AnnuAl RepoRt
2011
AnnuAl RepoR t 2011
tABLE OF
cONtENts
1 | Overview
1.1 | Performance highlights
1.2 | Chairman’s statement
1.3 | Chief Executive Officer’s review
1.4 | Business overview
1.5 | Sustainability
1.6 | Key performance indicators
1.7 | Principal risks and uncertainties
2 | Business review
2.1 | Financial review
2.2 | Metals and minerals
2.3 | Energy products
2.4 | Agricultural products
2.5 | Reserves and resources
3 | Corporate Governance
3.1 | Chairman’s Introduction
3.2 | Board of Directors
3.3 | Corporate governance report
3.4 | Directors’ remuneration report
3.5 | Directors’ report
4 | Financial Statements
Statement of directors’ responsibilities
Independent auditors’ report
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the financial statements
5 | Additional information
5.1 | Glossary
5.2 | Shareholder information
9
12
13
14
19
22
24
38
48
58
64
68
80
81
84
91
97
104
105
106
107
108
109
110
111
158
159
OvErviEw
1 | Overview
1.1 | Performance highlights
1.2 | Chairman’s statement
1.3 | Chief Executive Officer’s review
1.4 | Business overview
1.5 | Sustainability
1.6 | Key performance indicators
1.7 | Principal risks and uncertainties
9
12
13
14
19
22
24
1.1 | Performance highlights
• Income before attribution increased 4% to $ 4.3 billion in
Adjusted EBIT
2011.
• Industrial activities Adjusted EBIT 1 up 18% compared to
2010, benefiting from generally stronger commodity prices
and increased production.
• Marketing activities Adjusted EBIT, excluding agricultural
products which was adversely impacted by the unprece-
dented volatility and disruption in the cotton market, was
over 10% higher than 2010.
• Copper equivalent 1 production volumes increased 16% in
2011 driven by a strong performance from the industrial
activities including:
– Kazzinc: completion of the new copper smelter and in-
creased gold production;
– Katanga: 57% production increase of copper metal con-
tained as a result of the phase III expansion;
– Mutanda: current production has increased 47,000 MT to
64,000 MT. The growth is part of its 110,000 MT copper
development project which is tracking ahead of schedule;
– Prodeco: 45% increase in production from 2010 attribut-
able to the current expansion project; and
– Aseng field in Block I – Equatorial Guinea: first oil pro-
duced in Q4 2011.
• Significant increase in Kazzinc’s mineral reserves at the
Vasilkovskoye, Maleevsky and Ridder-Sokolny deposits with
contained gold up 50%, contained copper up 136% and con-
tained zinc up 67%.
• Strong and improving cashflow coverage ratios with FFO 2 to
Net debt 2 increasing 20% from 22.6% to 27.2% and Net debt
to Adjusted EBITDA 1 falling to 2.00 times from 2.38 times.
• Following the Xstrata merger and Viterra acquisition an-
nouncements, Glencore’s current credit ratings are Baa2
(review with direction uncertain) from Moody’s and BBB
(watch positive) from S&P.
n
o
i
l
l
i
m
$
S
U
6 000
5 000
4 000
3 000
2 000
1 000
0
2009
2010
2011
Marketing activities
Industrial activities
2009 2010 2011
1 591 2 337 1 911
1 716 2 953 3 487
Cu equivalent volume growth
9
0
0
2
n
i
1
o
t
d
e
s
a
b
e
R
1.6
1.5
1.4
1.3
1.2
1.1
1.0
2009
2010
2011
Marketing activities
Industrial activities
2010 2011
7%
28% 16%
4%
Net debt and FFO to net debt
n
o
i
l
l
i
m
$
S
U
15 000
12 500
10 000
7 500
5 000
2 500
0
30
25
20
15
%
10
5
0
2009
2010
2011
• The Directors propose a final dividend of $ 0.10 per share,
bringing the total dividend for the year to $ 0.15 per share.
Net debt (US $ million)
FFO to net debt (%)
1 Refer to glossary on page 158 for definitions and calculations.
2 Refer to page 43.
| Annual Report 2011 | 9
Glencore’s business segments are responsible for
managing the marketing, sourcing, hedging,
logistics and industrial investment and production
activities for their respective commodities.
Glencore’s key strengths are its global scale,
strong growth platform, diversity of products,
ability to add value, extensive and well
established customer and
supplier base and
industrial and market -
ing information flows.
Metals and minerals
Key commodities: zinc, copper, lead,
alumina, aluminium, ferro alloys, nickel,
cobalt and iron ore, including smelting,
refining, mining, processing and storage
related operations of the relevant
commodities.
Energy products
Key commodities: crude oil, oil
prod ucts, steam coal and metallurgical
coal supported by investments in coal
mining and oil production operations,
ports, vessels and storage facilities.
Agricultural products
Key commodities: wheat, corn, barley,
rice, oil seeds, meals, edible oils,
bio fuels, cotton and sugar supported
by investments in farming, storage,
handling, processing and port facilities.
Adjusted EBIT by segment 2011
6 000
5 000
n 4 000
o
i
l
l
i
m
$
S
U
3 000
2 000
1 000
0
5 290
5 398
3 307
2009
2010
2011
Metals and minerals
Energy products
Agricultural products
Corporate and other
10 | Annual Report 2011 |
Main office
Office
Independent agent
Metals and minerals asset
Energy products asset
Agricultural products asset
oveRview | BuSineSS Review | CoRpoRAte GoveRnAnCe | FinAnCiAl StAteMentS | AdditionAl inFoRMAtion
Glencore is a leading globally integrated producer and marketer
of commodities with worldwide activities in the production,
refinement, processing, storage, transport and marketing of
metals and minerals, energy and agricultural products.
Revenue by region 2011
Non current assets by region 2011
11%
1%
17%
14%
$ 186 bn
24%
$ 34 bn
51%
26%
38%
5%
13%
Africa
Oceania
The Americas
Europe
Asia
| Annual Report 2011 | 11
1.2 | Chairman’s statement
In May 2011, Glencore welcomed new shareholders on the occasion of the listing of the company on the
London and Hong Kong stock exchanges. Before the Initial Public Offering, Glencore appointed a new
Board which I am proud to lead as Chairman. Each Non-Executive Director has an excellent track record in
an area of expertise directly relevant to Glencore’s operations.
2011 was a year of achievement for Glencore, despite the economic challenges that the world faced in the
period. The development and urbanisation of China, India and other higher growth countries continues. The
desire of hundreds of millions of people to improve their living standards, and the challenges of growing
supply to meet that the resulting demand, underpin the fundamentals of global markets for commodities in
the long term.
During the year, the Non-Executive Directors and I visited some of Glencore’s key assets. We were very im-
pressed by the high quality of the operations and the commitment of Glencore people around the world. We
will improve the already high standards as to ensure an even better performance in the future.
Glencore believes that sustainability must be an integral part of everything we do, enhancing the well-being
of our employees, surrounding communities and local environments. In September 2011, Glencore pub-
lished its first ever sustainability report. In recent years the company has established stringent global stand-
ards for Health, Safety, Environmental and Community (HSEC) relations performance under the Glencore
Corporate Practice programme. During 2011, we also announced our membership of the Extractive Indus-
tries Transparency Initiative (EITI), a global effort to help Governments use funds generated from natural
resources in a responsible manner.
In many cases, our industrial operations have already exceeded these standards. Challenges that remain,
have the full focus of the HSEC Committee and Glencore’s Board. We will report our progress in subsequent
sustainability reports.
On 7 February 2012, the Boards of Glencore and Xstrata agreed an all-share merger of equals, to create a
unique $ 90 billion natural resources group. The Board has unanimously agreed that the merger is in the
best interests of Glencore Shareholders. It builds upon the long-standing relationship between Xstrata and
Glencore to the greater benefit of both companies and their shareholders. Since Xstrata was created by
Glencore and then spun-out in 2002, these two entrepreneurial companies have grown separately into lead-
ers in the commodity industry, each with a different but highly complementary focus. Together these two
companies will create a group with the capabilities and scale to play a leading role in meeting the growing
global demand for commodities, whilst helping resource holding countries create value from their natural
endowments.
On 20 March 2012, Glencore announced a CAD 6.1 billion acquisition of Viterra, one of the world’s leading
global agri-businesses and food ingredients companies with major operations across Canada and Australia.
The transaction was announced in partnership with Agrium and Richardson International who have agreed
to acquire part of Viterra’s Canadian operations for CAD 2.6 billion. The acquisition is our first major invest-
ment in the North American agricultural sector and reflects Glencore’s strong belief in the importance and
future potential of the Canadian and Australian grain markets. It will also allow us to be well placed to par-
ticipate in future growth opportunities across the North American market.
It is an exciting time for Glencore and for you, our shareholders.
Simon Murray
Chairman
12 | Annual Report 2011 |
oveRview | BuSineSS Review | CoRpoRAte GoveRnAnCe | FinAnCiAl StAteMentS | AdditionAl inFoRMAtion
1.3 | Chief Executive Officer’s review
2011 witnessed a number of events which inevitably disrupted the pattern of the global economy in the short
term and with it the demand for commodities. The Japanese Tsunami severely impacted domestic and re-
gional supply/demand patterns, while the Arab Spring tightened the outlook for global energy markets with
resultant higher prices in oil. This had broader ramifications for the global economy as it struggled to sustain
the growth delivered during 2010 as the issue at the heart of the 2008 – 09 financial and economic crisis, namely
general levels of indebtedness in developed economies, remained unaddressed. The dilemma for govern-
ments of developed economies since then has been and remains how to maintain consumption and invest-
ment growth while attempting to signal serious intent to the bond markets about reducing sovereign debt.
In light of this challenging economic environment we are pleased that Glencore has been able to continue
to deliver a healthy financial performance with Glencore net income, pre-significant items, increasing by
7% to $ 4.1 billion in 2011. This increase was supported by solid underlying profitability in the marketing
business against a generally difficult market backdrop. The industrial business benefited from stronger
average prices for the key commodities it produces as well as the increased production at many operations
including Prodeco, Katanga, Kazzinc and Mutanda.
The improved financial performance and extensive fund raising activities completed during the year pro-
vides us with a resilient balance sheet and financial flexibility with close to $ 7 billion of committed liquidity
at the end of the year, over twice the stated $ 3 billion minimum we set ourselves. This financial flexibility
allowed us to continue to pursue various inorganic growth opportunities as we announced a number of bolt
on acquisitions including Umcebo, Optimum Coal and Rosh Pinah Zinc. In addition, we also completed the
takeover offer in respect of the minority shareholding in Minara Resources.
Our listing on the London and Hong Kong Stock Exchanges in May 2011 was the largest ever IPO of ordinary
shares on the premium listing segment of the London Stock Exchange and the first simultaneous London
primary and Hong Kong secondary IPO. The resulting governance and shareholder structure serves to align
the interests of all stakeholders in the Company. The Board of Directors proposes a final dividend of $ 0.10
per share for 2011.
Glencore’s IPO also coincided with the start of the next stage of our journey of value creation which will see
us deliver organic industrial growth conservatively in excess of 50% by 2014, substantially ahead of our peer
group average. This in turn should help drive volumes and enhanced returns within our marketing business,
particularly in copper, coal and oil. In 2011, our key industrial expansion projects continued to progress
with the portfolio overall on track and within budget giving us confidence that we can deliver considerable
growth in the next twelve months even absent an improvement in the economic environment.
The announcement on 7 February 2012 of our proposed merger with Xstrata is the logical next step for two
complementary businesses to create a new powerhouse in the global commodities industry. This is a natu-
ral combination which will realise immediate and ongoing value from marketing the combined Group’s prod-
ucts to maximise supply chain margin opportunities including via blending, swapping and storing to meet
customers’ needs more efficiently and cost effectively. Furthermore, the combined Group’s enhanced scale,
diversification and financial flexibility in combination with Glencore’s existing relationship with thousands of
third-party commodity producers worldwide, is expected to allow us to capitalise on more opportunities to
grow the enlarged asset base. The new Company, Glencore Xstrata, will be the most diverse major resource
group which will be in a position to realise immediate and ongoing value for its shareholders.
Looking ahead, in the short-term we expect a continuation of the healthy growth seen within emerging
markets during 2011. Whilst looking to the longer term, we see no change to the fundamental drivers for
healthy markets in our major commodities. Emerging market urbanisation will continue to increase com-
modity intensity per capita as people strive to improve their living standards to a level which is taken for
granted in developed societies. China will continue to remain the central driving factor given its existing
scale, resources and growth objectives.
Ivan Glasenberg
Chief Executive Officer
| Annual Report 2011 | 13
1.4 | Business overview
Glencore’s marketing and industrial investment activities are
supported by a global network of more than 50 offices located
in more than 40 countries throughout Europe, North, Central
and South America, the CIS, Asia, Australia, Africa and the
Middle East. Glencore’s main offices are located in Baar (Swit-
zerland), Stamford (Connecticut), London, Rotterdam, Beijing,
Moscow and Singapore. This network provides Glencore with
significant worldwide sourcing and distribution capabilities.
Glencore’s marketing operations employ close to 3,000 people
worldwide, while industrial operations directly or indirectly em-
ploy over 58,000 people in 33 countries. Refer to the map on
page 10 and 11 for more details on the locations of offices and
operations.
Glencore has an established record of successful strategic in-
vestments in industrial assets which have become an important
component of its physical marketing activities. Glencore in-
tends to continue to pursue selective strategic acquisitions and
alliances to support and strengthen its core physical marketing
activities as and when opportunities arise. Glencore evaluates
each industrial asset investment opportunity on a stand-alone
basis, however, also recognising its potential to support and
strengthen Glencore’s physical marketing activities or its ex-
isting industrial operations. Similarly, Glencore evaluates dis-
posals of industrial assets when they are no longer deemed to
support its marketing activities and/or when compelling selling
opportunities arise.
Glencore’s three business segments focus on the following
commodity segments:
• The metals and minerals business segment focuses on: zinc/
copper/lead, alumina/aluminium and ferroalloys/nickel/cobalt/
iron ore. The activities of Glencore’s metals and minerals busi-
ness segment are supported by ownership interests in con-
trolled and non-controlled industrial assets such as mining,
smelting, refining and warehousing operations;
• The energy products business segment focuses on: oil/oil
products and coal/coke. The activities of Glencore’s energy
products business segment are supported by ownership in-
terests in controlled and non-controlled coal mining and oil
production operations as well as investments in strategic han-
dling, storage and freight equipment and facilities; and
• The agricultural products business segment focuses on: grains
(including wheat, maize and barley), oils/oilseeds, cotton and
sugar. The activities of Glencore’s agricultural products busi-
ness group are supported by investments in controlled and
non-controlled storage, handling and processing facilities in
strategic locations.
OuR BusinEss
Overview
Glencore is a leading integrated producer and marketer of met-
als and minerals, energy and agricultural products. Glencore
operates globally, marketing and distributing physical com-
modities sourced from third party producers and its own pro-
duction. Glencore’s customers and suppliers number in excess
of 8,000 and span the automotive, steel, power generation, oil
and food processing industries. Glencore also provides financ-
ing, logistics and other essential services to producers and
consumers.
Glencore’s long experience as a commodity marketer has al-
lowed it to develop its expertise in the commodities which it
markets. Glencore has also cultivated long-term relationships
with a broad supplier and customer base across diverse indus-
tries and geographic regions. Glencore’s marketing activities
are supported by investments in industrial assets operating in
Glencore’s core commodities. Glencore’s marketing operations
are believed to be less correlated to commodity prices than its
industrial operations, due to commodity price risk being sub-
stantially hedged.
As a marketer, Glencore is able to differentiate itself from other
production entities as, in addition to focusing on minimising
costs and delivering operational efficiencies, Glencore focuses
on maximising the efficiency of the entire supply chain, taking
into account its extensive and global third party supply base, its
logistics, risk management and working capital financing capa-
bilities, extensive market insight, business optionality, extensive
customer base, competitive market position in most commodi-
ties and economies of scale. In contrast, this is not the busi-
ness model of Glencore’s mainly industrial competitors who are
generally not set up to exploit the full range of value added
margin and arbitrage opportunities which exist throughout the
commodity supply chain.
Businesses
Glencore conducts its operations in three business segments:
Metals and minerals, Energy products and Agricultural products.
Glencore’s business segments are responsible for managing the
marketing, sourcing, hedging, logistics and industrial investment
activities relating to the commodities which they cover.
Glencore
Metals and minerals
Energy products
Agricultural products
Zinc/copper/lead
Oil
Alumina/aluminium
Coal/coke
Ferroalloys/nickel/
cobalt/iron ore
Grains
Oils/oilseeds
Cotton/sugar
14 | Annual Report 2011 |
oveRview | BuSineSS Review | CoRpoRAte GoveRnAnCe | FinAnCiAl StAteMentS | AdditionAl inFoRMAtion
OuR stRAtEgy
Glencore’s strategy is to maintain and strengthen its position as
one of the world’s leading diversified natural resources groups.
Strategic objectives
• Continue to leverage geographic scope and diversification
of operations: Glencore intends to extend product and geo-
graphical range offered to suppliers and customers.
• Capitalise on strategic investments in industrial assets:
Glencore’s strategic investments in industrial assets are an
important component of its physical sourcing strategy for
its marketing activities. Glencore believes these investments
underpin Glencore as a reliable supplier for its customers.
• Use additional capital and liquidity to grow the business:
Glencore believes the initial public offering provided re-
sources now available to fund future growth opportunities
as they arise.
• Focus on cost management and further enhancing logistical
capabilities: Glencore intends to continue its focus on cost
control and operational efficiencies at its industrial assets and
on the sourcing of competitively priced physical commodities
from reliable third party suppliers.
• Maintain conservative financial profile and investment grade
ratings: Glencore’s conservative financial profile and invest-
ment grade credit ratings have enabled it to consistently ac-
cess the required funding on competitive terms and maintain
healthy levels of liquidity. Glencore intends to maintain its in-
vestment grade credit ratings.
• Disciplined risk management: Glencore intends to continue
its focus in this key area by maintaining and expanding its risk
management resources, information systems and culture.
• Place highest priority on employees, the environment and
local communities: Glencore places the highest priority on
its employees, the environment and the local communities
where it operates.
MARKEting ACtiVitiEs
Function of marketing activities
Glencore’s marketing activities source a diversified range of
physical commodities from third party suppliers and from in-
dustrial assets in which Glencore has full or part ownership in-
terests. These commodities are sold, often with value added
services such as freight, insurance, financing and/or storage, to
a broad range of consumers and industrial commodity end us-
ers, with many of whom Glencore enjoys long-term commercial
relationships.
Types of arbitrage strategies
Many of the physical commodity markets in which Glencore
operates are fragmented or periodically volatile. As a result,
discrepancies often arise in respect of the prices at which the
commodities can be bought or sold in different geographic
locations or time periods, taking into account the numerous
relevant pricing factors, including freight and product quality.
These pricing discrepancies can present Glencore with arbi-
trage opportunities whereby Glencore is able to deploy capital
to generate profit by sourcing, transporting, blending, storing
or otherwise processing the relevant commodities. Whilst the
strategies used by Glencore’s business segments to generate
such margin vary from commodity to commodity, the main arbi-
trage strategies can be generally described as follows:
• Geographic: where Glencore leverages its relationships and
production, processing and logistical capabilities in order to
source physical commodities from one location and deliver
them to another location where such commodities can com-
mand a higher price (net of transport and/or other transac-
tion costs);
• Product related: where it is possible to exploit the blending
or multi-use characteristics of the particular commodities be-
ing marketed, such as the various crude oil products, coal or
metal concentrates, in order to supply products which attract
higher prices than their base constituents, or exploit existing
and/or expected price differentials; and
• Time-related: where it is possible to exploit a difference be-
tween the price of a commodity to be delivered at a future date
and the price of a commodity to be delivered immediately,
where the available storage, financing and other related
costs until the future date are less than the forward pricing
difference.
Arbitrage ensures markets function more efficiently by deliver-
ing supply to where it is most needed, in time, geography or
product.
Glencore uses market information made available by its market-
ing and industrial teams across its many locations to identify
arbitrage opportunities. Glencore’s marketing and investment
activities and relationships with producers and consumers of
raw materials are supported by a global network providing
Glencore with visibility over shifting supply and demand dy-
namics in respect of sizeable volumes of physical commodities
across the globe. The detailed information from Glencore’s
widespread operations and close relationships with producers,
consumers and logistics providers often enables Glencore to
identify opportunities, taking into account its extensive logis-
tics capabilities, to source and supply physical commodities at
attractive margins.
Logistics
Glencore’s logistics operations are a key part of its marketing
operations. They enable Glencore to fulfil its marketing obliga-
tions and to maximise arbitrage opportunities created by de-
mand and supply imbalances. Physical sourcing and marketing
of commodities requires highly professional handling and ship-
ment of such goods from the supplier to the customer, including
storage activities, as required. Typically, the staff handling the
physical movement of goods (the “traffic team”) account for a
significant proportion of the headcount of a business segment.
Glencore’s dedicated chartering teams actively trade freight to
gain market knowledge and volume benefits. The freight ele-
ment of transactions is furthermore used to maintain maximum
physical optionality so that full value can be extracted from
| Annual Report 2011 | 15
the underlying commodity positions of each department. This
complements Glencore’s overall ability to seize geographic and
time spread arbitrage opportunities as they arise.
fected the pricing for many of our commodities although the
impact on end demand was more muted.
inDustRiAL ACtiVitiEs
Glencore’s ownership of controlled and non-controlled indus-
trial assets is designed to generate attractive stand-alone re-
turns and overall business diversification. They also serve as
a way to source physical supply for Glencore’s marketing arm
and provide further market insight and technical know-how.
Glencore believes that its corresponding reduced reliance on
third parties helps to ensure that suppliers and customers alike
see Glencore as a more reliable counterparty.
Glencore capitalises on investment opportunities created by,
among other things, (i) the privatisation of natural resources
producers primarily in emerging markets, (ii) the rebalancing of
asset portfolios by other players in the natural resources indus-
try and (iii) further industry consolidation as smaller producers
sell out and/or seek capital to fund growth.
Any decision to acquire or dispose of an industrial asset is
based on the stand alone potential of the asset and its poten-
tial contribution to Glencore’s marketing activities and requires
group level approval. Once acquired, an asset is held within
one of the business segments. The business segments man-
age the controlled and non-controlled industrial assets via
hands-on “asset controllers” to interface between the asset
and Glencore in respect of day to day operating, financial and
commercial matters. Glencore’s approach to the management
of its industrial assets differs from some of its key competitors
in that Glencore encourages its industrial assets to focus on
the elements of operating performance, which businesses can
directly control.
MARKEt REViEw
2011 was a year characterised by recurring sovereign liquidity and
solvency crises, widespread popular uprisings and large scale
natural disasters. In the background, China, the dominant force
in global commodity consumption continued to tighten credit
conditions in order to keep inflation in check. The US economy
remained lacklustre with household formation and job creation
both muted, and business confidence weak. All of these factors
had important effects on the levels of prices and demand for our
major commodities.
The year started optimistically and the first six months saw 2010’s
positive momentum in prices and absolute demand levels
continue. However, as the year progressed, the fundamental
impetus faded somewhat in the face of China’s deliberate de-
celeration of its economy, rising global oil prices and the re-
emergence of Eurozone debt concerns. Against this backdrop,
the second half of 2011 was a challenging period for global
financial markets in particular, with governments’ reactions to
sovereign debt issues and fiscal policies having a strong daily
influence on investor sentiment and behaviour. This in turn af-
16 | Annual Report 2011 |
In spite of this more difficult environment, the vast majority of
commodities posted gains in average prices compared to 2010,
with only those that are fundamentally over-supplied (e.g. fer-
rochrome and cobalt) falling year-on-year. The early gains in
prices were largely driven by stronger industrial output, gen-
erally positive momentum in the global growth cycle and the
impact of the various liquidity injections of 2010. However, the
Chinese government’s determined intervention to ease infla-
tion undoubtedly reduced apparent demand for many indus-
trial commodities during 2011, with the rate of steel production
growth in particular declining as the year progressed. This re-
sulted from slower growth in end demand in combination with
tighter credit conditions which helped drive down inventory lev-
els within the supply chain. The resurfacing of grave Eurozone
debt issues during H2 2011 triggered a renewed sell-off in risk
assets, including commodities, with the rest of the world joining
the destocking cycle. Investment demand from commodity in-
dices also generally declined during 2011. So while annual aver-
age prices were generally up in 2011, a comparison of absolute
December 2011 and December 2010 prices better conveys the
challenging nature of commodities markets over the past year
and in particular during the second half.
Base metals’ prices decreased between 14% and 26% in Decem-
ber 2011 compared to December 2010, with each metal in the
complex trading relatively in-line with the others. Precious met-
als were both more disparate in their performance and more
volatile, with silver and gold both ending 2011 at higher levels.
Oil (and oil products) and gold delivered the best returns in
2011. Oil was largely driven by the Libyan supply disruption and
general political uncertainty within the Middle East. Gold pri-
ces continued to benefit from negative global real interest rates
and the combined resurgence in gold buying by central banks
(as a diversifier of reserves) and investors (as a safe haven). Ten-
sions in the Middle East persist, and it is particularly noteworthy
that the situation in Iran has the potential to dramatically alter
the oil supply/demand balance. The price of oil has a unique
ability to be self correcting at either end of the price spectrum
given its importance to global growth and as such it will remain
a defining factor for global growth in 2012.
With less exposure to financial market sentiment, bulk com-
modities were on the whole steadier than exchange traded
metals during 2011. Thermal coal in particular remained broadly
flat for the majority of 2011, with Australian flooding, US exports
and the Japanese Tsunami driving uncertainty in the commod-
ity’s supply/demand balance. Coking coal retreated from the
spike induced by the flooding, although the decline is less
pronounced than that seen in the later stages of 2010. Iron ore
was reasonably stable for much of the year, but dramatically fell
away in October facing a Chinese buyers strike before eventu-
ally recovering at the end of year below the $ 140/t level.
Agricultural commodities had a turbulent 2011, with the markets
reaching peaks in the summer of 2011. While the sector is typi-
cally less susceptible to macro headwinds (e.g. weak fixed asset
investments (FAI), industrial production (IP) and GDP growth)
oveRview | BuSineSS Review | CoRpoRAte GoveRnAnCe | FinAnCiAl StAteMentS | AdditionAl inFoRMAtion
than the industrial and energy commodities, a combination of
uncertain politics, unfavourable weather and generally low in-
ventory levels drove prices up materially. Prices eventually stabi-
lised in the fourth quarter. While agricultural commodities may
not revisit last year’s highs in 2012, a combination of improving
non-OECD demand, continued low inventory levels and an un-
certain supply outlook across many sub-groups should keep
prices well supported around recent levels.
One of the key drivers of this growth is the Updated Phase IV Ex-
pansion at Katanga which was approved in Q4 2011. This expan-
sion will entail the construction of an additional 100,000 tonnes
per annum solvent extraction plant and an in-pit crusher at the
KOV Open Pit, which should allow Katanga to increase its cop-
per production to 270,000 tonnes per annum of LME Grade A
copper by December 2013 and thereafter to 310,000 tonnes per
annum.
Subject to developments in Iran, we continue to expect com-
modity prices to remain largely supply driven during 2012.
Generally, inventories remain below average levels in most
major commodities. We continue to see customer behaviour
and physical premia consistent with this view. This is a key dif-
ferentiator to the environment in 2008, when a major element
of the correction in global industrial production was caused
by the de-stocking of inventories. With most commodities pro-
ducing at close to capacity levels and with broadly declining
grade levels globally, the scope for supply disappointments re-
mains very real. 2011 has reminded us once more how weather
and production disappointments are liable to compound sup-
ply issues when assets are operating close to capacity levels.
Operating and capital costs have also continued to rise ahead
of expectations around the commodity space, which is putting
continued pressure on marginal costs.
On a longer term horizon, we see no change to the fundamental
drivers for healthy demand in our major commodities. Emerg-
ing market urbanisation will continue to increase commodity
intensity per capita, as developing economies strive to improve
their living standards to the level of OECD countries. China will
remain the central driving force on account of its existing scale,
inherent potential and demonstrable commitment to deliver
growth and development. The precise growth rates and the
patterns they form will clearly vary by country, reflecting devel-
oping economies’ heterogeneous political and cultural struc-
tures. However, we firmly believe that the common theme will
remain one of healthy long-term demand growth for the com-
modities which we supply.
New capital investment
Glencore is focused on delivering industry-leading organic pro-
duction growth which in turn will help drive growth within its
marketing business. In this regard, Glencore is very focused on
delivering this growth in a capital efficient manner.
As a result of currently approved projects for metals and min-
erals and energy products, Glencore’s own production, on a
100% basis, in copper equivalent units (using current commod-
ity price forward curves), is forecast to increase from 1.1 million
tonnes in 2011 to in excess of 1.7 million tonnes in 2015, a Com-
pound Annual Growth Rate (CAGR) of 13%.
In 2011, overall, our key industrial growth projects continued
to progress on track and within budget giving confidence that
Glencore can deliver considerable growth in the next few years,
even absent an improvement in the economic environment.
The meaningful production growth experienced by the African
Copperbelt assets in 2011 is expected to continue into 2012.
At Mutanda, the optimisation of the front end of the Phase III
plant and the associated cobalt circuit is expected to be com-
pleted by the end of Q2 2012 and Q4 2012 respectively which,
along with the already commissioned EW4 tank house, will re-
sult in the overall hydrometallurgical complex being capable of
producing 110,000 tonnes per annum of copper cathodes and
23,000 tonnes per annum of cobalt in hydroxide at design feed
grades. Mutanda also continues to assess various other expan-
sion options and is currently considering whether to expand the
plant capacity to 210,000 tonnes per annum (with an initial cost
estimate of $ 670 million) or to expand the existing plant capacity
to 150,000 tonnes per annum in conjunction with the construc-
tion of a new 100,000 tonnes sulphide concentrator.
Mutanda, Katanga and Kansuki are engaged in a project to se-
cure power for all three operations through the refurbishment
of two turbines at the Inga dam which is expected to provide
450 megawatts of electricity. The project is being executed in
partnership with Société Nationale d’Electricité, the national
power operator in the Democratic Republic of Congo with an
initial cost estimate of $ 340 million, recoverable via future low-
er tariffs.
The Smelter Phase III project at Mopani is currently underway
which includes the installation of three new converters, gas
cleaning equipment and a second acid plant, which will im-
prove sulphur dioxide emissions capture to above 97%. The
project is on schedule. In addition the Synclinorium project,
a major new shaft development, should provide access to
115 million tonnes of copper ore and is expected to yield 4 mil-
lion tonnes per annum of ore by 2018, replacing production
from the current ore bodies.
Glencore’s metals’ industrial asset growth is also expected to
be driven by Kazzinc. The new IsaSmelt copper smelter was
commissioned in August 2011 and is forecast to ramp-up pro-
duction to its design capacity of 70,000 tonnes per annum
during 2012. In addition, ore processing at Altyntau Kokshetau
(Kazzinc’s gold unit) is forecast to ramp up to its design capac-
ity of 8.0 million tonnes per annum by 2013 (from an estimated
7.0 million in 2012), with gold (including silver in gold equivalent)
production expected to exceed 800,000 toz per annum.
Growth in the Energy Products industrial assets is expected from
Prodeco as it ramps-up capacity to 21 million tonnes by Q4 2013
through development primarily of the Calenturitas mine. Also,
construction of the new direct loading port (Puerto Nuevo in
Cienaga) is currently underway which will provide Prodeco with
higher annual throughput capacity and lower operating costs
compared to the current port at Puerto Zuñiga. This project is
on schedule and is expected to be commissioned in Q1 2013.
| Annual Report 2011 | 17
In addition, the West African oil portfolio will further contribute
to the Energy Products industrial asset’s growth. After Aseng
(Block I) commenced first oil production in November 2011 ahead
of schedule, the development of the Alen gas/condensate field
(Block O) remains on track for first production in late 2013 with a
target flow rate of 37,500 bbl per day. Further exploratory drill-
ing is scheduled in 2012 in respect of various blocks in Cameroon
and Equatorial Guinea.
For the Agricultural Products business unit, a five year expan-
sion plan is in place at Rio Vermelho which is due to increase
crush ing capacity from 1 million tonnes to 2.6 million tonnes.
There are significant organic expansion projects underway, pri-
marily via build of additional crushing capacity in Argentina,
Hungary, Poland and Czech Republic.
Key objectives for 2012
In 2012, Glencore plans to invest some $ 2.9 billion of its current
three year $ 5.3 billion capital expenditure plan, as it continues
its primarily brownfield development strategy. This is expected
to generate significant growth in own-production (in copper
equivalent terms) in line with Glencore’s objective of doubling
same between 2011 and 2015. These developments include the
continued consolidation and expansion of the copperbelt as-
sets, however have not factored in significant further expansion
potential of the South African coal portfolio, taking into account
the recently completed Umcebo and Optimum investments.
Glencore will continue to look for sensible value accretive ac-
quisitions as opportunities arise for further enhancement of
its platform for future growth and returns and also continue to
focus on cost efficiencies across its industrial activities, particu-
larly in an industry currently experiencing cost pressures from
various sources.
Cash generation, liquidity and the maintenance of its in-
vestment grade credit ratings will remain key focus areas for
Glencore, including managing existing financing facilities and
tapping new funds as appropriate to maintain a strong financial
profile in order to deliver Glencore’s growth strategy.
Glencore’s Board has agreed an all-share merger of equals
with Xstrata to create a leading global integrated producer and
marketer of commodities. Upon completion, Glencore Xstrata
will realise near term value from marketing the combined group’s
products, be able to capitalise on more growth opportunities
than the sum of either company alone and better optimise the
combined group’s pipeline of development projects.
18 | Annual Report 2011 |
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1.5 | sustainability
Glencore Corporate Practice (GCP) is designed to ensure ro-
bust business practice for sustainability and other non-financial
business areas, throughout all Glencore business segments and
commodity departments, at both corporate and local levels. It
meets internationally-accepted best practice standards for cor-
porate governance and management of non-financial activities.
We use it to continuously improve performance in these areas,
and to develop internal and external understanding and ac-
ceptance of how we manage sustainability.
International law
Best practice standards
GCP principles
GCP management
Group and local
policies
Local law
tHE sCOPE OF gCP
The GCP requirements are mandatory for everyone at Glencore.
This applies throughout our marketing activities, and in all in-
dustrial activities where we own over 50% or have operational
control.
gCP gOVERnAnCE
Responsibility for GCP development and implementation lies
with our Health and Safety, Environment and Communities
(HSEC) committee, established by Glencore’s Board in 2011.
Chaired by an independent Board member, this committee
provides the leadership, control and guidance needed to en-
sure group-wide adherence to the GCP framework.
The committee evaluates how effectively Glencore identifies
and manages environmental and health and safety risks, and as-
sesses our compliance with the relevant regulations. It assesses
the impact of Glencore sustainability programmes on our em-
ployees, local communities and other third parties, as well as
the impact on our reputation.
pendent audits of Glencore’s sustainability performance, and
any management strategies and action plans in response to
issues raised, making recommendations to the Board as appro-
priate.
PROgREss OVERViEw FOR 2011
Health and safety
It is with great sadness that we report 18 fatalities at our opera-
tions in 2011. We also saw lost time injury frequency rates that
were slightly higher, although not fully comparable with 2010.
These results clearly reinforce our focus on continuous improve-
ment in health and safety.
To this end, our HSEC Board committee initiated and conduct-
ed baseline assessments of health and safety in 2011, assisted
by an internationally renowned independent third party. As-
sessments started at our South American metals operations in
January 2012, and will be rolled out across all operations over
the rest of the year. These assessments are designed to improve
the transparency of our health and safety management and
provide additional input for taking any necessary corrective ac-
tion and improvements. This is a further step along the road to
achieving our aim of a zero harm operation.
Environment
We experienced no serious environmental accidents (classified
as “Class A: Major” by our environmental incident reporting
system) in 2011. We believe this reflects the robustness of our
procedures and policies, particularly in light of our extensive
and complex activities. These activities are not limited to the
extraction of natural resources but also include significant lo-
gistical operations: for example, maritime transportation.
The majority of Glencore’s industrial assets are brownfield, rather
than greenfield, operations. Greenfield projects are particularly
prone to issues that involve disturbing land upon which people
live or rely for their livelihoods, or which has specific environ-
mental value: for instance natural beauty, or valuable ecosys-
tems, habitats or biodiversity. In contrast, brownfield legacy
issues often require equipment upgrades or, in extreme cases,
partial or complete rebuilding of facilities. This must generally
be done while continuing production to maintain local levels of
employment. This may result in a situation where our approach
is challenged and subjected to scrutiny by local or global stake-
holders, such as NGOs or the media. Challenges typically focus
on the timescales of our improvement projects, rather than our
end objectives. This is because timescales for complex projects
can be particularly lengthy and may not match the expectations
of observers and other stakeholders. This has been the case for
some of our operations in 2011.
The committee receives management reports on all fatalities
and serious accidents (and the resulting actions), and evaluates
and oversees all sustainability reporting to external stakehold-
ers, on behalf of the Board. It reviews the results of any inde-
As stated in our GCP commitments, we are committed to con-
tinuously reducing the environmental impact of our operations.
2011 saw further improvements, with many initiatives com-
menced, implemented or completed this year.
| Annual Report 2011 | 19
One legacy issue subject to significant local and global stake-
holder scrutiny in 2011 involved our Mopani smelter operation.
The smelter emissions have had a negative impact on air quality
in the town of Mufulira in Zambia since its commissioning in 1937.
Mopani’s improvement projects continued in 2011, including
modernisation of the smelter, which is progressing to an accel-
erated timetable. The pace of work, by both Mopani’s workers in
Zambia and equipment manufacturers elsewhere, enabled us to
announce that the modernisation will be finished by the end of
2013. This is 18 months ahead of the target agreed with the Zam-
bian government in the environmental management plan. Once
completed, we will capture over 97% of our emissions meeting
international standards on emissions capture.
In 2011 we also continued with significant investments in our
DRC operations, located in the province of Katanga. We contin-
ued the commissioning of our greenfield Mutanda copper and
cobalt hydrometallurgical plant in accordance with a phased
approach. This has allowed us to use the latest environmental
techniques including the construction of a double lined tailings
facility.
At Katanga Mining Ltd, our brownfield project in DRC, we con-
tinued upgrading the copper and cobalt metallurgical facilities.
We continue to address environmental legacy issues and where
possible accelerate solutions to reverse these. In February 2012
we completed construction of the effluent discharge system
which will neutralise and discharge all effluent from the plants
into a tailings facility, bringing to an end a legacy issue spanning
more than 50 years. However, in the meantime the situation has
also attracted NGO and media attention. Working in such an
environment inevitably means that there are many challenges
ahead, but we are satisfied that our responsible development of
DRC resources continues to provide improved living conditions
for the local population and over ten thousand quality jobs. In
addition, Glencore makes significant direct voluntary contribu-
tions towards schools, hospitals and other infrastructure for
nearby communities.
2011 was also an important year for our coal operations in Co-
lombia, which made huge progress in expanding its two oper-
ating mines, as well as the construction of new direct-loading
port facilities. This is expected to be one of the world’s leading
coal ports, with a direct loading system that is world-class in
safety, efficiency and environmental protection.
As part of our first sustainability report, we estimated our
greenhouse gas emissions across the group. This showed that
emissions from our shipping activities outweigh those from
land equipment. Consequently, we launched a project in 2011
to explore opportunities for reducing our shipping fuel con-
sumption by systematically examining the energy efficiency of
our time-chartered vessels.
affected. The air quality concern is attributed to the operations
of all four concession owners in the region, one of which is Pro-
deco. All four companies are committed to resettling residents
in compliance with World Bank standards and their own corpo-
rate principles. During an assessment and community consulta-
tion carried out in 2011, it became clear that residents’ expecta-
tions were not being met by the government-owned operator
managing the project, and that the process required greater
transparency. For this reason, the four concession owners have
now appointed an additional external team to support and ex-
pedite activities. Drawn from a world-renowned company with
both local Colombian and international resettlement expertise,
the team was deployed at the beginning of 2012. They plan to
meet with community representatives in Plan Bonito, El Hatillo
and Boqueron to collaboratively establish negotiation commit-
tees, create committee rules and procedures and agree a reset-
tlement action plan.
We also continued our established programme of social devel-
opment projects in 2011. We aim to tailor these programmes to
the needs of the local communities.
In the DRC, projects included the construction of a new on-site
hospital for our workers in Kolwezi (and their dependants), a
new clinic at Mutanda, and a dispensary in the villages of Kando
and Lualaba, which will provide medical services for more than
5,000 people. We continued with the rehabilitation and main-
tenance of the roads of the Kolwezi district and in addition re-
habilitated the Kolwezi runway and airport. We continued with
donations in the forms of medical supplies to local hospitals
and books and desks for local schools. Glencore completed the
construction of the 102-bed Kisangani hospital in the northern
province of Orientale. In March 2012, Glencore also completed
the construction of the 75-bed Pweto hospital in the south of
the Katanga province. Both new facilities include state-of-the-
art medical equipment, and cater for a variety of specialised
fields of medicine.
In Zambia, Mopani undertook a sanitation infrastructure project
in the Wusakile township, with the construction of some 1,500
new sanitation units. This was identified as an area where Mo-
pani could contribute to the people of Wusakile and bring an
end to the recurrent outbreaks of typhoid fever. The rehabilita-
tion of the Kitwe bypass and the Sabina-to-Mufulira National
roads were also undertaken during 2011. Mopani continued its
involvement in schooling and health programmes, which have
been running for many years. Our malaria programme enjoys
continued success with the malaria incident rate in the town of
Kitwe reducing from 200 out of every 1,000 people in 2001 to
7.7 out of every 1,000 people in 2011. The Mopani HIV/AIDS pro-
gramme continues to be successful, with the transmission rate
from mother to child reducing from 35% in 2005 to below 3%
in 2011.
Communities
At our Calenturitas coal project, based in Cesar province, Co-
lombia, we are undertaking a resettlement project in conjunc-
tion with three other mining companies. Air quality monitoring
in the area led to a governmental decree to resettle three com-
munities, with approximately 600 households expected to be
Product stewardship
In 2010, our agricultural division qualified for the International
Sustainability and Carbon (ISCC) certification scheme, in order
to meet the requirements of the European Renewable Energy
Directive (for sustainable biofuel production supply chains). For
2011, we expanded this supply chain integrity programme to
20 | Annual Report 2011 |
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our crushing plants in Argentina, crop cultivation in Australia
and country offices in Europe.
Our product stewardship activities in 2010 were largely char-
acterised by preparations for the new European substance
registration requirements for REACH (the European Union’s
chemical control act). Building on those achievements, 2011 saw
product safety integrated further into our marketing activities.
For our EU customers, this included implementation of an elec-
tronic safety datasheet distribution system, which we intend to
roll out globally in the future.
Reporting
We issued our first public sustainability report (covering the
year 2010) in 2011. This is available at www.glencore.com/sus-
tainability. We plan to issue our 2011 report in the summer of
2012, which will include further details of the GCP management
programme.
tHE gCP PROgRAMME
The full GCP programme will incorporate Glencore’s group-
wide sustainability targets and objectives to the existing GCP
framework. This will allow us to measure and report on our pro-
gress towards fulfilling our GCP commitments.
Roll out of the GCP programme is a key sustainability milestone
for 2012; top-level targets and objectives will be published in
our 2011 sustainability report.
Every business within the group will contribute its own set of
objectives to the programme, where necessary, appropriate for
its specific operations and aligned to the group targets. Peri-
odic assessments, management reviews and corrective action
plans should ensure that performance is in line with the GCP
requirements, objectives and targets.
| Annual Report 2011 | 21
1.6 | Key performance indicators
Glencore’s financial and sustainable development key performance indicators (KPIs) provide some measure of our performance
against key drivers of our strategy.
Adjusted EBIT
6 000
5 000
n 4 000
o
i
l
l
i
m
$
S
U
3 000
2 000
1 000
0
2009
2010
2011
Funds from operations (FFO)
n
o
i
l
l
i
m
$
S
U
4 000
3 000
2 000
1 000
0
Adjusted EBIT is a measure that provides insight into Glencore’s overall business
performance (a combination of cost management, seizing market opportunities and
growth) and the corresponding flow driver towards achieving an industry leading re-
turn on equity. Adjusted EBIT as defined in the glossary on page 158 consists of rev-
enue less cost of goods sold and selling and administrative expenses plus share of in-
come from associates and jointly controlled entities and dividend income as disclosed
on the face of the consolidated statement of income, excluding significant items.
2011 Adjusted EBIT was up 2% to $ 5,398 million compared to 2010, with industrial activi-
ties benefiting from stronger commodity prices and increased production and market-
ing activities impacted by unprecedented volatility and disruption in the cotton market.
FFO is a measure that reflects Glencore’s ability to generate cash for investment, debt
servicing and distributions to shareholders as well as an indictation of Glencore’s abil-
ity to deliver against its growth and financial flexibility objectives. FFO comprises cash
provided by operating activities before working capital changes less tax and net inter-
est payments plus dividends received and adding back listing related expenses in 2011.
2009
2010
2011
2011 FFO was up 6% to $ 3,522 million compared to 2010, broadly consistent with the
increase in Adjusted EBIT above.
Net debt/FFO to net debt
n
o
i
l
l
i
m
$
S
U
15 000
12 500
10 000
7 500
5 000
2 500
0
2009
2010
2011
Net debt is an absolute measure of how we are managing our balance sheet and capi-
tal structure, while of equal or greater importance, the relationship of FFO to net debt
is an indication of our financial flexibility and strength, a key driver of our strategy. Net
debt is defined as total current and non-current borrowings and commodities sold
with agreements to repurchase less cash and cash equivalents, marketable securities
and readily marketable inventory.
30
25
20
15
%
10
5
0
2011 Net debt decreased 12% to $ 12,938 million compared to 2010, with the proceeds
raised from the Listing offset by capex, working capital and business acquisition related
investments. The ratio of FFO to net debt improved to 27.2% in 2011 from 22.6% in 2010.
22 | Annual Report 2011 |
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Lost time injury frequency rate (LTIFR)
R
F
T
L
I
14
12
10
8
6
4
2
0
2009
2010
2011
Metals and minerals
Energy products
Agricultural products
The lost time injury frequency rate (LTIFR) is a key measure of how we are deliver-
ing against our commitment to the health and safety of our employees. The LTIFR is
calculated based on the total number of injuries per million hours worked (by both
employees and contractors)
Group 2011 LTIFR increased from 3.44 to 3.75, although this increase does not ap-
propriately recognise the improvements achieved in metals and minerals and energy
products which reduced from 3.92 and 1.18 to 3.29 and 0.81 respectively. Agricultural
products reported an almost four-fold increase in LTIFR to 11.96, primarily attributable
to enhanced reporting and portrayal of a selection of hazardous working conditions,
such that a like for like comparison is not particularly meaningful in 2011, however will
be so going forward.
Number of environmental Class A accidents
We undertake extensive and complex activities which are not limited to the extraction
of natural resources but also include significant logistical operations such as maritime
transportation. To measure the robustness of our procedures and policies, we use
ultimately the occurrence of Class A environmental accidents in the group. We classify
disastrous or close to disastrous environmental accidents as Class A. Class A stands
for incidents or spills with a major environmental impact that have a long-term effect
reversible only by long-term remediation with aftercare.
No Class A environmental accidents were reported in 2011 (2010: nil; 2009: 2).
| Annual Report 2011 | 23
1.7 | Principal risks and uncertainties
Glencore’s business, results of operations or financial condition could be materially and adversely affected by competitive, eco-
nomic, political, legal, regulatory, social, business and financial risks and uncertainties. The risks described below are those that
Glencore currently believes may materially affect it although this is not an exhaustive list. Additional risks and uncertainties not
currently known to Glencore, or those which are currently deemed to be immaterial, may become material and adversely affect
Glencore’s business, results of operations, financial condition and/or prospects.
The results may differ significantly from those previously projected as a result of certain factors, including the risks which it faces,
as described below. The order in which the following is presented does not necessarily reflect the likelihood of their occurrence or
the relative magnitude of their potential material adverse effect on Glencore’s business, results of operations, financial condition
and/or prospects. These principal risks and uncertainties should be considered in connection with any forward looking statements
in this document and the cautionary statement.
EXTERNAL
Fluctuation in expected volumes of supply or demand for the commodities in which Glencore markets
Glencore is dependent on the expected
volumes of supply or demand for com-
modities in which Glencore is active,
which can vary over time based on chang-
es in resource availability, government
policies and regulation, costs of produc-
tion, global and regional economic con-
ditions, demand in end markets for prod-
ucts in which the commodities are used,
technological developments, including
commodity substitutions, fluctuations in
global production capacity, global and
regional weather conditions and natural
disasters, all of which impact global mar-
kets and demand for commodities.
Fluctuation of commodity prices
The revenue and earnings of Glencore’s
industrial asset activities and to a lesser
extent its marketing activities are depen-
dent upon prevailing commodity prices.
Commodity prices are influenced by a
number of external factors, including the
supply of and demand for commodities,
speculative activities by market partici-
pants, global political and economic
conditions and related industry cycles
and production costs in major producing
countries.
Impact: Fluctuations in the volume of each commodity produced or marketed by
Glencore could materially impact Glencore’s business, results of operations and earn-
ings. These fluctuations could result in a reduction or increase in the income gener-
ated in respect of the volumes handled by Glencore’s marketing activities, or a reduc-
tion or increase in the volume and/or margin in respect of commodities produced by
Glencore’s industrial assets.
mItIgatIon: The risk of fluctuations in demand for the commodities in which Glencore
markets is managed by maintaining a diversified portfolio of commodities to market,
reducing the impact of movement in any one commodity market. Individual commodi-
ties, even apparently closely linked products such as barley and wheat, have their own
demand cycles reducing over-reliance on any single product.
Impact: Fluctuations in the price of commodities produced or marketed could materi-
ally impact Glencore’s business, results of operations and earnings. The impacts that
fluctuating commodity prices have on Glencore’s business differ between its market-
ing activities and industrial activities:
Marketing activities: In a market environment in which prices for a particular com-
modity are higher on average, the premiums/margins that Glencore generates in its
physical marketing operations relating to such commodity as a result of geographi-
cal, time and quality imbalances tend to be higher. Glencore also generally benefits
from fluctuating market prices, rather than long periods of stable prices, as it seeks to
physically arbitrage such resulting price differentials. As prices of commodities rise,
Glencore generally has higher working capital financing requirements over the same
quantity of commodities in question. During periods of falling commodity prices, the
opposite applies in that Glencore will require less working capital financing for its
marketing activities.
Industrial activities: Higher prices will be particularly favourable to the profitability of
Glencore in respect of those commodities which Glencore produces at its industrial
assets or are produced by its associated companies and other investees. Similarly, low
prices will negatively impact Glencore’s industrial activities and could result in such
activities incurring losses.
24 | Annual Report 2011 |
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Fluctuation in currency exchange rates
The vast majority of Glencore’s transac-
tions are denominated in U.S. Dollars,
while operating costs are spread across
several different countries the currencies
of which fluctuate against the U.S. Dollar.
A significant downturn in the price of commodities generally results in a decline in
Glencore’s profitability during such a period and could potentially result in a devalu-
ation of inventories and impairments. Although the impact of a downturn on com-
modity prices affects Glencore’s marketing and industrial activities differently, the
negative impact on its industrial activities is generally greater, as the profitability in
the industrial activities is more directly exposed to price risk due to its higher level of
fixed costs, while Glencore’s marketing activities are ordinarily substantially hedged in
respect of price risk and principally operate a service-like margin-based model.
mItIgatIon: The risk of fluctuations in commodity prices is managed by maintaining
a diversified portfolio of commodities, reducing the impact of movement to any in-
dividual commodity price. In addition, Glencore continuously reviews and looks to
optimise its asset portfolio to ensure it is sufficiently cost effective and efficient and
a substantial portion of our inventory is either under contract for sale at a predeter-
mined price or hedged through futures and options on commodity exchanges or with
highly rated counterparties. Therefore, at any one time, the commodity price risk is
restricted to a small proportion of the working capital balance. Financial expense risk
during periods of low commodities prices is mitigated by maintaining an investment
grade rating and a mix of floating and fixed rate funding options, the former generally
passed on via the transactional terms in marketing arrangements.
Impact: The vast majority of transactions undertaken by both Glencore’s marketing
and industrial activities are denominated in U.S. Dollars. However, Glencore is ex-
posed to fluctuations in currency exchange rates:
• through its industrial activities, because a large proportion of the operating costs
of these assets are denominated in the currency of the country in which each asset
is located, the largest of such currency exposures being to the Australian Dollar, the
Kazakhstan tenge, the Colombian Peso and the Canadian Dollar via Glencore’s stake
in Xstrata;
• through the costs of Glencore’s global office network, which are denominated large-
ly in the currency of the country in which each office is located, the largest of such
currency exposures being to the Swiss Franc, the Pound Sterling and the Euro; and
• through its marketing activities, although only a small minority of purchase or sale
transactions are denominated in currencies other than U.S. Dollars.
Foreign exchange rates have seen significant fluctuation in recent years and a depre-
ciation in the value of the U.S. Dollar against one or more of the currencies in which
Glencore incurs significant costs will therefore result in an increase in the cost of these
operations in U.S. Dollar terms and could adversely affect Glencore’s financial results.
mItIgatIon: Glencore manages the risk of fluctuating currency exchanges rates by
operating in a number of different geographies and by hedging specific future non
U.S. Dollar denominated commodity purchase or sale commitments.
| Annual Report 2011 | 25
Impact: The geopolitical risks associated with operating in a large number of regions
and countries, if realised, could affect Glencore’s ability to manage or retain interests
in its industrial activities and could have a material adverse effect on the profitability,
ability to finance or, in extreme cases, viability of one or more of its industrial assets.
Although Glencore’s industrial assets are geographically diversified across various
countries, disruptions in certain of its industrial operations at any given time could
have a material adverse effect on Glencore’s marketing business.
mItIgatIon: Geopolitical risk is managed through geographical diversification of
commodities and operations, continuous monitoring and dialogue through and with
Glencore’s network of field offices and a commitment to engage proactively with em-
ployees and the communities in which it operates, in order to maintain and improve
its licence to operate.
Geopolitical risk
Glencore operates and owns assets in a
large number of geographic regions and
countries some of which are categorised
as developing, complex and having un-
stable political or social climates and, as
a result, is exposed to a wide range of po-
litical, regulatory and tax environments.
These environments are subject to change
in a manner that may be materially ad-
verse for Glencore, including changes to
government policies and regulations
governing industrial production, foreign
investment, price controls, export con-
trols, tariffs, income and other forms of
taxation (including policies relating to the
granting of advance rulings on taxation
matters), nationalisation or expropria-
tion of property, repatriation of income,
royalties, the environment and health and
safety.
Compliance with a significant number of laws and regulations
As a diversified production, sourcing, mar -
k eting and distribution company con-
ducting complex transactions globally,
Glencore is exposed to and subject to
extensive laws and regulations governing
various matters. These include laws and
regulations relating to bribery and cor-
ruption, taxation, anti-trust, financial mar -
kets regu la tion, environmental protec tion,
management and use of hazardous sub-
stances and explosives, management of
natural resources, licences over resour ces
owned by various governments, explora-
tion, development of projects, produc-
tion and post-closure reclamation, the
employment of expatriates, labour and
occupational health and safety standards,
and historic and cultural preservation.
Impact: These laws and regulations could allow governmental authorities and private
parties to bring lawsuits based upon damages to property and injury to persons re-
sulting from the environmental, health and safety and other impacts of Glencore’s
past and current operations, and could lead to the imposition of substantial fines,
penalties, other civil or criminal sanctions, the curtailment or cessation of operations,
orders to pay compensation, orders to remedy the effects of violations and/or or-
ders to take preventative steps against possible future violations. Moreover, the costs
associated with compliance with these laws and regulations are substantial and any
changes to these laws could cause additional expenditure (including capital expendi-
ture) to be incurred or impose restrictions on or suspensions of Glencore’s operations
and delays in the development of its properties. In addition, obtaining the necessary
governmental permits can be a particularly complex and time consuming process and
may involve costly undertakings. The duration and success of permit applications are
contingent on many factors, including those outside Glencore’s control. Failure to
obtain or renew a necessary permit could mean that such companies would be unable
to proceed with the development or continued operation of a mine or project, which,
in turn, may have a material adverse effect on Glencore’s business, results of opera-
tions, financial condition and prospects.
mItIgatIon: Glencore is committed to comply with or exceed the laws, regulations and
best practice guidelines applicable to its operations and products in the jurisdictions
in which it operates and through continuous monitoring of legislative requirements
and engagement with government and regulators it strives to ensure full compliance.
Liquidity, or ready access to funds, is essential to Glencore’s businesses. Liquidity risk
is the risk that Glencore is unable to meet its payment obligations when due, or that
it is unable, on an ongoing basis, to borrow funds in the market on an unsecured or
secured basis at an acceptable price to fund actual or proposed commitments. While
Glencore adjusts its minimum internal liquidity targets in response to changes in mar-
ket conditions, its liquidity may be impaired due to circumstances it is unable to con-
trol, such as general market disruptions, sharp increases in the prices of commodities
or an operational problem that affects its suppliers or customers or itself.
Liquidity risk
Glencore’s failure to obtain funds could
limit its ability to engage in desired ac-
tivities and grow its business.
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Impact: A lack of liquidity may mean that Glencore will not have funds available to
maintain or increase its marketing activities and industrial activities.
Marketing activities: Glencore’s marketing activities employ significant amounts of
working capital to fund purchases of commodities for future delivery to its end cus-
tomers, to meet margin requirements under derivative contracts and to fund the ac-
quisition and maintenance of certain transport and storage assets which complement
its marketing activities. Any inability to fund these amounts of working capital may
prevent Glencore from maintaining its historic levels of marketing activity or from in-
creasing such levels in the future.
Industrial activities: Glencore’s industrial activities may be capital intensive and the
continued funding of such activities is critical to maintain its ownership interests in its
industrial assets, to maintain production levels in periods when net operating cash
flow is negative or insufficient to cover capital expenditures, to increase production
levels in the future in accordance with its business plans and to grow its industrial ac-
tivities through the acquisition of new assets. Any inability to fund these operating and
capital expenditure requirements may prevent Glencore from maintaining or growing
its industrial activities’ production output.
mItIgatIon: Glencore operates a policy of liquidity risk management, whereby it seeks
to maintain (via a minimum prescribed level) sufficient cash and cash equivalents and
other sources of committed funding available to meet anticipated and unanticipated
funding needs.
Impact: Many of the physical commodity markets in which Glencore operates are frag-
mented or periodically volatile. As a result, discrepancies generally arise in respect of
the prices at which the commodities can be bought or sold in different forms, geo-
graphic locations or time periods, taking into account the numerous relevant pric-
ing factors, including freight and product quality. These pricing discrepancies can
present Glencore with arbitrage opportunities whereby Glencore is able to generate
profit by sourcing, transporting, blending, storing or otherwise processing the rel-
evant commodities. Profitability of Glencore’s marketing activities is, in large part,
dependent on its ability to identify and exploit such arbitrage opportunities. A lack
of such opportunities, for example due to a prolonged period of pricing stability in a
particular market, or an inability to take advantage of such opportunities when they
present themselves, because of, for example, a shortage of liquidity or an inability
to access required logistics assets or other operational constraints, could adversely
impact Glencore’s business, results of operations and financial condition.
mItIgatIon: Glencore mitigates the risk of an inability to take advantage of arbitrage
opportunities or lack thereof by maintaining a diversified portfolio of products and
through informational advantages Glencore enjoys via its global network, its size-
able market share and logistics capabilities in many commodities enabling it to move
quickly in response to arbitrage opportunities afforded by fluctuations and disequi-
librium in commodity markets.
MARKETING ACTIVITIES
Arbitrage opportunities
Glencore’s marketing activities are de-
pendent, in part, on its ability to identify
and take advantage of arbitrage oppor-
tunities.
Hedging strategy
Glencore’s hedging strategy may not
always be effective, does not require all
risks to be hedged and may leave an ex-
posure to basis risk.
Impact: Glencore’s marketing activities involve a significant number of purchase and
sale transactions across multiple commodities. To the extent Glencore purchases a
commodity from a supplier and does not immediately have a matching contract to sell
the commodity to a customer, a downturn in the price of the commodity could result
in losses to Glencore. Conversely, to the extent Glencore agrees to sell a commodity
to a customer and does not immediately have a matching contract to acquire the com-
| Annual Report 2011 | 27
modity from a supplier, an increase in the price of the commodity could result in losses
to Glencore, as it then seeks to acquire the underlying commodity in a rising market.
In the event of disruptions in the commodity exchanges or markets on which Glencore
engages in hedging transactions, Glencore’s ability to manage commodity price risk
may be adversely affected and this could in turn materially adversely affect its busi-
ness, financial condition and results of operations.
In addition, there are no traded or bilateral derivative markets for certain commodi-
ties that Glencore purchases and sells, which limits Glencore’s ability to fully hedge its
exposure to price fluctuations for these commodities.
mItIgatIon: In order to mitigate the risks in its marketing activities related to commod-
ity price fluctuations and potential losses, Glencore has a policy, at any given time,
of hedging substantially all of its marketing inventory and relevant forward purchase
commitments not already contracted for sale at pre-determined prices through fu-
tures and swap commodity derivative contracts, either on commodities’ exchanges or
in the over the counter market.
In instances where there are no traded or bilateral derivative markets for certain com-
modities, Glencore’s ability to hedge its commodity exposure is limited to forward
contracts for the physical delivery of a commodity or futures and swap contracts for a
different, but seemingly related, commodity.
Impact: Non-performance by Glencore’s suppliers, customers and hedging counter-
parties may occur in a range of situations, such as:
• a significant increase in commodity prices could result in suppliers being unwilling
to honour their contractual commitments to sell commodities to Glencore at pre-
agreed prices;
• a significant reduction in commodity prices could result in customers being unwilling
or unable to honour their contractual commitments to purchase commodities from
Glencore at pre-agreed prices;
• customers may take delivery of commodities from Glencore and then find them-
selves unable to honour their payment obligations due to financial distress or any
other reasons; and
• hedging counterparties may find themselves unable to honour their contractual
commitment due to financial distress or other reason.
Non-performance by a counterparty could have an adverse impact on its business,
results of operations and financial condition, including by creating an unintended,
unmatched commodity price exposure.
In addition, financial assets consisting principally of cash and cash equivalents, mar-
ketable securities, receivables and advances, derivative instruments and long-term
advances and loans could potentially expose Glencore to concentrations of credit risk.
mItIgatIon: Glencore seeks to reduce the risk of customer non-payment by requir-
ing credit support from creditworthy financial institutions including making extensive
use of credit enhancement products, such as letters of credit or insurance policies,
where appropriate, and by imposing limits on open accounts extended. Whilst these
limits are believed appropriate based on current levels of perceived risk, there is a
possibility that a protracted difficult economic environment would negatively impact
the quality of these exposures. In addition, mark-to-market exposures in relation to
hedging contracts are regularly and substantially collateralised (primarily with cash)
pursuant to margin arrangements put in place with such hedge counterparts.
Glencore actively monitors the credit quality of its counterparties, including the risk of
non-performance by suppliers and customers alike, through internal reviews, strong
relationships and industry experience and a credit scoring process which includes,
where available, public credit ratings.
Counterparty credit and performance risk
Glencore, in particular via its marketing
activities, is subject to non performance
risk by its suppliers, customers and hedg-
ing counterparties.
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Impact: Glencore’s marketing activities are exposed to commodity price, foreign
exchange, interest rate, counterparty (including credit), operational, regulatory and
other risks. Glencore has devoted significant resources to developing and implement-
ing policies and procedures to manage these risks and expects to continue to do so in
the future. Nonetheless, Glencore’s policies and procedures to identify, monitor and
manage risks have not been fully effective in the past and may not be fully effective in
the future. Some of Glencore’s methods of monitoring and managing risk are based
on historical market behaviour that may not be an accurate predictor of future market
behaviour. Other risk management methods depend on evaluation of information re-
lating to markets, suppliers, customers and other matters that are publicly available
or otherwise accessible by Glencore. This information may not in all cases be accu-
rate, complete, up to date or properly evaluated. Management of operational, legal
and regulatory risk requires, among other things, policies and procedures to properly
record and verify a large number of transactions and events, and these policies and
procedures may not be fully effective in doing so.
Failure to mitigate all risks associated with Glencore’s business could have a material
adverse effect on Glencore’s business, results of operations and financial condition.
mItIgatIon: Glencore uses, among other techniques, Value-at-Risk, or VaR, as a key
market risk measurement technique for its marketing activities. VaR does not purport
to represent actual gains or losses in fair value on earnings to be incurred by Glencore,
nor does Glencore expect that VaR results are indicative of future market movements
or representative of any actual impact on its future results. VaR has certain limitations;
notably, the use of historical data as a proxy for estimating future events, market il-
liquidity risks and tail risks. While Glencore recognises these limitations and continu-
ously refines its VaR analysis, there can be no assurance that its VaR analysis will be an
effective risk management methodology. Management of counterparty non-payment
risk is mitigated by substantial use of credit enhancement products, including letters
of credit, insurance and bank guarantees. Please refer to section 2.1 Financial review
for further explanation on the use of VaR.
Impact: Any disruptions in the supply of product by factors such as weather and
other natural disasters, unexpected maintenance problems, collapse or damage to
mines, labour disruptions and changes in laws and regulations could adversely affect
Glencore’s margins. Glencore’s business, results of operations, financial condition and
prospects could be materially adversely impacted if it is unable to continue to source
required volumes of commodities from its suppliers on reasonable terms or at all.
mItIgatIon: Glencore sources product from a large range of suppliers (industrial as-
sets and third parties) and is not reliant on any one supplier to satisfy its performance.
This enables Glencore to source alternative product in the event of supply disruption.
Glencore benefits from investments in numerous communities and shared ownership
with local entities that helps to mitigate against some country specific risks.
Risk management policies and procedures
Identifying, quantifying and managing
risk is complex and challenging and al-
though it is Glencore’s policy and prac-
tice to identify and, where appropriate
and practical, actively manage such
risks to support its objectives in man-
aging its capital and future financial se-
curity and flexibility, Glencore’s policies
and procedures may not adequately
identify, monitor and quantify risk.
Supply of commodities from third parties
Glencore purchases a portion of the
physical commodities sold by its market-
ing activities from its controlled indus-
trial operations and associates, including
Xstrata. The remainder of the commodi-
ties sourced by its marketing operations
are purchased from third party suppli-
ers and entities in which Glencore has
a minority stake (excluding associates).
Glencore expects to continue to source
commodities from such third parties in
the future. Glencore is potentially ex-
posed to both price and supply risks with
respect to commodities sourced from
third parties and entities in which it holds
a minority stake. Glencore is reliant on
third parties to source the majority of the
commodities purchased by its marketing
operations.
| Annual Report 2011 | 29
Freight, storage, infrastructure and logistics support
Glencore’s marketing activities require
access to significant amounts of freight,
storage, infrastructure and logistics sup-
port and it is exposed to increases in the
costs thereof. In addition, Glencore often
competes with other producers, purchas-
ers or marketers of commodities or other
products for limited storage and berth-
ing facilities at ports and freight termi-
nals, which can result in delays in loading
or unloading Glencore’s products and
expose Glencore to significant delivery
interruptions.
INDUSTRIAL ACTIVITIES
Impact: Increases in the costs of freight, storage, infrastructure and logistics support
or limitations or interruptions in the supply chain which impedes Glencore’s ability
to deliver its products on time, could adversely affect Glencore’s business, results of
operations or financial condition.
mItIgatIon: The risk of disruptions to or limitations of freight, storage, infrastructure
and logistics support is mitigated through Glencore’s market position, global reach
and its longstanding relationships with third party suppliers of freight. These give
Glencore an advantage in ensuring its commodity transport needs are met along with
its investments in storage and logistic assets such as vessels, oil terminals, metals
warehouses and grain silos.
Non-controlling stakes, joint ventures and strategic, partnership arrangements
Some of Glencore’s industrial assets are
held through non-controlling stakes or
joint ventures and strategic partnership
arrangements.
Impact: Glencore does not control a number of its industrial investments. Although
Glencore has various structures in place which seek to protect its position where it
does not exercise control, the boards of these companies may:
• have economic or business interests or goals that are inconsistent with or are opposed
to those of Glencore;
• exercise veto rights or take shareholders’ decisions so as to block actions that
Glencore believes to be in its best interests and/or in the best interests of all share-
holders;
• take action contrary to Glencore’s policies or objectives with respect to its invest-
ments or commercial arrangements; or
• as a result of financial or other difficulties, be unable or unwilling to fulfil their obli-
gations under any joint venture or other agreement, such as contributing capital to
expansion or maintenance projects.
Improper management or ineffective policies, procedures or controls of a non-con-
trolled entity could adversely affect the business, results of operations and financial
condition of the relevant investment and, therefore, of Glencore.
mItIgatIon: Where projects and operations are controlled and managed by Glencore’s
co-investors or where control is shared on an equal basis, Glencore may provide ex-
pertise and advice, but it has limited or restricted ability to mandate compliance with
Glencore’s policies and/or objectives.
Project development
Glencore has a number of significant
expansions planned for its existing op-
erations, the development of which is
exposed to a number of risks outside of
its control such as technical uncertain-
ties, availability of suitable financing, in-
frastructure constraints, cost overruns,
insufficient labour skills or resources and
delays in permitting or other regulatory
matters.
Impact: Any future upward revisions in estimated project costs, delays in completing
planned expansions, cost overruns, suspension of current projects or other operation-
al difficulties after commissioning, may have a material adverse effect on Glencore’s
business, results of operations and financial condition, in turn requiring Glencore to
consider delaying discretionary expenditures, including capital expenditures, or sus-
pending or altering the scope of one or more of its development projects.
mItIgatIon: Project development risks are mitigated and managed through Glencore’s
continuous project status evaluation and reporting processes, the significant focus of
such being appropriate approval processes and transparent and timely reporting of
costs and progress relative to plan. Significant projects are regularly audited against
the project plan and reporting processes.
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Operating risks and hazards
Glencore’s industrial activities are subject
to numerous operating risks and hazards
normally associated with the development
and operation of natural resource projects,
many of which are beyond Glencore’s con-
trol.
These operating risks and hazards include
unanticipated variations in grade and
other geological problems, seismic activ-
ity, climatic conditions such as flooding
or drought, metallurgical and other pro-
cessing problems, technical failures, una-
vailability of materials and equipment,
industrial actions or disputes, industrial
accidents, labour force disruptions, un-
anticipated transportation constraints,
tribal action or political protests, force
majeure factors, environmental hazards,
fire, explosions, vandalism and crime.
Impact: These risks and hazards could result in damage to, or destruction of, proper-
ties or production facilities, may cause production to be reduced or to cease at those
properties or production facilities, may result in personal injury or death, environmen-
tal damage, business interruption and legal liability and may result in actual produc-
tion differing from estimates of production.
The realisation of such operating risks and hazards and the costs associated with them
could materially adversely affect Glencore’s business, results of operations and finan-
cial condition, including by requiring significant capital and operating expenditures
to abate the risk or hazard, restore Glencore or third party property, compensate third
parties for any loss and/or pay fines or damages.
mItIgatIon: Operating risks and hazards are managed through Glencore’s continuous
assessment, reporting and communication of the risks that affect its business through
its annual risk review processes and updates to its risk register. In addition, risk is miti-
gated somewhat through geographic and multiple project diversification.
Title to the land, resource tenure and extraction rights
Glencore has industrial activities invest-
ments in certain countries where title to
land and rights in respect of land and
resources (including indigenous title) has
not been and may not always be clear,
creating the potential for disputes over
resource development. In many cases,
the government of the country in which a
particular asset is located is the sole au-
thority able to grant such rights and, in
some cases, may have limited infrastruc-
ture and limited resources which may
constrain Glencore’s ability to ensure that
it has obtained secure title to individual
exploration licences or extraction rights.
Availability of infrastructure
The production, processing and product
delivery capabilities of Glencore’s indus-
trial assets rely on their infrastructure be-
ing adequate and remaining available.
Impact: Glencore does not believe that any such disputes are imminent, however, such
a dispute, if related to a material industrial asset, could disrupt or delay relevant min-
ing, processing or other projects and/or impede Glencore’s ability to develop new
industrial properties and may have a material adverse effect on Glencore’s business,
results of operations and financial condition.
mItIgatIon: Title and tenure risks are managed through geographical diversification
of commodities and operations, continuous monitoring and dialogue through and
with Glencore’s network of local offices and a commitment to engage proactively with
employees, governments and the communities in which Glencore operates to main-
tain and better its licence to operate.
Impact: The mining, drilling, processing, development and exploration activities of
the industrial assets in which Glencore holds an interest depend on adequate infra-
structure. Certain of these assets are located in areas that are sparsely populated and
difficult to access. Reliable roads, power sources, transport infrastructure and water
supplies are essential for the conduct of these operations and the availability and cost
of these utilities and infrastructure affect capital and operating costs and therefore
Glencore’s ability to maintain expected levels of production and results of operations.
Any such issues arising in respect of the infrastructure supporting or on Glencore’s
sites could have a material adverse effect on Glencore’s business, results of opera-
tions, financial condition and prospects.
mItIgatIon: Availability of infrastructure risk is mitigated through the continuous moni-
toring and dialogue through and with Glencore’s network of local offices, a commit-
ment to engage proactively with governments and the communities in which Glencore
operates to maintain and improve its licence to operate, and where appropriate, the
establishment of back-up sources of power.
| Annual Report 2011 | 31
Cost control
As commodity prices themselves are
out side of Glencore’s control, the com-
petitiveness and sustainable long-term
profitability of its industrial asset port -
folio depends significantly on its ability
to closely manage costs and maintain
a broad spectrum of low-cost, efficient
operations. Costs associated with the
operation of Glencore’s industrial as-
sets can be broadly categorised into la-
bour costs and other on-site expenses,
including power and equipment costs.
Resources and reserves
Glencore’s stated mineral, coal and hy-
drocarbon reserves, resources and min-
eralised potential are only estimates and
the anticipated volumes or grades may
not be achieved.
Environmental hazards
The processes and chemicals used in
Glencore’s extraction and production
methods, as well as its shipping and
storage activities, are subject to environ-
mental hazards.
32 | Annual Report 2011 |
Impact: Production costs are heavily influenced by the extent of ongoing develop-
ment required, ore grades, mine planning, processing technology, logistics, energy
and supply costs and the impact of exchange rate fluctuations on costs of operations.
All of Glencore’s industrial assets are, to varying degrees, affected by increases in
costs for labour and fuel. Unit production costs are also significantly affected by pro-
duction volumes and therefore production levels are frequently a key factor in deter-
mining the overall cost competitiveness of Glencore’s industrial activities.
mItIgatIon: Maintaining costs and where appropriate lowering them is supported by
Glencore’s continuous reporting on these measures, coupled with the inclusion of cer-
tain cost control evaluation measures in assessing management performance. In addi-
tion, risk is mitigated somewhat through geographic and multiple project diversification.
Impact: Actual reserves, resources or mineralised potential may not conform to ge-
ological, metallurgical or other expectations, and the volume and grade of ore or
product recovered may be below the estimated levels. Lower market prices, increased
production costs, reduced recovery rates and other factors may render Glencore’s
reserves, resources or mineralised potential uneconomic to exploit and may result in
revision of its reserve estimates from time to time. If Glencore’s actual mineral, coal
and hydrocarbon reserves and resources are less than current estimates or if Glencore
fails to develop its resource base through the realisation of identified or new mineral
potential, Glencore’s business, results of operations and financial condition may be
materially and adversely affected.
mItIgatIon: Glencore updates annually the quantity and quality of the estimated proven
and probable reserves to reflect extraction, additional drilling and other available data
in accordance with internationally recognized reporting frameworks, including JORC,
SAMREC and PRMS. For the major deposits, the estimates are prepared and signed off
by independent competent persons.
Impact: Where Glencore holds or has interests in industrial activities, these assets are
generally subject to environmental hazards as a result of the processes and chemicals
used in traditional extraction, production, storage, disposal and transportation meth-
ods. Environmental hazards may exist on Glencore’s owned or leased properties or at
those of the industrial activities in which it holds an interest, or may be encountered
while its products are in transit. The storage of tailings at Glencore’s industrial assets
may present a risk to the environment, property and persons, where there remains a
risk of leakage from or failure of Glencore’s tailings dams.
Additionally, Glencore conducts oil exploration and drilling activities and also stores
and transports crude oil and oil products around the world. Damage to exploration or
drilling equipment, a vessel carrying oil or to a facility where it is stored could lead to
a spill, causing environmental damage with significant clean-up or remediation costs.
Glencore may be liable for losses associated with environmental hazards, have its li-
cences and permits withdrawn or suspended or may be forced to undertake extensive
remedial clean-up action or to pay for government-ordered remedial clean-up ac-
tions, even in cases where such hazards have been caused by any previous or subse-
quent owners or operators of the property, by any past or present owners of adjacent
properties, by independent third party contractors providing services to Glencore or
by acts of vandalism by trespassers. Any such losses, withdrawals, suspensions, ac-
tions or payments may have a material adverse effect on Glencore’s business, results
of operations and financial condition.
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SUSTAINABLE DEVELOPMENT
Emissions and climate change regulation
Glencore’s global presence exposes it to
a number of jurisdictions in which regula-
tions or laws have been or are being con-
sidered to limit or reduce emissions. The
likely effect of these changes will be to
increase the cost for fossil fuels, impose
levies for emissions in excess certain per-
mitted levels and increase administrative
costs for monitoring and reporting.
Community relations
The continued success of Glencore’s ex-
isting operations and its future projects
are in part dependent upon broad sup-
port and a healthy relationship with the
respective local communities.
mItIgatIon: Compliance with international and local regulations, protecting our peo-
ple, communities and the environment from harm and our operations from business
interruptions are top priorities for Glencore. Glencore operating procedures and those
of its partners in relation to owned tankers conform to industry best practise working
under the guidelines of the International Maritime Organisation (“IMO”), relevant Flag
States and top tier Classification societies. Tankers chartered from third parties are re-
quired to meet strict vetting inspection requirements in line with OCIMF (Oil Compa-
nies International Marine Forum) and Glencore’s own standards. Glencore’s oil explo-
ration activities engage best industry practises and procedures and utilise first class
drilling contractors with proven expertise and experience. Additionally, wide-spread
and comprehensive insurance cover is actively procured, to reduce the financial im-
pact of operational risks, property damage, business interruption and environmental
liabilities to the extent possible.
Impact: Increasing regulation of greenhouse gas emissions, including the progressive
introduction of carbon emissions trading mechanisms and tighter emission reduction
targets is likely to raise production, transportation and administrative costs. In addi-
tion, regulation of greenhouse gas emissions in the jurisdictions of Glencore’s major
customers and in relation to international shipping could also have a material adverse
effect on the demand for some of Glencore’s products.
mItIgatIon: Glencore, through its sustainability program, strives to ensure emissions and
climate change issues are identified, understood and effectively managed and monitored
in order to meet international best practice standards and ensure regulatory compliance.
Impact: If it is perceived that Glencore is not respecting or advancing the economic and
social progress and safety of the communities in which it operates, Glencore’s reputa-
tion and shareholder value could be damaged, which could have a negative impact on
its ‘‘social licence to operate’’, its ability to secure new resources and its financial perfor-
mance. The consequences of negative community reaction could also have a material
adverse impact on the cost, profitability, ability to finance or even the viability of an oper-
ation. Such events could lead to disputes with national or local governments or with local
communities or any other stakeholders and give rise to material reputational damage. If
Glencore’s operations are delayed or shut down as a result of political and community
instability, its earnings may be constrained and the long-term value of its business could
be adversely impacted. Even in cases where no action adverse to Glencore is actually
taken, the uncertainty associated with such political or community instability could nega-
tively impact the perceived value of Glencore’s assets and industrial investments and,
consequently, have a material adverse effect on Glencore’s financial condition.
mItIgatIon: Glencore believes that the best way to manage these vital relationships
is to adhere to the principles of open dialogue and co-operation and in doing so it
engages with local communities to present and demonstrate the positve communal
attributes of Glencore’s local operations and ensure that appropriate measures are
taken to prevent or mitigate possible adverse effects on them, along with the regular
reporting of such.
| Annual Report 2011 | 33
Employees
The maintenance of positive employee
and union relations and the ability to at-
tract and retain skilled workers are key to
the success of Glencore.
Health, safety and environment
Glencore’s operations are subject to
health, safety and environmental regula-
tions and legislation along with complying
with Glencore’s corporate sustainability
framework (Glencore Corporate Practice).
Impact: Some of Glencore’s employees, as well as employees in non-controlled indus-
trial investments, are represented by labour unions under various collective labour
agreements. Glencore or the industrial investments in which it holds an interest may
not be able to satisfactorily renegotiate its collective labour agreements when they
expire and may face tougher negotiations or higher wage demands than would be
the case for non-unionised labour. In addition, existing labour agreements may not
prevent a strike or work stoppage at its facilities in the future, and any strike or other
work stoppage could have a material adverse effect on Glencore’s business, results of
operations and financial condition.
The success of Glencore’s business is also dependent on its ability to attract and re-
tain highly effective marketing and logistics personnel as well as highly qualified and
skilled engineers and other industrial, technical and project experts to operate its
industrial activities in locations experiencing political or civil unrest, or in which they
may be exposed to other hazardous conditions. Glencore may not be able to attract
and retain such qualified personnel and this could have a material adverse effect on
Glencore’s business, results of operations and financial condition.
mItIgatIon: Glencore understands that one of the key factors in its success is a good
and trustworthy relationship with its people. This priority is reflected in the principles
of its corporate practice and its related guidance, which require regular, open, fair and
respectful communication, zero tolerance for human rights violations, fair remunera-
tion and, above all, a safe working environment.
Impact: New or amended environmental, health and safety legislation or regulations
may result in increased operating costs or, in the event of non compliance or accidents
or incidents causing personal injury or death or property or environmental damage at
or to Glencore’s mines, smelters, refineries, concentrators, drill rigs or related facilities
(such as logistics and storage facilities) or surrounding areas may result in significant
losses, interruptions in production, expensive litigation, imposition of penalties and
sanctions or suspension or revocation of permits and licences, even in cases where
such hazards have been caused by any previous or subsequent owners or operators
of the property, by any past or present owners of adjacent properties, by independ-
ent third party contractors providing services to Glencore or by acts of vandalism by
trespassers. Any such losses, withdrawals, suspensions, actions or payments may have
a material adverse effect on Glencore’s business, results of operations and financial
condition.
mItIgatIon: Glencore is committed to comply with or exceed the laws, regulations
and best practice guidelines applicable to its operations and products in the jurisdic-
tions in which it operates and through its extensive compliace program, including
continuous monitoring of legislative requirements and engagement with government
and regulators, it strives to ensure full compliance.
34 | Annual Report 2011 |
oveRview | BuSineSS Review | CoRpoRAte GoveRnAnCe | FinAnCiAl StAteMentS | AdditionAl inFoRMAtion
| Annual Report 2011 | 35
Business
review
2 | Business review
2.1 | Financial review
2.2 | Metals and minerals
2.3 | Energy products
2.4 | Agricultural products
2.5 | Reserves and resources
38
48
58
64
68
2.1 | Financial review
BASIS OF PRESENTATION OF FINANCIAL INFORMATION
The financial information has been prepared on a basis as outlined in note 1 of the financial statements. It
is presented in the Overview and the Financial review sections before significant items unless otherwise
stated to provide an enhanced understanding and comparative basis of the underlying financial perfor-
mance. Significant items are items of income and expense which, due to their financial impact and nature or
the expected infrequency of the events giving rise to them, are separated for internal reporting and analysis
of Glencore’s results.
PERFORMANCE HIgHLIgHTS
US $ million
2011
2010
Change
Key statement of income and cash flows highlights:
Revenue
186 152
144 978
Adjusted EBITDA
Adjusted EBIT
Glencore net income pre significant items 2
Income before attribution
Earnings per share (Basic) (US $)
Funds from operations (FFO)
6 464
5 398
4 060
4 268
0.72
3 522
6 201
5 290
3 799
4 106
0.35
3 333
28%
4%
2%
7%
4%
106%
6%
US $ million
2011
2010
Change
Key financial position highlights:
Total assets
Glencore shareholders’ funds ¹
Net debt
Current capital employed (CCE) ¹
Ratios:
Adjusted current ratio ¹
FFO to Net debt
Net debt to Adjusted EBITDA
Adjusted EBITDA to net interest
¹ Refer to glossary on page 158 for definitions and calculations.
2 Refer to page 41.
86 165
29 265
12 938
22 479
1.53x
27.2%
2.00x
7.63x
79 787
19 613
14 756
19 588
1.26x
22.6%
2.38x
6.91x
8%
49%
– 12%
15%
21%
20%
– 16%
10%
38 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
RESuLTS
Adjusted EBIT increased 2% to $ 5,398 million in 2011 compared to 2010. The 2011 results benefited from
generally higher average prices for the key commodities Glencore produces and mostly greater volumes
handled by our marketing groups, tempered by the marked decline in agricultural marketing performance.
Nonetheless, the Group’s large scale, vertically integrated business model, spanning a diverse commodity
portfolio, served to underpin a modest overall rise in Group profitability.
Adjusted EBIT
Adjusted EBIT by business segment is as follows:
US $ million
Metals and minerals
Energy products
Agricultural products
Corporate and other ¹
Total
Marketing
activities
Industrial
activities
2011
Adjusted
EBIT
Marketing
activities
Industrial
activities
2010
Adjusted
EBIT
1 242
697
– 8
– 20
1 911
1 357
375
– 39
1 794
3 487
2 599
1 072
– 47
1 774
48%
20%
– 1%
33%
5 398 100%
1 401
450
659
– 173
2 337
1 160
235
58
1 500
2 953
2 561
685
717
1 327
48%
13%
14%
25%
5 290 100%
¹ Corporate industrial activities include $ 1,893 million (2010: $ 1,729 million) of Glencore’s equity accounted share of
Xstrata’s income.
Marketing Adjusted EBIT declined by 18% to $ 1,911 million in 2011, primarily due to the underperformance
of our agricultural products division largely associated with the unprecedented volatility and disruption in
the cotton market.
Industrial Adjusted EBIT was up by 18% to $ 3,487 million in 2011, benefiting from generally stronger com-
modity prices and increased production at many operations, as ongoing expansionary plans are progressed.
The metals and minerals segment Adjusted EBIT increased slightly to $ 2,599 million, with 17% growth
in the industrial asset portfolio, driven by stronger metal prices and increased production, offsetting an
11% decline in marketing contribution. The latter was due to lower profits from the ferroalloys and zinc/
copper departments which benefited in 2010 from strong physical purchasing and restocking fundamentals
while overall firm physical premia and volumes were maintained during 2011.
The largest increase in Adjusted EBIT in 2011 was from the energy segment, up 56% to $ 1,072 million, pri-
marily due to the stronger oil market fundamentals during the first half of the year. Increased coal volumes
from Prodeco and commencement of oil production at the Aseng field in Q4 2011 accounted for the 60%
increase in industrial energy EBIT contribution to $ 375 million.
The agricultural products segment had a negative Adjusted EBIT of $ 47 million in 2011, compared to a con-
tribution of $ 717 million in 2010. The year-on-year decline was significantly impacted by the cotton activities,
where extreme market volatility produced an outcome of ineffective hedging due to the dislocation of physi-
cal and paper markets and high levels of physical contractual non-performance by suppliers and customers.
Our agricultural asset portfolio is currently in a phase of considerable targeted expansion and development,
which is expected to translate into enhanced scale and performance going forward. The 2011 result, in large
part, reflects the current negative biodiesel production margin environment in Europe.
Corporate and other primarily relates to the Group’s equity accounted interest in Xstrata and the variable
pool bonus accrual, the net result of which increased from $ 1,327 million to $ 1,774 million. Xstrata accounted
for $ 164 million (up 10%) of this improvement, with overhead reduction accounting for the balance.
| Annual Report 2011 | 39
Revenue
Revenue for the year ended 31 December 2011 was $ 186,152 million, a 28% increase compared to
$ 144,978 million in 2010. The increase is primarily due to higher average commodity prices for most of the
commodities which the Group produces and markets. Higher year-on-year average prices were notable in
crude oil (39% for Brent), copper (17%), wheat (22%) and gold (28%) however, given the relatively high contri-
bution of Glencore’s oil business to Group revenue, the increase in average oil prices is the largest driver of
the total revenue increase over the period.
Cost of goods sold
Cost of goods sold for the year ended 31 December 2011 was $ 181,938 million, a 30% increase from
$ 140,467 million in the year ended 31 December 2010. This increase was primarily due to the higher com-
modity prices noted above and the resulting impact on the purchases of the respective commodities.
Selling and administrative expenses
Selling and administrative expenses for the year ended 31 December 2011 were $ 857 million, a 19% reduc-
tion from $ 1,063 million in 2010, primarily due to lower variable employee compensation charges.
Share of income from associates and jointly controlled entities
Share of income from associates and jointly controlled entities for the year ended 31 December 2011 was
$ 1,972 million, a 8% increase from $ 1,829 million in 2010. The improvement is primarily due to the higher
earnings flow-through from Xstrata, supported by an increasing contribution from Mutanda.
Other expense – net
Net other expense for 2011 was $ 511 million, compared to $ 8 million in 2010. The net amount in 2011 primar-
ily comprised $ 344 million of expenses related to Glencore’s listing, a $ 92 million of mark-to-market loss in
respect of various minority holdings in listed companies, $ 63 million related to final costs associated with
the settlement of the Prodeco option and $ 32 million of asset impairments.
Interest income
Interest income for the year ended 31 December 2011 was $ 339 million, a 21% increase over 2010. Interest
income includes interest earned on various loans extended, including to companies within the Russneft
Group which primarily accounted for the overall increase compared to the prior year.
Interest expense
Interest expense for the year ended 31 December 2011 was $ 1,186 million, a 3% decline from $ 1,217 million
in 2010, or flat, when taking into account $ 39 million of capitalised borrowing costs written off in 2010.
Interest expense on floating rate debt decreased by $ 40 million to $ 511 million from $ 551 million (excluding
significant items) over 2011. Floating rate debt is predominantly used to fund fast turning and liquid working
capital, the funding cost of which is taken into account in transactional pricing and terms and accordingly
sought to be “recovered” in Adjusted EBIT of our marketing activities.
Interest expense on fixed rate funding was $ 675 million in 2011, an increase of $ 48 million over 2010. The net
increase is due to the Eurobond and Swiss Franc bond issuances in March 2010 and October 2010/January
2011.
Income taxes
A net income tax credit of $ 264 million was recognised during the year ended 31 December 2011 compared
to an expense of $ 234 million for the year ended 31 December 2010. The 2011 credit resulted primarily from
the recognition of substantial tax benefits that were crystallised following the reorganisation of the Glencore
Group as part of the Listing. It has been Glencore’s historical experience that its effective tax rate pre signifi-
cant items on pre-tax income, excluding share of income from associates and jointly controlled entities and
dividend income has been 10% as illustrated in the table below. Following the Listing related Restructuring
which crystallised significant available future tax benefits as noted above, it is expected that the future effec-
tive tax rate will increase relative to the past as going forward, old structure employee shareholder payments
will no longer be available to offset marketing related taxable income.
40 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Earnings
A summary of the differences between Adjusted EBIT and Glencore net income, including significant items,
is set out below:
US $ million
Adjusted EBIT
Net finance costs
Net other items ¹
Income tax expense
Non controlling interests
Glencore net income pre significant items
Earnings per share (Basic) pre significant items (US $)
Other expense – net ¹
Mark to market movements on investments held for trading
Mark to market valuation of certain coal forward contracts
Listing related expenses
Net gain on restructured Russneft interests
Net impairment (charge)/reversal
Prodeco call option expense
Impairment of non current inventory
Gain on revaluation of Vasilkovskoye Gold
Other
Write off of capitalised borrowing costs ²
Net gain/(loss) on disposal on investments
Net deferred tax asset recorded – mainly Listing/Restructuring benefits ³
Share of Associates’ exceptional items 4
Non controlling interest portion of significant items 5
Total significant items
Attribution to hybrid and ordinary profit participation shareholders
Income attributable to equity holders
Earnings per share (Basic) (US $)
2011
2010
5 398
– 847
– 5
– 250
– 236
4 060
0.72
– 92
25
– 344
0
– 6
– 63
– 26
0
0
0
9
514
– 45
16
– 12
0
4 048
0.72
5 290
– 897
– 152
– 234
– 208
3 799
1.02
0
– 790
0
46
674
– 225
0
462
– 23
– 39
– 6
0
0
– 147
– 48
– 2 460
1 291
0.35
¹ Recognised within other expense – net, see note 3 of the financial statements.
² Recognised within interest expense.
3 Recognised within income tax credit/(expense), see note 4 of the financial statements.
4 Recognised within share of income from associates and jointly controlled entities, see note 2 of the financial statements.
5 Recognised within non controlling interests.
| Annual Report 2011 | 41
SIgNIFICANT ITEMS
Significant items are items of income and expense which, due to their financial impact and nature or the
expected infrequency of the events giving rise to them, are separated for internal reporting and analysis
of Glencore’s results to provide a better understanding and comparative basis of the underlying financial
performance.
In 2011, Glencore recognised $ 12 million of significant expenses which comprised a positive $ 25 million
(2010: negative $ 790 million) of mark to market adjustments associated with certain fixed price forward coal
sales contracts relating to Prodeco’s future production that did not qualify for “own use” or cash flow hedge
accounting, $ 92 million of negative mark to mark adjustments on interests in other investments classified
as held for trading and carried at fair value, with Glencore’s interest in Century Aluminum Company cash
settled equity swaps, Volcan Compania Minera S.A.A. and Nyrstar N.V. accounting for the majority of such
movements, and $ 344 million of expenses related to the Listing of Glencore. These expenses were largely
offset by the recognition of $ 514 million of net tax credits relating primarily to certain income tax deduc-
tions that were crystallised, following the reorganisation of Glencore prior to Listing. See notes 3 and 4 of the
financial statements for additional details.
The net amount for 2010 included $ 225 million of Prodeco call option expenses, offset by $ 674 million of im-
pairment reversals following the rebound in market conditions and underlying valuation assumptions. 2010
also included a $ 462 million gain ($ 315 million, net of non controlling interests) related to the revaluation of
the initial 40% interest in Vasilkovskoye Gold immediately prior to the acquisition of the remaining 60% inter-
est in February 2010. See note 3 of the financial statements for additional details.
LIquIdITy ANd CAPITAL RESOuRCES – CASH FLOw
Cash generated by operating activities before working capital changes
Net cash generated by operating activities before working capital changes in the year ended 31 December
2011 was $ 4,101 million, a decrease of $ 133 million (3%) compared to 2010 or up 5% pre significant items,
taking into account $ 325 million of relevant Listing/Restructuring related expenses incurred during the year.
The pre significant items increase is consistent with the improved earnings.
Working capital changes
Net working capital increased by $ 3,174 million during the year ended 31 December 2011 compared to an
increase of $ 2,998 million in 2010. Much of the 2011 increase occurred in December 2011 alone ($ 2.4 billion),
as Glencore was presented with highly attractive ‘funded’ commodity sourcing opportunities. Most of this
working capital investment is temporary in nature and is expected to reverse during H1 2012.
Net cash used by investing activities
Net cash used by investing activities was $ 3,690 million in 2011 compared to $ 4,755 million in 2010. The net
outflow in 2011 primarily related to the continued capital expenditure programs in respect of Vasilkovskoye
Gold’s production ramp up, the various West African upstream oil development projects, the development
of the Mutanda copper/cobalt mine and production expansion at Katanga and Prodeco. In addition, a few
bolt on investments were progressed, including securing a 31.2% interest in Optimum Coal and 43.7% of
Umcebo Coal as well as increasing various existing equity related holdings, including in Volcan, Century
Aluminum and Minara Resources. The 2010 net outflow included the $ 2,000 million base amount in relation
to the exercise of the Prodeco call option.
Net cash generated by financing activities
During 2011, in addition to regular bank and bond financing activities, Glencore refinanced the $ 2.8 billion
($ 2.3 billion drawn) bank loans secured by Xstrata shares with new 2 year $ 2.7 billion equivalent facilities and
raised $ 7.6 billion net of issue costs via equity offerings on the London and Hong Kong stock exchanges.
42 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
ASSETS, LEVERAgE ANd wORKINg CAPITAL
Total assets were $ 86,165 million as at 31 December 2011 compared to $ 79,787 million as at 31 Decem-
ber 2010. Over the same time period current assets increased from $ 44,296 million to $ 45,731 million. The
adjusted current ratio at 31 December 2011 was 1.53 compared to 1.26 at 31 December 2010. This improve-
ment is attributable to the refinancing of the Xstrata secured bank loans and the resulting reclassification
from current to non current borrowings, the repayment of various ‘re-drawable’ short term facilities and
the investment in working capital as noted above. Non current assets increased from $ 35,491 million as at
31 December 2010 to $ 40,434 million as at 31 December 2011, primarily due to the capital expenditure pro-
grams noted above and the equity accounting pick-up of our share of Xstrata’s earnings.
Consistent with 31 December 2010, 99% ($ 13,785 million) of total marketing inventories were contractually
sold or hedged (readily marketable inventories) at 31 December 2011. These inventories are readily convert-
ible into cash due to their liquid nature, widely available markets, and the fact that any associated price risk
is covered either by a physical sale transaction or a hedge transaction on a commodity exchange or with a
highly rated counterparty. Given the highly liquid nature of these inventories, which represent a significant
share of current assets, Glencore believes it is appropriate to consider them together with cash equivalents
in analysing Group net debt levels and computing certain debt coverage ratios and credit trends. Balance
sheet liquidity is very healthy such that current capital employed plus liquid stakes in listed associates (at
book carrying value) covers 143% of Glencore’s total gross debt as at 31 December 2011.
Net debt
US $ million
Borrowings
Commodities sold with agreements to repurchase
Gross debt
Cash and cash equivalents and marketable securities
Net funding
Readily marketable inventories
Net debt
2011
2010
28 029
39
28 068
– 1 345
26 723
– 13 785
12 938
30 132
484
30 616
– 1 529
29 087
– 14 331
14 756
| Annual Report 2011 | 43
Movement in net debt
US $ million
Cash generated by operating activities before working capital changes
Listing related cash expenses included in number above (via statement of income)
Net interest paid
Tax paid
Dividends received from associates
Funds from operations
Non current advances and loans
Acquisition of subsidiaries
Purchase and sale of investments
Purchase and sale of property, plant and equipment
Working capital changes, excluding readily marketable inventory movements
and other
Share issuance, net of issue costs and Listing related cash expenses included in
the statement of income (see above)
Acquisition of additional interest in subsidiaries
Dividends paid
Cash movement in net debt
Debt assumed in business combination
Foreign currency revaluation of non current borrowings and other non cash items
Profit participation certificates redemptions
Non cash movement in net debt
Total movement in net debt
Net debt, beginning of period
Net debt, end of period
2011
2010
4 101
325
– 798
– 472
366
3 522
– 320
– 350
– 760
– 2 626
4 234
0
– 802
– 323
224
3 333
– 825
– 624
– 2 060
– 1 470
– 3 720
– 1 640
7 291
– 315
– 364
2 358
– 204
– 68
– 268
– 540
1 818
– 14 756
– 12 938
0
– 75
– 30
– 3 391
– 745
70
– 504
– 1 179
– 4 570
– 10 186
– 14 756
Net debt as at 31 December 2011 decreased to $ 12,398 million from $ 14,756 million as at 31 December 2010,
with the proceeds raised from the Listing extensively deployed in progressing the Group’s key capex and
development programs (Prodeco, Oil Exploration and Production and Mutanda), securing a selection of
new investments and stake-building in existing holdings and short term funding of non readily marketable
inventory working capital.
The ratio of Net debt to Adjusted EBITDA improved from 2.38 times in 2010 to 2.00 times as at 31 December
2011, while the ratio of FFO to Net debt improved from 22.6% in 2010 to 27.2% in 2011.
CAPITAL RESOuRCES ANd FINANCINg
During the year ended 31 December 2011, the following notable financing activities took place:
• In January, Glencore issued additional 5 year, 3.625% CHF 225 million ($ 235 million) bonds;
• In February and August, Glencore redeemed the $ 700 million 8% Perpetual bonds at par;
• In May, Glencore replaced the previous 364 day $ 1,375 million and $ 515 million committed revolving cred-
it facilities with two new 364 day committed revolving credit facilities for $ 2,925 million and $ 610 million
respectively, both with a one year term extension option at Glencore’s discretion. In addition, Glencore
extended the final maturity of $ 8,340 million of the $ 8,370 million medium term revolver for a further year
to May 2014. In aggregate, the new facilities represent an overall increase in committed available liquidity
of $ 1,645 million;
• In May, Glencore International plc was admitted to trading on the London and Hong Kong Stock Exchang-
es in what was the largest ever IPO of ordinary shares on the premium listing segment of the London Stock
Exchange and the first simultaneous London primary and Hong Kong secondary IPO. The offer represent-
ed 16.94% of Glencore International plc’s post-IPO issued share capital and raised a net $ 7,291 million; and
• In June, Glencore refinanced the $ 2.8 billion ($ 2.3 billion drawn) facilities secured by Xstrata shares with
new 2 year $ 2.7 billion equivalent facilities.
44 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Glencore’s main refinancing requirements over the next twelve months relate to a few secured borrowing
base working capital facilities which ordinarily require extension/renewal each year. However, these tend
to be routine given the underlying strong collateral and their modest amounts in the context of our over-
all balance sheet and funding/liquidity levels. As at 31 December 2011, Glencore had available committed
undrawn credit facilities and cash amounting to $ 6.8 billion (as a financial policy, Glencore has a $ 3 billion
minimum threshold requirement).
Value at risk (VaR)
One of the tools used by Glencore to monitor and limit its primary market risk exposure, namely commodity
price risk related to its physical marketing activities, is the use of a VaR computation. VaR is a risk measure-
ment technique which estimates the potential loss that could occur on risk positions as a result of move-
ments in risk factors over a specified time horizon, given a specific level of confidence. The VaR methodology
is a statistically defined, probability based approach that takes into account market volatilities, as well as risk
diversification by recognising offsetting positions and correlations between commodities and markets. In
this way, risks can be measured consistently across all markets and commodities and risk measures can be
aggregated to derive a single risk value. Glencore has set a consolidated VaR limit (1 day 95%) of $ 100 million
representing less than 0.5% of Glencore shareholders’ funds.
Glencore uses a VaR approach based on Monte Carlo simulations and is computed at a 95% confidence level
with a weighted data history using a combination of a one day and one week time horizon.
Average market risk VaR (1 day 95%) during the year ended 31 December 2011 was $ 39 million (2010: $ 43 mil-
lion), representing a modest 0.1% of shareholders’ equity.
Whilst it is Glencore’s policy to substantially hedge its commodity price risks, there remains the possibility
that the hedging instruments chosen may not always provide effective mitigation of the underlying price
risk. The hedging instruments available to the marketing businesses may differ in specific characteristics
to the risk exposure to be hedged, resulting in an ongoing and unavoidable basis risk exposure. Residual
basis risk exposures represent a key focus point for Glencore’s commodity department teams who actively
engage in the management of such.
Credit ratings
In light of our extensive funding activities, investment grade ratings are of utmost importance to us. Follow-
ing the Xstrata merger and Viterra acquisition announcements, Glencore’s current credit ratings are Baa2
(review with direction uncertain) from Moody’s and BBB (watch positive) from S&P.
Dividend
The Directors have proposed a 2011 final dividend of $ 0.10 per share, amounting to $ 692 million. The interim
dividend of $ 0.05 per share, amounting to $ 346 million, was paid on 30 September 2011.
Dividend dates
Annual General Meeting
Ex-dividend date (UK and Hong Kong)
Last time for lodging transfers in Hong Kong
Record date in Hong Kong
Record date in UK
Deadline for return of currency election form (Jersey shareholders)
Applicable exchange rate date
Payment date
2012
9 May
16 May
4:30 pm (HK) 17 May
Opening of business (HK) 18 May
Close of business (UK) 18 May
21 May
25 May
1 June
Shareholders on the Jersey register, may elect to receive the dividend in Sterling, Euro or Swiss Franc. The
Sterling, Euro or Swiss Franc amount will be determined by reference to the exchange rates applicable to
the U.S. Dollar seven days prior to the dividend payment date. Shareholders on the Hong Kong branch reg-
ister will receive their dividends in Hong Kong Dollars. Further details on dividend payments, together with
currency election and dividend mandate forms, are available from Glencore’s website (www.glencore.com)
or from the Company’s Registrars. The Directors have proposed that the final dividend will be paid out of
capital contribution reserves. As such, the final dividend would be exempt from Swiss withholding tax.
As at 31 December 2011, Glencore International plc had CHF 14.4 billion of such capital contribution reserves
in its statutory accounts.
| Annual Report 2011 | 45
Notional allocation of debt and interest expense
Glencore’s indebtedness is primarily arranged centrally, with the proceeds then applied to marketing and
industrial activities as required.
Glencore does not allocate borrowings or interest to its three operating segments. However, to assist inves-
tors in the assessment of overall performance and underlying value contributors of its integrated business
model, Glencore notionally allocates its borrowings and interest expense between its marketing and indus-
trial activities as follows:
• At a particular point in time, Glencore estimates the borrowings attributable to funding key working capital
items within the marketing activities, including inventories, net cash margining and other accounts receiv-
able/payable, through the application of an appropriate loan to value ratio for each item. The balance of
Group borrowings is allocated to industrial activities (including Glencore’s stake in Xstrata).
• Once the average amount of borrowings notionally allocated to marketing activities for the relevant period
has been estimated, the corresponding interest expense on those borrowings is estimated by applying the
Group’s average variable rate cost of funds during the relevant period to the average borrowing amount.
The balance of Group interest expense and all interest income is allocated to industrial activities. The al-
location is a company estimate only and is unaudited. The table below summarises the notional allocation
of borrowings and interest and corresponding implied earnings before tax of the marketing and industrial
activities for the year ended 31 December 2011.
US $ million
Adjusted EBIT
Interest expense allocation
Interest income allocation
Allocated profit before tax
Allocated borrowings 1 – 31 December 2011
Allocated borrowings 1 – quarterly average
¹ Includes commodities sold with agreement to repurchase.
Marketing
activities
Industrial
activities
1 911
– 295
–
1 616
14 247
13 161
3 487
– 891
339
2 935
13 821
14 703
Total
5 398
– 1 186
339
4 551
28 068
27 864
Based on the implied equity funding for the marketing activities’ working capital requirements, as well as
the relatively modest level of non current assets employed in the marketing activities (assumed to be equity
funded), the return on notional equity for the marketing activities continued to be very healthy in 2011. The
industrial activities’ return on notional equity, although respectable, is being held back by mostly mid stage
oil, copper, coal and gold development and expansion projects, where significant investments have been
made to date, however the projects did not contribute to earnings in the year at anywhere near where their
full production potential is expected to be.
46 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
SuBSEquENT EVENTS AFFECTINg OuR FINANCIAL POSITION
• On 7 February 2012, Glencore announced its intention to acquire an additional 37.5% stake in Chemoil for
cash consideration of $ 174 million. The transaction is expected to close in Q2 2012.
• On 7 February 2012, the Glencore Directors and the Independent Xstrata Directors announced that they
had reached an agreement on the terms of a recommended all-share merger (the “Merger”) of equals of
Glencore and Xstrata to create a unique $ 90 billion natural resources group. The terms of the Merger pro-
vide Xstrata shareholders with 2.8 newly issued shares in Glencore for each Xstrata share held. The Merger
is to be effected by way of a Court sanctioned scheme of arrangement of Xstrata under Part 26 of the UK
Companies Act, pursuant to which Glencore will acquire the entire issued and to be issued ordinary share
capital of Xstrata not already owned by the Glencore Group. The Merger is subject to shareholder, anti-
trust and regulatory approvals.
• On 14 March 2012, Glencore received the applicable regulatory approvals to complete the acquisition of
an additional 28.5% interest in Optimum as originally agreed. See note 22 of the financial statements for
more information.
• On 20 March 2012, Glencore signed a definitive agreement pursuant to which it has agreed to acquire all
of the issued and outstanding shares of Viterra for CAD 16.25 per share in cash by way of a court approved
plan of arrangement. The transaction values Viterra’s equity at approximately CAD 6.1 billion on a fully di-
luted basis. At the same time, Glencore has entered into agreements with each of Agrium and Richardson
International which provide for the sale of certain assets of Viterra including assets which comprise a major-
ity of Viterra’s Canadian operations for a total cash consideration of CAD 2.6 billion, subject to specified
purchase price adjustments, including payment for working capital. Completion of the transaction is sub-
ject to customary closing conditions, including receipt of court, shareholder and regulatory approvals and
the absence of material adverse change. The transaction is expected to close during third quarter of 2012.
| Annual Report 2011 | 47
2.2 | Metals and minerals
“2011 was a solid year for the metals and minerals segment.
The business benefited from meaningful production growth
from its industrial activities and is well placed for contin-
ued strong growth, particularly from the African Copper-
belt assets.”
Daniel Maté, Telis Mistakidis
Highlights
Metals and minerals’ total Adjusted EBIT in 2011 was $ 2.6 billion, 2% higher than in the
prior year, driven by a stronger performance from the industrial activities.
Metals and minerals’ marketing activities delivered consistent results over the course
of 2011 generating Adjusted EBIT of $ 1.2 billion, 11% lower than in 2010. Overall firm
physical premia and volumes were sustained during the year.
Metals and minerals’ industrial activities Adjusted EBIT performance increased by 17%
compared to 2010, driven by higher average prices in 2011 (partially offset by higher
operating costs) and increased production at many of our operations as they progress
their ongoing expansionary plans.
Outlook
Looking ahead, we expect demand in the metals’ markets in which we operate to
increase gradually as the global economy continues its modest recovery. This is sup-
portive for our marketing business.
We expect to achieve continued strong growth in industrial production, particularly
from the African Copperbelt assets and gold at Kazzinc.
Adjusted EBIT
3 000
2 500
n 2 000
o
i
l
l
i
m
$
S
U
1 500
1 000
500
0
2009
2010
2011
Marketing activities
Industrial activities
2009 2010 2011
553 1 401 1 242
498 1 160 1 357
Marketing activities
T
M
k
l
,
t
n
e
a
v
i
u
q
e
u
C
6 000
5 000
4 000
3 000
2 000
1 000
0
2009
2010
2011
Volumes
2009 2010 2011
5 616 5 801 5 652
Industrial activities
1 000
T 800
M
k
l
,
t
n
e
a
v
i
u
q
e
u
C
600
400
200
0
2009
2010
2011
Volumes
2009 2010 2011
783
692
511
48 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
US $ million
Revenue
Adjusted EBITDA
Adjusted EBIT
Adjusted EBITDA margin (%)
Allocated average CE 1
Adjusted EBIT return on average CE
Marketing
activities
Industrial
activities
43 317
1 247
1 242
3%
7 746
16%
8 667
2 122
1 357
24%
15 108
9%
2011
51 984
3 369
2 599
–
22 854
11%
Marketing
activities
Industrial
activities
37 889
1 401
1 401
4%
7 018
20%
7 322
1 868
1 160
26%
12 208
10%
2010
45 211
3 269
2 561
–
19 226
13%
1 The simple average of segment current and non current capital employed (see note 2 of the financial statements), adjusted for production
related inventories, is applied as a proxy for marketing and industrial activities respectively.
MARKET CONdITIONS
Selected average commodity prices
S&P GSCI Industrial Metals Index
LME (cash) zinc price ($/t)
LME (cash) copper price ($/t)
LME (cash) lead price ($/t)
Gold price ($/oz)
Metal Bulletin alumina price ($/t)
LME (cash) aluminium price ($/t)
LME (cash) nickel price ($/t)
Metal Bulletin cobalt price 99.3% ($/lb)
Iron ore (Platts 62% CFR North China) price ($/DMT)
Currency table
AUD : USD
USD : COP
EUR : USD
GBP : USD
USD : CHF
USD : KZT
USD : ZAR
2010
Change
2011
440
2 193
8 813
2 397
1 573
374
2 398
393
2 159
7 543
2 147
1 227
332
2 173
22 843
21 811
16
169
18
147
12%
2%
17%
12%
28%
13%
10%
5%
– 11%
15%
Average
2011
Spot
31 Dec 2011
Average
2010
Spot
31 Dec 2010
Change in
average prices
1.03
1 848
1.39
1.60
0.89
147
7.26
1.02
1 939
1.30
1.55
0.94
148
8.09
0.92
1 897
1.33
1.55
1.04
147
7.32
1.02
1 908
1.34
1.56
0.94
147
6.63
12%
– 3%
5%
3%
– 14%
0%
– 1%
Metal prices generally increased over 2011 compared to 2010 with the GSCI Industrial Metals Index increasing by 12% from
December 2010 to December 2011. However, with the exception of aluminium, base metals prices were on average 10% –15% lower
in H2 2011 compared to H1 2011, which reflected increased investor and end user caution on the global growth outlook.
2011 was impacted by various macro events, such as the nuclear accident in Japan, social upheavals in North Africa and the Middle
East and the ongoing sovereign debt crisis in Europe. The pressures on equity and debt markets, driven by the financial uncertain-
ties, had a knock-on effect on commodity markets, where prices decreased and demand weakened.
| Annual Report 2011 | 49
Zinc/Copper/Lead
2011 markets were particularly characterised by supply disruptions and continuing decline in mine ore grades. Chile, which pro-
duces around one third of the world’s copper, saw its year on year production fall by 3.2%, while production from Indonesia was
severely impacted by the more than three month strike at the Grasberg mine. Production declined on an outright basis and is ex-
pected to continue to do so well into 2012 until the production cycle from ore to metal is re-established. This lack of supply growth
explains the relative strength in prices witnessed in the face of weak demand in Europe and USA. Lack of new production is also
relevant for zinc, though with China not being a net importer, zinc metal prices were relatively weaker.
The second half was dominated by reactions to the European financial crisis, in terms of price volatility on the terminal markets
and consumer behaviour and purchasing patterns. Inventories in China had declined from the high levels since the purchases in
2009 and 2010 when prices were lower. Inventories in the US and Europe, which had seen major drawdowns since 2009, had not
been rebuilt amid the uncertainty over Europe and were in fact cut even further throughout 2011 and remain that way. Chinese
buyers on the other hand, have used price weakness in the fourth quarter to purchase large amounts of metal for nearby delivery
and rebuild the inventory pipeline to a more ‘normal’ level, particularly for copper. We also saw the first signs of demand strength
in the US during Q4 2011, most evident in the automobile sector where production was ramped up, following the supply chain
disruptions in Japan and Thailand. There has been good consumer demand for zinc although purchasing was for current demand
with no emphasis on restocking.
Alumina/Aluminium
The above mentioned market disruptions added complexity to the alumina/aluminium business, which created several profitable
transaction opportunities that allowed the department to maintain a robust and profitable base in 2011.
The more recent decline in prices has increased producer margin pressure with many no longer able to cover their production cost.
Indications for aluminium premiums for duty unpaid, in-warehouse material at the beginning of 2011 were $ 110 – 135 per tonne,
with an average 2011 range of approximately $ 110 – 130 per tonne and a more recent level of $ 95 – 120 per tonne. Investor demand
for physical metal, supported by wide contangos, has kept overall physical markets reasonably balanced.
Ferroalloys/Nickel/Cobalt/Iron Ore
The global stainless steel industry experienced a continued slowdown in H2 2011, due to interalia destocking in all markets across
the distribution chain. Other ferroalloy consuming industries such as aerospace, automotive, oil and gas and plating remained
strong throughout the second half.
The 2011 cobalt price was lower (11%) compared to 2010. The main reasons were (i) overstocking in the Chinese battery market, (ii)
oversupply of producer metal and (iii) the loss of market share of Japanese battery producers (mostly due to a strong Yen). These
factors were especially acute in Q4. Many producers reduced their inventory over year-end, based on pessimistic forecasts for
Q1 2012 however, we believe activity will be reasonable based on strong demand in the superalloy and battery sectors.
The iron ore price initially kept at a high level due to strong Chinese crude steel production matching the increased availability
of material however, this balance started to change around September 2011. Prices declined due to the postponement of certain
European allocations, tighter credit availability and poor steel sales in China. These concerns led to market prices falling c. $ 60
per DMT in a six week period to c. $ 115 per DMT at the end of October. Despite lower Chinese steel production levels, prices
then recovered and stabilised in the $ 135 – 140 per DMT range, slightly above many marginal-cost producers’ cost of production.
MARKETINg
Highlights
Overall the 2011 result was solid albeit lower than the record 2010 performance. The decline in performance was partly due to lower
profits from the ferroalloys and zinc/copper departments (which performed strongly in 2010 when physical purchasing and restock-
ing in Asia was particularly intensive), offset by higher volumes and profits in the aluminium/alumina department.
Adjusted EBIT for 2011 was $ 1,242 million, compared to $ 1,401 million in 2010, a reduction of 11%.
Financial information
US $ million
Revenue
Adjusted EBITDA
Adjusted EBIT
50 | Annual Report 2011 |
2011
2010
Change
43 317
1 247
1 242
37 889
1 401
1 401
14%
– 11%
– 11%
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Selected marketing volumes sold
Zinc metal and concentrates 1
Copper metal and concentrates 1
Lead metal and concentrates 1
Gold
Silver
Alumina/aluminium
Ferroalloys (incl. agency)
Nickel
Cobalt
Iron ore
1 Estimated metal unit contained.
Units
2011
2010
Change
million MT
million MT
million MT
thousand toz
thousand toz
million MT
million MT
thousand MT
thousand MT
million MT
2.7
1.9
0.7
756
11 128
11.4
2.7
191.4
22.9
10.3
2.9
1.9
0.7
589
8 527
10.6
2.6
193.9
17.9
9.3
– 7%
–
–
28%
31%
8%
4%
– 1%
28%
11%
Zinc/Copper/Lead
2011 zinc volumes were lower at 2.7 million tonnes vs. 2.9 million tonnes in 2010, while copper and lead volumes were consistent
between the two years. 2011 profits were lower than 2010 but remained strong. The decline was from a high base in 2010 which
benefited from strong physical purchases and restocking in Asia.
Alumina/Aluminium
In 2011, the marketed volumes for alumina/aluminium increased to 11.4 million tonnes compared to 10.6 million tonnes in 2010,
representing an increase of 8%. Arbitrage opportunities in aluminium were more favourable in 2011, with increased opportunities
for inventory financing transactions and cash and carry deals. 2011 profits were higher than 2010.
Ferroalloys/Nickel/Cobalt/Iron Ore
Chrome ore output levels from South African producers continued to ramp up during 2011, which ensured a steady increase in
monthly volumes.
Overall nickel volumes for all types of products remained strong and were similar to 2010 levels.
Cobalt volumes remained strong for the whole of 2011 compared with 2010 and confirmed existing trends in intermediate prod-
ucts, with a marked increase in exports.
Despite a slow start to the year due to severe supply disruptions in Canada, Brazil and Australia and the loss of supply from India
due to the monsoon and the export ban iron ore volumes increased by 1 million tonnes in 2011 compared to 2010, mainly due to
increased availability of spot cargos in H2 2011.
Overall profits in 2011 were slightly below 2010 levels with a mixture of positive and negative year-on-year performances within the
various individual commodity books.
INduSTRIAL ACTIVITIES
Highlights
• Metals and minerals’ industrial activities performance continued to improve during 2011, driven by higher average prices in 2011
and increased production volumes at many of our operations.
• Total industrial revenues for metals and minerals were $ 8,667 million, up 18% from $ 7,322 million in 2010. Adjusted EBITDA and
Adjusted EBIT for 2011 were $ 2,122 million and $ 1,357 million, up 14% and 17%, compared to $ 1,868 million and $ 1,160 million
in 2010.
| Annual Report 2011 | 51
Financial information
US $ million
Revenue
Kazzinc
Other Zinc
Zinc
Katanga
Mopani
Other Copper
Copper
Alumina/Aluminium
Ferroalloys/Nickel/Cobalt/Iron ore
Total
Adjusted EBITDA
Kazzinc
Other Zinc
Zinc
Katanga
Mopani
Other Copper
Copper
Alumina/Aluminium
Ferroalloys/Nickel/Cobalt/Iron ore
Share of income from associates and dividends (includes Mutanda)
Total
Adjusted EBITDA margin (%)
Adjusted EBIT
Kazzinc
Other Zinc
Zinc
Katanga
Mopani
Other Copper
Copper
Alumina/Aluminium
Ferroalloys/Nickel/Cobalt/Iron ore
Share of income from associates and dividends (includes Mutanda)
Total
Capex
Kazzinc
Other Zinc
Zinc
Katanga
Mopani
Other Copper
Copper
Alumina/Aluminium
Ferroalloys/Nickel/Cobalt/Iron ore
Total
52 | Annual Report 2011 |
2011
2010
Change
2 262
1 029
3 291
528
1 155
2 493
4 176
520
680
8 667
862
297
1 159
198
328
219
745
60
83
75
2 122
24%
561
191
752
141
207
161
509
50
– 29
75
1 357
439
131
570
325
163
116
604
20
76
1 270
1 855
901
2 756
496
863
2 072
3 431
422
713
7 322
815
225
1 040
168
218
214
600
– 9
189
48
1 868
26%
579
115
694
109
68
179
356
– 17
79
48
1 160
350
110
460
221
130
92
443
31
67
1 001
22%
14%
19%
6%
34%
20%
22%
23%
– 5%
18%
6%
32%
11%
18%
50%
2%
24%
n.m.
– 56%
56%
14%
–
– 3%
66%
8%
29%
204%
– 10%
43%
n.m.
n.m.
56%
17%
–
–
–
–
–
–
–
–
–
–
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Production data
thousand ¹
Kazzinc
Zinc metal
Lead metal ²
Copper metal ³
Gold
Silver
Katanga
Copper metal ³
Cobalt 4
Mutanda
Copper metal ³
Cobalt 4
Mopani
Copper metal ³
Cobalt 4
Other Zinc (Los Quenuales, Sinchi Wayra,
AR Zinc, Portovesme)
Zinc metal
Zinc oxide
Zinc concentrates
Lead metal
Lead concentrates
Tin concentrates
Silver metal
Silver in concentrates
Other Copper (Cobar, Pasar, Punitaqui)
Copper metal
Copper concentrates
Cobalt
Silver contained
Alumina/Aluminium (Sherwin)
Alumina
Nickel/Cobalt (Murrin Murrin)
Nickel metal
Cobalt
Total Zinc contained
Total Copper contained
Total Lead contained
Total Tin contained
Gold (incl. Gold equivalents) 5
Total Alumina
Total Nickel
Total Cobalt
MT
MT
MT
toz
toz
MT
MT
MT
MT
MT
MT
MT
DMT
DMT
MT
DMT
DMT
toz
toz
MT
DMT
MT
toz
MT
MT
MT
MT
MT
MT
MT
toz
MT
MT
MT
Using feed
from own
sources
Using feed
from third
party
sources
Using feed
from own
sources
2011
Total
Using feed
from third
party
sources
2010
Total
Own feed
change
246.0
35.6
51.2
390
54.8
66.2
1.8
39
4 299
5 571
91.2
2.4
63.7
7.9
–
–
–
–
300.8
101.8
53.0
429
9 870
91.2
2.4
63.7
7.9
101.4
0.6
103.0
0.3
204.4
0.9
30.5
75.5
461.2
11.9
61.0
4.7
754
7 978
123.2
–
–
–
–
–
–
–
153.7
75.5
461.2
11.9
61.0
4.7
754
58.2
3.4
16.3
8.9
94.4
0.8
27.9
68.0
390.6
14.2
56.6
3.8
871
239.1
33.1
48.0
326
61.7
67.7
1.8
22
300.8
100.8
49.8
348
5 182
1 549
6 731
3%
8%
7%
20%
– 17%
57%
– 29%
291%
– 11%
–
–
–
–
58.2
3.4
16.3
8.9
103.0
197.4
7%
0.3
1.1
– 25%
116.7
–
–
–
–
–
–
–
144.6
68.0
390.6
14.2
56.6
3.8
871
7 781
176.0
185.5
–
450
9%
11%
18%
– 16%
8%
24%
– 13%
3%
n.m.
10%
n.m.
130%
7 978
7 781
–
164.1
204.9
–
1 035
–
0.2
–
164.1
204.9
0.2
1 035
–
176.0
185.5
–
450
–
–
–
–
1 460
1 460
–
1 259
1 259
n.m.
28.5
1.9
563.1
362.6
82.5
2.2
706
–
28.5
12.8
1.5
0.2
178.0
268.9
66.2
–
164
1 460
1.5
0.7
30.0
2.1
741.1
631.5
148.7
2.2
870
1 460
30.0
13.5
27.7
1.9
514.3
268.6
77.8
1.9
562
0.7
0.1
28.4
2.0
178.4
280.9
67.6
–
47
692.7
549.5
145.4
1.9
609
–
1 259
1 259
27.7
15.0
0.7
0.4
28.4
15.4
3%
0%
9%
35%
6%
16%
26%
n.m.
3%
– 15%
¹ Production is included on a 100% basis. Controlled industrial assets only with the exception of Mutanda (40% owned) where Glencore has
operational control.
² Lead metal includes lead contained in lead concentrates.
³ Copper metal includes copper contained in copper concentrates and blister copper.
4 Cobalt contained in concentrates and hydroxide.
5 Gold/Silver conversion ratio of 1/44.53 and 1/60.63 for 2011 and 2010 respectively based on average prices.
| Annual Report 2011 | 53
OPERATIONS
Kazzinc (Glencore interest: 50.7%)
Zinc and lead output in 2011 was in line with 2010 production levels. Processing silver-rich Dukatsky concentrate contributed to a
47% increase in silver production from 6.7 million toz in 2010 to 9.9 million toz in 2011. Production of gold was 429,000 toz, a 23%
increase compared to 2010 production of 348,000 toz.
Kazzinc is near completion of its New Metallurgy project at an estimated cost of $ 926 million. The project consisted of the con-
struction of a 70,000 tonnes per annum IsaSmelt Copper smelter/refinery, a new acid plant, modernisation of the existing lead
plant and construction of the necessary auxiliary operations.
The new copper smelter was commissioned in August 2011 with first copper cathode produced in the last few days of August
which met all international requirements. By the end of 2011, nearly 13,000 tonnes of copper cathode had been produced at the
Ust-Kamenogorsk copper smelter with a gradual ramp up to the 70,000 tonnes per annum design capacity expected in 2012.
Ore processing at Altyntau Kokshetau was 5.7 million tonnes in 2011, a 61% increase compared to 2010. The Altyntau mills were
each stopped in June and July for 45 days to allow work to be completed which is expected to result in processing production
capacity increasing to 8.0 million tonnes per annum by 2013. Reinforcement of the foundations underneath the two ball mills went
well with both mills coming back into operation by the end of July and end of August respectively. Some gold recovery issues
still exist despite the installation of extra fine grinding capacity during the 45 days stoppage period, which is expected to allow
the liberation of more gold in the grinding stage and therefore increased recovery. This challenge predominantly relates to the
extremely hard nature of the ore which makes it difficult to grind below the necessary 4 microns in order to recover the gold. As a
result, Kazzinc failed to meet its gold production target in 2011, however gold recovery rates have recently been improving.
In April 2011, Glencore conditionally agreed to increase its stake in Kazzinc from 50.7% to 93.0% for a total transaction considera-
tion of $ 3.2 billion (consisting of the issuance of $ 1 billion of Glencore shares at its IPO price, equating to approximately 117 million
shares, and $ 2.2 billion in cash). Glencore and the seller are currently targeting an agreed Q3 2012 completion date.
As a result of further exploration drilling and technical studies, Kazzinc significantly increased its JORC compliant mineral reserves,
at the Vasilkovskoye, Maleevsky and Ridder-Sokolny deposits with gold up 50%, silver up 84%, copper up 136%, lead up 62% and
zinc up 67% compared to the JORC compliant reserves outlined in the IPO prospectus adjusted for depletion during 2011 (see
separate RNS release 5 March 2012). The effect of the higher mineral reserves has been to increase copper production, as com-
pared to the plan outlined in the IPO prospectus, from own mined sources by 76% in 2012 and 230% in 2015.
Katanga (Glencore interest: 75.2%)
Katanga’s contained copper in ore mined in 2011 amounted to 198,600 tonnes, a 51% increase compared to 2010.
Ore mined and hoisted at the KTO underground mine in 2011 was 1.6 million tonnes (at an average 3.71% copper content), an in-
crease of 23% compared to 2010, whilst ore mined at the KOV Open Pit in 2011 was 2.5 million tonnes, 249% above 2010 production
levels. The copper grade of ore mined from the KOV Open Pit for 2011 averaged 4.98% copper content.
Ore milled at the Kamoto concentrator in 2011 amounted to 4.1 million tonnes, an increase of 40% compared to 2010. The current
milling capacity at Kamoto of 7.7 million tonnes per annum of ore is sufficient to support the life of mine plan through to 2014.
479,900 tonnes of total concentrate were produced, representing a 58% increase compared to 2010. Katanga continued to increase
the production of oxide concentrate for sale as a finished product. The construction of a 120,000 tonnes per annum concentrate
filtration and bagging facility was commissioned in the third quarter of 2011.
Copper produced in metal and concentrate for 2011 totalled approximately 91,200 tonnes, an increase of 57% compared to 2010. To-
tal cobalt production in 2011 was 2,400 tonnes, 29% lower than in 2010 as a result of lower head grades in the current copper ore body.
Katanga experienced certain operational disruptions at the old existing installations during 2011. During Q4 2011, Katanga’s Board
announced that it had approved the Updated Phase IV Expansion. This acceleration of the Phase IV will address the problems
experienced during 2011. Consistent with the completion of the Phase III Expansion project Katanga commissioned a front end
engineering and early works report, which identified the following key items:
• an additional 100,000 tonnes per annum solvent extraction plant, over and above the 200,000 tonnes per annum solvent extrac-
tion (“SX”) plant described in the ITR (“Independent Technical Report”) to be constructed in front of the existing Luilu elec-
trowinning (“EW”) plant. The ITR detailed the conversion of the existing copper electrowinning facility at the Luilu refinery to a
200,000 tonnes per annum capacity copper electrowinning facility fed by the 200,000 tonnes per annum solvent extraction plant;
54 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
• Katanga reaching higher copper and cobalt production levels sooner than the timelines described in the ITR;
• an increase in expansionary capital expenditures from approximately $ 537 million (as described in the ITR) to approximately
$ 635 million due primarily to the inclusion of the additional solvent extraction plant and an in-pit crusher at KOV Open Pit; and
• the increase of copper production to 270,000 tonnes per annum of LME Grade A copper and thereafter the expansion of copper
production to 310,000 tonnes per annum, utilising anticipated cash flows from operating activities.
In order to expedite the commencement of the Updated Phase IV Expansion project, Katanga finalised the execution of a facility
of up to $ 515.5 million from Glencore which will fund the portion of the project not already covered by Katanga’s existing operat-
ing cash flow.
A further facility of $ 120 million was drawn in full to fund the redemption on 30 December 2011 of Katanga’s outstanding
CAD 125 million 14% debentures which otherwise would have been due for repayment on 30 November 2013.
For further information please visit www.katangamining.com
Mutanda (Glencore interest: 40.0%)
Mutanda is accounted for as an associate under Glencore’s operational control.
Total copper production in 2011, including both cathodes and copper in concentrate, was 63,700 tonnes. Copper cathodes con-
tributed 44,000 tonnes to the year’s production which was significantly higher than the forecast of 24,000 tonnes. Total copper
production in H2 2011 of 37,900 tonnes was 47% higher than the 25,800 tonnes in H1 2011.
Total cobalt production in 2011, including both cobalt in hydroxide and cobalt in concentrate, was 7,900 tonnes. Total cobalt pro-
duction in both concentrate and hydroxide in H2 2011 was 4,300 tonnes, an 18% increase compared to the 3,600 tonnes produced
in H1 2011.
The Phase I Hydrometallurgical Plant achieved design capacity of 20,000 tonnes per annum of annualised copper cathode pro-
duction in January 2011. Under the Phase II project (construction of a 40,000 tonnes per annum SX/EW plant), EW2 and EW3 tank
houses were commissioned ahead of schedule in April and June respectively.
The completion of the front end (milling and leaching) of the Phase II plant and associated cobalt circuit is expected in Q1 2012.
This, along with the already commissioned EW2 and EW3 tank houses, will increase overall plant capacity to 60,000 tonnes per
annum of copper cathodes and 18,000 tonnes per annum of cobalt in hydroxide at design feed grades.
The optimisation of the front end of the Phase III plant and the associated cobalt circuit is expected to be completed by the end
of Q2 2012 and Q4 2012 respectively which, along with the already commissioned EW4 tank house, will result in the overall hydro-
metallurgical complex being capable of producing 110,000 tonnes per annum of copper cathodes and 23,000 tonnes per annum
of cobalt in hydroxide at design feed grades.
The acid plant, which has a design capacity of 390 tonnes per day sulphuric acid and 73 tonnes per day SO2 capacity, is currently
being commissioned. The cost of the sulphuric acid plant and all three Phases of the Hydrometallurgical Plant is expected to be
$ 734 million.
Mutanda also continues to assess various other expansion options and is currently considering whether to expand the current
plant capacity to 210,000 tonnes per annum (with an initial cost estimate of $ 670 million) or to expand the existing plant capacity
to 150,000 tonnes per annum in conjunction with the construction of a new 100,000 tonnes unit sulphide concentrator.
Mutanda, in conjunction with Katanga and Kansuki, is engaged in a project to secure power for all three operations through the re-
furbishment of two turbines at the Inga dam which is expected to provide 450 megawatts of power. The project is being executed
in partnership with SNEL, the national power operator in the DRC, and EGMF, the project contractor. The initial cost estimate is
$ 340 million, which will be contributed by Mutanda, Katanga and Kansuki. The amount invested will be recovered via lower elec-
tricity tariffs.
Glencore holds a 50% interest in Kansuki Investments Sprl which in turn holds a 75% interest in Kansuki Sprl, the owner of the
Kansuki concession, thereby giving Glencore an effective interest of 37.5%. Kansuki is a 185 square kilometre copper and cobalt
pre-development project which borders the Mutanda concession. A total of $ 135 million of capital expenditure for mine and
plant development has been committed of which $ 103 million has been spent. Exploration of the Kansuki concession is ongoing.
Discussions with respect to a potential combination of the Mutanda and Kansuki operations are ongoing with a view to ultimately
obtaining a majority stake in the merged entity.
| Annual Report 2011 | 55
Mopani (Glencore interest: 73.1%)
Total contained copper in ore hoisted and mined was 6% higher than in 2010 whilst total contained copper in concentrate for
2011 was 9% higher than 2010 due to the improved ore deliveries from mining. 2011 gross anode production from the smelter
of 208,200 tonnes was 5% higher than 2010 levels, which was driven by increased concentrate receipts and improved recoveries.
Total finished copper from own sources in 2011 was 7% higher compared to 2010 whilst total finished copper for 2011 at
204,400 tonnes, including purchased material and toll, was the highest achieved since Mopani’s inception.
Finished cobalt production in 2011 was 18% lower compared to 2010, primarily due to the lower cobalt grades in both Mopani
and purchased concentrates. Cobalt production was further adversely affected by the re-alignment of the Nkana concentrator to
maximise copper concentrate production as well as the cobalt roaster being put on care and maintenance.
There are a series of major capital expenditure projects underway to increase mine production and continue to improve and
modernise the smelter. The Synclinorium project is a new shaft development which should provide access to 115 million tonnes of
copper ore and is expected to yield 4 million tonnes per annum of ore by 2018 replacing and improving on production from the
current ore bodies in Nkana. It will be mined for approximately 18 years with an average grade of 1.85% copper content and 0.06%
cobalt content. Forecast capital expenditure for the project is $ 323 million.
In metallurgy, the Smelter Phase III project is currently underway and includes the installation of three new converters, gas cleaning
equipment and a second acid plant, which will improve sulphur dioxide emissions capture to above 97%. The project is on sched-
ule and forecast capital expenditure for the project is $ 145 million.
Other Zinc
Los Quenuales (Glencore interest: 97.5%)
Los Quenuales, which comprises of the Iscaycruz and Yauliyacu mines, continued its strong production performance in H1 2011
throughout the whole year.
Total ore processed at Iscaycruz was 43% higher than in 2010 (the mine having reopened in April 2010). Zinc and lead head grades
did decline modestly but the higher overall volumes resulted in a 24% increase in the production of zinc concentrates whilst lead
concentrate production levels effectively remained unchanged.
Total ore processed at Yauliyacu was 2% lower than in 2010, although zinc concentrate production remained unchanged due to im-
provements in recovery and head grade. In late April 2011, Los Quenuales ceased production of a single complex bulk concentrate,
instead opting for separation into lead and copper concentrates. These separate concentrates are more readily saleable under
current market conditions. In aggregate, as a result of the slight reduction in volumes treated and lower head grades, Yauliyacu
produced 5% less bulk/lead/copper concentrates in 2011.
Sinchi Wayra (Glencore interest: 100%)
Production at Sinchi Wayra was significantly higher compared to 2010. Ore treated and zinc concentrate produced was 15% higher
whilst lead and tin concentrates produced were 29% and 25% higher respectively. These improvements were the result of a num-
ber of efficiency programs and low value/short pay-back capex expansion projects. These positive factors were slightly offset by
a heavier than normal rainy season. Recovery issues in the Colquiri concentrator, as noted in the Interim Report 2011, have been
addressed and largely resolved.
Negotiations with the Bolivian government to amend Sinchi Wayra’s mining contracts in accordance with the new constitution are
ongoing and whilst progress has been made, the final outcome and the timing thereof cannot be determined at this stage.
AR Zinc (Glencore interest: 100%)
Production levels were consistent with prior years and in line with expectations, with zinc metal production increasing by 6% year
on year.
The Palpala lead smelter had a maintenance shutdown during January and returned to full capacity thereafter however, as a result
of the shutdown, lead metal production for the year was 17% lower than 2010 levels.
The Aguilar mine produced 15% more lead in concentrate compared to 2010, with the surplus unable to be treated at Palpala being
exported.
Perkoa (Glencore interest: 50.1%)
Construction is currently ongoing, with first production expected later this year. It is expected that the mine plan will be improved by
adding a new opencut source of ore, increasing planned plant capacity. These planned improvements which should also increase
the life of mine and total overall production.
56 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Other Copper
Cobar (Glencore interest: 100%)
Total production for 2011 was 44,700 tonnes of copper contained, an 11% reduction compared to 2010. This decrease is largely
attributable to a temporary reduction in loader availability and lower head grades.
The main capital expenditure project currently underway is the shaft extension which will reduce operating costs per unit, allow
access to more ore and increase production. The project is expected to be completed by the end of 2013 and total forecast capital
expenditure for the project is $ 175 million.
Punitaqui (Glencore interest: 100%)
During 2011 Punitaqui produced 39,000 tonnes of copper concentrates, an encouraging first full year of production given opera-
tions only started toward the end of 2010, following the mine’s acquisition in February 2010 and subsequent refurbishment.
Alumina/Aluminium
Sherwin Alumina (Glencore interest: 100%)
Production in 2011 was 1,460,100 tonnes, an increase of 16% compared to 2010, which was primarily due to the restart of the fifth
digestor unit at the beginning of 2011.
Key capital expenditure projects include the re-bundling of the vertical heat exchangers which is ongoing and the increase in
calciner capacity which is close to completion.
Ferroalloys/Nickel/Cobalt/Iron Ore
Murrin Murrin (Glencore interest: 100%)
Production in 2011 was 30,000 tonnes of nickel packaged and 2,100 tonnes of cobalt packaged, a 6% and 5% increase compared
to 2010 production of 28,400 tonnes of nickel and 2,000 tonnes of cobalt. This increase was despite production being impacted by
various issues including a series of electrical storms, heavy rain and flooding as well as maintenance issues.
The failure of an acid plant heat exchanger in June saw production continuing at a reduced rate before the tie-in of a new tem-
porary unit in July. In October, the acid plant was shut to facilitate the tie-in of the replacement heat exchanger. Production
subsequently improved in the second half of the year, reflecting increased plant availability and increased processed ore-grade
following the ramp-up to full production from the Murrin Murrin East ore body.
Capital expenditure in 2011 was strictly contained and included the development of the Murrin Murrin East mine, commissioning of
the high-density slurry project and work on a sixth reduction autoclave and second flash vessel unit in the refinery’s nickel circuit,
all of which commenced prior to 2011.
In September 2011, Glencore launched an all cash offer to acquire all the remaining Minara shares not already owned by Glencore.
In November, following the successful closure of the offer, Glencore acquired the remaining shares and now owns 100%. The total
consideration in respect of the minority buyout was approximately $ 265 million.
| Annual Report 2011 | 57
2.3 | Energy products
“2011 was a relatively strong year for the energy products
segment, benefiting from favourable supply and demand
conditions coupled with continued success in expanding
our industrial asset portfolio achieving first oil production
from the Aseng field, a few months ahead of schedule and
expanding our coal operational base in South Africa and
Colombia.”
Alex Beard, Tor Peterson
Highlights
Energy products’ total Adjusted EBIT in 2011 was $ 1,072 million, an increase of 56%
compared to 2010. The improved performance was driven by strong growth in both
marketing and industrial activities.
Energy products’ marketing activities reported Adjusted EBIT of $ 697 million in 2011,
a 55% increase on 2010. This improvement was driven, in particular, by stronger oil
market fundamentals during H1 2011. H2 2011 performance was impacted by lower
wet freight rates (given our long, but continuously reducing exposure to time charters)
and a more challenging oil market environment which provided fewer opportunities.
Energy products’ industrial activities Adjusted EBIT performance increased by 60% to
$ 375 million in 2011, driven by higher average coal prices and increased production
at Prodeco and the commencement of production at the Aseng oil field in Block I –
Equatorial Guinea.
Outlook
Looking ahead, after an initial period of weakness due to uncertainties surrounding
the Euro crisis, we expect demand in the energy markets in which we operate to pick
up and thereafter for growth to remain stable.
Adjusted EBIT
1 400
1 200
1 000
n 800
o
i
l
l
i
m
$
S
U
600
400
200
0
2009
2010
2011
Marketing activities
Industrial activities
2009 2010 2011
697
450
375
235
945
413
Marketing activities
120 000
100 000
80 000
T
M
k
60 000
40 000
20 000
0
900 000
800 000
700 000
600 000
500 000
400 000
300 000
200 000
100 000
0
s
l
b
b
k
2009
2010
2011
Coal (k MT)
Oil (k bbls)
2009
2011
2010
106 000 100 900
95 400
812 638 897 849 849 271
Industrial activities
T
M
k
21 000
18 000
15 000
12 000
9 000
6 000
3 000
0
3 000
2 500
2 000
1 500
1 000
500
0
s
l
b
b
k
2009
2010
2011
Coal (k MT)
Oil (k bbls)
2009
16 094
–
2010
17 433
–
2011
20 506
2 785
58 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
US $ million
Revenue
Adjusted EBITDA
Adjusted EBIT
Adjusted EBITDA margin (%)
Allocated average CE 1
Adjusted EBIT return on average CE
Marketing
activities
Industrial
activities
114 756
724
697
1%
5 168
13%
2 309
571
375
25%
4 762 2
8%
2011
117 065
1 295
1 072
–
9 930 2
11%
Marketing
activities
Industrial
activities
87 850
470
450
1%
5 614 2
8%
1 499
359
235
24%
3 376 2
7%
2010
89 349
829
685
–
8 989 2
8%
1 The simple average of segment current and non current capital employed (see note 2 of the financial statements), adjusted for production
related inventories, is applied as a proxy for marketing and industrial activities respectively.
2 For the purposes of this calculation, capital employed has been adjusted to exclude Russneft, Atlas, PT Bakrie and Oteko Group loans
(see note 8 of the financial statements), which generate interest income and do not contribute to Adjusted EBIT.
MARKET CONdITIONS
Selected average commodity prices
S&P GSCI Energy Index
API2 ($/t)
API4 ($/t)
Prodeco realised price ($/t) 1
Shanduka realised export price ($/t)
Shanduka realised domestic price ($/t)
Oil price – Brent ($/bbl)
2011
2010
Change
333
122
116
95
108
43
111
266
93
92
82
96
35
80
25%
31%
26%
16%
13%
23%
39%
1 As at 31 December 2011, 27 million tonnes had been sold forward at an average price of $ 94 per tonne.
The underlying fundamentals of global energy markets generally improved during 2011 with average prices appreciably higher
during 2011 than 2010. The GSCI Energy Index increased by 25% from December 2010 to December 2011.
Coal
During H1 2011 demand for coal was strongly supported by cold weather related demand, combined with supply shortages due
to Australian flooding and adverse weather conditions in Colombia, which left the traded market relatively tight. The effect of the
Japanese earthquake and tsunami on nuclear generation also played a role in increasing demand for coal, especially in the envi-
ronmentally sensitive Atlantic markets.
Thereafter, the global financial crisis and uncertainty surrounding consumption patterns led to many players taking a cautious ap-
proach towards longer term commitments and a move to a more spot price oriented market. This resulted in lower demand and prices.
Prices fell further towards the end of the year, impacted by mild weather and robust coal supplies, especially from the US, which af-
fected the Atlantic markets, whereas the Asian markets remained more robust and resilient, although the general trend was also lower.
Oil
Brent front month prices started the year at $ 95 per barrel and ended at $ 107 per barrel, ranging between $ 93 per barrel and $ 127
per barrel, with most of the volatility seen during the first half of the year. During 2010, the range was between $ 70 per barrel to
$ 95 per barrel. The increased volatility in H1 2011, driven by events in the Middle East and North Africa, the Japanese Tsunami and
nuclear accident, European sovereign debt concerns and the IEA’s decision to release strategic reserves in June, provided numerous
marketing opportunities. For example, the removal of Libya’s light sweet crude caused a sharp tightening of supplies of this grade.
During H2 2011, oil prices trended downwards, and oil markets became dominated by bank and sovereign credit developments. The
resulting unpredictability during this period resulted in more challenging trading conditions.
WTI became further dislocated from international grades in the second half of the year due to the domestic US crude benchmark’s
captive delivery location. The differential between Brent-WTI started the year at $ 2 per barrel differential, reaching a peak of $ 28
per barrel in mid-October before narrowing to $ 9 per barrel at the end of December 2011. The market ended with Brent and gasoil
in backwardation but with gasoline showing the expected contango into the driving season.
| Annual Report 2011 | 59
MARKETINg
Highlights
2011 saw a strong year-on-year improvement, however this reflects, to a large extent, the weak base comparable period for oil mar-
keting in 2010. 2011 continued to be negatively impacted by the weak freight environment in both the dry and wet market segments.
Adjusted EBIT for 2011 was $ 697 million, compared to $ 450 million in 2010, an increase of 55%.
Financial information
US $ million
Revenue
Adjusted EBITDA
Adjusted EBIT
Selected marketing volumes sold
million
Thermal coal (MT)
Metallurgical coal (MT)
Coke (MT)
Crude oil (bbls)
Oil products (bbls)
2011
2010
Change
114 756
87 850
724
697
470
450
31%
54%
55%
2011
91.0
4.1
0.3
271.4
577.8
2010
Change
92.2
8.0
0.7
375.0
522.9
– 1%
– 49%
– 57%
– 28%
10%
Coal
Actual volume reduction was applicable to the more specialised metallurgical coal and coke products, whereas thermal coal
volumes were fairly stable year on year.
The reduced volatility and lower overall freight rates resulted in fewer arbitrage opportunities between the various origins, with
smaller volumes of cross market arbitrage being available. The reduction in volumes of generally higher margin specialised prod-
ucts resulted in a negative variance compared to 2010, although overall profitability remained solid.
The outlook for 2012 remains positive, although some market weakness can be expected during the early part of the year due to
the uncertainty surrounding the European sovereign debt crisis. Thereafter, we expect demand to pick up and remain stable on
the back of lower inventories and reduced nuclear capacity. The availability of good quality coal is likely to remain constrained with
most of the growth in production centred on lower quality products, which is therefore likely to allow good quality coal to enjoy
solid premiums over the rest of the market.
Glencore’s focus remains committed to continue a growth strategy around strengthening of global partnerships with key players
in the Pacific and Atlantic markets and to build up arbitrage and multi sourcing capabilities beyond equity investments. Glencore
is well placed in this respect with most of its production and equity partnerships covering premium quality coal.
Oil
On an overall barrels per day basis, volumes decreased by 5% to 2.3 million barrels per day in 2011 from 2.5 million barrels per day
in 2010. Despite this modest decline in volume, there was no material impact to the department’s overall business coverage in
support of profit opportunities and future growth potential.
Whilst high volatility and favourable physical supply/demand conditions provided more opportunities in H1 2011, the market dur-
ing H2 2011 proved more challenging, with weaker expectations for developed market economic growth, poor refining margins
and weak freight rates, resulting in fewer arbitrage opportunities. Despite a general improvement in freight in the months leading
up to May 2011, challenging conditions returned for the remainder of the year with the renewed sovereign debt crisis, evidenced
by market oversupply (particularly of larger vessels), continuing high bunker fuel prices and lower back-haul.
60 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
INduSTRIAL ACTIVITIES
Highlights
• The energy industrial segment delivered a substantially improved performance during 2011 on the back of production increases
at our coal operations in Colombia.
• Industrial revenues in 2011 were $ 2,309 million versus $ 1,499 million in 2010, an increase of 54%. Adjusted EBITDA and Adjusted
EBIT for 2011 was $ 571 million and $ 375 million respectively, up 59% and 60% compared to $ 359 million and $ 235 million in 2010.
• Our coal mining and infrastructure expansion in Colombia is progressing well with Puerto Nuevo more than 50% complete and
expected to be commissioned in Q1 2013.
• The Aseng oil field in Block I started production in November 2011, well ahead of its initial estimated timeline, with a total produc-
tion of 2.8 million barrels by year-end, in excess of 50,000 barrels per day.
Financial information
US $ million
Revenue
Prodeco
Shanduka
Coal
Oil
Total
Adjusted EBITDA
Prodeco
Shanduka
Coal
Oil
Share of income from associates and dividends
Total
Adjusted EBITDA margin (%)
Adjusted EBIT
Prodeco
Shanduka
Coal
Oil
Share of income from associates and dividends
Total
Capex
Prodeco
Shanduka
Coal
Oil
Total
2011
2010
Change
1 344
323
1 667
642
2 309
418
75
493
23
55
571
25%
281
49
330
– 10
55
375
510
29
539
706
1 245
954
292
1 246
253
1 499
278
47
325
– 12
46
359
24%
199
14
213
– 24
46
235
277
27
304
514
818
41%
11%
34%
154%
54%
50%
60%
52%
n.m.
20%
59%
–
41%
250%
55%
n.m.
20%
60%
–
–
–
–
–
| Annual Report 2011 | 61
Production data
thousand MT ¹
Thermal Coal
Prodeco
Shanduka (Export) ²
Shanduka (Domestic) ²
Total
Own
Buy-in
Coal
2011
Total
Own
Buy-in
Coal
2010
Total
Own produc-
tion change
14 586
498
5 422
20 506
195
–
802
997
14 781
498
6 224
21 503
10 042
385
7 006
17 433
230
–
497
727
10 272
385
7 503
18 160
45%
29%
– 23%
18%
¹ Controlled industrial assets only. Production is on a 100% basis.
2 Shanduka production for 2010 restated to a saleable basis, previously reported on a “ROM” (Run of Mine) basis.
thousand bbls
Oil ¹
Block I
Total
¹ On a 100% basis. Glencore’s ownership interest in the Aseng field is 23.75%
OPERATIONS
2011
Total
2010
Total
Change
2 785
2 785
–
–
n.m.
n.m.
Prodeco (Glencore interest: 100%)
Total own coal production in 2011 was 14.6 million tonnes, an increase of 46% compared to 10.0 million tonnes in 2010. This substan-
tial increase is largely attributable to the broad expansion project underway, which is forecast to increase production to 21 million
tonnes by Q4 2013.
At the Calenturitas mine, Sector A has been opened contributing 4.3 million tonnes of the 7.6 million tonnes produced in 2011, a
46% increase from 5.2 million tonnes in 2010. Production at the La Jagua mine was 7.0 million tonnes, a 46% increase compared to
4.8 million tonnes in 2010.
The increased production across Prodeco’s mines was somewhat constrained by the previously communicated delays in delivery
of mining equipment from Japan in the aftermath of the Tsunami as well as the downtime of 21 rain days in excess of budget,
primarily due to exceptionally heavy rains in October and November.
The largest capital expenditure project currently underway is the construction of the new direct loading port (Puerto Nuevo in
Cienaga), which will provide Prodeco with higher annual throughput capacity and a lower operating cost, compared with the
current port at Puerto Prodeco (Zuñiga). The project is on schedule and expected to be commissioned in Q1 2013.
The remaining capital expenditure projects relate to ongoing mine fleet expansion and mine-based infrastructure support, which
is substantially complete.
Shanduka (Glencore interest: 70.0%)
Total saleable own coal production for 2011 was 5.9 million tonnes, a 20% decrease compared to 2010 production of 7.4 million
tonnes. This decrease was primarily due to the Kendal operations being placed on care and maintenance, which had the effect of
reducing lower-margin domestic sales.
A pre-feasibility study related to the Springboklaagte project is progressing well and is showing positive results.
62 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Umcebo (Glencore interest: 43.7%)
Glencore completed the acquisition of a 43.7% stake in Umcebo in December 2011. The transaction secures access to long-life
resources from South Africa’s principal coal field in Mpumalanga, which has established infrastructure for the transport of export
quality thermal coal. In addition, it also secures an eventual 1.5 million tonnes of export allocation in Phase V of the Richards Bay
Coal Terminal expansion.
Umcebo currently has three thermal coal mines in operation (Middelkraal, Kleinfontein and Klippan) and a standalone wash plant,
with an aggregate annual production capacity of approximately 6.0 million tonnes of saleable coal. Furthermore, the Wonderfon-
tein mine is scheduled to commence production in late 2012, with an annual saleable production capacity of 2.7 million tonnes.
Oil Exploration & Production (Glencore interest: Block I: 23.8%/Block O: 25.0%)
First production from the Aseng field (Block I – Equatorial Guinea) was achieved on 6 November 2011, ahead of the planned start-
up of Q1 2012. Gross oil production achieved to the end of December 2011 was 2.8 million barrels, an average daily rate of over
50,000 barrels per day. Gross oil production since the start of 2012 has averaged 55,000 barrels per day.
Subsea development drilling and well completion work on the Alen gas/condensate field (Block O – Equatorial Guinea) remains
ongoing, whilst the shallow water wellhead platform arrived and was installed in H2 2011. The project remains on schedule for first
production in late 2013 with a target flow rate of 37,500 barrels per day.
| Annual Report 2011 | 63
2.4 | Agricultural products
“we fully expect 2012 results to recover, with a return
to profitability in cotton, coupled with continued strong
performance in grains, oilseeds and sugar. Investments in
oil seed crushing capacity and the expansion of our stor-
age and handling infrastructure has laid a foundation for
growth. The recently announced acquisition of Viterra’s tier
one grain storage, handling and port assets, subject to share-
holder and regulatory approval, is complementary from a
product and geographic perspective and will transform our
business.”
Chris Mahoney
Highlights
Grain and oilseeds marketing reported solid results for 2011. Overall agricultural prod-
ucts marketing results were significantly impacted by the unprecedented cotton mar-
ket environment. The extreme volatility produced an outcome of ineffective hedging
and high levels of physical contractual non-performance by suppliers and customers.
Events in the cotton market accounted for the majority of the year-on-year reduction
in agricultural products marketing Adjusted EBIT.
Our asset portfolio is currently in a phase of substantial targeted expansion and de-
velopment, which is expected to translate into enhanced scale and profitability going
forward. The 2011 performance, in large part, reflects the current negative biodiesel
production margin environment in Europe.
Outlook
We expect a significant improvement in 2012 results across our whole agricultural
products business. The proposed acquisition of Viterra, subject to various approvals,
represents a tremendous opportunity to secure significant grain handling, storage and
port infrastructure at origin. Viterra is, geographically highly complementary, broaden-
ing our reach into North America, providing the opportunity to leverage Glencore’s
existing and extensive global network. The acquisition is consistent with Glencore’s
stated strategy of strengthening its position as one of the global leaders in the grain
and oil seed markets.
Adjusted EBIT
n
o
i
l
l
i
m
$
S
U
800
600
400
200
0
– 200
2009
2010
2011
Marketing activities
Industrial activities
2009 2010 2011
– 8
659
– 39
58
304
41
Marketing activities
40 000
35 000
30 000
T 25 000
M
k
20 000
15 000
10 000
0
2009
2010
2011
Volumes
2009
28 924
2010
31 042
2011
37 214
Industrial activities
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
T
M
k
2009
2010
2011
Volumes
2009
3 132
2010
4 312
2011
6 563
64 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
US $ million
Revenue
Adjusted EBITDA
Adjusted EBIT
Adjusted EBITDA margin (%)
Allocated average CE 1
Adjusted EBIT return on average CE
Marketing
activities
Industrial
activities
13 744
– 8
– 8
n.m.
3 323
0%
3 359
23
– 39
1%
1 631
– 2%
2011
17 103
15
– 47
–
4 953
– 1%
Marketing
activities
Industrial
activities
8 238
659
659
8%
2 368
28%
2 180
107
58
5%
1 106
5%
2010
10 418
766
717
–
3 474
21%
1 The simple average of segment current and non current capital employed (see note 2 of the financial statements), adjusted for production
related inventories, is applied as a proxy for marketing and industrial activities respectively.
MARKET CONdITIONS
Selected average commodity prices
S&P GSCI Agriculture Index
CBOT corn no.2 price (US¢/bu)
ICE cotton price (US¢/lb)
CBOT soya beans (US¢/bu)
NYMEX sugar # 11 price (US¢/lb)
CBOT wheat price (US¢/bu)
2011
490
680
137
1 317
27
709
2010
Change
363
428
94
1 049
22
582
35%
59%
46%
26%
23%
22%
Grain and oil seeds prices weakened in H2 2011, but nevertheless remained higher than in 2010. The GSCI Agriculture Index was
on average 35% higher in 2011 compared to 2010.
A substantial Russian wheat production recovery, a record Australian wheat crop and reduced US feed demand due to high prices
provided some relief to the tight supply/demand situation. South American production was however impacted by drought and
global supplies are still not burdensome. With demand underpinned by growth in Asia, good crops will be required in 2012 to
match expected demand.
Russian and Ukrainian export restrictions were lifted mid-2011, in response to good crops in both countries, but following near
record exports from Russia, domestic prices again strengthened in late 2011.
The cotton market began to normalise by late 2011 after a period of unprecedented volatility. In H2 2011 prices ranged between
US¢ 90 and US¢ 110 per pound, having been as high as US¢ 214 per pound early in the year. As noted earlier, contract performance
issues and the disconnect between futures prices and physical markets at various times during the year, created a very challenging
environment.
MARKETINg
Highlights
Grain, oil seed, sugar and freight volumes all trended higher in 2011, which is a positive development in an otherwise difficult
year. Marketing Adjusted EBIT/EBITDA in 2011 was – $ 8 million compared to 2010’s record $ 659 million. A number of factors, as
described below, had an impact on the results, however cotton was far and away, the key negative.
Grain and oil seeds performed reasonably well but not on a par with 2010, which was a particularly strong year. Export restrictions
in H1 2011 proved challenging, as did the European debt crisis induced volatility and uncertainty. When restrictions in Russia and
the Ukraine were lifted, our up country infrastructure, elevator network and port ownership proved valuable in enabling the swift
export of goods.
| Annual Report 2011 | 65
As noted before, in the cotton business, non and/or delayed contract performance by suppliers in a rising market, non-perfor-
mance of customer contracts in the subsequent declining market and, by historical standards, the unprecedented disconnect/
imperfect correlation between the futures market and the physical markets, created enormous challenges. These factors caused
significant loss/opportunity cost to numerous market participants and the industry, in general, is now undergoing a review in
respect of pricing and performance enhancing mechanisms, length of contacts etc.
Financial information
US $ million
Revenue
Adjusted EBITDA/EBIT
Selected marketing volumes sold
million MT
Grains
Oil/oilseeds
Cotton
Sugar
INduSTRIAL ACTIVITIES
2011
2010
Change
13 744
– 8
8 238
659
67%
n.m.
2011
25.3
10.8
0.5
0.7
2010
Change
20.9
9.4
0.2
0.5
21%
15%
150%
40%
Highlights
With the exception of biodiesel production, processed volumes were considerably higher in 2011 compared to 2010. The signifi-
cant increase in wheat milling production was due to an acquisition. The asset portfolio is in a phase of targeted expansion with a
focus on storage, handling and oilseed processing facilities. Two new oilseed processing plants were acquired in 2011 and our new
build projects remain on budget and time schedule.
Financial information
US $ million
Revenue
Adjusted EBITDA 1
Adjusted EBIT 1
Adjusted EBITDA margin (%)
Capex
1 Includes share of income from associates and dividends of $ 18 million (2010: $ 19 million).
Production data
thousand MT
Farming
Oilseed crushing
Oilseed crushing long term toll agreement
Biodiesel
Rice Milling
Wheat Milling
Sugarcane Processing
Total
66 | Annual Report 2011 |
2011
2010
Change
3 359
23
– 39
1%
221
2 180
107
58
5%
71
54%
– 79%
n.m.
–
–
2011
2010
Change
827
2 008
948
569
304
1 001
906
6 563
587
1 593
727
831
212
362
0
4 312
41%
26%
30%
– 32%
43%
177%
n.m.
52%
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
OPERATIONS
Rio Vermelho (Glencore interest: 100%)
During 2011 Rio Vermelho crushed a total of 906,000 tonnes of sugarcane, producing 75,000 cubic metres of hydrous ethanol. Pro-
duction was however below expectations, due to severe frosts which affected the region in June and August, and consequently
lowered agricultural yields.
Rio Vermelho farmed 68% of its sugarcane feedstock in 2011, the balance of which was supplied by independent farmers. The
share of own-farmed sugarcane is expected to increase over subsequent crop cycles as Rio Vermelho expands its own plantations.
A five year expansion plan is underway to increase crushing capacity from 1.0 million tonnes to 2.6 million tonnes, construct a Very
High Pol (“VHP”) sugar plant with a capacity of 260,000 tonnes and an anhydrous ethanol production capability of up to 80,000 cubic
metres as well as the construction of a cogeneration plant capable of supplying 200,000 megawatt hours of surplus electricity to
the grid. The first phase of the project, namely the construction of the VHP sugar plant, is expected to be completed by mid-2012.
The total estimated project cost is $ 322 million.
Other Agricultural Products
Oilseed crushing
Processed volumes increased in 2011 versus 2010, however soybean crush margins, particularly in South American in H2 2011,
were subdued. In December 2011, we acquired two soft seed processing facilities at Ústí in the Czech Republic and at Bodaczów
in Poland, production of which will only be realised in 2012. Our Hungarian plant construction completed and commenced com-
missioning in December. The Timbues soya bean facility in Argentina is scheduled for completion by the end of H1 2012. These
four facilities will add 3.6 million tonnes of processing capacity to our portfolio, including Glencore’s share of Timbues of 2.0 mil-
lion tonnes.
Biodiesel
Poor biodiesel esterification margins negatively impacted the 2011 results. Overcapacity in the EU and legislative changes that
effectively diminished biodiesel demand were the main underlying causes. In response, we reduced our production volume by
32% compared to 2010 and took the unfortunate, but necessary measure of mothballing the Schwarzheide plant. The outlook in
Europe remains challenging. In Argentina, our Renova joint venture performed well and the outlook is more positive, supported by
the government’s efforts to boost local biodiesel consumption.
Rice and wheat milling
Rice milled volumes rose by 43% in 2011, with better Argentine and Uruguayan rice crops. Wheat milling volume rose substantially
due to our late 2010 acquisition of 50% of the Brazilian milling company Predilito. Both rice and wheat milling performed satisfac-
torily. In Brazil, the business is supported by strong brand recognition.
Farming
Overall farm production rose 41% and the business performed reasonably well due to favourable weather conditions and large
crops.
| Annual Report 2011 | 67
2.5 | Reserves and resources
The reserves and resources data in the following tables is presented on a 100% asset basis, unless otherwise stated. All tonnage
and volume information has been rounded to reflect the relative uncertainty in the estimates; there may therefore be small differ-
ences in the totals. The Measured and Indicated Mineral and Coal Resources are reported inclusive of those resources modified
to produce reserves.
METALS ANd MINERALS
KAZZINC 1, 2
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
OPERATING MINES
Vasilkovskoye
Maleevsky
Ridder-Sokolny 3
Tishinsky
Staroye Tailings Dam 4
Ore
Gold
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
’000 MT
131 080
31 350
162 430
171 000
104 310
40 880
316 190
Content, g/t
Gold Amount, ‘000 toz
1.89
7 960
1.49
1 502
1.81
9 462
1.79
9 841
1.33
4 460
1.72
1.63
2 261
16 562
’000 MT
13 280
5 380
18 660
16 820
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
0.54
69.08
2.13
0.98
5.95
0.40
47.20
1.36
0.91
5.35
0.50
62.77
1.90
0.96
5.78
0.64
81.91
2.49
1.17
6.92
5 240
0.56
65.13
1.79
1.23
7.08
5 170
27 220
0.25
50.11
1.16
1.79
5.82
0.55
72.64
2.10
1.30
6.74
’000 MT
9 070
27 850
36 920
24 450
67 780
32 940
125 170
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
1.25
5.96
0.64
0.24
0.60
2.15
8.80
0.52
0.25
0.52
1.93
8.22
0.55
0.25
0.54
1.58
10.23
0.72
0.37
0.87
2.16
9.27
0.64
0.33
0.68
1.56
9.26
0.47
0.32
0.72
1.89
9.45
0.61
0.34
0.73
’000 MT
18 200
4 900
23 100
25 360
7 960
5 020
38 340
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
’000 MT
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
0.53
7.99
0.52
0.91
4.19
–
–
–
–
–
–
–
–
0.47
9.36
0.40
0.88
4.13
3 580
1.13
11.83
0.04
0.34
0.74
0.52
8.28
0.49
0.91
4.18
3 580
1.13
11.83
0.04
0.34
0.74
2 390
21.60
2 390
21.60
0.55
8.04
0.53
0.85
4.09
–
–
–
–
–
–
–
–
0.42
6.94
0.40
0.72
3.69
4 420
1.14
12.36
0.04
0.34
0.74
2 480
21.71
0.27
8.44
0.50
1.41
3.77
2 790
0.96
10.96
0.04
0.29
0.62
0.48
7.86
0.50
0.90
3.96
7 210
1.07
11.82
0.04
0.32
0.69
–
–
2 480
21.71
Shaimerden Stockpiles
Ore
Zinc
’000 MT
Content, %
68 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
KAZZINC 1, 2
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
DEVELOPMENT PROJECTS
Dolinnoye
Obruchevskoye
Chashinskoye Tailings Dam
Tishinsky Tailings Dam
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
Ore
Gold
Silver
Copper
Lead
Zinc
’000 MT
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
’000 MT
Content, g/t
3 660
3.93
53.76
0.20
0.75
1.41
890
1.73
Content, g/t
42.80
Content, %
Content, %
Content, %
0.81
4.27
8.98
960
2.38
29.82
0.14
0.50
1.02
3 250
0.90
33.21
0.83
2.66
6.50
4 620
3.61
48.77
0.19
0.70
1.33
4 140
1.08
35.26
0.82
3.01
7.03
4 010
4.47
61.83
0.24
0.92
1.76
2 710
1.76
65.37
1.51
0.42
2.46
3 040
2.51
34.03
0.14
0.51
1.01
5 510
0.51
22.15
1.05
0.37
2.06
3 830
10 880
2.11
29.54
0.20
0.68
1.26
3.09
42.70
0.20
0.72
1.37
5 240
13 460
0.51
36.42
0.95
0.36
1.77
0.76
36.41
1.24
0.39
2.16
’000 MT
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
’000 MT
Content, g/t
Content, g/t
Content, %
Content, %
Content, %
–
–
–
–
–
–
–
–
–
–
–
–
55 500
55 500
0.67
5.13
0.05
0.15
0.38
0.67
5.13
0.05
0.15
0.38
1 100
1 100
0.38
5.10
0.23
0.44
2.25
0.38
5.10
0.23
0.44
2.25
–
–
–
–
–
–
–
–
–
–
–
–
57 800
30 000
87 800
0.67
5.16
0.05
0.15
0.38
1 150
0.38
5.13
0.23
0.44
2.26
0.50
4.57
0.06
0.19
0.45
–
–
–
–
–
–
0.61
4.96
0.05
0.16
0.40
1 150
0.38
5.13
0.23
0.44
2.26
¹ The information in the tables above, in relation to mineral resources and ore reserves, has been estimated in accordance with the guidelines
of the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC code) and
is dated as of 31 December 2011.
² Remaining mine life: different for each mine, ranging from eight to 21 years. Expiry date of relevant mining/concession licences: different for
each mine, ranging from 19 May 2013 to 7 November 2030.
3 Mineral resources and ore reserves for Ridder-Sokolny have been completed for a significant part of the deposit, however there are still some
outstanding results.
4 The grades of copper and zinc for the depletion of the Staroye Tailings have been estimated from assumptions based upon the known propor-
tion of other metals within the tailings due to a lack of grade data.
Competent Persons: the mineral resource and ore reserve estimates set out above were reviewed and approved by Phil Newall of Wardell
Armstrong. The mineral resource and ore reserve estimates have been prepared in accordance with the JORC Code. Mr Newall is a Competent
Person as defined by JORC and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity which he is undertaking.
| Annual Report 2011 | 69
KATANGA 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Kamoto
T17
Mashamba East
KOV
Kananga
Tilwezembe
Ore
’000 MT
13 000
19 400
32 400
32 100
32 900
11 000
76 000
Copper
Cobalt
%
%
3.43
0.51
3.70
0.53
3.59
0.52
4.33
0.58
4.63
0.57
5.00
0.59
4.56
0.58
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2 500
2 500
4 500
9 400
5 200
19 100
3.51
0.56
3.51
0.56
2.71
0.54
4.44
0.65
4.21
0.98
3.97
0.71
5 900
5 900
3.00
0.36
3.00
0.36
–
–
–
75 000
65 300
140 300
1.80
0.38
0.76
0.10
1.32
0.25
55 100
55 100
3 900
117 200
69 800
190 900
4.74
0.45
4.74
0.45
4.25
0.22
5.41
0.42
3.58
0.32
4.72
0.38
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4 100
4 000
8 100
1.61
0.79
2.00
0.98
1.80
0.88
9 500
13 800
23 300
1.89
0.60
1.75
0.60
1.81
0.60
1 As at 31 December 2011. The information in the table above, in relation to mineral reserves and resources, is in compliance with the JORC
Code and has been extracted without material adjustment from the Competent Person’s Report compiled for Katanga.
2 Remaining life of mine: in excess of 25 years. Expiry date of relevant mining/concession licences: 7 May 2022 for the Kananga Extension and
3 April 2024 for all remaining operations.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Willem van der Schyff
of Golder Associates. The reserve and resources estimates have been prepared in accordance with the JORC Code. Mr van der Schyff is a
Competent Person as defined by JORC and has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking.
MUTANDA 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Mutanda pits
Stockpiles
Ore
’000 MT
41 400
6 500
47 900
100 000
23 700
172 200
295 900
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
3.00
0.82
6 700
2.53
1.36
3.09
0.82
–
–
–
3.01
0.82
6 700
2.53
1.36
2.15
0.70
1.54
0.82
1.03
0.47
1.45
0.58
–
–
–
–
–
–
–
–
–
–
–
–
1 As at 31 December 2011. The information in the table above in relation to mineral reserves and resources is in compliance with the JORC Code
and has been extracted without material adjustment from the Competent Person’s Report compiled for Mutanda.
2 Remaining mine life: 20 years. Expiry date of relevant mining/concession licenses: 26 May 2022 for Mutanda. This is renewable in accordance
with the DRC mining code for periods of 15 years.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Willem van der Schyff
of Golder Associates. The reserves and resources estimates have been prepared in accordance with the JORC Code. Mr van der Schyff is a
Competent Person as defined by JORC and has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking.
70 | Annual Report 2011 |
KANSUKI 1, 2
Area 3
Area 1
Area 2 East
Area 2 West
Kabwimia
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Commodity
Measured Indicated
Inferred
Total
Resources
Ore
’000 MT
16 700
Copper
Cobalt
%
%
1.72
0.17
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
Ore
’000 MT
Copper
Cobalt
%
%
–
–
–
–
–
–
–
–
–
–
–
–
400
0.93
0.14
63 900
1.13
0.37
–
17 100
–
–
–
–
–
1.70
0.17
63 900
1.13
0.37
–
–
–
–
–
–
–
–
–
38 800
38 800
0.44
0.08
0.44
0.08
71 600
71 600
0.65
0.28
0.65
0.28
6 200
6 200
0.75
0.02
0.75
0.02
1 As at 31 December 2011. The mineral resource estimates set out above were reviewed and approved by Willem van der Schyff of Golder
Associates. The resource estimates have been prepared in accordance with the JORC Code. Mr van der Schyff is a Competent Person as
defined by JORC and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to
the activity which he is undertaking.
2 Expiry date of relevant mining/concession licences: 5 May 2022. This is renewable in accordance with the DRC mining code for periods of
15 years.
MOPANI 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Nkana Sulphides
Nkana Oxides
Mufulira Sulphides
Mufulira Oxides
Ore
’000 MT
98 700
19 800
118 600
143 600
42 500
38 300
224 400
Copper
Cobalt
%
%
1.91
0.08
1.78
0.09
1.89
0.08
2.01
0.10
1.79
0.12
1.66
0.11
1.91
0.11
Ore
’000 MT
2 800
5 500
8 300
8 400
7 300
1 100
16 700
Total copper
Acid soluble copper
Cobalt
%
%
%
3.20
2.21
0.14
0.76
0.50
0.07
1.58
1.08
0.10
2.79
1.86
0.13
0.96
0.63
0.07
1.26
0.85
0.07
1.90
1.26
0.10
Ore
’000 MT
13 800
3 600
17 400
22 700
8 700
35 700
67 100
Copper
%
2.15
2.24
2.17
2.49
2.62
2.52
2.53
Ore
’000 MT
2 700
Total copper
Acid soluble copper
%
%
1.55
0.98
500
1.38
0.93
3 100
9 600
2 900
1 700
14 100
1.53
0.97
1.73
0.95
1.34
0.85
1.39
0.89
1.61
0.92
1 As at 31 December 2011. The information in the table above, in relation to mineral reserves and resources, is in compliance with the JORC
Code and has been extracted without material adjustment from the Competent Person’s Report compiled for Mopani.
2 Remaining life of mine: 26 years for Nkana and 12 years for Mufulira. Expiry date of relevant mining/concession licences: 31 March 2025 for
both of these mines.
Competent Persons: the mineral reserve and resource estimates set out above were reviewed and approved by Willem van der Schyff of Golder
Associates. The reserves and resources estimates have been prepared in accordance with the JORC Code. Mr van der Schyff is a Competent
Person as defined by JORC and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity which he is undertaking.
| Annual Report 2011 | 71
LOS QUENUALES 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Iscaycruz
Yauliyacu
Ore
Zinc
Lead
Copper
Silver
Ore
Zinc
Lead
Copper
Silver
’000 MT
1 186
1 209
2 394
%
%
%
toz/t
9.75
0.65
0.19
0.54
6.96
0.14
0.35
0.27
8.34
0.39
0.27
0.40
2 099
12.99
1.01
0.33
0.89
4 501
10 092
16 691
6.51
0.61
0.33
1.00
4.31
0.24
0.59
0.66
6.00
0.44
0.49
0.78
’000 MT
1 082
2 837
3 919
1 686
8 865
14 315
24 866
%
%
%
toz/t
2.31
0.90
0.23
3.04
2.13
0.88
0.20
3.20
2.18
0.89
0.21
3.16
3.67
1.26
0.37
4.71
3.40
1.31
0.37
5.96
3.35
1.20
0.34
5.19
3.39
1.24
0.35
5.43
1 As at 31 December 2011.
2 Remaining mine life: the expected life of Iscaycruz is two years based on reserves and twelve years based on resources. The expected life of
Yauliyacu is three years based on reserves and 19 years based on resources. Expiry date of relevant mining/concession licences: permanent.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Glencore Competent Person,
Chris Emerson, and have been prepared in accordance with the JORC Code. Mr Emerson is a Competent Person as defined by the JORC Code.
Mr Emerson is a fellow of the Geological Society of London and a member of AusIMM – The Minerals Institute and has more than ten years
experience in underground polymetallic deposits in Latin America.
SINCHI WAYRA 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Bolivar
Porco
Colquiri
Poopo
Caballo Blanco
Ore
Zinc
Lead
Silver
Ore
Zinc
Lead
Silver
Ore
Zinc
Tin
Ore
Zinc
Lead
Silver
Ore
Zinc
Lead
Silver
’000 MT
%
%
toz/t
’000 MT
%
%
toz/t
’000 MT
%
%
’000 MT
%
%
toz/t
’000 MT
%
%
toz/t
163
9.34
1.29
7.66
239
8.65
0.61
4.47
753
8.13
1.54
104
7.62
0.29
3.77
67
12.07
0.48
2.16
293
9.60
0.99
8.20
482
8.61
0.50
3.83
802
8.02
1.27
180
7.89
0.43
4.80
286
8.71
2.35
6.08
456
9.51
1.10
8.01
721
8.62
0.54
4.04
1 555
8.07
1.40
284
7.79
0.38
4.42
353
9.35
2.00
5.34
670
11.23
1.48
10.83
597
9.36
0.54
3.68
1 511
9.68
1.64
286
9.13
0.44
5.09
376
10.78
2.42
6.47
608
11.10
1.02
11.28
383
11.59
0.92
4.68
727
9.04
1.89
255
9.33
0.77
8.05
256
10.27
2.77
7.65
2 389
9.72
0.79
10.41
1 033
11.10
0.92
5.24
1 943
8.83
1.93
874
9.03
0.87
9.11
430
10.14
3.10
8.45
3 667
10.23
0.95
10.63
2 013
10.68
0.81
4.67
4 182
9.17
1.82
1 415
9.11
0.77
8.10
1 062
10.40
2.78
7.55
1 As at 31 December 2011.
2 Remaining mine life: the expected life of the mines as a group, considering current production capacities, is an average of two years based
on reserves and seven years based on resources. Expiry date of relevant mining/concession licenses: different for each mine, ranging from
30 June 2014 to 16 January 2027 in respect of Porco, Colquiri and Poopo and permanent in respect of Bolivar and Caballo Blanco.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Glencore Competent Person,
Chris Emerson, and have been prepared in accordance with the JORC Code. Mr Emerson is a Competent Person as defined by the JORC Code.
Mr Emerson is a fellow of the Geological Society of London and a member of AusIMM – The Minerals Institute and has more than ten years
experience in underground polymetallic deposits, predominantly in Latin America.
72 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
AR ZINC1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Aguilar
Ore
Zinc
Lead
Silver
’000 MT
1 231
1 553
2 784
1 752
2 801
1 597
6 150
%
%
toz/t
8.89
7.82
5.55
5.12
6.48
4.24
6.79
7.07
4.82
7.76
6.36
4.63
4.18
4.73
3.26
7.21
7.00
4.57
5.99
5.78
3.99
1 As at 31 December 2011.
2 Remaining mine life: approximately four years based on reserves and nine years based on resources. AR Zinc plans to continue exploration
with the aim of extending the life of mine. Expiry date of relevant mining/concession licences: permanent.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Glencore Competent Person,
Chris Emerson, and have been prepared in accordance with the JORC Code. Mr Emerson is a Competent Person as defined by the JORC Code.
Mr Emerson is a fellow of the Geological Society of London and a member of AusIMM – The Minerals Institute and has more than ten years
experience in underground polymetallic deposits, predominantly in Latin America.
COBAR 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Cobar
Ore
’000 MT
1 591
3 485
5 076
2 362
3 454
5 502
11 318
Copper
Silver
%
g/t
4.45
16.5
4.60
17.9
4.55
17.5
5.82
19.0
6.12
24.0
6.00
20.0
6.00
21.0
1 As at 31 December 2011.
2 Remaining mine life: current expected life of mine is approximately five years based on reserves and approximately 10 years based on re-
sources, although Cobar has previously been able to extend its expected life of mine through exploratory drilling in the area covered by its
concession. Expiry date of relevant mining/concession licences: 5 December 2028.
Competent Persons: the mineral reserves estimates set out above were reviewed and approved by Glencore Competent Person, Daniel How-
ard. The mineral resources estimates set out above were reviewed and approved by Glencore Competent Person, Jason Hosken. The mineral
reserves and resources estimates have been prepared in accordance with the JORC Code. Mr Howard has been a member of AusIMM – The
Minerals Institute since 2011 (graduate member for 10 years) and has more than 8 years of experience in underground polymetallic deposits in
Australia. Mr Hosken has been a member of AusIMM – The Minerals Institute for more than 13 years and has more than 17 years of experience
in underground polymetallic deposits in Australia.
PUNITAQUI 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Punitaqui
Ore
Copper
Silver
’000 MT
%
toz/t
2 164
1.44
7.26
2 687
1.39
4.72
4 852
1.41
5.86
2 513
1.58
7.42
3 748
1.40
4.88
1 103
2.05
4.97
7 364
1.56
5.76
1 As at 31 December 2011.
2 Remaining mine life: approximately five years based on reserves and seven years based on resources. Punitaqui plans to continue exploration
with the aim of extending the life of mine. Expiry date of relevant mining/concession licences: permanent.
Competent Persons: the mineral reserves and resources estimates set out above were reviewed and approved by Glencore Competent Person,
Chris Emerson, and have been prepared in accordance with the JORC Code. Mr Emerson is a Competent Person as defined by the JORC Code.
Mr Emerson is a fellow of the Geological Society of London and a member of AusIMM – The Minerals Institute and has more than ten years
experience in underground polymetallic deposits, predominantly in Latin America.
| Annual Report 2011 | 73
PERKOA 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Reserves
Resources
Perkoa
Ore
Zinc
Silver
’000 MT
%
g/t
–
–
6 300
6 300
13.9
13.9
430
17.2
41.4
6 290
16.3
35.0
–
–
–
6 720
16.4
35.4
1 As at 31 December 2011 for 100% of the Perkoa Project. Reserve information produced July 2009, Resource information produced August 2005.
2 Remaining mine life: current expected life of mine is approximately 9 years based on reserves and approximately 9 years based on resources.
Expiry date of relevant mining/concession licences: 20 March 2027.
Competent Persons: The ore reserves estimates set out above were reviewed and approved by Mr John Miles. The mineral resources estimates
set out above were reviewed and approved by Dr Mike Armitage. Both Mr Miles and Dr Armitage are Members of the Institute of Materials,
Minerals and Mining which is a ‘Recognised Overseas Professional Organisation’ (‘ROPO’), and both have sufficient experience which is relevant
to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent
Persons as defined in the JORC code. Dr Armitage is a fellow of the Geological Society of London and is the Chairman of SRK Consulting (UK)
Ltd. Mr Miles is a Principal Associate of SRK Consulting (UK).
MURRIN MURRIN 1, 2
Commodity
Proved ³ Probable
Total Measured ³ Indicated
Inferred
Total
Reserves
Resources
Ore
’000 MT
Nickel Content, % 4
Cobalt Content, % 4
%
Nickel Cut Off Grade
150 408
35 774
186 182
184 582
72 914
10 479
267 974
1.00
0.072
0.99
0.074
1.00
0.072
1.01
0.073
0.8
1.00
0.079
0.8
0.94
0.059
0.8
1.00
0.074
1 As at 31 December 2011. The above Resources and Reserves have been prepared in accordance with the JORC Code.
2 Remaining mine life: at the forecast throughput capacity of 3.6 million tonnes per annum, the project’s operating life is in excess of 40 years.
Expiry dates for relevant tenements differ for each tenement and range from 2012 to 2032. The Murrin Murrin 31 December 2011 Ore Reserve
estimate is based on the optimised Base Case pit shells for Measured and Indicated Mineral Resources.
3 Includes scats and stockpiles.
4 Ore Reserve grades have been subject to the application of grade modifying factors. These have been derived from analysis of the previous
two years mine-to-mill grade performance and result in grade modifying factors of 94% and 92% for nickel and cobalt respectively. The esti-
mated Ore Reserve tonnage has not been subjected to any modification.
Competent Persons: As at 31 December 2011 the information in this report relating to Exploration Results is based on information compiled
by Mr David Selfe, the information relating to Ore Resources is based on information compiled by Mr Stephen King and Mr David Selfe, the
information relating to Ore Reserves is based on information compiled by Mr Rod Greenup and the information relating to Metallurgical Results
is based on information compiled by Mr Brad Adamson. Mr Selfe, Mr King, Mr Greenup and Mr Adamson are all Members of the Australasian
Institute of Mining and Metallurgy and are all full time employees of Minara Resources Ltd. Mr Selfe, Mr King, Mr Greenup and Mr Adamson
all have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which
they are undertaking in order to qualify as Competent Persons as defined in the JORC Code and all consent to the inclusion in this report of the
matters based on their information in the form and context in which it appears.
74 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
ENERgy PROduCTS
EQUATORIAL GUINEA
1P
2P
3P
Aseng field 3
Alen field 4
91
42
107
65
125
96
1P
22
10
2P
25
16
3P
30
24
Reserves (MMstb) 1
Gross field
Glencore working interest 2
1 As at 31 December 2011. The reserves information set out above were reviewed and approved by RPS Energy Consultants Limited (“RPS”), has
been prepared in accordance with the Petroleum Resources Management System (PRMS) and has been extracted without material adjustment
from the RPS Report.
2 Glencore working interest in Block O is 25 per cent. and Glencore working interest in Block I is 23.75 per cent.
3 Includes oil and condensate.
4 Alen is 95% in Block O and 5% in Block I.
EQUATORIAL GUINEA
1C
2C
3C
Liquids (MMstb) ²
Gas (Bscf)
52
1 679
107
2 452
192
3 433
1C
13
408
2C
26
597
3C
47
838
Contingent Resources 1
Gross field
Glencore working interest
1 As at 31 December 2011. The resources information set out above were reviewed and approved by RPS Energy Consultants Limited (“RPS”),
has been prepared in accordance with PRMS and has been extracted without material adjustment from the RPS Report.
2 Includes oil and condensate.
EQUATORIAL GUINEA
Liquids (MMstb) ²
Gas (Bscf) ³
Prospective Resources (Unrisked) 1
Recoverable
Gross
Glencore working interest
P90
P50
P10
P90
P50
P10
57
399
162
789
447
1 600
14
96
39
192
108
390
1 As at 31 December 2011. The resources information set out above were reviewed and approved by RPS Energy Consultants Limited (“RPS”),
has been prepared in accordance with PRMS and has been extracted without material adjustment from the RPS Report.
2 Includes oil and condensate.
³ Gas volumes include inerts.
| Annual Report 2011 | 75
PRODECO 1
Calenturitas 2
La Jagua 3
Coal reserves (‘000 MT)
Coal resources (‘000 MT)
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Coal
Coal
119 000
102 000
221 000
170 000
170 000
70 000
410 000
98 000
22 000
120 000
107 000
23 000
–
130 000
1 As at 31 December 2011. The information in the table above in relation to mineral reserves and resources is in compliance with the JORC Code.
2 Remaining mine life: expected to be 20 years. Expiry date of relevant mining/concession licenses: 2035.
3 Remaining mine life: expected to be 20 years. Expiry date of relevant mining/concession licenses: Carbones El Tesoro and Carbones de La
Jagua expiring between 2027 and 2038, and Consorcio Minero Unido expiring in 2014 with renewal considered probable due to the fact that
the integrated La Jagua mine plan has already been approved.
Competent Persons: The mineral reserves estimates set out above were reviewed and approved by Greg Eisenmenger of Minarco-MineConsult.
The mineral resources estimates set out above were reviewed and approved by Kerry Whitby of McElroy Bryan Geological Services. The mineral
reserves and resources estimates have been prepared in accordance with the JORC Code. Mr Eisenmenger and Mr Whitby are each Competent
Persons as defined by JORC and have sufficient experience which is relevant to the style of mineralisation and type of deposit under considera-
tion and to the activity which they are undertaking.
SHANDUKA 1, 2
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Coal reserves (‘000 MT)
Coal resources (‘000 MT)
Graspan
Townlands
Steelcoal reserve
Lakeside Opencut
Lakeside Underground
Leeuwfontein
Springlake Opencut
Springlake Underground
Argent
Springboklaagte ³
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
18 823
15 466
9 927
–
–
–
950
12 068
–
–
–
–
–
–
–
–
–
–
–
18 823
15 466
9 927
–
–
–
950
29 583
21 379
13 352
1 680
3 470
5 260
2 060
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29 583
21 379
13 352
1 680
3 470
5 260
2 060
12 068
12 470
7 500
17 110
37 080
–
–
21 844
–
21 844
36 600
36 600
79 810
103 930
5 530
189 270
1 As at 31 December 2011.
2 Remaining mine life: individual mining operations have expected lives ranging from three to twelve years, based on their reserves. However,
the Springboklaagte deposit extends Shanduka’s expected life by approximately 20 to 25 years. Expiry date of relevant mining/concession
licenses: different for each mine, ranging from October 2015 to March 2022 in respect of Graspan, Townlands, Steelcoal reserve, Lakeside
and Springlake. Leeuwfontein is still what is known as an ‘‘old order right’’ or mining license, with applications pending for conversion into
a ‘‘new order right’’ or mining license (only upon conversion will the expiry date be known). All other mining rights are “new order rights”.
Springboklaagte is still a prospecting right, which are granted for five year periods and are renewable for a further three year period. The main
prospecting right expired on 3 August 2011 and an application for the renewal of the prospecting right was lodged on 3 June 2011. Further to
this an application for a mining right was also lodged in April 2011. Argent has a prospecting right valid until 29 June 2013.
3 Springboklaagte is held as a Joint Venture between Shanduka and Umcebo, 100% of the reserves and resources are included in the table
above.
Competent Persons: the mineral reserves and resources estimates set out above were compiled and approved by Karin van der Merwe, Gerrit
Cronjé, Burger du Toit and Thys de Bruin of Shanduka Coal (Pty) Ltd. The reserves and resources estimates have been prepared in accordance
with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (the SAMREC Code). All are
Competent Persons as defined by SAMREC and each have sufficient experience which is relevant to the style of mineralisation and type of
deposit under consideration and to the activity which they are undertaking.
76 | Annual Report 2011 |
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Coal reserves (‘000 MT)
Coal resources (‘000 MT)
Commodity
Proved Probable
Total Measured Indicated
Inferred
Total
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
Coal
15 311
2 600
2 671
959
–
52 590
–
–
–
–
–
15 311
20 200
–
–
–
–
–
–
–
–
–
–
2 600
2 671
959
–
52 590
–
–
–
–
3 000
4 500
1 700
12 700
98 300
700
4 000
–
600
–
–
–
–
–
–
–
–
–
–
20 200
3 600
4 500
1 700
5 638
18 338
–
–
–
98 300
700
4 000
367 100
114 350
177 000
181 600
107 710
–
8 500
6 640
36 600
36 600
79 810
103 930
5 530
189 270
UMCEBO 1, 2
Middelkraal
Kleinfontein
Klippan Opencut
Klippan Underground
Kleinfontein Jicama
Wonderfontein
Norwesco
Doornrug
Hendrina
Belfast
Springboklaagte ³
1 As at 31 December 2011.
2 Remaining mine life: individual mining operations have expected lives ranging from three to twelve years, based on their reserves. However, the
Springboklaagte deposit extends Umcebo’s expected life by approximately 20 to 25 years. Expiry date of relevant mining/concession licenses:
different for each mine, ranging from October 2015 to March 2022 in respect of Middelkraal, Kleinfontein, Klippan, Norwesco and Doornrug.
Springboklaagte is still a prospecting right, which are granted for five year periods and are renewable for a further three year period. The main
prospecting right expired on 3 August 2011 and an application for the renewal of the prospecting right was lodged on 3 June 2011. Further to
this an application for a mining right was also lodged in April 2011. Wonderfontein prospecting right lapsed on 17 November 2011 however a
renewal was lodged on 28 July 2011. A mining right application was submitted and granted in February 2012, but is yet to be executed.
3 Springboklaagte is held as a Joint Venture between Shanduka and Umcebo, 100% of the reserves and resources are included in the table
above.
Competent Persons: the mineral reserves and resources estimates set out above were compiled and approved by Karin van der Merwe, Gerrit
Cronjé, Burger du Toit and Thys de Bruin of Shanduka Coal (Pty) Ltd. The reserves and resources estimates have been prepared in accordance
with SAMREC. All are Competent Persons as defined by SAMREC and each have sufficient experience which is relevant to the style of minerali-
sation and type of deposit under consideration and to the activity which they are undertaking.
| Annual Report 2011 | 77
Corporate
GovernanCe
3 | Corporate Governance
3.1 | Chairman’s Introduction
3.2 | Board of Directors
3.3 | Corporate governance report
3.4 | Directors’ remuneration report
3.5 | Directors’ report
80
81
84
91
97
3.1 | Chairman’s Introduction
Welcome to our first Corporate Governance report.
In preparing this report we have been mindful of the conflicting challenges of governance reporting – the
objective on the one hand of keeping the report concise and the aim on the other of providing a full and
complete report.
As Glencore prepared for its London and Hong Kong listings in 2011, the Company has implemented a struc-
ture, both organisational and operational, by which it has sought to be fully compliant with the UK Corporate
Governance Code. This report details this implementation, but I would first like to highlight the following:
• The Board consists of six independent Non-Executive Directors and two Executive Directors.
• Each Non-Executive Director has a proven track record in business at a high level and expertise of direct
relevance to the Company.
• As large shareholders, the interests of Glencore’s Executive Directors are aligned closely with those of
other shareholders.
• The Board and Committee structure properly required of a large listed company has been effectively
implemented in practice, with Board Committees conducting their duties rigorously and thoroughly. The
Non-Executives have provided critical challenge and support to the areas of the Group which they believe
are of particular importance. In particular our Audit Committee has taken a strong interest in the risk and
internal audit functions. Our HSEC Committee has also provided considerable input and insight to assist
and guide the progress the Company is making to improve its safety performance and on various other
material sustainability issues.
• We have appointed a Company Secretary who has considerable PLC experience to ensure that the Chairman
and other Non-Executive Directors have the support and assistance required to implement our responsi-
bilities effectively.
• Although our Board has been operating for less than a year we carried out a comprehensive evaluation
exercise with issues for improvement identified. We have sought to provide high quality information to
the market and constructive engagement with shareholders. We have also sought to engage with others
who are relevant to or impacted by the Group’s activities including Non-Governmental Organisations and
relevant regulators.
• We intend to reflect regularly upon developments in corporate governance best practice. In particular we
recognise that we should seek greater diversity, particularly gender, within our Board.
We have sought to report on our governance in a user friendly and direct a manner as possible, giving a
clear summary of the considered leadership which the Board and its Committees provides to the Group.
We would welcome feedback on this report.
80 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
3.2 | Board of Directors
All of the Directors were appointed in March or April 2011, shortly prior to the Company’s IPO.
SIMON MURRAY 4
Chairman (age 71)
Appointed to the Board as Non-Executive Chairman in April 2011. He is the founder and current chairman
of GEMS Limited, a private equity investment group operating across Asia. Previously, Mr Murray led Jar-
dine Matheson’s engineering and trading operations from 1966 to 1980, after which he set up Davenham
Investments, a project advisory company. From 1984 until 1993, Mr Murray was group managing director of
Hutchison Whampoa, leading its entry into the mobile telecommunication business, developing its energy
business and expanding its container and port operations. Mr Murray served as a member of the Hutchison
Whampoa Board until May 2007. From 1994 to 1997, Mr Murray was the executive chairman of Deutsche Bank
group for the Asia Pacific region.
Mr Murray is currently a member of the Board of Directors of a number of public companies including IRC,
Essar Energy, Orient Overseas, Wing Tai Properties, Greenheart, Compagnie Financiere Richemont and
Sino Forest Corporation. Mr Murray was a non-executive director of Vodafone between July 2007 and July
2010. In 1993, Mr Murray was appointed a CBE in honour of his contribution to the Hong Kong community.
Mr Murray has also been awarded the Order of Merit of the French Republic and is a Chevalier de la Legion
d’honneur. He holds an honorary B.A. degree in law from Bath University and attended the Stanford Execu-
tive Programme (SEP) in the U.S.
IVAN GLASENBERG 2, 4
Chief Executive Officer (age 55)
Ivan Glasenberg joined Glencore in April 1984 and has been Chief Executive Officer since January 2002.
Mr Glasenberg initially spent three years working in the coal/coke commodity department in South Africa
as a marketer, before spending two years in Australia as head of the Asian coal/coke commodity division.
Between 1988 and 1989, he was based in Hong Kong as manager and head of Glencore’s Hong Kong and
Beijing offices, as well as head of coal marketing in Asia, where his responsibilities included overseeing the
Asian coal marketing business of Glencore and managing the administrative functions of the Hong Kong
and Beijing offices. In January 1990, he was made responsible for the worldwide coal business of Glencore
for both marketing and industrial assets, and remained in this role until he became Chief Executive Officer
in January 2002.
Mr Glasenberg is a Chartered Accountant of South Africa and holds a Bachelor of Accountancy from the
University of Witwatersrand. Mr Glasenberg also holds an M.B.A. from the University of Southern California.
He is currently a director of Xstrata plc and United Company Rusal plc and JSC Zarubezhneft. Before join-
ing Glencore, Mr Glasenberg worked for five years at Levitt Kirson Chartered Accountants in South Africa.
STEVEN KALMIN
Chief Financial Officer (age 41)
Steven Kalmin joined Glencore in September 1999 as general manager of finance and treasury functions
at Glencore’s coal industrial unit (now part of Xstrata). Mr Kalmin moved to Glencore’s Baar head office in
October 2003 to oversee Glencore’s accounting and reporting functions, becoming Chief Financial Officer
in June 2005.
Mr Kalmin holds a Bachelor of Business from the University of Technology, Sydney and is a member of
the Institute of Chartered Accountants of Australia and the Financial Services Institute of Australasia. He is
currently a director of Century Aluminum Co. Before joining Glencore, Mr Kalmin worked for nine years at
Horwath Chartered Accountants in Sydney, leaving the firm as a director.
| Annual Report 2011 | 81
ANTHONY HAYWARD 2, 3, 4 *
Senior Independent Director (age 54)
He is CEO of Genel Energy plc and a member of the European advisory Board of AEA. He was group chief
executive of BP plc from 2007 to 2010, having joined BP in 1982 as a rig geologist in the North Sea. Following
a series of technical and commercial roles in Europe, Asia and South America, he returned to London in 1997
as a member of the upstream executive Committee. He became group treasurer in 2000, chief executive for
BP upstream activities and member of the main Board of BP in 2003. Dr. Hayward studied geology at Aston
University in Birmingham and completed a PhD at Edinburgh University. He is also a fellow of the Royal Soci-
ety of Edinburgh and holds honorary doctorates from the University of Edinburgh, Aston University and the
University of Birmingham.
LI NING 4
Non-Executive Director (age 55)
Li Ning has been an executive director of Henderson Land Development Company Limited since 1992. He
was also an executive director of Henderson Investment Company Limited from 1990 to 2010. He has also
been an executive director of Hong Kong (Ferry) Holdings Company Limited since 1989. Prior to joining the
Henderson group, he began his career in the banking industry with Chekiang First Bank Limited.
Mr Li holds a B.Sc. degree from Babson College. Mr Li also graduated in 1983 from the University of South-
ern California with an M.B.A. degree.
PETER COATES 1, 2*, 4
Non-Executive Director (age 66)
Currently a non-executive director and chairman of Santos Ltd., and a non-executive director of Amalgamat-
ed Holdings. Until recently, he was a non-executive director and chairman of Minara, a position he had held
since May 2008. Mr Coates has occupied many senior positions in a diverse range of resource companies,
including those mining silver, lead, zinc, nickel, iron ore, bauxite and coal. Mr Coates was previously the chief
executive of Xstrata’s coal business, having joined the company in 2002 when Glencore sold its Australian
and South African coal assets to Xstrata. From January 2008 to June 2009 Mr Coates was non-executive
chairman of Xstrata Australia. Mr Coates is a past chairman of the Minerals Council of Australia, the NSW
Minerals Council and the Australian Coal Association.
He was appointed to the Office of the Order of Australia in June 2009 and was recently awarded the Aus-
tralasian Institute of Mining and Metallurgy Medal for 2010. He holds a Bachelor of Science degree in Mining
Engineering from the University of New South Wales.
LEONHARD FISCHER 1*, 3
Non-Executive Director (age 49)
Leonhard Fischer was appointed chief executive officer of RHJ International in January 2009, having been
co-chief executive officer since 2007. He is also chairman of the Kleinwort Benson group and is a member of
the Board of Directors at Julius Baer, AXA Konzern and Arecon.
Mr Fischer was previously a non-executive director and member of the audit Committee at 3W Power Solu-
tions S.A, and also served as chief executive officer of Winterthur group from 2003 to 2006. Mr Fischer was
a member of the executive Board of Credit Suisse from 2003 to March 2007, having joined the firm from
Allianz AG, where he had led the Corporates and Markets Division. Prior to this, he had been a member of
the executive Board of Dresdner Bank in Frankfurt. Mr Fischer holds an M.A. in Finance from the University
of Georgia.
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WILLIAM MACAULAY 1, 3*
Non-Executive Director (age 66)
He is the chairman and chief executive officer of First Reserve Corporation, a private equity investment firm
focused on the energy industry, and has been with the company since its founding in 1983. Prior to joining
First Reserve he was a co-founder of Meridien Capital Company, a private equity buyout firm. From 1972
to 1982, he was with Oppenheimer & Co., where he served as director of corporate finance with direct re-
sponsibility for the firm’s buyout business. He also served president of Oppenheimer Energy Corporation.
Mr Macaulay is chairman of the Board of Dresser-Rand and is a director of Weatherford International. He also
serves on numerous private energy company Boards. In addition, he is chairman of the Board of the Rogosin
Medical Institute and chairman of the advisory Board of the City University of New York.
Mr Macaulay holds a B.B.A. degree, Magna Cum Laude in Economics from City College of New York, and an
M.B.A. from the Wharton School of the University of Pennsylvania. He also has received an Honorary Doctor
of Humane Letters degree from Baruch College.
JOHN BURTON
Company Secretary (age 47)
John Burton was appointed Company Secretary in September 2011. He was formerly Company Secretary
and General Counsel of Informa plc and before that a partner at CMS Cameron McKenna in London special-
ising in corporate law.
Committee membership is designated as follows:
1 Audit
2 Health, Safety, Environment and Communities (HSEC)
3 Remuneration
4 Nominations
* denotes Committee chair
| Annual Report 2011 | 83
3.3 | Corporate governance report
BOARD GOVERNANCE
Overview
Prior to 28 April 2011 when a compliant structure was estab-
lished, the Company did not comply with the UK Corporate
Governance Code (the Code) as the Company was a private
concern wholly owned by its employees. It has since that date
complied with all relevant provisions set out in the Code. The
governance section seeks to set out how Glencore has applied
the main principles set out in the Code in a manner which ena-
bles shareholders to evaluate how these principles have been
applied.
The disclosures in this report relate to our responsibilities for
preparing the annual report (including compliance with the
Code to the extent required), our report on the effectiveness
of the Group’s risk management and internal control systems,
the functioning of our audit Committee and our going concern
statement.
Details of the Company’s significant shareholders, voting rights,
directors’ powers and rules concerning the appointment and
replacement of directors and amendments to the articles of as-
sociation are either contained in this section 3.3 or section 3.4.
Glencore’s Board comprises six Non-Executive Directors (in-
cluding the Chairman) and two Executive Directors. A list of the
Directors, with brief biographical details, is provided on pages
81– 83. For the Chairman, those details include his other signifi-
cant commitments.
Board of Directors
Independent Non-Executive Chairman
Executive directors
Independent directors
CEO
CFO
Audit
Committee
Remuneration
Committee
Nominations
Committee
HSEC
Committee
Business segment heads
Metals and minerals
Energy products
Agricultural products
Zinc/copper/lead
Alumina/aluminium
Ferroalloys/nickel/cobalt/iron ore
Oil
Coal/coke
Grains
Oils/oilseeds
Cotton/sugar
NB: All board committees are chaired by independent directors
Risk management
Internal audit
Corporate finance
Legal & compliance
Sustainability
Treasury, accounting
& tax
IT
Human resources
Chairman and Chief Executive Officer
Glencore has established a clear division between the respec-
tive responsibilities of the Non-Executive Chairman of the
Board, and the Chief Executive Officer, which are set out in
a schedule of responsibilities that has been approved by the
Board. While the Non-Executive Chairman is responsible for
leading the Board’s discussions and decision-making, the Chief
Executive Officer is responsible for leading Glencore’s operat-
ing performance and day-to-day management. This, coupled
with the schedule of reserved matters describes below, ensures
that no individual has unfettered powers of decision.
Non-executive Directors
The Company’s Non-Executive Directors provide a broad range
of skills and experience to the Board which assists in both their
roles in formulating the Company’s strategy and in providing
constructive challenge to the Executive Directors. All of them
are regarded by the Company as independent Non-Executive
Directors within the meaning of ‘‘independent’’ as defined in
the Code and free from any business or other relationship which
could materially interfere with the exercise of their independent
judgment. This view has been taken having regard to all facts
including the following:
William Macaulay is chairman and chief executive of First Re-
serve Corporation (First Reserve). First Reserve was on Mr Ma-
caulay’s appointment to the Board the holder of a tranche of
$ 2.3 billion Convertible Bonds due 2014 issued by Glencore
Finance (Europe) S.A. (First Reserve has subsequently sold
these bonds and now holds shares, or economic interests in
respect of shares, totalling 157,996,976 in number, as further
detailed on page 98).
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Peter Coates was until April 2011 the independent non-execu-
tive chairman of Minara, while that company was 70.6% owned
by Glencore, and was until August 2009 a non-executive chair-
man of Xstrata Australia and a former chief executive of Xstrata
Coal, part of Xstrata plc, a listed entity in which Glencore holds a
34.5% interest. Mr Coates joined Xstrata in 2002 with Glencore’s
coal assets in Australia and South Africa when they were sold to
Xstrata for cash and shares simultaneous with Xstrata’s primary
listing and capital raising in London.
Board Committees
The Board has established the following Committees to assist
it in exercising its functions: Audit, Nomination. Remuneration
and Health, Safety, Environmental and Communities (HSEC). A
report from each Committee is set out on pages 88 to 96.
Each Committee reports to, and has its terms of reference ap-
proved by, the Board and the minutes of the Committee meet-
ings are reviewed by the Board. These terms of reference are
available at www.glencore.com/corporate-governance.php.
Board Meetings
The Board has approved a formal schedule which sets out those
matters which are reserved for its decision making alone such
as strategy, the annual budget and material acquisitions and
disposals.
2011 was obviously an unusual year given that the Company was
incorporated and listed in the first half of the year. In future the
Board plans to have a minimum of 5 meetings a year with addi-
tional meetings as required. The Board will usually meet at the
Company’s headquarters in Baar, Switzerland although it may
occasionally meet elsewhere.
The Board and its Committees have standing agenda items
to cover their proposed business at their scheduled meetings
which in the Board’s case includes a review of the latest financial
position and current trading and an analysis of the work being
undertaken by its Committees. The Chairman seeks to ensure
that the very significant work of the Committees feeds into, and
benefits as to feedback from, the full Board. Most Board meet-
ings also benefit from a presentation by the head of a division
and some technical and investor relations updates.
The Chairman holds meetings with the Non-executive Direc-
tors without the Executive directors present, and at least once a
year the Senior Non-executive Director chairs a meeting of the
Non-executive Directors without the Chairman present.
Attendance during the year for all scheduled Board and Board Committee meetings is given in the table below:
Simon Murray
Ivan Glasenberg
Steven Kalmin
Peter Coates
Leonhard Fischer
Anthony Hayward
William Macaulay
Li Ning
Board ¹
of 4
Audit
of 2
Nominations
of 3
Remuneration
of 2
HSEC
of 3
4
4
4
4
4
4
4
4
–
–
–
2
2
–
2
–
3
3
–
–
–
3
–
3
–
–
–
–
2
2
2
–
–
3
–
3
–
3
–
–
¹ Excludes meetings held in relation to the IPO.
Appointment and re-election of Directors
The work of the Nominations Committee in respect of the ap-
pointment and reappointment of Directors is contained in that
Committee’s report, below.
muneration Report. No other contract with the Company or any
subsidiary undertaking of the Company in which any Director
was materially interested subsisted during or at the end of the
financial year.
All members of the Board will be offering themselves for re-
election at the 2012 Annual General Meeting. It is part of the
Chairman’s role to discuss the time commitment and contribu-
tion of each Non-executive Director as part of his individual
appraisal, and the Nomination Committee unanimously recom-
mends the reappointment of each of the Directors.
All of the Directors have service agreements or letters of ap-
pointment and the details of their terms are set out in the Re-
Information and professional development
It is considered of great importance that the Non-Executive
Directors (1) attain a good knowledge of the Company and
its business and (2) allocate sufficient time to Glencore to dis-
charge those responsibilities effectively. New Directors receive
a full, formal and tailored induction on joining the Board, in-
cluding meetings with senior management and advisers and
visits to the Group’s operational locations. The Board calendar
is planned to ensure that Directors are briefed on a wide range
| Annual Report 2011 | 85
of topics. Directors are also given the opportunity to visit the
Group’s industrial assets and discuss aspects of the business
with employees, and regularly meet the heads of the Group’s
main departments. As well as internal briefings, Directors at-
tend appropriate external seminars and briefings.
well as a common accounting policies and procedures manual.
Management monitors the publication of new reporting stand-
ards and work closely with their external auditors in evaluating
the impact of these standards.
All Directors have access to the advice and services of the Com-
pany Secretary, who is responsible to the Board for ensuring
the Board procedures are complied with, and have access to
independent and professional advice at the Company’s ex-
pense, where they judge this to be necessary to discharge their
responsibilities as Directors.
Board performance evaluation
Since Glencore has a new Board, it was thought appropriate
that the first evaluation process should be an internal one. By
using assessment questionnaires prepared by the Company
Sec retary and the Chairman, all Directors graded areas such
as performance of the Board and its Committees, the effec-
tiveness of the Chairman, Executive and Non- Executive Direc-
tors, the monitoring of operational performance and Corporate
Governance, as well as leadership and culture. The Company
Secretary and the Chairman provided a report of the results,
which were discussed by the Board and by each Committee.
The Board and the Committees concluded that overall they
functioned effectively. However, matters for improvement con-
cerning planning, logistics, content of meetings, board papers
and the need for additional directors were discussed and agreed.
We have reviewed the interests declared by the Directors which
could conflict with those of the Company, and we are satisfied
that the Board’s powers to authorise potential conflicts is oper-
ating effectively.
Remuneration
Remuneration is covered in the Remuneration report on pages
91 to 96 which includes a description of the work of the Remu-
neration Committee.
ACCOUNTABILITY AND AUDIT
Financial reporting
The Group has in place a comprehensive financial review cycle,
which includes a detailed annual budgeting process where
business units prepare budgets for approval by the Board. The
Group uses a large number of performance indicators to meas-
ure both operational and financial activity in the business. De-
pending on the measure these are reported and reviewed on a
daily, weekly or monthly basis. In addition management in the
business receives a weekly and monthly pack of indicators which
are the basis of regular operational meetings, where corrective
action is taken if necessary. At a Group level a well-developed
management accounts pack including income statements, bal-
ance sheets, cash flow statement as well as key ratios related to
capital productivity is prepared and reviewed monthly by man-
agement. As part of the monthly reporting process a forecast of
the current year numbers is carried out. To ensure consistency
of reporting the Group has a global consolidation system as
Risk management and internal control
The Board has applied Principle C.2 of the Code by establishing
a continuous process for identifying, evaluating and managing
the risks that are considered significant by the Group in accord-
ance with the revised Turnbull Guidance on Internal Control
published by the Financial Reporting Council. This process has
been in place for the period under review and up to the date
of approval of the Annual Report and Accounts. The process
is designed to manage rather than eliminate risk, and can only
provide reasonable and not absolute assurance against mate-
rial misstatement or loss. The directors confirm that they have
reviewed the effectiveness of the risk management and internal
control systems. This review excludes associates of the Group
as Glencore does not have the ability to dictate or modify the
internal controls of these entities. This report describes how
the effectiveness of the Group’s structure of internal controls
including financial, operational and compliance controls and
risk management systems is reviewed.
1) Approach to risk management
Effective risk management is crucial in helping the Group to
achieve its objectives of preserving its overall financial strength
for the benefit of all shareholders and other stakeholders and
safeguarding its ability to continue as a going concern while
generating sustainable long term profitability. Spanning the or-
ganisational structure, Glencore’s disciplined approach to risk
management and control originates with strategic responsibil-
ity in the hands of the Board, which also retains operational au-
thority on matters exceeding agreed thresholds of materiality.
The Board retains final authority for assessing and approving
the Group’s overall risk appetite and sets overall limits which
are subject for review annually. Through delegation to the Audit
Committee for oversight and to senior management for day-to-
day operational issues, an effective risk management govern-
ance apparatus has been established for the Group.
The Audit Committee retains responsibility for reviewing the
overall effectiveness of Glencore’s risk management approach
and systems.
As a primary oversight and control, the CEO engages in a
regular and ongoing interrogatory exchange with the manage-
ment team and he is supported in this challenge process by the
Group’s organisational structure with its concentration of major
decision making, as well as by the alignment of the economic
interest of key senior staff with the medium term performance
of the company through shareholding lock-ins. The CRO, the
Group Risk Management Team and the multi-sourced reporting
available to them help to equip the CEO and senior manage-
ment with appropriate analysis in order to allow them to con-
duct appropriate risk management of the group.
The CRO and Group Risk Management Team act as facilitators
of the control process with elements of consolidated reporting
including counterparty credit exposure, the co-ordination of
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Group and departmental Value at Risk (“VaR”), stress and sce-
nario testing amongst others. The departments and Group risk
team are engaged in an ongoing dialogue concerning general
aspects of risk management policy and the central team pro-
vide oversight and input on those aspects of risk management
and risk mitigation that remain the functional responsibility of
the Group’s’individual departments. The internal audit, compli-
ance and business ethics Committees also play key roles in man-
aging Group operational risk and verifying process controls.
Glencore recognises the need for continuous focus on this key
area in the context of both the evolution of its business risks, and
the unpredictable and volatile global economic environment.
The Group continues to maintain and expand the resources and
information systems used in its centralised risk management,
whilst also adopting and following policies which are intended
to mitigate and manage market price and credit risks.
2) Risk assessment and control tools
Glencore’s finance and risk professionals, working in coordina-
tion with the Group’s departments, monitor and report regularly
to management on the financial risks and exposures Glencore is
facing. The Group monitors its commodity price risk exposure by
using a VaR computation assessing open commodity positions
which are subject to price risks. The credit quality of its coun-
terparts is actively and continuously monitored by the Group
through internal reviews and a credit scoring process which in-
cludes, where available, public credit ratings. The Group makes
active and widespread use of credit enhancement through the
use of products such as letters of credit and credit insurance
products to help manage and mitigate credit risk exposures.
VaR is a risk measurement technique which Glencore uses to
monitor and limit its primary market exposure related to its
physical marketing exposures and related derivative posi-
tions. VaR estimates the potential loss in value of open po-
sitions that could occur as a result of adverse market move-
ments over a defined time horizon, given a specific level of
confidence. The methodology is a statistically defined, prob-
ability based approach that takes into account market volatili-
ties, as well as risk diversification benefits by recognising off-
setting positions and correlations between commodities and
markets. In this way, risks can be compared across all markets
and commodities and risk exposures can be aggregated to
derive a single risk value.
lines where price transparency is less dependable. Glencore
reports VaR across the Group and also by commodity depart-
ment, as well as at a variety of more detailed levels.
VaR does not purport to represent actual gains or losses in
fair value on earnings to be incurred by Glencore, nor does
Glencore claim that these VaR results are indicative of future
market movements or representative of any actual impact on
its future results. VaR should always be viewed in the context of
its limitations; notably, the use of historical data as a proxy for
estimating future events, market illiquidity risks and risks asso-
ciated with longer time horizons as well as tail risks. The Group
recognises these limitations and so complements and refines
its risk analysis through the use of stress and scenario analysis.
Glencore regularly backtests its VaR to establish adequacy of
accuracy and to facilitate analysis of breaks.
Whilst it is Glencore’s policy to substantially hedge its commod-
ity price risks, there remains the possibility that the hedging in-
struments chosen may not always provide effective mitigation
of the underlying price risk. The hedging instruments available
to the marketing businesses may differ in specific characteristics
to the risk exposure to the hedged, resulting in an ongoing and
unavoidable basis risk exposure. Residual basis risk exposures
represent a key focus point for Glencore’s commodity depart-
ment teams who actively engage in the management of such.
Internal and External Audit
Glencore has a dedicated Internal Audit function reporting di-
rectly to the Audit Committee. The role of Internal Audit is to
evaluate and improve the effectiveness of risk management,
control, and governance processes.
Internal Audit reviews areas of potential risk within the business
and suggests control solutions to mitigate any exposures. The
Audit Committee is regularly informed about audits performed
and relevant findings, as well as the progress on implementing
the actions agreed with management.
During each financial year the Audit Committee reviews the ex-
ternal and internal audit work programmes and considers re-
ports from internal and external auditors on the system of inter-
nal control and any material control weaknesses. It also received
responses from management regarding the actions taken on
issues identified in audit reports.
The Board has approved a one day, 95% VaR limit of $ 100 mil-
lion which is subject to review and approval on an annual ba-
sis. The purpose of this Group limit is to assist senior manage-
ment in controlling the Group’s overall risk profile. During 2011
Glencore’s average VaR was approximately $ 39 million. This
represents a decrease from the actual average of approximate-
ly $ 43 million in the prior year.
Glencore’s VaR computation covers its business in the key base
metals, coal, oil/natural gas and the main risks in the Agricultur-
al Products department (grain, oil seeds, sugar and cotton). It
assesses open priced positions and those which are subject to
price risk, but due to a lack of liquid terminal market, Glencore
does not extend its VaR calculation to a number of business
The Group’s policy on non-audit services provided by the ex-
ternal auditors is designed to ensure the external auditor’s in-
dependence and objectivity is safeguarded. A specified wide
range of services may not be provided as they have the poten-
tial to impair the external auditor’s independence (Excluded
Services). The Audit Committee’s approval is required for (1)
any Excluded Service (2) and other engagement where either
(i) the fee is contingent, (ii) the fee may exceed $ 500,000, or (iii)
where the fees for all non-audit work may exceed $ 15 million.
The external auditors were requested to provide certain non-
audit services when it was concluded that they were the most
appropriate supplier due to efficiency and status as a leading
firm for the specific services being requested. For 2011 the to-
tal non-audit fees paid to the auditors were $ 17.9 million which
| Annual Report 2011 | 87
principally related to the auditors’ role as Reporting Accountant
in connection with the Listing; further details are contained in
note 25 to the financial statements.
Relationships with shareholders
The Board aims to present a balanced and clear view of the
Group in communications with shareholders and believes that
being transparent in describing how we see the market and the
prospects for the business is extremely important.
We communicate with shareholders in a number of different
ways. The formal reporting of our full and half year results and
interim management statements are a combination of presen-
tations, group calls and one to one meetings. The full and half
year reporting is then followed by investor meetings in a variety
of locations where we have institutional shareholders. We also
regularly meet with existing and prospective shareholders to
update them on our latest performance or to introduce them
to the Company and periodically arrange a visit to the business
to give analysts and major shareholders a better understanding
of how we manage our business. These visits and meetings are
principally undertaken by the CEO, CFO and Head of Investor Re-
lations. In addition, many major shareholders have meetings with
the Chairman and appropriate senior personnel of the Group in-
cluding the Company Secretary and Head of Sustainability.
The Board receives regular updates on the views of sharehold-
ers through a briefing, which is a standing agenda item for all
Board meetings, from the Company’s Head of Investor Rela-
tions, which is supplemented by input from the Chairman, CEO
and CFO. In addition, the Senior Independent Director is avail-
able to meet shareholders if they wish to raise issues separately
from the arrangements as described above.
The Company’s Annual General Meeting will be held in Zug on
Wednesday, 9 May. Full details of the meeting are set out in the
letter from the Chairman and Notice of Meeting sent with this re-
port. Shareholders unable to attend are encouraged to vote using
the proxy card mailed to them or electronically as detailed in the
Notice of Meeting. All documents relating to the AGM are avail-
able on the Company’s website at: www.glencore.com.
AUDIT COMMITTEE REPORT
Chairman
Leonhard Fischer
Other members
Peter Coates
William Macaulay
All members of the Committee were appointed prior to the IPO
and have served for the rest of the year. Each is considered to
be an independent Non-Executive Director and deemed to be
financially literate by virtue of their business experience. Each
of Leonhard Fischer and William Macaulay is considered by the
Board to have recent and relevant financial experience and has
competence in accounting. The Committee met twice during
the year and all the Committee members attended both meet-
ings. John Burton is Secretary to the Committee.
88 | Annual Report 2011 |
Role and responsibilities
The primary function of the audit Committee is to assist the
Board in fulfilling its responsibilities with regard to financial re-
porting, external and internal audit, risk management and con-
trols. This includes:
• monitoring and reviewing the Group’s financial and account-
ing policies and practices;
• monitoring the integrity of the annual and half yearly finan-
cial statements and any formal announcements relating to the
group’s financial performance and reviewing significant finan-
cial reporting judgments relating to them;
• considering the reappointment of the external auditors;
• considering the scope of the annual external audit and the
work undertaken by external auditors;
• reviewing and monitoring the independence of the external
auditor and the provision of additional services by it;
• monitoring matters that influence or could distort the presen-
tation of accounts and key figures;
• reviewing Glencore’s internal financial, operational and compli-
ance controls and internal controls and risk management systems;
• monitoring and reviewing the effectiveness of Glencore’s in-
ternal audit function;
• overseeing the Group’s procedures for detecting fraud and
handling allegations from whistleblowers; and
• making recommendations to the Board for a resolution to
be put to the shareholders for their approval on the appoint-
ment of the external auditors and to authorise the Board to fix
the remuneration and terms of engagement of the external
auditors.
Governance processes
The Audit Committee usually invites the CEO, CFO, Group
Financial Controller, Head of Risk and Head of Internal Audit
and the lead partner from the external auditors to attend each
meeting. Other members of management may attend as and
when requested. The Committee also holds private sessions
with the external auditors and the Head of Internal Audit with-
out members of management being present. The Committee
has adopted guidelines allowing non-audit services to be con-
tracted with the external auditors on the basis as set out on
page 87.
Main Activities
During the year, the Committee’s principal work included the
following:
• adopted the Committee’s terms of reference;
• reviewed and adopted a new policy for the provision of non
audit services by the external auditors;
• reviewed the policies detecting, reporting and preventing
fraud and serious breaches of business conduct and whistle-
blowing procedures;
• reviewed the internal Audit Department’s annual audit plan
and the performance assessment of the Internal Audit function;
• reviewed and agreed the audit plan, scope and fees of the
audit work to be undertaken by the external auditors;
• considered the output from the Group-wide process used to
identify, evaluate and mitigate risks;
• monitored and reviewed the effectiveness of Glencore’s inter-
nal controls;
• reviewed and discussed the half-year unaudited financial state-
ments with management and the external auditors;
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
• discussed various material accounting issues with manage-
ment and the external auditors, particularly those involving key
judgments and estimates; and
The first was the search for and consideration of a proposed
new Non-Executive Director. This process was halted in the
light of the proposed Xstrata merger.
• reviewed and agreed the preparation and scope of the year-
end reporting process.
Reappointment of external Auditor
The Committee has recommended to the Board that a pro-
posal be put to shareholders at the 2011 Annual General
Meeting for the reappointment of Deloitte as external auditor.
There are no contractual restrictions on the Company’s choice
of external auditor, and in making our recommendation we
took into account, amongst other matters, the objectivity and
independence of Deloitte and their continuing effectiveness
and cost.
The Committee conducted an annual evaluation of its perfor-
mance and concluded that it was effective, has acted in accord-
ance with its terms of reference and had ensured the objectivity
of the external auditors.
Leonhard Fischer
Chairman of the Audit Committee
26 March 2012
NOMINATIONS COMMITTEE
Chairman
Anthony Hayward
Other members
Simon Murray
Ivan Glasenberg
Li Ning
The majority of the members of the Committee are independ-
ent Non-executive Directors. The Committee met three times
during the year and its members attended all of its meetings.
Roles and responsibilities
The main responsibilities of the Committee are to assist the
Board with succession planning and with the selection process
for the new appointment of new Directors, both Executive and
Non-Executive, including the Chairman and to have oversight
of senior management succession planning. This involves:
• Evaluating the balance and skills, knowledge and experience
on the Board and identifying the capabilities required for a
particular appointment;
• Overseeing the search process; and
• Evaluating an annual succession planning report from the
CEO in relation to senior management.
The full Terms of Reference of the Committee are available on
our website at www.glencore.com/corporate-governance.php.
Main Activities
The Committee focused on three main tasks during this year.
Secondly, a search process for a female Non-Executive Director
was initiated, for which a number of leading female business
leaders have been identified. This has been ongoing with a final
decision being driven by the proposed Xstrata merger.
Thirdly, we considered the current composition of the Board.
Subject to there being a perceived need for the addition of one
or two further Non-Executive Directors, it was agreed that the
Board operated in a satisfactory manner and the Board agreed
with the Committee’s view that all current serving Directors be
recommended to shareholders for re-election.
An external consultancy has been retained for search purposes.
Anthony Hayward
Chairman of the Nominations Committee
26 March 2012
HEALTH, SAFETY, ENVIRONMENT & COMMUNITIES
(HSEC) COMMITTEE
Chairman
Peter Coates
Other members
Ivan Glasenberg
Anthony Hayward
Michael Fahrbach
The Committee met three times during the year and each Com-
mittee member attended all of the meetings.
Role and responsibilities
The main responsibilities of the Committee are, in respect of
the Group to:
• Evaluate the effectiveness of policies and systems for identify-
ing and managing environmental, health and safety risks;
• Assess the policies and systems for ensuring compliance with
environmental, health and safety regulatory requirements;
• Assess performance with regard to the impact of HSEC relat-
ed decisions and actions upon employees, communities and
other third parties;
• Receive reports concerning all fatalities and serious accidents
and actions taken as a result of such fatalities or serious ac-
cidents;
• Evaluate and oversee the quality and integrity of any report-
ing to external stakeholders concerning HSEC matters; and
• Review the results of any independent audits of performance
in regard to HSEC matters and strategies and action plans de-
veloped by management in response to issues raised.
| Annual Report 2011 | 89
Main Activities
During the year, the Committee
• Reviewed, amended and adopted terms of reference for the
Committee;
• Reviewed the current corporate practice framework for the
Group and approved ongoing changes and reviewed its im-
plementation and practice;
• Reviewed and overseen the Group’s first sustainability report
which was published in the autumn of 2011;
• Undertaken initial site visits and approved ongoing site visit
programme;
• Agreed procedures in regard to fatality reporting and review
and recommendations process in respect of each fatality;
• Received comprehensive presentation from the management
of Mopani one of our major African assets ; and
• Commissioned a leading international company to carry out a
baseline assessment of the Group’s Health and Safety standards.
Peter Coates
Chairman of the Health, Safety, Environmental and Communi-
ties Committee
26 March 2012
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3.4 | Directors’ remuneration report
REMUNERATION COMMITTEE
GOVERNANCE
Chairman
William Macaulay
Other members
Anthony Hayward
Leonhard Fischer
Secretary
John Burton
INTRODUCTION
I am pleased to present the inaugural remuneration report pub-
lished for the Company.
One criticism of UK-listed company remuneration reports is that
they can be too long, too technical and too confusing. So I hope
that this report represents a reasonable attempt by us to make
it short, simple and straight forward.
OUR PHILOSOPHY
We have the same philosophy as any other Remuneration Com-
mittee, namely to set the company’s remuneration policies and
practices so that they facilitate the attraction, retention and mo-
tivation of the Executive Directors and other senior executives
of appropriate high calibre to implement the Group’s strategy
while aligning the interests of the Executive Directors and ex-
ecutives with those of shareholders generally. This policy under-
pins our entire approach to executive remuneration at Glencore.
One notable aspect of our Executive Directors’ remuneration
is that, with their agreement and reflecting their status as ma-
jor shareholders, the Executive Directors do not currently par-
ticipate in our long term incentive arrangements (the CEO has
also agreed not to participate in our bonus arrangements). As a
result, we are currently able to set overall remuneration for our
Executive Directors at lower levels than in comparable compa-
nies and for comparable performance. The Committee believes
that the Executive Directors’ significant personal shareholdings
create sufficient alignment of interest with shareholders in the
absence of participation in a long term incentive arrangement.
If our proposed merger with Xstrata plc proceeds, however, we
would need to review our overall remuneration policy.
2011 was an important first year for the Committee. We estab-
lished our overall remuneration framework and, within this con-
text, the remuneration packages for the Executive Directors.
We agreed service contracts in line with UK best practice. We
also reviewed performance during the year and determined the
bonus payment to be made to the CFO.
I hope you will find this Remuneration Report clear and inform-
ative.
This Remuneration Report has been prepared on behalf of
the Board by the Remuneration Committee. The Committee
adopts the principles of good governance as set out in the
UK Corporate Governance Code and complies with the List-
ing Rules of the Financial Services Authority and the relevant
schedules of the Companies Act 2006 and the Directors’ Re-
muneration Report Regulations in Schedule 8 to the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008.
These regulations require the Company’s auditors to report
on the ‘Audited Information’ in the report and to state that this
section has been properly prepared in accordance with these
regulations. As such, the report is divided into audited and un-
audited information.
A resolution to approve this report will be put to shareholders
at the Company’s AGM.
Membership and experience of the Remuneration Committee
We believe that the members of the Committee provide a use-
ful balance of abilities, experience and perspectives to provide
the critical analysis required in carrying out our function. In par-
ticular:
• William Macaulay has had a long career in private equity which
has involved exposure to compensation issues many times
and in a variety of situations;
• Leonhard Fischer is a career banker who similarly has had con-
siderable exposure to issues of pay and incentives; and
• Tony Hayward has for many years been a senior employee and
executive in the resources industry, most notably as CEO of
BP, and therefore brings considerable experience as a senior
executive to our deliberations.
All members of the remuneration Committee are considered to
be independent.
Role of the Remuneration Committee
The terms of reference of the Committee set out its role. They
are available on the Company’s website at www.glencore.com/
corporate-governance.php.
Its principal responsibilities are, on behalf of the Board, to:
• Set the Company’s executive remuneration policy (and review
its ongoing relevance and appropriateness);
• Fix the individual remuneration packages for the Executive
Directors including the scope of pension payments;
• Determine the total individual remuneration package for the
Chairman, in consultation with the Chief Executive;
• Have responsibility for overseeing schemes of performance
related remuneration (including share incentive plans) for, and
determine awards for, the Executive Directors;
• Ensure that the contractual terms on termination for the Ex-
ecutive Directors are fair and not excessive; and
• Monitor senior management remuneration.
| Annual Report 2011 | 91
Remuneration Committee activities 2011
Following listing, the Committee met twice and considered,
amongst other matters, the following:
• Its terms of reference;
• The regulatory framework that applies to the governance of
executive remuneration in the Group;
• The remuneration policy applicable to the Executive Direc-
tors following the IPO and the specific terms of the Executive
Directors’ remuneration, including consideration of annual
bonus and long term incentives;
• Senior management remuneration policy, including level and
its structure and the future application of share plans;
• The appointment of remuneration consultants to advise the
Committee; and
• The appropriate evaluation methodology for the Committee.
External advisers to the Remuneration Committee
During 2011, the Committee appointed the remuneration consul-
tancy practice of Deloitte LLP to provide independent advice to
the Committee. Deloitte LLP is the Company’s retained auditor
and also provided other services to the Company during 2011.
The Committee considers Deloitte to be independent. The Re-
muneration Committee advisers’ terms of reference are in ac-
cordance with APB Ethical Standard 5 and restrict the provision of
certain services in order to maintain auditor independence. The
scope and value of services to the Company is kept under review.
Advice is provided with use of established methodologies and
the advisers are not involved in the decision making process. Ad-
visory partners and staff have no involvement in audit, and are not
involved in the preparation of audited information. The Commit-
tee also receive advice on legal matters from Linklaters.
The Committee is able to consider corporate performance on
HSEC and governance issues when setting remuneration for the
Executive Directors. The Committee seeks to ensure that the
incentive structure for the Group’s senior management does
not raise HSEC or governance risks by inadvertently motivating
irresponsible behaviour.
Internal advisers to the Remuneration Committee
The Chairman, CEO and CFO are usually invited to attend some
or all of the proceedings of Remuneration Committee meet-
ings. They do not participate in any decisions concerning their
own remuneration. In addition, the Committee received advice
from John Burton, the Company Secretary.
EXECUTIVE DIRECTORS’ REMUNERATION
All emoluments to the Directors are paid in UK Pounds Sterling
except for pension contributions and insurance benefits pro-
vided to the Executive Directors. As noted in the emoluments
table below, these are presented in UK Pounds Sterling. In addi-
tion, as the financial statements are denominated in U.S. Dollars,
we have also provided a total remuneration table on page 95
below which presents the total amounts in U.S. Dollars.
Remuneration Framework
The key elements of the current Executive Directors’ remunera-
tion framework are shown in the table. Each component is dis-
cussed in more detail on the pages that follow.
Component
Purpose
Overview
Current practice
Fixed
Base salary
• Provides market competitive
fixed remuneration
• Salaries are positioned within a market
competitive range for companies of a
similar size and complexity
• Reviewed annually with the next review
due to take place in December 2012
• Executive Officer:
$ 1,437,080 ¹ (£ 925,000)
• Financial Officer:
$ 1,087,520 ¹ (£ 700,000)
Pension
• Provides basic retirement
• Defined contribution scheme for all Swiss
• Both Executive Directors
benefits
employees
participate
• Contributions are based on age
• Annual contribution
15 – 19% on base salary of up
to $ 297,693 ¹ (CHF 278,400)
Other Benefits
• Provides appropriate
• Provision of standard company Swiss
insurance cover benefits
insurances
Variable
Annual bonus
• Supports delivery of short
• Award of maximum of 200% of salary
• The CEO does not currently
term operational & strategic
goals
Performance
Share Plan
Deferred Bonus
Plan
• Incentivises the creation of
shareholder value over the
longer-term
• Incentivises the creation of
shareholder value over the
longer-term
• Overall plan limit of 500% of salary
• Malus clauses apply
participate
• The CFO participates and
has been assessed against
targets
• Both Executive Directors do
not currently participate
• Provides for deferral of annual bonus above
• Applicable to CFO and
agreed amount
senior management
Significant Personal
Shareholdings
• Aligns the interests of
executives and shareholders
• No formal shareholding requirements are
needed given the size of shareholdings
• The CEO has a beneficial
ownership of c.16%
• The CFO has a beneficial
ownership of c.1%
¹ These amounts are set in UK Pounds Sterling and have been converted to U.S. Dollars using the exchange rates stated in the Currency table
on page 49.
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The Role of Variable Pay at Glencore
Throughout the organisation, a significant proportion of the
remuneration of our senior executive team is based on perfor-
mance during the year and, through partial deferral, including
into shares, on shareholder value created over the long term.
These principles have served the Company well over a number
of years and remain firmly in place.
Our Executive Directors have significant personal sharehold-
ings. They, and the Committee, believe that this currently pro-
vides sufficient alignment between their interests and those of
shareholders, regarding long term Company performance and
shareholder value. As a result, the CEO does not currently par-
ticipate in the annual or long term incentive arrangements and
receives just a base salary and pension/benefits which are set
at a lower level than for comparable companies. The CFO is eli-
gible to participate in the annual bonus but does not currently
participate in any long term incentive arrangements.
Group’s significant borrowings. On this basis, the Committee
determined that the CFO should be awarded a bonus of 200%
of salary (the maximum opportunity) for the 2011 financial year.
Mr Kalmin waived half of this award so that the bonus paid was
£ 700,000, equal to 100% of his salary.
Long term incentives
As described above, the Executive Directors do not currently
participate in any long term incentive arrangements, reflect-
ing the significant alignment achieved through large personal
shareholdings.
The Committee will keep this under review to ensure it remains
appropriate. In the event that long term incentive awards are
made to Executive Directors, they would normally be made
under the Glencore Performance Share Plan (described below)
and would include stretching performance targets measured
over a period of at least three years.
Although this results in a higher proportion of fixed remunera-
tion (as a percentage of total remuneration) than would be the
case in comparable companies, the Committee believes this is
appropriate given the current alignment created through the
significant share ownership described above.
The Glencore Performance Share Plan (PSP)
The PSP was implemented on Admission. The table below sets
out the key features of the plan, which the Committee believes
to be aligned with UK best practice.
The Committee also notes that it results in a lower level of overall
remuneration for the Executive Directors than would be the case
in similar companies, which is beneficial to our shareholders.
Base Salary
For 2011, annual base salaries for the Executive Directors were
set at £925,000 and £700,000 for the CEO and CFO respec-
tively, which the Committee considers to be within the market
competitive range and appropriate.
When setting remuneration for our executives, the Committee
takes into account market data from listed companies of a simi-
lar financial size, and pay and conditions in the wider Glencore
group to ensure that pay for our most senior employees is con-
sistent with, and aligned to, the rest of the organisation.
Salaries will remain unchanged for 2012.
Annual bonus
The current maximum bonus opportunity for Executive Direc-
tors is 200% of base salary. This opportunity is positioned to-
wards the lower end of market practice in UK-listed companies
of a similar size, which the Committee believes is appropriate at
the current time.
As described above, the CEO does not currently participate
in the annual bonus arrangements. The CFO does participate
and for the current financial year will be assessed using a com-
bination of key criteria aligned to the delivery of our strategy
which are within his areas of responsibility. In respect of 2011,
the Committee considered the performance of the CFO against
a number of performance criteria including successful com-
pletion of the Company’s IPO, the establishment of reporting
processes and investor relations functions suitable for a FTSE
100 company and management and partial refinancing of the
Key features
Details
Form of award
• Conditional shares or nil-cost options
Individual limits
• 500% of base salary
Aggregate limits
Malus clauses
• The Company’s share plans include best
practice dilution limits: 10% in ten years
under all share plans and 5% in ten years
under discretionary plans
• Awards can be reduced or extinguished in the
event that a participant’s actions or behaviour
results in a material loss, or detriment, to the
Company
Change of control
• Participants may be required or permitted to
exchange awards for equivalent awards
over shares in the acquiring company; and
• Alternatively, the Committee has discretion
to determine that awards vest immediately,
subject to time and performance proration.
Leaver conditions • Awards generally lapse for all except ‘good
leavers’;
• For ‘good leavers’, awards generally continue
and vest on the normal vesting date and
subject to performance. The Committee
retains discretion to allow awards to vest on
cessation, subject to time and performance
pro-rating; and
• On death awards generally vest in full, unless
the Committee decides otherwise.
The Glencore Deferred Bonus Plan (DBP)
Under the DBP, all or part of a participant’s bonus is deferred
as an award of ordinary shares (Bonus Awards) which vests at
the end of a specified period subject to continued employment
and forfeiture for malus events. No awards have been granted
under this plan to date.
| Annual Report 2011 | 93
Shareholding
The Remuneration Committee believes that a significant share-
holding by Executive Directors aligns their long-term economic
interests with those of our shareholders and demonstrates their
commitment to the business.
Other benefits
The Executive Directors benefit from the same insurance ar-
rangements provided to all its Swiss employees being salary
loss (long term sickness) and accident insurance cover.
Given the status of our current Executive Directors as major
shareholders (see the Directors’ share interests table on page 98),
the Committee considers formal shareholding requirements
unnecessary at this time. However, the Committee will keep this
under review and may introduce a shareholding requirement if
it becomes appropriate to do so in the future.
Pensions
The Executive Directors participate in the Group’s defined con-
tribution pension scheme which is operated for all staff at its Baar
office. Contributions are paid in CHF and represented amounts
equivalent to c.15–19% (contributions are age related) of gross
annual salary up to CHF 278,400 for both Executive Directors.
Total shareholder return relative performance
The graph below shows the company’s performance, measured
by total shareholder return, compared with the performance of
the FTSE Mining Sector index. The Company is a constituent of
this index and it has been chosen as it is the widely recognised
performance comparison for large UK-listed mining companies.
The time line on the graph starts on 24 May 2011, the date of
Admission. In drawing up this graph it has been assumed that
all dividends paid have been reinvested, which the company
believes is a fair method of calculation.
110
100
90
80
70
60
5/11
6/11
7/11
8/11
9/11
10/11
11/11
12/11
FTSE 350 Mining
Glencore
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Non-executive directors
Letters of appointment & re-election – all non-executive direc-
tors have letters of appointment with the Company for an initial
period of three years from their date of appointment, subject to
reappointment at each AGM. Each letter is dated 28 April 2011.
The Company may terminate each appointment by immediate
notice and there are no special arrangements or entitlements
on termination.
Policy for determining non-executive directors (NED) fees – the
initial remuneration of the NEDs was determined by the Board
prior to the IPO within the limits set by the Articles of Associa-
tion. NEDs are only remunerated through fees. Further details
are provided below. In particular, they are not eligible to partici-
pate in any of the Company’s share incentive schemes or join
any Company pension scheme.
Going forward, the Board will review NED remuneration levels
periodically to ensure that they remain aligned with those of
other major listed companies.
Executive Directors’ Contracts
The table below summarises the key features of the executive
directors’ service contracts.
Provision
Service contract terms
Notice period
Contract date
• 12 months notice by either party
• Employment contracts for the CEO and
CFO are dated 28 April 2011
Expiry date
Termination payment • No special arrangements or entitlements
on termination
• Rolling service contract
Change in control
• In the event of a change of control of the
Company, the contracts of the Executive
Directors do not provide for any enhanced
payments, nor for any liquidated damages
External appointments
The Executive Directors each held external appointments (be-
ing directorships of non-subsidiary companies) during 2011.
These are referred to at the end of their respective biographical
summaries on page 81. The Executive Directors assign to the
Group any compensation which they receive from such external
Board directorships.
AUDITED SECTION
Directors’ emoluments
The emoluments for the Directors for the 2011 financial year were:
GBP thousand
Base salary/fees Annual bonus Other benefits ¹
Total
Executive directors
Ivan Glasenberg
Steven Kalmin
Non-Executive Directors 3
Simon Murray
Peter Coates
Leonhard Fischer
Anthony Hayward
William Macaulay
Li Ning
925
700
1 625
456
128
92
113
90
65
944
–
700
700
–
–
–
–
–
–
–
Total
2 569
700
2
2
4
–
–
–
–
–
–
–
4
927
1 402
2 329
456
128
92
113
90
65
944
3 273
Total US $
thousand 2
1 487
2 247
3 734
731
205
148
181
144
104
1 513
5 247
¹ This constitutes the cost to the Company of the provision of the insurance cover referred to under Other Benefits above. These costs have
been borne in Swiss Franc and have been converted to UK Pounds Sterling using the exchange rates stated in the Currency table on page 49.
2 These amounts are paid in a foreign currency and have been converted to U.S. Dollars using the exchange rates stated in the Currency table
on page 49.
3 The fees were payable to the Non-Executive Directors from 14 April 2011 except for Mr. Murray for whom the date was 28 April 2011.
| Annual Report 2011 | 95
Annual fees are paid in accordance with a Non-Executive Direc-
tor’s role and responsibilities as follows:
DIRECTORS’ PENSION ENTITLEMENTS
Non-Executive Directors have no entitlement in respect of any
pension arrangements. The Executive Directors have never
been a member of defined benefit schemes provided by the
Group and accordingly they have no accrued entitlements un-
der these schemes.
For the Executive Directors the following contributions have
been made by the Group in 2011 to the Group’s defined con-
tribution pension scheme which it operates for its Swiss based
employees:
2011
Ivan Glasenberg
Steven Kalmin
GBP
thousand
US $
thousand
37 ¹
29 ¹
59
47
¹ These payments have been converted to UK Pounds Sterling using
the exchange rates stated in the Currency table on page 49.
Approval
Approved by the Board of Directors and signed on its behalf by:
William Macaulay
Chairman of the Remuneration Committee
26 March 2012
2011
Directors
Chairman
Senior Independent Director
Non-Executive Director
Remuneration Committee
Chairman
Member
Audit Committee
Chairman
Member
Nominations Committee
Chairman
Member
HSEC Committee
Chairman 2
Member
GBP
thousand
US $
thousand 1
675
109
79
28
15
35
20
23
12
80
12
1 082
175
127
45
24
56
32
37
19
128
19
1 These amounts are set in UK Pounds Sterling and have been con-
verted to U.S. Dollars using the exchange rates stated in the Cur-
rency table on page 49.
2 The fee payable to the chair of the HSEC Committee was increased
from the level initially set to reflect the additional workload request-
ed by the Board during the year which is expected to continue for
the foreseeable future.
Aggregate Directors’ Remuneration
The total amounts for Directors’ remuneration for the 2011
financial year in U.S. Dollars were as follows:
US $ thousand
Emoluments
Share incentive gains and payments
Retirement contributions
5 247 ¹
–
106 1
¹ The amounts were paid in UK Pounds Sterling or Swiss Franc as ex-
plained above and have been converted to U.S. Dollars using the
exchange rates stated in the Currency table on page 49.
DIRECTORS’ SHARE INTERESTS
The Directors who held office at 31 December 2011 have the
beneficial interests in the issued share capital of the Company
shown on page 98.
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3.5 | Directors’ report
Introduction
This Annual Report is presented by the Directors on the affairs
of Glencore International plc (the Company) and its subsidiaries
(the Group or Glencore), together with the financial statements
and auditors’ report, for the year ended 31 December 2011. The
Directors’ Report including details of the business, the devel-
opment of the Group and likely future developments as set out
in the Overview and Business review section, which together
forms the management report for the purposes of the UK Fi-
nancial Services Authority’s Disclosure and Transparency Rule
(DTR) 4.1.8R. The notice concerning forward looking statements
is set out on page 160. References to the Company may also
include references to the Group or part of the Group.
Corporate structure
Glencore International plc is a public company limited by
shares, incorporated in Jersey and domiciled in Baar, Switzer-
land and its shares are listed on the London and Hong Kong
Stock Exchanges.
Principal activities
Glencore is one of the world’s leading integrated producers
and marketers of commodities. It has worldwide activities in the
production, sourcing, processing, refining, transporting, stor-
age, financing and supply of metals and minerals, energy prod-
ucts and agricultural products.
Financial results and dividends
The Group’s financial results are set out in the financial state-
ments and in the Financial review section of this annual report.
The Board recommends a final dividend of $ 0.10 per share total-
ling approximately $ 692 million. Including the interim dividend
of $ 0.05 per share which has already been paid, this provides
for a total dividend for the 2011 financial year of $ 0.15 per share
and $ 1,038 million in aggregate. Shareholders will be asked to
approve the final dividend at the Annual General Meeting on
9 May 2012, for payment on 1 June 2012 to ordinary sharehold-
ers whose names are on the register on 18 May 2012.
Review of business, future developments and post balance
sheet events
A review of the business and the future developments of the
Group is presented in the Overview and the Business review.
A full description of acquisitions, disposals, and material chang-
es to Group companies undertaken during the year, including
post balance sheet events, is included in the Financial review
and in note 22 of the financial statements.
Financial instruments
Descriptions of the use of financial instruments and Glencore
financial risk management objectives and policies, including
hedging activities and exposure to price risk, credit risk, liquid-
ity risk and cash flow risk are included in section 1.7 Principal
risks and uncertainties and in note 23 of the financial statements.
Corporate Governance
A report on corporate governance and compliance with the UK
Corporate Governance Code is set out on pages 80 to 96 and
forms part of this report by reference.
Creditor payment policy and practice
In view of the international nature of the Group’s operations
there is no specific Group-wide policy in respect of payments
to suppliers. Individual operating entities are responsible for
agreeing terms and conditions for their business transactions
and ensuring that suppliers are aware of the terms of payment.
It is Group policy that payments are made in accordance with
those terms, provided that all trading terms and conditions
have been met by the supplier.
Glencore International plc is a holding company with no busi-
ness activity other than the holding of investments in the Group
and therefore had no trade creditors at 31 December 2011.
Health, safety, environment & communities (HSEC)
An overview of health, safety and environmental performance
and community participation is provided in section 1.5 Sustain-
ability.
Exploration and research and development
The Group business units carry out exploration and research
and development activities that are necessary to support and
expand their operations.
Political and charitable donations
No political donations were made in 2011. In addition to our
large-scale community programmes, Glencore makes donations
and provides sponsorship to various causes. Glencore seeks to
ensure that charitable contributions and sponsorship should
never be used as a substitute for political contributions. Guid-
ance on Glencore’s policy towards charitable contributions is
set out in the Glencore Corporate Practice programme. For the
year ended 31 December 2011, the Company spent a total of
$ 123 million (2010: $ 80 million) on both purely philanthropic
and community investment initiatives.
Employee policies and involvement
Glencore operates an equal opportunities policy that aims to
treat individuals fairly and not to discriminate on the basis of
sex, race, ethnic origin, disability or on any other basis. Applica-
tions for employment are fully considered on their merits, and
employees are given appropriate training and equal opportuni-
ties for career development and promotion.
The Group places considerable value on the involvement of its
employees which is reflected in the principles of Glencore Cor-
porate Practice and its related guidance, which require regular,
open, fair and respectful communication, zero tolerance for
human rights violations, fair remuneration and, above all, a safe
working environment.
| Annual Report 2011 | 97
Directors’ conflicts of interest
Under Jersey law and the Company’s Articles of Association
(which mirror section 175 of the UK Companies Act 2006), a di-
rector must avoid a situation in which he has, or can have, a di-
rect or indirect interest that conflicts, or possibly may conflict,
with the interests of the Company. The duty is not infringed if the
matter has been authorised by the Directors. Under the Articles,
the Board has the power to authorise potential or actual conflict
situations. The Board maintains effective procedures to enable
the Directors to notify the Company of any actual or potential
conflict situations and for those situations to be reviewed and,
if appropriate, to be authorised by the Board. Directors’ conflict
situations are reviewed annually. A register of authorisations is
maintained.
No director has any other interest in the share capital of the
Company whether pursuant to any share plan or otherwise.
No changes in directors’ interests have occurred between
31 December 2011 and 26 March 2012.
Each of Mr Glasenberg and Mr Kalmin has executed a Lock-Up
Deed, pursuant to which they have agreed, subject to certain
customary exceptions, that during the period from 24 May 2011
to 24 May 2016 they will not dispose of the ordinary shares held
by them at 24 May 2011. The percentage of Executive Director’s
Ordinary Shares held at 24 May 2011 that is subject to restric-
tions on disposal decreases on each anniversary date by 20 per
cent of the original holding.
Directors’ liabilities and indemnities
The Company has granted third party indemnities to each of its
Directors against any liability that attaches to them in defend-
ing proceedings brought against them, to the extent permit-
ted by the Jersey Law. In addition, Directors and Officers of the
Company and its subsidiaries are covered by Directors & Offic-
ers liability insurance.
Directors
The names of the Company’s Directors who served during the
year, together with their biographical details and other informa-
tion, are shown on pages 81 and 83.
Directors’ interests
Details of interests in the ordinary shares of the Company of
those Directors who held office at 31 December 2011 are given
below:
Name of director
Executive
Ivan Glasenberg
Steven Kalmin
Non executive
Simon Murray
Peter Coates
Leonhard Fischer
Anthony Hayward
William Macaulay ¹
Li Ning
Ordinary shares
held as at
31 December 2011
Percentage
of issued
share capital
1 093 418 752
70 523 154
0
82 700
0
0
121 996 976
62 000
15.8%
1.0%
0.0%
0.0%
0.0%
0.0%
1.79%
0.0%
¹ Of these shares, 121,996,976 ordinary shares are held by FR Galaxy
Holdings S.a.r.l. (FR) (114,247,165 shares) and ECP Galaxy Holdings
S.a.r.l. (ECP) (7,749,811 shares) respectively. The Company has been
notified that (1) FR is a connected person of William Macaulay and
(2) ECP is an affiliate of FR. In addition, FR has an economic interest
under swap arrangements in 33,750,000 shares and ECP in 2,250,000
shares (being an aggregate 36,000,000 shares, which is approximately
0.5% of the issued share capital of the Company).
Share capital and shareholder rights
At the date of this report, the ordinary share capital of the Com-
pany was $ 69,227,135.11 represented by 6,922,713,511 ordinary
shares of $ 0.01 each.
Major interests in shares
As at 26 March 2012 Glencore had been notified of the following
interests representing 3% or more of the issued ordinary share
capital of the Company:
Name of holder
Number
of shares
Percentage
of issued
share capital
Ivan Glasenberg
Daniel Francisco Maté Badenes
Aristotelis Mistakidis
Tor Peterson 1
Alex Beard
1 093 418 752
417 468 330
411 730 597
366 074 885
320 260 410
15.8%
6.0%
5.9%
5.3%
4.6%
¹ Within the meaning of Chapter 5 of the UK Disclosure and Transpar-
ency Rules, Tor Peterson is an indirect holder of 109,178,079 Ordinary
Shares held by Cititrust (Switzerland) Limited pursuant to a fiduciary
arrangement established for his benefit. This indirect holding of Or-
dinary Shares is included in the above table.
Share capital
The rights attaching to the Company’s ordinary shares, being
the only share class of the Company, are set out in the Com-
pany’s Articles of Association (Articles), which can be found at
www.glencore.com. Subject to Jersey law, any share may be is-
sued with or have attached to it such preferred, deferred or oth-
er special rights and restrictions as the Company may by special
resolution decide or, if no such resolution is in effect, or so far
as the resolution does not make specific provision, as the Board
may decide. No such resolution is currently in effect. Subject to
the recommendation of the Board, holders of ordinary shares
may receive a dividend. On liquidation, holders of ordinary
shares may share in the assets of the Company. Holders of ordi-
nary shares are also entitled to receive the Company’s Annual
Report and Accounts (or a summarised version) and, subject to
certain thresholds being met, may requisition the Board to con-
vene a general meeting (GM) or the proposal of resolutions at
AGMs. None of the ordinary shares carry any special rights with
regard to control of the Company.
98 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Holders of ordinary shares are entitled to attend and speak at
GMs of the Company and to appoint one or more proxies or, if
the holder of shares is a corporation, a corporate representa-
tive. On a show of hands, each holder of ordinary shares who
(being an individual) is present in person or (being a corpora-
tion) is present by a duly appointed corporate representative,
not being himself a member, shall have one vote and on a poll,
every holder of ordinary shares present in person or by proxy
shall have one vote for every share of which he is the holder.
Electronic and paper proxy appointments and voting instruc-
tions must be received not later than 48 hours before a GM.
A holder of ordinary shares can lose the entitlement to vote at
GMs where that holder has been served with a disclosure no-
tice and has failed to provide the Company with information
concerning interests held in those shares. Except as (1) set out
above and (2) permitted under applicable statutes, there are no
limitations on voting rights of holders of a given percentage,
number of votes or deadlines for exercising voting rights.
The Directors may refuse to register a transfer of a certificated
share which is not fully paid, provided that the refusal does not
prevent dealings in shares in the Company from taking place on
an open and proper basis or where the Company has a lien over
that share. The Directors may also refuse to register a transfer
of a certificated share unless the instrument of transfer is: (i)
lodged, duly stamped (if necessary), at the registered office of
the Company or any other place as the Board may decide ac-
companied by the certificate for the share(s) to be transferred
and/or such other evidence as the Directors may reasonably re-
quire as proof of title; or (ii) in respect of only one class of shares.
Transfers of uncertificated shares must be carried out using
CREST and the Directors can refuse to register a transfer of an
uncertificated share in accordance with the regulations govern-
ing the operation of CREST.
The Directors may decide to suspend the registration of trans-
fers, for up to 30 days a year, by closing the register of sharehold-
ers. The Directors cannot suspend the registration of transfers of
any uncertificated shares without obtaining consent from CREST.
There are no other restrictions on the transfer of ordinary shares
in the Company except: (1) certain restrictions may from time to
time be imposed by laws and regulations (for example insider
trading laws); (2) pursuant to the Company’s share dealing code
whereby the Directors and certain employees of the Company
require approval to deal in the Company’s shares; and (3) where
a shareholder with at least a 0.25% interest in the Company’s is-
sued share capital has been served with a disclosure notice and
has failed to provide the Company with information concern-
ing interests in those shares. There are no agreements between
holders of ordinary shares that are known to the Company
which may result in restrictions on the transfer of securities or
on voting rights.
The rules for appointment and replacement of the Directors
are set out in the Articles. Directors can be appointed by the
Company by ordinary resolution at a GM or by the Board upon
the recommendation of the Nomination Committee. The Com-
pany can remove a director from office, including by passing
an ordinary resolution or by notice being given by all the other
Directors.
The powers of the Directors are set out in the Articles and pro-
vide that the Board may exercise all the powers of the Com-
pany including to borrow money. The Company may by ordinary
resolution authorise the Board to issue shares, and increase,
consolidate, sub-divide and cancel shares in accordance with
its Articles and Jersey law.
The Company may amend its Articles by special resolution ap-
proved at a GM.
Purchase of Own Shares
At the end of the year, the Directors had authority, under a
shareholders’ resolution passed on 3 May 2011, to purchase
through the market up to 10% of the Company’s issued ordinary
shares immediately following the IPO. This authority expires at
the conclusion of the AGM of the Company to be held in 2012.
Going concern
The financial position of the Group, its cash flows, liquidity posi-
tion and borrowing facilities are set out in the Overview and the
Business review sections. Furthermore, note 23 of the consoli-
dated financial statements includes the Group’s objectives and
policies for managing its capital, its financial risk management
objectives, details of its financial instruments and hedging ac-
tivities and its exposure to credit and liquidity risk.
In May 2011, the Company’s shares were admitted to trading
on the London and Hong Kong Stock Exchanges. Concurrent-
ly with this admission process, the Company implemented an
offer for subscription of new ordinary shares. Pursuant to this
offer, 922,713,511 ordinary shares were issued, representing
16.94% of the Group’s post admission issued share capital rais-
ing proceeds of c. $ 7,291 million net of expenses. Other sig-
nificant financing activities that took place during the year are
detailed in the Business review section. As a consequence, the
Directors believe that the Group is well placed to manage its
business despite the current highly uncertain economic envi-
ronment.
The Directors believe, having made appropriate enquiries, that
the Group has adequate resources to continue its operational
existence for the foreseeable future. For this reason they con-
tinue to adopt the going concern basis in preparing the finan-
cial statements.
The Directors have made this assessment after consideration of
the Company’s budgeted cash flows and related assumptions,
undrawn debt facilities, debt maturity review, analysis of debt
covenants, and in accordance with Going Concern and Liquid-
ity Risk: Guidance for Directors of UK Companies 2009 pub-
lished by the UK Financial Reporting Council.
| Annual Report 2011 | 99
AUDITORS
Each of the persons who is a Director at the date of approval of
this annual report confirms that:
(a) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
(b) the Director has taken all the steps that he/she ought to have
taken as a director in order to make himself/ herself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure
that the financial statements comply with the Companies (Jersey)
Law 1991. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Com-
pany’s website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from legis-
lation in other jurisdictions.
Deloitte LLP have expressed their willingness to continue in of-
fice as auditors and a resolution to reappoint them will be pro-
posed at the forthcoming Annual General Meeting.
Signed on behalf of the board:
John Burton
Company Secretary
26 March 2012
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare fi-
nancial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with International Financial Reporting Standards
as issued by the International Accounting Standards Board
and International Financial Reporting Standards as adopted
for use in the European Union, together (IFRS). The financial
statements are required by law to be properly prepared in ac-
cordance with the Companies (Jersey) Law 1991. International
Accounting Standard 1 requires that financial statements
present fairly for each financial year the Company’s financial
position, financial performance and cash flows. This requires
the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income and expens-
es set out in the International Accounting Standards Board’s
‘Framework for the preparation and presentation of financial
statements’.
In virtually all circumstances, a fair presentation will be achieved
by compliance with all applicable IFRSs. However, the Directors
are also required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a man-
ner that provides relevant, reliable, comparable and under-
standable information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable us-
ers to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
• make an assessment of the Company’s ability to continue as
a going concern.
100 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
| Annual Report 2011 | 101
financial
StatementS
4 | Financial Statements
Statement of directors’ responsibilities
Independent auditors’ report
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the financial statements
104
105
106
107
108
109
110
111
Financial StatementS
StAtement of diRectoRS’ ReSponSibilitieS
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with International Financial Reporting Standards and interpretations as adopted
by the European Union, International Financial Reporting Standards and interpretations as issued by the International Account-
ing Standards Board and the Companies (Jersey) Law 1991, give a true and fair view of the assets, liabilities, financial position and
profit of the Group and the undertakings included in the consolidation taken as a whole; and
• the management report, which is incorporated in the Overview and Business review sections, includes a fair review of the
development and performance of the business and the position of the Group and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and uncertainties they face.
Ivan Glasenberg
Chief Executive Officer
Steven Kalmin
Chief Financial officer
26 March 2012
104 | Annual Report 2011 |
104 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
independent AUditoR’S RepoRt to tHe membeRS of GlencoRe inteRnAtionAl plc
We have audited the group financial statements (the “financial
statements”) of Glencore International plc for the year ended
31 December 2011 which comprise the Consolidated State-
ment of Income, the Consolidated Statement of Comprehen-
sive Income, the Consolidated Statement of Financial Position,
the Consolidated Statement of Cash Flows, the Consolidated
Statement of Changes in Equity and the related notes 1 to 30.
The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRS) as adopted by European Union.
Separate opinion in relation to iFRS as issued by the iaSB
As explained in the accounting policies to the financial state-
ments, the Group, in addition to complying with its legal obliga-
tion to comply with IFRSs as adopted by the European Union,
has also applied IFRSs as issued by the International Account-
ing Standards Board (IASB). In our opinion the Group financial
statements comply with IFRSs as issued by the IASB.
matters on which we are required to report by exception
We have nothing to report in respect of the following:
This report is made solely to the company’s members, as a
body, in accordance with Article 113A of the Companies (Jersey)
Law 1991. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or as-
sume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this re-
port, or for the opinions we have formed.
Under the Companies (Jersey) Law 1991 we are required to re-
port to you if, in our opinion:
• proper accounting records have not been kept by the parent
company, or proper returns adequate for our audit have not
been received from branches not visited by us; or
• the financial statements are not in agreement with the ac-
counting records and returns; or
• we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review the part of the
Corporate Governance Statement relating to the company’s
compliance with the nine provisions of the UK Corporate Gov-
ernance Code specified for our review.
Other matters
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the provisions of the UK Companies Act 2006 as if that Act had
applied to the company.
We have reviewed the directors’ statement, contained within
the Directors’ Report, in relation to going concern as if the
company had been incorporated in the UK and have nothing to
report to you in that respect.
David Quinlin
for and on behalf of Deloitte LLP
Chartered Accountants and Recognized Auditor
London, UK
26 March 2012
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors’ Responsi-
bilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an opin-
ion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Prac-
tices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give rea-
sonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the group’s circumstances and have been con-
sistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and
the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the an-
nual report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent mate-
rial misstatements or inconsistencies we consider the implica-
tions for our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the group’s affairs as at
31 December 2011 and of the group’s profit for the year then
ended;
• have been properly prepared in accordance with IFRS as
adopted by European Union;
• have been properly prepared in accordance with the Compa-
nies (Jersey) Law 1991.
| Annual Report 2011 | 105
| Annual Report 2010 | 105
Financial StatementS
conSolidAted StAtement of income
foR tHe yeARS ended 31 decembeR
US $ million
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates and jointly controlled entities
Gain/(loss) on sale of investments
Other expense – net
Dividend income
Interest income
Interest expense
income before income taxes and attribution
Income tax credit/(expense)
income before attribution
Attribution to hybrid profit participation shareholders
Attribution to ordinary profit participation shareholders
income for the year
attributable to:
Non controlling interests
Equity holders
earnings per share
Basic (US $)
Diluted (US $)
The accompanying notes are an integral part of these consolidated financial statements.
Notes
2011
2010
186 152
– 181 938
– 857
1 972
9
– 511
24
339
– 1 186
4 004
264
4 268
0
0
144 978
– 140 467
– 1 063
1 829
– 6
– 8
13
281
– 1 217
4 340
– 234
4 106
– 367
– 2 093
4 268
1 646
220
4 048
0.72
0.69
355
1 291
0.35
0.35
3
4
13
13
14
14
106 | Annual Report 2011 |
106 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
conSolidAted StAtement of compReHenSive income
foR tHe yeARS ended 31 decembeR
US $ million
Income for the year
Notes
Exchange (loss)/gain on translation of foreign operations
Loss on cash flow hedges
(Loss)/gain on available for sale financial instruments
7
Share of other comprehensive loss from associates and jointly controlled entities
Income tax relating to components of other comprehensive income
net loss recognised directly in equity
Cash flow hedges transferred to the statement of income, net of tax
Other comprehensive loss
total comprehensive income
attributable to:
Non controlling interests
Equity holders
The accompanying notes are an integral part of these consolidated financial statements.
2011
4 268
– 59
– 15
– 1 206
– 25
– 2
– 1 307
6
– 1 301
2 967
214
2 753
2010
1 646
26
– 182
25
– 43
2
– 172
6
– 166
1 480
373
1 107
| Annual Report 2011 | 107
| Annual Report 2010 | 107
Financial StatementS
conSolidAted StAtement of finAnciAl poSition
AS At 31 decembeR
US $ million
assets
non current assets
Property, plant and equipment
Intangible assets
Investments in associates and jointly controlled entities
Other investments
Advances and loans
Deferred tax assets
current assets
Inventories
Accounts receivable
Other financial assets
Prepaid expenses and other assets
Marketable securities
Cash and cash equivalents
Assets held for sale
total assets
equity and liabilities
capital and reserves – attributable to equity holders
Share capital
Reserves and retained earnings
Non controlling interests
Hybrid profit participation shareholders
Ordinary profit participation shareholders
total net assets attributable to profit participation shareholders,
non controlling interests and equity holders
Other non current liabilities
Borrowings
Deferred income
Deferred tax liabilities
Provisions
current liabilities
Borrowings
Commodities sold with agreements to repurchase
Accounts payable
Provisions
Other financial liabilities
Income tax payable
Liabilities held for sale
total equity and liabilities
The accompanying notes are an integral part of these consolidated financial statements.
108 | Annual Report 2011 |
108 | Annual Report 2010 |
Notes
2011
2010
5
6
7
7
8
4
9
10
24
11
12
13
13
13
17
18
4
19
17
9
21
19
24
12
14 639
210
18 858
1 547
4 141
1 039
40 434
17 129
21 895
5 065
297
40
1 305
45 731
0
45 731
86 165
69
29 196
29 265
3 070
32 335
0
0
12 088
0
16 766
2 438
3 830
369
35 491
17 393
18 994
5 982
118
66
1 463
44 016
280
44 296
79 787
37
5 387
5 424
2 894
8 318
1 823
12 366
32 335
22 507
19 844
158
1 399
953
22 354
8 185
39
18 160
98
4 804
190
31 476
0
31 476
86 165
18 251
164
1 308
719
20 442
11 881
484
15 973
172
8 066
217
36 793
45
36 838
79 787
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
conSolidAted StAtement of cASH flowS
foR tHe yeARS ended 31 decembeR
US $ million
Operating activities
Income before income taxes and attribution
adjustments for:
Depreciation and amortisation
Share of income from associates and jointly controlled entities
Increase in non current provisions
(Gain)/loss on sale of investments – net
Unrealised mark to market movements on other investments
Impairments and other non cash items – net
Interest expense – net
cash generated by operating activities before working capital changes
Working capital changes
Increase in accounts receivable 1
Decrease/(increase) in inventories
(Decrease)/increase in accounts payable 2
total working capital changes
Income tax paid
Interest received
Interest paid
net cash (used)/generated by operating activities
investing activities
Payments of non current advances and loans
Acquisition of subsidiaries, net of cash acquired
Disposal of subsidiaries
Purchase of investments
Xstrata rights issue settlement via exercise of Prodeco call option
Proceeds from sale of investments
Purchase of property, plant and equipment
Payments for exploration and evaluation
Proceeds from sale of property, plant and equipment
Dividends received from associates
net cash (used) by investing activities
Financing activities
Share issuance, net of issue costs
Proceeds from issuance of Swiss Franc and Euro bonds
(Repayment of)/proceeds from Perpetual bonds
Repayment of Euro bonds
Proceeds from Convertible bonds
Proceeds from other non current borrowings
Repayment of other non current borrowings
Proceeds from Xstrata secured bank loans
(Repayment of)/net proceeds from current borrowings
Acquisition of additional interest in subsidiaries
Payment of profit participation certificates
Dividend paid to non controlling interests
Dividend paid to equity holders of the parent
net cash generated by financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
cash and cash equivalents, end of year
Notes
2011
2010
4 004
4 340
1 066
– 1 972
1
– 9
92
72
847
4 101
– 1 797
239
– 1 616
– 3 174
– 472
121
– 919
– 343
– 320
– 350
4
– 919
0
155
– 2 606
– 204
184
366
– 3 690
7 616
237
– 681
– 700
0
221
– 169
384
– 1 493
– 315
– 861
– 18
– 346
3 875
– 158
1 463
1 305
1 026
– 1 829
11
6
178
– 434
936
4 234
– 4 142
– 1 724
2 868
– 2 998
– 323
229
– 1 031
111
– 825
– 624
0
– 191
– 2 000
131
– 1 657
– 233
420
224
– 4 755
0
2 317
327
0
283
776
– 413
0
2 945
– 75
– 883
– 28
– 2
5 247
603
860
1 463
22
3
13
15
1 Includes movements in other financial assets, prepaid expenses, other assets and other non cash current assets.
2 Includes movements in other financial liabilities and current provisions.
The accompanying notes are an integral part of these consolidated financial statements.
| Annual Report 2011 | 109
| Annual Report 2010 | 109
Financial StatementS
conSolidAted StAtement of cHAnGeS in eqUity
foR tHe yeARS ended 31 decembeR
Total
reserves
and
retained
earnings
Share
capital
Total
equity
attribut-
able to
equity
holders
Non
control-
ling
interests
Total
equity
Retained
earnings
Share
premium 1
Other
reserves 1
4 413
0
0
4 413
1 291
– 43
– 2
0
0
0
0
5 659
5 659
4 048
– 25
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
5 694
7 607
21
0
0
0
– 346
0
0
58
0
0
0
– 18
4 395
0
9
– 9
0
– 141
0
0
0
9
4 404
1 291
– 184
– 2
0
– 134
– 134
0
12
0
12
46
– 46
37
37
0
0
0
0
0
0
0
4 441
1 258
5 699
– 46
46
4 441
1 291
– 184
– 2
0
– 134
0
12
0
0
1 258
355
18
0
– 28
59
– 46
46
5 699
1 646
– 166
– 2
– 28
– 75
1 232
1 232
0
12
– 272
5 387
37
5 424
2 894
8 318
– 272
0
5 387
4 048
– 1 270
– 1 295
0
0
0
0
0
– 98
0
0
13 821
– 7
7 607
21
58
– 98
0
– 346
37
0
0
5 424
4 048
– 1 295
16
13 837
7
9
0
0
0
0
0
0
7 616
21
58
– 98
0
– 346
2 894
220
– 6
0
0
0
0
0
– 235
215
– 18
8 318
4 268
– 1 301
13 837
0
7 616
21
58
– 333
215
– 364
4 039
26 797
– 1 640
29 196
69
29 265
3 070
32 335
US $ million
at 1 January 2010
Class B shares redeemed pursuant to the Restructuring ¹
Ordinary shares issued pursuant to the Restructuring ¹
at 1 January 2010 (restated)
Income for the year
Other comprehensive (loss)/income
Dividends paid 2
Return of capital to non controlling interests
Change in ownership interest in subsidiaries
Acquisition of subsidiaries
Equity portion of Convertible bonds
at 31 December 2010 (restated)
at 1 January 2011
Income for the year
Other comprehensive loss
Issue of share capital 1
Tax on Listing related expenses 3
Equity settled share-based payments 4
Change in ownership interest in subsidiaries
Acquisition of subsidiaries
Dividends paid 2
at 31 December 2011
1 See note 13.
² See note 15.
³ See note 4.
4 See note 16.
Conversion of HPPS and PPS profit participation plans ¹
0
13 821
Conversion of LTS and LTPPS profit participation plans ¹
– 5 701
The accompanying notes are an integral part of these consolidated financial statements.
110 | Annual Report 2011 |
110 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
noteS to tHe finAnciAl StAtementS
1. AccoUntinG policieS
corporate information
The Glencore Group (Glencore) is a leading integrated marketer
and producer of natural resources, with worldwide activities in
the marketing of metals and minerals, energy products and ag-
ricultural products and the production, refinement, processing,
storage and transport of these products. Glencore operates on
a global scale, marketing and distributing physical commodi-
ties sourced from third party producers and own production
to industrial consumers, such as those in the automotive, steel,
power generation, oil and food processing industries. Glencore
also provides financing, logistics and other services to produ
cers and consumers of commodities. Glencore’s long experi-
ence as a commodity merchant has allowed it to develop and
build upon its expertise in the commodities which it markets
and cultivate long-term relationships with a broad supplier and
customer base across diverse industries and in multiple geo-
graphic regions. Glencore’s marketing activities are supported
by investments in industrial assets operating in Glencore’s core
commodities.
These consolidated financial statements were authorised for is-
sue in accordance with a Directors’ resolution on 26 March 2012.
listing/Restructuring of the Group
On 24 May 2011, Glencore International plc (the “Company”)
was admitted to the Official List of the UK Listing Authority and
commenced trading on the London Stock Exchange’s premium
listed market and on the Hong Kong Stock Exchange on 25 May
2011 via a secondary listing (the “Listing”). The Company is in-
corporated in Jersey, domiciled in Switzerland, and is the new
ultimate parent company of Glencore and owner of 100% of the
issued share capital of Glencore International AG, following a
restructuring of the ownership interests in Glencore Interna-
tional AG immediately prior to admission (the “Restructuring”)
(see note 13). The Company’s registered office is at Queensway
House, Hilgrove Street, St Helier, Jersey, JE1 1ES.
Although this consolidated financial information has been re-
leased in the name of the parent, Glencore International plc,
it represents insubstance continuation of the existing Group,
headed by Glencore International AG and the following ac-
counting treatment has been applied to account for the Re-
structuring:
structuring, the equity structure reflects the applicable move-
ments in equity of Glencore International plc, including the
equity instruments issued to effect the Restructuring and the
Listing; and
• comparative numbers presented in the consolidated financial
statements are those reported in the consolidated financial
statements of Glencore International AG, for the year ended
31 December 2010, except for the presentation of the share
capital, other reserves and per share amounts, which have
been restated to reflect the change in the nominal value of the
ordinary shares resulting from the Restructuring as if Glencore
International plc had been the parent company during such
periods.
Statement of compliance
The accounting policies adopted are in accordance with:
• International Financial Reporting Standards (IFRS) and inter-
pretations as adopted by the European Union (EU) effective
as of 31 December 2011; and
• IFRS and interpretations as issued by the International Ac-
counting Standards Board (IASB) effective as of 31 December
2011.
Basis of preparation
The financial statements are prepared under the historical cost
convention except for the revaluation to fair value of certain
financial assets, liabilities and marketing inventories and have
been prepared on a going concern basis. The Directors have
made this assessment after consideration of the Group’s budg-
eted cash flows and related assumptions, including appropri-
ate stress testing thereof, key risks and uncertainties, undrawn
debt facilities and debt maturity review and in accordance with
the Going Concern and Liquidity Guidance for Directors of UK
Companies 2009 published by the Financial Reporting Coun-
cil. Further information on Glencore’s business activities, cash
flows, liquidity and performance are set out in the Business re-
view and its objectives, policies and processes for managing its
capital and financial risks are detailed in note 23.
All amounts are expressed in millions of United States Dollars,
unless other wise stated, consistent with the predominant func-
tional currency of Glencore’s operations.
• the consolidated assets and liabilities of the subsidiary
Glencore International AG were recognised and measured at
the preRestructuring carrying amounts, without restatement
to fair value;
In accordance with Article 105(11) of the Companies (Jersey)
Law 1991, the parent company is not required to present sepa-
rate financial statements as consolidated statements have been
presented.
• the retained earnings and other equity balances recognised
in the consolidated statement of financial position reflect the
consolidated retained earnings and other equity balances of
Glencore International AG, as at 24 May 2011, immediately
prior to the Restructuring, and the results of the period from
1 January 2011 to 24 May 2011, the date of the Restructuring,
are those of Glencore International AG as the Company was
not active prior to the Restructuring. Subsequent to the Re-
| Annual Report 2011 | 111
| Annual Report 2010 | 111
Financial StatementS
changes in accounting policies and comparability
The following amendments to the existing standards and inter-
pretations were adopted as of 1 January 2011:
• IAS 24 – Related Party disclosures;
• IFRIC 14 – Prepayments of a minimum funding requirement
(amendment);
• IFRIC 19 – Extinguishing financial liabilities with equity instru-
ments.
The adoption of these new and revised standards and interpre-
tations did not have a material impact on the recognition, meas-
urement or disclosure of reported amounts.
In addition, Glencore adopted IFRS 2 – Sharebased Payment
which details the accounting and disclosure requirements with
respect to the phantom equity award plan (see note 16) estab-
lished concurrent with the Listing and IAS 38 – Intangible Assets
with respect to the acquisition of the Pacorini Group and other
business combinations completed during the year and the rec-
ognition and accounting for goodwill and other intangible as-
sets (see notes 22 and 6).
At the date of authorisation of these financial statements, the
following standards and interpretations applicable to Glencore
were issued but not yet effective:
• IFRS 9 – Financial Instruments
• IFRS 10 – Consolidated Financial Statements
• IFRS 11 – Joint Arrangements
• IFRS 12 – Disclosure of Interests in Other Entities
• IFRS 13 – Fair Value Measurement
• IAS 19 – Employee Benefits (2011)
• IAS 27 – Separate Financial Statements (2011)
• IAS 28 – Investments in Associates and Joint Ventures (2011)
• Amendments to IFRS 7 – Financial Instruments: Disclosures
• Amendments to IAS 1 – Presentation of Items of Other Com-
prehensive Income
• Amendments to IAS 12 – Deferred Tax: Recovery of Underly-
ing Assets
• Amendments to IAS 32 – Offsetting Financial Assets and Fi-
nancial Liabilities
• IFRIC 20 – Stripping Costs in the Production Phase of a Sur-
face Mine
The Directors are currently evaluating the impact these new
standards and interpretations will have on the financial state-
ments of Glencore.
Principles of consolidation
The consolidated financial statements of Glencore include the
accounts of the Company and its subsidiaries. A subsidiary is
an entity that is ultimately controlled by the Company. Control
is the power to govern the financial and operating policies of
an entity so as to obtain benefits from its activities. Control is
usually assumed where Glencore ultimately owns or controls
more than 50% of the voting rights, unless evidence exists to
the contrary. The results of subsidiaries acquired or disposed of
during the year are consolidated from the effective date of ac-
quisition or up to the effective date of disposal, as appropriate.
All intercompany balances, transactions and unrealised profits
are eliminated.
Non controlling interests in subsidiaries are identified sepa-
rately from Glencore’s equity and are initially measured either
at fair value or at the non controlling interests’ proportionate
share of the fair value of the acquiree’s identifiable net assets.
Subsequent to acquisition, the carrying amount of non control-
ling interests is the amount of those interests at initial recog-
nition plus the non controlling interests’ share of subsequent
changes in equity. Total comprehensive income is attributed to
non controlling interests even if this results in the non controlling
interests having a deficit balance.
Changes in Glencore’s interests in subsidiaries that do not re-
sult in a loss of control are accounted for as equity transactions
with any difference between the amount by which the non con-
trolling interests are adjusted and the fair value of the consid-
eration paid or received being recognised directly in equity and
attributed to equity holders of Glencore.
investments in associates, jointly controlled entities and joint
venture operations
Associates and jointly controlled entities (together Associates)
in which Glencore exercises significant influence or joint control
are accounted for using the equity method. Significant influ-
ence is the power to participate in the financial and operating
policy decisions of the investee but is not control over those
policies. Significant influence is presumed if Glencore holds be-
tween 20% and 50% of the voting rights, unless evidence exists
to the contrary. Joint control is the contractually agreed sharing
of control over an economic entity where strategic and/or key
operating decisions require unanimous decision making.
Equity accounting involves Glencore recording its share of the
Associate’s net income and equity. Glencore’s interest in an As-
sociate is initially recorded at cost and is subsequently adjusted
for Glencore’s share of changes in net assets of the Associate,
less any impairment in the value of individual investments.
Where Glencore transacts with an Associate, unrealised profits
and losses are eliminated to the extent of Glencore’s interest in
that Associate.
Changes in Glencore’s interests in Associates are accounted for
as a gain or loss on disposal with any difference between the
amount by which the carrying value of the Associate is adjusted
and the fair value of the consideration received being recog-
nised directly in the statement of income.
Where Glencore undertakes activities under joint venture op-
eration or asset arrangements, Glencore reports such interests
using the proportionate consolidation method. Glencore’s
share of the assets, liabilities, income, expenses and cash flows
of jointly controlled operations or asset arrangements are con-
solidated with the equivalent items in the consolidated financial
statements on a line by line basis.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method of accounting, whereby the iden-
tifiable assets, liabilities and contingent liabilities (identifiable
net assets) are measured on the basis of fair value at the date
of acquisition. Acquisition related costs are recognised in the
statement of income as incurred.
112 | Annual Report 2011 |
112 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Where a business combination is achieved in stages, Glencore’s
previously held interests in the acquired entity are remeasured
to fair value at the acquisition date (i.e. the date Glencore at-
tains control) and the resulting gain or loss, if any, is recognised
in the statement of income.
Interest and dividend income is recognised when the right to
receive payment has been established, it is probable that the
economic benefits will flow to Glencore and the amount of in-
come can be measured reliably. Interest income is accrued on a
time basis, by reference to the principal outstanding and at the
applicable effective interest rate.
Where the fair value of consideration transferred for a business
combination exceeds the fair values attributable to Glencore’s
share of the identifiable net assets, the difference is treated
as purchased goodwill, which is not amortised but is reviewed
annually for impairment and when there is an indication of
impairment. Any impairment identified is immediately recog-
nised in the statement of income. If the fair value attributable
to Glencore’s share of the identifiable net assets exceeds the
consideration transferred, the difference is immediately recog-
nised in the statement of income.
Similar procedures are applied in accounting for the purchases
of interests in Associates. Any goodwill arising from such pur-
chases is included within the carrying amount of the invest-
ment in Associates, but not amortised thereafter. Any excess of
Glencore’s share of the net fair value of the Associate’s identifi-
able net assets over the cost of the investment is included in the
statement of income in the period of the purchase.
The main operating and finance subsidiaries and investments of
Glencore are listed in note 30.
non current assets held for sale and disposal groups
Non current assets and assets and liabilities included in dispos-
al groups are classified as held for sale if their carrying amount
will be recovered principally through a sale transaction rather
than through continuing use, they are available for immediate
disposal and the sale is highly probable. Non current assets
held for sale are measured at the lower of their carrying amount
or fair value less costs to sell.
Revenue recognition
Revenue is recognised when the seller has transferred to the
buyer all significant risks and rewards of ownership of the as-
sets sold. Revenue excludes any applicable sales taxes and is
recognised at the fair value of the consideration received or re-
ceivable to the extent that it is probable that economic benefits
will flow to Glencore and the revenues and costs can be reliably
measured. In most instances sales revenue is recognised when
the product is delivered to the destination specified by the
customer, which is typically the vessel on which it is shipped, the
destination port or the customer’s premises.
For certain commodities, the sales price is determined on a
provisional basis at the date of sale as the final selling price is
subject to movements in market prices up to the date of final
pricing, normally ranging from 30 to 90 days after initial book-
ing. Revenue on provisionally priced sales is recognised based
on the estimated fair value of the total consideration receivable.
The revenue adjustment mechanism embedded within provi-
sionally priced sales arrangements has the character of a com-
modity derivative. Accordingly, the fair value of the final sales
price adjustment is re-estimated continuously and changes in
fair value are recognised as an adjustment to revenue. In all cas-
es, fair value is estimated by reference to forward market prices.
Foreign currency translation
Glencore’s reporting currency and the functional currency of
the majority of its operations is the U.S. Dollar as this is assessed
to be the principal currency of the economic environment in
which they operate.
Foreign currency transactions
Transactions in foreign currencies are converted into the func-
tional currency of each entity using the exchange rate pre-
vailing at the transaction date. Monetary assets and liabilities
outstanding at year end are converted at year end rates. The re-
sulting exchange differences are recorded in the consolidated
statement of income.
Translation of financial statements
For the purposes of consolidation, assets and liabilities of group
companies whose functional currency is in a currency other than
the U.S. Dollar are translated into U.S. Dollars using year end
exchange rates, while their statements of income are translat-
ed using average rates of exchange for the year. Goodwill and
fair value adjustments arising from the acquisition of a foreign
operation are treated as assets and liabilities of the foreign
operation and are translated at the closing rate. Translation
adjustments are included as a separate component of share-
holders’ equity and have no statement of income impact to the
extent that no disposal of the foreign operation has occurred.
Repurchase agreements
Glencore enters into repurchase transactions where it sells cer-
tain marketing inventories, but retains all or a significant portion
of the risks and rewards relating to the transferred inventory.
Repurchase transactions are treated as collateralised borrow-
ings, whereby the inventories are not derecognised from the
statement of financial position and the cash received is recorded
as a corresponding obligation within the statement of financial
position as “commodities sold with agreements to repurchase”
or, if the repurchase obligation is optional, within “trade advances
from buyers”.
Borrowing costs
Borrowing costs are expensed as incurred except where they
relate to the financing of construction or development of quali-
fying assets in which case they are capitalised up to the date
when the qualifying asset is ready for its intended use.
| Annual Report 2011 | 113
| Annual Report 2010 | 113
Financial StatementS
Retirement benefits
Glencore operates various pension schemes in accordance with
local requirements and practices of the respective countries.
The annual costs for defined contribution plans that are funded
by payments to separate trustee administered funds or insur-
ance companies equal the contributions that are required un-
der the plans and are accounted for as an expense. Glencore
uses the projected unit credit actuarial method to determine
the present value of its defined benefit obligations and the re-
lated current service cost and, where applicable, past service
cost.
Actuarial gains and losses are accounted for using the corridor
method. Under this method, to the extent that any cumulative
unrecognised actuarial gain or loss exceeds 10% of the greater
of the present value of the defined benefit obligation and the
fair value of plan assets, that excess is recognised in income
over the expected average remaining working lives of the em-
ployees participating in the plan. Past service cost is recognised
immediately to the extent that the benefits are already vested,
and otherwise is amortised on a straight line basis over the aver-
age period until the benefits become vested.
Share-based payments
Equity-settled share-based payments
Equity-settled share-based payments are measured at the fair
value of the awards based on the market value of the shares at
the grant date. Fair value excludes the effect of non market
based vesting conditions. The fair value is charged to the state-
ment of income and credited to retained earnings on a straight-
line basis over the period the estimated number of awards are
expected to vest.
At each balance sheet date, Glencore revises its estimate of the
number of equity instruments expected to vest as a result of
the effect of non marketbased vesting conditions. The impact
of the revision of the original estimates, if any, is recognised
in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to retained
earnings.
Cash-settled share-based payments
For cashsettled sharebased payments, a liability is initially rec-
ognised at fair value based on the estimated number of awards
that are expected to vest, adjusting for market and non market
based performance conditions. Subsequently, at each report-
ing period until the liability is settled, the liability is remeasured
to fair value with any changes in fair value recognised in the
statement of income.
income taxes
Income taxes consist of current and deferred income taxes.
Current taxes represent income taxes expected to be payable
based on enacted or substantively enacted tax rates at the pe-
riod end and expected current taxable income, and any adjust-
ment to tax payable in respect of previous years. Deferred taxes
are recognised for temporary differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of tax-
able profit, using enacted or substantively enacted income tax
rates which will be effective at the time of reversal of the under-
lying temporary difference. Deferred tax assets and unused tax
losses are only recognised to the extent that their recoverability
is probable. Deferred tax assets are reviewed at reporting pe-
riod end and amended to the extent that it is no longer prob-
able that the related benefit will be realised. To the extent that
a deferred tax asset not previously recognised fulfils the criteria
for recognition, an asset is recognised.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same authority and Glencore has
both the right and the intention to settle its current tax assets
and liabilities on a net or simultaneous basis. The tax effect of
certain temporary differences is not recognised principally with
respect to the initial recognition of an asset or liability (other
than those arising in a business combination or in a manner
that initially impacted accounting or taxable profit) and tem-
porary differences relating to investments in subsidiaries and
associates to the extent that Glencore can control the timing of
the reversal of the temporary difference and it is probable the
temporary difference will not reverse in the foreseeable future.
Deferred tax is provided in respect of fair value adjustments
on acquisitions. These adjustments may relate to assets such
as extraction rights that, in general, are not eligible for income
tax allowances.
Royalties, extraction taxes and other levies/taxes are treated
as taxation arrangements when they have the characteristics
of an income tax including being imposed and determined in
accordance with regulations established by the respective gov-
ernment’s taxation authority.
Current and deferred tax are recognised as an expense or in-
come in the statement of income, except when they relate to
items that are recognised outside the statement of income
(whether in other comprehensive income or directly in equity)
or where they arise from the initial accounting for a business
combination.
exploration and evaluation expenditure
Exploration and evaluation expenditure relates to costs in-
curred on the exploration and evaluation of potential mineral
and petroleum resources and includes costs such as research-
ing and analysing historical exploration data, exploratory drill-
ing, trenching, sampling and the costs of prefeasibility studies.
Exploration and evaluation expenditure for each area of inter-
est, other than that acquired from the purchase of another com-
pany, is charged to the statement of income as incurred except
when the expenditure will be recouped from future exploitation
or sale of the area of interest and it is planned to continue with
active and significant operations in relation to the area, or at
the reporting period end, the activity has not reached a stage
which permits a reasonable assessment of the existence of
commercially recoverable reserves, in which case the expendi-
ture is capitalised. Purchased exploration and evaluation assets
are recognised at their fair value at acquisition.
Capitalised exploration and evaluation expenditure is recorded
as a component of mineral and petroleum rights in property,
plant and equipment.
114 | Annual Report 2011 |
114 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
All capitalised exploration and evaluation expenditure is moni-
tored for indications of impairment. Where a potential impair-
ment is indicated, an assessment is performed for each area of
interest or at the cash generating unit level. To the extent that
capitalised expenditure is not expected to be recovered it is
charged to the statement of income.
Development expenditure
When commercially recoverable reserves are determined and
such development receives the appropriate approvals, capital-
ised exploration and evaluation expenditure is transferred to
construction in progress. Upon completion of development
and commencement of production, capitalised development
costs are transferred as required to either mineral and petro-
leum rights or deferred mining costs and depreciated using the
unit of production method (UOP).
Property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets are stat-
ed at cost, being the fair value of the consideration given to
acquire or construct the asset, including directly attributable
costs required to bring the asset to the location or to a condi-
tion necessary for operation and the direct cost of dismantling
and removing the asset, less accumulated depreciation and
any accumulated impairment losses. Intangible assets include
goodwill, future warehousing fees and trademarks.
Property, plant and equipment and intangible assets are de-
preciated to their estimated residual value over the estimated
useful life of the specific asset concerned, or the estimated re-
maining life of the associated mine, field or lease. Depreciation
commences when the asset is available for use. Identifiable in-
tangible assets with the finite life are amortised on a straight-
line basis over their expected useful life. Goodwill is not depre-
ciated.
The major categories of property, plant and equipment are de-
preciated on a UOP and/or straightline basis as follows:
Buildings
Land
Plant and equipment
Mineral rights and development costs
Deferred mining costs
10 – 45 years
not depreciated
3 – 30 years/UOP
UOP
UOP
Assets under finance leases, where substantially all the risks
and rewards of ownership transfer to the Group as lessee, are
capitalised and amortised over their expected useful lives on
the same basis as owned assets or, where shorter, the term of
the relevant lease. All other leases are classified as operating
leases, the expenditures for which, are charged against income
over the accounting periods covered by the lease term.
Deferred stripping costs
Stripping costs incurred in the development of a mine (or pit)
before production commences are capitalised as part of the
cost of constructing the mine (or pit) and subsequently amor-
tised over the life of the mine (or pit) on a unit of production
basis. Production stripping costs are deferred when the actual
stripping ratio incurred significantly exceeds the expected long
term average stripping ratio and are subsequently amortised
when the actual stripping ratio falls below the long term aver-
age stripping ratio. Where the ore is expected to be evenly dis-
tributed, waste removal is expensed as incurred.
mineral and petroleum rights
Mineral and petroleum reserves, resources and rights (together
Mineral Rights) which can be reasonably valued, are recognised
in the assessment of fair values on acquisition. Mineral Rights
for which values cannot be reasonably determined are not rec-
ognised. Exploitable Mineral Rights are amortised using the
UOP over the commercially recoverable reserves and, in certain
circumstances, other mineral resources. Mineral resources are
included in amortisation calculations where there is a high de-
gree of confidence that they will be extracted in an economic
manner.
Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising
from the installation of plant and other site preparation work,
discounted to their net present value, are provided for and
capitalised at the time such an obligation arises. The costs are
charged to the statement of income over the life of the opera-
tion through depreciation of the asset and the unwinding of the
discount on the provision.
Costs for restoration of subsequent site disturbance, which is
created on an ongoing basis during production, are provided
for at their net present values and charged to the statement of
income as extraction progresses.
Other investments
Equity investments, other than investments in Associates, are
recorded at fair value unless such fair value is not reliably de-
terminable in which case they are carried at cost. Changes in
fair value are recorded in the statement of income unless they
are classified as available for sale, in which case fair value move-
ments are recognised in other comprehensive income and are
subsequently recognised in the statement of income when real-
ised by sale or redemption, or when a reduction in fair value is
judged to be a significant or prolonged decline.
impairment
Glencore conducts at least annually an internal review of asset
values which is used as a source of information to assess for
any indications of impairment. Formal impairment tests are car-
ried out at least annually for cash generating units containing
goodwill and for all other non current assets when events or
changes in circumstances indicate the carrying value may not
be recoverable.
| Annual Report 2011 | 115
| Annual Report 2010 | 115
Financial StatementS
A formal impairment test involves determining whether the car-
rying amounts are in excess of their recoverable amounts. An
asset’s recoverable amount is determined as the higher of its
fair value less costs to sell and its value in use. Such reviews are
undertaken on an assetbyasset basis, except where assets do
not generate cash flows independent of other assets, in which
case the review is undertaken at the cash generating unit level.
If the carrying amount of an asset exceeds its recoverable
amount, an impairment loss is recorded in the income statement
to reflect the asset at the lower amount.
An impairment loss is reversed in the statement of income if
there is a change in the estimates used to determine the recover-
able amount since the prior impairment loss was recognised. The
carrying amount is increased to the recoverable amount but not
beyond the carrying amount net of depreciation or amortisation
which would have arisen if the prior impairment loss had not been
recognised. Goodwill impairments and impairments of available
for sale equity investments are not subsequently reversed.
Provisions
Provisions are recognised when Glencore has a present obliga-
tion, as a result of past events, and it is probable that an outflow
of resources embodying economic benefits that can be reliably
estimated will be required to settle the liability.
convertible bonds
At the date of issue, the fair value of the liability component
is determined by discounting the contractual future cash flows
using a market rate for a similar non convertible instrument. The
liability component is recorded as a liability on an amortised
cost basis using the effective interest method. The equity com-
ponent is recognised as the difference between the fair value of
the proceeds as a whole and the fair value of the liability com-
ponent and it is not subsequently remeasured. On conversion,
the liability is reclassified to equity and no gain or loss is recog-
nised in the statement of income and upon expiry of the conver-
sion rights, any remaining equity portion will be transferred to
retained earnings.
Derivatives and hedging activities
Derivative instruments, which include physical contracts to sell
or purchase commodities that do not meet the own use exemp-
tion, are initially recognised at fair value when Glencore be-
comes a party to the contractual provisions of the instrument
and are subsequently remeasured to fair value at the end of
each reporting period. Fair values are determined using quoted
market prices, dealer price quotations or using models and oth-
er valuation techniques, the key inputs for which include current
market and contractual prices for the underlying instrument,
time to expiry, yield curves, volatility of the underlying instru-
ment and counterparty risk.
inventories
The majority of marketing inventories are valued at fair value
less costs to sell with the remainder valued at the lower of cost
or net realisable value. Unrealised gains and losses from chang-
es in fair value are reported in cost of goods sold.
Gains and losses on derivative instruments for which hedge
accounting is not applied, other than the revenue adjustment
mechanism embedded within provisionally priced sales, are
recognised in cost of goods sold.
Production inventories are valued at the lower of cost or net real-
isable value. Cost is determined using the first in first out (FIFO)
or the weighted average method and comprises material costs,
labour costs and allocated production related overhead costs.
Financing and storage costs related to inventory are expensed
as incurred.
cash and cash equivalents
Cash and cash equivalents comprise cash held at bank, cash in
hand and short-term bank deposits with an original maturity of
three months or less. The carrying amount of these assets ap-
proximates their fair value.
Financial instruments
Financial assets are classified as either financial assets at fair
value through profit or loss, loans and receivables, heldto
maturity investments or available for sale financial assets de-
pending upon the purpose for which the financial assets were
acquired. Financial assets are initially recognised at fair value on
the trade date, including, in the case of instruments not record-
ed at fair value through profit or loss, directly attributable trans-
action costs. Subsequently, financial assets are carried at fair
value (other investments, derivatives and marketable secur ities)
or amortised cost less impairment (accounts receivable and
advances and loans). Financial liabilities other than derivatives
are initially recognised at fair value of consideration received
net of transaction costs as appropriate and subsequently car-
ried at amortised cost.
116 | Annual Report 2011 |
116 | Annual Report 2010 |
Those derivatives qualifying and designated as hedges are
either (i) a Fair Value Hedge of the change in fair value of a
recognised asset or liability or an unrecognised firm commit-
ment, or (ii) a Cash Flow Hedge of the change in cashflows to
be received or paid relating to a recognised asset or liability or
a highly probable transaction.
A change in the fair value of derivatives designated as a Fair
Value Hedge is reflected together with the change in the fair
value of the hedged item in the statement of income.
A change in the fair value of derivatives designated as a Cash
Flow Hedge is initially recognised as a cash flow hedge reserve
in shareholders’ equity. The deferred amount is then released
to the statement of income in the same periods during which
the hedged transaction affects the statement of income.
Hedge ineffectiveness is recorded in the statement of income
when it occurs.
When a hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting, any cumula-
tive gain or loss existing in equity at that time remains in share-
holders’ equity and is recognised in the statement of income
when the committed or forecast transaction is ultimately recog-
nised in the statement of income. However, if a forecast or com-
mitted transaction is no longer expected to occur, the cumula-
tive gain or loss that was recognised in equity is immediately
transferred to the statement of income.
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
A derivative may be embedded in a “host contract”. Such com-
binations are known as hybrid instruments and at the date of
issuance, the embedded derivative is separated from the host
contract and accounted for as a stand alone derivative if the
criteria for separation are met. The host contract is accounted
for in accordance with its relevant accounting policy.
critical accounting policies, key judgments and estimates
The preparation of the consolidated financial statements re-
quires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as well as
the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period.
The estimates and associated assumptions are based on his-
torical experience and other factors that are considered to be
relevant. Actual outcomes could differ from those estimates.
Glencore has identified the following areas as being critical
to understanding Glencore’s financial position as they require
management to make complex and/or subjective judgments
and estimates about matters that are inherently uncertain:
Valuation of derivative instruments
Derivative instruments are carried at fair value and Glencore
evaluates the quality and reliability of the assumptions and data
used to measure fair value in the three hierarchy levels, Level 1,
2 and 3, as prescribed by IFRS 7. Fair values are determined in
the following ways: externally verified via comparison to quot-
ed market prices in active markets (Level 1); by using models
with externally verifiable inputs (Level 2); or by using alterna-
tive procedures such as comparison to comparable instruments
and/or using models with unobservable market inputs requir-
ing Glencore to make market based assumptions (Level 3). For
more details refer to note 24.
Depreciation and amortisation of mineral and petroleum rights,
project development costs and plant and equipment
Mineral and petroleum rights, project development costs and
certain plant and equipment are amortised using UOP. The
calculation of the UOP rate of amortisation, and therefore the
annual amortisation charge to operations, can fluctuate from
initial estimates. This could generally result when there are sig-
nificant changes in any of the factors or assumptions used in
estimating mineral or petroleum reserves, notably changes in
the geology of the reserves and assumptions used in determin-
ing the economic feasibility of the reserves. Such changes in
reserves could similarly impact the useful lives of assets depre-
ciated on a straight line basis, where those lives are limited to
the life of the project, which in turn is limited to the life of the
proven and probable mineral or petroleum reserves. Estimates
of proven and probable reserves are prepared by experts in ex-
traction, geology and reserve determination. Assessments of
UOP rates against the estimated reserve and resource base and
the operating and development plan are performed regularly.
Impairments
Investments in Associates and other investments, advances and
loans and property, plant and equipment and intangible assets
are reviewed for impairment whenever events or changes in cir-
cumstances indicate that the carrying value may not be fully re-
coverable or at least annually for goodwill and other indefinite
life intangible assets. If an asset’s recoverable amount is less
than the asset’s carrying amount, an impairment loss is recog-
nised. Future cash flow estimates which are used to calculate
the asset’s fair value are based on expectations about future
operations primarily comprising estimates about production
and sales volumes, commodity prices, reserves and resources,
operating, rehabilitation and restoration costs and capital ex-
penditures. Changes in such estimates could impact recover-
able values of these assets. Estimates are reviewed regularly by
management.
Provisions
The amount recognised as a provision, including tax, legal, res-
toration and rehabilitation, contractual and other exposures or
obligations, is the best estimate of the consideration required
to settle the related liability, including any related interest
charges, taking into account the risks and uncertainties sur-
rounding the obligation. The Group assesses its liabilities and
contingencies based upon the best information available, rel-
evant tax laws and other appropriate requirements.
Restoration, rehabilitation and decommissioning costs
A provision for future restoration, rehabilitation and decommis-
sioning costs requires estimates and assumptions to be made
around the relevant regulatory framework, the magnitude of
the possible disturbance and the timing, extent and costs of
the required closure and rehabilitation activities. To the extent
that the actual future costs differ from these estimates, adjust-
ments will be recorded and the statement of income could be
impacted. The provisions including the estimates and assump-
tions contained therein are reviewed regularly by management.
Taxation
Deferred tax assets are recognised only to the extent it is con-
sidered probable that those assets will be recoverable. This
involves an assessment of when those deferred tax assets are
likely to reverse, and a judgement as to whether or not there
will be sufficient taxable profits available to offset the tax as-
sets when they do reverse. These judgements are subject to
risk and uncertainty and hence, to the extent assumptions re-
garding future profitability change, there can be an increase or
decrease in the amounts recognised in income in the period in
which the change occurs. The recoverability of deferred tax as-
sets including the estimates and assumptions contained therein
are reviewed regularly by management.
| Annual Report 2011 | 117
| Annual Report 2010 | 117
Financial StatementS
Fair value
In addition to recognising derivative instruments at fair value,
as discussed above, an assessment of fair value of assets and
liabilities is also required in accounting for other transactions,
most notably, business combinations and disclosures related to
fair values of marketing inventories, financial assets and liabili-
ties. In such instances, fair value measurements are estimated
based on the amounts for which the assets and liabilities could
be exchanged at the relevant transaction date or reporting pe-
riod end, and are therefore not necessarily reflective of the like-
ly cashflow upon actual settlements. Where fair value measure-
ments cannot be derived from publicly available information,
they are estimated using models and other valuation methods.
To the extent possible, the assumptions and inputs used take
into account externally verifiable inputs. However, such infor-
mation is by nature subject to uncertainty, particularly where
comparable market based transactions rarely exist.
118 | Annual Report 2011 |
118 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
2. SeGment infoRmAtion
Glencore is organised and operates on a worldwide basis in three core business segments – metals and minerals, energy products
and agricultural products, with each business segment responsible for the marketing, sourcing, hedging, logistics and industrial
investment activities of their respective products and reflecting the structure used by Glencore’s management to assess the
performance of Glencore.
The business segments’ contributions to the Group are primarily derived from the net margin or premium earned from physical
marketing activities (net sale and purchase of physical commodities), provision of marketing and related valueadd services and
the margin earned from industrial asset activities (net resulting from the sale of physical commodities over the cost of production
and/or cost of sales) and comprise the following underlying key commodities:
• Metals and minerals: Zinc, copper, lead, alumina, aluminium, ferro alloys, nickel, cobalt and iron ore, including smelting, refining,
mining, processing and storage related operations of the relevant commodities;
• Energy products: Crude oil, oil products, steam coal and metallurgical coal supported by investments in coal mining and oil
production operations, ports, vessels and storage facilities;
• Agriculture products: Wheat, corn, barley, rice, oil seeds, meals, edible oils, biofuels, cotton and sugar supported by investments
in farming, storage, handling, processing and port facilities.
Corporate and other: statement of income amounts represent Glencore’s share of income related to Xstrata and other unallocated
Group related expenses (mainly variable pool bonus accrual). Balance sheet amounts represent Group related balances.
The financial performance of the segments is principally evaluated with reference to Adjusted EBIT/EBITDA which is the net result
of revenue less cost of goods sold and selling and administrative expenses plus share of income from associates and jointly con-
trolled entities and dividend income as disclosed on the face of the consolidated statement of income. Furthermore, given that
funding costs in relation to working capital employed in the marketing activities are sought to be “recovered“ via transactional
terms, the performance of marketing activities is also assessed at a net income level.
The accounting policies of the operating segments are the same as those described in the summary of significant accounting
policies. Glencore accounts for intersegment sales and transfers where applicable as if the sales or transfers were to third parties,
i.e. at current market prices.
| Annual Report 2011 | 119
| Annual Report 2010 | 119
Financial StatementS
2011
US $ million
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
Total
Revenue from third parties
51 984
117 065
17 103
0
186 152
marketing activities
Adjusted EBIT
Depreciation and amortisation
adjusted eBitDa
industrial activities
Adjusted EBIT
Depreciation and amortisation
adjusted eBitDa
total adjusted eBitDa
Depreciation and amortisation
total adjusted eBit
Significant items ¹
Other expense – net ²
Share of Associates’ exceptional items ³
Interest expense – net
Gain on sale of investments
Income tax credit
income before attribution
1 242
5
1 247
1 357
765
2 122
3 369
– 770
2 599
697
27
724
375
196
571
1 295
– 223
1 072
– 8
0
– 8
– 39
62
23
15
– 62
– 47
– 20
11
– 9
1 794
0
1 794
1 785
– 11
1 774
1 911
43
1 954
3 487
1 023
4 510
6 464
– 1 066
5 398
– 511
– 45
– 847
9
264
4 268
¹ Significant items of income and expense which, due to their financial impacts, nature or the expected infrequency of the events giving rise to
them, have been separated for internal reporting and analysis of Glencore’s results.
² See note 3.
³ Share of Associates’ exceptional items comprise Glencore’s share of exceptional charges booked directly by Xstrata ($ 25 million) and Century
($ 20 million).
2011
US $ million
Current assets
Current liabilities
allocatable current capital employed
Property, plant and equipment
Intangible assets
Investments in Associates and other investments
Non current advances and loans
allocatable non current capital employed
Other assets 1
Other liabilities 2
total net assets
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
18 506
– 7 676
10 830
9 367
169
2 950
1 280
13 766
0
0
17 605
– 11 312
6 293
4 210
29
1 060
2 723
8 022
0
0
5 110
– 1 589
3 521
1 062
12
206
138
1 418
0
0
24 596
14 315
4 939
3 165
– 2 675
490
0
0
16 189
0
16 189
2 384
– 30 578
– 11 515
Total
44 386
– 23 252
21 134
14 639
210
20 405
4 141
39 395
2 384
– 30 578
32 335
Additions to non current assets
1 463
1 510
227
0
3 200
1 Other assets include deferred tax assets, marketable securities and cash and cash equivalents.
2 Other liabilities include borrowings, deferred income, deferred tax liabilities, non current provisions and commodities sold with agreements
to repurchase.
120 | Annual Report 2011 |
120 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
2010
US $ million
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
Total
Revenue from third parties
45 211
89 349
10 418
0
144 978
marketing activities
Adjusted EBIT
Depreciation and amortisation
adjusted eBitDa
industrial activities
Adjusted EBIT
Depreciation and amortisation
adjusted eBitDa
total adjusted eBitDa
Depreciation and amortisation
total adjusted eBit
Significant items ¹
Other expense – net ²
Share of Associates’ exceptional items
Interest expense – net
Loss on sale of investments
Income tax expense
income before attribution
1 401
0
1 401
1 160
708
1 868
3 269
– 708
2 561
450
20
470
235
124
359
829
– 144
685
659
0
659
58
49
107
766
– 49
717
– 173
10
– 163
1 500
0
1 500
1 337
– 10
1 327
2 337
30
2 367
2 953
881
3 834
6 201
– 911
5 290
– 8
0
– 936
– 6
– 234
4 106
¹ Significant items of income and expense which, due to their financial impacts, nature or the expected infrequency of the events giving rise to
them, have been separated for internal reporting and analysis of Glencore’s results.
² See note 3.
2010
US $ million
Current assets
Current liabilities
allocatable current capital employed
Property, plant and equipment
Investments in Associates and other investments
Non current advances and loans
allocatable non current capital employed
Other assets 1
Other liabilities 2
total net assets
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
17 901
– 8 597
9 304
8 860
2 134
813
11 807
0
0
15 759
– 11 237
4 522
2 489
1 108
2 832
6 429
0
0
5 958
– 2 000
3 958
739
157
113
1 009
0
0
21 111
10 951
4 967
2 869
– 2 594
275
0
15 805
72
15 877
2 178
– 32 852
– 14 522
Total
42 487
– 24 428
18 059
12 088
19 204
3 830
35 122
2 178
– 32 852
22 507
Additions to non current assets
1 001
818
71
0
1 890
1 Other assets include deferred tax assets, marketable securities, cash and cash equivalents and assets held for sale.
2 Other liabilities include borrowings, deferred income, deferred tax liabilities, provisions, commodities sold with agreements to repurchase
and liabilities held for sale.
| Annual Report 2011 | 121
| Annual Report 2010 | 121
Financial StatementS
Geographical information
US $ million
Revenue from third parties 1
The Americas
Europe
Asia
Africa
Oceania
non current assets 2
The Americas
Europe
Asia
Africa
Oceania
2011
2010
45 836
70 323
47 759
20 538
1 696
39 183
47 724
42 820
13 975
1 276
186 152
144 978
4 535
17 293
5 838
4 555
1 486
33 707
3 755
15 224
5 880
2 702
1 293
28 854
1 Revenue by geographical destination is based on the country of incorporation of the sales counterparty.
² Non current assets are non current operating assets other than financial instruments and deferred tax assets.
3. otHeR expenSe – net
US $ million
Changes in mark to market valuations on investments held for trading – net
Changes in mark to market valuation of certain coal forward contracts ¹
Listing related expenses
Other Listing related expenses – Phantom equity awards
Gain on settlement of restructured Russneft loans
Impairment on equity interest in various Russneft Group entities
(Impairment)/impairment reversal
Prodeco transaction and related expenses
Impairment of non current inventory ¹
Revaluation of previously held interest in newly acquired businesses
Foreign exchange (loss)/gain
Other
total
Notes
13
16
8
8
22
2011
– 92
25
– 286
– 58
0
0
– 6
– 63
– 26
0
– 8
3
– 511
2010
– 178
– 790
0
0
382
– 336
674
– 225
0
462
31
– 28
– 8
¹ These other expense items, if classified by function of expense would be recognised in cost of goods sold. All other amounts in Other
expense – net are classified by function.
In addition to foreign exchange gains/(losses) and mark to market movements on investments held for trading, other expense – net
includes other significant items of income and expense which due to their non operational nature or expected infrequency of the
events giving rise to them are reported separately from operating segment results. Other expense – net includes, but is not limited
to, impairment charges/reversals, revaluation of previously held interests in business combinations, restructuring and closure costs
and Listing related expenses.
changes in mark to market valuations on investments held for trading – net
Primarily relates to movements on interests in other investments classified as held for trading and carried at fair value, with Glencore’s
interest in Century Aluminum Company cash settled equity swaps, Volcan Compania Minera S.A.A. and Nyrstar N.V.accounting
for the majority of the movement in 2011 and 2010.
122 | Annual Report 2011 |
122 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
changes in mark to market valuation of certain coal forward contracts
Represents movements in fair value of certain fixed price forward coal sales contracts relating to Prodeco Group’s (Prodeco)
future production, into which it plans to physically deliver. Following the legal reacquisition of Prodeco in March 2010, from an
accounting perspective, these forward sales contracts could not technically be classified as ‘own use’ or as cashflow hedges,
which would have deferred the income statement effect until performance of the underlying future sale transactions. As at year
end, approximately 8.4 million tonnes (2010: 19.3 million tonnes) of such coal had been sold forward at a fixed price in respect of
quarterly periods to the end of 2013.
listing related expenses
Expenses incurred in connection with the Listing that relate to obtaining the listing for ordinary shares, the Restructuring and/
or change in the employee shareholder profit attribution model, rather than the costs incurred solely in relation to the issuance
of the new (primary) equity (see note 13), comprise $ 91 million of stamp duty costs, $ 42 million of professional advisors’ costs
and $ 153 million of compensation related costs.
impairment reversal
In 2010, during the regular assessment of whether there is an indication of an asset impairment or whether a previously recorded
impairment may no longer be required, an upward revision of long term base metals and coal price assumptions resulted in an
impairment reversal of $ 674 million against Glencore’s interest in Xstrata. The recoverable amount of Glencore’s share of the
underlying net assets has been determined on the basis of its fair value less costs to sell using discounted cash flow techniques.
Prodeco transaction and related expenses
In March 2009, Xstrata acquired Prodeco for $ 2 billion and concurrently granted Glencore an option to repurchase Prodeco
within 12 months for $ 2.25 billion plus notional profits accrued during the option period and the net balance of any cash invested.
Given the fixed price repurchase option, the conditions for derecognition/disposal of Prodeco were not met under IFRS and as a
consequence, Prodeco’s operations remained in the consolidated financial statements, while the “proceeds” were deferred and
recognised as a liability. In March 2010, the option was exercised. Following the exercise of the option, in addition to the option
repurchase expenses (including the option premium and profit entitlement), $ 115 million of additional depreciation expense was
recognised in 2010 to reflect the depreciation that would have been charged if the related assets had not previously been classified
as held for sale. Expenses recorded in 2011 relate to the final settlement of the option price.
Revaluation of previously held interest in newly acquired businesses
In February 2010, Kazzinc purchased the remaining 60% of Vasilkovskoye Gold (see note 22). At the date of acquisition, the previ-
ously owned 40% interest was revalued to its fair value and as a result, a net gain of $ 462 million was recognised.
| Annual Report 2011 | 123
| Annual Report 2010 | 123
Financial StatementS
4. income tAxeS
Income taxes consist of the following:
US $ million
Current income tax expense
Deferred income tax credit
total tax credit/(expense)
2011
– 417
681
264
2010
– 292
58
– 234
The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the following
reasons:
US $ million
2011
2010
income before income taxes and attribution
Less: share of income from Associates
Parent company’s and subsidiaries’ income before income tax and attribution
Income tax expense calculated at the Swiss income tax rate
Effect of different tax rates from the standard Swiss income tax rate
Tax exempt income, net of nondeductible expenses and other permanent differences
Tax implications of the Restructuring and Listing, including deductions/losses triggered ¹
Effect of available tax losses not recognised, and other changes in the valuation of deferred tax assets 2
Effect of change in tax rate on deferred tax balances
Other
income credit/(expense)
4 004
– 1 972
2 032
– 312
– 102
14
687
– 19
– 2
– 2
264
4 340
– 1 829
2 511
– 401
– 78
254
0
135
– 145
1
– 234
1 As part of the Restructuring (see note 13), the potential amounts owing to the shareholder employees under the various active profit partici-
pation plans were settled and crystallised income tax deductions/losses in Switzerland and other countries that can be carried forward and
applied against future taxable income. $ 381 million (2010: $ nil million) of deferred tax assets related to future deductible amounts and tax
losses have not been brought to account.
2 In 2010, following the regular assessment and review of business plans related to Katanga Mining Limited, it was determined that a substantial
portion of the previously unrecognised tax losses could be recognised.
The tax credit/(expense) relating to components of other comprehensive income/(loss) and share premium is as follows:
US $ million
Cash flow hedges ¹
Listing related expenses ²
income tax relating to components of other comprehensive loss and share premium
¹ Recognised in other comprehensive income.
² Recognised in share premium.
2011
2010
– 2
21
19
2
0
2
124 | Annual Report 2011 |
124 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Deferred taxes as at 31 December 2011 and 2010, are attributable to the items detailed in the table below:
US $ million
Deferred tax assets 1
Tax losses carried forward
Mark to market valuations
Other
total
Deferred tax liabilities 1
Depreciation and amortisation
Mark to market valuations
Other
total
Deferred tax – net
Reconciliation of deferred tax – net
Opening balance
Recognised in income for the year
Recognised in other comprehensive loss and share premium
Business combination
closing balance
Notes
2011
2010
892
12
135
1 039
– 1 217
– 19
– 163
– 1 399
– 360
– 939
681
19
– 121
– 360
274
45
50
369
– 926
– 320
– 62
– 1 308
– 939
– 538
58
2
– 461
– 939
22
1 Asset and liability positions in the same category reflect the impact of tax assets and liabilities arising in local tax jurisdictions that cannot be
offset against tax assets and liabilities arising in other tax jurisdictions.
Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is
probable. As at 31 December 2011, $ 1,445 million (2010: $ 562 million) of deferred tax assets related to available loss carry forwards
have been brought to account, of which $ 892 million (2010: $ 274 million) are disclosed as deferred tax assets with the remaining
balance being offset against deferred tax liabilities arising in the same respective entity. $ 861 million (2010: $ 257 million) of the
aforementioned net deferred tax assets arise in entities that have been loss making in 2011 and 2010. In evaluating whether it is
probable that taxable profits will be earned in future accounting periods, all available evidence was considered. These forecasts
are consistent with those prepared and used internally for business planning and impairment testing purposes. Following this
evaluation, it was determined there would be sufficient taxable income generated to realise the benefit of the deferred tax assets.
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been rec-
ognised in the consolidated financial statements are detailed below and will expire as follows:
US $ million
1 year
2 years
3 years
Thereafter
Unlimited usage
total
2011
2010
11
28
127
956
978
2 100
75
56
38
270
124
563
As at 31 December 2011, unremitted earnings of $ 18,573 million (2010: $ 12,255 million) have been retained by subsidiaries and
associates for reinvestment. No provision is made for income taxes that would be payable upon the distribution of such earnings.
| Annual Report 2011 | 125
| Annual Report 2010 | 125
Financial StatementS
5. pRopeRty, plAnt And eqUipment
US $ million
Gross carrying amount:
1 January 2011
Business combination
Additions
Disposals
Other movements
31 December 2011
accumulated depreciation and impairment:
1 January 2011
Depreciation
Disposals
Impairments ¹
Other movements
31 December 2011
net book value 31 December 2011
Land
and
buildings
Plant
and
equipment
Mineral and
petroleum
rights
Deferred
mining
costs
Notes
22
1 281
108
36
– 17
113
9 187
591
2 411
– 431
287
1 521
12 045
239
36
– 6
32
22
323
1 198
2 556
710
– 263
15
– 21
2 997
9 048
4 484
76
416
0
– 359
4 617
548
260
2
0
– 40
770
3 847
542
0
148
– 2
– 13
675
63
56
0
10
0
129
546
¹ Consists of impairments of specific assets recorded during the period which are immaterial both individually and in aggregate.
US $ million
Gross carrying amount:
1 January 2010
Business combination
Additions
Disposals
Reclassified from held for sale
Other movements
31 December 2010
accumulated depreciation and impairment:
1 January 2010
Depreciation
Disposals
Reclassified from held for sale
Impairments ¹
Other movements
31 December 2010
net book value 31 December 2010
Land
and
buildings
Plant
and
equipment
Mineral and
petroleum
rights
Deferred
mining
costs
Notes
22
12
12
1 066
370
26
– 35
112
– 258
1 281
235
77
– 15
7
5
– 70
239
1 042
6 255
910
1 346
– 525
908
293
1 718
2 283
422
– 38
73
26
9 187
4 484
1 810
752
– 177
128
4
39
2 556
6 631
364
171
– 12
7
0
18
548
229
91
96
– 2
155
– 27
542
14
26
0
10
12
1
63
3 936
479
Total
15 494
775
3 011
– 450
28
18 858
3 406
1 062
– 267
57
– 39
4 219
14 639
Total
9 268
3 654
1 890
– 600
1 248
34
15 494
2 423
1 026
– 204
152
21
– 12
3 406
12 088
¹ Consists of impairments of specific assets recorded during the period which are immaterial both individually and in aggregate.
Plant and equipment includes expenditure for construction in progress of $ 1,389 million (2010: $ 1,343 million) and a net book
value of $ 317 million (2010: $ 64 million) of obligations recognised under finance lease agreements. Mineral and petroleum rights
include expenditures for exploration and evaluation of $ 306 million (2010: $ 379 million). Depreciation expenses included in cost
of goods sold are $ 1,049 million (2010: $ 893 million), in selling and administrative expenses $ 13 million (2010: $ 18 million) and in
other expense – net Prodeco transaction related expenses $ nil million (2010: $ 115 million).
126 | Annual Report 2011 |
126 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
During 2011, $ 44 million (2010: $ 2 million) of interest was capitalised within property, plant and equipment. With the exception of
project specific borrowings, the rate used to determine the amount of borrowing costs eligible for capitalisation was 4% (2010: 5%).
6. intAnGible ASSetS
US $ million
cost:
1 January 2011
Business combination
Reclassified from held for sale
31 December 2011
accumulated amortisation and impairment:
1 January 2011
Amortisation expense ¹
31 December 2011
net carrying amount
¹ Recognised in cost of goods sold.
Notes
Goodwill
Future ware-
housing fees
Other
Total
22
12, 22
0
36
133
169
0
0
0
169
0
0
32
32
0
3
3
29
0
13
0
13
0
1
1
12
0
49
165
214
0
4
4
210
Pacorini
Goodwill of $ 133 million and the future warehousing fees have been recognised as part of the acquisition of the Pacorini metals
warehousing business, see note 22.
The goodwill is attributable to synergies expected to arise in conjunction with the metals marketing division’s expected increased
activities. In assessing whether goodwill has been impaired, the carrying amount of the cash generating unit was compared with
its recoverable amount. The recoverable amount was determined by reference to the value in use which utilises pretax cash flow
projections based on the approved financial budgets for 5 years which includes factors, such as inventory levels, volumes and
operating costs, discounted to present value at a rate of 10%. The cash flows beyond the 5 year period have been extrapolated
using a declining growth rate of 10% per annum which is the projected long term reduction in average inventory levels for the
warehousing business.
The future warehousing fees represent the expected income receivable on metal in the warehouses as at the date of acquisition
when the metal is expected to be physically withdrawn from the warehouses in future periods based on the expected holding
periods. Future warehousing fees are amortised over their useful economic lives of 5 years.
OceanConnect
Goodwill of $ 30 million has been recognised as part of the acquisition of certain assets constituting the business of OceanCon-
nect. The goodwill is attributable to synergies expected to arise from the enhancements to the energy products marketing divi-
sion’s existing business activities and improvements in its service offerings to its customers.
Other
Other intangible assets primarily consist of trademarks for agricultural products and are amortised over their estimated useful
economic lives of 10 years.
| Annual Report 2011 | 127
| Annual Report 2010 | 127
Financial StatementS
7. inveStmentS in ASSociAteS And otHeR inveStmentS
A list of the principal operating, finance and industrial subsidiaries and Associates and other investments is included in note 30.
US $ million
Xstrata plc
Other listed Associates
listed associates
Non listed Associates
investments in associates
2011
2010
16 187
1 337
17 524
1 334
18 858
14 616
895
15 511
1 255
16 766
listed associates
As at 31 December 2011, the fair value of listed Associates using published price quotations was $ 16,157 million (2010: $ 24,511 mil-
lion). Glencore has completed a detailed assessment of the recoverable amount of investments where indicators of impairment
were identified and concluded that the recoverable value supports the carrying value of these investments and that no impairment
is required.
Optimum
In October 2011, Glencore acquired a 31.2% interest in Optimum Coal Holdings Limited (“Optimum”) for $ 382 million. Glencore
has agreements to acquire an additional 28.5% interest in Optimum, which has subsequently closed on 26 March 2012 (see note
22).
US $ million
available for sale
United Company Rusal (“UCR”)
Fair value through profit and loss
Volcan Compania Minera S.A.A.
Nyrstar N.V.
Century Aluminum Company cash settled equity swaps
Jurong Aromatics Corporation Pte Ltd
Other
Other investments
2011
2010
842
842
359
105
78
55
108
705
1 547
2 048
2 048
187
117
73
0
13
390
2 438
As at 31 December 2011, $ nil million (2010: $ 113 million) of Glencore’s investment in UCR was pledged as a guarantee against
certain borrowings of UCR.
Summarised financial information in respect of Glencore’s Associates, reflecting 100% of the underlying Associate’s relevant
figures, are set out below.
US $ million
Current assets
Non current assets
Current liabilities
Non current liabilities
net assets
Revenue
Net profit
2011
2010
12 129
69 884
– 8 919
12 214
65 033
– 9 309
– 24 620
– 23 197
48 474
39 940
6 194
44 741
48 116
4 941
The amount of corporate guarantees in favour of joint venture entities as at 31 December 2011 was $ 50 million (2010: $ nil million).
Glencore’s share of joint venture entities’ capital commitments amounts to $ 301 million (2010: $ 831 million).
128 | Annual Report 2011 |
128 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
8. AdvAnceS And loAnS
US $ million
Loans to Parents
Loans to Associates
Other non current receivables and loans
total
Loans to Associates generally bear interest at applicable floating market rates plus a premium.
Other non current receivables and loans comprise the following:
US $ million
counterparty
OAO Russneft
Interest bearing loan at 9% per annum (see note below)
Atlas Petroleum International Limited (“Atlas”)
Interest bearing loans at LIBOR plus 3% 1
Secured marketing related financing arrangements 2
PT Bakrie & Brothers Tbk
Interest bearing secured loans at LIBOR plus 10%
Oteko Group
Interest bearing loan at LIBOR plus 6%
Other ³
total
2011
2010
0
840
3 301
4 141
72
426
3 332
3 830
2011
2010
2 211
2 082
246
365
80
86
313
477
301
200
25
247
3 301
3 332
1 Primarily relates to carried interest loans associated with the development of the Aseng oil project in Equatorial Guinea, where Atlas is one of the equity
partners. The operator of the field and project is Noble Energy, based in Houston. The Aseng project commenced oil production in Q4 2011, and loans
are being repaid from oil proceeds.
2 Various marketing related financing facilities, generally secured against certain assets and/or payable from the future sale of production of the
counterparty. The weighted average interest rate of the loans is 10% and on average are to be repaid over a 3 year period.
³ $ 74 million (2010: $ nil million) relates to amounts owing in respect of future rehabilitation and restoration obligations.
Russneft loans
In December 2010, OAO Russneft (“Russneft”) completed a significant debt amendment and restatement with its major lenders,
whereby Glencore’s previously existing facilities, including some amounts which had been advanced for conversion into Russneft
equity, were consolidated into a single facility. The consolidated facility, with a principal amount of $ 2,080 million, bears interest at
9% per annum, with 3% paid quarterly and the remaining 6% capitalised and payable along with the principal which is expected in
monthly installments over a 3 year period commencing Q4 2017, but in any event, not before repayment of the debt owing to the
other major lender. The facility is secured by a second ranked charge over certain of Russneft’s assets.
In 2010, Glencore accounted for this amendment and restatement as a substantial modification, which resulted in derecognition
of all amounts carried under the previous facilities including principal, accrued interest and equity conversion advances and rec-
ognition, at fair value, of the consolidated facility. The transaction resulted in a gain (after taking into account the carrying value
of the principal, net of allowance for doubtful accounts, and the accrued interest ($ 1,413 million) and equity conversion advances
($ 285 million) of $ 382 million during the period ended 31 December 2010.
The 2010 loan amendment also constituted a loss event with respect to Glencore’s equity holdings in certain Russneft subsidiaries
due to the increased leverage, amended repayment profile and the enhancement of prioritised security of the consolidated loans
and, as a consequence, an impairment charge of $ 336 million was recognised against other investments during the period ended
31 December 2010.
| Annual Report 2011 | 129
| Annual Report 2010 | 129
Financial StatementS
9. inventoRieS
US $ million
Production inventories
Marketing inventories
total
2011
2010
3 150
13 979
17 129
2 805
14 588
17 393
Production inventories consist of materials, spare parts, work in process and finished goods held by the production entities. Mar-
keting inventories are commodities held by the marketing entities. Marketing inventories of $ 13,785 million (2010: $ 14,331 million)
are carried at fair value less costs to sell.
Glencore has a number of dedicated financing facilities, which finance a portion of its marketing inventories. In each case, the
inventory has not been derecognised as the Group retains the principal risks and rewards of ownership. The proceeds received
are recognised as either current borrowings, commodities sold with agreements to repurchase or trade advances from buy-
ers, depending upon their funding nature. As at 31 December 2011, the total amount of inventory secured under such facili-
ties was $ 1,834 million (2010: $ 2,426 million). The proceeds received and recognised as current borrowings were $ 1,631 million
(2010: $ 1,338 million), as commodities sold with agreements to repurchase $ 39 million (2010: $ 484 million) and as trade advances
from buyers $ nil million (2010: $ 67 million).
10. AccoUntS ReceivAble
US $ million
Trade receivables 1
Trade advances and deposits 1
Associated companies 1
Other receivables
total
1 Collectively referred to as receivables.
2011
2010
15 903
3 022
643
2 327
21 895
12 663
4 297
494
1 540
18 994
The average credit period on sales of goods is 28 days (2010: 28 days).
As at 31 December 2011, 8% (2010: 5%) of receivables were between 1– 60 days overdue, and 3% (2010: 2%) were greater than
60 days overdue. Such receivables, although contractually past their due dates, are not considered impaired as there has not been
a significant change in credit quality of the relevant counterparty, and the amounts are still considered recoverable taking into ac-
count customary payment patterns and in many cases, offsetting accounts payable balances.
The movement in allowance for doubtful accounts is detailed in the table below:
US $ million
Opening balance
Released during the year
Incurred during the year
Utilised during the year ¹
closing balance
2011
155
– 28
43
– 41
129
2010
302
– 16
58
– 189
155
¹ The amount utilised during 2010 primarily comprises the Russneft loan amendment and restatement (see note 8).
130 | Annual Report 2011 |
130 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Glencore has a number of dedicated financing facilities, which finance a portion of its receivables. In each case, the receivables have
not been derecognised, as the Group retains the principal risks and rewards of ownership. The proceeds received are recognised
as current borrowings (see note 17). As at 31 December 2011, the total amount of trade receivables secured was $ 2,934 million
(2010: $ 2,349 million) and proceeds received and classified as current borrowings amounted to $ 2,265 million (2010: $ 1,950 million).
11. cASH And cASH eqUivAlentS
US $ million
Bank and cash on hand
Deposits and treasury bills
total
2011
2010
981
324
1 305
1 090
373
1 463
As at 31 December 2011, $ 80 million (2010: $ 23 million) was restricted. $ 47 million has been placed in escrow for the pending
acquisition of Rosh Pinah (see note 26).
12. ASSetS And liAbilitieS Held foR SAle
In March 2011, the plan to merge the Pacorini metals warehousing business with a third party was abandoned and the net assets
(assets of $ 280 million and liabilities of $ 45 million) previously classified as held for sale in 2010 were reclassified to the respective
line items in the statement of financial position at depreciated cost as detailed below:
US $ million
Property, plant and equipment
Intangible assets
Inventory
Accounts receivable
Cash and cash equivalents
total assets
Non current borrowings
Accounts payable
Income tax payable
Current borrowings
total liabilities
Total
4
165
13
79
19
280
– 1
– 31
– 4
– 9
– 45
| Annual Report 2011 | 131
| Annual Report 2010 | 131
Financial StatementS
13. SHARe cApitAl And ReSeRveS
Number of
shares
(thousand)
Share capital
(US $ million)
Share premium
(US $ million)
authorised:
31 December 2011 Ordinary shares with a par value of $ 0.01 each
50 000 000
–
issued and fully paid up:
1 January 2010 – class B shares
Class B shares redeemed pursuant to the Restructuring
Ordinary shares issued pursuant to the Restructuring
1 January 2010 (restated) – Ordinary shares
31 December 2010 (restated) – Ordinary shares
Ordinary shares issued in exchange for HPPS and PPS profit participation obligations
Ordinary shares issued in exchange for LTS and LTPPS profit participation obligations
Ordinary shares issued at Listing (“primary issuance”)
Share issue costs associated with the primary issuance
Tax on Listing related expenses
Dividends paid
31 December 2011 – Ordinary shares
150
– 150
3 716 495
3 716 495
3 716 495
1 617 268
666 237
922 714
–
–
–
6 922 714
46
– 46
37
37
37
16
7
9
–
–
–
69
–
0
0
0
0
0
13 821
5 694
7 887
– 280
21
– 346
26 797
Restructuring
Prior to the Listing, Glencore’s articles of incorporation authorised the issuance of non voting profit participation certificates
(“PPC”) with no nominal value to its employees enabling them to participate in four profit sharing arrangements: Hybrid Profit
Participation Shareholders (HPPS), Ordinary Profit Participation Shareholders (PPS), Glencore L.T.E. Profit Participation Sharehold-
ers (LTS) and Long Term Profit Participation Shareholders (LTPPS). The profit sharing arrangements entitled the employees to a
portion of Glencore shareholders’ funds accumulated during the period that such employees held the PPCs. The PPCs attributed
Glencore International AG’s consolidated net income pro rata based on the 150,000 Class B shares issued as at 31 December 2010.
Immediately prior to the Listing, Glencore implemented a Restructuring whereby amounts owing to the then shareholder employ-
ees under the various active profit participation plans were settled in exchange for new ordinary shares and the ultimate ownership
interests in Glencore International AG were assumed via Glencore International plc. The accounting outcome of these transactions
is outlined below:
Settlement of the profit participation plans
The accounting for the settlement of the four profit participation plans was similar, whereby the outstanding balances under each
plan prior to Listing were exchanged for an equivalent number of ordinary shares at the Listing price of 530 pence ($ 8.56) per
share. The difference between the nominal and fair value of the new ordinary shares issued was recognised as a share premium.
Reorganisation of the ultimate parent company
Following the settlement of the profit participation plans described above, Glencore International plc replaced Glencore Holding
AG as the ultimate parent company and Glencore International AG became a wholly owned subsidiary of Glencore International
plc, the entity listed on the London and Hong Kong stock exchanges.
listing
On 24 May 2011, Glencore International plc issued 922,713,511 ordinary shares which comprised 891,463,511 shares to institutional
investors (the “International Offer”) at a price of 530 pence ($ 8.56) per share on the London Stock Exchange, and 31,250,000 shares
to professional and retail investors in Hong Kong (the “Hong Kong Offer”) at a price of HK$ 66.53 ($ 8.56) per ordinary share.
The gross proceeds raised were $ 7,896 million and total transaction (Restructuring and Listing) and related expenses incurred
were $ 566 million. $ 280 million of the transaction costs were attributable to the issue of new (primary) equity and have been de-
ducted against share premium while $ 286 million were attributable to stamp duty and other expenses associated with the above
noted Restructuring as well as an allocation of transaction costs that jointly related to the issuing of the new (primary) equity and
the listing of the Company and as such have been charged to income during the year (see note 3). Joint transaction costs were
allocated based on the ratio of new shares issued, in relation to total shares outstanding.
132 | Annual Report 2011 |
132 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Reserves
US $ million
at 1 January 2010
Ordinary shares issued pursuant to the Restructuring
at 1 January 2010 (restated)
Exchange gain on translation of foreign operations
Loss on cash flow hedges, net of tax
Gain on available for sale financial instruments
Cash flow hedges transferred to the statement of
income, net of tax
Change in ownership interest in subsidiaries
Equity portion of Convertible bonds
at 31 December 2010 (restated)
at 1 January 2011
Exchange loss on translation of foreign operations
Loss on cash flow hedges, net of tax
Loss on available for sale financial instruments
Cash flow hedges transferred to the statement of
income, net of tax
Change in ownership interest in subsidiaries
Transla-
tion
adjust-
ment
Equity
portion
of Con-
vertible
bonds
Cash
flow
hedge
reserve
Net
unre-
alised
gain/
(loss)
Net
ownership
changes in
subsidiaries
Notes
Other
reserves
– 7
0
– 7
8
0
0
0
0
0
1
1
– 53
0
0
0
0
23
7
22
17
23
7
22
77
0
77
0
0
0
0
0
12
89
– 89
0
– 89
0
– 180
0
6
0
0
– 263
89
– 263
0
0
0
0
0
0
– 17
0
6
0
0
0
0
0
0
25
0
0
0
25
25
0
0
– 1 206
0
0
0
0
0
0
0
0
0
– 134
0
– 134
– 134
0
0
0
0
– 98
– 232
Total
– 18
9
– 9
8
– 180
25
6
– 134
12
– 272
– 272
– 53
– 17
– 1 206
6
– 98
1
9
10
0
0
0
0
0
0
10
10
0
0
0
0
0
at 31 December 2011
– 52
89
– 274
– 1 181
14. eARninGS peR SHARe
US $ million
Notes
Profit attributable to equity holders for basic earnings per share
Interest in respect of Convertible bonds
Profit attributable to equity holders for diluted earnings per share
10
– 1 640
2011
4 048
135
4 183
2010
1 291
130
1 421
Weighted average number of shares for the purposes of basic earnings per share (thousand)
5 657 794
3 716 495
effect of dilution:
Equity settled share-based payments
Convertible bonds
Weighted average number of shares for the purposes of diluted earnings per share (thousand)
Basic earnings per share (US $)
Diluted earnings per share (US $)
16
17
22 790
406 738
6 087 322
0
238 061
3 954 556
0.72
0.69
0.35
0.35
| Annual Report 2011 | 133
| Annual Report 2010 | 133
Financial StatementS
15. dividendS
US $ million
Paid during the year:
Final dividend for 2010 – $ nil per Class B share (2009 – $ 13.33 per Class B share)
Interim dividend for 2011 – $ 0.05 per ordinary share (2010 – $ nil per Class B share)
total
Proposed final dividend for 2011 – $ 0.10 per ordinary share (2010 – $ 13.33 per Class B share)
2011
2010
0
346
346
692
2
0
2
2
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements. Dividends declared in respect of the year ended 31 December 2011 will be paid on
1 June 2012. The 2011 interim dividend was paid on 30 September 2011.
16. SHARe-bASed pAymentS
2011 Phantom equity awards
In April and May 2011 in connection with the Listing, phantom equity awards were made to certain employees in lieu of interests
in Glencore’s existing equity ownership schemes. These equity awards will vest on or before 31 December 2013, subject to the
continued employment of the award holder. Phantom equity awards may be satisfied in shares by the issue of new ordinary shares,
by the transfer of ordinary shares held in treasury or by the transfer of ordinary shares purchased in the market (in each case with a
market value equal to the value of the award at vesting, including dividends paid between Listing and vesting), or in cash. Glencore
currently intends to settle these awards through the issuance of shares. Based on the Listing offer price, the aggregate number
of ordinary shares underlying the awards is 24,024,765. The fair value of the awards at the issue date was $ 8.56 per award for an
aggregate fair value of $ 206 million determined by reference to the Listing price at the grant date. As at year end, the number
of shares underlying the awards was 22,789,924. The total expense recognised in the period was $ 58 million (2010: $ nil million).
134 | Annual Report 2011 |
134 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
17. boRRowinGS
US $ million
non current borrowings
144A Notes
Xstrata secured bank loans
Convertible bonds
Eurobonds
Sterling bonds
Swiss Franc bonds
Perpetual notes
Ordinary profit participation certificates
Committed syndicated revolving credit facility
Finance lease obligations
Other bank loans
total non current borrowings
current borrowings
Committed syndicated revolving credit facility
Committed secured inventory/receivables facility
Committed secured receivables facilities
Bilateral uncommitted secured inventory facilities
U.S. commercial paper
Xstrata secured bank loans
Eurobonds
Perpetual notes
Ordinary profit participation certificates
Finance lease obligations
Other bank loans 1
total current borrowings
Notes
2011
2010
947
2 688
2 152
3 612
996
882
347
750
5 907
278
1 285
19 844
0
1 700
1 181
1 015
512
0
0
0
533
39
3 205
8 185
946
0
2 132
3 725
999
639
735
1 059
6 744
63
1 209
18 251
515
1 700
700
888
310
2 292
765
292
796
4
3 619
11 881
26
9/10
10
9
26
¹ Comprises various uncommitted bilateral bank credit facilities and other financings.
144a notes
$ 950 million 6% coupon Notes due 2014. The Notes are recognised at amortised cost at an effective interest rate of 6.15% per
annum.
Xstrata secured bank loans
In June 2011, Glencore refinanced the $ 2.8 billion facilities ($ 2.3 billion drawn) with new 2 year $ 2.7 billion equivalent facilities.
The facilities have been accounted for as secured bank loans which bear interest at a rate of U.S. $ LIBOR plus 95 basis points
per annum. As at 31 December 2011, shares representing $ 5,343 million (2010: $ 4,199 million) of the carrying value of Glencore’s
investment in Xstrata were pledged as security.
convertible bonds
$ 2,300 million 5% coupon convertible bonds due December 2014. The bonds are convertible at the option of the investors into
406,737,932 ordinary shares of Glencore International plc. The bonds consist of a liability component and an equity component.
The fair values of the liability component ($ 2,211 million) and the equity component ($ 89 million) were determined, using the
residual method, at issuance of the bonds. The liability component is measured at amortised cost at an effective interest rate of
5.90% per annum.
| Annual Report 2011 | 135
| Annual Report 2010 | 135
Financial StatementS
euro, Sterling and Swiss Franc bonds
The Group has issued bonds denominated in Euro, Sterling and Swiss Franc where upon issuance, the principal amounts and the
future interest payments were swapped (using instruments which qualify as cash flow hedges) into their U.S. Dollar equivalent. The
details of amounts issued and outstanding are as follows:
US $ million
Euro 600 million 5.375% coupon bonds
Euro 850 million 5.250% coupon bonds
Euro 750 million 7.125% coupon bonds
Euro 1 250 million 5.250% coupon bonds
eurobonds
GBP 650 million 6.50% coupon bonds
CHF 825 million 3.625% coupon bonds
total
Maturity
Initial US $
equivalent
US $ fixed
interest
rate in %
2011
2010
Sep 2011
Oct 2013
April 2015
March 2017
Feb 2019
April 2016
–
1 078
1 200
1 708
3 986
1 266
828
6 080
–
6.60
6.86
6.07
6.58
4.87
0
1 045
944
1 623
3 612
996
882
5 490
765
1 080
968
1 677
4 490
999
639
6 128
In January 2011, Glencore issued additional CHF 225 million ($ 235 million) 3.625% interest bearing bonds due April 2016.
Perpetual notes
During 2011, Glencore redeemed $ 700 million of the 8% perpetual notes at par, leaving a total of $ 350 million of 7.5% Perpetual
bonds outstanding.
Ordinary profit participation certificates
Profit participation certificates bear interest at 6 month U.S. $ LIBOR, are repayable over 5 years and in the event of certain trig-
gering events, which include any breach of a financial covenant, would be subordinated to unsecured lenders.
committed revolving credit facilities
In May 2011, Glencore replaced the previous 364 day $ 1,375 million and $ 515 million committed revolving credit facilities with
two new 364 day committed revolving credit facilities for $ 2,925 million and $ 610 million respectively, both with a one year term
extension option at Glencore’s discretion. In addition, Glencore extended the final maturity of $ 8,340 million of the $ 8,370 million
medium term revolver for a further year to May 2014. In aggregate, the new facilities represent an overall increase in committed
available liquidity of $ 1,645 million. Funds drawn under the facilities bear interest at U.S. $ LIBOR plus a margin ranging from 110
to 175 basis points per annum.
committed secured inventory/receivables facility
In November 2011, Glencore renewed the 364 day committed $ 1.7 billion secured inventory and receivables borrowing base
facility under the same terms. Under the program, Glencore has the option to pledge up to $ 750 million of eligible base metals
inventory or up to $ 1.7 billion of eligible receivables. Funds drawn under the facility bear interest at U.S. $ LIBOR plus 110 basis
points per annum.
committed secured receivables facilities
Includes a 364 day $ 200 million committed secured receivables financing program due February 2012 which, has been extended
to August 2012, and a six month $ 750 million multicurrency program due June 2012. Funds drawn under the facilities bear interest
at U.S. $ LIBOR or, in relation to any loan in Euro, EURIBOR, plus a margin ranging from 105 to 115 basis points per annum.
U.S. commercial paper
Glencore has in place a stand alone U.S. commercial paper program for $ 1,000 million rated A2 and P2 respectively by Standard
& Poor’s and Moody’s rating agencies. The notes issued under this program carry interest at floating market rates and mature not
more than 270 days from the date of issue.
136 | Annual Report 2011 |
136 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
18. defeRRed income
During 2006, Glencore entered into an agreement to deliver a fixed quantity of silver concentrate, a byproduct from its mining
operations, for a period of 15 years at a fixed price for which Glencore received an upfront payment of $ 285 million. The outstand-
ing balance represents the remaining non current portion of the upfront payment. The upfront payment is released to revenue at a
rate consistent with the implied forward price curve at the time of the transaction and the actual quantities delivered.
19. pRoviSionS
non current
US $ million
1 January 2010
Provision utilised in the year
Accretion in the year
Provisions assumed in business combination
Additional provision in the year
31 December 2010
1 January 2011
Provision utilised in the year
Accretion in the year
Provisions assumed in business combination
Additional provision in the year
31 December 2011
Post
retirement
benefits ¹
Employee
entitlement
Rehabilitation
costs
Other ²
Total
59
– 4
0
4
1
60
60
– 1
0
0
2
61
85
– 2
0
0
15
98
98
– 17
0
0
35
116
236
– 5
22
3
123
379
379
– 14
24
43
142
574
165
– 22
0
0
39
182
182
– 56
0
14
62
202
545
– 33
22
7
178
719
719
– 88
24
57
241
953
¹ See note 20.
2 Other includes provisions in respect of mine concession obligations of $ 52 million (2010: $ 54 million), construction related contractual provi-
sions of $ 27 million (2010: $ 29 million), export levies of $ 45 million (2010: $ 42 million) and deferred purchase consideration of $ 33 million
(2010: $ 21 million).
employee entitlement
The employee entitlement provision represents the value of state governed employee entitlements due to employees upon their
termination of employment. The associated expenditure will occur in a pattern consistent with when employees choose to exercise
their entitlements.
Rehabilitation costs
Rehabilitation provision represents the accrued cost required to provide adequate restoration and rehabilitation upon the comple-
tion of extraction activities. These amounts will be settled when rehabilitation is undertaken, generally at the end of a project’s life,
which ranges from 2 to 50 years. In South Africa, the Group makes contributions to rehabilitation trusts to meet some of the costs
of rehabilitation liabilities.
| Annual Report 2011 | 137
| Annual Report 2010 | 137
Financial StatementS
current
US $ million
1 January 2010
Provision utilised in the year
Additional provision in the year
31 December 2010
1 January 2011
Provision utilised in the year
Additional provision in the year
31 December 2011
Onerous con-
tracts
Demurrage
and related
claims
Other
Total
1
0
92
93
93
– 89
0
4
51
– 14
24
61
61
– 10
23
74
23
– 6
1
18
18
– 8
10
20
75
– 20
117
172
172
– 107
33
98
20. peRSonnel coStS And employee benefitS
Total personnel costs, which includes salaries, wages, social security, other personnel costs and sharebased payments but excludes
attribution to profit participation shareholders, incurred for the years ended December 31, 2011 and 2010, were $ 1,723 million
and $ 1,677 million, respectively. Personnel costs related to consolidated industrial subsidiaries of $ 1,203 million (2010: $ 885 mil-
lion) are included in cost of goods sold. Other personnel costs are included in selling and administrative expenses and share
based payments are included in other expense.
The Company and certain subsidiaries sponsor various pension schemes in accordance with local regulations and practices. Eli-
gibility for participation in the various plans is either based on completion of a specified period of continuous service, or date of
hire. The plans provide for certain employee and employer contributions, ranging from 5% to 16% of annual salaries, depending on
the employee’s years of service. Among these schemes are defined contribution plans as well as defined benefit plans. The main
locations with defined benefit plans are Switzerland, the UK and the US.
Defined contribution plans
Glencore’s contributions under these plans amounted to $ 21 million in 2011 and $ 11 million in 2010.
Defined benefit plans
The amounts recognised in the statement of income are as follows:
US $ million
Current service cost
Interest cost
Expected return on plan assets
Net actuarial losses recognised in the year
Past service cost
Exchange differences
total
The actual return on plan assets amounted to a gain of $ 4 million (2010: gain of $ 14 million).
The amounts recognised in the statement of financial position are determined as follows:
US $ million
Present value of defined benefit obligations
Less: fair value of plan assets
Unrecognised actuarial losses
Restrictions of assets recognised
liability in the statement of financial position
138 | Annual Report 2011 |
138 | Annual Report 2010 |
Notes
19
2011
2010
19
19
– 15
13
2
– 2
36
2011
513
– 284
– 164
– 4
61
14
16
– 11
5
1
0
25
2010
422
– 267
– 91
– 4
60
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Movement in the present value of the defined benefit obligation is as follows:
US $ million
Opening defined benefit obligation
Current service cost
Interest cost
Past service cost
Benefits paid
Actuarial loss
Exchange differences on foreign plans
Other movements
closing defined benefit obligation
Movement in the present value of the plan assets is as follows:
US $ million
Opening fair value of plan assets
Expected return on plan assets
Contribution from the employer
Actuarial loss
Exchange differences on foreign plans
Other movements
closing fair value of plan assets
The plan assets consist of the following:
US $ million
Cash and short term investments
Fixed income
Equities
Other
total
2011
2010
422
19
19
2
– 26
67
1
9
513
363
14
16
1
– 27
17
– 5
43
422
2011
2010
267
15
26
– 20
3
– 7
284
232
11
27
– 5
– 5
7
267
2011
2010
10
109
120
45
284
5
115
96
51
267
The overall expected rate of return is a weighted average of the expected returns of the various categories of plan assets held.
Glencore’s assessment of the expected returns is based on historical return trends and analysts’ predictions of the market for the
asset class in the next twelve months.
The principal actuarial assumptions used were as follows:
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
2011
2010
3 –7%
3 – 8%
2 – 5%
3 – 4%
3 – 6%
3 – 8%
2 – 6%
3 – 4%
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned.
These tables imply expected future lifetimes (in years) for employees aged 65 as at the 31 December 2011 of 18 to 24 for males
(2010: 18 to 24) and 20 to 25 (2010: 22 to 25) for females. The assumptions for each country are reviewed each year and are adjusted
where necessary to reflect changes in fund experience and actuarial recommendations.
The Group expects to make a contribution of $ 26 million (2010: $ 27 million) to the defined benefit plans during the next financial
year.
| Annual Report 2011 | 139
| Annual Report 2010 | 139
Financial StatementS
Summary historical information:
US $ million
2009
2008
2007
21. AccoUntS pAyAble
US $ million
Trade payables
Trade advances from buyers
Associated companies
Other payables and accrued liabilities
total
Present value of
defined benefit
obligation
Fair value of
plan assets
363
324
370
232
190
260
2011
2010
14 523
852
1 511
1 274
18 160
12 278
634
1 788
1 273
15 973
22. AcqUiSition And diSpoSAl of SUbSidiARieS
2011
Acquisitions
During 2011, Glencore acquired interests in various businesses, the most significant being Umcebo Mining (Pty) Ltd (“Umcebo”).
The net cash used in the acquisition of subsidiaries and the fair value of the assets acquired and liabilities assumed at the date of
acquisition are detailed below:
US $ million
Property, plant and equipment
Intangible assets
Investments in Associates
Loans and advances ²
Inventories
Accounts receivable ²
Cash and cash equivalents
Non controlling interest
Non current borrowings
Deferred tax liabilities
Provisions
Accounts payable
Current borrowings
total fair value of net assets acquired
Goodwill arising on acquisition ³
Less: cash and cash equivalents acquired
Less: contingent consideration 4
net cash used in acquisition of subsidiaries
Umcebo 1
Other
555
0
10
30
10
34
4
– 208
– 57
– 118
– 53
– 84
0
123
0
4
0
119
220
13
0
6
13
19
14
– 7
– 12
– 3
– 4
– 28
– 7
224
36
14
15
231
Total
775
13
10
36
23
53
18
– 215
– 69
– 121
– 57
– 112
– 7
347
36
18
15
350
1 The fair values are provisional due to the complexity of the valuation process. The finalisation of the fair value of the assets and liabilities
acquired will be completed within 12 months of the acquisition.
2 Represents the gross contractual amount for loans and advances and accounts receivable.
3 None of the goodwill arising on acquisition is deductible for tax purposes.
4 The contingent consideration related to the purchase of assets of OceanConnect ranges between $ 5 million and $ 15 million based on future
earnings of the business acquired.
140 | Annual Report 2011 |
140 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Umcebo
In December 2011, in order to increase its South African coal market presence, Glencore completed the acquisition of a 43.7% stake
in Umcebo, an unlisted South African coal mining company, for $ 123 million cash consideration. Although Glencore holds less than
50% of the voting rights, it has the ability to exercise control over Umcebo as the shareholder agreements allow Glencore to control
the Board of Directors through the ability to appoint half of the Directors and the CEO, who has the casting vote in respect of the
financial and operating policies of Umcebo. The acquisition was accounted for as a business combination with the non controlling
interest being measured at its percentage of net assets acquired.
If the acquisition had taken place effective 1 January 2011, the operation would have contributed revenue of $ 309 million and a loss
before attribution of $ 3 million. Glencore’s share of income and revenue from the date of these acquisitions amounted to $ nil mil-
lion due to the fact that the acquisition was completed in late December 2011.
Other
Other comprises primarily acquisitions of 100% interest of crushing plants in the Czech Republic and 90.7% interest of crushing
plants in Poland for cash consideration of $ 82 million and $ 71 million, respectively, a 100% interest in Sable Zinc Kabwe Limited,
a Zambian metalprocessing plant for cash consideration of $ 29 million and certain assets related to the business of OceanCon-
nect for total consideration of $ 30 million. The goodwill recognised in connection with these acquisitions principally related to
OceanConnect.
If these acquisitions had taken place effective 1 January 2011, the operations would have contributed revenue of $ 104 million and
a loss before attribution of $ 19 million. Glencore’s share of revenue and loss from the date of these acquisitions amounted to
$ 1,321 million and $ 9 million, respectively.
Acquisition subsequent to the year ended 31 December 2011
On 14 March 2012, Glencore received the applicable regulatory approvals to complete the acquisition of an additional 28.5%
interest in Optimum for cash consideration of $ 358 million as originally agreed, based on the foreign exchange rates prevailing
on 26 March 2011. This increases Glencore’s total ownership interest to 59.7% and provides Glencore with the ability to exercise
control over Optimum through control over 50% of the voting rights. As a result, beginning on the acquisition date, Glencore
will consolidate Optimum which reported total assets and liabilities of $ 1,437 million and $ 564 million, respectively as at
31 December 2011 and will recognise a loss of $ 19 million resulting from the fair value adjustment of the equity interest held by
Glencore at the date of acquisition. The transaction closed on 26 March 2012.
Optimum is a South African coal mining company listed on the Johannesburg Stock Exchange. The transaction further increases
Glencore’s presence in the South African coal market. Due to the timing of the transaction, management is in the preliminary
stages of determining values of the assets and liabilities acquired and the associated accounting for the acquisition. Accordingly,
certain disclosures relating to the business combination such as the fair value of net assets acquired have not been presented.
| Annual Report 2011 | 141
| Annual Report 2010 | 141
Financial StatementS
2010
Acquisitions
During 2010, Glencore acquired controlling interests in various businesses, the most significant being Vasilkovskoye Gold, Chemoil
Energy Limited (Chemoil) and Pacorini. The net cash used in the acquisition of subsidiaries and the fair value of the assets acquired
and liabilities assumed at the date of acquisition are detailed below:
US $ million
Vasilkovskoye
Chemoil
Pacorini
Other 1
Total
Property, plant and equipment
Investments in Associates
Inventories
Accounts receivable
Cash and cash equivalents
Assets held for sale
Non controlling interest
Non current borrowings
Deferred tax liabilities
Accounts payable
Current borrowings
Liabilities held for sale
total fair value of net assets acquired
Less: amounts previously recognised through investments and loans
Less: cash and cash equivalents acquired
net cash used in acquisition of subsidiaries
2 855
0
44
103
13
0
– 947
– 14
– 365
– 81
0
0
1 608
1 403
13
192
519
69
317
703
108
0
– 230
– 166
– 96
– 493
– 494
0
237
0
108
129
0
0
0
0
0
277
0
0
0
0
0
– 68
209
0
0
209
280
3 654
0
93
76
11
0
– 55
– 61
0
– 212
– 10
– 0
122
17
11
94
69
454
882
132
277
– 1 232
– 241
– 461
– 786
– 504
– 68
2 176
1 420
132
624
1 Includes the acquisitions of a 76% interest in Rio Vermelho, a 60% interest in Biopetrol Industries AG and a 100% interest in Minera Altos de
Punitaqui.
Vasilkovskoye
In February 2010, Kazzinc purchased the remaining 60% of Vasilkovskoye Gold, a gold development company, that it did not pre-
viously own for $ 1,140 million to enhance its existing gold production base. The acquisition was funded through the payment of
$ 205 million and the issuance of new Kazzinc shares which resulted in Glencore’s ultimate ownership in Kazzinc being diluted from
69% to 50.7% (without a loss of control). The dilution resulted in a loss of $ 99 million which has been recognised in reserves (see
note 13). Prior to acquisition, Kazzinc owned a 40% interest in Vasilkovskoye Gold which, at the date of acquisition, was revalued
to its fair value of $ 760 million and as a result, a net gain of $ 462 million was recognised in other income (see note 3). The acquisi-
tion was accounted for as a business combination with the non controlling interest being measured at its percentage of net assets
acquired determined by using discounted cash flow techniques with a discount rate of 8.5%.
For the period post acquisition, Vasilkovskoye Gold contributed revenue of $ 130 million and a loss before attribution of $ 15 mil-
lion. If the acquisition had taken place effective 1 January 2010, the operation would have contributed revenue of $ 131 million and
a loss before attribution of $ 22 million.
Chemoil
In April 2010, Glencore completed the acquisition of a 51.5% stake in Chemoil, a Singapore listed fuel oil storage and supply
company, for $ 237 million cash consideration to strengthen its global storage and marketing capabilities. The acquisition was ac-
counted for as a business combination with the non controlling interest being measured at its percentage of net assets acquired.
For the period post acquisition, Chemoil contributed revenue of $ 6,089 million and income before attribution of $ 4 million. If the
acquisition had taken place effective 1 January 2010, the operation would have contributed revenue of $ 7,175 million and a loss
before attribution of $ 3 million.
Pacorini
In September 2010, Glencore acquired the metals warehousing division of the Pacorini Group for $ 209 million in cash to further
enhance its presence in the metals warehousing business. As contemplated at the time of the acquisition, Glencore commenced a
review of the strategic alternatives to strengthen Glencore’s participation in the metals warehousing business, which was expected
to result in a merger involving the acquired business and a third party. As a result, the assets and liabilities were classified as held
for sale in 2010.
142 | Annual Report 2011 |
142 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
In March 2011 the plan to merge the Pacorini business with a third party was abandoned due to a breakdown in final negotiations
and the net assets previously classified as held for sale in 2010 were reclassified to the respective line items in the statement of
financial position at depreciated cost (see note 12). Subsequent to this reclassification, the acquisition accounting was finalised as
follows:
US $ million
Property, plant and equipment
Intangible assets
Accounts receivable
Cash and cash equivalents
Assets held for sale ¹
Non current borrowings
Deferred tax liabilities ²
Accounts payable
Current borrowings
Liabilities held for sale ¹
total fair value of net assets acquired
Goodwill arising on acquisition ²
Less: cash and cash equivalents acquired
net cash used in acquisition of subsidiaries
Provisional fair
value as previ-
ously reported
Adjustments
Fair value at
acquisition
0
0
0
0
277
0
0
0
0
– 68
209
0
21
188
3
32
96
21
– 277
– 1
– 8
– 62
– 5
68
– 133
133
0
0
3
32
96
21
0
– 1
– 8
– 62
– 5
0
76
133
21
188
¹ Assets and liabilities held for sale have been reclassified to the respective line items in the statement of financial position.
² $ 37 million of goodwill is expected to be deductible for tax purposes.
Disposals
In 2011 and 2010, there were no material disposals of subsidiaries.
23. finAnciAl And cApitAl RiSk mAnAGement
Financial risks arising in the normal course of business from Glencore’s operations comprise market risk (including commodity
price risk, interest rate risk and currency risk), credit risk (including performance risk) and liquidity risk. It is Glencore’s policy and
practice to identify and, where appropriate and practical, actively manage such risks to support its objectives in managing its
capital and future financial security and flexibility. Glencore’s overall risk management program focuses on the unpredictability of
financial markets and seeks to protect its financial security and flexibility by using derivative financial instruments where possible
to substantially hedge these financial risks. Glencore’s finance and risk professionals, working in coordination with the commodity
departments, monitor, manage and report regularly to senior management, the Audit Committee and ultimately the Board of
Directors on the approach and effectiveness in managing financial risks along with the financial exposures facing the Group.
Glencore’s objectives in managing its capital (see table below) include preserving its overall financial health and strength for the
benefit of all stakeholders, maintaining an optimal capital structure in order to provide a high degree of financial flexibility at
an attractive cost of capital and safeguarding its ability to continue as a going concern, while generating sustainable long term
profitability. Paramount in meeting these objectives is Glencore’s policy to maintain an investment grade rating status. Following
the Listing, both S&P (via an upgrade) and Moody’s (via stabilisation of outlook) improved their credit ratings on Glencore to BBB
(stable) and Baa2 (stable) respectively. Following the Xstrata merger and Viterra acquisition announcements, Glencore’s current
credit ratings are Baa2 (review with direction uncertain) from Moody’s and BBB (watch positive) from S&P.
US $ million
Total net assets attributable to profit participation shareholders,
non controlling interests and equity holders
Less: non controlling interests
Glencore shareholders’ funds
2011
2010
32 335
3 070
29 265
22 507
2 894
19 613
| Annual Report 2011 | 143
| Annual Report 2010 | 143
Financial StatementS
commodity price risk
Glencore is exposed to price movements for the inventory it holds and the products it produces which are not held to meet priced
forward contract obligations and forward priced purchase or sale contracts. Glencore manages a significant portion of this expo-
sure through futures and options transactions on worldwide commodity exchanges or in over the counter (OTC) markets, to the
extent available. Commodity price risk management activities are considered an integral part of Glencore’s physical commodity
marketing activities and the related assets and liabilities are included in other financial assets from and other financial liabilities to
derivative counterparties, including clearing brokers and exchanges. Whilst it is Glencore’s policy to substantially hedge its com-
modity price risks, there remains the possibility that the hedging instruments chosen may not always provide effective mitigation
of the underlying price risk. The hedging instruments available to the marketing businesses may differ in specific characteristics to
the risk exposure to be hedged, resulting in an ongoing and unavoidable basis risk exposure. Residual basis risk exposures repre-
sent a key focus point for Glencore’s commodity department teams who actively engage in the management of such.
Glencore has entered into futures transactions to hedge the price risk of specific future operating expenditures. These trans
actions were identified as cash flow hedges. The fair value of these derivatives is as follows:
US $ million
Commodity futures – 2011
Commodity futures – 2010
Notional amounts
Recognised fair values
Buy
0
0
Sell
181
187
Assets
Liabilities
Maturity
0
0
101
75
2012
2012
Value at risk
One of the tools used by Glencore to monitor and limit its primary market risk exposure, namely commodity price risk related to its
physical marketing activities, is the use of a value at risk (VaR) computation. VaR is a risk measurement technique which estimates
the potential loss that could occur on risk positions as a result of movements in risk factors over a specified time horizon, given a
specific level of confidence. The VaR methodology is a statistically defined, probability based approach that takes into account
market volatil ities, as well as risk diversification by recognising offsetting positions and correlations between commodities and
markets. In this way, risks can be measured consistently across all markets and commodities and risk measures can be aggregated
to derive a single risk value. Glencore’s Board has set a consolidated VaR limit (1 day 95%) of $ 100 million representing less than
0.5% of Glencore shareholders’ funds.
Glencore uses a VaR approach based on Monte Carlo simulations and is computed at a 95% confidence level with a weighted data
history using a combination of a one day and one week time horizon.
Position sheets are regularly distributed and monitored and weekly Monte Carlo simulations are applied to the various business groups’
net marketing positions to determine potential future exposures. As at 31 December 2011, Glencore’s 95%, one day market risk VaR was
$ 28 million (2010: $ 58 million). Average market risk VaR (1 day 95%) during 2011 was $ 39 million compared to $ 43 million during 2010.
VaR does not purport to represent actual gains or losses in fair value on earnings to be incurred by Glencore, nor does Glencore
claim that these VaR results are indicative of future market movements or representative of any actual impact on its future results.
VaR should always be viewed in the context of its limitations; notably, the use of historical data as a proxy for estimating future
events, market illiquidity risks and tail risks. Glencore recognises these limitations, and thus complements and continuously refines
its VaR analysis by ana lysing forward looking stress scenarios and back testing calculated VaR against actual movements arising in
the next business week.
Glencore’s VaR computation currently covers its business in the key base metals (aluminium, nickel, zinc, copper, lead, etc), coal,
oil/natural gas and the main risks in the Agricultural products business segment (grain, oilseeds, sugar and cotton) and assesses
the openpriced positions which are those subject to price risk, including inventories of these commodities. Due to the lack of a
liquid terminal market, Glencore does not include a VaR calculation for products such as alumina or ferroalloy commodities as it
does not consider the nature of these markets, nor the Group’s underlying exposures to these products to be suited to this type of
analysis. Alternative tools have been implemented and are used to monitor exposures related to these products.
net present value at risk
Glencore’s future cash flows related to its forecast energy, minerals and agricultural production activities are also exposed to
commodity price movements. Glencore manages this exposure through a combination of portfolio diversification, occasional
shorter term hedging via futures and options transactions, insurance products and continuous internal monitoring, reporting and
quantification of the underlying operations’ estimated valuations.
144 | Annual Report 2011 |
144 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
interest rate risk
Glencore is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on
its assets and liabilities and cash flows. Matching of assets and liabilities is utilised as the dominant method to hedge interest rate
risks. Floating rate debt which is predominantly used to fund fast turning working capital (interest is internally charged on the fund-
ing of this working capital) is primarily based on U.S. $ LIBOR plus an appropriate premium. Accordingly, prevailing market interest
rates are continuously factored into transactional pricing and terms.
Assuming the amount of floating rate liabilities at the reporting period end were outstanding for the whole year, interest rates were
50 basis points higher/lower and all other variables held constant, Glencore’s income and shareholders’ funds for the year ended
31 December 2011 would decrease/increase by $ 98 million (2010: decrease/increase by $ 91 million).
currency risk
The U.S. Dollar is the predominant functional currency of the Group. Currency risk is the risk of loss from movements in exchange
rates related to transactions and balances in currencies other than the U.S. Dollar. Such transactions include operating expendi-
ture, capital expenditure and to a lesser extent purchases and sales in currencies other than the functional currency. Purchases
or sales of commodities concluded in currencies other than the functional currency, apart from certain limited domestic sales at
industrial operations which act as a hedge against local operating costs, are hedged through forward exchange contracts. Con-
sequently, foreign exchange movements against the U.S. Dollar on recognised transactions would have an immaterial financial
impact. Glencore enters into currency hedging transactions with leading financial institutions.
Glencore’s debt related payments (both principal and interest) are denominated in or swapped using hedging instruments into
U.S. Dollars. Glencore’s operating expenses, being a small portion of its revenue base, are incurred in a mix of currencies of which
the U.S. Dollar, Swiss Franc, Pound Sterling, Australian Dollar, Euro, Kazakhstan Tenge, Colombian Peso and South African Rand
are the predominant currencies.
Glencore has issued Euro, Swiss Franc and Sterling denominated bonds (see note 17). Cross currency swaps were concluded to
hedge the currency risk on the principal and related interest payments of these bonds. These contracts were designated as cash
flow hedges of the foreign currency risks associated with the bonds. The fair value of these derivatives is as follows:
US $ million
Notional amounts
Recognised fair values
Buy
Sell
Assets
Liabilities
Average
maturity ¹
Cross currency swap agreements – 2011
Cross currency swap agreements – 2010
0
0
6 080
6 584
0
0
174
185
2015
2015
¹ Refer to note 17 for details.
credit risk
Credit risk arises from the possibility that counterparties may not be able to settle obligations due to Glencore within their agreed
payment terms. Financial assets which potentially expose Glencore to credit risk consist principally of cash and cash equivalents,
receivables and advances, derivative instruments and non current advances and loans. Glencore’s credit management process
includes the assessment, monitoring and reporting of counterparty exposure on a regular basis. Glencore’s cash equivalents
are placed overnight with a diverse group of highly credit rated financial institutions. Credit risk with respect to receivables and
advances is mitigated by the large number of customers comprising Glencore’s customer base, their diversity across various in-
dustries and geographical areas, as well as Glencore’s policy to mitigate these risks through letters of credit, netting, collateral
and insurance arrangements where appropriate. Additionally, it is Glencore’s policy that transactions and activities in trade related
financial instruments be concluded under master netting agreements or long form confirmations to enable offsetting of balances
due to/from a common counterparty in the event of default by the counterparty. Glencore actively and continuously monitors
the credit quality of its counterparties through internal reviews and a credit scoring process, which includes, where available,
public credit ratings. Balances with counterparties not having a public investment grade or equivalent internal rating are typically
enhanced to investment grade through the extensive use of credit enhancement products, such as letters of credit or insurance
products. Glencore has a diverse customer base, with no customer representing more than 3% (2010: 3%) of its trade receivables
(on a gross basis taking into account credit enhancements) or accounting for more than 2% of its revenues over the year ended
2011 (2010: 3%).
The maximum exposure to credit risk, without considering netting agreements or without taking account of any collateral held or
other credit enhancements, is equal to the carrying amount of Glencore’s financial assets plus the guarantees to third parties and
Associates (see note 27).
| Annual Report 2011 | 145
| Annual Report 2010 | 145
Financial StatementS
Performance risk
Performance risk arises from the possibility that counterparties may not be willing or able to meet their future contractual physical
sale or purchase obligations to/from Glencore. Glencore undertakes the assessment, monitoring and reporting of performance
risk within its overall credit management process. Glencore’s market breadth, diversified supplier and customer base as well as the
standard pricing mechanism in the majority of Glencore’s commodity portfolio which does not fix prices beyond three months,
with the main exception being coal and cotton where longer term fixed price contracts are common, ensure that performance
risk is adequately mitigated. The commodity industry is continuing a trend towards shorter fixed price contract periods, in part to
mitigate against such potential performance risk, but also due to the development of more transparent and liquid spot markets,
e.g. coal and iron ore and associated derivative products and indexes.
liquidity risk
Liquidity risk is the risk that Glencore is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis,
to borrow funds in the market on an unsecured or secured basis at an acceptable price to fund actual or proposed commitments.
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents through the availability of adequate
committed funding facilities. Glencore has set itself an internal minimum liquidity target to maintain at all times, available commit-
ted undrawn credit facilities of $ 3 billion (2010: $ 3 billion). Glencore’s credit profile, diversified funding sources and committed
credit facilities, ensure that sufficient liquid funds are maintained to meet its liquidity requirements. As part of its liquidity manage-
ment, Glencore closely monitors and plans for its future capital expenditure and proposed investments, as well as credit facility
refinancing/extension requirements, well ahead of time.
Certain borrowing arrangements require compliance with specific financial covenants related to working capital, minimum cur-
rent ratio and a maximum long term debt to tangible net worth ratio. During the period, the Company has complied with these
requirements.
As at 31 December 2011, Glencore had available committed undrawn credit facilities, cash and marketable securities amounting to
$ 6,831 million (2010: $ 4,220 million). The maturity profile of Glencore’s financial liabilities based on the contractual terms is as follows:
After
5 years
Due
3 – 5 years
Due
2 – 3 years
Due
1 – 2 years
Due
0 –1 year
Total
2 178
9 985
4 396
8 185
28 029
3 285
0
270
0
0
0
547
0
820
0
768
0
39
0
849
0
394
3 555
3 545
10 792
5 639
39
942
18 160
3 551
30 877
39
3 376
18 160
4 804
54 408
45 731
45 731
After
5 years
Due
3 – 5 years
Due
2 – 3 years
Due
1– 2 years
Due
0 –1 year
4 152
0
668
0
0
0
4 974
7 094
2 031
11 881
0
949
0
739
0
0
766
0
288
0
0
800
0
955
0
484
834
15 973
6 084
45
Total
30 132
484
4 017
15 973
8 066
45
4 820
6 662
8 148
3 786
35 301
58 717
44 296
44 296
2011
US $ million
Borrowings
Commodities sold with agreements to repurchase
Expected future interest payments
Accounts payable
Other financial liabilities
total
Current assets
2010
US $ million
Borrowings
Commodities sold with agreements to repurchase
Expected future interest payments
Accounts payable
Other financial liabilities
Liabilities held for sale
total
Current assets
146 | Annual Report 2011 |
146 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
24. finAnciAl inStRUmentS
Fair value of financial instruments
The following table presents the carrying values and fair values of Glencore’s financial instruments. Fair value is the amount at
which a financial instrument could be exchanged in an arm’s length transaction between informed and willing parties, other than
in a forced or liquidated sale. Where available, market values have been used to determine fair values. When market values are
not available, fair values have been calculated by discounting expected cash flows at prevailing interest and exchange rates. The
estimated fair values have been determined using market information and appropriate valuation methodologies, but are not nec-
essarily indicative of the amounts that Glencore could realise in the normal course of business.
The financial assets and liabilities are presented by class in the tables below at their carrying values, which generally approxi-
mate to the fair values. In the case of $ 28,029 million (2010: $ 30,132 million) of borrowings, the fair value at 31 December 2011
is $ 28,247 million (2010: $ 31,476 million).
2011
US $ million
assets
Other investments 3
Advances and loans
Accounts receivable
Other financial assets
Cash and cash equivalents and marketable securities
total financial assets
liabilities
Borrowings
Commodities sold with agreements to repurchase
Accounts payable
Other financial liabilities
total financial liabilities
Carrying
value 1
Available
for sale
FVtPL 2
Total
0
4 141
21 895
0
0
842
0
0
0
0
26 036
842
28 029
39
18 160
0
46 228
0
0
0
0
0
705
0
0
5 065
1 345
7 115
0
0
0
4 804
4 804
1 547
4 141
21 895
5 065
1 345
33 993
28 029
39
18 160
4 804
51 032
1 Carrying value comprises investments, loans, accounts receivable, accounts payable and other liabilities measured at amortised cost.
2 FVtPL – Fair value through profit and loss – held for trading.
3 Other investments of $ 1,429 million are classified as Level 1 with the remaining balance of $ 118 million classified as Level 3.
2010
US $ million
assets
Other investments
Advances and loans
Accounts receivable
Other financial assets
Cash and cash equivalents and marketable securities
total financial assets
liabilities
Ordinary and hybrid profit participation shareholders
Borrowings
Commodities sold with agreements to repurchase
Accounts payable
Other financial liabilities
total financial liabilities
Carrying
value 1
Available
for sale
FVtPL 2
Total
0
2 048
3 830
18 994
0
0
0
0
0
0
22 824
2 048
14 189
30 132
484
15 973
0
60 778
0
0
0
0
0
0
390
0
0
5 982
1 529
7 901
0
0
0
0
8 066
8 066
2 438
3 830
18 994
5 982
1 529
32 773
14 189
30 132
484
15 973
8 066
68 844
1 Carrying value comprises investments, loans, accounts receivable, accounts payable and other liabilities measured at amortised cost.
2 FVtPL – Fair value through profit and loss – held for trading.
| Annual Report 2011 | 147
| Annual Report 2010 | 147
Financial StatementS
The following tables show the fair values of the derivative financial instruments including trade related financial and physical for-
ward purchase and sale commitments by type of contract as at 31 December 2011 and 2010. Fair values are primarily determined
using quoted market prices or standard pricing models using observable market inputs where available and are presented to
reflect the expected gross future cash in/outflows. Glencore classifies the fair values of its financial instruments into a three level
hierarchy based on the degree of the source and observability of the inputs that are used to derive the fair value of the financial
asset or liability as follows:
Level 1 unadjusted quoted inputs in active markets for identical assets or liabilities; or
inputs other than quoted inputs included in Level 1 that are directly or indirectly observable in the market; or
Level 2
Level 3 unobservable market inputs or observable but can not be market corroborated, requiring Glencore to make market
based assumptions.
Level 1 classifications primarily include futures with a tenor of less than one year and options that are exchange traded. Level 2
classi fications primarily include futures with a tenor greater than one year, over the counter options, swaps and physical forward
transactions which derive their fair value primarily from exchange quotes and readily observable broker quotes. Level 3 classifica-
tions primarily include physical forward transactions which derive their fair value predominately from models that use broker quotes
and applicable market based estimates surrounding location, quality and credit differentials. In circumstances where Glencore
cannot verify fair value with observable market inputs (Level 3 fair values), it is possible that a different valuation model could pro-
duce a materially different estimate of fair value.
It is Glencore’s policy that transactions and activities in trade related financial instruments be concluded under master netting
agreements or long form confirmations to enable balances due to/from a common counterparty to be offset in the event of default
by the counterparty.
Other financial assets
2011
US $ million
commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
total
2010
US $ million
commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
total
148 | Annual Report 2011 |
148 | Annual Report 2010 |
Level 1
Level 2
Level 3
Total
2 521
50
67
0
0
61
528
0
239
1 015
76
50
2 699
1 908
0
0
0
458
0
0
458
3 049
50
306
1 473
76
111
5 065
Level 1
Level 2
Level 3
Total
1 168
106
174
0
0
45
1 493
628
43
471
1 744
149
80
3 115
0
0
0
1 374
0
0
1 374
1 796
149
645
3 118
149
125
5 982
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Other financial liabilities
2011
US $ million
commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
total
2010
US $ million
commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
total
Level 1
Level 2
Level 3
Total
1 643
61
31
0
0
76
758
51
372
590
766
15
1 811
2 552
0
25
0
416
0
0
441
2 401
137
403
1 006
766
91
4 804
Level 1
Level 2
Level 3
Total
2 786
25
295
0
0
37
3 143
1 356
70
489
1 199
660
31
3 805
0
99
0
1 019
0
0
1 118
4 142
194
784
2 218
660
68
8 066
The following table shows the net changes in fair value of Level 3 other financial assets and other financial liabilities:
US $ million
1 January 2010
Total gain/(loss) recognised in cost of goods sold
Sales
Realised
31 December 2010
1 January 2011
Total gain/(loss) recognised in cost of goods sold
Sales
Realised
31 December 2011
Swaps
Physical
forwards
Options
Total
Level 3
– 1
2
0
– 1
0
0
0
0
0
0
681
– 209
0
– 117
355
355
– 269
0
– 44
42
– 88
– 58
– 41
88
– 99
– 99
1
0
73
– 25
592
– 265
– 41
– 30
256
256
– 268
0
29
17
| Annual Report 2011 | 149
| Annual Report 2010 | 149
Financial StatementS
25. AUditoRS’ RemUneRAtion
US $ million
2011
2010
Remuneration in respect of the audit of Glencore’s consolidated financial statements
Other audit fees, primarily in respect of audits of accounts of subsidiaries
total audit fees
Auditrelated assurance services
Corporate finance services ¹
Taxation compliance services
Other taxation advisory services
Other services
total non-audit fees
total professional fees
3
13
16
2
12
2
1
1
18
34
3
11
14
1
7
1
1
1
11
25
1 Included within corporate finance services is $ 9 million (2010: $ 6 million) of professional fees related directly to the auditors role as Reporting
Accountant in connection with the Listing. The expenses have been classified as Listing related expenses (see note 13).
26. fUtURe commitmentS
Capital expenditure for the acquisition of property, plant and equipment is generally funded through the cash flow generated by
the respective industrial entities. As at 31 December 2011, $ 884 million (2010: $ 787 million), of which 92% (2010: 100%) relates to
expenditure to be incurred over the next year, was contractually committed for the acquisition of property, plant and equipment.
Certain of Glencore’s exploration tenements and licenses require it to spend a minimum amount per year on development ac-
tivities, a significant portion of which would have been incurred in the ordinary course of operations. As at 31 December 2011,
$ 549 million (2010: $ 404 million) of such development expenditures are to be incurred, of which 57% (2010: 36%) are for commit-
ments to be settled over the next year.
Glencore procures seagoing vessel/chartering services to meet its overall marketing objectives and commitments. At year end,
Glencore has committed to future hire costs to meet future physical delivery and sale obligations and expectations of $ 2,171 mil-
lion (2010: $ 2,608 million) of which $ 570 million (2010: $ 325 million) are with associated companies. 50% (2010: 50%) of these
charters are for services to be received over the next 2 years.
As part of Glencore’s ordinary sourcing and procurement of physical commodities and other ordinary marketing obligations, the
selling party may request that a financial institution act as either a) the paying party upon the delivery of product and qualifying
documents through the issuance of a letter of credit or b) the guarantor by way of issuing a bank guarantee accepting responsibility
for Glencore’s contractual obligations. As at 31 December 2011, $ 8,642 million (2010: $ 8,956 million) of such commitments have
been issued on behalf of Glencore, which will generally be settled simultaneously with the payment for such commodity.
Glencore has entered into various operating leases mainly as lessee for office and warehouse/storage facilities. Rental expenses
for these leases totalled respectively $ 77 million and $ 66 million for the years ended 31 December 2011 and 2010. Future net mini-
mum lease payments under non cancellable operating leases are as follows:
US $ million
Within 1 year
Between 2 and 5 years
After 5 years
total
150 | Annual Report 2011 |
150 | Annual Report 2010 |
2011
2010
76
147
120
343
97
225
151
473
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Glencore has entered into finance leases for various plant and equipment items, primarily vessels and machinery. Future net mini-
mum lease payments under finance leases together with the future finance charges are as follows:
US $ million
Within 1 year
Between 2 and 5 years
After 5 years
total minimum lease payments
Less: amounts representing finance lease charges
Present value of minimum lease payments
Future development and related commitments
Undiscounted minimum
lease payments
Present value of minimum
lease payments
2011
2010
2011
2010
50
197
136
383
66
317
5
23
95
123
56
67
39
164
114
317
317
4
18
45
67
67
Kazzinc
In April 2011, Glencore agreed to acquire additional stakes in Kazzinc. Upon closing, these purchases will increase Glencore’s
ownership from 50.7% to 93.0% for a total transaction consideration of $ 2.2 billion in cash and $ 1.0 billion in equity based on the
Listing price (116.8 million shares). Glencore and seller are currently targeting an agreed Q3 2012 completion date.
Kansuki
In August 2010, Glencore acquired an ultimate 37.5% interest in the Kansuki concession (Kansuki), a 185 square kilometre cop-
per and cobalt predevelopment project which borders Glencore’s partly owned Mutanda concession in the DRC. In exchange,
Glencore has a) an obligation to finance the first $ 400 million of development related expenditures, if any, as and when such
expenditure is incurred, b) the right to operate the operations and c) a life of mine offtake agreement for all copper and cobalt
produced by Kansuki. In addition, one of the partners in Kansuki has the right to sell an additional 18.75% ultimate interest to
Glencore at the then calculated equity value of the operation, at the earlier of the date the operation produces a minimum annual
70,000 tonnes of copper and August 2013. A total of $ 135 million of capital expenditure for mine and plant development has been
committed of which $ 103 million has been spent. Exploration of the Kansuki concession is ongoing. Discussions with respect to
a potential combination of the Mutanda and Kansuki operations are ongoing, with a view to ultimately obtaining a majority stake
in the merged entity.
Prodeco
Prodeco currently exports the majority of its coal through Puerto Prodeco which operates under a private concession awarded
by the Colombian government. This concession expired in March 2009, however the Colombian government has continued to
grant Prodeco the right to use the port under annual lease agreements. To comply with new government regulations on loading
methods, which became effective from July 2010 and to alleviate itself from the uncertainty of the annual concession renewal pro-
cess associated with Puerto Prodeco, Prodeco has commenced construction of a new, wholly owned, port facility (Puerto Nuevo)
which is estimated to cost $ 567 million and be commissioned over the first half of 2013. If the concession does not continue to
be extended, Prodeco’s export capability could be curtailed, which would significantly impact operations until Puerto Nuevo is
operational. As at 31 December 2011, $ 246 million of the estimated initial investment has been incurred and $ 157 million has been
contractually committed and is included in the capital expenditure commitments disclosure above.
Rosh Pinah Zinc corporation (Proprietary) limited
In December 2011, Glencore entered into an agreement to acquire an 80.1% interest in Rosh Pinah, an underground zinc/lead mine
in southwestern Namibia for total consideration of approximately $ 175 million. As at 31 December 2011, $ 47 million have been
placed in escrow (see note 11). Closing is subject to the receipt of applicable regulatory approvals which are expected in 2012.
| Annual Report 2011 | 151
Financial StatementS
27. continGent liAbilitieS
The amount of corporate guarantees in favour of associated and third parties as at 31 December 2011, was $ 53 million (2010:
$ 69 million). Also see note 7.
litigation
Certain legal actions, other claims and unresolved disputes are pending against Glencore. Whilst Glencore cannot predict the
results of any litigation, it believes that it has meritorious defenses against those actions or claims. Glencore believes the likelihood
of any material liability arising from these claims to be remote and that the liability, if any, resulting from any litigation will not have
a material adverse effect on its consolidated income, financial position or cashflows.
environmental contingencies
Glencore’s operations, mainly those arising from the ownership in industrial investments, are subject to various environmental
laws and regulations. Glencore is in material compliance with those laws and regulations. Glencore accrues for environmental
contingencies when such contingencies are probable and reasonably estimable. Such accruals are adjusted as new information
develops or circumstances change. Recoveries of environmental remediation costs from insurance companies and other parties
are recorded as assets when the recoveries are virtually certain. At this time, Glencore is unaware of any material environmental
incidents at its locations.
Bolivian constitution
In 2009 the Government of Bolivia enacted a new constitution. One of the principles of the constitution requires mining entities
to form joint ventures with the government. Glencore, through its subsidiary Sinchi Wayra, has, in good faith, entered into negoti
ations with the Bolivian government regarding this requirement. Whilst progress has been made, the final outcome and the timing
thereof cannot be determined at this stage.
28. RelAted pARty tRAnSActionS
In the normal course of business, Glencore enters into various arm’s length transactions with related parties (including Xstrata and
Century), including fixed price commitments to sell and to purchase commodities, forward sale and purchase contracts, agency
agreements and management service agreements. Outstanding balances at period end are unsecured and settlement occurs in
cash (see notes 8, 10, 13 and 21). There have been no guarantees provided or received for any related party receivables or payables.
All transactions between Glencore and its subsidiaries are eliminated on consolidation along with any unrealised profits and losses
between its subsidiaries and Associates. Glencore entered into the following transactions with its Associates:
US $ million
Sales
Purchases
Interest income
Interest expense
Agency income
Agency expense
2011
2010
1 666
– 10 414
1 086
– 9 472
42
– 1
69
0
34
– 1
82
– 5
Remuneration of key management personnel
The remuneration of Directors and other members of key management personnel recognised in the statement of income includ-
ing salaries and other current employee benefits amounted to $ 170 million (2010: $ 146 million). Immediately prior to the Listing,
Glencore implemented a Restructuring whereby $ 6,130 million of PPS and HPPS amounts owing to the Directors and other mem-
bers of key management personnel were settled in exchange for new ordinary shares (see note 13). Further details on remuneration
of Directors is set out in the Directors’ Remuneration report on pages 91–96.
152 | Annual Report 2011 |
152 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
29. SUbSeqUent eventS
Subsequent to year end, the following significant events occurred:
• On 7 February 2012, Glencore announced its intention to acquire an additional 37.5% stake in Chemoil for cash consideration of
$ 174 million. The transaction is expected to close in Q2 2012.
• On 7 February 2012, the Glencore Directors and the Independent Xstrata Directors announced that they had reached an agree-
ment on the terms of a recommended all-share merger (the “Merger”) of equals of Glencore and Xstrata to create a unique
$ 90 billion natural resources group. The terms of the Merger provide Xstrata shareholders with 2.8 newly issued shares in
Glencore for each Xstrata share held. The Merger is to be effected by way of a Court sanctioned scheme of arrangement of
Xstrata under Part 26 of the UK Companies Act, pursuant to which Glencore will acquire the entire issued and to be issued or-
dinary share capital of Xstrata not already owned by the Glencore Group. The Merger is subject to shareholder, antitrust and
regulatory approvals.
• On 14 March 2012, Glencore received the applicable regulatory approvals to complete the acquisition of an additional 28.5%
interest in Optimum as originally agreed. See note 22 for more information.
• On 20 March 2012, Glencore signed a definitive agreement pursuant to which it has agreed to acquire all of the issued and out-
standing shares of Viterra for CAD 16.25 per share in cash by way of a court approved plan of arrangement. The transaction values
Viterra’s equity at approximately CAD 6.1 billion on a fully diluted basis. At the same time, Glencore has entered into agreements
with each of Agrium and Richardson International which provide for the sale of certain assets of Viterra including assets which
comprise a majority of Viterra’s Canadian operations for a total cash consideration of CAD 2.6 billion, subject to specified pur-
chase price adjustments, including payment for working capital. Completion of the transaction is subject to customary closing
conditions, including receipt of court, shareholder and regulatory approvals and the absence of material adverse change. The
transaction is expected to close during third quarter of 2012.
| Annual Report 2011 | 153
| Annual Report 2010 | 153
Financial StatementS
30. liSt of pRincipAl opeRAtinG, finAnce And indUStRiAl SUbSidiARieS And inveStmentS
Method of
consolidation
in 2011 1
Country of
incorporation
%
interest 2011
%
interest 2010
Main activity
Glencore International plc
Glencore International AG
Glencore AG
P
F
F
Allied Alumina Inc. (Sherwin Alumina) F
Century Aluminum Company 2
Glencore Funding LLC
Glencore UK Ltd
Glencore Commodities Ltd
Glencore Energy UK Ltd
Glencore Group Funding Limited
Glencore Finance (Bermuda) Ltd
AR Zinc Group
Boundary Ventures Limited 3
E
F
F
F
F
F
F
F
E
Empresa Minera Los Quenuales S.A. F
Glencore Exploration (EG) Ltd.
Glencore Finance (Europe) S.A.
Kansuki Group
Minera Altos de Punitaqui
Mopani Copper Mines plc
Mutanda Group
Prodeco Group
Recylex S.A.
Sinchi Wayra Group
United Company Rusal Limited
Finges Investment B.V.
Biopetrol Industries AG 4
Glencore Grain B.V.
Nyrstar N.V.
Optimum Coal Holdings Limited
F
F
E
F
F
E
F
E
F
O
F
F
F
O
E
Pannon Vegetable Oil Manufacturing F
Rio Vermelho
Sable Zinc Kabwe Limited
Umcebo Mining (Pty) Ltd 5
Usti Oilseed Group
Xstrata plc
Zaklady Tluszczowe w Bodaczowie
Chemoil Energy Limited 6
Cobar Group
Glencore Singapore Pte Ltd
Kazzinc Ltd.
Vasilkovskoye Gold
F
F
F
F
E
F
F
F
F
F
F
Jersey
Switzerland
Switzerland
100.0
100.0
United States
100.0
United States
46.4
United States
100.0
U.K.
U.K.
U.K.
UAE
Bermuda
Argentina
Burkina Faso
Peru
Bermuda
Luxembourg
DRC
Chile
Zambia
DRC
Colombia
France
Bolivia
Jersey
100.0
100.0
100.0
100.0
100.0
100.0
55.7
97.5
100.0
100.0
37.5
100.0
73.1
40.0
100.0
32.2
100.0
8.8
Netherlands
100.0
Switzerland
60.3
Netherlands
100.0
Belgium
South Africa
Hungary
Brazil
Zambia
7.8
31.2
100.0
100.0
100.0
South Africa
43.7
Czech Republic 100.0
U.K.
Poland
Hong Kong
Australia
Singapore
Kazakhstan
Kazakhstan
34.5
90.7
51.5
100.0
100.0
50.7
100.0
n.a.
100.0
100.0
44.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
0.0
97.1
100.0
100.0
37.5
100.0
73.1
40.0
100.0
32.2
100.0
8.8
100.0
60.3
100.0
7.8
0.0
100.0
76.0
0.0
0.0
0.0
34.5
0.0
51.5
100.0
100.0
50.7
100.0
Operating
Operating
Alumina production
Aluminium production
Finance
Operating
Operating
Operating
Finance
Finance
Zinc/Lead production
Zinc development
Zinc/Lead production
Oil exploration/development
Finance
Copper production
Copper production
Copper production
Copper production
Coal production
Zinc/Lead production
Zinc/Tin production
Aluminium production
Finance
Biodiesel production
Operating
Zinc/Lead production
Coal production
Vegetable oil production
Sugar cane/ethanol production
Copper production
Coal production
Edible oil production
Diversified production
Edible oil production
Oil storage and bunkering
Copper production
Operating
Zinc/Lead/Copper production
Gold production
1 P = Parent; F = Full consolidation; E = Equity method; O = Other investment
2 Represents Glencore’s economic interest in Century, comprising 41.6% (2010: 39.1%) voting interest and 4.8% (2010: 4.9%) non voting interest.
3 Although Glencore holds more than 50% of the voting rights, it does not have the ability to exercise control over Boundary Ventures as a result of
shareholder agreements which provide for joint control over the governance of the financial and operating policies.
4 Publicly traded on the Frankfurt Stock Exchange under the symbol A0HNQ5. Glencore owns 46,812,601 shares.
5 Although Glencore holds less than 50% of the voting rights, it has the ability to exercise control over Umcebo as a result of shareholder agree-
ments which provide Glencore the ability to control the Board of Directors.
6 Publicly traded on the Singapore Exchange under the symbol CHEL.SI. Glencore owns 666,204,594 shares.
154 | Annual Report 2011 |
154 | Annual Report 2010 |
Financial StatementS
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
Method of
consolidation
in 2011
Country of
incorporation
%
interest 2011
%
interest 2010
Main activity
Katanga Mining Limited 7
Murrin Murrin Group
Moinho Agua Branca S.A.
Moreno Group
Pacorini Group
Pasar Group
Polymet Mining Corp.
Portovesme S.r.L.
Renova S.A.
F
F
F
F
F
F
E
F
E
Russneft Group (various companies) 8 O
Shanduka Coal (Pty) Ltd
ST Shipping & Transport Pte Ltd
Topley Corporation
Volcan Compania Minera S.A.A.
F
F
F
O
Bermuda
Australia
Brazil
Argentina
Switzerland
Philippines
Canada
Italy
Argentina
Russia
75.2
100.0
97.0
100.0
100.0
78.2
24.1
100.0
33.5
74.4
82.4
97.0
100.0
100.0
78.2
6.3
100.0
33.3
Copper production
Nickel production
Wheat flour milling
Edible oils production
Metals warehousing
Copper production
Copper production
Zinc/Lead production
Vegetable oil production
40.0 – 49.0
40.0 – 49.0
Oil production
South Africa
70.0
Singapore
B.V.I.
Peru
100.0
100.0
6.9
70.0
100.0
100.0
4.1
Coal production
Operating
Ship owner
Zinc production
7 Publicly traded on the Toronto Stock Exchange under the symbol KAT.TO. Glencore owns 1,433,702,634 shares.
8 Although Glencore holds more than 20% of the voting rights, it has limited key management influence and thus does not exercise significant
influence.
| Annual Report 2011 | 155
| Annual Report 2010 | 155
AdditionAl
informAtion
5 | Additional information
5.1 | Glossary
5.2 | Shareholder information
158
159
5.1 | Glossary
AvAilAble committed liquidity
US $ million
Cash and cash equivalents and marketable securities
Headline committed syndicated revolving credit facilities
Amount drawn under syndicated revolving credit facilities
Amount drawn under U.S. commercial paper program
Total
2011
2010
1 345
11 905
– 5 907
– 512
6 831
1 529
10 260
– 7 259
– 310
4 220
AdJuSted cuRReNt RAtio
Current assets over current liabilities, both adjusted to exclude other financial liabilities.
AdJuSted ebit/ebitdA
US $ million
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates and jointly controlled entities
Dividend income
Share of Associates’ exceptional items
Adjusted EBIT
Depreciation and amortisation
Adjusted EBITDA
2011
2010
186 152
– 181 938
– 857
1 972
24
45
5 398
1 066
6 464
144 978
– 140 467
– 1 063
1 829
13
0
5 290
911
6 201
cuRReNt cAPitAl emPloyed
Current capital employed is current assets, presented before assets held for sale, less accounts payable,
other financial liabilities, current provisions and income tax payable.
coPPeR equivAleNt
Glencore has adopted a copper equivalent measure to assist in analysing and evaluating across its varied
commodity portfolio. The copper equivalent measure is determined by multiplying the volumes of the re-
spective commodity produced or marketed by the ratio of the respective commodity’s average price over
the average copper price in the prevailing period.
GleNcoRe Net iNcome
Income before attribution less attribution to non controlling interests.
GleNcoRe SHAReHoldeRS’ FuNdS
Total net assets attributable to profit participation shareholders, non controlling interests and equity hold-
ers less non controlling interests.
ReAdily mARketAble iNveNtoRieS
Readily marketable inventories are readily convertible into cash due to their very liquid nature, widely avail-
able markets and the fact that the price risk is covered either by a physical sale transaction or hedge transac-
tion on a commodity exchange or with a highly rated counterparty.
158 | Annual Report 2011 |
overview | BUSiNeSS review | CorPorATe GoverNANCe | FiNANCiAL STATeMeNTS | AddiTioNAL iNForMATioN
5.2 | Shareholder information
Glencore International plc is registered in Jersey, with headquarters in Switzerland
and operations around the world.
Headquarters
Registered Office
Baarermattstrasse 3
P.O. Box 777
CH-6341 Baar
Switzerland
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
The company has a primary quote on the London Stock Exchange (LSE) and a secondary quote
on the Hong Kong Stock Exchange (HKEx).
London Stock Exchange (LSE)
Reuters Code: GLEN.L
Bloomberg Code: GLEN LN
ISIN: JE00B4T3BW64
Sedol Number: LON B4T3BW6
Hong Kong Stock Exchange (HKEx)
Reuters Code: 0805.HK
Bloomberg Code: 805
ISIN: JE00B4T3BW64
Sedol Number: XHKG B3NFYS8
Share registrar
Enquiries
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier, Jersey
JE1 1ES
Channel Islands
Tel.: +44 (0) 870 707 4040
Computershare Hong Kong Investor Services Limited
Hopewell Centre 46th Floor
183 Queen’s Road East
Wan Chai
Hong Kong
Tel.: +852 2862 8628
Company Secretary
John Burton
john.burton@glencore.com
Assistant Company Secretary
Ivy Chan
ivy.chan@glencore.com
Glencore International plc
Baarermattstrasse 3
CH-6340 Baar
Switzerland
Tel.: +41 41 709 2000
Fax: +41 41 709 3000
E-mail: info@glencore.com
| Annual Report 2011 | 159
Forward looking statements
This document contains statements that are, or may be deemed to be, “forward looking statements”. These forward looking statements may
be identified by the use of forward looking terminology, including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “will”,
“could”, or “should” or in each case, their negative or other variations thereon or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward looking statements include all matters that are not historical facts and include, but
are not limited to, statements regarding Glencore’s beliefs, opinions or current expectations concerning, among other things, the business,
financial condition, results of operations, prospects, strategies and plans of Glencore.
By their nature, forward looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore’s control.
Forward looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important
factors that could cause these uncertainties include, but are not limited to, those discussed under “Principal risks and uncertainties” in section
1.7 of this document.
No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncer-
tainties facing Glencore. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed
or implied in such forward looking statements.
Forward looking statements speak only as of the date of this document. Other than in accordance with its legal or regulatory obligations
(including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Services Authority and the Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited), Glencore is not under any obligation and Glencore and its affiliates
expressly disclaim any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future
events or otherwise.
No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted
to mean that earnings per Glencore share for the current or future financial years would necessarily match or exceed the historical published
earnings per Glencore share.
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe
for any securities. The making of this document does not constitute a recommendation regarding any securities.
160 | Annual Report 2011 |