at the price of exposing itself to another risk in the central African nation: corruption.“Buying cobalt from Glencore’s Congo projects doesn’t only raise ethical issues, it even creates legal risks for U.S. companies like Tesla since part of the money paid subsequently goes to a sanctioned entity,” said Elisabeth Caesens, director of Brussels-based transparency group Resource Matters, who has studied the Congolese mining industry for more than a decade. “Has it consulted the U.S. Treasury ahead of signing the deal about any precautions it should take under U.S. law about these payments to Gertler?”Tesla didn’t respond to emailed questions, and Glencore and Gertler both declined to comment. A spokesperson for the Treasury Department wouldn’t discuss the Tesla contract beyond saying that it “strongly encourages” U.S. companies to develop a risk-based approach to sanctions compliance.U.S. companies are barred from doing business with sanctioned entities, such as Ventora Development Sasu, the Gertler company that receives royalties from Glencore’s mines in Congo. But Tesla’s contract is with Glencore, which is based in Switzerland.Sanctions experts offered differing views of the legal risk for a company in Tesla’s situation, with some saying the arrangement probably doesn’t run afoul of the rules and the prospect of a U.S. enforcement action seems remote. Others said they thought Treasury might take a harder line.In sanctioning Gertler, the U.S. said he had used his friendship with former President Joseph Kabila to act as a middleman for multinational companies to acquire mining operations in Congo and had profited from “opaque and corrupt” deals – allegations Gertler has denied. Earlier this month Bloomberg News reported on financial transactions among a network of companies and individuals that emerged in Congo largely after the sanctions were imposed and that raise questions about whether they somehow enabled Gertler to continue doing business there. Gertler’s lawyers said he didn’t have any business dealings with, or even know, most of the individuals and denied he was engaged in sanctions evasion.Almost three-quarters of the world’s cobalt comes from Congo, where Glencore owns two of the largest mines, and demand is forecast to surge in coming years, driven by electric-vehicle sales.Direct deals between miners and auto manufacturers are rare. Glencore, the world’s biggest producer of cobalt, has other long-term contracts with non-U.S. companies in the middle of the battery supply chain, including Belgium’s Umicore SA, South Korea’s Samsung SDI Co. and China’s GEM Co. Some U.S. companies, including Apple Inc., source cobalt products from these suppliers, according to reports published last year.Glencore halted royalties to Gertler in response to the sanctions but resumed paying in euros in mid-2018 to resolve a lawsuit filed by the businessman. On the day Glencore announced its decision, the U.S. designated an additional 14 companies controlled by Gertler, including Ventora.At the time, Glencore said it had discussed the matter with U.S. and Swiss authorities but declined to confirm whether Treasury approved the decision. Meeting contractual obligations to Gertler was the company’s “only viable option to avoid the material risk of seizure” of its mines, the company said two years ago.Less than three weeks after Glencore restarted paying royalties to Gertler, the U.S. Justice Department subpoenaed the company to produce documents relating to possible corruption in Congo, Nigeria and Venezuela. Authorities in the U.K. and Switzerland also have opened investigations. Glencore has said the Swiss probe concerns the company’s alleged “failure to have the organizational measures in place to prevent alleged corruption in” Congo, and that it’s cooperating with authorities in all three countries.It is unclear to what extent the investigations may focus on Glencore’s relationship with Gertler.Gertler’s rights to royalties from two copper and cobalt mines in Congo are his only known remaining financial ties to the world’s biggest commodity trader. After a decade as joint venture partners, Glencore bought out Gertler’s minority stakes in both projects in early 2017.Of Glencore’s Congolese assets, only one, Kamoto Copper Co., is currently operating. On track to become the world’s largest cobalt mine, it will be the source of most of the metal Tesla buys, at least until Glencore’s second site reopens.While Gertler’s ownership of the Kamoto royalties was known, how much he paid for them hasn’t previously been reported. Gertler obtained the rights to 2.5% of Kamoto’s net sales in May 2013 in exchange for a $150 million reduction in debt owed to one of his companies by Gecamines, Gertler’s lawyers wrote in a Feb. 3 letter to Bloomberg News in response to questions about the deal.In January 2015, Gecamines decided not to exercise an option to buy back the rights and instructed Kamoto to assign the royalties permanently to Gertler, according to his lawyers and a copy of the contract. Gecamines, which didn’t reply to questions, still owns 25% of the mine.Soon after the royalties were transferred, Kamoto advanced $54.7 million to Gertler’s company, and then shut the mine for two years to upgrade equipment. The advances were offset by the end of last year, and Kamoto was supposed to resume royalty payments to Gertler early this year, according to a report published in February by the Glencore subsidiary that controls the mine.Gertler also benefited from the settlement two years ago of a dispute between Glencore and Gecamines that arose after the state miner threatened to dissolve Kamoto over its debt levels. As well as Glencore writing off billions of dollars of loans, Kamoto waived rights to compensation for deposits it had ceded to Gecamines by holding back royalties and dividends starting in 2019. Since the royalties had been transferred to Gertler, he stands to earn them uninterrupted until Kamoto is depleted.Gertler could reap far more than he paid for the rights. In the lawsuit he initiated in 2018 after Glencore paused the flow of royalties, Gertler said they were worth $2.3 billion – about 15 times what he agreed to buy them for.Glencore’s goal is for Kamoto to produce an average of 300,000 tons of copper and 30,000 tons of cobalt each year from 2022 until the end of the mine’s life, expected to run for more than 20 years, according to company statements. Last year Kamoto generated $1.39 billion in revenue on output of more than 230,000 tons of copper and 17,000 tons of cobalt.At the average price over the past year, it would cost Tesla about $191 million to buy 6,000 tons of cobalt, putting Gertler’s annual royalties from the contract at between $4 million and $5 million. For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Daniel Mate, the billionaire metals trader and Glencore Plc executive, is retiring from the company and handing over trading of zinc and lead to Nick Popovic, according to people familiar with the matter.While the transition is expected to last some time, Mate, who is Glencore’s fifth-largest shareholder, has already handed over most of his responsibilities, said the people, who asked not to be identified ahead of an official announcement. Last week, Mate resigned from the board of Volcan Cia Minera SAA, a Latin American mining group in which Glencore has a big stake, and was replaced by Popovic, according to a regulatory filing.The departure of Mate, who has worked for 32 years at Glencore, comes amid a change of guard at the commodities trading house. Several of the traders who overnight became billionaires thanks to the company’s initial public offering in 2011 have already left Glencore in the past two years. They include former head of copper trading Telis Mistakidis, head of oil Alex Beard and head of agriculture Chris Mahoney.Among those that remained are Tor Peterson, head of coal trading, Mate himself, and Ivan Glasenberg, the company’s chief executive officer. In December 2019, Glasenberg said that the retirement of the remaining managers of his era should happen during 2020, as a prelude for his own departure.“There are not many of us old guys left,” said Glasenberg at the time.A Glencore spokesman declined to comment.Nikola Popovic, known in the industry as Nick, was until now the head of Glencore’s unit in Kazakhstan.Mate, a Spaniard in his late fifties, controls a 3.41% stake in Glencore, valued at current prices at just over $1 billion, according to data compiled by Bloomberg. At the time of Glencore’s IPO, his was one of the biggest fortunes in Spain. However, his wealth has diminished as the company’s share price plunged from 530 pence in 2011 to 180 pence now. Only Glasenberg controls a larger stake among the top executives.The passing of the baton at Glencore is a significant moment for the commodities industry. The firm is the world’s largest commodity trader, dominating transactions in most industrial metals, including copper, zinc and aluminum.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The Mt Arthur coal mine in Australia is one of the world’s best. It’s got plenty of reserves and the low-cost supplies produced there are easily shipped to Southeast Asia, where there’s insatiable appetite for the fuel.Yet owner BHP Group has a problem: It’s struggling to find a buyer willing to pay the right price.The world’s biggest mining company’s unsuccessful effort over the past year to offload the asset highlights the predicament producers are in. To bow to mounting investor pressure to exit the most polluting fuel, BHP may need to sell a profitable mine for much less than it believes it’s worth.Activists have for years said that miners could face a cliff-edge moment by holding onto assets for too long -- and that now seems to be happening in thermal coal. While the mines generate plenty of cash and will have customers for years to come, investors increasingly don’t want to hold shares in companies digging the fuel, which accounts for about 30% of carbon emissions.What’s happening in coal may be a warning to other mining and oil and gas companies about how quickly assets can drop in value as investors rally behind the Paris climate accord. It also presents a risk for resource companies that invest in projects based on the coming decades, rather than years.Coal-asset values have collapsed quickly. Rio Tinto Group sold its last coal mines for almost $4 billion just two years ago amid strong interest from big miners and private equity groups. Now rivals BHP and Anglo American Plc risk paying the price of waiting too long.“We could have exited a few years back, and we probably would have got a better price, but we’ve also made good cash flows from what are good assets,” Anglo American Chief Executive Officer Mark Cutifani said. “How we exit is more important to me, in terms of stakeholders and reputation, than getting an absolute number on the bottom line.”Burning coal is the top contributor to carbon dioxide emissions, causing tens of thousands of deaths a year. While Europe is rapidly turning its back on the fuel, Asian countries like India and China are building hundreds of new power plants and global demand is expected to hold up over the next two decades.But major miners realize their earnings from coal will ultimately be outweighed by the risk of too many investors dumping their stock. Even Glencore Plc, one of the staunchest defenders of the fuel, agreed to cap output and plans to separate the business should it spook too many shareholders.There are signs the pool of potential buyers of thermal coal mines is shrinking. BHP rejected early offers from parties including Yancoal Australia Ltd. and Adani Group’s local unit for Mt Arthur that missed its own valuation, Bloomberg reported this week. Anglo American has decided it would be better to spin off its South African coal business rather than finding a buyer with enough cash.“Who else is going to buy a massive thermal coal mine at this point in time? Is any other mining house going to come in, I doubt it,” said Tim Buckley, a Sydney-based director of energy finance studies at the Institute for Energy Economics and Financial Analysis. “Private equity is unfortunately the only answer.”Writing DownColombia’s giant Cerrejon mine shows how tough it may be to offload assets. Owned by Glencore, Anglo and BHP, it mainly ships coal to Europe, where the market has been hit by cheap gas prices. Glencore has already written down the asset by $435 million and there are few obvious buyers for such a mine.With thermal-coal asset values dropping so heavily in recent years, there’s potentially not much more room for prices to drop, said Nick Stansbury, head of commodity research at Legal & General Investment Management, which manages more than 1.2 trillion pounds ($1.5 trillion) of assets. Still, it might make more sense to sell them for less than they’re worth, rather than face investor backlash for holding onto them.More shareholders “are adopting policies that say ‘I don’t want to own companies that produce thermal coal, it is so unaligned with Paris, it is so inconsistent with my investment values,’” Stansbury said. “Companies that aren’t Paris aligned are going to be increasingly bad investments, not because the cash flows are at risk, but because the cost of capital is going up.”For some diversified miners, the fuel represents little more than a rounding error on overall earnings. Thermal coal accounts for a small fraction of BHP’s and Anglo American’s profits. It’s much more important for Glencore -- the biggest thermal coal shipper gets about one-third of its mining profit from the commodity and has been the most resistant to investor pressure.Glencore billionaire CEO Ivan Glasenberg agreed to cap production to “still have investors.” The company’s management is also prepared to spin off its coal unit should it start to detract from the value placed on its other mines, according to people familiar with the matter, who asked not to be identified as the matter is private.That would allow it to focus on mining copper, cobalt and nickel, which are seen essential to green technologies.“Unlike oil and gas, Big Mining does not require complete reinvention,” Deutsche Bank AG said in a note. “In-house energy transition opportunities are available, but M&A would help to improve the opportunity set for some of the companies.”Still, investor attitudes can change quickly. Two years ago, Anglo American said investors supported the view that the company was best positioned to keep running coal mines the world needs, with local communities set to benefit from better access to health care, water and non-mining related jobs. Now, investors increasingly disagree.“For us, our thermal coal assets are high quality and well located, but they are our shortest life assets on average, so it’s a rational economic decision and our likely exit is via a demerger,” Anglo’s Cutifani said. “But simply selling assets is not necessarily the best decision for the planet. That’s the reality.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- The wire transfer was just one of millions that ricochet through the global financial system every day. Starting at the Zurich branch of a Russian state bank, $800 million zipped through Citigroup Inc. in New York before landing in a small bank in Lebanon.The payment came from Russian oil giant Rosneft PJSC –- a loan to the cash-strapped government of the breakaway region of Kurdistan in northern Iraq that would be repaid with barrels of crude.It was the opening tranche of a $6 billion torrent of cash that made a similar journey over the next two years. But the account didn’t belong to the Kurdish government. The money flowed to a company registered in the tax haven of Belize, with a mailing address in Cyprus, and controlled by a Pakistani-born businessman: Murtaza Lakhani.A veteran of the oil industry’s most challenging jurisdictions, Lakhani was using his company’s account at Lebanon’s BankMed SAL as the clearing house for Kurdistan’s new-found oil wealth.Disclosed as part of a lawsuit, the billions of dollars that flowed in and out of the account offer a rare window into the inner workings of the global oil trade.It’s a tale of petrodollars and power in the Middle East, linking the world’s largest commodity traders with local politicians, the Kremlin and even the family of Lebanon’s former prime minister. The lawsuit, a dispute between Lakhani’s company and BankMed, provides hundreds of pages of wire transfers, emails, and ledgers, providing a payment-by-payment insight into his role at the heart of one of the hottest oil trades in recent years: selling Kurdish crude.Private IndividualLakhani’s relationship with the Kurdish government was extraordinary for a private individual. Through his company, IMMS Ltd., Lakhani handled payments from Rosneft and oil traders like Vitol Group and Trafigura Group; he made payments for foreign companies to which the Kurdistan Regional Government owed money; and he transferred hundreds of millions of dollars to the Kurdish finance ministry itself.The set-up may spur campaigners to amplify calls for greater transparency in the oil industry. It remains unclear how much money Lakhani was making from handling Kurdistan’s cash flows. The use of the BankMed accounts has also exacerbated the region’s economic woes because a banking crisis in Lebanon left some of the funds marooned in Lakhani’s company’s account.“Oil trading remains secretive in far too many countries, which creates space for potential controversies such as this one,” said Alexandra Gillies, an adviser at the Natural Resource Governance Institute. “The trading companies and the governments involved have a responsibility to be more transparent and follow due process.”The Kurdish Ministry of Natural Resources said in a statement that it agreed to use IMMS’s account in 2017 because it had “no other viable options.” Lakhani’s company was “only a service provider and is only paid fees by the KRG according to its contract.”To view the documents from the court case between Lakhani’s company and BankMed, click here.A spokesman for Lakhani said that all banking transactions carried out by IMMS on behalf of the Kurdish government were instructed, approved and countersigned by the Kurdish Ministry of Natural Resources. “These operations were always done in full compliance with local laws and regulations and with full transparency between all parties,” the spokesman said.For the trading companies that dealt with him, Lakhani is an awkward counterpoint to the recent trend of publicly disavowing the use of middlemen, or “agents.” In private, the traders argue that Lakhani wasn’t their man: he was the agent of the Kurds, and they paid through him because the Kurdish authorities instructed them to do so. The size of the deals suggests they had few qualms. In just one three-month period last year, Vitol, Trafigura and smaller trading house Petraco Oil Group paid a combined total of more than $1 billion into the account of Lakhani’s company, according to data disclosed in the lawsuit.Trafigura and Petraco declined to comment, while Vitol said it had stringent controls to ensure compliance with all laws and regulations.For Lakhani, playing middleman for the Kurdish government reprised a role he’d perfected over his career.The 58-year-old businessman has been working in hot spots of the oil trading world for decades. Known for his wide network of contacts, he is equally at home in the discreet world of Swiss finance as the oil fields of Iraq.Asked a few years ago to describe his role in the oil industry, he told the Financial Times: “I get my hands dirty.” (Lakhani’s spokesman said that he had meant he was “prepared to work hard in a ‘hands on’ manner, often in a small team.”) Despite his role at the heart of some of the world’s hottest oil deals, however, he eschews the limelight, only occasionally speaking in public and rarely allowing himself to be photographed.Family BusinessBorn in Karachi in 1962 but raised in England and Canada, Lakhani began his career in commodities helping with his family business trading rice, cotton and wheat. On an old personal web page, he said that in the 1980s he “moved his focus to oil trading, concentrating on some of the most challenging markets in the world.”Soon, that meant Iraq under Saddam Hussein, working as an agent for Glencore Plc, the world’s largest commodity trader. Describing himself as Glencore’s “man in Baghdad,” Lakhani received a monthly fee of $5,000 to help the company buy Iraqi crude.At the time, Iraq could only sell its crude via a system known as the oil-for-food program, administered by the United Nations. But with demand for oil booming, Saddam found a loophole in the early 2000s, asking traders to pay a surcharge to his government outside the UN system.A later investigation into the oil-for-food program found that Lakhani paid just over $1 million in surcharges for crude that was ultimately bought by Glencore, despite UN staff issuing warnings to traders that paying the surcharges was illegal. Lakhani himself provided UN investigators receipts for cash he’d received from Glencore –- as much as $415,000 on one occasion –- which he then transported across Switzerland before delivering it to the Iraqi diplomatic mission in Geneva.“Mr. Lakhani was asked to attend interviews with the U.S. government to assist it with its investigation, and voluntarily provided his assistance,” Lakhani’s spokesman said. “Since 2006, Mr. Lakhani has had no further involvement with this matter.” Glencore declined to comment.Neither Lakhani nor Glencore was ever charged with any wrongdoing in the oil-for-food affair.British GeneralMore recently, he expanded his oil trading business, recruiting grandees to the boards of his various companies including Simon Murray, the former Glencore chairman, and Charles Guthrie, who’d been the most senior general in the British army.One of his latest ventures has involved another difficult oil producer: Venezuela. For several months in 2019 and 2020, Lakhani’s company helped to ship Venezuelan crude through an obscure route -- his tankers picked up the oil half way through its voyage, via a ship-to-ship transfer off the west coast of Africa. After Washington slapped sanctions on Rosneft Trading SA, one of the major shippers of Venezuelan oil, one of Lakhani’s companies, Mercantile & Maritime, said it planned to end the business linked to the country.Lakhani’s spokesman said the Venezuelan deals were fully compliant with international law.Then there was Kurdistan.Lakhani had been doing business in northern Iraq for years, but his moment came in 2014, when, with the jihadist group Islamic State expanding its reach into Iraq, Kurdish fighters took over the key oil city of Kirkuk. With access to more crude, the Kurds’ long-cherished dreams of independence seemed closer. But first they needed to find buyers for their oil. And that wasn’t easy as the central government in Baghdad, which until then largely controlled all sales, threatened legal action.Lakhani stepped in. According to his spokesman, IMMS began working with the regional government of Kurdistan in 2014, “assisting in the exporting of crude oil from the Kurdistan region through logistics, shipping and port management services.” At the time, only a handful of oil trading houses were willing to touch the oil, including Vitol, Trafigura and Petraco. “He knew exactly who would and who wouldn’t deal with us,” Kurdish Natural Resources Minister Ashti Hawrami told Reuters in 2015.Putin AllySoon the riches of Kurdistan attracted Rosneft, led by Igor Sechin, a close ally of President Vladimir Putin. In February 2017, Rosneft announced its first deal to buy Kurdish oil and in June the two sides signed an even bigger deal. Perhaps symbolically, the scions of Kurdistan’s two most important clans –- the Barzani and Talabani families –- presided over the signature of the contract. As Sechin and Hawrami inked the agreeement, smiling behind them stood Nechirvan Barzani and Qubad Talabani, who today are the region’s president and deputy prime minister, respectively. Asked whether the deal would raise eyebrows, Barzani replied: “I hope so.”The arrival of Rosneft and its money was also a turning point for Lakhani. Just as the Russian company was readying its first payments, the Kurdish government was facing growing difficulties. Until mid-2017, the KRG had received oil revenues via a bank in Erbil that had a relationship with Commerzbank AG in Germany, and via Halkbank in Turkey. But then the U.S. started investigating Halkbank for helping to evade sanctions against Iran, freezing $200 million of the Kurdish government’s money. The Commerzbank route “was no longer viable” due to concerns about Iraq’s banking sector, according to the Kurdish Ministry of Natural Resources.The Kurds turned, once again, to Lakhani. The businessman hit upon BankMed of Lebanon after an introduction from one of the Lebanese bank’s shareholders, according to an IMMS affidavit. The bank was well connected: it was partly owned by the country’s then prime minister, Saad Hariri, and his family. A spokesperson for Hariri denied that he or any other shareholder had introduced IMMS to BankMed.By August 2017, IMMS had opened an account at BankMed. A month later, the emails between the company and the bank showed a growing urgency. “i know u already discussed with ML abt a sub account for IMMS,” wrote a top employee of IMMS in an email on Sep. 27, in an apparent reference to Lakhani. “What do u need to open it asap,” the employee asked, “as i will probably expecting funds soon!”Temporary Measure“In 2017, with no other viable options, and the KRG facing growing cash-flow problems, it agreed with IMMS (which had an account with BankMed in Lebanon), to ask BankMed to open a sub-account,” the Kurdish ministry said. “The arrangement with IMMS and BankMed was seen by the KRG as a necessary but temporary measure until other sustainable banking options became viable to the KRG.”And so the money started to flow. A SWIFT message, disclosed in the U.S. court case, memorializes the $800 million payment on 13 December 2017 from Rosneft Trading’s account at Gazprombank JSC in Zurich to be paid, via Citibank in New York, to the IMMS BankMed account. The message notes that the money is an advance payment under “THE CRUDE OIL PURCHASE AND SALE CNTR REF 2016/KRG RN001” and reassures the banks involved that it’s fully compliant with sanctions. Two days later, IMMS placed $725 million into separate short-term deposit accounts at BankMed.Lakhani’s spokesman said that the $800 million received from Rosneft in December 2017 and the $725 million in deposits made two days later were “not related in anyway” and that “any suggestion of a conflict of interest is unfounded and without merit.”Rosneft said that its payments to IMMS’s account were “absolutely transparent and fully in line with local regulation,” and added that they had been approved and signed off by the Kurdish Ministry of Natural Resources. Gazprombank confirmed the December 2017 transaction, adding that it “strictly adheres to the rule of law in all jurisdictions in which it operates.”Over time, the flow of money into the IMMS account grew and grew. Between December 2017 to the end of 2019, IMMS carried out more than $6 billion in banking transactions via BankMed, not only directly, but also via the accounts the Lebanese bank kept in New York with correspondent banks Citibank, JPMorgan Chase & Co., Bank of New York Mellon Corp. and Standard Chartered Plc. The banks declined to comment.Interest RateBy November the following year, IMMS agreed to place $1 billion into a three-year term deposit with BankMed. The interest rate would be 10% -- or $100 million a year – to be paid into a separate account.Things started to go wrong when a banking crisis struck Lebanon late last year. As money ran short throughout the Lebanese financial system, IMMS tried to withdraw the $1 billion – but BankMed blocked it. Lakhani’s company started legal proceedings against BankMed, and soon after, the bank ended its business relationship with him, canceling several accounts.When Lakhani tried to recover his money by suing BankMed, he opened a window on his role in Kurdistan.The legal papers show how Lakhani’s business stretched through the global oil industry. According to a ledger that covers the period between March and May 2019, just over $2.8 billion flowed into the account at BankMed. The largest single named source of funds during that period is Vitol, through its wholly-owned subsidiary Arkham – which in three months paid $443 million into the IMMS account, according to Bloomberg calculations based on court filings.Traders FollowOther traders were not far behind: Edgewater Falls, a company rivals say is connected to Petraco, paid $436 million; Trafigura paid $331 million; and Rosneft paid $182 million. On the other side, IMMS was paying the expenses of the Kurdish government. The accounts detail wire transfers to oil companies pumping crude in the region, including DNO ASA and Genel Energy Plc. IMMS also transferred money directly to the Kurdish finance ministry – some $765 million over the three months. The traders, Lakhani, and the Kurdish ministry all declined to comment on the details of the transactions. Genel said that all sources of payments due to it from the Kurdish government were subject to its due diligence; DNO did not respond to a request for comment.On paper, the funds that got blocked appeared to be Lakhani’s own money, deposited in accounts belonging to IMMS. Still, as soon as the money was frozen, the Kurdish government ran into a financial crisis, unable to meet payments. According to an audit by Deloitte of Kurdistan’s oil revenues, the country had about $318 million locked in an account in Lebanon at the end of 2019.It’s clear that IMMS was handling money on behalf of the Kurdish government. The court filings include payment orders to BankMed signed by Hawrami; and both Lakhani’s spokesman and the Ministry of Natural Resources said that each payment on behalf of the KRG was authorized by the ministry.It’s less obvious from the legal filings where the Kurds’ money ends and Lakhani’s own money begins, how lucrative the business of handling the billions of dollars for Kurdish oil was, and who benefited from any profits.Credit LineIMMS was one of several companies owned by Lakhani to hold accounts at BankMed -- others included Oil & Gas Management Services Group Limited, a British Virgin Islands-registered entity, and Mercantile and Maritime Energy Pte Ltd. of Singapore. And thanks to the $1 billion that IMMS deposited at BankMed, Lakhani was granted as much as $800 million in lines of credit to carry out other activities.Lakhani’s spokesman said that the Kurdish government’s money “was not part of the $1 billion.”“Legal and accounting safeguards were in place to ensure separation between IMMS’s funds and the KRG’s funds,” the spokesman said.The Kurdish ministry said that “to our knowledge,” the sub-account into which its oil revenues were paid was a current account which did not accrue interest.In early April, the lawsuit between Lakhani’s company and its Lebanese bank was settled out of court –- with the two sides “amicably resolving their disputes and dismissing all legal proceedings between them,” according to a statement. The settlement did not involve the withdrawal of any deposits or the transfer of any funds outside Lebanon, the statement added. Yet the fallout is still being felt in Kurdistan, which has yet to pay a significant chunk of the bills that were due to oil companies pumping crude in the region between November 2019 and February 2020.The Kurdish Ministry of Natural Resources told Bloomberg that “some $250m of the KRG’s money remains stuck in the BankMed sub-account.” This money was due to be paid to oil companies pumping crude in the region between November 2019 and February 2020. The plunge in oil prices exacerbated the problem.Lakhani’s spokesman said it would be “wholly untrue” to suggest that IMMS’s actions led to Kurdistan’s financial crisis.Regardless, the legal battle appears to have dented Lakhani’s influence in Kurdistan. The Kurdish government in early 2020 opened an account at Citibank through which it is processing “most of its oil revenues from the buyers”, according to the Ministry of Natural Resources. However, it added: “Even now IMMS services are still needed to facilitate some of the transfers.”(Updates with details of settlement between BankMed and IMMS.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Glencore Plc has restructured a $500 million oil-for-cash loan to Kurdistan in northern Iraq, reducing payments for 2020 as the semi-autonomous region struggles due to low petroleum prices.The so-called prepayment deals, in which a trading house advances a government money to be repaid with future oil shipments, have been popular among some African and Middle Eastern producers with few others ways of raising funds. But they have also proved controversial, in some cases creating an opaque form of debt that puts governments’ finances under strain when oil prices drop.The restructuring was announced via a regulatory filing on the Cayman Islands Stock Exchange, where debt notes linked to the Kurdish loan are listed.After oil plunged earlier this year, Kurdistan struggled to repay its oil-for-cash debt, as did the likes of Chad and the Republic of Congo. The loans are paid back with oil cargoes. If crude prices fall, countries need to divert more barrels to keep up with the payments.New TermsGlencore, the world’s largest commodity trader, lent the money to the Kurdistan Regional Government in January 2017, with repayments starting three years later.Under the new terms, the KRG will repay the loan at a rate of $3 million per month between June and November, compared with an original repayment schedule of $20.8 million per month, according to the July 8 regulatory notice. From December 2020 until December next year, the KRG agreed to increase its monthly repayments to about $29.9 million.The restructuring will affect global investors, including U.S. pension funds, because they bought five-year notes known as Oilflow SPV 1 DAC linked to the KRG loan. The notes, which have a 12% coupon, fell to a record 74 cents on the dollar in April and the yield rose above 60%, according to data compiled by Bloomberg.The price has since climbed to about 94 cents, partly because Brent crude’s more than doubled in that period with the easing of coronavirus lockdowns. At $43.46 a barrel, Brent’s still down 34% this year.A majority of investors in the notes approved the restructuring terms on Tuesday, according to the regulatory filing.A Glencore spokesperson declined to comment and a representative of the Kurdistan government didn’t immediately respond to a request for comment.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- A startup backed by a group of tycoons including Bill Gates plans to use data-crunching algorithms to search for cobalt near a Canadian nickel mine owned by Glencore Plc.Kobold Metals has acquired rights to an area of about 1,000 square kilometers (386 square miles) -- roughly the size of New York City -- in northern Quebec, according to Chief Executive Officer Kurt House. It’s the first such foray by the company to become public.San Francisco Bay Area-based Kobold Metals is hoping to use data analytics to build a “Google Maps for the earth’s crust.” The company is betting it can find metals crucial to the electric-vehicle revolution, such as cobalt, that so far have eluded more traditionally-minded geologists.Read: Algorithms Join Cobalt Hunt Backed by Gates, Bezos and DalioHouse said the company’s exploration activities at the site in Quebec could help prove the value of its approach.“The subtleties in the geophysical signals are really only evident when you have all of the data and can evaluate it in a systematic, statistically rigorous way,” he said. “It’s just too much for the human brain to handle.”He said that the company was likely to start collecting geophysical data in the next three to six months, and could start drilling in a couple of years. The area, just south of Glencore’s Raglan nickel mine, is “highly prospective” for cobalt, nickel and platinum-group metals, House said.Shareholders of Kobold Metals include Silicon Valley venture capital firm Andreessen Horowitz, Norwegian oil major Equinor ASA and Breakthrough Energy Ventures, a fund backed by Gates and a dozen other tycoons including Jeff Bezos, Ray Dalio and Michael Bloomberg, owner of Bloomberg LP, the parent company of Bloomberg News.House said exploration in Quebec was one of a number of activities that Kobold Metals was pursuing, including forging partnerships with mining companies to help identify ways to expand their existing resources.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Volcan Compania Minera S.A.A. y Subsidiarias and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
The big shareholder groups in Glencore plc (LON:GLEN) have power over the company. Institutions often own shares in...
An explosion on Thursday at Astron Energy's South African refinery in Cape Town has killed at least two people and injured several others, a source who works at the 100,000 barrel per day plant told Reuters. A company spokeswoman did not immediately respond to calls, and the fire brigade referred all queries to Astron Energy. The plant, which was busy starting up after undergoing extended maintenance, was shut down after a fire broke out early on Thursday.
Just when his electric vehicle (EV) company Tesla seemed to be pivoting away from using cobalt in its batteries, it signs a long-term supply deal for the controversial metal with Glencore. This from the man who has vowed to eliminate cobalt from the Tesla product mix because of its financial cost and the reputational cost of a metal associated with child labour and poor safety conditions at artisanal mining operations in the Democratic Republic of Congo, the world's dominant producer. Tesla's not the first auto company to lock in future cobalt supplies with a miner.
Just when his electric vehicle (EV) company Tesla seemed to be pivoting away from using cobalt in its batteries, it signs a long-term supply deal for the controversial metal with Glencore. This from the man who has vowed to eliminate cobalt from the Tesla product mix because of its financial cost and the reputational cost of a metal associated with child labour and poor safety conditions at artisanal mining operations in the Democratic Republic of Congo, the world's dominant producer. Tesla's not the first auto company to lock in future cobalt supplies with a miner.
Chile´s state-run Codelco said on Monday it would implement new measures at its El Teniente copper mine, the company´s largest deposit, to maintain operations amid increasing worker angst over the fast-spreading coronavirus. The world´s top copper producer said it would move to a 14-day on, 14-day off shift schedule at El Teniente, and that it would begin to test workers three times per shift for COVID-19. The "extraordinary measures" would allow it to "ensure the continuity of operations and the contribution of El Teniente to the country," the company said in a statement.
Switzerland's Attorney General's Office (OAG) has opened a criminal probe into commodity miner and trader Glencore <GLEN.L> over allegations it failed to have measures in place to prevent corruption in the Democratic Republic of Congo (DRC). In a statement on Friday, the OAG said it opened the criminal proceedings against Glencore this month, but it was not possible to predict the timeframe or course of the case. Prosecutors began investigations against "unknown perpetrators" after receiving a complaint in 2017 on suspicion of bribery of foreign public officials, the OAG said.
A British barrister is asking the United Nations Special Rapporteur to intervene with coal miner Cerrejon on behalf of Wayuu indigenous people in Colombia allegedly suffering damage to their health amid the coronavirus pandemic. Cerrejon, which is owned equally by BHP Group, Anglo American and Glencore, rejected the allegations, saying information in the claim was wrong. Cerrejon had initially reduced operations during Colombia's nationwide quarantine, but began normalizing its work last month.
Moody's Investors Service, ("Moody's") assigned a Caa2 rating to Century Aluminum Company's (Century) new $250 million senior secured notes due 2025. Moody's also affirmed Century's Caa1 corporate family rating (CFR) and Caa1-PD probability of default rating. The proceeds from the proposed notes will be used to refinance the existing senior secured notes due 2021.
Mining companies in Zambia, Africa's No.2 copper producer, have suffered a 30% drop in revenue over the three months to April due to the COVID-19 pandemic and the fallout could last for at least 12 months, the Chamber of Mines said on Thursday. Severe global restrictions on movement have hit mining supply chains and hindered the export and sale of copper, the mining industry association said, hurting company revenues and government coffers. The metal is Zambia's main foreign exchange earner and a key driver of tax revenues.
Unionized copper mine workers in Chile asked on Wednesday to be included in a dialogue between companies and the government to address the exploding coronavirus crisis in the world´s top producer of the red metal. The Chilean Mines Federation - which groups the workers at Chile's principal copper deposits - has softened its tone since demanding on Sunday that authorities strengthen enforcement of safety rules following an "alarming" increase in coronavirus cases among miners. "We want to request, as the largest mining organization in Chile, a three-way dialogue ... to prevent even more mine workers from becoming infected," the group said in a statement.
Copper Mark, a traceability system launched by the International Copper Association (ICA), expected more members this year after two units of mining giant Rio Tinto joined in May. Copper Mark was launched in April 2019 as part of ICA's effort to bring the whole copper supply chain in par with the rising standards and expectations for responsible copper production. It welcomed Oyu Tolgoi LLC in Mongolia and Kennecott Utah Copper LLC in the United States, both owned by Rio Tinto, and expected members of the ICA to be among the early adopters, said Michele Brulhart, its executive director.
Tesla inks pact with Glencore to buy cobalt for its batteries as it looks to secure enough of the rare metal to both boost output and keep competition at bay.
A Chilean regulator on Tuesday dismissed the concerns voiced by union workers that mining companies were failing to enforce sanitary measures to combat the spread of the coronavirus, calling mine adherence to the restrictions "adequate." "We have verified on the ground an adequate implementation by the industry and its workers of ... the respective protocols," the agency said in the statement. Chile, unlike neighboring Peru, has yet to require mines to limit operations, even as the number of cases nationwide has soared.