Annual
Report
2017
We are a leading integrated producer
and marketer of commodities operating
around the world. Our commodities
comprise metals and minerals, energy
products and agricultural products
Success
today…
Cover photograph
Copper anodes,
Altonorte copper
smelter, Chile
Highlights
Highlights
Net income attributable to
equity holders (US$ million)
Earnings per share (basic)
(US$)
5,777
0.41
2
0
1
5
2
0
1
6
2
0
1
7
(4,964)
1,379
5,777
2
0
1
5
2
0
1
6
2
0
1
7
(0.37)
0.10
0.41
Adjusted EBITDA◊
(US$ million)
14,762
Adjusted EBIT◊
(US$ million)
8,552
2
0
1
5
2
0
1
6
2
0
1
7
8,694
10,268
14,762
2
0
1
5
2
0
1
6
2
0
1
7
2,172
3,930
8,552
Total borrowings
(US$ million)
33,934
Net debt/FFO to net debt◊
(US$ million/%)
10,673
2
0
1
5
2
0
1
6
2
0
1
7
44,049
33,218
33,934
2
0
1
5
2
0
1
6
2
0
1
7
25,889
15,526
10,673
30
0
90
FFO to net debt (%)
60
120
Net cash generated by
operating activities before
working capital changes
(US$ million)
Funds from operations◊
(US$ million)
11,866
11,556
2
0
1
5
2
0
1
6
2
0
1
7
7,454
7,868
11,866
2
0
1
5
2
0
1
6
2
0
1
7
6,615
7,770
11,556
◊ Alternative performance
measures
Adjusted measures referred
to as Alternative performance
measures (APMs) which
are not defined or specified
under the requirements
of International Financial
Reporting Standards; refer to
APMs section on page 197 for
definition and reconciliations
and note 2 of the financial
statements for reconciliation
of Adjusted EBIT/EBITDA.
Read more
Page 197
Lost time injury frequency
rate (LTIFR)
1.02
2
0
1
5
2
0
1
6
2
0
1
7
1.34
1.40
1.02
Carbon emissions
(million tonnes CO2)
33.5
2
0
1
5
2
0
1
6
2
0
1
7
23.0
23.1
21.6
14.3
12.2
11.9
Scope 1
Scope 2
Community investment
(US$ million)
90
2
0
1
5
2
0
1
6
2
0
1
7
94
84
90
Strategic report
02 At a glance
04 Chief Executive Officer’s review
08 Well positioned for the future
10
12
Our market drivers
Electric Vehicles – a disruptive force
underpinning our commodities
Sustainable development
16 Business model
20 Our strategy for a sustainable future
24
40 Key performance indicators
42
52
Principal risks and uncertainties
Financial review
Business review
– Metals and minerals
– Energy products
– Agricultural products
60
72
78
Corporate Governance
82 Directors and officers
84 Chairman’s introduction
86 Corporate governance report
101 Directors’ remuneration report
106 Directors’ report
112
122
123
Financial statements
Independent Auditor’s Report
to the members of Glencore plc
Consolidated statement of income
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes of equity
124
125
127
128 Notes to the financial statements
Additional information
197 Alternative performance measures
202 Other reconciliations
204
211 Resources and reserves
219 Shareholder information
Production by quarter – Q4 2016 to Q4 2017
… with a focus
on tomorrow
As we look forward, the potential large-
scale roll out of electric vehicles and
energy storage systems looks set to
unlock material new sources of demand
for enabling underlying commodities,
including copper, cobalt, zinc and nickel
Read more
page 12
At a glance
We are one of the world’s
largest natural resource
companies. Active at every
stage of the commodity
supply chain, we are
uniquely diversified by
geography, product and
activity, maximising the
value we create for our
business and its diverse
stakeholders
Adjusted EBITDA 2017 (%)◊
$14.8bn
(2016: $10.3bn)
Revenue◊1 by region
and segment 2017 (%)
Metal and minerals
$80.5bn
(2016: $66.3bn)
Energy products
$128.3bn
(2016: $89.0bn)
Agriculture
$12.6bn
(2016: $22.0bn)
$170m
Annual investment
2018-24 to secure
long-term production
at our Integrated
Nickel operations
Key
Metal and minerals sites
Energy products sites
(Number of assets where grouped)
Agriculture sites
Corporate offices
Marketing office/other
Business segments
Active at every stage of the commodity chain
Non-current assets2 by region (%)
By region
$78.2bn
(2016: $74.2bn)
Metals and
minerals
Metals and minerals
Energy
Agriculture
Americas
Asia
Europe
Africa
Oceania
1 Revenue by geographic destination is based on the
country of incorporation of the sales counterparty.
However, this may not necessarily be the country
of the counterparty’s ultimate parent and/or final
destination of the product, see note 2 of the
financial statements.
2 Non-current assets are non-current assets excluding
other investments, advances and loans and deferred
tax assets. The percentage contributions are derived
from the information included in note 2 of the
financial statements.
02
Energy
Agriculture
Business review
Page 60
1
Exploration, acquisition
and development
2
Extraction and production
3
Processing and refining
4
Blending and optimisation
5
Logistics and delivery
4
5
7
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
$400m
Investment in the
Zhairem zinc brownfield
development in
Kazakhstan to add
c.160ktpa zinc in
concentrate from 2020
We are investing to grow
our cobalt production
133%
over the next three years
4
5
7
Highly diversified
Global scale
Sustainable focus
What makes us different?
+90
commodities
3
business segments
Market insight
c.4,000
employees in marketing
40+
years’ experience
50
countries
150
sites
90
offices
146,000
people
24%
reduction in
Total Recordable Injury
Frequency Rate in 2017
5%
reduction in
carbon emissions in 2017
• High-quality, low-cost
assets in desirable
commodities
• Entrepreneurial culture:
employees empowered
to make decisions
• Long-term relationships
with broad base of
suppliers and customers
• Marketing business
less correlated to
commodity prices
• Maximum flexibility
and economies of scale
Well positioned
for the future
Page 08
03
Glencore Annual Report 2017 Chief Executive Officer’s review
Our performance in 2017 is our strongest on
record. Glencore’s balance sheet has never been
stronger and our investment case, underpinned
by our leading marketing and industrial asset
businesses, has never been better
Going forward, those commodities
where primary market balances are
in deficit or trending towards deficit,
such as zinc, copper, nickel and
thermal coal should see positive
price divergence versus potentially
oversupplied markets.
Delivering sector-leading
returns for shareholders
In 2017, Glencore outperformed
all its UK-listed major diversified
mining peers, with shares up 41%.
Our balance sheet is robust,
and our investment case is
increasingly compelling.
Financial performance was strong
in 2017, with Adjusted EBITDA of
$14.8 billion, up 44% and net income
attributable to equity holders
increasing to $5.8 billion, from
$1.4 billion in 2016, reflecting healthy
commodity prices and the continued
robust earnings contribution from
our highly cash generative Marketing
and Industrial businesses.
Marketing resilient again
Marketing Adjusted EBIT was
$3.0 billion in 2017, 3% higher
than 2016, reflecting the benefits
of continued supportive market
conditions, volume growth in key
market segments and a positive end
to the year, eclipsing the $2.8 billion
guidance provided during the
Investor Update in early December.
Metals & Minerals and Energy
Products both delivered strong
contributions while Agricultural
Products posted a resilient
performance when compared to
many peers. Marketing has again
proven its ability to generate
consistently solid earnings with high
cash conversion, taking into account
its low fixed capital requirements.
and investment, by battery and
automotive manufacturers and
infrastructure players, adjusting
progressively upwards. This provides
an additional dimension of future
demand growth for a number of our
key commodities. Early signals of
inflation and higher interest rates
also bode well for commodities
as an asset class.
Chinese supply-side reform, aided by
consistent environmental policy and
compliance, positively affected a
number of commodities during
2017, including thermal coal, zinc
and aluminium.
Capitalising on a strong
operating environment
After an encouraging end to 2016,
which saw commodities recover
from cycle lows, positive momentum
continued through 2017, resulting
in prolonged outperformance of
Glencore’s key commodities versus
the broader markets. Concerns of
tightening financial conditions in
China during the second quarter
proved to be short-lived, with
commodities rallying once again
through the second half of the year.
Strong economic performance
in both major developing and
developed markets has underpinned
supportive commodity demand
conditions. The electric vehicle
upheaval continues to unfold, with
the scale of market penetration
04
04
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Creating long-term,
sustainable returns
for shareholders
Capitalising on the
strong economic
performance in both
major developing and
developed markets that
underpins supportive
commodity demand
conditions
Well-positioned to
supply into the likely
energy and mobility
evolution, including the
rapidly evolving electric
vehicle story
Anticipated strong
production growth in
copper (25%) nickel (30%)
and cobalt (133%) over
the next three years
Conviction to create
value through
partnerships, M&A and
organic reinvestment
while maintaining
a conservative
balance sheet
Looking ahead, while we maintain
our long-term Marketing Adjusted
EBIT guidance range of $2.2 to
$3.2 billion, a continuation of recent
healthy marketing conditions would
suggest a 2018 performance in the
upper half of the range.
Industrial margin expansion
through higher prices and relentless
cost focus
Industrial Adjusted EBITDA of
$11.5 billion in 2017 was 60%
higher than 2016. Our asset
portfolio continued to deliver overall
competitive all-in unit costs which,
despite some minor production
challenges during the year, allowed
the Company to capitalise on healthy
commodity prices and generate
higher Adjusted EBITDA mining
margins of 38% and 41% respectively
in our Metals and Energy operations.
Energy and mobility transformation
forecast to unlock material new
sources of commodity demand
Commodity differentiation is
increasingly important, and
Glencore’s commodity mix
is becoming less dependent
on demand generated by
infrastructure related investment
in developing markets.
Accelerating electric vehicle adoption
requires an energy and mobility
transformation that is forecast to
unlock material new sources of
demand for the enabling underlying
commodities including copper,
nickel and cobalt.
Electric Vehicles – a disruptive
force underpinning our
commodities
Page 12
We recently commissioned an
independent study to gauge the
potential incremental demand
for these commodities under the
Electric Vehicles Initiative scenario
of 30 % electric vehicle market share
by 2030. The findings suggest an
additional 4.1Mt of copper, 1.1Mt
of nickel and 314kt of cobalt supply
will be required by 2030.
These potentially significant new
demand sources offer compelling
fundamentals, particularly when
coupled with persistent
supply challenges.
Automaker investment in EVs:
$90 billion and counting
The rate at which automotive and
battery companies have scaled up
electric vehicle investment plans
speaks to our opportunity as a
supplier of key metals.
Global automaker investments now
total more than $90 billion, with at
least $19 billion attributed to the U.S.,
$21 billion to China and $52 billion
to Germany. Volkswagen alone
plans to spend $40 billion by 2030
to build electrified versions of over
300 models. Chinese automakers are
ramping up focus on the EV story,
while a number have announced
investment partnerships with the
likes of Ford, VW and General Motors.
Our resource base is well positioned
to supply into this likely energy and
mobility evolution, particularly given
our anticipated strong production
growth in copper (25%) nickel (30%)
and cobalt (133%) over the next
three years.
We discuss the electric vehicle theme
in more detail on page 12.
05
Glencore Annual Report 2017 Chief Executive Officer’s review
continued
2018 Shareholder
distribution
$2.9bn
$0.20/share
Minimising our impact
on the environment
5%
reduction in carbon
emissions intensity
by 2020 vs 2016
Conviction to create value
through partnerships, M&A
and organic reinvestment
Over the past 15 months, in our
constant drive to create long-term
value for shareholders, we continued
to leverage our trading and
strategic relationships to source
and structure both acquisitions
and disposals, including:
• Acquisition of 49% of Rio Tinto’s
Hunter Valley Operations (thermal
coal) with Yancoal retaining 51%,
gaining access to sizeable high
quality energy coal resources and
marketing rights (pending)
• Sale of 51% of non-U.S. petroleum
products storage and logistics
business to HNA (sale of smaller
U.S. portion pending)
• Creation of BaseCore Metals
alongside Ontario Teachers’
Pension Plan, a growth vehicle
for base metal streams, royalties
and commercial opportunities
• Sale of our African zinc assets
to Trevali for mix of cash and
shares, thereby accelerating the
development of a mid-size zinc
growth vehicle with Glencore
retaining 25% equity participation
and offtake agreements
• Acquisition of Chevron’s South
African and Botswana mid/down-
stream oil business (pending)
• Acquisition of majority of voting
class shares in Volcan, gaining
exposure/access to a premier
zinc district and potential asset/
marketing synergies
• Acquisition of remaining 31%
interest in Mutanda copper
• Increased Rosneft oil offtake,
alongside equity partnership
structure with the QIA
Additionally, we have an attractive
suite of organic growth options across
the portfolio. Key existing projects
neared completion in 2017, including
Katanga (copper/cobalt – now in
commissioning), Mopani (copper –
commissioning late 2018) and
Koniambo (nickel, Line 2 in
commissioning).
A suite of low-cost, low-risk
brownfield opportunities were
approved or progressed during
2017, including Integrated Nickel
Operations (nickel), Zhairem (zinc),
Katanga acid plant and cobalt circuit
debottlenecking (copper/cobalt),
Mutanda cobalt reclaim (copper),
United Wambo Open Cut (coal)
and Mt Owen extension (coal).
$2.9 billion shareholder distribution
Consistent with new distribution
policy and reflecting strong cash
generation in 2017, we have declared
a distribution of $2.9 billion ($0.20 per
share) in respect of 2017 cash flows,
to be paid in two equal instalments
in 2018.
This payment comprises a fixed
$1 billion pay-out in respect of
Marketing activities and a variable
component of $1.9 billion,
representing c.36% of Industrial
asset free cash flow compared
to our policy minimum of 25%.
Corporate governance
and sustainability
Our ambition to integrate
sustainability throughout our
business remains a key strategic
priority for the Group and reflects
our commitment to operate
transparently and responsibly.
It also encompasses our desire to
protect the wellbeing of our people,
our host communities and the
natural environment, while sharing
lasting benefits with the regions
where we work and society
as a whole.
Sadly, we recorded nine fatalities
at our operations in 2017. Our goal
remains zero fatalities and there is
unrelenting focus on ensuring leading
practice at all our operations.
Progress during 2017 included the
publication of our commitment to
preventing the occurrence of Modern
Slavery and human trafficking within
our operations and supply chains,
the release of our 2016 Sustainability
report, as well as updated reports on
Payments to Governments and our
Climate Change Considerations paper.
06
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Strategic priorities
Integration of
sustainability
throughout
our business
Our strategy for a
sustainable future
Page 20
Maintain a robust
and flexible
balance sheet
Focus on cost control
and operational
efficiencies
Looking forward
We look ahead with confidence,
noting the synchronised global
economic growth, supportive
commodity fundamentals and
the emerging electric vehicle
story. We believe our unrivalled
positioning in “Tier 1” commodities
and “Tier 1” assets will continue
to create compelling value
for shareholders.
Ivan Glasenberg
Chief Executive Officer
1 March 2018
We continued to make progress
on meeting our group-wide carbon
emission intensity reduction
target of at least 5% on 2016 levels
by 2020, committed to the Task
Force on Climate-related Financial
Disclosures, and completed an
assessment of sites at a high risk
of water-related issues.
We were delighted to appoint
Ms Gill Marcus to the Board as an
Independent Non-Executive Director,
with effect from 1 January 2018.
Gill was Governor of the South African
Reserve Bank from November 2009
to November 2014, and her long
record of public service coupled
with her finance experience, geo-
political insights and non-executive
board experience will be a great
benefit to us.
Due to sustained low levels of
liquidity and the general ability
and preference for prospective
investors to access Glencore’s
primary exchange, we sought
to delist from Hong Kong, which
took effect in January 2018.
07
Creating long-term
sustainable returns
for shareholders
$2.9bn distribution
recommended in respect
of 2017 cash flows, above
the minimum policy
threshold, given robust
balance sheet progression
Our ambition to integrate
sustainability throughout
our business remains
a key strategic priority
for the Group
Structural industry
supply side challenges,
coupled with robust
demand, generate
compelling fundamentals
in our commodities
Unrivalled positioning
in “Tier 1” commodities
and “Tier 1” assets will
continue to create
compelling value
Glencore Annual Report 2017 Well positioned for the future
Following our successful efforts to reposition the capital structure and
optimise our asset base, we remain focused on our strategy to sustainably
grow total shareholder return while operating responsibly. We are
confident we can offer a differentiated value proposition to investors
Uniquely diversified by
commodity, geography
and activity
The right commodity
mix for changing needs
Well-capitalised,
low-cost,
high-return assets
• Fully integrated from mine
• Future demand patterns
• Since 2009, over
to customer
• Presence in 50 countries
across 150 operating sites
• Producing and marketing
more than 90 commodities
across three business
segments
• Diversified across multiple
suppliers and customers
for maturing economies are
likely to favour mid and late
cycle commodities
• Major producer of later
cycle commodities including
the enabling materials
(copper, cobalt, nickel)
that underpin the battery
chemistry and infrastructure
likely to power electric vehicles
and energy storage systems
$39 billion has been spent
on industrial assets
• Low-cost long-life assets
in many of the world’s premier
mining districts support
sustainable long-term
cash flows
• Mine-life extension
potential embedded
in key commodities
Adjusted EBITDA◊ diversified by
commodity and geography (%)
Volume of commodities required
to enable 30% EV sales by 2030
Industrial Adjusted EBITDA
mining margins
● Copper 28%
● Zinc 17%
● Nickel 4%
● Ferroalloys 4%
● Coal 25%
● Oil 1%
● Marketing 21%
● Americas 32%
● Europe/Asia 8%
● Africa 14%
● Oceania 25%
● Marketing 21%
+4.1mt
Copper
+1.1mt
Nickel
+314kt
Cobalt
CRU “Green Scenario” – see page 14.
08
38%
Metals and minerals, up from 33%
41%
Energy products, up from 32%
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Business review
Page 60
A unique marketing
business that extracts
value across the
entire supply chain
An entrepreneurial
culture and a conviction
to create value
Generate significant
cash flow and
distribution potential
• As a marketer of commodities,
we can extract value from
the full-range of arbitrage
opportunities
• We create value from our
economies of scale, our
extensive (including third
parties) supply base, our
logistics, risk management
and working capital
financing capabilities
• Capital allocation framework
balances preservation
of capital structure with
attractive investment and
growth opportunities
• Conviction to create value
through partnerships, M&A
and organic investment
• Unique ability to source and
structure deals using trading
and strategic relationships
• Funds from operations (FFO)◊
up 49% to $11.6 billion in 2017
• FFO/Net debt◊ of 108%
• Distribution policy based on
a fixed/variable payout of prior
year cash flow, comprising
a fixed $1 billion from
marketing and a minimum
pay-out ratio of 25% of
Industrial asset free cash flow
Resilience of marketing earnings
Resilience of marketing earnings
Investing in capital efficient growth
Earnings per share
150
120
90
60
30
0
$1.6bn
Including Volcan (Zn), Mutanda
(Cu,Co), Yancoal equity (coal)
$0.41
up 310% YoY
Recycling capital through disposals
2018 distribution recommended
2012
2013
2014
2015
2016
2017
Marketing Adjusted EBIT Indexed
Industrial Adjusted EBITDA Indexed
$1.0bn
Trevali (Zn), HG Storage (Oil), BaseCore
Metals (base metals streams/royalties)
$2.9bn
$0.20/share, +186% YoY
See page 202.
09
Glencore Annual Report 2017
Our market drivers
We are dependent upon the supply of and demand for our commodities
Key market drivers
Impact on our industry
Future commodity supply
• The pro-cyclical nature of mining investment means
that new mines are usually approved when
commodity prices are higher
• Given the long development time frames required
to bring new mine supply on line, the timing as to
when this appears in the economic cycle is difficult
to predict and could appear at low points in the
economic cycle, creating excess supply in the market
• Over-investment creates oversupply and with it a prolonged
period of low commodity prices
• Although commodity prices have increased significantly
from the lows seen in early 2016, the experience of the last
economic cycle has provided investor pressure on companies
to be more cautious about investing in new supply
• Balancing a finite, declining resource base with the need
to grow to meet expected future demand is an inherent
challenge for companies in the resource sector
Demand for the
commodities we produce
• The industrialisation and urbanisation of developing
economies over the last decade has driven significant
growth in commodity demand
• China’s rapid growth over this period now means
that it accounts for up to half of global demand for
most commodities
• As developing economies mature, the commodities
that drive their growth change
• Increased levels of industrialisation and urbanisation
suggest demand growth rates for commodities may
be lower in the future
• Negative demand could generate excess supply along
with lower commodity prices
• Early-cycle commodities such as iron ore, coking coal and
cement may become less important as demand patterns
shift in favour of mid and late cycle commodities such
as copper, zinc, cobalt, nickel, thermal coal and
agricultural products
Energy and emissions
transformation
• Momentum to decarbonise the global economy
is gathering pace as nations increasingly coordinate
efforts aimed at minimising emissions of carbon
dioxide to achieve climate change goals and
transition the world to a low-carbon economy
• This transition is likely to increase the cost for fossil fuels,
impose levies for emissions and increase costs for monitoring
and reporting and to reduce demand for fossil fuels
• Third parties, including potential or actual investors,
may also introduce policies adverse to Glencore due
to our interest in fossil fuels, particularly coal
• Technological advances are making renewable energy
sources more competitive with fossil fuels and are likely
to displace them over the longer run. In particular, many
analysts believe that demand for coal may reduce sooner
than previously expected
10
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
How we are responding
• Our disciplined approach to capital
allocation attempts to ensure that
supply and demand forces retain
a level of balance
• Given the unpredictability of costs, risks
and timing of large scale greenfield
projects we prefer to add supply via
targeted capital efficient/low risk
brownfield expansions when required
Electric Vehicles –
a disruptive force
underpinning our
commodities
Page 12
Principal risks
and uncertainties
Page 42
Financial review
Page 52
• With the expectation that the global
• We are a major producer of the
economy will continue to progress towards
a consumption based economy and
therefore, commodity demand growth will
be focused in the higher-end, fast growing
consumer sectors, our diverse commodity
portfolio, supplying this demand, is well
placed to benefit from this transition
commodities that underpin the current
battery chemistry and infrastructure
initiatives that are expected to power
electric vehicles and energy storage
systems and this new source of demand
• We continuously assess the risks and
opportunities presented by decarbonisation
of energy and mobility across our product
and operational portfolio
• Widespread adoption of electric vehicles
and energy storage systems will create
material new sources of demand for
enabling commodities
• As a major producer and consumer of fossil
fuels, we recognise our responsibility to
understand and manage our greenhouse
gas emissions, and support the global
transition to a low-carbon economy
11
Glencore Annual Report 2017 Metals and
minerals
Electric Vehicles – a disruptive
force underpinning our
commodities
The Electric Vehicle Initiative
is a multi-government policy
forum targeting
30%
market share for electric
vehicle sales by 2030
1212
Glencore Annual Report 2017
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
The energy and mobility
transformation currently
underway is unlocking
material new sources
of demand for enabling
commodities such as
copper, nickel and cobalt
The emergence of
electric vehicles (EVs)
is set to transform the
mobility space due to a
combination of factors:
Environmental considerations
Momentum to decarbonise the
economy is gathering pace as nations
increasingly coordinate efforts on this
transition. Bloomberg New Energy
Finance forecasts investment in zero
carbon energy at c.$8.7 trillion by
2040, with an estimated 530 million
electric vehicles on the road.
Political mandate
A growing consensus, highlighted
by the Paris Accord and the Electric
Vehicle Initiative (EVI), is seeking to
coordinate national and regional
policies towards a low carbon future.
Specifically on transportation, the
EVI is a multi-government policy
forum comprising 16 major global
economies. The initiative seeks to
facilitate the global deployment
of 20 million EVs by 2020. A further
campaign announced in 2017,
led by China, targets at least 30%
new electric vehicle sales by 2030,
collectively across all EVI countries.
Technological progress
Rapid advances in technology are
emerging across the EV supply chain,
from power generation and storage
to charging and vehicles.
With technological progress
comes cost efficiencies, enhanced
performance and ultimately
products that can compete with
traditional internal combustion
engine (ICE) alternatives.
Industry commentators now expect
the total cost of ownership (TCO) for
EVs to reach parity with ICE vehicles
in the early part of the next decade1.
1 CRU “Mobility and Energy Futures –
Perspectives towards 2035”, prepared
for Glencore by CRU Consulting.
Consumer experience
While the EV story is clearly in
its early days, existing EV models
and those under development are
already demonstrating performance
comparable to, or exceeding,
equivalent ICEs.
Average EV range, acceleration and
speed are increasing while targeted
charging times and TCO are rapidly
decreasing; all enhancing the
consumer experience.
Glencore Annual Report 2017
13
13
Glencore Annual Report 2017 Electric Vehicles – a disruptive force
underpinning our commodities
continued
Driving demand
Rapid technology advances in battery chemistry, along with strong
government support, is accelerating the economic breakeven point
of electric vehicles and building demand for our key commodities
Predicted growth in EV sales
30%
EV by 2030
2020
● ICE 94%
● Hybrid EV 4%
● Battery EV 2%
2025
● ICE 85%
● Hybrid EV 5%
● Battery EV 10%
2030
● ICE 64%
● Hybrid EV 6%
● Battery EV 30%
● Fuel cell EV 1%
Total cost of ownership – closing the
economic gap with conventional vehicles
45,000
42,000
39,000
36,000
33,000
30,000
2 0 17
2 0 18
2 0 19
2 0 2 0
2 0 2 1
2 0 2 2
2 0 2 3
2 0 2 4
2 0 2 5
2 0 2 6
2 0 2 7
2 0 2 8
2 0 2 9
2 0 3 0
ICE – petrol
BEV without subsidy
BEV with subsidy
Source: CRU ‘Green Scenario’
Source: CRU
>30% CAGR in battery electric
vehicle sales to 2030 leads to an
increase in demand for metals
Copper
84kg
Cu
Nickel
30kg
Ni
Cobalt
8kg
Co
Estimated average metal use per vehicle:
Based on estimated 53kWh
global average battery pack size.
Source: CRU ‘Green Scenario’.
The impact of this growth in demand for metals has implications across the value chain
Generation and grid
infrastructure (kt)
2025
2020
2030
Cu
40
170
536
Grid storage
(kt)
Charging infrastructure
(kt)
Non-ICE vehicles
(kt)
2020
2025
2030
2020
2025
2030
Cu
Ni
Co
24
20
7
86
71
26
180
150
55
Cu
23
115
392
2020
2025
2030
304 1,068 2,972
66
17
299
80
985
259
Cu
Ni
Co
Leading to additional metal demand by 2030
Copper
4.1Mtpa
Nickel
c.1.1Mtpa
Cobalt
314ktpa
18% of 2017 global supply
55% of 2017 global supply
332% of 2017 global supply
14
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Potential supply
Glencore is well-positioned to supply
into the energy and mobility evolution
Our commodities are crucial
to the electric vehicle (EV) story
The energy and mobility
transformation currently underway
is forecast to unlock material new
sources of demand for enabling
underlying commodities including
copper, nickel and cobalt.
We are uniquely positioned with
our commodity mix, having strong
production growth across these
three core EV metals over the
next three years.
Glencore own source copper
Glencore own source nickel
25% growth
in production to 2020
30% growth
in production to 2020
1.6Mt
142kt
1.3Mt
109kt
2017
2020
2017
2020
Glencore own source cobalt
133% growth
in production to 2020
63kt
27kt
2017
2020
15
On the cusp of
mainstream EV roll-out
The rate at which automotive and
battery companies have scaled up
electric vehicle investment plans
speaks to our opportunity as a
supplier of key metals.
Global automaker investment now
totals over $90 billion, with at least
$19 billion attributed to the U.S.,
$21 billion to China and $52 billion
to Germany.
Volkswagen alone plans to
spend $40 billion by 2030 to
build electrified versions of over
300 models. Chinese automakers
are ramping up focus on the
EV story, while a number
have announced investment
partnerships with the likes
of Ford, VW and General Motors.
Global planned and existing
battery cell production capacity
amounts to over 300GWh, which
compares to Tesla’s Gigafactory
target capacity of 35GWh. China
accounts for approximately
two-thirds of the total.
How much metal is required?
To illustrate the demand
potential for a number of our key
commodities, we commissioned
CRU to model the metal
requirements across the supply
chain to achieve the EVI target
of 30% EV market share by 2030.
Unsurprisingly the forecast metal
requirements are significant,
as early as 2020.
An additional c.4.1Mt of copper
(18% of 2017 supply), c.1.1Mt of
nickel (55% of 2017 supply) and
314kt of cobalt (332% of 2017
supply) will be required to
enable 30M EV sales by 2030.
.
Glencore Annual Report 2017 Business model
As a global producer and marketer of commodities, we are uniquely
diversified by geography, products and activities. Integrating our marketing
and industrial business sets us apart from our competitors and helps us
generate value
Inputs and
resources on
which our business
model depends
Assets and natural resources
• Our resources and reserves
are overall long-life and of
a high quality, enhancing
the scale and value of our
marketing business
• We are a disciplined
producer, aligning supply
to demand and margin
over volume
Our people and partners
• We have established
long-term relationships
with a broad range of
suppliers and customers
across diverse industries
and geographies
• 146,000 employees and
contractors spread across
90 offices and 6 continents
Financial discipline
• We deploy capital in
a disciplined manner,
creating value for all
our stakeholders
• Our hedging strategies
protect us against price
risks and ensure that our
marketing profitability is
primarily determined by
volume-driven activities
and value–added services
rather than absolute price
Unique market knowledge
• As an integrated
commodity producer and
marketer, we are uniquely
positioned to generate
value at every stage of
the commodity chain
16
Our business activities
are driven to achieve
our strategic imperatives
and our commitment to
developing a sustainable
business
Safety
The safety of our people is our top priority.
We aim to eliminate fatalities and provide
a safe workplace.
Health
We want to protect and improve
the health of our workforce and
local communities.
Processing and refining
Our expertise and technological
advancement in processing and refining
mean we can optimise our end
products to suit a wider customer base
and provide a security of supply as well
as valuable market knowledge.
Blending and optimisation
Our ability to blend and optimise allows
us to offer a wide range of product
specifications, resulting in a superior
service and an ability to meet our
customer specific requirements.
3 business segments,
spanning the metals,
energy and agricultural
markets, producing
90 commodities
from 150 sites
Extraction and production
We mine and beneficiate minerals
across a range of commodities, mining
techniques and countries, for processing
or refining at our own facilities, or
for sale.
Exploration, acquisition
and development
Our focus on brownfield sites and
exploration close to existing assets
lowers our risk profile and lets us
use existing infrastructure, realise
synergies and control costs.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Environment
We aim to minimise any negative
environmental impact from our
activities and promote efficient use of
resources, such as energy and water.
Anti-bribery and corruption
Offering, paying, soliciting or accepting
bribes is unacceptable. We work to
identify and reduce the risks of bribery
and corruption across all our business.
Community & human rights
We foster sustainable growth and respect
human rights wherever we operate.
Our strategy for a sustainable future
Page 20
Sustainability framework
Page 25
Principal risks and uncertainties
Page 42
Outputs
Protecting our people
24%
reduction in total recordable injury
frequency rate
Income taxes paid to host countries
$1.4bn
Minimising our impact
on the environment
5%
reduction in carbon emissions
(scopes 1 and 2)
Time
arbitrage
Geographic
arbitrage
Logistics
and delivery
Our commodities in
everyday products
Product
arbitrage
Our logistics assets allow us to handle large
volumes of commodities, both to fulfil our
obligations and to take advantage of demand
and supply imbalances. These value added
services make us a preferred counterparty
for customers without such capabilities.
Adjusted EBITDA◊
$14.8bn
2017 distributions to shareholders
$2.9bn
paid in 2018, basis 2017 cash flows
17
Glencore Annual Report 2017 Business model
continued
Metals and
minerals
Energy
Agriculture
Strength
through
combination
Our scale and presence both as a
producer and marketer of commodities
is unrivalled
We are present at every point of the value
chain, from where commodities are
sourced to where they are consumed
• Global scale
• Long-term relationships
• Unique insights
• Differentiated opportunities
4.0mt1
1,200
Copper metal and
concentrates marketed
Vessels on the ocean
at any one time
7,000+
Long-term relationships
with suppliers and
customers
2.8mt1
Zinc metal and
concentrates marketed
2.1bn bbl
Crude oil and oil
products marketed
1 Estimated metal unit contained.
Glencore
Exploration
Extraction/
production
Processing/
refining
Blending/
optimisation
Logistics/
marketing
Traditional miner
Marketer
18
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Our marketing business
We move commodities from where they
are plentiful to where they are needed
Market insight
and customer
understanding
Our global scale and
presence in more than
90 commodities across
50 countries gives
us extensive market
knowledge and
insight to help us fully
understand the needs
of our customers.
Anticipating supply
and demand
Our integrated marketing
and industrial businesses
work side-by-side to give
us presence across the
entire supply chain,
delivering in-depth
knowledge of physical
market supply and
demand dynamics and
an ability to rapidly adjust
to market conditions.
Creating opportunities
The significant scale of
both our own production
and the volumes secured
from third parties allows
us to create margin
opportunities from our
ability to supply the exact
commodities the market
needs through processing
and/or blending and
optimisation of qualities.
Generating revenue
We generate revenues
as a fee-like income
from physical asset
handling and arbitrage,
as well as blending and
optimisation opportunities.
Our use of hedging
instruments results in
profitability being largely
determined by these
activities rather than by
absolute price movements.
Arbitrage
opportunities
Many of the physical
commodity markets in
which we operate are
fragmented or periodically
volatile. This can result in
arbitrage: price discrepancies
between the prices for
the same commodities
in different geographic
locations or time periods.
Other factors with arbitrage
opportunities include freight
and product quality.
Geographic
arbitrage
Product
arbitrage
Time
arbitrage
Disparity
Different prices for the
same product in different
geographic regions, taking
into account transportation
and transaction costs.
Disparity
Pricing differences between
blends, grades or types of
commodity, taking into
account processing and
substitution costs.
Execution
Leverage global relationships
and production, processing
and logistical capabilities
to source product in one
location and deliver
in another.
Execution
Ensure optionality with
commodity supply contracts,
and look to lock-in profitable
price differentials through
blending, processing or
end-product substitution.
Disparity
Different prices for a
commodity depending
on whether delivery
is immediate or at a future
date, taking into account
storage and financing costs.
Execution
Book “carry trades” that
benefit from competitive
sources of storage,
insurance and financing.
Strategy and risk
A supportive strategy
Our Marketing Business supports the
creation of incremental value from
a pool of allocated capital through
critical mass, blending, storage
and arbitrage opportunities.
How we manage risk
We mitigate credit risks through
application of measures including
credit insurance, letters of credit,
security arrangements and bank
or corporate guarantees.
Our strategy for a sustainable future
Page 20
Principal risks and uncertainties
Page 42
Our presence at every stage of the
value chain allows us to leverage
our scale and diversity.
We manage market exposure by
reducing price risks arising from timing
differences to acceptably low levels.
Our policies/procedures seek to
ensure we comply with applicable
sanctions, laws and regulations.
19
Glencore Annual Report 2017 Our strategy for a
sustainable future
We recognise our ongoing responsibility to not only deliver financial
performance but also make a positive contribution to society and
create lasting benefits for stakeholders in a manner that is responsible,
transparent and respectful to the rights of all
Strategic objective
To sustainably grow
total shareholder return
while maintaining a
strong investment grade
rating and acting as a
responsible operator
20
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
CEO’s review
Page 04
Strategic priority
Integration of
sustainability
throughout
our business
We believe that by being
a better operator with a
reputation for doing things the
right way, we will be seen by
our stakeholders as a partner
of choice. We are achieving this
through taking an approach
of continuous improvement.
This approach is delivered
through our health and safety
programmes, advancing our
environmental performance,
respecting human rights and
by developing, maintaining
and strengthening our
relationships with all
of our stakeholders.
We recognise that a robust
and sufficiently flexible
balance sheet contributes
to the delivery of sustainable,
long-term shareholder returns
and ensures that Glencore
is well placed to withstand
the cyclical nature of the
natural resource industry.
We aim to increase returns
on capital and cash flows
while targeting a maximum
2x Net debt/Adjusted
EBITDA ratio throughout
the cycle. We aim to only
deploy capital when strict
and clearly defined financial
criteria, relating to returns
and payback, can be met.
We seek to increase the value
of our business by improving
the competitiveness of our
assets through an ongoing
focus on cost management
and logistical capabilities,
including operating safely
and efficiently. We take a
disciplined approach towards
all of our assets and will
divest when another operator
places greater value on
them, or curtail production in
response to oversupply when
it makes sense to do so.
Strategic priority
Maintain
a robust
and flexible
balance sheet
Our major industrial assets
are mainly long-life and
low-cost, reflecting our
substantial investment into
existing assets as well as our
appetite, capabilities and
belief in some commodities
and geographies where
our peers are not materially
present. Our industrial assets
provide a consistent source
of volumes for our marketing
operations, which are
supplemented by third party
production. Our marketing
activities use their scale
and capabilities to extract
additional margin throughout
our business model and
provide a superior service to
our customers and a reliable
supply of quality product.
21
Strategic priority
Focus on cost
control and
operational
efficiencies
Glencore Annual Report 2017 Our strategy for a
sustainable future
continued
Strategic priority
Integration of
sustainability
throughout
our business
Improved our TRIFR by
24%
Strategic priority
Maintain
a robust
and flexible
balance sheet
Managed Net debt◊
$10 – 16bn
range
Strategic priority
Focus on cost
control and
operational
efficiencies
Adjusted EBITDA◊
+60%
across industrial business
22
Performance in 2017
SafeWork programme
Continued to progress our SafeWork
programme, an initiative that focuses on
eliminating fatalities and serious injuries.
Regrettably, there were nine fatalities
from nine incidents during the year.
We continue to work towards the
elimination of fatalities from our
business. More positively, our TRIFR
and LTIFR improved by 24% and 27%
respectively compared to 2016.
Updated our progress in integrating
climate change issues into our business
through our second report on climate
change considerations for our business.
Water management
Completed assessment of sites at a
high risk of water-related issues and
finalised our water management
guideline, which aligns with the ICMM’s
position statement on water and its
water management framework.
Climate change
On track for meeting group-wide carbon
emission intensity reduction target of
at least 5% on 2016 levels by 2020.
Committed to Task Force on Climate-
related Financial Disclosures.
Community engagement
Our community development
programmes are an integral part of our
community and stakeholder engagement
strategies. In 2017, we spent $90 million
on these programmes (2016: $84 million).
Performance in 2017
Conservatively repositioned
Revised capital structure and credit
profile managed through targeting a
maximum 2x Net debt/Adjusted EBITDA
through the cycle, augmented by an
upper Net debt cap of c.$16 billion.
Year-end Net debt and FFO/Net debt
were $10.7 billion and 108.3% respectively.
Conviction to create value
Targeted bolt-on acquisitions, low-
cost/risk organic growth and recycling
of capital enabled capital efficient
growth in compelling commodities.
Bonds
Issued $2.1 billion of bonds with maturities
of 5 and 10 years. Post-2018 maturities
capped at c.$3 billion in any one year.
Credit rating
Credit rating upgraded to Baa2
(stable) by Moody’s and BBB
(positive outlook) by Standard &
Poor’s in line with lower leverage.
Credit facility
Revolving credit facility refinanced
and resized to reflect reduced funding
needs. Committed available liquidity
of c,$12.9 billion at year end covers
more than 3 years of bond maturities.
Supply
Continued our disciplined approach
to supply. Partial restart of idled
zinc production planned for 2018.
The balance of this capacity will
be restarted at the right time.
Performance in 2017
Industrial
Increased Adjusted EBITDA mining
margins of 38% and 41% respectively
in our metals and energy operations
reflect the benefit of higher prices that
more than offset modest inflationary
and cost pressures as well as the
optimisation of cost structures and
efficiencies over the past two years.
Marketing
Achieved c.$3.0 billion Adjusted
EBIT across our marketing business,
underlining both supportive market
conditions during the year as well as
upside to a positive commodity cycle.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Priorities going forward
Sustainability
We will continue to
implement activities that
further integrate sustainability
throughout our business to
support our commitment
to continuously improve
our standards of health,
safety, environmental and
community performance.
Transparency
We are committed to
operating transparently,
responsibly and meeting or
exceeding applicable laws
or external requirements.
Key performance
indicator
Page 40
Principal risks
and uncertainties
Page 42
Principal risks
• Health, safety and
environment,
including potential
catastrophes
• Emissions and
climate change
• Community relations
and human rights
• Skills availability
and retention
KPIs
• Safe and healthy
workplace – reduce
TRIFR, LTIFR and
occupational
disease cases
• Environmental
performance –
water withdrawn,
greenhouse gas (GHG)
emissions, meeting
our commitments on
climate change
• Long-term value
for communities –
community
investment spend
Priorities going forward
Balance sheet strength
We are committed to
maintaining our balance
sheet strength to ensure it is
capable of supporting growth
and shareholder returns
regardless of the commodity
price environment.
Investment grade rating
We will preserve a robust
capital structure and business
portfolio that reflects our
commitment to targeting,
receiving and maintaining a
strong BBB/Baa investment
grade rating. In this regard,
we are targeting a maximum
2x Net debt/Adjusted
EBITDA through the cycle,
augmented by an upper Net
debt cap of c.$16 billion.
KPIs
• Returns to shareholders –
Funds from operations,
Net funding and
Net debt
• Value for our
shareholders –
Adjusted EBIT/EBITDA,
Net income attributable
to equity holders
Principal risks
• Reductions in
commodity prices
• Fluctuations in supply
of, or demand for,
commodities in
which we operate
• Fluctuations in currency
exchange rates
• Liquidity risk
• Counterparty credit
and performance
Priorities going forward
Industrial activities
Our industrial activities
will continue to focus
on controlling costs and
generating sustainable
operating and capital
efficiencies. Our marketing
business supports the
creation of incremental
value through critical mass,
blending, storage and
geographical arbitrage.
Positioned to leverage
our scale and diversity
Our marketing activities’
priorities are to maximise
the returns and cash flows
from the pool of allocated
capital, which, in turn,
supports the strengthening
of our balance sheet. Our
presence at every stage
of the value chain means
that Glencore is uniquely
positioned to leverage
our scale and diversity.
KPIs
• Returns to
shareholders – Funds
from operations, Net
funding and debt
• Value for our
shareholders –
Adjusted EBIT/EBITDA,
Net income attributable
to equity holders
Principal risks
• Geopolitical risk
including social unrest
• Laws, regulations,
enforcement, permits
and licences
to operate
• Operating and cost risk
• Cyber risk
23
Glencore Annual Report 2017 Sustainable
development
24
Overview
We are continuing to implement activities and processes
that support the full integration of sustainability throughout
our business. This is complemented by the group-wide
application of the principle of continuous improvement.
We are committed to operate transparently and
responsibly. Our sustainability strategy, policies and
procedures support good business practice and drive
positive change throughout our business.
We are committed to protecting the wellbeing of
our people, our host communities and the natural
environment, while sharing lasting benefits with the
regions where we work and society as a whole.
Lost time injury
frequency rate
(per million hours worked)
Total recordable injury
frequency rate
(per million hours worked)
2
0
1
5
2
0
1
6
2
0
1
7
1.34
1.40
1.02
2
0
1
5
2
0
1
6
2
0
1
7
4.35
4.05
3.09
CO2e Scope 1
(million tonnes)
CO2 Scope 2
(million tonnes)
2
0
1
5
2
0
1
6
2
0
1
7
23.0
23.1
21.6
2
0
1
5
2
0
1
6
2
0
1
7
14.3
12.2
11.9
Water withdrawn
(million m3)1
Community investment
spend (US$ million)
2
0
1
5
2
0
1
6
2
0
1
7
954
971
924
2
0
1
5
2
0
1
6
2
0
1
7
94
84
90
1 2015 data is not directly comparable to later periods due to changes in
data reporting methodology, as set out in our 2016 Sustainability Report.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Committed to creating
a sustainable future
The commodities that we
produce and market have
an essential role in everyday
life and support the
development of emerging
economies. Our activities
and our presence deliver
lasting benefits to our
stakeholders and to
society, creating value both
locally and globally. We are
committed to creating
value for our stakeholders in
a manner that is responsible,
transparent and respectful
to the rights of all
Our approach to sustainability reflects
our commitment to operate in a
responsible and transparent manner.
We recognise our role in protecting
the wellbeing of our people, our
host communities and the natural
environment. We believe that our
presence delivers lasting benefits
within the regions where we
operate and society as a whole.
Through the integration of
sustainability throughout our
business practices, we aim to
embody Glencore’s five values that
define our purpose, our priorities
and the fundamental principles
by which we conduct business.
Our sustainability strategy, policies
and procedures support good
business practice and meet or
exceed applicable laws and external
requirements. Our sustainability
strategy sets out our ambitions
against four core pillars with clearly
defined imperatives, objectives,
priority areas and targets.
Our sustainability strategy is
reviewed annually to confirm that
it is continuing to fulfil the needs
of our business.
Sustainability framework
Corporate strategy
Integration of
sustainability
throughout our
business
Maintain
a robust and
flexible balance
sheet
Focus on cost
control and
operational
efficiencies
Values
Safety – Entreprenuerialism –
Simplicity – Responsibility – Openness
Code of Conduct
Group sustainability strategy
Health
Become a leader in the protection
and improvement of our people’s
and communities’ wellbeing
Safety
Become a leader in workplace
safety, eliminating fatalities
and injuries
Environment
Minimise any negative
environmental impact from
our operations and apply
the precautionary principle
in decision-making
Community and human rights
Foster sustainable growth and
respect human rights wherever
we operate
Group HSEC policies
Operational policies
Developed for the specific needs
of individual assets
Management, data reporting,
risk management and assurance
to monitor compliance
Board HSEC Committee
Oversight and ultimate
responsibility.
Our Board receives regular
updates and has detailed
oversight of how our business
is performing across all
our internally defined
sustainability-related
material risk areas.
Sustainability principles,
guidance and policies
Integrated throughout the
business and give guidance
on the standards we expect.
Material topics
• Internal and external
materiality assessment
process to identify
material topics
• Material topics are the focus
of our sustainability strategy
review and reporting
• Operational activities
focus on addressing
and progressing the
material topics
25
Glencore Annual Report 2017
Sustainable development
continued
Further details on our sustainability
strategy, our approach to its
implementation, performance
and ambitions are available in our
sustainability-related publications,
which include an annual
sustainability report published
in accordance with the core
requirements of Global Reporting
Initiative (GRI):
• Our approach to sustainability
• Sustainability report and highlights
• Data book and GRI references
• Payments to governments report
• Modern slavery statement
All of our sustainability
communications are available on
our website: www.glencore.com/
sustainability.
External commitments
We are signatories to the United
Nations Global Compact (UNGC),
aligning our strategies and operations
with its principles, which cover
human rights, labour, environment
and anti-corruption. In line with the
UNGC’s requirements, we publish
an annual communication on our
progress. The UNGC also encourages
participants to support the
Sustainable Development Goals
(SDGs), with an emphasis on
collaboration and innovation.
We welcome the SDGs and
the advent of a systematic global
approach to society’s overall
development. We believe that we
can play a role in supporting our
host governments to meet the SDGs.
In addition, we uphold the
International Labour Organization
(ILO) Declaration on Fundamental
Principles and Rights at Work and the
UN Universal Declaration of Human
Rights. We work in accordance with
a number of specific international
frameworks, including the Core
Conventions of the ILO and the
UN Guiding Principles on Business
and Human Rights. We are members
of the Plenary of the UN’s Voluntary
Principles on Security and
Human Rights.
Performance overview
Progress against our core sustainability strategy pillars
Achieved
On track
Not achieved
2015–20 Strategic priorities
Progress in 2017
Status
Safety
No fatalities
Nine fatalities occurred at Glencore assets during 2017
50% reduction of Group LTIFR by the end of 2020,
against 2015 baseline of 1.341
50% reduction in TRIFR by 2020 using 2014 figure
of 5.02 as a baseline1
Our LTIFR improved by 24% compared to our 2015 baseline,
mainly due to the exclusion of Glencore Agriculture. In 2017, our
LTIFR was 1.02 per million hours worked (2016: 1.40 including
Glencore Agriculture)
Our TRIFR improved by 38% compared to our 2014 baseline,
mainly due to the exclusion of Glencore Agriculture. Our 2017
TRIFR was 3.09 per million hours worked (2016: 4.05 including
Glencore Agriculture)
Health
Year-on-year reduction in the number of new cases
of occupational disease
46 new cases of occupational disease recorded, a 48% decrease
on 2016 (89 cases recorded, includes Glencore Agriculture)
Environment No major or catastrophic environmental incidents
Zero major or catastrophic environmental incidents
Established a group-wide carbon emission-intensity
reduction target of 5% on 2016 baseline by 2020
Our 2017 carbon emission intensity increased marginally to
4.78tGHG/tCu from 4.75tGHG/tCu in 2016. We are implementing
initiatives to deliver our 2020 carbon target.
High water risk assets to implement five-year water
targets for 2017–21
The identified high risk sites are currently carrying out operational
changes which are intended to result in overall improvements
Continue internal and external audit programme
for high-risk tailings storage facilities
Our internal and external audit programme for high-risk tailings
storage facilities was ongoing throughout the year
No serious human rights incidents
Zero serious human rights incidents
Implement our social value creation strategy
Identified material assets to report their socio-economic
contribution data
Distribute the Community Leadership Programme
Toolkit to all assets
The toolkit was distributed to all assets. Training on the toolkit took
place in Australia and South Africa. Further training sessions will be
held in Canada and South America in 2018
Community
and human
rights
1 Baseline figures include Glencore Agriculture.
26
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
We have been a member of the
International Council on Mining &
Metals since 2014. We endorse its
sustainable development framework
principles and are an active member
of its working groups.
We strongly support transparency in
the redistribution and reinvestment
of the payments we make to local
and national governments. We are
active participants in the Extractive
Industries Transparency Initiative (EITI).
We comply with the EU Accounting
and Transparency Directives; in line
with those provisions, we publish
separate annual reports detailing
material payments made to
governments, broken down
by country and project.
As part of our commitment to
responsible product stewardship, we
follow the UN globally harmonised
system for classification and labelling
of chemicals (GHS), the EU REACH
regulations on the registration,
evaluation, authorisation and
restriction of chemicals, and the
London Bullion Market Association
(LBMA) Responsible Gold guidance.
Where appropriate, we participate
in the REACH consortia related
to the materials we produce; these
include the consortia for zinc,
cadmium, sulphuric acid, lead
and precious metals.
We submit annual reports to
the CDP climate change and
water programmes.
Risk management and assurance
The identification, assessment
and mitigation of risk determines
our approach to sustainability
management. All of our assets
apply our risk management
framework and its supporting
guidelines. We align our framework
with international standards and it
provides a harmonised approach
to managing our health, safety,
environment, community, human
rights and reputational risks, as well
as those linked to the management
of financial and legal issues.
Our assets use the framework to
identify hazards, particularly those
with potentially major or catastrophic
consequences, and to develop plans
to address and eliminate, or mitigate,
the related risks. For each of the
identified catastrophic hazards we
have implemented a standardised
approach to identifying and
understanding their causes
and controls.
27
Glencore Annual Report 2017 Sustainable development
continued
Our internal HSEC assurance
programme has a primary focus
on our systematic management of
the catastrophic hazards and their
relevant controls and critical controls.
Senior subject matter experts
participate in the assurance
programme; our Board receives
reports on its findings, which are
actively followed up and verified.
The assurance programme is
contributing to improving standards
and performance group-wide.
Stakeholder engagement
We engage with all relevant
stakeholder groups to build
meaningful relationships and
understand their expectations and
aspirations. Through recognising the
importance of open and transparent
engagement, we are able to
minimise our negative societal
impact, optimise the value we
bring to local communities, and
maintain our licence to operate.
The geographies and markets in
which we operate are extremely
complex and we conduct dialogues
on local, national, regional and
international levels. As a result, we
engage on a broad variety of topics
with a wide range of stakeholders
with diverse interests and opinions.
Where appropriate, we take an
informed and constructive role in
public policy development processes.
For example, we are working with
policy makers directly and through
trade associations, on issues related
to clean energy, carbon reporting and
carbon pricing, recognising that
governments and industry must
work together to establish policy
frameworks that deliver the optimal
balance of social, environmental and
economic considerations appropriate
for individual nations.
28
Materiality assessment
We focus the reporting of our
sustainability performance and
progress on topics identified as being
material to Glencore’s development,
performance, position and/or future
prospects. Every two years, we
undertake a materiality assessment
to establish the material topics for
our sustainability strategy review
and sustainability reporting – these
topics have the potential to have
the greatest impact on Glencore’s
business activities.
In line with the GRI guidance
on materiality, our materiality
assessment involves a group-wide
review of material topics at global
and local levels. It also includes
information that reflects our
understanding of the issues that
affect our business and the natural
resources sector, our regulatory
requirements and the topics raised
during engagement with our people
and external stakeholders including
local communities, investors, the
media, governments and NGOs.
We consider a topic material if senior
management determines that it
may significantly affect our business
operations or have a significant
impact on any of our stakeholders.
Engaging with our stakeholders
We need constructive relationships
with our stakeholders to optimise our
business. We listen to and work with
others, to explore the challenges
we face as a business.
Our stakeholders include our employees
and contractors, host communities,
civil society, unions, governments,
business partners, non-governmental
organisations, investors and the media.
We reach out to them on local, national,
regional and international levels.
We engage with all stakeholder groups
to build meaningful relationships and
understand their expectations and
aspirations. This minimises any potential
negative societal impact, optimises the
value we bring to local communities,
and maintains our licence to operate.
We hold regular face-to-face meetings,
conference calls and participate
in multi-stakeholder discussions.
We participate in roundtables with
government and other industry
representatives to discuss new policies
as well as amendments to existing
legislation. We hold transparent
negotiations with union officials to
discuss wage and benefit agreements.
Our employees receive regular briefings
on health and safety matters. Many of
our assets hold regular open days, when
local community members can visit
our sites and interact with our
operational teams.
These activities are complementary;
together, they form part of our response
to global business issues and help us
to identify the issues that are of most
importance to our stakeholders.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Material topics
The topics identified as being material to Glencore’s development, performance,
position and future prospects:
Business model
Page 16
Exploration
Extraction/
production
Processing
and refining
Blending
and
optimisation
Logistics/
marketing
Catastrophic hazard
management
Health and safety
Climate change
Water and effluents
Waste and air emissions
Human rights
Community
HSEC pillars key
Product stewardship
Health
Safety
Environment
Community and human rights
Our progress in 2017
Catastrophic hazard management
We are committed to ensuring
the safety and wellbeing of our
people and the communities and
environment around us. Catastrophic
events that take place in the natural
resource sector can have disastrous
impacts on workers, communities,
the environment and corporate
reputation, as well as having
substantial financial cost. We are
actively identifying, monitoring and
mitigating the catastrophic hazards
within our business. The Board
receives regular updates on this
area and actively encourages an
approach of ongoing improvement.
Workplace health and safety
The health and safety of our people
is our top priority. Our ambition is to
become a health and safety leader,
and to create a workplace without
fatalities, injuries or occupational
diseases. We take a proactive,
preventative approach towards
health and safety. Our aim is to
establish a positive safety culture
that supports all of our employees
and contractors being empowered
to have the authority to stop work
if they consider a workplace or
situation unsafe. We believe that all
occupational fatalities, diseases and
injuries are preventable.
An important tool in improving
safety at our operations has been
the recording of high potential
risk incidents (HPRIs).
The reporting of HPRIs represents a
positive part of our strategy to reduce
fatalities and, as such, we do not
target a reduction in this metric.
During 2017, 78% of our recorded
HPRIs related to six hazards (mobile
equipment: 30%; ground/strata
failure: 13%; lifting and cranage: 9%;
working at heights: 8%; energy
isolation: 7% and fire and explosions:
4%). For each of these hazards, we
have developed protocols that detail
the actions necessary to identify and
29
Glencore Annual Report 2017 Sustainable development
continued
mitigate their associated risk.
The reported HPRIs also help us to
identify the activities that we need to
prioritise in order to advance further
our safety performance.
Lost time injury
frequency rate*
1.02
We are encouraging our workforce
to recognise the need to record and
report HPRIs through the promotion
of a risk-based safety culture.
2015
2016
2017
1.34
1.40
1.02
Total recordable injury
frequency rate*
3.09
2015
2016
2017
4.35
4.05
3.09
Number of
HPRIs reported
368
2015
2016
2017
338
405
368
New occupational
disease cases
46
2015
2016
2017
46
127
89
* Per million hours worked.
It is with deep regret that we have
not met our goal of zero fatalities. In
2017, nine people lost their lives at our
operations, compared to 16 during
2016. All loss of life is unacceptable
and we are determined to eliminate
fatalities across our Group.
Our lost time injury frequency rate
(LTIFR) reflects the total number of
LTIs per million hours worked and
does not include restricted work
injuries or fatalities. Our LTIFR are
recorded when an employee or
contractor is unable to work following
an incident; days recorded begin on
the first rostered shift that the worker
is absent after the day of the injury.
In 2017, our LTIFR was 1.02 per million
hours worked (2016: 1.40 including
and 1.22 excluding Glencore
Agriculture) and reflects the
continuing progress we are making
to embed a culture of safety at all
our assets. We are progressing well
against our long-term goal of
reducing employee and contractor
lost-time injuries by 50% by the end
of 2020 against a 2015 figure of 1.34.
The total recordable injury frequency
rate (TRIFR) is the sum of fatalities,
lost time injuries, restricted work
injuries and medical treatment
injuries per million hours worked.
The metric represents all injuries that
require medical treatment beyond
first aid. We are on track to meet the
progressive improvement required
to achieve our long-term goal of
achieving a 50% reduction in
TRIFR by the end of 2020, using our
2014 TRIFR of 5.02 as the baseline.
Our 2017 TRIFR of 3.09 is a 38%
improvement against the
2014 baseline.
30
Climate change
The impact on our business
As a significant producer of energy
products and a significant energy
consumer we are aware that energy
is a key input and cost to our business
as well as being a material source
of our carbon emissions. We are
working to mitigate the physical
impacts of climate change where we
can and consider resource efficiency
when making operational decisions.
Wherever we operate, we seek
to optimise our energy and
carbon footprint.
We recognise the global climate
change science as laid out by the
Intergovernmental Panel on Climate
Change and acknowledge the global
climate change goals outlined in
the United Nations Convention on
Climate Change Paris Agreement.
Following the broad consensus
reached by nation states, we
anticipate a global shift towards a
lower-carbon economy, supported
by appropriate policies and bringing
significant economic changes.
We believe the implementation
of measures by national and intra-
national governments, as well as
public sentiment, will continue to
drive public policy developments
and programmes to restrict global
greenhouse gas emissions (GHGs).
This is likely to affect our business
and represents both risks and
opportunities that our company
needs to manage. We support a
least-cost pathway to achieving
climate change goals that considers
the cost and consequences of all
available policy options and does not
hinder socio-economic development.
Addressing climate change
across our business
To address the impacts, opportunities
and risks relating to climate change
within our business, we have
established an internal cross-
functional and cross-commodity
working group, led by our Chairman
with Board oversight to consider
and examine climate change issues.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
CO2e Scope 1
(million tonnes)
21.6
2015
2016
2017
23.0
23.1
21.6
CO2 Scope 2
(million tonnes)
11.9
2015
2016
2017
14.3
12.2
11.9
Total energy use
(petajoules)
202
2015
2016
2017
236
222
202
The working group is overseeing
the ongoing integration of carbon
emissions and energy into our annual
business planning process and the
mapping to 2020 of our forward
projected energy and carbon
footprint. This work is feeding into
a detailed review of our carbon
emissions and energy profile. It
includes an assessment of potential
mitigation and abatement projects,
and underpins the basis of our
internal Marginal Abatement Cost
Curve (MACC).
In mid-2017, the work undertaken by
our climate change working group
resulted in Glencore establishing an
initial group-wide carbon emission-
intensity reduction target of at least
5% on 2016 levels by 2020, measured
in terms of tonnes of greenhouse
gases emitted per tonne of copper
equivalent industrial production
(tGHG/tCu).
In line with our expectations, our 2017
energy emission intensity increased
marginally compared with 2016,
from 4.75tGHG/tCu to 4.78tGHG/tCu.
This slight increase reflects energy
use relating to pre-stripping activity
and construction work for future
production improvements.
The small increase in 2017 was
anticipated when our 2020 target
was established. Structural carbon
intensity improvements are planned
for 2018 to 2020. Our 2018 carbon
budget process showed that we are
on track to meet our 2020 target as
we progress towards higher energy
efficiency levels and carbon-efficient
operational changes.
How we are taking action
We use renewable energy sources
where possible; renewable sources
deliver 13.5% of our total energy
needs (2016: 14% excluding Glencore
Agriculture). In Australia, we use
coal seam gas from our mines to
supplement power generation at a
number of our assets and have flares
installed at those underground coal
mines with the necessary supply
and concentration of methane.
We play an active role in engaging
with governments and other
interested stakeholders to develop
strategies for reducing the impact of
climate change. We actively support
the development of low emission
technologies and some renewable
energy sources.
We are investing in a number of low
carbon energy projects that address
direct and indirect emissions from
our operations. They include
treatment of fugitive emissions from
coal processing and ventilation air
methane and the large-scale CCS
coal energy demonstration project
(feasibility stage) in Australia
(described on page 32).
Reporting on our emissions
We divide CO2 emissions reporting
into three different scopes, in line
with the Greenhouse Gas Protocol,
and measure both the direct
and indirect emissions generated
by the industrial activities, entities
and facilities where we have
operational control.
During 2017, we emitted 21.6 million
tonnes CO2e of Scope 1 (direct
emissions) from our consumed fuel.
This figure includes emissions from
reductants used in our metallurgical
smelters. It also includes CO2e
of methane emissions from our
operations, which is around 36%
of our Scope 1 emissions. The
reduction in Scope 1 emissions
is mainly due to lower coal seam
emissions at our Australian
coal operations.
In 2017, we emitted 11.9 million
tonnes CO2 of Scope 2 location-based
(indirect emissions) which applied
appropriate country-by-country
grid emission factors to all of our
purchased electricity, regardless
of specific renewable electricity
contracts. Our Scope 2 reduction
was mainly due to the closure of
our Alumina operations in early 2016,
as well as some energy efficiency
gains at our ferroalloys smelters.
31
Glencore Annual Report 2017 Sustainable development
continued
Our Scope 3 emissions include
those from a broad range of sources,
including use of fossil energy that we
produce and shipping transportation.
We report our Scope 3 emissions
in our 2017 Sustainability Report.
In 2017, The Transition Pathway
Initiative (TPI), which aims to define
what the transition to a low carbon
economy looks like for companies
in high-impact sectors such as oil
and gas, mining and electricity
generation, awarded Glencore
a ‘Level Four – Strategic Assessment’.
This is the TPI’s highest score and
recognises the work that we have
undertaken to identify and address
the risks to our business posed by
climate change.
We publicly report to the CDP
Carbon Disclosure programme.
In 2017, Glencore achieved a CDP
score of B (2016: B).
Cross reference table to Task Force on Climate-related Financial Disclosures
Governance: Disclose the organisation’s governance around climate-related risks and opportunities
(a) Describe the Board’s oversight of climate-related
Board Committees: Page 87
risks and opportunities.
Risk – Board leadership: Page 90
(b) Describe management’s role in assessing and
Work at Board meetings: Page 89
managing climate-related risks and opportunities.
HSEC Committee report: Page 100
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on
the organisation’s businesses, strategy, and financial planning where such information is material
(a) Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium, and long term.
Principal risks and uncertainties/climate
change: Page 50
(b) Describe the impact of climate-related risks and
opportunities on the organisation’s businesses,
strategy, and financial planning.
Principal risks and uncertainties/climate
change: Page 50
(c) Describe the resilience of the organisation’s
strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario.
2017 Climate Change Considerations
for Our Business: Page 20
Risk management: Disclose how the organisation identifies, assesses, and manages
climate-related risks
(a) Describe the organisation’s processes for
identifying and assessing climate-related risks.
Principal risks and uncertainties/climate
change: Page 50
(b) Describe the organisation’s processes for managing
climate-related risks.
2017 Climate Change Considerations
for Our Business: Page 14
Addressing climate change across our
business: Page 30
(c) Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Principal risks and uncertainties: Page 50
Key performance indicators: Page 41
Metrics and targets: Disclose the metrics and targets used to assess and manage relevant
climate-related risks and opportunities where such information is material
(a) Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in
line with its strategy and risk management process.
Reporting on our emissions: Page 31
Key performance indicators: Page 41
(b) Disclose Scope 1, Scope 2 and, if appropriate,
Reporting on our emissions: Page 31
Scope 3 greenhouse gas (GHG) emissions, and the
related risks.
Key performance indicators: Page 41
(c) Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Addressing climate change across our
business: Page 30
32
Carbon capture
and storage (CCS)
The International Energy Agency has
identified CCS as a vital technology
if the world is to meet its greenhouse
gas reduction targets.
Since 2009, Glencore has participated
in a number of Australian low-emission
technology projects.
One of these is the Integrated
Surat Basin CCS project, which was
established in 2010 to demonstrate
the effectiveness of CCS technology
in the region.
The purpose of the study is to
deliver an integrated CCS project
incorporating carbon capture,
transport and sequestration to
establish a basis for permitting of
long-term CO2 storage in a suitable
location in Queensland.
This study will provide a framework
for a genuine best practice model
to deliver a viable commercial
approach to reducing CO2 emissions
in Queensland and elsewhere in
Australia, reducing Australia’s overall
carbon footprint and benefiting all
emitters of CO2 requiring storage.
For more information about CTSCo,
visit www.ctsco.com.au.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Water withdrawn
(million m3)
924
2015
2016
2017
954
971
924
2015 data is not directly comparable to
later periods due to changes in data
reporting methodology disclosed in our
2016 Sustainability Report.
In 2017, we withdrew 924 million m3
of water (2016: 971 million m3 or
829 million m3 excluding Glencore
Agriculture). The like-for-like increase
is mainly due to two assets increasing
their dewatering efforts as their
operational profiles reached
groundwater aquifers and all assets
aligning with our revised water
reporting requirements.
We are an active member of the
International Council on Mining &
Metals (ICMM)’s water management
working group and participated
in the development of its Position
Statement on Water Stewardship.
During 2017, our internal water
working group finalised our water
management guideline in line with
the ICMM’s position statement on
water and water management
framework. Furthermore we
completed our high-risk site
assessments related to water and
set up a process for the internal
sharing of best water-related
practices. In 2017, we harmonised
our water metrics to align with the
Water Accounting Framework (WAF)
of the Minerals Council of Australia.
Going forward, we will pilot the
ICMM’s catchment-based approach
to water management during the
first half of 2018. Catchment-based
water management is a
comprehensive, systematic approach
to identifying, evaluating and
responding to local water-related
risks through the lifecycle of an asset
as well as capturing an asset’s impact
on other local water users.
We publicly report to the CDP Water
Disclosure programme.
Financial Stability Board’s Task
Force on Climate-related Financial
Disclosures (TCFD)
We support the recently published
recommendations of the Financial
Stability Board’s TCFD. The TCFD has
developed a voluntary framework for
the reporting of climate-related
financial risk disclosures for use
by lenders, insurers, investors and
other stakeholders.
We welcome the opportunity
to engage with our stakeholders
on climate change matters and
report on our progress against the
Aiming for A initiative. During 2017,
we produced the second edition of
our Climate Change Considerations
for our Business publication. This
publication analyses the robustness
of our portfolio against climate-
related scenarios and provides
an assessment of the risks and
opportunities available to Glencore
in a low-carbon economy.
In response to the guidance
produced by the TCFD, we have
provided a cross-reference table
on page 32. The table references
the sections in this report and
other publications that meet the
guidance of the TCFD.
Water and effluents
Water is an essential component of
our business activities. We recognise
that water is a shared and finite
resource and we are conscious of
the increasing concerns of our local
stakeholders and other local water
users regarding ongoing availability
of water, security of access and the
potential for impacts on water supply.
We are committed to managing
our impact on water resources
responsibly. We prioritise efficient
water use, water reuse/recycling,
responsible waste water disposal
and maintaining any equipment that
may pose a hazard to water quality.
We engage with local water users to
avoid material adverse impacts on
the quality and quantity of local
water sources or compromising
their access to water.
33
Glencore Annual Report 2017 Sustainable development
continued
Waste and air emissions
Our operations emit emissions such
as sulphur dioxide (SO2), dust and
nitrogen oxide as well as generate
waste, which can affect the
environment and nearby
communities. We monitor all material
emissions and continuously look for
ways to reduce those that pollute the
air around us. Wherever we operate,
we comply with relevant regulatory
limits and/or international standards
for air emissions regarding SO2.
Our open cut operations emit dust
from excavation and movement of
material. We monitor dust levels at
affected communities and minimise
dust in a number of ways.
Our metal and coal assets generate
tailings, which are stored in purpose-
built tailings storage facilities. We
continuously monitor our tailings
facilities for integrity and structural
stability. Flooding and seismic activity
are the main natural phenomena
that may affect them. We have an
ongoing assurance programme
that specifically focuses on our
tailings facilities.
Our assets continually review their
waste management procedures
and identify opportunities for
improvement, to minimise the
impact of the waste we produce.
The increase in waste produced
during 2017 was primarily due to
increased stripping ratios at a
number of assets and the reopening
of an Australian coal operation.
Total amount of hazardous
and non-hazardous
mineral waste generated
(million tonnes)
2,129
2015
2016
2017
2,111
2,025
2,129
Sulphur dioxide emissions
(thousand tonnes)
358
2015
2016
2017
366
402
358
Community investment
spend (US$ million)
90
2015
2016
2017
94
84
90
Community complaints
1,063
2015
2016
2017
1,741
963
1,063
34
Community engagement and
social commitment compliance
The communities surrounding
our operations are our neighbours,
employees, business partners
and future workforce. Through our
commitment to two-way dialogue
with our local communities, we aim
to secure a broad base of support
for our activities. We aim to foster
sustainable growth where we
operate. We work with communities
to deliver socio-economic
development through investment
in infrastructure, procurement,
health and education projects.
We contribute to society throughout
our value chain, via employment,
procurement, enterprise
development, infrastructure and
social investment programmes.
Our community development
programmes are an integral part
of our community and stakeholder
engagement strategies. We design
our programmes to help reduce
dependency on our operations,
encourage self-reliance and
contribute to sustainable growth
in our host regions. In 2017,
we spent $90 million on these
programmes (2016: $84 million).
Human rights and
grievance mechanisms
We prioritise respect for human
rights everywhere that we operate.
We uphold the human rights of our
people and our local communities,
including vulnerable groups such
as women, children, indigenous
people and victims of conflict.
Respect for human rights is
enshrined in Glencore’s Code of
Conduct, which lays out the essential
requirements for our people and
stems from our values. It also
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
explicitly aligns our security
procedures with the United Nations
Voluntary Principles on Security and
Human Rights (Voluntary Principles).
We also endorse the Voluntary
Principles within our public Group
Human Rights Policy.
As a member of the Voluntary
Principles Initiative, we are working
with the member governments,
companies and NGOs to develop
further our approach towards human
rights. We have implemented the
Voluntary Principles at our assets
with a high risk of human rights
breaches since 2013.
Our Group Human Rights Policy
applies to all Glencore operations
and offices over which we have
operational control. The policy
requires our operations to identify
and assess risks of human rights
breaches as part of our general
risk assessment processes, which
include baseline and impact studies
at existing operations and due
diligence on new operations
and business partners.
Assets conduct regular human
rights training for their workforce.
This covers general human rights
awareness during day-to-day
activities for our wider workforce,
as well as focused Voluntary
Principles training for our security
employees and contractors.
At operations with a relatively high
risk of breaches of security-related,
human rights, we require our own
employees and private security
contractors to undergo specific
training on human rights, aligned
with the Voluntary Principles. Where
possible, we also provide awareness-
raising sessions on the Voluntary
Principles to public security forces
deployed on our concessions.
All our operations are required to
have in place grievance mechanisms
that are accessible, accountable and
fair, and that enable our stakeholders
to raise concerns without fear of
recrimination. We align our grievance
mechanisms with the requirements
of the UN Guiding Principles on
Business and Human Rights.
As a member of the Voluntary
Principles Initiative, we are working
with the member governments,
companies and NGOs to further
develop our approach towards
human rights.
During 2017, we received
1,063 complaints from the
communities living around our
operations. The majority of the
complaints received related to three
assets, Chad E&P, Mount Isa Mines
and Pasar, and concerned impacts
from construction works (Chad) and
emissions (Mount Isa and Pasar).
Further details of such will be set
out in our Sustainability Report.
We take all complaints seriously
and continuously look for new ways
to minimise our impacts.
Product stewardship
Our products are vital to today’s
society, creating devices used daily, all
over the world. Our goal is to provide
competitively priced commodities
that meet our customers’ needs and
contribute to global society, while
addressing any associated health,
societal and environmental risks.
We work with experts, industry
consortia and our peers to study
the properties and impacts of our
products throughout their lifecycles,
to spread understanding of our
products. We engage with a broad
range of stakeholders, including civil
society, governments and our
customers, to promote responsible
commodity sourcing. In 2017,
Glencore did not produce, process
or market any ‘conflict minerals’
originating from the conflict areas
as defined under the Dodd-Frank
Act (tin, tungsten, tantalum
and gold from the DRC and
adjoining countries).
35
Glencore Annual Report 2017 Sustainable development
continued
Our people
Our employees and contractors
are fundamental to our success.
At Glencore, our people are at the
heart of everything we do. We foster
an environment where our different
backgrounds, cultures and beliefs
are supported and encouraged. We
recognise that diversity brings new
ideas, innovation and different ways
of working and that mutual respect
leads to a driven workforce,
dedicated to our common goals.
We respect and implement relevant
local regulations and the International
Labour Organization Declaration on
Fundamental Principles and Rights
at Work.
Diversity
Reflecting the wide geographic
footprint of our workplaces, diversity
is at the core of Glencore’s approach
to its people. Our diversity policy
promotes a diverse and inclusive
workforce. We have established
guiding principles to improve
gender balance, encourage and
support diversity and to prevent
discrimination of gender or any
other diverse attribute. Our principles
support increased diversity awareness
throughout our business.
Group-wide, we employ
12,037 women, which is 14%
of our employees.
Not only do we have a diversified
portfolio of commodities and
services, our presence in 90
marketing offices and 150 assets in
more than 50 countries means our
people are varied, too. In our Baar
corporate office, we employ people
from 54 different nationalities, with
the gender balance approaching
40% female. Details of senior
management diversity is set out
on page 90.
Our people
We are proud of our people and our
shared commitment to who we are,
what we do and to continuously
improving the impact of our actions.
We recognise that our presence can
bring significant economic benefits
to our operating countries and the
communities living near to our assets.
Where possible, we employ
locally and our training and skills-
development programmes support
this ambition. Reflecting the diversity
of our business and workforce, we
tailor our training programmes to
meet the skills needed in the
communities that support our assets.
We periodically review the skills of
our current workforce against future
business requirements and take the
necessary steps to match available
talent against our current and
future requirements. When
appropriate, employees receive
training and skills development
to support their advancement.
During the year, a number of our
regional businesses were recognised
for their efforts to develop and
support their employees:
• our Australian copper business
received industry awards
recognising its outstanding
achievement in vocational
education and training
• our Canadian Raglan nickel mine
was recognised by the Conseil du
Patronat of Quebec for high rates
of job retention. This is particularly
pleasing considering the harsh
operating environment in the
far north of Canada
Our global rate of turnover was
9%; similar to that experienced
in 2016 (10%).
The success of our business is reliant
on attracting and retaining the
best people at every level. We offer
regular assessments of skill levels
and competence, with the aim of
identifying good performance, talent
and potential, and offering suitable
rewards, development opportunities,
and support.
Union relations
We recognise and uphold the rights
of our workforce to a safe workplace
and collective representation and
freedom of association. We are
committed to working honestly
and openly with labour unions
at all of our locations and treating
all employees with respect.
Workforce numbers at year end
Employees
Contractors
Total workforce
2015
100,614
55,854
2016
95,958
58,874
2017
(excluding
agriculture)
83,679
62,298
156,468
154,832
145,977
% of female employees
16
17
14
While several of our assets
successfully engaged in labour
re-negotiations during 2017, there
were various instances where labour
disputes occurred. Although where
we find ourselves in dispute with our
labour force or a part of it we usually
can find an acceptable solution
through negotiation, occasionally
a situation can be challenging.
36
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
At CEZ, a zinc refinery in Canada,
owned by the Noranda Income Fund
(NIF) and in which Glencore has a
25% stake and operates, members of
the United Steelworkers Union (USW)
went on strike in February. The labour
dispute resulted from the NIF’s cost
reduction initiatives to adjust to
market terms after the conclusion of
a 15-year term where the NIF enjoyed
the advantage of fixed processing
fees. In November, the 371 members
of the USW voted in favour of a
new six-year collective agreement.
The agreement was a compromise
between the NIF’s need to restructure
its cost base and the USW’s goal
of keeping its members’ pension
benefits unchanged.
During 2017, in Australia, we
negotiated new enterprise
agreements (EAs) with local
Construction, Forestry, Mining and
Energy Union (CFMEU) lodges
at 13 of our coal operations. At our
Oaky North mine we have been
negotiating with the CFMEU on a
new agreement for nearly three years.
In early 2018, following an extended
labour dispute, we reached an
in-principle agreement with national,
state and local CFMEU leaders;
regrettably Oaky North’s union
members voted against the
proposed agreement that would
have resulted in a return to work.
The in-principle agreed EA positions
the mine for a successful future.
Wellbeing
Our entire workforce shares
responsibility for creating, fostering
and maintaining a culture of safe
work. Our goal is a trained, competent
and motivated workforce. We actively
promote and support health and
wellness programmes for all of our
workers. Additionally, confidential
and voluntary counselling services
are made available to our employees
and their dependents to help
resolve both personal and work-
related problems.
Our progress in 2017
During the year, we continued
to advance the perception of our
employer brand. We took steps
to improve the consistency of our
employee communications, to
address transparently public
concerns and to engage actively
with interested stakeholders.
Together, these efforts are reinforcing
Glencore’s position as an employer
of choice in the main markets in
which we operate.
Our Fundamental Values
Our objectives and policies towards
our people reflect our values:
Safety
Our first priority in the workplace is
to protect the health and well-being
of all our people. We take a proactive
approach to health and safety; our
goal is continuous improvement in
the prevention of occupational
disease and injuries
Entrepreneurialism
Our approach fosters the highest
level of professionalism, personal
ownership and entrepreneurial spirit
in all our people while never
compromising on their safety
and well-being. This is important
to our success and the superior
returns we aim to achieve for all
our stakeholders.
Simplicity
We aim to achieve our key
deliverables efficiently as a path
to industry-leading returns, while
maintaining a clear focus on
excellence, quality, sustainability
and continuous improvement
in everything we do.
Responsibility
We recognise that our work can
have an impact on our society and
the environment. We care about
our performance in relation to
environmental protection, human
rights, and health and safety.
Openness
We value open relationships and
communication based on integrity,
co-operation, transparency and
mutual benefit, with our people,
our customers, our suppliers,
governments and society in general.
37
Glencore Annual Report 2017 Sustainable development
continued
Compliance
Glencore’s success is founded on a
reputation, built over many years,
as being an honest and reliable
business partner. By upholding our
commitment to ethical business
practices, we seek to maintain this
reputation and meet our long-term
objectives through being regarded
as a business partner of choice.
Our Approach
We seek to maintain a culture of
ethical behaviour and compliance
throughout the Group, rather than
simply performing the minimum
required by laws and regulations.
We will not knowingly assist any
third party in breaching the law, or
participate in any criminal, fraudulent
or corrupt practice in any country.
To support this, we have
implemented a Group compliance
programme that includes a range
of policies, procedures, guidelines,
training and monitoring.
Our permanent and temporary
employees, directors and officers (as
well as contractors, where they are
under a relevant contractual
obligation) must comply with our
compliance policies, procedures and
guidelines that apply to their work,
in addition to complying with
applicable laws and regulations.
When we enter into joint ventures
where we are not the operator, we
seek to influence our partners to
adopt similar policies to ours.
Group Policy Framework
Our policy framework encompasses
our values, Code of Conduct and
policies, procedures and guidelines
on various compliance topics
including anti-corruption, sanctions,
anti-money laundering, the
prevention of fraud, market abuse,
the prevention of the facilitation of
tax evasion, anti-trust, data protection
and conflict of interest. This
framework reflects our commitment
to uphold good business practices
and to meet or exceed applicable
laws and external requirements.
We emphasise their importance
in our business activities, including
recruitment, induction, supplier
briefings and external engagement
activities. Training and awareness on
our policies, procedures and
guidelines, as well as strong
leadership, are critical components
of our compliance programme.
They ensure our employees
understand the behaviour expected
of them and provide guidance on
how they can identify and practically
approach legal and ethical dilemmas
in their daily work lives.
Compliance officers are full time
compliance employees who provide
dedicated compliance support to the
business. Compliance coordinators,
guided by the Group compliance
team, take on the role in addition to
their primary role. They support our
employees in day-to-day business
considerations, particularly those
seeking advice on ethical, lawful
behaviour or policy implementation.
The Group currently has
111 compliance officers and
coordinators. Employees may access
the telephone, email and postal
contact details of our compliance
officers and coordinators via the
Group intranet, their local intranet
and notice boards.
Employees can access the
compliance policies, procedures and
guidelines through various channels,
including via the compliance team,
the Group intranet or local intranet of
the specific asset at which they work.
Our managers and supervisors are
responsible for ensuring employees
understand and comply with the
policies and procedures. We monitor
and test their implementation on
a regular basis. Employees and
contractors who have access to a
work computer must confirm their
awareness and understanding
of our compliance requirements
electronically every year. Certain
assets implement their own policies
and procedures in addition to those
of the Group. These are designed to
address specific local requirements,
while being consistent with our
policy framework.
In accordance with our Code of
Conduct, anybody working for
Glencore who breaches the law, the
Code of Conduct, or other policies or
procedures may face disciplinary
action including dismissal. In 2017,
Glencore dismissed 284 employees
(2016: 318 and 2015: 523) for
breaching the Code of Conduct.
The dismissals predominantly related
to failures to follow safety instructions
or policies, or misappropriation of
company property.
The Group Business Ethics
Committee (BEC)
The BEC comprises Glencore’s CEO,
senior management and members
of the compliance team, as well as
external counsel. The BEC considers
compliance issues relevant to the
Group and reviews and approves our
policies, procedures and guidelines.
The BEC reports to the Audit
Committee. The policies, procedures
and guidelines approved by the BEC
are implemented by our compliance
team. The BEC meets two times per
year and its sub-committee meets
four times per year to consider in
more detail matters addressed
by the BEC.
38
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Training and Awareness
Our employees receive induction
sessions and ongoing training on a
range of compliance issues. In 2017,
31,737 employees and contractors
(2016: 29,569) completed our Code of
Conduct e-learning, which includes
guidance on raising concerns. In
addition, 22,872 (2016: 20,119)
completed e-learning training on our
global anti-corruption policy, which
includes guidance on giving and
receiving gifts and entertainment.
The target audience of the Code of
Conduct e-Learning is employees
with regular access to a work
computer and the training on
anti-corruption targets those whose
function may require them to interact
with third parties. For those
employees who do not have regular
access to a work computer, we
provide training in other ways
including induction sessions, pre-shift
general training and toolbox talks. In
addition, compliance officers and
coordinators conduct face-to-face
training for relevant employees to
raise awareness about compliance
risks related to their functions and to
train them on Glencore’s compliance
policies and procedures.
Monitoring
As part of the Group compliance
programme, we conduct monitoring
to test and verify compliance with
the Group policies, procedures and
guidelines and with the laws and
regulations applicable to Glencore’s
marketing and industrial activities.
This entails performing periodic and
ad hoc testing reviews in accordance
with the corporate testing and
monitoring plans, analysing
documents and procedures and,
in the case of findings, collaborating
with the relevant marketing office or
industrial operation to determine
the most appropriate course of
action, including any required
corrective action.
Bribery and corruption
Glencore’s Global Anti-Corruption
Policy is available on the Group
website. It contains our clear position
on bribery and corruption: the
offering, paying, authorising,
soliciting or accepting of bribes is
unacceptable. We conduct analysis
for corruption risks within our
businesses and seek to address these
risks through policies and procedures,
training and awareness raising,
monitoring and controls.
Glencore is a member of the
Partnering Against Corruption
Initiative (PACI). Members collaborate
on collective action and share leading
practice in organisational compliance.
The initiative is based on a
commitment to zero tolerance on
bribery and implementation of
practical and effective anticorruption
programmes. We are also an
associate member of the Maritime
Anti-Corruption Network (MACN).
The Group has also implemented the
Third Party Due Diligence Procedures
which seek to ensure that our third
party relationships are in accordance
with applicable laws and regulations
and the Global Anti-Corruption Policy.
The procedures set out a process
whereby circumstances that may
pose a corruption risk are reviewed,
addressed and taken into
consideration when deciding
whether and on which conditions
to proceed with a third party
relationship, particularly
intermediaries, joint-ventures and
service providers on a risk basis.
Sanctions
Glencore is committed to respecting,
upholding and complying with all
sanctions applicable to our business
and to all transactions in which we
engage, regardless of our role or
location. The applicability and scope
of the applicable sanctions can differ
per transaction, jurisdiction and other
factors. The Glencore Global
Sanctions Policy sets our approach
to sanctions and how we seek to
comply with applicable sanctions
and appropriately manage sanctions
risk. The Glencore Sanctions
Procedures outline the steps and
procedures we take to ensure
compliance with the Global
Sanctions Policy.
Prevention of Facilitation
of Tax Evasion
The Group does not tolerate tax
evasion of any kind, including
facilitation of tax evasion by any
person employed or contracted to
the Group or acting on its behalf
and has procedures which seek to
prevent any such facilitation.
Reporting Misconduct
If one of our people encounters a
situation that appears to breach our
policy framework that individual
must raise this promptly with his or
her immediate supervisor or
manager. Alternatively, the individual
may raise the concern with another
appropriate manager, compliance
officer or coordinator, or a member
of the BEC. If a concern remains
unresolved through local channels, it
can be referred to the Group’s Raising
Concerns programme. In countries
with low levels of internet access we
have telephone numbers, made
known to our people via notice
boards. Those who call or use the
online form may choose to raise their
concerns anonymously. Nobody
working for Glencore suffers
demotion, penalty or any other
disciplinary action for raising a
concern in good faith.
In 2017, the Raising Concerns
programme received 183 (2016: 153)
reports from employees, contractors
or third parties regarding situations
in which Group policies appeared to
be breached.
39
Glencore Annual Report 2017 Key performance indicators
Our financial and non-financial key performance indicators (KPIs) provide
a measure of our performance against the key drivers of our strategy
Financial key performance indicators
Adjusted EBIT/EBITDA◊ (US$ million)
14,762
2
0
1
5
2
0
1
6
2
0
1
7
2,172
8,694
3,930
10,268
8,552
14,762
EBITDA
EBIT
Funds from operations (FFO)◊
(US$ million)
11,556
2
0
1
5
2
0
1
6
2
0
1
7
6,615
7,770
11,556
Definition
Adjusted EBIT/EBITDA provide insight into our
overall business performance (a combination
of cost management, seizing market opportunities
and growth), and are the corresponding flow
drivers towards our objective of achieving industry-
leading returns.
Adjusted EBIT is the net result of revenue less cost of
goods sold and selling and administrative expenses,
plus share of income from associates and joint
ventures, dividend income and the attributable share
of Adjusted EBIT of relevant material associates and
joint ventures, which are accounted for internally by
means of proportionate consolidation, excluding
Significant items, Adjusted EBITDA consists of
Adjusted EBIT plus depreciation and amortisation,
including the related Proportionate adjustments.
2017 performance
Adjusted EBITDA was $14,762 million and Adjusted
EBIT was $8,552 million, increases of 44% and 118%
respectively compared to 2016, primarily driven by
higher commodity prices.
Market sentiment and commodity prices continued
to improve over 2017 following the cyclical lows
reached over H1 2016. The positive impact of the
higher prices on Adjusted EBITDA was somewhat
tempered by moderate cost inflation and the effects
of a weaker US dollar against most producer
country currencies.
Links to strategy
Definition
Funds from operations (FFO) is a measure that reflects
our ability to generate cash for investment, debt
servicing and distributions to shareholders.
2017 performance
FFO of $11.6 billion was 49% up on 2016, reflecting the
improved Adjusted EBITDA noted above and a tax
payments cycle reflective of last year’s lower earnings.
It comprises cash provided by operating activities
before working capital changes, less tax and net
interest payments plus dividends received, related
Proportionate adjustments and Significant items,
mainly comprising movements in coal related
mark-to-market items.
Links to strategy
Net funding/Net debt and
FFO to net debt◊ (US$ million)
10,673
2
0
1
5
2
0
1
6
2
0
1
7
41,245
25,889
32,619
15,526
32,898
10,673
0
30
60
90
120
Net debt
Net funding
FFO to
net debt (%)
Definition
Net funding/Net debt demonstrates how our debt is
being managed and is an important factor in ensuring
we maintain an investment grade rating status and
a competitive cost of capital.
2017 performance
Net funding as at 31 December 2017 increased by
$279 million to $32,898 million, whereas net debt (net
funding less readily marketable inventories) decreased
by $4,853 million over the year to $10,673 million.
Net debt is defined as total current and non-current
borrowings less cash and cash equivalents, readily
marketable inventories and related Proportionate
adjustments. The net debt assumed in the Volcan
acquisition (completed mid-November 2017) has also
been adjusted to provide a more consistent and
comparative analysis, but mostly to reflect the Group’s
relatively low 23.3% economic ownership (compared
to its 63.0% voting interest) in this still fully ring-fenced
listed entity, with its standalone, independent and
separate capital structure. The relationship of FFO
to net debt is an indication of our financial flexibility
and strength.
The latter measurement reflecting the increase in
readily marketable inventories ($5,132 million of the
working capital outflow of $5,245 million) over the
year due to a combination of increased commodity
prices and further investments into the strengthening
commodity market environment.
FFO to Net debt more than doubled to 108.3% in line
with higher FFO and lower Net debt over the period.
Links to strategy
Net income attributable
to equity holders (US$ million)
Definition
Net income attributable to equity shareholders is a
measure of our ability to generate shareholder returns.
5,777
2
0
1
5
2
0
1
6
2
0
1
7
(4,964)
1,379
5,777
◊ Refer to APMs section on page 197 for definition and reconciliations.
40
2017 performance
Net income attributable to equity holders increased
from a profit of $1,379 million in 2016 to a profit of
$5,777 million in 2017, reflecting the Adjusted EBIT
increase described above as well as lower impairment
charges net of gains on disposals.
Links to strategy
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Strategic priorities
Integration of
sustainability
throughout
our business
Maintain a robust
and flexible
balance sheet
Focus on cost control
and operational
efficiencies
Non-financial key performance indicators
Our strategy for a
sustainable future
Page 20
Safety: Total recordable injury
frequency rate (TRIFR)
(per million hours worked)
2
0
1
5
2
0
1
6
2
0
1
7
Water withdrawn*
(million m3)
2
0
1
5
2
0
1
6
2
0
1
7
4.35
4.05
3.09
954
971
924
*2015 data is not directly comparable to later periods
due to changes in data reporting methodology.
Carbon emissions
(million tonnes CO2*)
2
0
1
5
2
0
1
6
2
0
1
7
23.0
14.3
37.3
23.1
12.2
35.3
21.6
11.9
33.5
*Scope 1 emissions are measured in CO2e
Scope 1
Scope 2
location
based
Community investment spend
(US$ million)
2
0
1
5
2
0
1
6
2
0
1
7
94
84
90
Definition
We believe that every work-related incident, illness
and injury is preventable and we are committed
to providing a safe workplace.
TRIFR is the sum of fatalities, lost time injuries,
restricted work injuries and medical treatment injuries
per million hours worked. The metric represents all
injuries that require medical treatment beyond
first aid.
2017 performance
We are saddened to report that in 2017 nine people
lost their lives at our operations (2016: 16 people).
All loss of life is unacceptable and we are determined
to eliminate fatalities across our Group.
Our TRIFR is 3.09 per million hours worked, an
improvement over 4.05 recorded in 2016. We remain
on track to meet our long-term TRIFR goal of a 50%
reduction by 2020 using our 2014 TRIFR of 5.02 as
a baseline.
Links to strategy
Definition
Water withdrawal is a measure of our operational
resource efficiency.
Our operations have an ongoing responsibility to
increase the reuse of processed and use of recycled
waste water in order to reduce our impact on local
water supplies. Recycled water is predominantly
used in place of fresh water for processes such
as dust suppression.
2017 performance
In 2017, we withdrew 924 million m3 of water
(2016: 971 million m3). We are committed to
managing our impact on water resources responsibly.
We prioritise efficient water use, water reuse/recycling,
responsible waste water disposal and maintaining any
equipment that may pose a hazard to water quality.
Links to strategy
Definition
Our CO2 emissions reporting is separated into
Scope 1 and Scope 2 – location-based emissions.
Scope 1 includes emissions from combustion in
owned or controlled boilers, furnaces and vehicles/
vessels and coal seam emissions.
Scope 2 – location-based emissions applies the
grid emission factor to all our purchased electricity,
regardless of specific renewable electricity contracts.
We monitor and report both the direct and
indirect emissions generated by the industrial
activities, entities and facilities where we have
operational control.
2017 performance
During 2017, we emitted 21.6 million tonnes CO2e
of Scope 1 (direct emissions). The improvement over
2016 is mainly as a result of lower coal seam emissions
in our Australian coal operations.
We emitted 11.9 million tonnes CO2 of Scope 2 –
location based (indirect emissions). The small
reduction in Scope 2 emissions was caused by the
closure of Sherwin Alumina and some energy
efficiency gains in our Ferroalloys smelters.
Links to strategy
Definition
Community investments are our contributions to,
and financial support of, the broader communities
in the regions where we operate.
Funds are set aside to support initiatives that benefit
communities and local sustainable development.
We also make in-kind contributions, such as
equipment and management. We support
programmes for community development,
enterprise and job creation, health, education
and the environment.
2017 performance
In 2017, the funds we made available for
community investments were $90 million, an
increase on the amount invested in 2016 ($84 million).
Our community development programmes are an
integral part of our community and stakeholder
engagement strategies and our investments
supported various initiatives in all of our
operating regions.
Links to strategy
Non-financial indicators includes information and data from our industrial activities, including only assets where we have operational control, and excluding investment,
marketing and holding companies. The community investments spend also includes our marketing activities.
For some 2016 and 2015 indicators, data has been restated to reflect improvements in our data collection, analysis and validation systems.
41
Glencore Annual Report 2017 Principal risks
and uncertainties
Glencore is exposed to a variety of risks that can have an impact on our
business and prospects, future performance, financial position, liquidity,
asset values, growth potential, sustainable development and reputation
Therefore, risk management is one of the key responsibilities of the
Board and its Audit and HSEC Committees. Our principal risks and
uncertainties – whether under our control or not – are highly dynamic
and our assessment and our responses to them are critical to our future
business and prospects
Our risk management framework
identifies and manages risk in a way
that is supportive of our strategic
priorities of opportunistically
deploying capital, while protecting
our future financial security and
flexibility. Our approach towards
risk management is framed by our
ongoing understanding of the risks
that we are exposed to, our risk
appetite and how these risks
change over time.
The Board assesses and approves our
overall risk appetite, monitors our risk
exposure and sets the Group-wide
limits, which are reviewed on an
ongoing basis. This process is
supported by the Audit and HSEC
Committees, whose roles include
evaluating and monitoring the risks
inherent in their respective areas as
described on pages 92–93. The
current assessment of our principal
risks, according to exposure and
impact, is detailed on the following
pages. In accordance with UK
Financial Reporting Council guidance,
we define a principal risk as a risk
or combination of risks that can
seriously affect the performance,
future prospects or reputation of
Glencore. These include those risks
which would threaten the business
model, future performance, solvency
or liquidity of the Group. We look at
risk appetite from the context of
severity of the consequences
should the risk materialise, factors
influencing the risk and the
Company’s ability to mitigate it.
In compiling this assessment we have
indicated the impact and likelihood
of these risks in comparison with
a year ago in the chart below.
The commentary on the risks in this
section should be read in conjunction
with the explanatory text under
Understanding the information
on risks which is set out on the
following page.
The natural diversification of
our portfolio of commodities,
geographies, currencies, assets and
liabilities is a source of mitigation for
some of the risks we face. In addition,
through our governance processes
and our proactive management
approach we seek to mitigate, where
possible, the impacts of certain risks
should they materialise. In particular:
• our liquidity risk management
policy requires us to maintain
(via a $3 billion minimum
prescribed level) sufficient cash
and cash equivalents and other
sources of committed funding
available to meet anticipated and
unanticipated funding needs
• making use of credit enhancement
products, such as letters of credit,
insurance policies and bank
guarantees and imposing limits
on open accounts extended
• our management of marketing risk,
including daily analysis of Group
value at risk (VaR)
2017 developments
The following remain the leading
risks (i.e. those posing the greatest
potential threat) which the
Group faces:
1. Reduction in commodity prices:
there has been a general rise in
commodity prices over the past
18 months. Notwithstanding these
firmer price conditions, we remain
mindful that underlying markets
can be volatile and we continue to
focus on the partially controllable
element of the margin equation –
costs. Any significant downturn
in the current commodity price
environment, especially in zinc,
copper or coal, would have a
severe drag on our financial
performance. As a result, this
continues to be the Group’s
foremost risk.
2. Fluctuations in supply of, or
demand for commodities: the
depression of commodity prices
reflects the actual, perceived
or prospective increases in
supply of commodities and/or
reductions in demand.
3. Fluctuations in currency exchange
rates: the rise in commodity prices
noted above is associated with a
generally weaker U.S. dollar versus
producer country currencies.
Although strong producer
currencies are generally detrimental
over the short term to our locally
denominated operating costs, this
can be outweighed by stronger
42
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
2017 developments and overview of principal risks and uncertainties
e
r
e
v
e
S
j
r
o
a
M
e
t
a
r
e
d
o
M
r
o
n
M
i
t
c
a
p
m
I
1
13
3
4
6
2
7
8
11
12
9
5
10
Key
Risk impact
Minor
Moderate
Major
Severe
External risks
1
2
Reductions in commodity prices
Fluctuations in the supply of, or demand
for, the commodities in which we operate
Fluctuations in currency exchange rates
Geopolitical risk including social unrest
Laws, regulations, enforcement, permits
and licences to operate
Liquidity risk
3
4
5
6
Business risks
7
8
9
Counterparty credit and performance
Operating and cost risks
Cyber risk
Sustainability risks
10
11
12
13
Emissions and climate change
Community relations and human rights
Skills availability and retention
Health, safety, environment,
including potential catastrophes
Unlikely
Possible
Likely
Almost certain
Indicates change in 2017
Probability
In reassessing our risk analysis, we
have concluded that: cyber should
now be a stand-alone risk; sourcing,
freight, storage infrastructure and
logistics related risks no longer merit
inclusion as a separate risk; and we
have combined development and
operating risks and cost control as
Operating and cost risks as they are
largely inter-related.
world economic conditions
and the associated increases in
commodity prices that may derive
from this. Additionally, currency
rates can change for political and
economic reasons unlinked to the
commodities markets, which could
result in a mismatched impact of
pricing and currency movements
resulting in income volatility.
4. Health, safety, environment
including catastrophic hazards:
a serious failure in safety, health
and environmental management
could result in an operational
emergency or catastrophe, injuries
or fatalities and a negative impact
on our corporate reputation.
In particular, catastrophic
hazards such as tailings leakages
and collapses of pit walls or
underground tunnels represent
significant unquantifiable risks
for resources companies. During
2017, the HSEC Committee
continued to concentrate on
the management and mitigation
of the Group’s catastrophic
hazards – see page 100.
5. Liquidity risk: while our net debt
has further reduced in 2017, we
remain cognisant that access to
credit is vital and that debt
markets can be volatile.
Changes in risk exposure
and analysis
As a result of the strong economic
growth momentum seen over the
past 18 months and the repositioning
of our balance sheet and reduction in
the cost and capex structures of our
portfolio, the probability of liquidity
risk and counterparty credit and
performance exposures materialising
has reduced. Climate change
initiatives continue to be at the
forefront during 2017. Many countries
began to implement their
commitments to address climate
change, e.g. through announcing
limits on the number of petrol/diesel
cars to be produced or imposing
production limits on certain
industries. These events have led to
an increase, compared to 2016, both
in the probability of risk exposure and
its impact related to emissions and
climate change.
43
Glencore Annual Report 2017
Principal risks
and uncertainties
continued
Longer-term viability
In accordance with the requirements
of the UK Corporate Governance
Code, the Board has assessed the
prospects of the Group’s viability over
the four-year period from 1 January
2018. This period is consistent with
the Group’s established annual
business planning and forecasting
processes and cycle which is subject
to review and approval each year
by the Board. The four-year plan
considers Glencore’s Adjusted
EBITDA, Capital expenditure, Funds
from operations (FFO) and Net debt,
and the key financial ratios of Net
debt to Adjusted EBITDA and FFO
to Net debt over the forecasted
years and incorporates stress tests
to simulate the potential impacts
of exposure to the Group’s principal
risks and uncertainties.
These scenarios included:
• a prolonged downturn in the price
and demand of commodities most
impacting Glencore’s operations
• foreign exchange movements to
which the Group is exposed as a
result of its global operations
• consideration of the potential
impact of adverse movements in
macro-economic assumptions and
their effect on certain key financial
KPIs and ratios which could
increase the Group’s access
to or cost of funding
The scenarios were assessed taking
into account current risk appetite and
any mitigating actions Glencore could
take, as required, in response to the
potential realisation of any of the
stressed scenarios.
Based on the results of the related
analysis, the Directors have a
reasonable expectation that the
Group will be able to continue in
operation and meet its liabilities as
they fall due over the four-year period
of this assessment. They also believe
that the review period of four years
is appropriate having regard to the
Group’s business model, strategy,
principal risks and uncertainties,
and viability.
Understanding the information on risks
There are many risks and uncertainties which have the
potential to significantly impact our business, including
competitive, economic, political, legal, regulatory, social,
business and financial risk. The order in which these risks
and uncertainties appear does not necessarily reflect the
likelihood of their occurrence or the relative magnitude
of their potential material adverse effect on our business.
We have sought to provide examples of specific risks.
However, in every case these do not attempt to be an
exhaustive list. These principal risks and uncertainties should
be considered in connection with any forward looking
statements in this document as explained on page 220.
In addition, more information on our risks is available in the
relevant sections of our website.
To provide for concise text:
• where we hold minority interests in certain businesses,
although these entities are not generally subsidiaries, the
interests are mostly taken as being referred to in analysing
these risks, and “business” refers to these and any business
of the Group
• where we refer to natural hazards, events of nature or similar
phraseology we are referring to matters such as earthquake,
flood, severe weather and other natural phenomena
Identifying, quantifying and managing risk is complex and
challenging. Although it is our policy to identify and, where
appropriate and practical, actively manage risk, our policies
and procedures may not adequately identify, monitor and
quantify all risks.
• where we refer to “mitigation” we do not intend to suggest
that we eliminate the risk, but rather it shows the Group’s
attempt to reduce or manage the risk. Our mitigation of risks
will usually include the taking out of insurance where it is
customary and economic to do so
This section describes our attempts to manage, balance or
offset risk. Risk is, however, by its very nature uncertain and
inevitably events may lead to our policies and procedures not
having a material mitigating effect on the negative impacts
of the occurrence of a particular event. Our scenario planning
and stress testing may accordingly prove to be optimistic,
particularly in situations where material negative events
occur in close proximity. Since many risks are connected,
our analysis should be read against all risks to which it may
be relevant.
In this section, we have sought to update our explanations,
reflecting our current outlook. Mostly this entails emphasising
certain risks more strongly than other risks rather than the
elimination of, or creation of, risks. Certain investors may also
be familiar with the risk factors that are published in the
Group debt or equity prospectuses or listing documents.
These provide in part some differing descriptions of our
principal risks. A recent example is available on our website
at: http://www.glencore.com/who-we-are/governance
• this section should be read as a whole – often commentary
in one section is relevant to other risks
• “commodity/ies” will usually refer to those commodities
which the Group produces or sells
• “law” includes regulation of any type
• “risk” includes uncertainty and hazard and together with
“material adverse effect on the business” should be
understood as a negative change which can seriously affect
the performance, future prospects or reputation of the
Group. These include those risks which would threaten the
business model, future performance, reputation, solvency
or liquidity of the Group
• a reference to a note is a note to the 2017 financial statements
• a reference to the sustainability report is our 2017
sustainability report to be published in May 2018
44
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Strategic priorities
Integration of
sustainability
throughout
our business
Maintain a robust
and flexible
balance sheet
Focus on cost control
and operational
efficiencies
Risk description
External risks
Comments/impacts to the Group
Mitigation and risk appetite
1
Reductions in commodity prices
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. Outside of the inherent risk of commodity prices on unmined reserves/
resources, flat price exposure on extracted or trading related positions is to be hedged.
The revenue and earnings of substantial
parts of our industrial activities and, to a
lesser extent, our marketing activities, are
dependent 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 participants,
global political and economic conditions,
related industry cycles and production costs
in major producing countries.
Diversification of our portfolio of commodities,
geographies, currencies, assets and liabilities.
Government policy decisions can be very
important, e.g. in reducing the demand for
coal or increasing its pricing (via carbon taxes) –
see Emissions and climate change below.
New or improved energy production or
technologies can also reduce the demand
for some commodities such as coal.
Also see our longer-term viability analysis above
and the business review on page 60.
A significant downturn in the price of
commodities generally results in a decline
in our profitability and could potentially result
in impairment and balance sheet constraints.
It is especially harmful to profitability in the
industrial activities, which are more directly
exposed to price risk due to the higher level
of fixed costs.
The dependence of the Group (especially our
industrial business) on commodity prices,
make this the Group’s foremost risk. See the
Chief Executive Officer’s review on page 4
and the financial review on page 52.
Any economic developments, particularly
impacting China and other fast growing
countries, could lead to reductions in
demand for, and consequently prices
of, commodities.
2
Fluctuations in the supply of, or demand for, the commodities in which we operate
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. Although an inherent risk in the extractive and marketing industries,
we seek to ensure this risk is minimised through scale of operations and diversity of product.
We are dependent on the expected volumes
of supply or demand for commodities
which can vary for many reasons, such
as competitor supply policies, changes
in resource availability, government policies
and regulation, costs of production, global
and regional economic conditions, demand
in end markets for products in which the
commodities are used. These also include
technological developments, e.g. commodity
substitutions, fluctuations in global
production capacity, global and regional
weather conditions, natural disasters and
diseases, all of which impact global markets
and demand for commodities. Furthermore,
changes in expected supply and demand
conditions impact the expected future
prices (and thus the price curve) of
each commodity.
Future demand for certain commodities
might decline (fossil fuels), whereas others
might increase (such as copper, cobalt, and
nickel for their use in electric vehicles and
batteries), taking into consideration the
“greening” of the global economy.
This risk is currently prevalent in various
commodities, such as steel, coal and oil.
In particular, many analysts believe that
demand for coal will reduce sooner than
previously expected due to significant cost
reductions in renewable capacity and greater
efficiencies from coal power plants.
Also see Emissions and climate
change below.
Market price responses to such changes
are neither instantaneous nor perfectly
calibrated nor can the sustained
implementation of such policies be certain.
Diversification of our portfolio of commodities,
geographies, currencies, assets and liabilities.
Making sure we are prepared for the shift in
commodity demand by putting a special focus
on the parts of the business that will potentially
grow with the anticipated increase of electric
vehicles and battery production and closely
monitor fossil fuel (particularly thermal
coal) demands.
See the Chief Executive Officer’s review on
page 4 and the business review on page 60.
45
Glencore Annual Report 2017
Principal risks
and uncertainties
continued
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
3
Fluctuations in currency exchange rates
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. Where possible foreign exchange exposure to non operating foreign exchange
risk are to be hedged.
The vast majority of our transactions are
denominated in U.S. dollars, while operating
costs are spread across many different
countries, the currencies of which fluctuate
against the U.S. dollar. A depreciation in the
value of the U.S. dollar against one or more
of these currencies will result in an increase
in the cost base of the relevant operations
in U.S. dollar terms.
The main currency exchange rate exposure
is through our industrial assets, as a large
proportion of the costs incurred by these
operations is denominated in the currency
of the country in which each asset is located.
The largest of these exposures are to the
currencies listed on page 61.
Currency fluctuations tend to move in
symmetry with those in commodity prices
and supply and demand fundamentals as
noted above, such that decreases in
commodity prices are generally associated
with increases in the U.S. dollar relative to
local producer currencies and vice versa.
If this occurs then it is detrimental to us
through higher equivalent U.S. dollar
operating costs at the relevant operations.
This negative, however, would usually be
offset to some extent by the increases
in commodity prices which had caused
this change.
In respect of commodity purchase and sale
transactions denominated in currencies other
than U.S. dollars, the Group’s policy is usually to
hedge the specific future commitment through
a forward exchange contract. From time to time,
the Group may hedge a portion of its currency
exposures and requirements in an attempt
to limit any adverse effect of exchange
rate fluctuations.
4
Geopolitical risk including social unrest
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: High. We operate in countries with less developed political regimes. To be
considered a truly diversified commodities group, operations in these jurisdictions are required.
We operate and own assets in a large
number of geographic regions and countries,
some of which are categorised as developing,
complex or having unstable political or social
climates. As a result, we are exposed to a
wide range of political, economic, regulatory,
social and tax environments. The Group
transacts business in locations where
it is exposed to a risk of overt or effective
expropriation – resource nationalism
continues to be a challenging issue in
many countries. Our operations may also
be affected by political and economic
instability, including terrorism, civil disorder,
violent crime, war and social unrest.
Increased scrutiny by governments and
tax authorities in pursuit of perceived
aggressive tax structuring by multinational
companies has elevated potential tax
exposures for the Group.
Policies or laws in the countries in which we
do business may change in a manner that
may be adverse for us, even those with
stable political environments e.g. many
governments have sought additional sources
of revenue by increasing rates of taxation,
royalties or resource rent taxes.
We have no control over changes to policies,
laws and taxes.
The OECD tax reporting initiative on Base
Erosion and Profit Sharing (BEPS) is now
effective and in 2018 the Group will report for
the first time with regard to the 2017 tax year.
The continued operation of our existing
assets and future plans are in part dependent
upon broad support, our ‘‘social licence to
operate’’, and a healthy relationship with the
respective local communities – see further
Community Relations and Skills availability
and retention concerning workforce disputes.
The Group’s industrial assets are diversified
across various countries. Also, the Group
continues to actively engage with governmental
authorities in light of upcoming changes
and developments in legislation and
enforcement policies.
See map on page 3 which sets out our global
operational footprint.
In 2017, we also published our second Payments
to Governments report. This detailed total
government contributions in 2016 of around
$4 billion. We also continue to be an active
member of the Extractive Industries
Transparency Initiative (EITI).
46
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
5
Laws, regulations, enforcement, permits and licences to operate
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Medium. The Group maintains programmes which seek to ensure that we comply
with or exceed the laws and external requirements applicable to our operations and products.
However, some of our industrial activities are located in countries that are categorised as
developing, complex or having political or social climates and/or where corruption is generally
understood to exist.
We seek to ensure full compliance through our
commitment to complying with or exceeding
the laws and external requirements applicable
to our operations and products and through
monitoring of legislative requirements,
engagement with government and regulators,
and compliance with the terms of permits and
licences. We keep informed of new regulations
and legal requirements. We seek to manage the
risk of breaching applicable laws and external
requirements through our policy framework
which is described on page 91. However,
there can be no assurance that such policies,
procedures and controls will adequately protect
the Group against fraud, corruption, sanctions
breaches or other unlawful activities.
Since 2007 the Group has had various
business dealings with entities associated
with Dan Gertler in connection with its
copper assets in the DRC. In December 2017
the United States government designated
Dan Gertler and affiliated companies as
Specially Designated Nationals (SDNs),
thereby imposing blocking sanctions on
them and companies owned 50% or more
by them, under Executive Order 13818, titled
“Blocking the Property of Persons Involved in
Serious Human Rights Abuses or Corruption”.
The Group has pre-existing contractual
obligations to make royalty and pas-de-porte
payments in respect of KCC and Mutanda to
certain of these companies which pre-date
the SDN designation and which arose
when the companies acquired rights from
Gecamines. The Group has not made any
payment to the companies since the SDN
designation. The Group is still considering
how best to mitigate its risks in relation
to these obligations.
In January 2018, the DRC parliament
adopted a revised Mining Code. This
includes significant increases in royalties,
taxes, government ownership requirements
and repatriation restrictions and terminates
retroactively the 10-year stability clause that
exists in the current Mining Code. If the
revised Mining Code is promulgated and
implemented in this form, it would have
a significant impact on the investments
of the Group in the DRC and their value.
During the year, a restatement of past
financial statements at Katanga Mining
Limited, a subsidiary of the Group, was
required and the Ontario Securities
Commission is investigating various matters
relating to Katanga (see pages 92 and 97).
As KCC (Katanga’s 75% held main operating
subsidiary) did not rectify a capital deficiency
by 31 December 2017 as required by DRC
corporate laws, an interested party may
commence legal action before DRC judicial
authorities. Katanga continues to assess
options to address the capital deficiency
including options which may partially
adversely impact its entitlement to KCC’s
future cash flows.
We are exposed to extensive laws including
those relating to bribery and corruption,
sanctions, taxation, anti-trust, financial
markets regulation, environmental protection,
use of hazardous substances, product
safety and dangerous goods regulations,
development of natural resources, licences
over resources, exploration, production and
post-closure reclamation, employment of
labour and occupational health and safety
standards and preservation. The terms
attaching to any permit or licence to operate
may also be onerous and obtaining these
and other approvals, which may be revoked,
can be particularly onerous to comply with.
Furthermore, in certain countries title to land
and rights and permits in respect of resources
are not always clear or may be challenged.
The legal system and dispute resolution
mechanisms in some countries may be
uncertain so that we may be unable to
enforce our understanding of our rights.
Successful lawsuits based upon damage
resulting from operations could lead to the
imposition of substantial penalties, the
cessation of operations, compensation
and remedial and/or preventative orders.
Moreover, the costs associated with legal
compliance, including regulatory permits,
are substantial and increasing. Any changes
to these laws or their more stringent
enforcement or restrictive interpretation
could cause additional significant
expenditure to be incurred or cause
suspensions of operations and delays in the
development of industrial assets. Failure to
obtain or renew a necessary permit or the
occurrence of other disputes could mean
that we would be unable to proceed with the
development or continued operation of an
asset and/or impede our ability to develop
new industrial properties.
As a diversified sourcing, marketing and
distribution company conducting complex
transactions globally, we are exposed to the
risks of fraud, corruption, sanctions breaches
and other unlawful activities both internally
and externally. Our marketing operations are
large in scale, which may make fraudulent
or accidental transactions difficult to detect.
In addition, some of our industrial activities
are located in countries, such as the DRC,
where corruption is generally understood to
exist. Corruption and sanctions risks remain
highly relevant for businesses operating in
international markets as shown by recent
regulatory enforcement actions both inside
and outside the resources sector.
47
Glencore Annual Report 2017
Principal risks
and uncertainties
continued
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
6
Liquidity risk
Link to strategic priorities
Our failure to access funds (liquidity) would
severely limit our ability to engage in
desired activities.
Liquidity risk is the risk that we are unable to
meet our payment obligations when due, or
are unable, on an ongoing basis, to borrow
funds in the market at an acceptable price to
fund our commitments. While we adjust our
minimum internal liquidity threshold from
time to time in response to changes in
market conditions, this minimum internal
liquidity target may be breached due to
circumstances we are unable to control,
such as general market disruptions, sharp
movements in commodity prices or an
operational problem that affects our
suppliers, customers or ourselves.
Business risks
Risk appetite: Low. It is the Group’s policy to operate a BBB rating or above balance sheet and
to ensure a minimum level of cash or committed funding is available at any given time.
Risk movement in 2017: Decrease
A lack of liquidity may mean that we will
not have sufficient funds available for our
marketing and industrial activities, both of
which employ substantial amounts of capital.
If we do not have funds available for these
activities then they will decrease.
Note 25 details our financial and capital risk
management including liquidity risk.
The Financial Review on page 52 sets out the
Group’s Net Funding and Net Debt in 2017,
which are both currently within our targets. We
also issued during the year the following bonds
with applicable coupon and redemption dates:
$500 million 3% 2022, $500 million 3.875%
2027 and $1.0 billion 4% 2027.
While we have delevered and repositioned
the Group’s balance sheet in the past two years,
we remain cognisant that access to credit is vital
and that market conditions can change rapidly.
As at 31 December 2017, the Group had available
undrawn committed credit facilities and cash
amounting to $12.9 billion (31 December 2016:
$16.7 billion), comfortably ahead of our $3 billion
minimum prescribed level.
Standard & Poor’s and Moody’s latest
assessments for the Company’s investment
grade credit are BBB (positive outlook) and
Baa2 (stable) respectively.
7
Counterparty credit and performance
Risk movement in 2017: Decrease
Link to strategic priorities
Risk appetite: Low. Where possible, credit exposure are to be covered through
credit mitigation products.
Financial assets consisting principally
of receivables and advances, derivative
instruments and long-term advances and
loans can expose us to concentrations
of credit risk.
Furthermore, we are subject to non-
performance risk by our suppliers, customers
and hedging counterparties, in particular
via our marketing activities.
Non-performance by suppliers, customers
and hedging counterparties may occur and
cause losses in a range of situations, such as:
• a significant increase in commodity prices
resulting in suppliers being unwilling
to honour their contractual commitments
to sell commodities at pre-agreed prices
• a significant reduction in commodity
prices resulting in customers being
unwilling or unable to honour their
contractual commitments to purchase
commodities at pre-agreed prices
• suppliers subject to prepayment or hedging
counterparties may find themselves unable
to honour their contractual obligations
due to financial distress or other reasons
We monitor the credit quality of our
counterparties and seek to reduce the risk of
customer non-performance by requiring credit
support from creditworthy financial institutions
including making extensive use of credit
enhancement products, such as letters of credit,
bank guarantees and insurance policies. Specific
credit risk policy rules apply to open account
risk with an established threshold for referral
of credit positions by departments to central
management. In addition, note 25 details our
financial and capital risk management approach.
48
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
8
Operating and cost risks
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. It is the Company’s strategic objective to focus on cost control
and operating efficiencies.
Our industrial activities are subject to
numerous risks and hazards normally
associated with the initiation, development,
operation and/or expansion of natural
resource projects, many of which are beyond
our control. These include unanticipated
variations in grade and other geological
problems (so that anticipated or stated
reserves, may not conform to expectations).
Other examples include natural hazards,
processing problems, technical malfunctions,
unavailability of materials and equipment,
unreliability and/or constraints of
infrastructure, industrial accidents, labour
force challenges, disasters, protests, force
majeure factors, cost overruns, delays in
permitting or other regulatory matters,
vandalism and crime.
9
Cyber risk
Link to strategic priorities
A cyber security breach, incident or failure
of Glencore’s IT systems could disrupt our
businesses, result in the disclosure of
confidential information, damage our
reputation and create significant financial
and legal exposures.
Although Glencore invests heavily to monitor,
maintain and regularly upgrade its systems,
processes and networks, absolute security
is not possible.
The development and operating of assets
may lead to future upward revisions in
estimated costs, delays or other operational
difficulties or damage to properties or
facilities. This may cause production to be
reduced or to cease and may further result
in a decrease in production, personal injury
or death, third party damage or loss or
require greater infrastructure spending.
Also, the realisation of these risks could
require significant and additional capital
and operating expenditures.
Some of the Group’s interests in industrial
assets do not constitute controlling stakes.
Although the Group has various structures
in place which seek to protect its position
where it does not exercise control, these
other shareholders may have interests or
goals that are inconsistent with ours. They
may take action contrary to the Group’s
interests or be unable or unwilling to fulfil
their obligations.
Infrastructure availability remains a key risk,
e.g. availability of continuous high-voltage
power to our copper operations in the
Democratic Republic of Congo. We are
continuing to seek long-term power
solutions via the Inga dam refurbishment.
Development and operating risks and
hazards are managed through our continuous
development status evaluation and reporting
processes and ongoing assessment, reporting
and communication of the risks that affect our
operations along with updates to the risk register.
We publish quarterly our production results
and annually our assessment of reserves and
resources based on available drilling and other
data sources. Conversion of resources to reserves
and, eventually, reserves to production is an
ongoing process that takes into account
technical and operational challenges, economics
of the particular commodities concerned and
the impact on the communities in which
we operate.
Local cost control measures are complemented
by global procurement that leverages our
scale to seek to achieve favourable terms
on high-consumption materials such as fuel,
explosives and tyres.
Details of the significant impairments recorded
during the year are contained in note 5.
Deterioration in the price outlook or operating
difficulties may result in additional impairments.
Risk appetite: Low. Where possible, cyber exposures are to be mitigated through proactive
monitoring and routine tests to confirm security of systems.
Risk movement in 2017: New principal risk
Cyber risks for firms have increased
significantly in recent years owing in part
to the proliferation of new technologies,
the use of the internet and the increasing
degree of connectivity, telecommunications
technologies and major increase in
cyber-crime.
Our activities depend on technology for
industrial production, efficient operations,
environmental management, health
and safety, communications, transaction
processing and risk management.
We see the increasing convergence of IT and
OT (Operational Technology) networks that
will create new risks and demand additional
management time and focus. We also
depend on third parties in long supply chains
that are exposed to the same cyber risks
but which are largely outside our control.
We have invested in global IT security platforms
in order to seek to proactively monitor and
manage our cyber risks. We conduct routine
third party penetration tests to confirm the
security of our systems. Our designated IT
Security Council sets the global cyber security
strategy, conducts regular risk assessments
and designs targeted cyber security packages
that seek to thwart emerging malware, virus,
vulnerabilities etc. Our incident response team
is established and responsible to respond in the
event of any major cyber incident. We conduct
ongoing training of our employees in order to
raise the awareness of cyber security threats.
49
Glencore Annual Report 2017
Principal risks
and uncertainties
continued
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
Sustainability risks
10
Emissions and climate change
Risk movement in 2017: Increase
Link to strategic priorities
Risk appetite: High. Our business involves mining and consuming fossil fuels along
with processing minerals which inevitably entails emitting harmful emissions.
Our global presence exposes us to a number
of jurisdictions in which regulations have
been or are being considered to reduce
emissions. The likely effect of these changes
will be to increase the cost for fossil fuels,
impose levies for emissions and increase
costs for monitoring and reporting and to
reduce demand for fossil fuels. Third parties,
including potential or actual investors,
may also introduce policies adverse to the
Company due to its interest in fossil fuels.
A number of national governments have
already introduced, or are contemplating
the introduction of regulatory responses to
greenhouse gas emissions. This includes
countries where we have assets such as
Australia, Canada and Chile, as well as
customer markets such as China, India
and Europe.
Many countries are also pledging to stop
using fossil fuels (specifically coal) in power
generation, e.g. in 2017 25 countries and
regions including the UK, France and Mexico
undertook to do so by 2030.
As a result of these factors, some other
market participants and analysts have a
more bearish view (some strongly so) in
relation to coal and oil and believe that many
fossil fuel assets could become “stranded”,
i.e. no longer capable of operating for an
economic return with the capital invested
being irretrievably lost.
We are one of the major producers of key
metals (including copper, cobalt, nickel) that
are currently essential for electric vehicles and
the transition to a low carbon economy,
although technological change may over
time reduce their requirement.
Through our sustainability programme, we strive
to ensure emissions and climate change issues
are identified, understood and monitored
in order to meet international best practice
standards and ensure regulatory compliance.
We seek to ensure that there is a balanced
debate with regard to the ongoing use
of fossil fuels.
During 2017, we published our second Climate
Change Considerations for our Business which
sets out information about how our business
operates, our position on climate change and
how we are managing the opportunities
and challenges of climate change across
our business.
In order to understand and plan for the effects
of climate change on our business, we are
seeking to provide a framework for identifying,
understanding and, ultimately, managing (to the
extent possible) climate-related challenges and
opportunities facing our portfolio. This covers in
particular government policy, energy costs,
physical impacts, stakeholder perceptions,
and market impacts.
Further information is available at
www.glencore.com/sustainability/
climate-change
11
Community relations and human rights
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. It is our policy to ensure we proactively engage with local communities
to maintain our social licence to operate.
The continued success of our existing
operations and our future projects are in
part dependent upon broad support and
a healthy relationship with the respective
local communities.
A perception that we are not respecting or
advancing the interests of the communities
in which we operate, could have a negative
impact on our ‘‘social licence to operate’’, our
ability to secure access to new resources and
our financial performance. 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 operation and the safety
and security of our workforce and assets.
Such events could lead to disputes with
governments, with local communities
or any other stakeholders, and give rise to
reputational damage. Even in cases where
no adverse action is actually taken, the
uncertainty associated with this instability
could negatively impact the perceived value
of our assets.
We believe that the best way to manage these
vital relationships is to adhere to the principles of
open dialogue and cooperation. In doing so, we
engage with local communities to demonstrate
our operations’ contribution to socio-economic
development and seek to ensure that
appropriate measures are taken to prevent or
mitigate possible adverse impacts on the
communities, along with the regular reporting as
outlined on our website at: www.glencore.com/
sustainability/community-and-human-rights.
Some of our mine sites are in remote locations
where they are a – or the – key employer in the
region. Inevitably, every mine will reach a point
of depletion where it is no longer economic
to operate and must be closed in an orderly
fashion. We are working with all stakeholders
at our mine sites to operate for as long as it is
economically viable to do so, and to prepare
long-term plans that provide for a gradual
transition to the end of mine life.
50
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Risk description
Comments/impacts to the Group
Mitigation and risk appetite
12
Skills availability and retention
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. It is a key strategic objective of the Company to maintain positive employee
relationships and to attract and retain skilled workers.
The maintenance of positive employee and
union relations and the ability to attract and
retain skilled workers, including senior
management, are key to our success. This
attraction and retention of highly qualified
and skilled personnel can be challenging,
especially, but not only, in locations
experiencing political or civil unrest, or in
which they may be exposed to other
hazardous conditions.
Many employees, especially at the Group’s
industrial activities, are represented by labour
unions under various collective labour
agreements. Their employing company 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.
We understand that one of the key factors in our
success is a good and trustworthy relationship
with our people. This priority is reflected in the
principles of our sustainability programme
and 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, as outlined on our website at:
www.glencore.com/careers/Our-culture and
in our People section on page www.glencore.
com/sustainability/our-people.
Various union strike action has occurred at
several of our operations during the year
e.g. Coal Australia. Group companies seek
negotiated outcomes with employee
representatives, based on reasonableness
and fairness, however unfortunately and
occasionally strike action can occur.
13
Health, safety, environment, including potential catastrophes
Risk movement in 2017: Stable
Link to strategic priorities
Risk appetite: Low. It is our policy to ensure we comply with or exceed the health, safety and
environmental laws and external requirements applicable to our operations and products.
Our operations are subject to health,
safety and environmental laws along with
compliance with our corporate sustainability
framework. The processes and chemicals
used in extraction and production methods,
as well as transport and storage, may impose
environmental hazards. A serious failure
in these areas could lead to an emergency
or catastrophe at a site, which could result
in injuries or fatalities and also impact
production and our corporate reputation.
The storage of tailings at our industrial assets
and the storage and transport of oil are
material examples of these risks.
Environmental (including those associated
with particular environmental hazards) and
health and safety laws may result in increased
costs or, in the event of non-compliance or
incidents causing injury or death or other
damage at or to our facilities or surrounding
areas may result in significant losses,
including those arising from (1) interruptions
in production, litigation and imposition
of penalties and sanctions and (2) having
licences and permits withdrawn or
suspended or being forced to undertake
extensive remedial clean-up action or to pay
for government-ordered remedial clean-up
actions. In each case, liability may arise where
the hazards have been caused by any
previous or subsequent owners or operators
of the property, by any past or present owners
of adjacent properties, or by third parties.
We regret, we recorded nine fatalities at our
operations from nine separate incidents.
Our approach to sustainability and our
expectations of our workers and our business
partners are outlined in our sustainability
framework. This underpins our approach towards
social, environmental, safety and compliance
indicators, providing clear guidance on the
standards we expect all our operations to achieve.
Through the reporting function within the
programme, our Board and senior management
receive regular updates and have a detailed
oversight on how our business is performing
across all of the sustainability indicators.
We monitor catastrophic risks, in particular,
across our portfolio and operate emergency
response programmes.
Compliance with international and local
regulations and standards are top priorities.
We remain focused on the significant risks facing
our industry arising from operational catastrophes
such as the examples of tailings dam collapses in
Canada and Brazil and the coal mine explosions
experienced in the last five years. We seek to learn
from these events, and proactively assess our
exposure to similar incidents and implement
measures to avoid these.
Considerable ongoing investment continues
in the Group’s SafeWork health and
safety programme.
See also the Sustainable development review
on page 24 and the HSEC Committee report
on page 100.
Further details will also be published in our 2017
sustainability report.
51
Glencore Annual Report 2017
Financial review
Highlights
US$ million
Key statement of income and cash flows highlights1:
Net income attributable to equity holders
Adjusted EBITDA◊
Adjusted EBIT◊
Earnings per share (Basic) (US$)
Funds from operations (FFO)2◊
Net cash generated by operating activities before working capital changes
Capital expenditure◊
US$ million
Key financial position highlights:
Total assets
Net funding2◊
Net debt2◊
Ratios:
FFO to Net debt2◊
Net debt to Adjusted EBITDA◊
1 Refer to basis of preparation below.
2 Refer to page 56.
2017
2016 Change %
5,777
14,762
8,552
0.41
11,556
11,866
4,234
1,379
10,268
3,930
0.10
7,770
7,868
3,497
319
44
118
310
49
51
21
31.12.2017
31.12.2016 Change %
135,593
124,600
32,898
10,673
32,619
15,526
108.3%
0.72x
50.0%
1.51x
9
1
(31)
119
(52)
◊ Adjusted measures referred to as Alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting
Standards; refer to APMs section on page 197 for definition and reconciliations and note 2 of the financial statements for reconciliation of Adjusted EBIT/EBITDA and
capital expenditure.
Basis of presentation
The financial information in the
Financial and Business Review is
on a segmental measurement basis,
including all references to revenue
(see note 2) and has been prepared
on the basis as outlined in note 1
of the financial statements, with
the exception of the accounting
treatment applied to relevant
material associates and joint ventures
for which Glencore’s attributable
share of revenues and expenses
are presented.
The Group’s results are presented on
an “adjusted” basis, using alternative
performance measures (APMs)
which are not defined or specified
under the requirements of IFRS,
but are derived from the financial
statements, prepared in accordance
with IFRS, reflecting how
Glencore’s management assess
the performance of the Group.
The APMs are used to improve
the comparability of information
between reporting periods and
segments and to aid in the
understanding of the activities taking
place across the Group by adjusting
for Significant items, aggregating
or disaggregating (notably in the
case of relevant material Associates
accounted for on an equity basis)
certain IFRS measures. APMs are also
used to approximate the underlying
operating cash flow generation of the
operations (Adjusted EBITDA).
Significant items (see reconciliation
below) are items of income and
expense which, due to their variable
financial impact or the expected
infrequency of the events giving rise
to them, are separated for internal
reporting and analysis of
Glencore’s results.
Alternative performance measures
are denoted by the symbol ◊ and are
further defined and reconciled to the
underlying IFRS measures in the
APMs section on page 197.
52
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Financial results
Net income attributable to equity
holders increased from $1,379 million
in 2016 to $5,777 million in 2017 and
EPS increased from $0.10 per share
to $0.41 per share, driven by the
factors discussed below.
Adjusted EBITDA was $14,762 million
and Adjusted EBIT was $8,552
million, increases of 44% and 118%
respectively compared to 2016,
primarily driven by higher commodity
prices. Market sentiment and
commodity prices continued to
improve over 2017, following the
cyclical lows seen in early 2016.
Notable year over year average price
increases were cobalt (108%), zinc
(38%), coal (GC Newc. 34%) and
copper (27%). The positive impact of
the higher prices on Adjusted EBITDA
was somewhat tempered by upward
trending, albeit until now, relatively
moderate cost inflation and the
effects of a weaker U.S. dollar against
most producer country currencies,
including average year-over-year
declines against the South African
rand (9%), Kazakh tenge (5%) and
Australian dollar (3%). Adjusted
EBITDA mining margins were robust
at 38% and 41% in our metals and
energy operations, up respectively
from 33% and 32% in 2016.
Marketing Adjusted EBITDA
and EBIT increased by 5% and
3% to $3,224 million and
$3,012 million respectively:
• Metals and minerals Adjusted
Marketing EBIT was up 28% over
2016, with strong contributions from
most commodity departments,
reflecting the improved physical
commodity market conditions and
solid growth in volumes handled,
particularly copper, cobalt, zinc
and ferroalloys.
• Energy products Adjusted
Marketing EBIT was up 9%
compared to 2016, with healthy
contributions from both oil and
coal. The oil result was augmented
by a substantial volume increase
during the year, notably crude,
up 33%.
• Like-for-like, Agricultural products
Adjusted Marketing EBIT was down
26% compared to 2016, but up 7%
at the Adjusted EBITDA level, due
to a higher depreciation charge in
2017. This was an overall satisfactory
result, given the general industry
margin pressures, following a
succession of global bumper crops.
Following the sale of a 50% interest
in December 2016, Adjusted EBIT,
on a reported basis, was down 63%
compared to 2016.
Industrial Adjusted EBITDA increased
by 60% to $11,538 million (Adjusted
EBIT was $5,540 million, compared
to $1,011 million in 2016). As noted
above, the increase was primarily
driven by stronger average year-over-
year commodity prices, offset by
volume related impacts (including
temporary industrial action, acid
supply and weather related factors),
moderate cost inflation and adverse
foreign currency impacts, given the
generally weaker U.S. dollar against
the vast majority of local currencies
in our key operating jurisdictions.
Adjusted EBITDA/EBIT◊
Adjusted EBITDA by business segment is as follows:
US$ million
Metals and minerals
Energy products
Agricultural products1
Corporate and other
Total
Adjusted EBIT by business segment is as follows:
US$ million
Metals and minerals
Energy products
Agricultural products1
Corporate and other
Total
2017
2016
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Change
%
2,029
1,054
316
(175)
8,281
3,599
–
(342)
10,310
4,653
316
(517)
1,586
959
592
(74)
6,030
1,503
–
(328)
7,616
2,462
592
(402)
3,224
11,538
14,762
3,063
7,205
10,268
35
89
(47)
29
44
2017
2016
Marketing
activities
Industrial
activities
Adjusted
EBIT
Marketing
activities
Industrial
activities
Adjusted
EBIT
Change
%
2,005
990
192
(175)
3,012
4,496
1,424
–
(380)
5,540
6,501
2,414
192
(555)
1,562
909
522
(74)
8,552
2,919
2,182
(842)
–
(329)
1,011
3,744
67
522
(403)
3,930
74
n.m.
(63)
38
118
1 The above balances represent Glencore’s interest in Glencore Agri, being 49.9% post 1 December 2016, and 100% pre the sale date. Following completion of the sale, the
results from Agricultural products have been combined under Marketing activities and the 2016 comparatives, relating to Industrial 2016 EBITDA/EBIT of $138 million and
$104 million respectively have been reclassified from Industrial to Marketing activities. See page 78 and note 2.
53
Glencore Annual Report 2017 Financial review
continued
Earnings
A summary of the differences between reported Adjusted EBIT and income attributable to equity holders, including
significant items, is set out in the following table:
US$ million
Adjusted EBIT◊
Net finance and income tax expense in relevant material associates and joint ventures1
Net finance and income tax expense of discontinued operations2
Net finance costs
Income tax expense3
Non-controlling interests
Income attributable to equity holders of the Parent from continuing and discontinued
operations pre-significant items
Earnings per share (Basic) pre-significant items (US$)
Significant items◊
Share of Associates’ significant items4
Mark-to-market valuation on certain coal hedging contracts5
Unrealised intergroup profit elimination5
Gain on disposals and investments6
Other expense – net7
Income tax expense3
Non-controlling interests’ share of significant items8
Total significant items
Income attributable to equity holders of the Parent from continuing and discontinued operations
Earnings per share (Basic) (US$)
1 Refer to note 2 of the financial statements and to APMs section for reconciliations.
2 Refer to note 24 of the financial statements.
3 Refer to other reconciliations section for the allocation of the total income tax expense between pre-significant and significant items.
4 Recognised within share of income from associates and joint ventures, see note 2 of the financial statements.
5 Recognised within cost of goods sold, see note 2 of the financial statements.
6 Refer to notes 3 and 24 of the financial statements and to APMs section for reconciliations.
7 Recognised within other expense – net, see notes 4 and 24 of the financial statements and to APMs section for reconciliations.
8 Recognised within non-controlling interests, refer to APMs section.
2017
8,552
(591)
–
(1,451)
(1,572)
570
5,508
0.39
(6)
225
(523)
1,309
(594)
(187)
45
269
5,777
0.41
2016
3,930
(264)
(201)
(1,533)
(362)
422
1,992
0.14
(132)
(225)
(374)
2,370
(1,997)
(276)
21
(613)
1,379
0.10
54
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Significant items
Significant items are items of income
and expense which, due to their
variable financial impact 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 2017, Glencore recognised a net
$269 million gain (2016: net expenses
of $613 million) in significant items,
including $187 million of income tax
related expense items mainly related
to the substantial reductions in U.S.
corporate income tax rates. The net
gain comprises primarily:
• Income of $225 million (2016:
$225 million expense) relating to
the accounting period matching
of certain coal derivative positions
open at 31 December 2016 and
subsequently fully settled during
2017. These positions related
to portfolio risk management/
hedging activities initiated in
Q2 2016 to manage forward
sales price exposure, relating
to future coal production. The
transactions were not able to be
designated as hedging instruments
under IFRS, which would have
allowed for the deferment of any
income statement effect until
performance of the underlying
future sale transactions. The fair
value movements were offset
against revenue in the segment
information as the related sales
(of production) were realised.
• A $6 million expense
(2016: $132 million) representing
Glencore’s share of significant
expenses recognised directly by our
associates, primarily impairment
charges recognised within Century.
• Gain on disposals and investments
of $1,309 million (2016: $2,370
million) see note 3. In 2017, the gain
primarily relates to the disposal
of Zinc Africa ($232 million), an
oil storage business (HG Storage,
$674 million) and a royalty portfolio
($210 million). In 2016, the balance
is primarily comprised of gains on
disposals of $430 million related
to GRail and $1,848 million related
to Glencore Agri.
• Other expenses – net $594 million
(2016: $1,923 million) see notes 4
and 5. Balance primarily comprises:
– impairments of $628 million
(2016: $1,268 million). 2017
impairments related mainly to
Chad oil ($278 million), Cameroon
oil ($81 million) and junior loans
extended to a coal terminal
facility ($149 million). These
impairments were partially offset
by a reversal of $243 million
related to the Equatorial Guinea
oil operations. 2016 impairments
related primarily to Chad oil
($622 million), Equatorial Guinea
oil operations ($311 million),
Cerrejón coal (recognised
within share of income from
associates, $345 million) and
various coal shipping investments
($61 million).
– $290 million (2016: $121 million)
of mark-to-market gains on
investments held for trading.
– $80 million (2016: $70 million)
of net foreign exchange losses.
– $75 million (2016: $92 million)
relating to certain legal matters.
The 2017 balance is a cost
estimate for potential settlement
of claims brought against the
Group related to an operation
disposed in 2005. The 2016
amount relates to expenses
incurred to settle a compliance
matter in respect of a U.S.
biofuels program in the years
2011/12.
– $78 million (2016: $Nil) relating to
the cumulative effect of certain
accounting issues that resulted
in Katanga, an 86.3% controlled
subsidiary listed on the Toronto
Stock Exchange, restating its
2014, 2015 and 2016 results.
The cumulative effect has been
corrected in Glencore’s 2017
financial statements. Had the
Group’s results been restated,
income before taxes for the year
ended 2016 would have been
lower by $10 million.
Net finance costs
Net finance costs were $1,451 million
in 2017, compared to $1,533 million
incurred during the comparable
reporting period. Interest expense
in 2017 was $1,619 million, a 4%
decrease from $1,688 million in 2016,
owing mainly to the repayment of
higher margin debt. Interest income
in 2017 was $168 million, consistent
with the prior year.
Income taxes
An income tax expense of
$1,759 million was recognised during
2017, compared to an income tax
expense of $638 million in 2016.
Adjusting for a net $187 million
(2016: $276 million) of income tax
expense related to significant
items – $30 million (2016: $19 million)
due to currency translation effects
and a net $157 million of income tax
arising primarily from the substantial
reduction in US tax rates, following
the announced US tax reform, the
2017 pre-significant items income tax
expense was $1,572 million (2016:
$362 million). The 2017 effective tax
rate, pre-significant items, was 30.3%,
consistent with a calculated effective
tax rate of 32.4% in 2016.
Assets, leverage and working capital
Total assets were $135,593 million as
at 31 December 2017, compared to
$124,600 million as at 31 December
2016, a period over which, current
assets increased from $43,412 million
to $49,726 million, due to increases
in inventories, primarily as a result of
commodity price increases, notably
in our metals and minerals segment.
Non-current assets increased from
$81,188 million to $85,867 million,
primarily due to the acquisition of
Volcan, as outlined in note 24 of the
financial statements.
55
Glencore Annual Report 2017 Financial review
continued
Cash flow and net funding/debt
Net funding
US$ million
Total borrowings as per financial statements
Relevant associates and joint ventures’ net funding1
Cash and cash equivalents
Volcan net funding
Net funding◊
Cash and non-cash movements in net funding
US$ million
Cash generated by operating activities before working capital changes
Coal related hedging and legal settlement costs included above (via statement of income)
Relevant associates and joint ventures Adjusted EBITDA2
Share in earnings from other associates included within EBITDA
Net interest paid1
Tax paid1
Dividends received from associates1
Funds from operations◊
Net working capital changes (excluding gold and silver streaming proceeds)1
Gold and silver streaming proceeds
Acquisition and disposal of subsidiaries – net1
Purchase and sale of investments – net1
Purchase and sale of property, plant and equipment – net1
Net margin receipts/(calls) in respect of financing related hedging activities
Acquisition of additional interests in subsidiaries
Distributions paid and transactions of own shares – net
Coal related hedging and legal settlement costs (refer above)
Cash movement in net funding
Foreign currency revaluation of borrowings and other non-cash items
Total movement in net funding
Net funding, beginning of period
Net funding◊, end of period
Less: Readily marketable inventories2
Net debt◊, end of period
31.12.2017 31.12.2016
33,934
33,218
1,792
(2,124)
(704)
1,919
(2,518)
–
32,898
32,619
31.12.2017 31.12.2016
11,866
(225)
2,440
(39)
(1,199)
(1,372)
85
11,556
7,868
368
1,447
–
(1,271)
(680)
38
7,770
(5,073)
(2,371)
–
8
(350)
971
5,944
(13)
(3,898)
(3,306)
1,255
(561)
(1,175)
225
1,987
(2,266)
(279)
(32,619)
(32,898)
22,225
(695)
(7)
(88)
(368)
7,837
789
8,626
(41,245)
(32,619)
17,093
(10,673)
(15,526)
1 Adjusted to include the impacts of proportionate consolidation of relevant material associates and joint ventures as outlined in the APMs and other reconciliations section.
2 Refer to APMs section for definition and reconciliations.
56
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
The reconciliation in the table
above is the method by which
management reviews movements
in net funding and net debt and
comprises key movements in cash
and any significant non-cash
movements on net funding items.
Excluding $704 million of net debt
assumed in the Volcan acquisition
(completed mid-November 2017),
net funding as at 31 December 2017
increased by $279 million to
$32,898 million, whereas net
debt (net funding less readily
marketable inventories) decreased
by $4,853 million over the year to
$10,673 million. The Volcan assumed
debt has been adjusted/excluded
to provide a more consistent and
comparative analysis, but mostly
to reflect the Group’s relatively
low 23.3% economic ownership
(compared to its 63.0% voting
interest) in this still fully ring-fenced
listed entity, with its standalone,
independent and separate capital
structure. The cash outlay in respect
of the 2017 share purchase is included
in acquisition of subsidiaries above.
It is the Group’s current intention
to internally report on/treat this
investment in accordance with
equity accounting principles, in
parallel with full consolidation
for IFRS reporting purposes.
The net funding movement reflects
the increase in readily marketable
inventories ($5,132 million of the net
working capital outflow of $5,073
million) over the year, primarily due to
the substantially higher commodity
prices, but also to proactive seizing
of further short-term capital
deployment opportunities in
the buoyant commodity market
environment. It is contextually
noteworthy, given the earnings
enhancing controllable inventory
build, that funds from operations
significantly exceeded (nearly
double) the $3,898 million of net
capital expenditure, $342 million
of net acquisitions of subsidiaries
and investments, $561 million
of acquisitions of non-controlling
interests in subsidiaries (African
copper) and payment of $1,175 million
of dividends to shareholders and
non-controlling interests.
The ratio of Net debt to Adjusted
EBITDA improved to 0.72 times in
2017 from 1.51 times in 2016, and the
ratio of FFO to Net debt improved to
108.3% in 2017 from 50.0% in 2016.
Business and investment
acquisitions and disposals
Net outflows from business
acquisitions and divestures was
$903 million, compared to an
inflow on disposals of $5,944 million
in 2016. The net outflow in 2017
is primarily due to the acquisition
of an additional interest in Volcan
($653 million), the acquisition of the
remaining 31% interest of Mutanda
not previously owned ($524 million),
an increase in our interest in Katanga
to 86.3% from 75.3% ($38 million)
and a $300 million investment in
Yancoal. These are offset by disposals
and ongoing smaller stake retentions
in HG Storage ($502 million), Zinc
Africa ($222 million) and BaseCore
Metals ($150 million). The 2016 net
inflow from divestitures resulted
primarily from the disposal of a 50%
interest in Glencore Agri. See note 24
for further explanations.
Liquidity and funding activities
In 2017, the following significant
financing activities took place:
• In May 2017, Glencore signed
new one-year revolving credit
facilities for a total amount of
$7,335 million, refinancing the
$7,700 million one-year revolving
credit facilities signed in February
2016. Funds drawn under the
facilities bear interest at U.S.$ LIBOR
plus a margin of 40 basis points.
Glencore also voluntarily reduced
the medium term facility size from
$6,800 million to $5,425 million and
extended its maturity by 24 months
to 2022. As at 31 December 2017,
the facilities comprise:
– a $7,335 million one year
revolving credit facility with a
12 month term-out borrower’s
option (to May 2019) and a
12-month extension option; and
– a $5,425 million medium-term
revolving credit facility
(to May 2022).
• In March 2017, issued a 10 year
$1,000 million, 4% coupon bond.
• In October, issued a 5 year
$500 million, 3% coupon bond
and a 10 year $500 million,
3.875% coupon bond.
As at 31 December 2017, Glencore
had available committed undrawn
credit facilities and cash amounting
to $12.9 billion.
57
Glencore Annual Report 2017 Glencore has set a consolidated
VaR limit (1 day 95%) of $100 million
representing some 0.2% of equity.
In Q2 2016, this limit was technically
breached for 1 day by $1 million
as the VaR calculation did not
account for the future physical coal
production that was economically
hedged with the corresponding
derivatives captured and reported on.
If such underlying hedged exposure
had been included in the VaR
calculation, the actual VaR number
would have been substantially lower,
with no resulting technical breach.
This hedge book has now fully rolled
off, as noted above. Glencore uses a
VaR approach based on Monte Carlo
simulations and is either a one day
or one week time horizon computed
at a 95% confidence level with a
weighted data history.
Average market risk VaR (1 day 95%)
during 2017 was $25 million,
representing less than 0.1% of equity.
Average equivalent VaR during 2016
was $42 million.
Distributions
The directors have recommended a
2017 financial year cash distribution
of $0.20 per share amounting to
$2.9 billion, excluding any distribution
on own shares and ignoring any
attribution of shares which may
take place prior to the record dates.
Payment will be effected as a
$0.10 per share distribution in May
2018 (see below) and a $0.10 per
share distribution in September 2018
(in accordance with the Company’s
announcement on the 2018
Distribution timetable also made
on 21 February 2018).
The distribution is proposed to
be effected as a reduction of the
capital contribution reserves of the
Company. As such, this distribution
would be exempt from Swiss
withholding tax. As at 31 December
2017, Glencore plc had CHF 37 billion
of such capital contribution reserves
in its statutory accounts. The
distribution is subject to shareholders’
approval at its AGM on 2 May 2018.
The distribution is ordinarily paid
in US dollars. Shareholders on the
Jersey register may elect to receive
the distribution in sterling, euros or
Swiss francs, the exchange rates
of which will be determined by
reference to the rates applicable
to the US dollar as stated above.
Shareholders on the Johannesburg
register will receive their distribution
in South African rand. Further details
on distribution payments, together
with currency election and
distribution mandate forms, are
available from the Group’s website
(www.glencore.com) or from the
Company’s Registrars.
Financial review
continued
Credit ratings
In light of the Group’s extensive
funding activities, maintaining
investment grade credit rating status
is a financial priority. The Group’s
credit ratings are currently Baa2
(stable) from Moody’s and BBB
(positive outlook) from Standard &
Poor’s. Glencore’s publicly stated
objective, as part of its overall
financial policy package, is to seek
and maintain strong Baa/BBB credit
ratings from Moody’s and Standard &
Poor’s respectively. In support thereof,
Glencore targets a maximum 2x Net
debt/Adjusted EBITDA ratio through
the cycle.
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 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.
58
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
First tranche of proposed distribution
2018
Applicable exchange rate reference date (Johannesburg Stock Exchange (JSE))
Close of business (UK) 12 April
Applicable exchange rate announced on the JSE
Last day to effect removal of shares cum distribution between Jersey and JSE registers
at commencement of trade
Last time to trade on JSE to be recorded in the register for distribution
Ex-distribution date (JSE)
Ex-distribution date (Jersey)
Distribution record date for JSE
Distribution record date in Jersey
Deadline for return of currency elections form (Shareholders on Jersey Register only)
Removal of shares between the Jersey and JSE registers permissible from
Applicable exchange rate reference date (Jersey)
Annual General Meeting (shareholder vote to approve aggregate 2018 distribution)
H1 distribution payment date
13 April
13 April
23 April
24 April
26 April
Close of business (SA) 26 April
Close of business (UK) 27 April
30 April
30 April
2 May
2 May
23 May
59
Glencore Annual Report 2017 Metals and
minerals
60
Highlights
Adjusted EBITDA of $10.3 billion was $2.7 billion (36%)
over 2016. Marketing and Industrial activities each
contributed strongly to the year-over-year growth,
with a 28% and 37% increase, respectively.
These strong results were fuelled by solid underlying
global economic growth, which combined with overall
industry capital discipline and generally muted production
growth, resulted in commodity markets tightening
over the year, with a corresponding increase in prices
and premiums. Such market conditions, together
with continued Industrial cost and productivity focus,
contributed to the increase in Adjusted EBITDA mining
margin from 33% to 38%, while increased marketing
base metals’ volumes aided the segment’s overall
strong performance improvement compared to 2016.
Adjusted EBITDA
(US$ million)◊
Adjusted EBIT
(US$ million)◊
2
0
1
5
2
0
1
6
2
0
1
7
5,310
7,616
10,310
2
0
1
5
2
0
1
6
2
0
1
7
1,403
3,744
6,501
Mining margin
Marketing Adjusted EBIT
38%
Strong cash flow
generation/conversion
$2,005m
Robust demand for
our commodities amid
tightening supply
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA margin
Marketing
activities
51,017
2,029
2,005
4.0%
Industrial
activities
29,448
8,281
4,496
28.1%
2017
80,465
10,310
6,501
12.8%
Market conditions
Selected average commodity prices
S&P GSCI Industrial Metals Index
LME (cash) copper price ($/t)
LME (cash) zinc price ($/t)
LME (cash) lead price ($/t)
LME (cash) nickel price ($/t)
Gold price ($/oz)
Silver price ($/oz)
Metal Bulletin cobalt price 99.3% ($/lb)
Metal Bulletin ferrochrome 6 – 8.5% C basis 60 – 70% Cr, max 1.5% Si (¢/lb)
Iron ore (Platts 62% CFR North China) price ($/DMT)
Marketing
activities
Industrial
activities
42,142
1,586
1,562
3.8%
2017
341
6,173
2,893
2,315
10,414
1,258
17
25
129
71
24,196
6,030
2,182
24.9%
2016
272
4,867
2,094
1,868
9,606
1,248
17
12
90
58
2016
66,338
7,616
3,744
11.5%
Change %
25
27
38
24
8
1
–
108
43
22
Currency table
AUD : USD
USD : CAD
USD : COP
EUR : USD
GBP : USD
USD : CHF
USD : KZT
USD : ZAR
Spot
31 Dec 2017
Spot
31 Dec 2016
Average
2017
Average
2016
Change in
average %
0.78
1.26
2,986
1.20
1.35
0.97
333
12.38
0.72
1.34
3,002
1.05
1.23
1.02
334
13.74
0.77
1.30
2,952
1.14
1.28
0.98
326
13.31
0.75
1.32
3,052
1.11
1.35
0.99
342
14.69
3
(2)
(3)
3
(5)
(1)
(5)
(9)
61
Glencore Annual Report 2017 Metals and minerals
continued
Marketing
Highlights
Base metals’ prices continued their
positive momentum from the second
half of 2016, into and through 2017.
Indeed, year-end prices for most of
the selected commodities in the
table above were considerably higher
than the annual averages, with
copper around $7,200/t, zinc at
$3,300/t, nickel at $12,700/t and
equivalent cobalt at $34/lb. LME
stocks of copper, zinc, nickel and lead
all reduced over the year. Market
concerns related to heightened
Chinese economic risks proved
short-lived, and by year end, a level of
consensus had emerged that growth
in both developed and emerging
markets was more sustainable.
Reflecting these improved
fundamental physical commodity
market conditions, with solid growth
in volumes handled, particularly
copper, cobalt, zinc and ferroalloys,
Marketing’s Adjusted EBIT was
$2.0 billion, up 28% compared
to 2016.
Financial information
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Selected marketing volumes sold
Copper metal and concentrates1
Zinc metal and concentrates1
Lead metal and concentrates1
Gold
Silver
Nickel
Cobalt
Ferroalloys (incl. agency)
Alumina/aluminium
Iron ore
1 Estimated metal unit contained.
2017
51,017
2,029
2,005
2016
42,142
1,586
1,562
Change %
21
28
28
Units
mt
mt
mt
moz
moz
kt
kt
mt
mt
mt
2017
4.0
2.8
1.0
2.0
89.1
204
42
8.7
10.7
47.7
2016
Change %
3.5
2.0
0.9
2.1
92.1
221
39
7.6
11.4
47.1
14
40
11
(5)
(3)
(8)
8
14
(6)
1
62
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
fears of tightening financial
conditions in China, this resulted in a
temporary pullback in the price rally.
Copper scrap inventory reverted to
normalised levels by mid-year, with
drawdowns in copper units across
the value chain through to year-end.
Looking ahead, global supply is
expected to be impacted by ageing
assets, limited sector reinvestment,
a diminished project pipeline and
elevated risk of mine disruptions.
With global economic growth
pointing to healthy demand, the
copper market is likely to remain
in substantial supply deficit, which,
if it occurs, will in turn result in
further inventory drawdowns.
The emerging battery and electric
vehicle trend adds further uplift to
the demand outlook and attractive
fundamentals. Copper and cobalt are
expected to play important roles
across the value chain of the energy
and mobility evolution, from power
generation and distribution, to energy
storage and vehicles.
During 2017, Glencore commissioned
CRU to model the metal requirements
to realise the Electric Vehicle Initiative
target of 30 million electric vehicle
sales by 2030. CRU forecast that
4.1Mt of copper (18% of 2016 supply),
1.1Mt of nickel (56% of 2016 supply)
and 314kt of cobalt (314% of 2016
supply) will be required annually by
2030. As early as 2020, forecast EV
related metal demand becomes
material, requiring an additional
c.390kt of copper and c.24kt of
cobalt. In 2017, the pricing impact/
expectation of this new demand
dynamic was clearly evident in cobalt,
with the spot price rallying 130%
through the year.
Copper
Robust price growth
driven by both demand
and supply
c.390ktpa
EV demand projected by 2030
c.2%
Supply contraction in 2017
In 2017, the copper price averaged
$6,173/t, increasing 27% year-over-
year. The rally was most apparent in
the second half, with a 2017 high of
$7,254/t in late December marking
levels last seen in early 2014. Over
the year, synchronised global growth
fuelled healthy demand in major
copper consuming regions. Mine
supply challenges continued to
exceed market expectations, resulting
in a c.2% contraction in mined
volumes year-on-year, the first
decline in over 15 years.
Copper scrap flows played an
important role in the first half of
the year, as higher prices triggered
the release of stockpiled scrap into
the market and contributed to a
short period of apparent demand
weakness. Combined with misplaced
Zinc
Global supply increases
comfortably absorbed by
the market
59%
YoY increase in Chinese
metal imports
9%
Non-China supply increase in 2017
In 2017, the zinc price recorded
a 38% year-over-year increase,
benefiting from the combination
of synchronised global growth,
strong orders from the steel industry
and continuing tightness in the
concentrate market, which
progressively spread to the metal
market during the course of the year.
Despite the higher prices, for a range
of reasons, China did not contribute
to any mine supply growth, which
meant that the 9% (~650kt) increase
in concentrate supply from the
Rest of the World was comfortably
absorbed by the market. 2017
Chinese mine production dropped
by 8.6% (~300kt). The environmental
drive in China continued to put
pressure on extractive industries,
limiting domestic zinc mine
output. In response, Chinese zinc
concentrates imports rose by 21.9%
(~140kt), despite the lower spot TC
levels ($38/dmt in 2017 vs $102/dmt
in 2016).
63
Glencore Annual Report 2017
Metals and minerals
continued
On the metal front, Chinese
production was down by 0.7% in
2017 (~40kt). With local stocks already
at low levels, Chinese consumers
resorted to higher metal imports, up
59.3% year-on-year. 2017 Chinese zinc
metal imports were a record 676kt.
Both LME and SHFE zinc stocks
continued to draw down; LME stocks
fell to 182kt at December 2017
(2016: 428kt), while SHFE stocks
more than halved to 69kt at
December 2017 (2016: 153kt).
The lead supply trend is similar,
recording a year-over-year price
increase of 24%. Spot TCs are also
at a historical low, at $26/dmt
in 2017 (2016: $119/dmt).
Going forward, higher prices will
incentivise higher concentrate
production, easing TCs in the mid-
term and eventually resulting in
higher metal production. However,
the environmental constraints
in China and the slower than
anticipated pace of mine restarts
(or new mines) means that the
current zinc tightness may remain for
some time. As there is also a time lag
before concentrates units convert into
metal units, we expect the current
strong pricing environment to be
supported in the near to mid-term.
64
a solid upswing in the European
automotive market, while nickel
demand from the battery sector
accelerated through 2017, with
annual growth estimated at 30%.
Overall we estimate primary nickel
demand in 2017 of >2.2Mt,
representing a 10% increase on 2016.
Price-induced closures, production
issues and general supply disruptions
prompted widespread under-
performance in non-nickel pig iron
supply. This was nevertheless offset
by the ramp up of Indonesian NPI
capacity and the acceleration of
Chinese NPI supply through year
end. While Indonesia’s reversal of
a ban on ore exports incited fears
of unconstrained ore availability,
boosting Chinese NPI supply growth,
actual shipments were c.5Mt wet ore
for the year.
Global nickel output in 2017 is
estimated at <2.1Mt, marking
a 5% increase on 2016, which masks
a 2% decline in non-NPI supply.
Consequently, the nickel market
remained in material supply deficit
for a second year running, enabling
global stocks to draw down quickly
despite headline LME inventory
suggesting otherwise. Even with
a conservative forecast for 2018
demand, the outlook is for continued
sizeable deficits and further draws in
primary nickel stocks. Forecast supply
increases are based on Indonesia
exporting more nickel units in ore
or NPI, with production elsewhere
expected to be flat or fall.
Nickel
Solid demand increases in
stainless and non-stainless
steels, plus emerging
battery demand
10%
Estimated demand growth in 2017
5%
Estimated output growth
In 2017, a record supply deficit was
evident in the nickel market, as strong
synchronised demand growth across
all regions and industry segments
offset supply gains. Such positive
fundamentals, backed by strong
physical activity and significant draws
in global inventory, drove nickel
premiums to record highs.
Growth in global stainless steel –
the dominant driver of nickel
demand – is estimated at 6%,
fuelled by a 9% increase in 300-series
stainless. Positive developments
in non-stainless further supported
demand growth, including orders
from the oil and gas industry and
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Ferroalloys
Alumina/Aluminium
Large demand swings
and volatile pricing, with
overall growth led by the
steel sector
Chinese government
following through
on environmental
commitments
6%
23%
Estimated stainless steel
market growth
Increase in LME aluminium
price YoY
The 2017 chrome market was
characterised by large demand
swings and volatile pricing for
both chrome ore and ferrochrome.
The year started with a series of
environmental and price-driven
Chinese stainless steel mill closures,
which temporarily impacted chrome
demand. This reversed in the second
half when global stainless steel melts
reached record volumes, partly
through the commissioning of a new
major Indonesian project. Overall,
global stainless steel production and
ferrochrome demand are estimated
to have grown 6% and 7%
respectively in 2017.
Carbon steel market fundamentals
continued to improve throughout
2017, resulting in increased demand
for manganese units, which
supported manganese ore and
alloy prices globally.
Vanadium demand continued
to strengthen across product
applications. Ongoing Chinese
commitment to reducing pollution
levels resulted in a reduction of local
vanadium output, lower exports and
an increased drawdown of stock.
This boosted vanadium prices
by 50% in H2 2017.
Unprecedented supply-side events in
China shaped the aluminium market
in the second half of 2017, helping
aluminium and its raw material
prices gather further momentum.
Shutdown of illegal capacities and
winter production cuts in China
demonstrated the government’s
willingness to enforce its
environmental policies.
The alumina market was balanced
in 2017 but supply-side concerns as
a result of the winter production cuts
caused large scale stockpiling and
“panic buying” in China during Q4.
Prices rallied to a 10-year high of
$480/t FOB Australia in November.
The average H2 2017 price was 45%
higher than the same period last year.
Meanwhile, metal prices showed
more modest gains, with the average
H2 2017 LME 3-Month price 24%
higher than H2 2016. Divergent
sentiment about the scale of
reductions undertaken by Chinese
producers led to a brief drop in
December 2017, but the price
recovered, ending the year at
$2,268/t.
U.S. premiums continued to lead
global premium levels. In the second
half of 2017, in-warehouse Rotterdam
premiums fluctuated between
$75 – $95/t, CIF Main Japanese Ports
between $74 – $103/t and delivered
Midwest USA ranging from
7.25 – 9.5c/lb.
Iron ore
Quality differentials
dominated product pricing
21%
YoY increase in iron ore spot price
index (62% CFR North China)
In 2017, we believe iron ore
prices decoupled from iron ore
fundamentals, by following steel
margins instead. Iron ore split further
into different market segments: the
price of low grade iron ore continued
to decrease throughout the year,
while higher grades benefited from
improving steel markets, hence
overall prices remained at fairly high
levels. Discounts for lower grade and
high silica cargoes have now reached
a level that is starting to elicit a supply
response. For 2018, while overall
supply of iron ore may increase, we
could see a decrease in low grade
cargoes exported to China.
65
Glencore Annual Report 2017 Metals and minerals
continued
Industrial activities
Highlights
The metals’ price increases noted
above, partially offset by the generally
lower production volumes and some
inflationary cost pressures over prior
year, resulted in Adjusted EBITDA of
$8.3 billion, a 37% increase over 2016.
The net positive development led
to an increase in Adjusted EBITDA
mining margin from 33% to 38%.
Financial information
US$ million
Revenue◊
Copper assets
African copper (Katanga, Mutanda, Mopani)
Collahuasi1
Antamina1
Looking forward, train one of
Katanga’s whole ore leach project
commissioned in Q4 2017 and is
planned to ramp up through 2018,
while Lady Loretta (Mount Isa zinc) is
expected to restart production in H1
2018, following its shutdown in 2015.
Other South America (Alumbrera, Lomas Bayas, Antapaccay, Punitaqui)
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Custom metallurgical (Altonorte, Pasar, Horne, CCR)
Intergroup revenue elimination
Copper
Zinc assets
Kazzinc
Australia (Mount Isa, McArthur River)
European custom metallurgical (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
North America (Matagami, Kidd, Brunswick, CEZ Refinery)
Other Zinc (Argentina, Bolivia, Peru, Rosh Pinah2, Perkoa2)
Zinc
Nickel assets
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Australia (Murrin Murrin)
Nickel
Ferroalloys
Aluminium/Alumina
Metals and minerals revenue◊
1
2
Represents the Group’s share of these JVs.
Disposed of in August 2017.
66
2017
2016
Change %
2,695
1,303
1,199
2,394
1,965
7,957
(295)
17,218
3,075
1,362
1,273
1,790
695
8,195
1,323
598
1,921
2,111
3
29,448
1,839
1,006
820
2,257
1,799
6,572
(429)
13,864
2,602
1,133
1,209
1,030
537
6,511
1,432
503
1,935
1,873
13
24,196
47
30
46
6
9
21
n.m.
24
18
20
5
74
29
26
(8)
19
(1)
13
(77)
22
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Adjusted EBITDA◊
Adjusted EBIT◊
2017
2016 Change %
2017
2016 Change %
(240)
n.m.
668
803
934
264
542
602
1,088
1,060
524
343
4,360
42%
1,203
645
169
359
244
2,620
35%
555
78
633
33%
655
5
8
8,281
38%
458
407
3,333
38%
989
454
174
184
115
1,916
33%
446
(19)
427
22%
423
(60)
(9)
6,030
33%
153
48
55
3
14
(16)
31
22
42
(3)
95
112
37
24
n.m.
48
55
n.m.
n.m.
37
63
551
675
546
186
194
286
341
407
85
280
2,215
1,159
769
371
78
260
152
1,630
99
12
111
528
5
7
539
143
84
104
1
871
(28)
(61)
(89)
310
(60)
(9)
4,496
2,182
93
98
34
119
(31)
91
43
159
(7)
150
n.m.
87
n.m.
n.m.
n.m.
70
n.m.
n.m.
106
US$ million
Copper assets
African copper
Collahuasi1
Antamina1
Other South America
Australia
Custom metallurgical
Copper
Adjusted EBITDA mining margin2
Zinc assets
Kazzinc
Australia
European custom metallurgical
North America
Other Zinc
Zinc
Adjusted EBITDA mining margin2
Nickel assets
Integrated Nickel Operations
Australia
Nickel
Adjusted EBITDA margin
Ferroalloys
Aluminium/Alumina
Iron ore
Metals and minerals Adjusted EBITDA/EBIT◊
Adjusted EBITDA mining margin2
1 Represents the Group’s share of these JVs.
2
Adjusted EBITDA mining margin is Adjusted EBITDA (excluding custom metallurgical assets) divided by Revenue (excluding custom metallurgical assets and intergroup
revenue elimination) i.e. the weighted average EBITDA margin of the mining assets. Custom metallurgical assets include the Copper custom metallurgical assets and Zinc
European custom metallurgical assets and the Aluminium/Alumina group, as noted in the table above.
67
Glencore Annual Report 2017 2017
2016
Sustaining Expansion
Total
Sustaining Expansion
Total
352
214
180
308
218
161
381
45
–
46
12
–
733
259
180
354
230
161
270
160
194
310
176
127
357
4
1
34
2
3
627
164
195
344
178
130
1,433
484
1,917
1,237
401
1,638
121
256
74
65
77
593
131
14
–
145
163
2
52
–
–
13
–
65
102
–
241
343
4
–
173
256
74
78
77
658
233
14
241
488
167
2
127
209
54
61
55
506
96
14
–
110
101
–
2,336
896
3,232
1,954
26
–
–
4
–
30
34
–
263
297
13
–
741
153
209
54
65
55
536
130
14
263
407
114
–
2,695
Metals and minerals
continued
US$ million
Capital expenditure◊
Copper assets
African copper
Collahuasi1
Antamina1
Other South America
Australia
Custom metallurgical
Copper
Zinc assets
Kazzinc
Australia
European custom metallurgical
North America
Other Zinc
Zinc
Nickel assets
Integrated Nickel Operations
Australia
Koniambo
Nickel
Ferroalloys
Aluminium/Alumina
Capital expenditure◊
1 Represents the Group’s share of these JVs.
68
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Production data
Production from own sources – Total1
Copper
Zinc
Lead
Nickel
Gold
Silver
Cobalt
Ferrochrome
Platinum
Palladium
Rhodium
Vanadium Pentoxide
2017
2016
kt 1,309.7
1,425.8
kt 1,090.2
1,094.1
kt
kt
koz
koz
kt
kt
koz
koz
koz
mlb
272.5
109.1
1,033
294.2
115.1
1,027
37,743
39,069
27.4
1,531
116
161
13
20.9
28.3
1,523
148
209
16
21.1
Production from own sources – Copper assets1
African Copper
(Katanga, Mutanda, Mopani)
Copper metal
Copper in concentrates
Cobalt3
Collahuasi4
Copper metal
Copper in concentrates
Silver in concentrates
Antamina5
Copper in concentrates
Zinc in concentrates
Silver in concentrates
kt
kt
kt
kt
kt
koz
kt
kt
koz
Other South America (Alumbrera,
Lomas Bayas, Antapaccay, Punitaqui)
Copper metal
kt
Copper in concentrates
Gold in concentrates and in doré
Silver in concentrates and in doré
kt
koz
koz
Australia (Mount Isa, Ernest Henry,
Townsville, Cobar)
Copper metal
Copper in concentrates
kt
kt
Gold
Silver
Total Copper department
koz
koz
Copper
Cobalt
Zinc
Gold
Silver
kt 1,165.7 1,270.6
kt
kt
koz
koz
23.9
128.1
415
24.5
66.8
468
13,224
14,214
Production from own sources – Zinc assets1
Change
%
2017
2016
Change
%
(8)
–
(7)
(5)
1
(3)
(3)
1
(22)
(23)
(19)
(1)
Kazzinc
Zinc metal
Lead metal
Lead in concentrates
Copper metal2
Gold
Silver
Silver in concentrates
Australia (Mount Isa,
McArthur River)
Zinc in concentrates
Lead in concentrates
Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
kt
kt
koz
North America (Matagami, Kidd)
Zinc in concentrates
Copper in concentrates
Silver in concentrates
Other Zinc: South America
(Argentina, Bolivia, Peru)
Zinc in concentrates
Lead metal
Lead in concentrates
Copper in concentrates
Silver metal
Silver in concentrates
Other Zinc:
Africa (Rosh Pinah, Perkoa)
Zinc in concentrates
Lead in concentrates
Silver in concentrates
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
210.5
187.6
52.9
4.7
49.7
585
44.0
15.2
53.9
521
5,780
4,510
132
469
488.4
185.4
8,741
130.1
48.0
2,292
99.0
12.7
29.7
2.1
666
436.0
156.4
7,114
kt
kt
123.7
47.3
koz
2,271
kt
kt
kt
kt
koz
koz
kt
kt
koz
kt
kt
kt
koz
99.8
13.6
41.2
3.4
637
7,775
7,271
92.1
3.7
157
122.2
7.2
282
962.1 1,027.3
272.5
100.4
585
294.2
104.0
521
koz 23,866
24,231
12
20
(69)
(8)
12
28
(72)
(11)
(16)
(19)
(5)
(1)
(1)
1
7
39
62
(4)
7
(25)
(49)
(44)
(6)
(7)
(3)
12
(2)
South American production above excludes Volcan Compania Minera. Owing to the
recent timing of the share tender in Q4 2017 (Glencore now has 63% of the voting
shares and a 23% overall economic interest), management is in preliminary stages
of reviewing the operations and the associated reporting framework. Therefore
production data has been excluded, which currently provides a more consistent
comparative analysis.
69
2017
2016
Change
%
236.0
254.4
2.7
23.9
–
24.5
(7)
n.m.
(2)
–
2.1
(100)
230.5
3,103
220.8
3,276
142.6
128.1
6,579
145.5
66.8
6,778
78.1
80.0
245.3
308.8
348
382
1,821
2,366
164.6
65.9
67
205.1
53.9
86
1,721
1,794
4
(5)
(2)
92
(3)
(2)
(21)
(9)
(23)
(20)
22
(22)
(4)
(8)
(2)
92
(11)
(7)
Glencore Annual Report 2017 Metals and minerals
continued
Production from own sources – Nickel assets1
Production from own sources – Ferroalloys assets1
Integrated Nickel Operations (INO)
(Sudbury, Raglan, Nikkelverk)
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
kt
kt
kt
kt
kt
Gold
Silver
Platinum
Palladium
Rhodium
Murrin Murrin
Nickel metal
Cobalt metal
Koniambo
Nickel in ferronickel
Total Nickel department
Nickel
Copper
Cobalt
Gold
Silver
Platinum
Palladium
Rhodium
koz
koz
koz
koz
koz
kt
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
2017
2016
Change
%
57.0
0.5
15.6
28.0
0.8
32
653
75
136
6
34.1
2.7
65.6
0.6
16.6
34.6
1.0
37
624
90
173
6
35.3
2.8
(13)
(17)
(6)
(19)
(20)
(14)
5
(17)
(21)
–
(3)
(4)
17.5
13.6
29
109.1
43.6
115.1
51.2
3.5
32
653
75
136
6
3.8
37
624
90
173
6
(5)
(15)
(8)
(14)
5
(17)
(21)
–
Ferrochrome6
PGM7
Platinum
Palladium
Rhodium
Gold
4E
2017
1,531
2016
1,523
Change
%
1
41
25
7
1
74
58
36
10
1
105
(29)
(31)
(30)
–
(30)
kt
koz
koz
koz
koz
koz
Vanadium Pentoxide
mlb
20.9
21.1
(1)
Total production – Custom metallurgical assets1
2017
2016
Change
%
Copper (Altonorte, Pasar, Horne, CCR)
kt
Copper metal
Copper anode
Zinc (Portovesme, San Juan de
Nieva, Nordenham, Northfleet)
Zinc metal
Lead metal
Silver
526.8
535.7
489.1
522.5
788.0
193.8
789.8
216.6
kt
kt
kt
koz
13,656
14,845
8
3
–
(11)
(8)
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis,
except as stated.
2 Copper metal includes copper contained in copper concentrates and blister.
3 Cobalt contained in concentrates and hydroxides.
4 The Group’s pro-rata share of Collahuasi production (44%).
5 The Group’s pro-rata share of Antamina production (33.75%).
6 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
7 Consolidated 50% of Mototolo and 100% of the Group’s PGM recovery plant.
Operating highlights
Copper assets
Own sourced copper production of
1,309,700 tonnes was 116,100 tonnes
(8%) lower than in 2016, reflecting
the Ernest Henry minority sale in
Q4 2016, end of life production
declines at Alumbrera and various
temporary effects including lower
throughput at Mutanda (due to
constrained supply of sulphuric acid)
and smelter maintenance at Mount
Isa. Q4 production of 363,200 tonnes
was 59,600 tonnes (20%) higher than
in Q3, reflecting the resolution of such
temporary impacts.
African copper
Own sourced copper production of
238,700 tonnes was 15,700 tonnes
(6%) lower than in 2016, reflecting
throughput restrictions at Mutanda,
initially related to unusually wet
weather, and in Q3, due to an
interruption in sulphuric acid supply
from Mopani, resulting from its power
supply constraints. Mutanda’s Q4 own
sourced production of 51,500 tonnes
was in line with historical
performance levels.
Cobalt production of 23,900 tonnes
was broadly in line with 2016.
Katanga commissioned phase 1
of its new whole ore leach processing
project in December 2017, with
2,200 tonnes of copper cathode
produced by the end of December.
Prior to such commissioning, 2,700
tonnes of copper in concentrates
were produced and sold, originating
from the KITD Tailings project.
Collahuasi
Glencore’s share of copper
production was 230,500 tonnes, up
7,600 tonnes (3%) on 2016, mainly
reflecting marginally improved ore
grades and consistently strong
milling performance.
Antamina
Glencore’s share of copper
production was 142,600 tonnes, in
line with 2016, and the share of zinc
production was 128,100 tonnes, an
increase of 61,300 tonnes (92%) on
2016, reflecting the higher proportion
of copper/zinc ores being mined,
and the inherent nature of the
Antamina deposit.
Other South America
Own sourced copper production of
323,400 tonnes was 65,400 tonnes
(17%) down on 2016, mainly relating
to Alumbrera as it nears end of life.
Antapaccay mined and processed
on average lower grades for the year,
but performed strongly in Q4 as the
mine sequenced to a new phase of
production with higher grades.
70
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Australia
Own sourced copper production of
230,500 tonnes was 28,500 tonnes
(11%) lower than in 2016, reflecting
the sale of a minority stake in the
Ernest Henry mine in late 2016 and
smelter maintenance in Q3 2017.
Q4 production post-maintenance
was substantially stronger.
Australia
Zinc production of 436,000 tonnes
was 52,400 tonnes (11%) down
on 2016 and lead production of
156,400 tonnes was 29,000 tonnes
(16%) down, reflecting general mine
planning changes at Mount Isa and
the impact of no longer processing
Black Star ore.
Custom metallurgical assets
Copper cathode production of
526,800 tonnes was 37,700 tonnes
(8%) higher than in 2016, mainly
reflecting Pasar’s expansion project.
Copper anode production of 535,700
tonnes was within 3% of 2016 levels.
North America
The Canadian mines produced
123,700 tonnes of zinc, down
6,400 tonnes (5%) on 2016, reflecting
expected variability in mined volumes
and head grades as both operations
reach end of life.
Zinc assets
Own sourced zinc production of
1,090,200 tonnes was in line with
2016, as the step-up in Antamina zinc
production noted above was offset
by the disposals of the African
mines to Trevali Mining, and lower
production, as expected, at Mount Isa.
Kazzinc
Own sourced zinc production of
210,500 tonnes was 22,900 tonnes
(12%) higher than in 2016, reflecting
the increased mix of processing some
site work-in-process, compared to
third party material. Production
including third party material was
316,800 tonnes, up 4%, reflecting
various process improvements.
Own sourced lead production of
57,600 tonnes was 1,600 tonnes (3%)
lower than in 2016. Total lead
production including third party feed
was 151,000 tonnes, in line with the
comparable period.
Own sourced copper production of
49,700 tonnes was 4,200 tonnes (8%)
lower than in 2016, due to a planned
smelter shutdown in Q3 2017.
Own sourced gold production of
585,000 ounces was 64,000 ounces
(12%) higher than in 2016, reflecting
stronger grades and recoveries
at Vasilkovsky plus initial gold
production from the Dolinnoe mine.
Other Zinc
The South American assets produced
99,800 tonnes of zinc, in line with
2016. Lead production of 54,800
tonnes was 12,400 tonnes (29%) up
on 2016, mainly relating to stronger
production at Aguilar in Argentina.
The African assets produced 92,100
tonnes of zinc and 3,700 tonnes of
lead up to 31 August 2017, at which
point they were sold to Trevali Mining.
European custom metallurgical assets
Zinc production of 788,000 tonnes
was in line with 2016. Lead
production of 193,800 tonnes was
22,800 tonnes (11%) lower, reflecting
more complex feeds than previously
being processed.
Nickel assets
Own sourced nickel production of
109,100 tonnes was 6,000 tonnes (5%)
down on 2016, owing to changes in
the use of third party versus own
sourced feeds in the INO circuit,
partly offset by a strengthening
operational performance
at Koniambo.
Integrated Nickel Operations (INO)
Own sourced nickel production of
57,500 tonnes was 8,700 tonnes (13%)
down on 2016, mainly due to a higher
proportion of third party feeds in the
production mix, as noted above.
Total production including third-party
feeds was 87,100 tonnes, down 7%
on 2016.
Murrin Murrin
Own sourced nickel production of
34,100 tonnes was 1,200 tonnes (3%)
lower than in 2016, mainly reflecting
the maintenance shut in H1 2017.
Koniambo
Production of 17,500 tonnes was
3,900 tonnes (29%) higher than in
2016, reflecting efforts to steadily
improve the plant’s operating
performance towards capacity
expectation levels. The DC furnace 2
rebuild is complete with first
metal tapped in December 2017.
A progressive testing and ramp-up
process will continue in the
coming months.
Ferroalloys assets
Ferrochrome
Attributable ferrochrome production
of 1,531,000 tonnes was in line with
2016. Quarter on quarter changes
were largely driven by timing of
furnace refurbishments.
Platinum Group Metals (PGM)
Mototolo’s concentrate production
was temporarily suspended from
August to December 2017, while
strengthening of the tailings dam
was carried out. Glencore’s share
of production at 72,000 ounces
was therefore down ~30% on
2016. Normal operations have
since resumed.
A further 2,000 ounces were
reclaimed from a PGM recovery plant
at Eastern Chrome Mines, mainly in
Q4 2017. Steady-state operations from
such activities are expected to yield
~10,000 ounces per year.
Vanadium
Production of 20.9 million pounds
was in line with 2016.
71
Glencore Annual Report 2017 Energy
products
72
Highlights
Energy Products Adjusted EBITDA of $4.7 billion
was $2.2 billion (89%) up on 2016. Both periods were
constrained somewhat by the corporate risk management
decision in Q2 2016 to economically hedge a portion of
future coal sales, effectively “locking in” H1 2016 pricing,
resulting in an “opportunity cost” of $380 million (2016:
$980 million) realised in 2017. All the affected tonnes had
rolled off by year-end. Adjusting for this hedging impact,
2017 Adjusted EBITDA was up 60% over the prior year.
Much of this increase was due to higher realised coal
prices, with benchmark thermal coal averages up around
30 – 35% year over year. Marketing also contributed to the
increase, aided by higher oil volumes and supportive coal
market conditions.
In August 2017, Glencore reached an agreement with
Yancoal to acquire a 49% JV interest in the Hunter Valley
Operations coal business in New South Wales, which
is expected to complete in H1 2018, subject to
regulatory approvals.
Adjusted EBITDA
(US$ million)◊
Adjusted EBIT
(US$ million)◊
2
0
1
5
2
0
1
6
2
0
1
7
3,095
2,462
4,653
690
67
2
0
1
5
2
0
1
6
2
0
1
7
2,414
Coal Adjusted
EBITDA margin
41%
Pre economic hedge
Crude oil marketed
33% higher
Strategic partnerships and
offtakes include Rosneft
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Energy products
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA margin
Marketing
activities
118,199
1,054
990
0.9%
Industrial
activities
10,067
3,599
1,424
35.8%
2017
128,266
4,653
2,414
3.6%
Marketing
activities
81,872
959
909
1.2%
Industrial
activities
7,149
1,503
(842)
21.0%
2016
89,021
2,462
67
2.8%
Market conditions
Selected average commodity prices
S&P GSCI Energy Index
Coal API4 ($/t)
Coal Newcastle (6,000) ($/t)
Oil price – Brent ($/bbl)
Marketing highlights
Seaborne coal prices continued their
momentum from 2016, as Chinese
policy restrictions were maintained to
limit/cap supply to support targeted
domestic coal price bands. After a
relatively prolonged period of range-
Financial information
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Selected marketing volumes sold
Thermal coal1
Metallurgical coal1
Coke1
Crude oil
Oil products
1 Includes agency volumes.
2017
178
84
88
55
2016
151
64
65
45
Change %
18
31
35
22
bound prices, from mid-year,
oil prices began to meaningfully
increase, with OPEC and non-OPEC
cuts, gradually reducing inventories
and improving sentiment
all contributing.
As a result of these positive market
developments and a meaningful
increase in oil volumes marketed,
2017 Marketing Adjusted EBIT
of $990 million was up 9% year
over year.
2017
118,199
1,054
990
2017
106.3
2.3
0.6
1,209
853
2016
81,872
959
909
Change %
44
10
9
2016
105.7
2.4
0.9
911
844
Change %
1
(4)
(33)
33
1
mt
mt
mt
mbbl
mbbl
73
Glencore Annual Report 2017 Energy products
continued
Thermal coal
Chinese domestic supply
restrictions led to increased
demand for imported coal
3.7%
Seaborne thermal coal demand
growth in 2017
35%
YoY increase in Newcastle index price
Global seaborne thermal coal
demand grew >30Mt or 3.7% during
2017, largely in the Pacific and Indian
Ocean markets. Korean and Chinese
demand growth dominated among
broad-based demand increases
across Asia, where increased coal use
for power generation and industrial
applications was supported by its
relatively low cost as a fuel supply.
Growth of the Chinese economy
supported total electricity and
thermal power generation demand
growth of 5.7% and 4.6% respectively
year over year. Combined with
production limitations, associated
with ongoing improvements
74
to domestic mines’ safety and
production controls, the increased
power demand contributed to
Chinese domestic coal supply
shortages, supporting prices and
increased import coal demand.
Hydro electricity generation shortfalls
in parts of Europe and strong
demand for electricity in Turkey
contributed to increased thermal
coal demand in the Atlantic.
On the supply side, Cyclone Debbie
and strikes curtailed Australian
supply, while weather also impacted
Colombia, with thermal coal export
volumes declining from both origins
during 2017. While higher prices
attracted additional supply from the
USA, Russia and Indonesia, overall the
short term supply response struggled
to keep up, with strong demand
during the second half of 2017.
To date, such supply response has
typically been in low energy and/or
high sulphur products, but this
could change in the future. In the
longer term, price volatility and
environmental concerns continue
to limit investment in new supply
capacity. At the end of December
2017, market index prices for
Newcastle, API4 and API2 closed
respectively 7%, 9% and 10% higher
than end December 2016, returning
to levels last seen briefly in November
2016, and prior to that, in April 2012.
Oil
OPEC cuts and renewed
optimism about global
growth supported
higher prices
22%
YoY increase in Brent crude price
During the first half of 2017, oil prices
were largely range bound, with
Brent capped around $55 per barrel.
By mid-year the benchmark slipped
to $45 per barrel as market sentiment
weakened, amidst events that
increased concerns about oversupply
and global inventories remaining
stubbornly high. However, by the
third quarter, high OPEC compliance
with its production cuts was evident,
and forecasters, encouraged by
synchronous GDP growth in most
global markets, predicted strong oil
demand growth. Inventories started
to draw down meaningfully, which
led to renewed optimism that
expectations on the oil market
rebalancing within the coming year
would be fulfilled, providing the
impetus for higher oil prices in
the second half of 2017.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Further support came from
geopolitical events and supply
disruptions, with outages in Libya,
Iraq, the North Sea, Canada, and
mounting concerns about Venezuela
production declines. The steady
increase in short-cycle US and other
non-OPEC production coming on
line was less influential in capping oil
price gains, as speculator net length
increased rapidly to historically high
levels, driving the price of Brent up to
$67 per barrel at the end of the year.
The Brent curve shifted decisively into
backwardation midway through the
year, and by year end, the WTI curve
followed suit. Refinery margins were
generally healthy for most of 2017,
in part supported by the impact of
some unexpected capacity losses in
Europe and the US. In shipping, the
tanker freight market remained
lacklustre and struggled to perform
as fleet expansion continued to
outpace scrapping of tanker tonnage.
Industrial activities
Highlights
Energy Products’ Adjusted EBITDA
of $3.6 billion was up $2.1 billion year
over year. As noted above, a portion
of this relates to the roll off of the
economic hedges during 2017, but
the far greater part reflects the
improved price environment, partially
offset by lower tonnes resulting
primarily from industrial action and
some inflationary cost pressures.
The Adjusted EBITDA mining margin,
pre economic hedges, increased
from 32% to 41%.
Financial information
US$ million
Net revenue◊
Coal operating revenue
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejón1
Impact of corporate coal economic hedging
Coal operating revenue
Coal other revenue
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejón1
Coal other revenue (buy-in coal)
Coal total revenue
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejón1
Impact of corporate coal economic hedging
Coal total revenue
Oil
Energy products revenue◊
1 Represents the Group’s share of this JV.
2017
2016
Change %
1,088
4,892
1,500
1,199
789
(380)
9,088
3
672
17
6
1
699
1,091
5,564
1,517
1,205
790
(380)
9,787
280
10,067
651
3,763
1,349
1,130
606
(980)
6,519
2
325
9
12
1
349
653
4,088
1,358
1,142
607
(980)
6,868
281
7,149
67
30
11
6
30
n.m.
39
50
107
89
(50)
–
100
67
36
12
6
30
n.m.
43
–
41
75
Glencore Annual Report 2017 Energy products
continued
Adjusted EBITDA◊
Adjusted EBIT◊
US$ million
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejón1
Coal result prior to hedging
Impact of corporate coal economic hedging
Total coal
Adjusted EBITDA margin2
Oil
Adjusted EBITDA margin
Energy products Adjusted EBITDA/EBIT◊
Adjusted EBITDA margin – pre economic hedge
Adjusted EBITDA margin – post economic hedge
2017
541
1,999
577
359
387
3,863
(380)
3,483
41%
116
41%
3,599
41%
38%
154
1,334
456
178
240
2,362
(980)
1,382
31%
121
43%
1,503
32%
22%
2016 Change %
251
50
27
102
61
64
n.m.
152
2017
249
876
289
192
210
1,816
(380)
1,436
2016 Change %
12
(26)
213
16
62
277
(980)
(703)
n.m.
n.m.
36
n.m.
239
556
n.m.
n.m.
(4)
(12)
(139)
n.m.
139
1,424
(842)
n.m.
1 Represents the Group’s share of this JV.
2 Coal EBITDA margin is calculated on the basis of Coal operating revenue before corporate hedging, as set out in the preceding table.
US$ million
Capital expenditure
Australia (thermal and coking)
Thermal South Africa
Prodeco
Cerrejón1
Total Coal
Oil
Capital expenditure◊
1 Represents the Group’s share of this JV.
2017
2016
Sustaining Expansion
Total
Sustaining Expansion
Total
153
162
175
54
544
98
642
73
26
1
–
100
–
100
226
188
176
54
644
98
742
181
98
43
31
353
72
425
110
30
3
2
145
1
146
291
128
46
33
498
73
571
76
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Production data
Coal assets1
Australian coking coal
Australian semi-soft coal
Australian thermal coal (export)
Australian thermal coal (domestic)
South African thermal coal (export)
South African thermal coal (domestic)
Prodeco
Cerrejón2
Total Coal department
mt
mt
mt
mt
mt
mt
mt
mt
mt
2017
6.1
4.0
49.1
7.5
18.7
10.0
14.6
10.6
2016
5.3
4.2
52.5
5.6
17.2
12.1
17.3
10.7
120.6
124.9
Change %
15
(5)
(6)
34
9
(17)
(16)
(1)
(3)
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis except for joint ventures, where the Group’s attributable share of production is included.
2 The Group’s pro-rata share of Cerrejón production (33.3%).
Oil assets
Glencore entitlement interest basis
Equatorial Guinea
Chad
Total Oil department
Gross basis
Equatorial Guinea
Chad
Total Oil department
2017
2016
Change %
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
2,529
2,524
5,053
11,914
3,450
15,364
3,629
3,882
7,511
16,909
5,308
22,217
(30)
(35)
(33)
(30)
(35)
(31)
Oil assets
Glencore’s oil entitlement interest
of 5.1 million barrels was 1.4 million
barrels (33%) lower than in 2016,
reflecting expected reductions in a
period of inactive field development
in a low oil price environment. Drilling
in Chad recommenced in H2 2017
with a single-rig campaign, which
is expected to offset natural field
declines in Equatorial Guinea.
Operating highlights
Coal assets
Coal production of 121 million tonnes
was 3% down on 2016, as reductions
associated with industrial action and
adverse weather events, were mostly
offset by productivity improvements
and Glencore’s higher equity share
in certain mines.
Australian coking
Production of 6.1 million tonnes was
0.8 million tonnes (15%) higher than
in 2016, mainly related to the restart
of the Integra mine.
Australian thermal and semi-soft
Production of 60.6 million tonnes
was 1.7 million tonnes (3%) down
on 2016, as higher equity ownership
of the Newlands and Collinsville
mines, expected ramp-ups (notably
Rolleston) and production efficiencies
across the board were offset by
planned mine closures and the
impact of industrial action.
South African thermal
Production of 28.7 million tonnes
was in line with 2016, as improved
operating performances at the main
mine complexes were offset by
planned closures of smaller mines.
Prodeco
Production of 14.6 million tonnes was
2.7 million tonnes (16%) lower than
in 2016, initially due to the impact
of severe wet weather and later,
as a result of a geotechnical event,
with productivity adversely affected
by the necessary workarounds.
Cerrejón
Glencore’s share of production at
10.6 million tonnes was in line with
2016, as the easement of some
restrictions related to dust emissions
in 2016, was offset by the disruption
caused by unusually heavy rainfall.
77
Glencore Annual Report 2017 Highlights
At the end of 2016, we completed the sale of 50% of the
Agricultural products business. The resulting joint venture
has been presented on a proportionate consolidation
basis in this analysis, hence the apparent year over year
reductions reflecting the changed ownership interest.
Underlying performance was within expectations
in a difficult trading environment, characterised by
relatively low prices and volatility, which limited
arbitrage opportunities.
Portfolio changes reflected the addition of a sugarcane
mill in Brazil, adding 50% to crushed volumes, and
the sale of our farming assets in Ukraine.
Adjusted EBITDA
(US$ million)◊
Adjusted EBIT
(US$ million)◊
2
0
1
5
2
0
1
6
2
0
1
7
734
592
50% selldown
316
2
0
1
5
2
0
1
6
2
0
1
7
524
522
50% selldown
192
Adjusted EBITDA
(100% basis)
$631m
Adjusted EBIT
(100% basis)
$384m
Agricultural
products
78
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Agricultural products
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA margin
Sustaining capital expenditure◊
Expansionary capital expenditure◊
Total capital expenditure◊
2017
12,611
316
192
2.5%
65
53
118
2017
(100% basis)
25,278
631
384
2.5%
130
105
235
2016
21,970
592
522
2.7%
93
47
140
Change %
(100% basis)
15
7
(26)
40
123
68
2016 financial information reflected 11 months results on a 100% consolidated basis, and 1 month on a 50%
proportionate consolidated basis. 2017 reflected 50% proportionate consolidation throughout.
Market conditions
Selected average commodity prices
S&P GSCI Agriculture Index
CBOT wheat price (US¢/bu)
CBOT corn no.2 price (US¢/bu)
CBOT soya beans (US¢/bu)
ICE cotton price (US¢/lb)
ICE sugar # 11 price (US¢/lb)
Selected marketing volumes sold
Million tonnes
Grain
Oil/Oilseeds
Cotton
Sugar
Marketing highlights
The grain and oilseed markets were
again well supplied, low priced and
lacked volatility, which in turn limited
arbitrage opportunities. Despite
a brief U.S. weather concern in late
June, impacting primarily spring
wheat, which proved to be less
significant than initially thought,
global crops were problem free with
Russia, Australia (basis late 2016
harvest carried over) and Brazil all
recording historically high production.
Global grain marketing performed
well in the environment and whilst
oilseed marketing results were
satisfactory, they fell short of 2016.
Record exports in Russia and
Australia were beneficial for the grain
handling and marketing businesses
in both countries. In Canada, the
Viterra handling business faced
challenges, particularly in the second
half. Reluctant selling by farmers in
the face of excess handling capacity
pressured margins. The disruption
2017
290
436
359
976
73
16
2017
45.3
29.6
0.5
0.7
2016
Change %
295
436
358
989
66
18
2016
43.8
26.7
0.4
0.5
(2)
–
–
(1)
11
(11)
Change %
3
11
25
40
of the pulses trade into India, due
to government intervention in
support of local producers, was also
a negative for Canadian exports.
79
Glencore Annual Report 2017
Agricultural products
continued
Processing/production data1
Farming
Crushing
Long-term toll agreement
Biodiesel
Rice milling
Wheat milling
Sugarcane processing
Total agricultural products
1 Reported on a 100% basis.
kt
kt
kt
kt
kt
kt
kt
kt
2017
360
8,065
812
735
177
920
4,884
15,953
2016
792
7,680
804
687
274
989
3,259
14,485
Change %
(55)
5
1
7
(35)
(7)
50
10
Operating highlights
Soft seed processing margins in
both the EU and Canada were below
expectations. In the EU, the rape seed
deficit was filled by imports, which
was of some benefit to the coastal
facilities but not to facilities, such as
ours, located inland. The lifting of
tariffs on imported biodiesel into
the EU depressed biodiesel margins
towards the end of the year. In
Argentina our performance was
satisfactory, but we endured periods
of crush margin weakness. Our sugar
milling performance, including the
Unialco mill acquired in February
2017, was also satisfactory, despite
weaker sugar prices in H2 2017.
The economic environment in Brazil
continues to provide challenges for
our wheat milling business, with
processing volumes down 7% year
over year reflective of reduced
domestic demand. We continued
our progressive exit from farming
with the sale of our remaining
Ukrainian farming assets in H2 2017.
80
Glencore Annual Report 2017 Corporate
Governance
82
84
86
101
106
Directors and officers
Chairman’s introduction
Corporate Governance report
Directors’ remuneration report
Directors’ report
81
Glencore Annual Report 2017 Directors and officers
Directors
Anthony Hayward
Chairman (H)
(60)
Ivan Glasenberg
Chief Executive Officer (H)
(61)
Peter Coates AO
Non-Executive Director (Hc)
(72)
Chairman since May 2013; he joined the Board
in 2011 as the Senior Independent Director.
Joined Glencore in April 1984; Chief Executive
Officer since January 2002.
Experience: Currently a managing partner
of St. James Asset Management and AEA
Capital. Chairman of Compact GTL Limited
and Colombia Oil and Gas.
He was CEO of BP plc from 2007–10, having
joined BP in 1982. He became group treasurer
in 2000, chief executive for BP upstream
activities and a member of the main board
of BP in 2003.
From 2011–15 he was CEO of Genel Energy plc
and chairman from 2015–17.
Dr Hayward studied geology at Aston University
in Birmingham and completed a Ph.D at
Edinburgh University. He is a fellow of the
Royal Society of Edinburgh.
Experience: Initially worked in Glencore’s coal
department in South Africa as a marketer.
Following time in Australian and Asian offices,
in 1990 he was made head of Glencore’s coal
marketing and industrial businesses, and
remained in this role until he became Group
CEO in January 2002.
Mr Glasenberg is a Chartered Accountant of
South Africa, holds a Bachelor of Accountancy
from the University of Witwatersrand and an
MBA from the University of Southern California.
He is currently a non-executive director of Rusal
(HKG: 0486) and Rosneft (MCX:ROSN).
Non-Executive Director since January 2014;
previously Executive Director from June
to December 2013 and Non-Executive Director
from April 2011 to May 2013.
Experience: Prior to joining Glencore in 1994
as a senior executive in the coal department,
Mr Coates had occupied senior positions
in a range of resource companies. He joined
Xstrata in 2002 as CEO of Xstrata’s coal business,
when Glencore sold its Australian and South
African coal assets to Xstrata, stepping down
in December 2007.
He was non-executive chairman of (1) Xstrata
Australia from 2008–09, (2) Minara Resources
Ltd from 2008–11 and (3) Santos Limited
from 2009–13 and 2015–18. He is currently
a non-executive director of Event Hospitality
and Entertainment Limited (ASX:EVT).
Mr Coates holds a degree in Mining Engineering
from the University of New South Wales.
John Mack
Non-Executive Director (Rc, N)
(73)
Gill Marcus
Non-Executive Director (A, N)
(68)
Patrice Merrin
Non-Executive Director (H)
(69)
Appointed in June 2013.
Appointed with effect from 1 January 2018.
Appointed in June 2014.
Experience: Mr Mack is the chairman of Lantern
Credit, a non-executive director of Lending Club
(NYSE:LC) and also serves on the board of Tri
Alpha. He also serves on the board of Trustees
of New York-Presbyterian Hospital and the
University Hospitals of both Columbia
and Cornell.
Mr Mack previously served as CEO of Morgan
Stanley from 2005–09. He retired as chairman
in 2011. Mr Mack first joined Morgan Stanley in
May 1972, becoming a board director in 1987
and president in 1993.
Before rejoining Morgan Stanley as chairman
and CEO in 2005, Mr Mack served as co-CEO
of Credit Suisse.
Mr Mack is a graduate of Duke University.
Experience: Ms Marcus was Governor of the
South African Reserve Bank from 2009–14.
She worked in exile for the African National
Congress from 1970 before returning to
South Africa in 1990. In 1994 she was elected
to the South African Parliament. In 1996 she
was elected as the deputy minister of finance
and 1999 the deputy governor of the
Reserve Bank.
Ms Marcus was the non-executive chair of the
Absa Group from 2007–09. She has also been
a non-executive director of Gold Fields Ltd and
Bidvest. She acted as chair of a number of
South African regulatory bodies, including the
Financial Services Board and the Standing
Committee for the Revision of the Banks Act.
Ms Marcus is a graduate of the University of
South Africa.
Experience: Ms Merrin is currently a non-
executive director of Kew Media Group Inc.
(TSX:KEW). She has been a director and then
chairman of CML Healthcare from 2008–13, and
a director of various other companies including
Stillwater Mining, NB Power and Arconic.
Following initial roles with Molson and
Canadian Pacific, Ms Merrin worked at Sherritt,
the Canadian diversified miner, for 10 years until
2004, latterly as COO. She then became CEO of
Luscar, Canada’s largest thermal coal producer.
Ms Merrin was a director of the Alberta Climate
Change and Emissions Management
Corporation from 2009–14.
Ms Merrin is a graduate of Queen’s University,
Ontario and completed the Advanced
Management Programme at INSEAD.
82
Glencore Annual Report 2017
Directors
Strategic Report
Governance
Financial
Statements
Additional
Information
Leonhard Fischer
Non-Executive Director (Ac, N, R)
(55)
Martin Gilbert
Non-Executive Director (A, R)
(61)
Peter Grauer
Senior Independent Director (A, Nc)
(72)
Appointed in April 2011.
Appointed in May 2017.
Experience: Mr Fischer is founder and chairman
of the investment committee of DFG Deutsche
Fondsgesellschaft SE Invest. Member of the
board of Gesellschaft zuer Foerderung der
Frankfurter Wertpapierboerst e.V.
He was CEO of BHF Kleinwort Benson group
S.A. from 2009–16. He was CEO of Winterthur
group from 2003–06 and a member of the
executive board of Credit Suisse group from
2004–07. He joined Credit Suisse from Allianz,
where he had been a member of the
management board.
Mr Fischer holds an M.A. in Finance from
the University of Georgia.
Experience: Mr Gilbert is co-chief executive
of Standard Life Aberdeen plc (LON:SLA).
Mr Gilbert was a co-founder of Aberdeen Asset
Management, which was established in 1983.
Mr Gilbert sits on the board of directors of the
Institute of International Finance. He is also a
member of the international advisory panel of
the Monetary Authority of Singapore and the
international advisory board of BritishAmerican
Business. He is also the deputy chairman of
Sky plc (LON:SKY). He was appointed chairman
of the Prudential Regulation Authority’s
practitioner panel in December 2013.
Mr Gilbert was educated in Aberdeen,
has an MA in Accountancy and an LLB
and is a Chartered Accountant.
Appointed in June 2013 and became the
Senior Independent Director in May 2014.
Experience: Mr Grauer is chairman of
Bloomberg Inc. He was chairman and chief
executive officer from 2002–11 and has been
a member of Bloomberg’s board of directors
since 1996. He is also currently a director of
Davita Inc (NYSE:DVA), a member of the
International Business Council of the WEF,
and a trustee of Rockefeller University.
Mr Grauer was managing director of Donaldson,
Lufkin & Jenrette from 1992–2000 and CSFB
Private Equity until 2002.
Mr Grauer graduated from the University of
North Carolina and the Harvard University
Graduate School of Business Program for
Management Development in 1975.
Officers
Steven Kalmin
Chief Financial Officer
(47)
John Burton
Company Secretary
(53)
Appointed as Chief Financial Officer
in June 2005.
Appointed Company Secretary in
September 2011.
Experience: He was formerly company
secretary and general counsel of Informa plc
and before that a partner of CMS in London
specialising in corporate law. Mr Burton holds
a B.A. degree in Law from Durham University.
He was admitted as a Solicitor in England
and Wales in 1990.
Experience: Joined Glencore in September
1999 as general manager of finance and
treasury functions at Glencore’s coal industrial
unit. He moved to Glencore’s head office
in 2003 to oversee Glencore’s accounting
functions, becoming CFO in June 2005.
In November 2017 he was appointed as a
director of Katanga Mining Limited (TSX: KAT).
Mr Kalmin holds a Bachelor of Business (with
distinction) from the University of Technology,
Sydney and is a member of the Chartered
Accountants Australia and New Zealand and
the Financial Services Institute of Australasia.
Before joining Glencore, Mr Kalmin worked for
nine years at Horwath Chartered Accountants.
Notes
All the Directors are non-executive apart
from Mr Glasenberg. The non-executive
Directors are designated as independent
apart from Mr Coates. Committee
membership is as follows:
A Audit
H Health, Safety, Environment
and Communities (HSEC)
N Nomination
R Remuneration
c denotes Committee chair
83
Glencore Annual Report 2017 Chairman’s introduction
While the business has performed well, we are
constantly reminded of the importance of governance,
compliance and sustainability issues. We have refreshed
and strengthened the Board with the appointments
of Martin Gilbert and Gill Marcus
• BaseCore Metals streams and
royalties joint venture with
Ontario Teachers
• agreed the formation of a joint
venture with Yancoal for the
Hunter Valley Coal Operations
• acquisition of the majority
of voting shares in Peruvian zinc
miner Volcan
• contribution of a portfolio of
petroleum storage and logistics
assets to an arrangement
with HNA
Safety remains a top priority for
the Board. We are committed to
achieving our goal of zero fatalities.
We offer our condolences to the
families of the nine people who
lost their lives while working at our
operations last year. The HSEC
Committee has met with the
management of all the operations
where the fatalities occurred to
review the incidents and ensure
that appropriate actions are taken
to prevent recurrence.
Our numerous and wide-ranging
asset base provides unique
challenges. However, during every
year in which I have served on your
Board, I have seen considerable
efforts to tackle legacy issues from
some previous underinvestment and
a continuous and significant record
of improvement.
We continue to invest in our
considerable and committed
workforce and will seek over
time to widen our reporting on
people matters.
Dear shareholders
I am pleased to present our corporate
governance report for 2017.
Following the down-cycle challenges
of 2015–16, the past year has been
one of consolidation and renewal.
Our wide-ranging portfolio of assets
together with our leading marketing
business are unique in the industry.
Even at the low point in the most
recent downturn, the Group’s
annualised Adjusted EBITDA
was circa $8 billion (H2 2015 and
H1 2016), supported by the generally
more stable Marketing earnings.
Shareholders will of course note the
comparative figure of $14.8 billion for
2017, reflecting both stronger pricing
across the industrial portfolio and
our strongest performance from
Marketing since 2008.
During the last year we have grown
the business through delivery of
major brownfield capital projects and
corporate transactions on both the
buy-side and sell-side, including:
• considerable progress in the
Katanga (copper/cobalt),
Mopani (copper) and Koniambo
(nickel) projects
84
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
We remain committed to
transparency, and in 2017 on a
voluntary basis we published our first
report on the steps we are taking to
review modern slavery in our supply
chain, and will be providing a further
update this year.
There are many opportunities and
challenges ahead for resource
businesses. I believe that Glencore
will continue to play a leading role
in sustainable value creation for all
our stakeholders.
Anthony Hayward
Chairman
1 March 2018
While the business has performed
well, we are constantly reminded
of the importance of governance,
compliance and sustainability issues,
not least by some adverse media
and NGO reports.
The Board has overseen the
Company’s response to Katanga’s
accounting restatement. This has
been an important area of focus for
us in the past few months, as detailed
further on pages 92 and 97.
We continue to refresh the Board.
Over the past twelve months we have
been pleased to welcome two new
Directors. Gill Marcus has led an
exemplary career of public service
to South Africa, which culminated in
her five year tenure as head of the
Reserve Bank of South Africa. Martin
Gilbert is one of Europe’s leading
asset management entrepreneurs
and is now co-CEO of Standard Life
Aberdeen plc. Further details of their
experience is on page 82.
Also during the year, Bill Macaulay
stepped down from the Board.
He had been a Director since the
Company’s IPO in May 2011 and
has been a strong and consistent
contributor to board debate and
I would like to thank him again for
his valuable contribution to Glencore.
In tax, we have seen, previously
through the EITI standards and
latterly through the EU Directive
on mandatory reporting for listed
companies on payments to
governments, a welcome move to
transparency with regard to the tax
position of corporates in the resources
sector. Our relevant disclosures are
referred to on page 106. As the
OECD’s base erosion and profit
shifting project moves into the
implementation stage, we are now
complying with the reporting
requests of member countries.
Following the endorsement of the
“Aiming for A” shareholder resolution
at our 2016 AGM, last year we
welcomed the launch of the
recommendations of the Taskforce
on Climate-related Financial
Disclosure (TCFD). We have stated
publicly our support for the TCFD,
and details of our progress in
identifying and addressing the risks
and opportunities resulting from
climate change for our business
are included in this report and the
upcoming 2017 Sustainability Report.
We face many challenging situations
at our operations, as we work to
extract resources safely, profitably
and responsibly, to mitigate our
environmental impact and support
our host communities. We recognise
the value of multi-stakeholder
dialogue in addressing these complex
situations through shared learnings
and expertise.
This year we have participated in a
number of such initiatives, including
those focused on management of
security, development of guidance on
human rights for the commodities
trading sector, and addressing the
challenges associated with the cobalt
value chain. Looking ahead, we seek
to continue to strengthen our
engagement in these platforms,
and to identify opportunities for
partnerships that can help us solve
the complex challenges we
encounter at and around
our operations.
85
Glencore Annual Report 2017 Corporate Governance report
This report should be read in conjunction with the Directors’ Report
and the remainder of the Governance section
The Senior Independent Director is
available to meet with shareholders
and acts as an intermediary between
the Chairman and other independent
Directors when required. This division
of responsibilities, coupled with the
schedule of reserved matters for the
Board, ensures that no individual
has unfettered powers of decision.
Further details of these
responsibilities are set out below.
Board governance and structure
Overview
This governance report sets out
how Glencore has applied the
main principles of the UK Corporate
Governance Code (“the Code”) in a
manner which enables shareholders
to evaluate how these principles
have been applied. As a London
premium listed entity we seek to
ensure full compliance with the
Code. The Board believes that the
Company has throughout the year
complied with all relevant provisions
contained in the Code.
The Glencore Board currently
comprises eight Non-Executive
Directors (including the Chairman)
and one Executive Director. On
1 January 2018 Gill Marcus joined
the Board. A list of the Directors
with their brief biographical details
and other significant commitments,
is provided in the previous pages.
The Chief Financial Officer attends
all meetings of the Board and Audit
Committee. The Company Secretary
attends all meetings of the Board
and its committees.
Division of responsibilities
As a Jersey incorporated company,
Glencore has a unitary Board,
meaning all Directors share equal
responsibility for decisions taken.
Glencore has established a clear
division between the respective
responsibilities of the Non-Executive
Chairman and the Chief Executive
Officer which are set out in a
schedule of responsibilities which
has been approved by the Board.
While the Non-Executive Chairman
is responsible for leading the Board’s
discussions and decision-making, the
CEO is responsible for implementing
and executing strategy and for
leading Glencore’s operating
performance and day-to-day
management. The CEO and CFO
have line of sight across the Group.
The CEO is further supported by the
Group’s senior management team
principally comprising the heads of
the businesses and the heads of legal
and strategy. The Company Secretary
is responsible for ensuring that there
is clear and effective information
flow to the Non-Executive Directors.
Roles and responsibilities
Chairman
Chief Executive Officer
Senior Independent
Director
Other Non-Executive
Directors
• Is a confidant of the
• Supply challenge and
• Leads and motivates
management team
• Implements strategy and
objectives as directed
by the Board
Chairman and (when
appropriate) also acts as
an intermediary for other
independent Directors
• Develops Group policies
• Will stand in for the
and proposals for
approval by the Board
and ensures effective
implementation
Chairman if he
is unable to attend
• Responsible for
appraising the
Chairman’s performance
along with other
independent Directors
• Available to shareholders
to answer questions
support to management
• Bring independent
mindset and differing
backgrounds and
experience to Board
debates
• Provide leadership and
challenge as chair of, or
a member of, the Board
Committees which
(except HSEC) comprise
only Non-Executive
Directors
• Scrutinise leadership
of Chairman
Company Secretary
• Secretary to Board
and its Committees
• Informs the Board on all
matters reserved to it
and ensures papers are
provided in sufficient
detail and on time
• Available to Directors
in respect of Board
procedures and provides
support and advice
• Ensures the Board is
kept informed on
governance matters
• Coordinates and assists
with the Board
evaluation process along
with the Chairman
• Leader of the Board
• Responsible for effective
communication flow
between Directors
• Facilitates effective
contribution of all
Directors
• Responsible for effective
Board governance
• Ensures effective
communication with
shareholders
86
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Non-Executive Directors
The Company’s Non-Executive
Directors provide a broad range
of skills and experience to the
Board, which assists in their roles
in formulating the Company’s
strategy and in providing constructive
challenge to executive management.
Glencore regularly assesses its Non-
Executive Directors’ independence.
Except for Peter Coates, due to his
employment by the Group during
2013–14, they all 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 judgement.
Management of conflicts of interest
All Directors endeavour to avoid any
situation of conflict of interest with
the Company. Potential conflicts can
arise and therefore processes and
procedures are in place requiring
Directors to identify and declare any
actual or potential conflict of interest.
Any such notifications are required to
be made by the Directors prior to, or
at, a Board meeting and all Directors
have a duty to update the whole
Board of any changes in
circumstances. Glencore’s Articles
of Association and Jersey law allow
for the Board to authorise potential
conflicts and the potentially
conflicted Director must abstain
from any vote accordingly. During
2017, no abstention procedures for
conflicts had to be activated.
Board Committees
The following four Committees are in
place to assist the Board in exercising
its functions: Audit, Nomination,
Remuneration and Health, Safety,
Environmental and Communities
(HSEC), as set out in the diagram on
the next page. Committee meetings
are held prior to Board meetings and
at each scheduled Board meeting
the chairman of each Committee
leads a discussion concerning
the Committee’s activities since
the previous Board meeting.
The Committees carry out a
considerable amount of work.
In particular:
• the Audit Committee provides
challenge and enquiry on the
significant areas of financial
and accounting oversight and
risk management
• the HSEC Committee, whose
membership includes both
Chairman and CEO, continues to
have the heaviest workload of all
the committees due to its strong
focus on sustainability issues,
especially safety performance
A report for 2017 from each
Committee Chairman is set out later
in this Corporate governance report.
Each Committee reports to, and has
its terms of reference approved by,
the Board and the minutes of the
Committee meetings are circulated
to the Board. Each Committee
reviewed its terms of reference during
the year and as a result revisions were
made to the HSEC Committee’s
terms of reference to ensure they
reflect the Board’s expectations
as to the Committee’s role.
All Committees’ terms of reference
are available at: www.glencore.com/
who-we-are/governance
Board attendance throughout the year
Attendance during the year for all scheduled full agenda Board and all Board Committee meetings is set out
in the table below:
Peter Coates
Leonhard Fischer
Martin Gilbert1
Ivan Glasenberg
Peter Grauer
Anthony Hayward
William Macaulay2
John Mack
Patrice Merrin
Board
of 6
6
Audit
of 4
–
Remuneration
of 2
–
Nomination
of 4
–
6
5
6
6
6
1
5
6
4
3
–
4
–
1
–
–
2
1
–
–
–
1
2
–
4
–
–
4
–
–
4
–
HSEC
of 5
5
–
–
5
–
5
–
–
5
1 Attended all meetings since appointment on 5 May 2017.
2 Attended all meetings until he retired from the Board on 14 April 2017.
In addition, there were another five limited agenda meetings of the Board. Details of all these Board meetings are set
out on page 89.
87
Glencore Annual Report 2017 Corporate Governance report
continued
Board structure
Shareholders
Elect
Directors
Ongoing
engagement
Chief Executive
Officer and Chief
Financial Officer
Board of
Directors
HSEC
committee
Audit
committee
Nomination
committee
Remuneration
committee
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.
Meetings are usually held at the
Company’s headquarters in Baar,
Switzerland. Details of the Board
and Committee meetings held
during the year are detailed above.
The Board and its Committees have
standing agenda items to cover their
proposed business at their scheduled
meetings. The Chairman seeks to
ensure that the very significant work
of the Committees feeds into, and
benefits as to feedback from, the full
Board. The Board and Committee
meetings also benefit from
presentations by senior executives
and some technical and investor
relations updates. Presentations from
the business and senior management
allow Directors to enhance their
understanding of the business and
the implementation of strategy, in
turn contributing to a more effective
Board. A summary of the Board’s
main activities during 2017 is set
out on the next page.
Several times a year the Chairman
holds meetings with the Non-
Executive Directors without the
Executive Director present, and at
least once a year the Non-Executive
Directors meet without the
Chairman present.
88
Appointment and
re-election of Directors
All Directors will be offering
themselves for re-election at the
2018 AGM.
All of the Directors have service
agreements or letters of appointment
and the details of their terms are set
out in the Directors’ remuneration
report. No other contract with
the Company or any subsidiary
undertaking of the Company in
which any Director was materially
interested existed during or at
the end of the financial year.
Information, management
meetings, site visits and
professional development
It is considered of great importance
that the Non-Executive Directors
attain a good knowledge of the
Company and its business and
allocate sufficient time to Glencore
to discharge their responsibilities
effectively. The Board calendar is
planned to ensure that Directors
are briefed on a wide range of
topics. As well as internal briefings,
Directors attend appropriate
external seminars and briefings.
While attending Company meetings,
the Directors also usually engage
with heads of commodities and other
senior Group functions. In addition, in
order to better familiarise themselves
with the industrial activities, site visits
are also arranged. During 2017, three
operations were visited.
All Directors have access to the
advice and services of the Company
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
expense, where they judge this
to be necessary to discharge their
responsibilities as Directors.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Work at Board
meetings and
principal Board
activities during 2017
The main considerations and
actions carried out at the meetings
of the Board during 2017 are
summarised here. The work
of the committees is described
later in this report.
At each main scheduled meeting
the following standing matters
are considered:
• consideration of any new
conflicts of interest
• review of minutes of previous
meetings, including actions
from previous meetings
• reports/updates from the CEO,
CFO, Head of Strategy and
Investor Relations and Head of
Communications. These reports
include consideration of strategic
matters including possible
asset expansions/contractions,
acquisitions/disposals, material
debt refinancing and analysis
of risks
In addition:
• regular updates are provided
by the Company Secretary
on governance, Board
processes and other Company
secretarial matters
• usually the Non-Executive
Directors have a separate
meeting, with sometimes
a second session without
the Chairman present
First scheduled short agenda meeting
• Results/business update
• Initial discussion as to proposed
impairment charges
Third scheduled short agenda meeting
• Business update
• Review and approval of half-year
Production Report
• Consideration and approval of Mutanda
• Review of potential M&A and other
and Katanga share purchase transactions
• Review and approval of prior year
Production Report and Reserves and
Resources Report
First scheduled meeting
• Annual results, including review and
approval, where appropriate, of:
– from the Audit Committee Chairman;
– detailed consideration of principal
risks uncertainties and mitigation
to be disclosed;
– report on going concern;
– final distribution recommendation;
– full-year results announcement for the
prior year;
– Annual Report draft; and
– management representation letter
• Consideration of AGM resolutions
• Report from the Nomination Committee
Chairman and discussion on whether all
current Directors should stand at AGM
• Report from the Remuneration Committee
Chairman
• Report from the HSEC Committee
Chairman, in particular discussions on
safety and draft sustainability report
• Reviewed updated Board governance
documents and key policies
• Board evaluation report and discussion
Second scheduled short agenda meeting
• Business update
• Considered and approved the
Q1 Production Report
• Consideration and conditional approval
of the appointment of Martin Gilbert as
independent Non-Executive Director
Second scheduled meeting
• Briefing on the business to be conducted
at the AGM (and after, of the other
issues raised)
• Business update and review
• Report from the HSEC Committee
Chairman
• Report from the Audit Committee
Chairman including as to the current
year audit plan
• Report from the Nomination Committee
Chairman
First short notice meeting
• Business update
• Consideration and approval of proposal
for an acquisition of Rio Tinto’s Australian
Hunter Valley coal assets
material matters including an update
on and approval of proposals
concerning Hunter Valley
Fourth scheduled meeting
• Half-year results, including review
and approval, where appropriate, of:
– report from the Audit Committee
Chairman
– principal risks and mitigation
to be disclosed
– report on going concern
– half-year results announcement
– other material accounting issues
– management representation letter
• Report from the HSEC Committee
Chairman
• Considered outcomes from multiple
shareholder meetings on governance
and sustainability issues
• Initial discussion concerning Katanga
control issues
Second short notice meeting
• Consideration and approval of
proposed investment in Chevron’s
downstream oil business in
South Africa and Botswana
Fifth scheduled meeting
• Review of Q3 financial report
• Review and approval of Q3
production report
• Consideration and approval of
Rusal share exchange transaction
• Consideration and approval of the
Company’s delisting in Hong Kong
• Established committee to oversee
Katanga review
• Review of the Group’s Zinc business
• Review of Group’s IT function including
cyber security
• Review of legal and compliance
function including actual or potential
litigation and the Raising Concerns
programme
• Report from the
HSEC Committee Chairman
Sixth scheduled meeting
• Review of Katanga control issues
• Review of principal risks and
uncertainties and preparation for
longer-term viability statement
• Consideration and approval
of the 2018 budget and 2019–21
business plan
Third scheduled meeting
• Review of various business issues
• Consideration and approval of updated
proposal concerning Hunter Valley
• Review of other M&A matters
• Consideration of certain regulatory matters
• Presentations from senior management
of copper and nickel
• Report from the HSEC Committee
Chairman
• Report from the Audit Committee
Chairman
89
Glencore Annual Report 2017 Corporate Governance report
continued
Diversity
The diversity policy which is
applied to appointments to our
administrative, management and
supervisory bodies with regard to
aspects such as, for instance, age,
gender, or education and professional
backgrounds is the same as for all
Group employees, as described on
page 36. During 2017 Martin Gilbert
and Gill Marcus were appointed
to the Board.
The Board is very cognisant
of the ongoing desire from
stakeholders for greater diversity
in senior management and boards.
In particular, leading institutional
shareholders have set a target for
women to comprise 30% of the
senior management and boards of
FTSE100 companies by 2020. While
we support the aims of diversity, we
do not believe that a one size fits all
policy is correct. Historically, certain
sectors have attracted a considerable
number of career women while
others – such as mining and
commodities – have not. Even today
we find it challenging to fill positions
in remote mining locations and for
the marketing of commodities
by women.
Director induction
New Directors receive a full, formal
and tailored induction on joining the
Board, including meetings with senior
management. The induction process
for Martin Gilbert in 2017 provided
a comprehensive introduction to the
main aspects of the Group, its
business and functions and the roles
and responsibilities of a UK listed
company director and the Company’s
Code of Conduct. A similar induction
is being undertaken for Gill Marcus
in 2018.
Board effectiveness
Since an external evaluation was
carried out during 2015 and no
material governance issues arose
during 2016, the Board resolved to
carry out an internal evaluation for
the year. As part of this process, the
findings from the external evaluation
(which were summarised in the 2015
Annual Report) were reviewed.
The evaluation process has been
augmented by the private sessions
which take place between the
Non-Executive Directors without
management and ongoing
discussions as to the efficiency
and effectiveness of the Board
and its committees. There are
currently no material issues which
have been identified regarding the
composition or operation of the
Board. The next Board evaluation
will be facilitated externally.
Remuneration
Remuneration is covered in the
Directors’ remuneration report which
follows this section. It includes
a description of the work of the
Remuneration Committee.
Risk – Board
leadership
The Board provides leadership
and oversight on risk
management. Specifically it:
(1) provides a robust assessment
of the principal risks facing
the Group
The Board determines the nature
and extent of the principal risks the
Group should take in achieving its
strategic objectives. The Board has
carried out a robust assessment
of the principal risks facing the
Group, including those that would
threaten its business model, future
performance, solvency or liquidity.
The Directors’ description of those
risks and their explanation as to
how they are being managed or
mitigated are set out on page 42.
(2) determines a longer-term
viability statement
Taking account of the Group’s
position and principal risks, the
Directors assess the prospects of the
Group and conclude whether they
have a reasonable expectation that
the Group will be able to continue
in operation and meet its liabilities
as they fall due over the period of
their assessment. Their conclusions
are set out on page 109.
(3) monitors the Group’s risk
management and internal
control systems
The Board oversees sound risk
management and internal control
systems. It carries out a regular
review of their effectiveness
including reviewing the Group’s
internal financial controls and the
Group’s internal control and risk
management. This monitoring and
review covers all material controls,
including financial, operational and
compliance controls. Their work
and conclusions are described
on pages 42 and 91 – 94.
90
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Accountability and audit
Financial reporting
The Group has in place a
comprehensive financial review cycle,
which includes a detailed annual
planning/budgeting process where
business units prepare budgets for
overall consolidation and approval
by the Board. The Group uses a large
number of performance indicators
to measure both operational and
financial activity in the business.
Depending on the measure, these
are reported and reviewed on a daily,
weekly or monthly basis. In addition,
management in the business receives
weekly and monthly reports 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 statement, balance
sheet, cash flow statement as well as
key ratios is prepared and reviewed
monthly by management. As part
of the monthly reporting process,
a reforecast of the current year
projections is performed. To ensure
consistency of reporting, the Group
has a global consolidation system
as well as a common accounting
policies and procedures manual.
Management monitors the
publication of new reporting
standards and works closely with
our external auditor in evaluating
their impact, if any.
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 accordance 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 financial
statements. The process is designed
to manage and mitigate rather than
eliminate risk, and can only provide
reasonable and not absolute
assurance against material
misstatement or loss. The Directors
confirm that they have carried out
a robust assessment of the principal
risks facing the Group and 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.
Risk Management Framework
• Risk culture
• Risk strategy and appetite
• Risk governance
Oversight
Tone from
the top
• Board of Directors
• Audit Committee
• HSEC Committee
• Risk organisation
• External disclosure
• Risk monitoring and reporting
Infrastructure
People
Process
Technology
• Management team (executive)
• Group functions (incl. Compliance)
• Internal Audit
• HSEC Assurance
• Risk identification
• Risk assessment
• Risk management
Identify
Measure
Mitigate
Control
Report
Risk process
• Business segments
and functions
Marketing
risk process
Industrial
risk process
HSEC
risk process
Principal risks
and uncertainties
(see pages 42)
External
Business
Sustainability
Prices
Supply &
demand
Operating
Credit
Catastrophes
HSEC
91
Glencore Annual Report 2017 Corporate Governance report
continued
of Katanga. Katanga has also been
advised that OSC enforcement
staff are reviewing Katanga’s risk
disclosure in connection with
applicable requirements under
certain international bribery,
government payment and anti-
corruption laws. Katanga is
cooperating fully with the OSC
investigations and the Board
committee continues to closely
monitor developments with
respect to the OSC investigation.
Approach to risk management
Effective risk management is crucial
in helping the Group 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
organisational structure, Glencore’s
disciplined approach to risk
management and control originates
with strategic responsibility in the
hands of the Board, which also
retains operational authority 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 to review
annually. It is assisted by the work of
the Audit Committee for oversight
and by senior management for
day-to-day operational matters, in
order to maintain an effective risk
management governance apparatus
for the Group.
Katanga Restatement
Notwithstanding the strong Group
internal control environment,
a restatement of past financial
statements was required at Katanga.
This followed an internal review
of certain of Katanga’s historic
accounting practices under the
direction of the independent
directors of Katanga, who engaged
Canadian legal counsel, and an
international accounting firm, to
assist them in conducting the review.
Despite the matter not having
a material adverse effect on the
consolidated income, financial
position or cash flows of Glencore,
the Board regarded it as serious and
accordingly established a Board
committee headed by the Chairman
to carefully consider the findings of
this review, and noted the material
weaknesses identified in Katanga’s
internal controls over financial
reporting. As a result of these matters,
three of the Katanga executive
directors resigned from the Katanga
board and Glencore nominated
three new directors to replace them.
Additionally as a result of a review
by Glencore, various structural and
internal control changes have been
implemented across the copper
department in order to enhance and
strengthen its financial processes and
procedures. Your Board has been
committed to ensure that the
weaknesses identified are addressed
and do not recur.
Katanga has been advised by the
Ontario Securities Commission (OSC)
that its enforcement staff are
investigating, among other things,
whether Katanga’s previously filed
periodic public disclosures contain
statements that are misleading in a
material respect and the adequacy
of Katanga’s corporate governance
practices and the related conduct
of certain directors and officers
Risk Management Framework
Management engagement
The Company’s senior management
reviews the major risks facing the
Group and decides if the level of risk
is acceptable or whether further steps
need to be taken to mitigate these
risks. Together, central and business
management set the level of risk
appetite by ensuring that there
is an appropriate balance between
the level of risk assumed and the
expected return.
Audit Committee
The Audit Committee is responsible
for reviewing the risk management
system and internal controls.
Mandated by the Board, the
Audit and HSEC Committees are
responsible for ensuring that the
significant risks identified are
properly managed.
Group functions
Group functions (Risk Management,
Compliance, Legal and Sustainable
Development) support the Business
Risk Owners and senior management
in mitigating risk across the Group.
Internal Audit
Internal Audit, as an independent
assurance provider, reviews the risk
management process and internal
controls established by the
management team.
A risk-based audit approach is
applied in order to focus on high
risk areas during the audit process.
It involves discussions with
management on the risks identified
in the business risk registers,
emerging risks, operational changes,
new investments and capital projects.
The key results from this process are
reported to the Audit Committee for
their review.
As well as being subject to a review
of the Audit Committee for its
effectiveness, the Internal Audit
function was also subject to a
conformance review in 2017
92
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
by KPMG pursuant to the
International Internal Audit Standards
and International Professional
Practices Framework Guidance.
A Generally Conforms assessment
(the best scale of assessment
available) was made by KPMG.
Industrial risk management
We believe that every employee
should be accountable for the risks
related to their role. As a result,
we encourage our employees to
escalate all risks to their immediate
supervisors. This enables risks to be
tackled and mitigated at an early
stage by the team with the relevant
level of expertise.
The management teams at each
industrial operation are responsible
for implementing a risk management
process that identifies, assesses and
manages risk.
The risks that may impact on
business objectives and plans are
maintained in a business risk register.
They include strategic, compliance,
operational and reporting risks.
Any significant risks are reported
to Management and the Audit
Committee. A Corporate Risk
Management Framework is
implemented on a Group-wide
basis to ensure consistency in the
assessment and reporting of risks.
HSEC risk management
These risk management processes
are operated at asset level subject
to coordination and guidance from
the central sustainability team and
subject to the leadership and
oversight of the HSEC Committee.
The Group’s internal assurance
programme continues to be
developed for the assessment of
compliance with leading practices
in health and safety, environment
and communities.
Further information is provided in the
report from the HSEC Committee
below and will be published in the
Group’s sustainability report for 2017.
Marketing risk management
Glencore’s marketing activities are
exposed to commodity price, basis,
volatility, foreign exchange, interest
rate, credit and performance, liquidity
and regulatory risks.
Glencore devotes significant
resources to developing and
implementing policies and
procedures to identify, monitor and
manage these risks.
Glencore has a disciplined and
conservative approach to Marketing
Risk (MR) management supported
by its flat organisational structure.
Glencore continues to update and
implement policies which are
intended to mitigate and manage
commodity price, credit and other
related risks.
Glencore’s MR is managed at an
individual, business and central
level. Initial responsibility for risk
management is provided by the
businesses in accordance with and
complementing their commercial
decision-making. A support,
challenge and verification role is
provided by the central MR function
headed by the Chief Risk Officer
(CRO) via its daily risk reporting
and analysis which is split by
market and credit risk.
The CEO, as the central figure of
commercial leadership and control,
drives functional risk management
policy, supported by the CFO and
CRO, with data and reporting from
the central risk team and the other
key functional units. In turn the CEO
reports to, and seeks authority limits
from the Board, with the main
oversight role being performed
by the Audit Committee which
receives a report from the CRO
at each of its scheduled meetings.
It also approves (subject to Board
confirmation) the Group-wide risk
profile, and any exceptions to
agreed positional thresholds.
At the heart of the risk management
regime is the process of challenge
that takes place between the
CEO, the CRO and the business
heads which sets risk appetite in
accordance with Group requirements
and market conditions for each
commodity. The objective is to
ensure that an appropriate balance
is maintained between the levels of
risk assumed and expected return,
which relies on the commodity-
specific expert knowledge provided
by business heads. This is then
subject to challenge from the
CEO based on his overall Group
knowledge and experience. This
process is designed to manage risk
effectively while facilitating the fast,
commercial decision-making which
is required in a dynamic commodity
marketing company.
Another important consideration
of the MR team is the challenge
of dealing with the impact of large
transactional flows across many
locations. The function seeks
to ensure effective supervision
by its timely and comprehensive
transaction recording, ongoing
monitoring of the transactions and
resultant exposures, providing all
encompassing positional reporting,
and continually assessing universal
counterparty credit exposure.
Key focus points
Market Risk limits and reporting
The MR team provides a wide array
of daily/weekly reporting. A daily risk
report showing Group Value at Risk
(VaR) as shown on the next page and
various other stress tests and analyses
are distributed to the CEO, CFO
and CRO. Business risk summaries
showing positional exposure and
other relevant metrics, together with
potential margin call requirements,
are also circulated daily. The MR
function works to enhance its stress
and scenario testing as well as
enhancing measures to capture risk
exposure within the specific areas
of the business, e.g. within metals,
concentrate treatment and
refining charges are analysed.
93
Glencore Annual Report 2017 Corporate Governance report
continued
Value at risk
The Group monitors its commodity
price risk exposure by using a VaR
computation assessing “open”
commodity positions which are
subject to price risks. VaR is one of
the risk measurement techniques
the Group uses to monitor and
limit its primary market exposure
related to its physical marketing
exposures and related derivative
positions. VaR estimates the
potential loss in value of open
positions that could occur as
a result of adverse market
movements over a defined time
horizon, given a specific level of
confidence. The methodology is
a statistically defined, probability
based approach that takes into
account market volatilities, as well
as risk diversification benefits by
recognising offsetting 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.
Last year, the Board approved the
Audit Committee’s recommendation
of a one day, 95% VaR limit of
$100 million for 2017, consistent with
the previous year. This limit is subject
to review and approval on an annual
basis. The purpose of this Group limit
is to assist senior management in
controlling the Group’s overall risk
profile, within this tolerance
threshold. During 2017 Glencore’s
reported average daily VaR was
approximately $25 million, with
an observed high of $41 million
and a low of $13 million.
There were no breaches in the limit
during the year.
The Group remains aware of the
extent of coverage of risk exposures
and their limitations. In addition, VaR
does not purport to represent actual
gains or losses in fair value on
earnings to be incurred by the
Group, nor are these VaR results
considered indicative of future
market movements or representative
of any actual impact on its future
results. VaR remains 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 associated
with longer time horizons as well
as tail risks. Recognising these
limitations the Group complements
and refines this risk analysis
through the use of stress and
scenario analysis. The Group
regularly back-tests its VaR to
establish adequacy of accuracy
and to facilitate analysis of
significant differences, if any.
The Board has again approved
the Audit Committee’s
recommendation of a one day, 95%
VaR limit of $100 million for 2018.
VaR development ($m)
45
40
35
30
25
20
15
10
5
0
Jan
2017
Mar
2017
Jun
2017
Sept
2017
Dec
2017
● Metals and minerals
● Energy products
● Agricultural products
Credit Risk Management
The Group continues to make
extensive use of credit enhancement
tools, seeking letters of credit,
insurance cover, discounting and
other means of reducing credit risk
from counterparts. In addition,
mark-to-market exposures in relation
to hedging contracts are regularly
and substantially collateralised
(primarily with cash) pursuant to
margining agreements in place
with such hedge counterparts.
The Group-wide Credit Risk Policy
governs higher levels of credit risk
exposure, with an established
threshold for referral of credit
decisions by business heads to CFO/
CEO (relating to unsecured amounts
in excess of $75 million with BBB or
lower rated counterparts). At lower
levels of materiality, decisions may
be taken by the business heads
where key strategic transactions
or established relationships suggest
that an open account exposure may
be warranted.
Systems and reporting
Whilst no single trading system that
the Group can identify appears able
to manage the broad range of
requirements that the different
business profiles of the Group would
place on it, interfacing with multiple
source systems and transferring data
from one to another create enhanced
risk to data integrity, granularity,
consistency and timeliness.
94
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
many major shareholders have
meetings with the Chairman and
appropriate senior personnel of the
Group including other Non-Executive
Directors, the Company Secretary
and senior Sustainability managers.
In particular in 2017, the following
were undertaken:
• a presentation and investor
roadshow was held in May to
provide a detailed account of
the Company’s sustainability
policies and plans. Led by the
Chairman of the HSEC Committee,
presentations were also given
by the Chairman and the CEO
• the Chairman and Company
Secretary met with a large number
of institutional shareholders in
the summer, principally to discuss
governance and reporting
The Board receives regular updates
from the Company’s Head of Strategy
on the views of shareholders through
a briefing, which is a standing
agenda item for all Board meetings,
which is supplemented by input
from the Chairman, CEO, CFO
and, if applicable, the Senior
Independent Director.
AGM
The Company’s next AGM is due to
be held in Zug on 2 May 2018. Full
details of the meeting will be set out
in the Notice of Meeting which will
be sent to shareholders one month
before the meeting. Shareholders
unable to attend are encouraged
to vote by proxy as detailed in the
Notice of Meeting.
All documents relating to the AGM
will be available on the Company’s
website at: www.glencore.com/agm
Dealing with requirements arising
from regulatory reform In 2017,
Glencore continued to implement
the requirements of financial
regulatory reform, including:
• the European Market Abuse
Regulation (MAR) which affects the
protection and disclosure of inside
information and the prevention of
market manipulation
• the Dodd-Frank Act, the European
Market Infrastructure Regulation
(EMIR) and the Swiss Financial
Market Infrastructure Act (FMIA)
which affect in particular the
areas of risk mitigation (trade
confirmation timeframes,
portfolio reconciliation, portfolio
compression and dispute
resolution) and trade reporting
Upcoming financial regulatory reform
proposals or requirements include:
• further requirements under EMIR
including mandatory clearing and
margining requirements
• further requirements under FMIA
including trade reporting, risk
mitigation, margin requirements
and mandatory clearing
• MIFID II including EU authorisations
and position limits
The impact of certain aspects of
these and other new regulations
to commodity market participants is
potentially considerable. The impact
on our marketing business will largely
be in the form of compliance
requirements (with associated costs),
rather than meaningful commercial
limitations. Glencore’s compliance,
finance, IT and risk teams continue
to work together in monitoring and
advising management on these
developments.
Internal Audit
Glencore has a dedicated Internal
Audit function reporting directly to
the Audit Committee. The role of
Internal Audit is to evaluate and
improve the effectiveness of risk
management, control, and business
governance processes.
Internal Audit reviews areas of
potential risk within the business and
suggests control solutions to mitigate
exposures identified. The Audit
Committee considers and approves
the risk-based audit plan, areas
of audit focus and resources and
is regularly updated on audits
performed and relevant findings, as
well as the progress on implementing
the actions arising. In particular,
the Committee considered Internal
Audit’s high priority issues (with a
particular focus on procurement
and systems), its KPIs and the
effectiveness and timeliness
of management’s responses
to its findings.
The Audit Committee reviewed
the effectiveness of the Internal
Audit function. As part of this work,
it considered the function’s
management framework and its
improvement programme.
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 quarterly
production reports is achieved
through a combination of releases,
presentations, group calls and one to
one meetings. The full- and half-year
reporting is 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 or to
introduce them to the Company
and periodically arrange visits to
parts of the business to give analysts
and major shareholders a better
understanding of how we manage
our operations. These visits and
meetings are principally undertaken
by the CEO, CFO and senior members
of the Investor Relations team and an
array of business heads. In addition,
95
Glencore Annual Report 2017 Corporate Governance report
continued
Mr Fischer and Mr Grauer served
throughout the year. Mr Gilbert joined
the Committee at its second meeting
of the year in May. Mr Macaulay
retired from the Board in April 2017,
and participated in one meeting prior
to this date. All are considered to be
Independent Non-Executive Directors
and deemed to be financially literate
by virtue of their business experience.
Additionally, all Committee members
are considered by the Board to have
recent and relevant financial
experience and have competence
in accounting. The Committee held
four scheduled and one additional
meeting during the year, which all
the Committee members attended.
John Burton is Secretary to
the Committee.
Governance processes
The Audit Committee usually invites
the CEO, CFO, Group Financial
Controller, CRO and Head of Internal
Audit and the lead partner from
the external auditor to attend
each meeting. Other members
of management and the external
auditor may attend as and when
required. Other Directors, and
sometimes all other Directors, also
attend its meetings. The Committee
also holds private sessions with the
external auditor and the Head of
Internal Audit without members of
management being present. The
Committee has adopted guidelines
allowing non-audit services to be
contracted with the external auditor
on the basis set out below.
Role, responsibilities
and main activities
The primary function of the Audit
Committee is to assist the Board
in fulfilling its responsibilities with
regard to financial reporting, external
and internal audit, risk management
and controls.
During the year, the Committee’s
principal work included the following:
• reviewing Glencore’s internal
financial and compliance controls
and internal controls and risk
management systems
• reviewing and agreeing the
preparation and scope of the
year-end reporting process;
• determining the global audit
plan, scope and fees of the audit
work to be undertaken by the
external auditor
• evaluating the Group’s procedures
for ensuring that the Annual Report
and accounts, taken as a whole, are
fair, balanced and understandable
• reviewing the full-year (audited),
and half-year (unaudited), financial
statements with management and
the external auditor
• reviewing the Group’s financial and
accounting policies and practices
including discussing material
issues with management and the
external auditor, especially matters
that influence or could affect the
presentation of accounts and
key figures
• considering applicable regulatory
changes to reporting obligations
• evaluating the effectiveness
of the external auditor
• recommending to the Board
a resolution to be put to the
shareholders for their approval
on the appointment of the external
auditor and to authorise the
Board to fix the remuneration
and terms of engagement of the
external auditor
• monitoring the independence of
the external auditor and reviewing
the operation of the Company’s
policy for the provision of non-audit
services by it
• considering and approving two
assignments above the approval
threshold with the external auditor
in respect of non-audit services
• considering the output from the
Group-wide processes used to
identify, evaluate and mitigate risks,
including credit and performance
risks, across the industrial and
marketing activities
Audit Committee
report
Chairman
Leonhard Fischer
Other members
Martin Gilbert
Peter Grauer
96
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
• considering the scope and
• to satisfy itself, in discussions
methodologies to determine the
Company’s going concern and
longer-term viability statements
• reviewing the Internal Audit
department’s annual audit plan
and reviewing the effectiveness
of the Internal Audit function
• monitoring and reviewing the
effectiveness of Glencore’s internal
controls for which there were no
significant failings or weaknesses
noted other than the Katanga
restatement noted below
• reviewing reports on the operation
of the Group’s legal compliance
programme, including material
notifications under the Group’s
Raising Concerns whistleblowing
programme
Risk analysis
The Committee receives reports
and presentations at its meetings on
our management of marketing and
other risks (excluding sustainability
risks which are reviewed by the
HSEC Committee).
Significant issues related
to the financial statements
The Committee assesses whether
suitable accounting policies have
been adopted and whether
management has made appropriate
estimates and judgements. They
also review external auditor reports
outlining audit work performed and
conclusions reached in respect of key
judgements, as well as identifying
any issues in respect of these.
During the year, the Committee
has focused in particular on these
key matters:
1. Katanga restatement
The Katanga restatement issue is
described on page 92. Areas of focus
for the Audit Committee were:
• understanding the material defects
in the internal control environment
which led to the misstatements
with the CEO and CFO and the
internal and external auditor that
the remedial steps proposed to
the internal controls are sufficient
to ensure that the weaknesses
identified do not recur
• overseeing the implementation and
monitoring of recommendations
by external experts and the
Board committee to strengthen
internal controls
• to consider the appropriate
treatment in our accounts
for matters arising as a result
of these issues
2. Acquisitions and disposals
Accounting for acquisitions
involves significant management
judgements and estimates. In 2017,
the Committee analysed the
accounting treatment of the QIA
and Rosneft strategic partnership,
the purchase of interests in Katanga,
Mutanda and Volcan, the finalisation
of the sale of a ~50% stake in
Glencore Agriculture, the sale of a
controlling stake in oil storage assets
and the Trevali zinc assets transaction.
3. Impairment
The Committee considered whether
the carrying value of goodwill,
industrial assets, physical trade
positions and material loans and
advances may be impaired as a result
of commodity price volatility and
some asset specific factors. The
Committee reviewed management’s
reports, outlining the basis for the key
assumptions used in calculating the
recoverable value for the Group’s
assets. Future performance
assumptions used are derived from
the Board approved business plan.
As part of the process for approval of
this plan, the Committee considered
the feasibility of strategic plans
underpinning future performance
expectations, and whether they
remain achievable. Considerable
focus was applied to management’s
commodity price and exchange rate
assumptions. The Committee
discussed with the external auditor
their work in respect of impairment
review, which was a key area of focus
for them.
4. Taxation
Due to its global reach, including
operating in high risk jurisdictions,
the Group is subject to enhanced
complexity and uncertainty in
accounting for income taxes,
particularly the evaluation of tax
exposures and recoverability of
deferred tax. The Committee has
engaged with management to
understand the potential tax
exposures globally and the key
estimates taken in determining the
positions recorded, including the
status of communications with local
tax authorities and the carrying
values of deferred tax assets.
5. Counterparty exposures
The Group’s global operations expose
it to credit and performance risk,
which result in the requirement to
make estimates around recoverability
of receivables, loans, trade advances
and contractual non-performance.
As part of an ongoing review, the
Committee considered material
continuing exposures, the robustness
of processes followed to evaluate
recoverability and whether the
amounts recorded in the financial
statements are reasonable.
Following its analysis of these
matters, the Committee satisfied
itself that the estimates made by
management are reasonable and
that financial statements disclosures
included in the accounts
are appropriate.
97
Glencore Annual Report 2017 Taking into account all relevant
factors the Audit Committee has
concluded that it is not appropriate
to tender at the current time.
The Committee has determined
that it is satisfied that the work of
Deloitte LLP is effective, the scope
is appropriate and significant
judgements have been challenged
robustly by the lead partner and
team. Additionally, there are no
contractual restrictions on the
Company’s choice of external auditor.
The Committee has therefore
recommended to the Board that a
proposal be put to shareholders at
the 2018 AGM for the reappointment
of Deloitte LLP as external auditor.
Leonhard Fischer
Chairman of the Audit Committee
1 March 2018
Corporate Governance report
continued
Internal Audit
The Committee monitored the
internal audit function as described
under Internal Audit on page 95.
External Audit
The Committee has evaluated the
effectiveness of the external auditor
and as part of this assessment,
has considered:
• the steps taken by the auditor
to ensure their objectivity and
independence
• the deep knowledge of the
Company which enhances
Deloitte’s ability to perform as
external auditor
• competence when handling key
accounting and audit judgements
and ability to communicate
these to the Committee and
management
• the extent of the auditor’s resources
and technical capability to deliver
a robust and timely audit including
consideration of the qualifications
and expertise of the team
• auditor’s performance and progress
against the agreed audit plan,
including communication of
changes to the plan and
identified risks
• the proven stability that is gained
from the continued engagement
of Deloitte as external auditor
• the benefit of lead audit
partner rotation.
The Committee assesses the quality
and effectiveness of the external
audit process on an annual basis
in conjunction with the senior
management team. Key areas of
focus include consideration of the
quality and robustness of the audit,
identification of and response to
areas of risk and the experience
and expertise of the audit team,
including the lead audit partner.
Provision of non-audit services
by the external auditor
The Group’s policy on non-audit
services provided by the external
auditor is designed to ensure the
external auditor independence and
objectivity is safeguarded. A specified
wide range of services may not be
provided as they have the potential
to impair the external auditor’s
independence (Excluded Services).
The Audit Committee’s approval is
required for (1) any Excluded Service
(2) any 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. Subject
to these restrictions and other
safeguards in the policy, the external
auditor may be permitted to provide
certain non-audit services when it is
concluded that they are the most
appropriate supplier due to efficiency
and status as a leading firm for those
specific services. For 2017, fees paid to
the external auditor were $32 million,
the total non-audit fees of which
were $9 million; further details
are contained in note 28 to the
financial statements.
Reappointment of the
external auditor
Deloitte has been the auditor of the
listed entity since its IPO in 2011.
A lead audit engagement partner
rotation occurred prior to the financial
year ended 31 December 2013 and is
due to take place again during 2018
for which preparations have already
commenced.
The Board and the Audit Committee
acknowledge the greater investor
scrutiny as to a tendering for, and
rotation of, the external auditor and
note the recent regulatory and
guidance changes.
98
Glencore Annual Report 2017 Nomination
Committee report
Chairman
Peter Grauer
Other members
John Mack
Leonhard Fischer
Strategic Report
Governance
Financial
Statements
Additional
Information
All members served on the
Committee throughout the year.
The Committee only comprises
Independent Non-Executive
Directors. The Committee met
four times during the year and all
members attended these meetings.
In addition, some of the discussions
and deliberations in respect of the
matters summarised below were
carried out at Board meetings.
Roles and responsibilities
The main responsibilities of the
Nomination Committee are to assist
the Board with succession planning
and with the selection process for
the appointment of new Directors,
both Executive and Non-Executive,
including the Chairman. This involves:
• evaluating the balance and skills,
knowledge and experience of
the Board and identifying the
capabilities and qualities
(including diversity) required
for a particular appointment
• overseeing the search process
• evaluating the need for Board
refreshment and succession
planning generally
Main activities
The Committee focused on two main
tasks during this year. Firstly, prior
to the notice of 2017 AGM being
compiled, the Committee considered
the performance of each Director.
It concluded that each Director is
effective in their role and continues
to demonstrate the commitment
required to remain on the Board.
Accordingly, it recommended to the
Board that re-election resolutions be
put for each continuing Director
at the 2017 AGM.
Secondly, the Committee considered
the composition of the Board and
refreshment. Search processes for
suitable additional Non-Executive
Directors were conducted.
Martin Gilbert was appointed
in May 2017. In recommending
his appointment to the Board,
Mr Gilbert’s in-depth financial
knowledge and long track record
both as a listed company CEO and
as a FTSE Non-Executive Director
were considered. At the end of the
year Gill Marcus was also appointed,
with effect from 1 January 2018.
Ms Marcus will bring to the Board
extensive experience of finance
and public service.
The Committee has noted the
recommendations of the Hampton/
Alexander Review on gender and the
Parker Review on ethnic diversity. It is
part of the Committee’s policy when
making new Board appointments to
consider the importance of diversity
on the Board, including gender
and ethnicity. This is considered
in conjunction with experience
and qualifications. Further details
are set out on page 90.
External consultancy Spencer Stuart
was retained for search mandates
during the year. Other than this
engagement Spencer Stuart do not
provide other services to the Group.
Peter Grauer
Chairman of the Nomination
Committee
1 March 2018
99
Glencore Annual Report 2017 Corporate Governance report
continued
The Committee met five times during
the year. Each Committee member
served throughout the year and
attended all of the meetings.
Every scheduled meeting had a
substantial agenda, reflecting the
Committee’s objective of overseeing
the Group’s ongoing improvements
in HSEC performance.
Responsibilities
The main responsibilities of the
Committee are to:
• ensure that appropriate Group
policies are developed in line with
our Values and Code of Conduct for
the identification and management
of current and emerging health,
safety, environmental and
community risks
• evaluate the effectiveness
of policy implementation and
HSEC risk management through:
– assessment of operational
performance
– review of recent internal and
external reports
– independent audits and reviews
of performance in regard to
HSEC matters, and action plans
developed by management
in response to issues raised
• report to the Board
Main activities
During the year, the Committee:
• reviewed and approved the
Group’s HSEC strategy
• continued its monitoring of
achieving ongoing reductions in
fatalities, especially at the higher
risk “focus assets”. For this purpose
it received a report on, reviewed
and made recommendations in
respect of, each fatality
• ongoing review of the Group’s
progress on its catastrophic
hazard management, as the
most important non-financial risk
management issue for the Group
• continued to analyse
implementation of the SafeWork
programme focusing on
identification of fatal hazards
and an appropriate safety culture
• considered reports from the
Group’s assurance programme
for sustainability matters with an
emphasis on catastrophic hazards
and approved the assurance plan
for 2018
• provided ongoing support for
management’s engagement on
climate change and emissions
matters. This included considering
the work of the Group’s climate
change working group, chaired
by Dr Hayward
• considered reports on key
performance indicators in relation
to material issues, including water
and energy use and complaints
from host communities
• considered process safety
management, water and effluents,
waste and spills, human rights and
grievance mechanism, product
stewardship and community
engagement and compliance
to social commitments
• considered engagement with
communities and NGOs on
sustainability matters
• reviewed and oversaw the
Group’s sustainability report
• held an investor roadshow to
inform and receive feedback
on the Company’s sustainable
development strategy and
approach to HSEC management
• considered a variety of other
material HSEC issues such as
resettlement programmes, incident
reporting and health strategy
Peter Coates
Chairman of the HSEC Committee
1 March 2018
Health, Safety,
Environment &
Communities
(HSEC) report
Chairman
Peter Coates
Other members
Ivan Glasenberg
Anthony Hayward
Patrice Merrin
100
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Directors’ remuneration report
For the year ended 31 December 2017
Introduction
On behalf of the Remuneration Committee, I am pleased
to present our Directors’ Remuneration Report for the
year ended 31 December 2017. As usual, we have sought
to make this report as short, simple and straightforward
as possible.
As a Jersey registered company headquartered in
Switzerland, Glencore is not subject to the UK’s reporting
regime but this report is prepared in full compliance
with the UK rules, unless stated otherwise. Accordingly,
over the following pages, we have set out details of the
implementation of our reward policy in 2017 including
the governance surrounding pay decisions, members
of the Committee and its advisers and details of what
was paid to Directors during the year.
At the 2017 AGM, shareholders approved our
remuneration arrangements through two votes, one
on the Directors’ Remuneration Report (excluding the
Directors’ Remuneration Policy) and the other on our
Directors’ Remuneration Policy with votes in excess
of 98% in favour of each resolution.
There are no changes in Board remuneration to report.
The Committee continues to ensure that the Directors’
Remuneration Policy and its implementation are
attractive to shareholders in reflecting good governance,
reasonable terms and complete transparency.
John Mack
Remuneration Committee Chairman
1 March 2018
Basis of reporting
We have presented this Remuneration Report to reflect
the reporting requirements on remuneration matters for
companies with a UK governance profile, particularly the
UK’s Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013
(the “UK Remuneration Regulations”). The Company aims
to comply in all material respects with the reporting
obligations within these regulations as a matter of good
practice. The report also describes how the Board has
complied with the provisions set out in the UK Corporate
Governance Code relating to remuneration matters.
Our auditors have reported on certain parts of the
Directors’ Remuneration Report and stated whether,
in their opinion, those parts of the report have been
properly prepared. Those sections of the report which
have been subject to audit are clearly indicated.
Part A – Directors’ Remuneration Policy
The Directors’ Remuneration Policy was approved
by shareholders at the 2017 AGM and the Company
continues its obligation to only make payments within
the limits it allows. The Policy will be put to a shareholder
vote the earlier of once every three years or when an
amendment to the Policy is proposed. As the Policy
is not being put forward for shareholder approval
at the 2018 AGM, it has not been included in this
Annual Report. A summary is set out below
and it is reproduced in full on our website at:
www.glencore.com/who-we-are/governance.
Summary of Directors’ Remuneration Policy
General Policy for Executive Directors
To facilitate the attraction, retention and motivation
of Executive Directors and other senior executives of
appropriately high calibre to implement the Group’s
strategy. In practice, the CEO has continued to waive
participation in bonus or LTI arrangements.
Base salary
Provides market competitive fixed remuneration.
The Committee has not increased the salary level
for any Executive Director since May 2011.
Benefits
To provide appropriate supporting non-monetary
benefits. Benefits received by Mr Glasenberg comprise
salary loss (long-term sickness) and accident insurance/
travel insurance with a limit of $20,000 p.a.
Pension
Provides basic retirement benefits which reflects local
market practice. Mr Glasenberg participates in the
standard pension scheme for all Baar (Switzerland) -based
employees with an annual cap on the cost of provision
of retirement benefits of $150,000 p.a.
Annual Bonus Plan
Supports delivery of short-term operational, financial
and strategic goals. The Committee has set a maximum
annual bonus level of 200% of base salary.
Long-Term Incentives
Glencore Performance Share Plan incentivises the
creation of shareholder value over the longer-term.
The Committee has set a maximum annual grant
level of 200% of base salary.
Significant Personal Shareholdings
Aligns the interests of executives and shareholders.
The Committee has set a formal shareholding
requirement for Executive Directors of 300% of salary.
The CEO has a beneficial ownership of over 8% of the
Company’s issued share capital.
101
Glencore Annual Report 2017 Directors’ remuneration report
For the year ended 31 December 2017
continued
Chairman and Non-Executive Director fees
Reflects time commitment, experience, global nature and
size of the Company. Non-Executive Directors and the
Senior Independent Director receive a base fee; additional
fees are paid for chairing or membership of a Board
committee. Chairman receives a single inclusive fee.
Non-Executive Directors are not eligible for any other
remuneration or benefits of any nature.
Potential rewards under various scenarios
Under the formal policy, consistent with other
large FTSE companies, the total available variable pay
(i.e. the maximum amount payable in respect of bonus
and long-term incentives) available to Mr Glasenberg
would be approximately $5,790,000 (being four times
base salary). As Mr Glasenberg has continued to waive
entitlement to all variable elements, including both bonus
and long-term incentives, his base salary and all benefits
are set at less than 25% of the aggregate remuneration
which would potentially have been available to him
had he not waived participation in these aspects. These
waivers are considered appropriate as the level of his
personal shareholding is sufficient to provide a keen
alignment of interest between him and of shareholders
more generally without the need to add additional
aspects to his package (and cost to other shareholders).
His fixed remuneration set out below was set at a
modestly below market level so the waivers do not reflect
any element of an excessive bias to fixed pay in the
traditional sense. Consistent with UK legislation, it has
been prepared using the following assumptions.
In 2017, Mr Glasenberg’s base salary was paid in US dollars
and his benefits and pension contributions were paid
in Swiss francs, as described in this report.
Fixed
• Consists of base salary, benefits and pension
• Base salary is applicable to both 2017 and 2018
• Benefits measured as benefits figure in the
single figure table
• Pension measured as pension figure in the
single figure table
Ivan Glasenberg Base Salary
$’000
1,447
Benefits
$’000
Pension
$’000
Total Fixed
$’000
4
62
1,513
On-target and
Maximum
Based on what the Director would receive if
performance was on-target (whether inclusive
or exclusive of share price appreciation
and dividends):
• STI: Mr Glasenberg currently waives any
right to participate in the annual bonus plan
All Directors’ contracts and letters of appointment will be
available for inspection on the terms to be specified in the
Notice of 2018 AGM.
Provision
Notice period
Service contract terms
• Twelve months’ notice by either party
Contract date
• 28 April 2011 (as amended on 30 October 2013)
Expiry date
• Rolling service contract
Termination
payment
Change
in control
• No special arrangements or entitlements on
termination. Any compensation would be
limited to base salary only for any unexpired
notice period (plus any accrued leave)
• On a change of control of the Company, no
provision for any enhanced payments, nor for
any liquidated damages
External appointments
The Executive Director’s external appointments are
noted on page 82. He assigns to the Group the
compensation received in relation to each appointment.
The appropriateness of these appointments is considered
as part of the annual review of Directors’ interests/
potential conflicts.
Non-Executive Directors’ Letters of appointment
and re-election
All Non-Executive Directors have letters of appointment
with the Company for an initial period of three years
from their date of appointment, subject to reappointment
at each AGM. The Company may terminate each
appointment by immediate notice and there are no
special arrangements or entitlements on termination
except that the Chairman is entitled to three
months’ notice.
As set out in last year’s Annual Report, the fees payable
to the Non-Executive Directors were increased with
effect from 1 January 2017. The annual fees are paid
in accordance with a Non-Executive Director’s role and
responsibilities. The fees payable for 2018 are unchanged
and are as follows:
US$ ‘000
Directors
Chairman
Senior Independent Director
Non-Executive Director
Remuneration Committee
Chairman
Member
1,150
200
135
45
25
60
35
40
20
125
40
• LTI: He does not currently participate in the
Audit Committee
Performance Share Plan
Executive Directors’ contracts
The table below summarises the key features of the
service contract for Ivan Glasenberg, the only person
who served as an Executive Director during the year.
Chairman
Member
Nomination Committee
Chairman
Member
HSEC Committee
Chairman
Member
102
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Part B – Implementation Report
Implementation Report – Unaudited Information
Remuneration Committee
Membership and experience of the Remuneration
Committee
We believe that the members of the Committee provide
a useful balance of abilities, experience and perspectives
to provide the critical analysis required in carrying out
the Committee’s function. Each of John Mack, Leonhard
Fischer and Martin Gilbert has had a long career in the
management of large financial services organisations
and therefore provides considerable experience of
remuneration analysis and implementation. All members
of the Remuneration Committee are considered to be
independent. Further details concerning independence
of the Non-Executive Directors are contained on page 87.
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/who-we-are/governance
Its principal responsibilities are, on behalf of the Board, to:
• set the Company’s executive remuneration policy (and
review its ongoing relevance and appropriateness)
Remuneration Committee meetings
The Committee met two times during the year and
considered, amongst other matters, the remuneration
policy applicable to the Executive Director, senior
management remuneration policy, including its level
and structure, the form and structure of grants to
employees under the Company’s Deferred Bonus Plan
and Performance Share Plan, and the content and
approval of the Remuneration Report.
The Chairman, CEO and CFO are usually invited to
attend some or all of the proceedings of Remuneration
Committee meetings. They do not participate in any
decisions concerning their own remuneration.
Advisers to the Remuneration Committee
The Committee appointed and received independent
remuneration advice during the year from its external
adviser, FIT Remuneration Consultants LLP (FIT). FIT is a
member of the Remuneration Consultants Group (the UK
professional body for these consultants) and adheres to its
code of conduct. The Committee was satisfied that the
advice provided by FIT was objective and independent.
FIT’s fees for this advice in respect of 2017 were $4,872
(2016: $10,410). FIT’s fees were charged on the basis of
the firm’s standard terms of business for advice provided.
FIT provided no other services to the Group in the year.
• establish the remuneration packages for the Executive
Director including the scope of pension benefits
The Committee also receives advice from John Burton,
the Company Secretary.
• determine the remuneration package for the
Chairman, in consultation with the Chief Executive
• have responsibility for overseeing schemes of
performance related remuneration (including share
incentive plans) for, and determine awards for, the
Executive Director (as appropriate)
• ensure that the contractual terms on termination
for the Executive Director are fair and not excessive
• monitor senior management remuneration
The Committee considers corporate performance on
HSEC and governance issues when setting remuneration
for the Executive Director. The Committee seeks to
ensure that the incentive structure for the Group’s senior
management does not raise HSEC or governance risks
by inadvertently motivating irresponsible behaviour.
Relative importance of remuneration spend
The table below illustrates the change in total
remuneration, distributions paid and net profit from 2016
to 2017.
Distributions and buy-backs
Net income attributable
to equity holders
Total remuneration
2017
US$m
998
5,777
4,656
2016
US$m
—
1,379
4,245
The figures presented have been calculated on the
following bases:
• Distributions and buy-backs – distributions paid during
the financial year. No shares were bought back during
the year.
• Net income attributable to equity holders –
our reported net income in respect of the financial year.
The Committee believes it is a good indicator
of ongoing relative statutory performance.
• Total remuneration – represents total personnel costs
as disclosed in note 22 to the financial statements
which includes salaries, wages, social security, other
personnel costs and share-based payments.
103
Glencore Annual Report 2017 Directors’ remuneration report
For the year ended 31 December 2017
continued
Performance graph and table
This graph shows the value to 31 December 2017, on
a total shareholder return (TSR) basis, of £100 invested
in Glencore plc on 24 May 2011 (our IPO date) compared
with the value of £100 invested in the FTSE 350 Mining
Index. The FTSE 350 Mining Index is considered to be an
appropriate comparator for this purpose as it is an equity
index consisting of companies listed in London in the
same sector as Glencore.
The UK reporting regulations also require that a TSR
performance graph is supported by a table summarising
aspects of CEO remuneration, as shown below for the
same period as the TSR performance graph:
Performance
100
80
60
40
20
0
18 May
2011
31 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
Glencore
FTSE 350 Mining Index
2017
2016
2015
2014
2013
2012
2011
Ivan Glasenberg Ivan
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Single figure of total
remuneration1
(US$’000)
Annual variable element
award rates against
maximum opportunity2
Long-term incentive vesting
rates against maximum
opportunity2
1,513
1,509
1,510
1,513
1,509
1,533
1,483
_
_
_
–
–
–
–
_
_
_
–
–
–
–
1 The value of benefits and pension provision in the single figure vary as a result of the application of exchange rates although in the relevant local currency these parts of
Mr Glasenberg’s remuneration have not altered since May 2011. In this table the figures are reported in US dollars, the currency in which Mr Glasenberg received his salary
in 2017. The salary was payable in pounds sterling prior to 2014. Therefore those figures have been translated into US dollars at the exchange rates used for the preparation
of the financial statements in those years. Mr Glasenberg’s pension and other benefits are charged to the Group in Swiss francs and these amounts are translated into
US dollars on the same basis.
2 The CEO has requested not to be considered for these potential awards.
Percentage change in pay of Chief Executive Officer
and comparative ratios
The UK Remuneration Regulations provide for disclosure
of percentage changes of the CEO’s remuneration against
the average percentage change for employees generally
or an appropriate group of employees. In addition, the UK
Investment Association’s 2016 Remuneration Principles
recommend disclosure as to how the remuneration
out-turn for a Company’s CEO compares with that of a) its
median employee and b) its Executive Committee. Given
that the CEO has, since May 2011, waived any entitlement
to any increase in salary (and given that his only other
unwaived benefits are those provided to all employees at
the Company’s head office in Baar) no such comparisons
or ratios have been made.
Most recent shareholder voting outcomes
The votes cast (1) to approve the Directors’ remuneration
report, for the year ended 31 December 2016 and (2) to
approve the Directors’ Remuneration Policy at the 2017
AGM were:
Votes “For”
Directors’ Remuneration Report
Votes
“Against”
Votes
“Abstentions”
(as a total
of votes cast)
98.24%
1.76%
0.11%
(10,748,442,346)
(192,592,622)
(12,442,987)
Directors’ Remuneration Policy
98.20%
1.80%
0.52%
(10,700,495,856)
(196,055,182)
(56,926,916)
The Committee continues to seek a productive and
ongoing dialogue with investors on the Directors’
Remuneration Policy, remuneration aspects of corporate
governance, any changes to the Company’s executive
pay arrangements and developments as to executive
remuneration issues in general.
104
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Implementation of policy in 2018
No change to any aspect of Directors’ remuneration is envisaged for 2018.
Implementation Report – Audited Information
Single figure table
US$’000
Ivan Glasenberg
Salary
2016
1,447
2017
1,447
Benefits
Annual Bonus
Long-term
incentives
2017
2016
2017
2016
2017
2016
4
2
–
–
–
–
Pension
2016
60
2017
62
Total
2016
1,509
2017
1,513
The notes to the performance table above also apply in relation to the compilation of this table. As no bonuses
or long-term incentives have been granted to Mr Glasenberg, there are no relevant performance measures to be
disclosed although the first page of this report notes the alignment of his position with that of other shareholders.
Non-Executive fees
The emoluments of the Non-Executive Directors for 2017 were as follows:
Name
Non-Executive Chairman
Anthony Hayward
Non-Executive Directors
Peter Coates
Leonhard Fischer
Martin Gilbert1
Peter Grauer
William Macaulay2
John Mack
Patrice Merrin
1 Appointed on 5 May 2017.
2 Retired on 14 April 2017.
The aggregate emoluments of all Directors for 2017
(including pension contributions) were $3,997,000
(2016: $3,780,000). The only Director participant
in a pension plan was Mr Glasenberg.
Directors’ interests
The Directors’ interests in shares are set out in the
Directors’ report which is set out after this report.
Mr Glasenberg’s holding is considerably in excess
of the formal share ownership guideline for
Executive Directors of 300% of salary.
Approval
This report in its entirety has been approved by the
Committee and the Board of Directors and signed
on its behalf by:
John Mack
Remuneration Committee Chairman
1 March 2018
Total 2017
US$’000
Total 2016
US$’000
1,150
1,056
260
240
127
275
57
200
175
249
221
—
237
178
187
143
105
Glencore Annual Report 2017 Directors’ report
For the year ended 31 December 2017
Introduction
This Annual Report is presented by the Directors on the
affairs of Glencore plc (the “Company”) and its subsidiaries
(the “Group” or “Glencore”), together with the financial
statements and auditor’s report, for the year ended
31 December 2017. The Directors’ report includes details
of the business, the development of the Group and
likely future developments as set out in the Strategic
Report, which together form the management report
for the purposes of the UK Financial Conduct Authority’s
Disclosure and Transparency Rule (DTR) 4.1.8R. The notice
concerning forward-looking statements is set out at the
end of the Annual Report.
Corporate structure
Glencore plc is a public company limited by shares,
incorporated in Jersey and domiciled in Baar, Switzerland.
Its shares are listed on the London and Johannesburg
Stock Exchanges. On 31 January 2018 the Company
delisted its shares from the Hong Kong Stock Exchange.
Financial results and distributions
The Group’s financial results are set out in the financial
statements section of this Annual Report.
A distribution of US$0.07 per share was paid in 2017.
The Board is recommending two distributions totalling
US$0.20 per share in respect of the 2017 financial year
as further detailed on page 58.
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 Strategic Report.
A description of acquisitions, disposals, and material
changes to Group companies undertaken during the year,
is included in the Financial review and in note 24 to the
financial statements.
Financial instruments
Descriptions of the use of financial instruments and
financial risk management objectives and policies,
including hedging activities and exposure to price risk,
credit risk, liquidity risk and cash flow risk are included
in notes 25 and 26 to the financial statements.
Corporate governance
A report on corporate governance and compliance
with the UK Corporate Governance Code is set out
in the Corporate Governance report and forms part
of this report by reference.
106
Health, safety, environment & communities (HSEC)
An overview of health, safety and environmental
performance and community participation is provided
in the Sustainable Development section of the Strategic
report. The work of the HSEC Board committee
is contained in the Corporate Governance report.
Taxation policy
Our Tax Policy: www.glencore.com/group-tax-policy
and our second payments to Governments report:
www.glencore.com/payments-to-goverments-report
set out the Company’s approach to tax and transparency
and disclose the payments made by the Group on
a country-by-country and project-by-project basis.
Exploration and research and development
The Group’s business units carry out exploration and
research and development activities that are necessary
to support and expand their operations.
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. Applications for employment and promotion are
fully considered on their merits, and employees are given
appropriate training and equal opportunities for career
development and promotion.
Where disability occurs during employment, the Group
seeks to accommodate that disability where reasonably
possible, including with appropriate training.
The Group places considerable value on the involvement
of its employees which is reflected in the principles of its
Code of Conduct and its related guidance, which requires
regular, open, fair and respectful communication, zero
tolerance for human rights violations, fair remuneration
and, above all, a safe working environment.
Employee communication is mainly provided by the
Group’s intranet and corporate website. A range of
information is made available to employees including all
policies applicable to them as well as information on the
Group’s financial performance and the main drivers of its
business. Employee consultation depends upon the type
and location of operation or office. Further information
on our people is set out on pages 36 and 39.
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 Director must avoid a situation
in which the Director has, or can have, a direct 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
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
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.
Directors’ liabilities and indemnities
The Company has granted third party indemnities to each
of its Directors against any liability that attaches to them
in defending proceedings brought against them, to the
extent permitted by Jersey Law. In addition, Directors and
Officers of the Company and its subsidiaries are covered
by directors & officers liability insurance.
Directors and Officers
The names of the Company’s Directors and Officers
who were in office at the end of 2017, together with
their biographical details and other information, are
shown on page 82.
Directors’ interests
Details of interests in the ordinary shares of the Company
of those Directors who held office during 2017 are
given below:
Name
Executive Directors
Ivan Glasenberg
Non-Executive Directors
Peter Coates
Leonhard Fischer
Martin Gilbert1
Peter Grauer
Anthony Hayward
William Macaulay2
John Mack
Patrice Merrin
Number of
Glencore
Shares
Percentage
of Total Voting
Rights
1,211,957,850
1,585,150
–
50,000
129,792
244,907
200,000
750,000
43,997
8.40
0.01
–
0.00
0.00
0.00
0.00
0.00
0.00
1 Appointed to the Board on 5 May 2017.
2 Retired from the Board on 14 April 2017. Figures provided at date of retirement.
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 of those in office
at the date of this report have occurred between
31 December 2017 and 1 March 2018.
Share capital and shareholder rights
As at 1 March 2018, the issued ordinary share capital
of the Company was $145,862,001 represented by
14,586,200,066 ordinary shares of $0.01 each, of which
161,459,158 shares are held in treasury and 127,711,907
shares are held by Group employee benefit trusts.
Major interests in shares
As at 31 January 2018 Glencore had been notified of the
following interests representing 3% or more of the issued
ordinary share capital of the Company:
Name of holder
Qatar Holding
Ivan Glasenberg
BlackRock Inc
Harris Associates
Daniel Maté
Aristotelis Mistakidis
Number
of shares
Percentage of
Total Voting
Rights
1,221,497,099
1,211,957,850
820,422,580
545,706,610
454,136,143
450,175,134
8.47
8.40
5.69
3.78
3.15
3.12
Share capital
The rights attaching to the Company’s ordinary shares,
being the only share class of the Company, are set out
in the Company’s Articles of Association (the “Articles”),
which can be found at www.glencore.com/who-we-are/
board-of-directors/governance-downloads/. Subject to
Jersey law, any share may be issued with or have attached
to it such preferred, deferred or other 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 distribution. On liquidation, holders of
ordinary shares may share in the assets of the Company.
Holders of ordinary 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 convene 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.
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 representative. On a show of hands, each
holder of ordinary shares who (being an individual) is
present in person or (being a corporation) 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 instructions must be received not later than 48
hours before a GM. A holder of ordinary shares can lose
107
Glencore Annual Report 2017 Directors’ report
For the year ended 31 December 2017
continued
the entitlement to vote at GMs where that holder has
been served with a disclosure notice 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 accompanied by the certificate for the
share(s) to be transferred and/or such other evidence
as the Directors may reasonably require 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 governing the operation of CREST.
The Directors may decide to suspend the registration
of transfers, for up to 30 days a year, by closing the register
of shareholders. 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 issued
share capital has been served with a disclosure notice
and has failed to provide the Company with information
concerning 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 Company can remove
a Director from office, including by passing an ordinary
resolution or by notice being given by all the other
Directors. The Company may amend its Articles
by special resolution approved at a GM.
108
The powers of the Directors are set out in the Articles and
provide that the Board may exercise all the powers of the
Company 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.
Purchase of own shares
At the end of the year, the Directors had authority,
under a shareholders’ resolution passed on 24 May 2017,
to purchase through the market up to 10% of the
Company’s issued ordinary shares. No purchase was
made by the Company during 2017. The Directors
will seek a similar authority at the Company’s AGM
to be held in 2018.
Going concern
The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are set out
in the Strategic Report. Furthermore, notes 25 and 26 to
the financial statements include the Group’s objectives
and policies for managing its capital, its financial risk
management objectives, details of its financial
instruments and hedging activities and its exposure
to credit and liquidity risk. Significant financing activities
that took place during the year are detailed in the
Financial review section.
The results of the Group, principally pertaining to its
industrial asset base, are exposed to fluctuations in both
commodity prices and currency exchange rates whereas
the performance of marketing activities is primarily
physical volume driven with commodity price risk
substantially hedged.
The Directors have a reasonable expectation, having
made appropriate enquiries that the Group has adequate
resources to continue its operational existence for the
foreseeable future. For this reason they continue to
adopt the going concern basis in preparing the financial
statements. The Directors have made this assessment
after consideration of the Group’s budgeted cash flows
and related assumptions including appropriate stress
testing of the identified uncertainties (being primarily
commodity prices and currency exchange rates) and
undrawn credit facilities, monitoring of debt maturities,
and after review of the Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting 2014 as published by the UK Financial
Reporting Council.
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
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 manner that provides relevant, reliable, comparable
and understandable information
• provide additional disclosures when compliance with
the specific requirements in IFRSs are insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the
entity’s financial position and financial performance
• make an assessment of the Company’s ability to
continue as a going concern
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 Company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
Signed on behalf of the Board
John Burton
Company Secretary
1 March 2018
Longer-term viability
In accordance with paragraph C2.2 of the Code, the
Directors have assessed the prospects of the Group’s
viability over a longer period than the 12 months required
by the going concern assessment above. A summary of
the assessment made is set out on page 44 in the
Principal risks and uncertainties section.
Based on the results of the related analysis, the Directors
have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall
due over the four-year period of this assessment. They also
believe that the review period of four years is appropriate
having regard to the Group’s business model, strategy,
principal risks and uncertainties, and viability.
Auditor
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 auditor
is unaware; and
(b) the Director has taken all the steps that he ought
to have taken as a director in order to make himself
aware of any relevant audit information and to
establish that the Company’s auditor is aware
of that information.
Deloitte LLP have expressed their willingness to continue
in office as auditor and a resolution to reappoint them will
be proposed at the forthcoming AGM.
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 financial
statements for the Company for each financial year.
The financial statements are prepared 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 accordance 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 expenses set
out in the International Accounting Standards Board’s
“Framework for the preparation and presentation of
financial statements”.
109
Glencore Annual Report 2017 Directors’ report
For the year ended 31 December 2017
continued
Information required by Listing Rule LR 9.8.4C
In compliance with UK Listing Rule 9.8.4C the Company discloses the following information:
Listing Rule
Information required
Relevant disclosure
9.8.4(1)
9.8.4(2)
9.8.4(5)
9.8.4(6)
9.8.4(12)
9.8.4(13)
9.8.4(14)
Interest capitalised by the Group
See note 7 to the financial statements
Unaudited financial information as required (LR 9.2.18)
See Chief Executive Officer’s review
Director waivers of emoluments
Director waivers of future emoluments
Waivers of dividends
Waivers of future dividends
See Directors’ remuneration report
See Directors’ remuneration report
See note 17 to the financial statements
See note 17 to the financial statements
Agreement with a controlling shareholder (LR 9.2.2A)
Not applicable
There are no disclosures to be made in respect of the other numbered parts of LR 9.8.4.
Confirmation of Directors’ responsibilities
We confirm that to the best of our knowledge:
• the consolidated 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 Accounting Standards Board and the Companies (Jersey) Law 1991, give a true and
fair view of the assets, liabilities, financial position and income of the Group and the undertakings included in the
consolidation taken as a whole;
• the management report, which is incorporated in the Strategic Report, 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; and
• the Annual Report and consolidated financial statements, taken as a whole, are fair and balanced and
understandable and provide the information necessary for shareholders to assess the performance, position, strategy
and business model of the Company.
The consolidated financial statements of the Group for the year ended 31 December 2017 were approved on the date
below by the Board of Directors.
Signed on behalf of the Board:
Anthony Hayward
Chairman
1 March 2018
Ivan Glasenberg
Chief Executive Officer
110
Glencore Annual Report 2017 Financial
statements
112
122
123
124
125
127
128
Independent Auditor’s Report
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes of equity
Notes to the financial statements
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Glencore Annual Report 2017 Independent Auditor’s Report
to the members of Glencore plc
Report on the audit of the financial statements
Opinion
In our opinion the financial statements:
• give a true and fair view of the affairs of Glencore plc and its subsidiaries’ (together “the Group”) affairs as at
31 December 2017 and of the Group’s income for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and as issued by the International Accounting Standards Board (IASB); and
• have been properly prepared in accordance with the Companies (Jersey) Law 1991.
We have audited the financial statements of the Group which comprise:
• the consolidated statement of income
• the consolidated statement of comprehensive income
• the consolidated statement of financial position
• the consolidated statement of cash flows
• the consolidated statement of changes of equity, and
• the related notes 1 to 33
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted
by the European Union and as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We confirm that the non-audit services prohibited
by the FRC’s Ethical Standard were not provided to the Group.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Impairments
• Revenue recognition
• Fair value measurements within the marketing operations
• Classification of financial instruments
• Credit and performance risk
• Taxation, and
• Katanga Mining Limited (Katanga) Restatements
Materiality
Scoping
Our assessment of the Group’s key audit matters is broadly consistent with 2016. “Capital preservation/
Debt reduction plans” is no longer considered a key audit matter as a result of the Group completing
the capital preservation and debt reduction plan announced in 2015. We identified “Katanga
Restatements” as a current year key audit matter following the announcement of the completion
of an internal review of certain of Katanga’s historic accounting practices.
We determined materiality for the Group to be $200 million, based on a normalised 3-year average
pre-tax profit.
We focused our Group audit scope primarily on the audit work at 47 components, representing the
Group’s most material marketing operations and industrial assets. These 47 components account for
93% of the Group’s net assets, 97% of the Group’s revenue and 89% of the Group’s adjusted EBITDA
(as set out in Note 2).
Significant changes
in our approach
Aside from the changes in key audit matters noted above, there were no significant changes to our
audit approach when compared to 2016.
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Financial
Statements
Additional
Information
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in note 1 to the financial statements about whether
they considered it appropriate to adopt the going concern basis of accounting in preparing them
and their identification of any material uncertainties to the Group’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
We are required to state whether we have anything material to add or draw attention to in relation
to that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially
inconsistent with our knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent
with the knowledge we obtained in the course of the audit, including the knowledge obtained
in the evaluation of the directors’ assessment of the Group’s ability to continue as a going concern,
we are required to state whether we have anything material to add or draw attention to in
relation to:
• the disclosures on pages 42 – 51 that describe the principal risks and explain how they are
being managed or mitigated;
• the directors’ confirmation on page 90 that they have carried out a robust assessment of the
principal risks facing the Group, including those that would threaten its business model, future
performance, solvency or liquidity; or
• the directors’ explanation on page 44 as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation that the group will be able to
continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or
assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the
Group required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained
in the audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
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Glencore Annual Report 2017 Independent Auditor’s Report
to the members of Glencore plc
continued
Impairments
Description of key audit matter
How the scope of our audit responded to the key audit matter
The carrying value of the Group’s non-current assets, which
includes intangible assets, property, plant and equipment, loans
and advances, and investments in associates and joint ventures,
amounted to $85,867 million at 31 December 2017.
The volatility in expected future prices of certain commodities key
to the Group (particularly oil, copper, cobalt, zinc and coal), foreign
exchange rates, production levels, operating costs, discount rates
and macro-economic developments require management to
closely monitor non-current asset carrying values.
Given the nature of the Group’s industrial assets, developments
concerning geology, production or distribution of the Group’s
products may also trigger a need to consider impairment.
For loans, advances and other investments, assessing
counterparty risk, solvency and liquidity can be highly subjective.
Management completes an impairment review on all of the
Group’s significant investments annually, as part of the Group’s
budgeting process.
The outcome of impairment assessments could vary significantly
were different assumptions applied. Refer to “Key sources of
estimation uncertainty” within note 1, notes 4, 5 and 9 as well
as the Audit Committee Report on pages 96 – 98.
In total impairments amounting to $871 million were recognised
in the year ended 31 December 2017 primarily relating to
oil assets as a result of commodity prices and operational
developments. This was offset by $243 million of impairment
reversals within oil assets following production plan optimisation
and cost efficiency identification.
We reviewed management’s assessment of impairment risk and
their assessment of the indicators of impairment and challenged
the significant assumptions used.
We sought to identify additional potential indicators of
impairment through our review of operational performance
and financial results as well as the impact of any significant
regulatory changes.
Where significant indicators of impairment (or impairment
reversals) were identified, we utilised Deloitte extractive industry
valuation specialists to assess the appropriateness of
management’s underlying model inputs and significant
assumptions.
In performing our challenge, we considered the risk of
management bias in the assumptions and estimates.
We challenged the significant inputs and assumptions used
in impairment and impairment reversal testing for intangible
assets, property, plant and equipment, associates and
joint ventures.
Our challenge included comparing inputs and significant
assumptions as noted above, to third party forecasts and
Deloitte developed discount rates. Production assumptions
were compared to life of mine or hydrocarbon extraction plans
where applicable as well as reserves and resources estimates.
Operating costs and production levels were also compared
to the current period actual results, management approved
budgets and life of mine models. Further, we assessed whether
macro assumptions had been applied on a consistent basis
across the Group.
We challenged management’s sensitivity analysis by performing
independent sensitivity analyses on selected assets, including
those which were not identified as having indicators of
impairment but have a higher risk of impairment due to lower
available headroom in fair value models, volatility in key pricing
assumptions, or the existence of operational circumstances
which may indicate potential for impairment.
For impairment reversals, we reviewed the audit evidence
relating to the reversal of conditions previously leading
to the impairment and the models supporting the reversal.
With respect to loans and advances of $2,976 million, our
procedures included challenging their recoverability by
reviewing supporting agreements and obtaining evidence
of current performance to identify potential indicators
of impairment.
We assessed the adequacy of impairment related disclosures
in the financial statements, including the key assumptions
used and the sensitivity of the financial statements to
these assumptions.
Key observations
Based on the results of our testing, we concluded that management’s assessment of impairment indicators was appropriate.
Where there were impairment indicators, our procedures found that the impairment models were in line with the underlying
mine and hydrocarbon extraction plans and supported by appropriate inputs and assumptions. We concluded that the key
pricing and discount rate assumptions were in line with third party evidence and our expert’s acceptable ranges.
We found management’s disclosures on key assumptions and impairment sensitivities to be appropriate.
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Financial
Statements
Additional
Information
Revenue recognition
Description of key audit matter
Revenue for the year was $205,476 million (2016: $152,948 million),
and the identification as a key audit matter primarily relates to
the following:
Marketing operations:
We identified a risk that the capture of trades within the trade
book is incomplete or inaccurate impacting the timing and
quantum of revenue recognition for commodity sales with
deliveries occurring on or around year-end.
Judgement is required to determine when risks and rewards
have transferred under certain contractual arrangements with
third parties, especially on or around year-end.
As a majority of the Group’s trades are measured at fair value
through profit and loss, a complete and accurate trade capture
process that includes all specific and bespoke terms within the
commodity contracts is critical for accurate financial reporting
and monitoring of trade book exposures and performance.
Marketing related activities depend on the reliability of the
trade capture systems and their IT infrastructure environment.
Industrial assets:
Substantially all output from industrial assets is sold by the
Group’s marketing divisions. Where third party sales occur, the
key risks relate to provisional pricing terms, metal concentrate
estimates and the consideration of embedded derivatives in
sales contracts.
Judgement must be exercised to determine when risks and
rewards have transferred under bill and hold and other non-
standard contract arrangements.
We presume a risk of material misstatement due to fraud
related to revenue recognition. Refer to note 1 for the revenue
accounting policies.
How the scope of our audit responded to the key audit matter
We have reviewed Glencore’s revenue recognition policies for
compliance with the requirements of IAS 18 Revenue (IAS 18).
For marketing operations we:
• evaluated the design, implementation and tested the
operating effectiveness of key controls surrounding the
completeness and accuracy of trade capture and the revenue
and trade cycle
• tested the operating effectiveness of general IT controls
surrounding major technology applications and critical
interfaces involving revenue recognition and the completeness
and accuracy of trade capture
• agreed, on a sample basis, deliveries occurring on or around
31 December 2017 to supporting documentation to assess
whether the IFRS revenue recognition criteria were met for
recorded sales
• obtained third party confirmations where relevant to check
completeness and accuracy of trade books, and
• performed cut-off testing of trades entered into the trade
book system around the reporting date
For industrial assets we:
• assessed the design and implementation of controls around
the methodology adopted by management to identify the
provisional pricing terms and the determination of estimates
of metal in concentrate sold to third parties;
• obtained third party confirmations to verify the completeness
and accuracy of third party sales; and
• reviewed key contracts for the existence of embedded
derivatives and performed valuation testing as appropriate.
We also performed testing on journal entries using computer
assisted profiling techniques to address the risk of management
override of internal controls related to revenue recognition.
Key observations
Based on the results of our testing, we are satisfied that the revenue recognition policies are in line with IFRS and were appropriately
applied throughout the period.
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Glencore Annual Report 2017 Independent Auditor’s Report
to the members of Glencore plc
continued
Fair value measurements within the marketing operations
Description of key audit matter
How the scope of our audit responded to the key audit matter
Determination of fair values of marketing inventories, financial
assets and liabilities is a complex and subjective area often
requiring significant estimates, particularly where valuations
utilise unobservable inputs (e.g. credit risk assessments, market
volatility and forecast operational estimates). At 31 December
2017, total Level 3 Other financial assets and liabilities amounted
to $356 million and $705 million respectively.
As the Group’s marketing inventories and other financial assets
and liabilities are measured at fair value at each reporting date,
these fair value measurements significantly impact the Group’s
results.
Refer to “Key sources of estimation uncertainty” within note 1
and additionally notes 26 and 27.
We evaluated the design and implementation and tested
operating effectiveness of key internal controls over
management’s processes for determining inputs to fair value
measurements and performed detailed substantive testing
on a sample basis of the related fair value measurements.
Using financial instrument specialists embedded within
the audit team with experience in commodity trading,
we specifically tested the evidence supporting significant
unobservable inputs utilised in Level 3 measurements
in the fair value hierarchy as outlined in note 27 to the
financial statements, which included reviews of
independent price quotes, recent transactions and
other supporting documentation.
Key observations
Based on the results of our testing, we are satisfied that the level 3 fair value measurements are supported by reasonable
assumptions in line with recent transactions and/or externally verifiable information.
We found the financial statement disclosures on fair value measurements in note 27 to be adequate.
Classification of financial instruments
Description of key audit matter
How the scope of our audit responded to the key audit matter
Glencore trades a diverse portfolio of commodities and utilises a
wide variety of trading strategies in order to profit from volatility
in market prices, differentials and spreads whilst maximising
flexibility and optionality.
We obtained an understanding of the trading strategies and
associated product flows within the Group’s marketing
departments using financial instrument specialists embedded
within the audit team with experience in commodity trading.
The classification of contracts relating to the Group’s marketing
operations is a judgemental area, particularly distinguishing sales
contracts where the Group physically delivers its own production
to a third party (“own use”), from those which form part of the
Group’s marketing operations. The majority of the Group’s trades
are measured at fair value through profit and loss.
Differences in classification affect recognition of associated gains
and losses as contracts which are “own use” are exempt from
mark-to-market accounting.
Transactions for the sale or purchase of commodities may contain
a financing element and/or embedded derivatives, which
may require judgement in determining the most appropriate
classification, presentation and accounting treatment.
We evaluated the design and implementation and tested
operating effectiveness of key controls around monitoring
exposures by the risk management department.
We analysed the trade books to understand unusual or complex
derivatives open at year-end. We also analysed the trading results
for portfolios designated as “own use” for evidence of any net
settlements, which may indicate potential tainting of the
IAS 39 “own use” criteria.
We challenged management’s judgement and conclusions
associated with classification and accounting for new significant
arrangements and significant changes to existing arrangements.
We assessed the adequacy of related disclosures in the financial
statements in accordance with the requirements of IFRS.
Refer to notes 26 and 27.
Key observations
Based on the results of our testing, we are satisfied that all significant assumptions applied in respect of the classification of financial
instruments are appropriate and that disclosures given around financial instruments are in accordance with the requirements of IFRS.
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Additional
Information
Credit and performance risk
Description of key audit matter
The Group is exposed to credit and performance risk arising
from the Group’s global production and marketing operations,
particularly in markets demonstrating significant price volatility
with limited liquidity and terminal markets.
This risk is heightened in times of increased price volatility,
where suppliers may be incentivised to default on delivery
and customers are unable to make payments.
At 31 December 2017, total advances and loans and accounts
receivable amounted to $2,976 million and $20,359 million
respectively.
Refer to notes 10, 12 and 25 and the Audit Committee Report
on pages 96 to 98.
Key observations
How the scope of our audit responded to the key audit matter
We undertook internal control testing of the Group’s centralised
and local credit and performance risk monitoring procedures.
We challenged management’s assessment of the recoverability
of aged and overdue receivables, loans and advance payments
with delayed or overdue deliveries, considering historical patterns
of trading and settlement as well as recent communications
with the counterparties and other post balance sheet
date evidence.
In addition, we challenged the valuation of significant fixed price
positions in commodities across the Group at year-end given the
high price volatility during the year, particularly with respect
to base metals and coal where the risk of non-performance
is higher.
We concluded that the Group’s provisioning in relation to counterparty and performance risk was appropriately assessed.
Taxation
Description of key audit matter
How the scope of our audit responded to the key audit matter
There is significant judgement around accounting for income
taxes particularly in light of the number of jurisdictions in which
the Group operates, including judgements concerning presence
of key corporate operations and holding companies, provisioning
for tax exposures, application of transfer pricing rules, the
recognition of deferred income tax assets and the taxation
impacts of any corporate restructurings.
This gives rise to complexity and uncertainty in respect of
the calculation of income taxes and deferred tax assets and
consideration of contingent liabilities associated with tax years
open to audit.
As at 31 December 2017, the Group has recorded net deferred
tax liabilities of $7,024 million and net deferred tax assets of
$1,733 million. Additionally, the Group has $6,574 million of gross
tax losses carried forward and deductible temporary differences,
for which no deferred tax assets have been recognised.
The assessment of tax-related contingent liabilities has been
disclosed in note 21.
Refer to “Key sources of estimation uncertainty” within note 1
and additionally notes 6 and 21, and the Audit Committee
Report on pages 96 to 98.
Key observations
We undertook a specific assessment of the material components
impacting the Group’s tax expense, balances and exposures
and performed detailed audit procedures in relation to these.
We considered the appropriateness of management’s
assumptions and estimates to support the recognition of
deferred tax assets with reference to forecast taxable profits
and the consistency of these forecasts with the Group’s budgets.
We reviewed and challenged management’s assessment
of uncertain tax positions and conclusions on complex tax
arrangements (such as transfer pricing) through discussions
with the Group taxation department, reviewing correspondence
with local tax authorities, reviewing third party expert tax
opinions and utilising Deloitte tax specialists, where appropriate,
to assess the adequacy of associated provisions and disclosures.
We challenged management on the disclosures in the
financial statements in relation to taxation, specifically on the
requirement for adequate assessment of uncertainties and
contingent liabilities.
The results of our testing were satisfactory and we concur that the level of tax provisions and disclosures are appropriate.
117
Glencore Annual Report 2017 Independent Auditor’s Report
to the members of Glencore plc
continued
Katanga Restatements
Description of key audit matter
Katanga is a Canadian listed copper and cobalt producer in the
Democratic Republic of Congo which is controlled by Glencore
and therefore a consolidated subsidiary. During the year, the
non-executive directors of Katanga initiated an independent
review into the accounting practices of Katanga covering the
financial years ended December 2014, 2015 and 2016
(“Independent Review”).
This review concluded that as a result of inappropriate
accounting practices and significant weaknesses in Katanga’s
internal control environment around financial reporting and
inventory valuation and recording, including management
override of internal controls, various financial line items were
misstated in 2014, 2015 and 2016. The cumulative restatements
resulted in a net reduction in total assets/liabilities and equity of
$60 million (net of income tax credits of $18 million) which was
accounted for as a current year adjustment in Glencore’s 2017
financial statements. These adjustments do not have a material
adverse effect on the consolidated income, financial position
or cash flows of Glencore.
The Glencore plc Board of Directors convened a board
committee to assess the implications of the findings from the
Katanga Independent Review on Glencore Group’s internal
controls (the “Glencore Review”). This was to assess the matter
including the possibility of similar issues existing at other
Glencore operations, and determine the appropriate measures
to improve the control environment and the disciplinary action
to be taken against Glencore personnel involved in misstating
past financial statements.
Our audit work, at Group and the relevant component level,
included additional procedures considering the impact
of the findings from the Katanga Independent Review
and the Glencore plc board committee.
Please refer to page 92 and 97 for the board’s discussion
on the matter and note 4 for the cumulative impacts of the
above adjustments in Glencore’s financial statements.
Key observations
How the scope of our audit responded to the key audit matter
The additional audit procedures performed by the Group and
relevant component audit teams in response to the Katanga
Independent Review included the following:
• The use of Deloitte forensic experts at Group and component
level to understand and challenge both the scope and
competency of the independent accounting expert engaged
by the non-executive directors assisting with the Katanga
Independent Review as well as the audit procedures
performed by the Group audit team
• A review of the report prepared by the independent
accounting expert from the Katanga Independent Review
to understand the nature of the misstatements, including
findings with respect to internal controls, including
management override of internal control
• Additional audit work with respect to the correcting entries
required to restate the Katanga financial statements
• Meeting with the Glencore Board of Directors and senior
management to understand the scope and findings of the
Glencore Review, including consideration of the risk of
management override at other Glencore assets and
specifically within the African copper assets
• Communicating the increased risk of management override
of controls to component auditors with similar risk profiles
to Katanga, requesting additional audit procedures be
conducted, such as the involvement of Deloitte technical
mining experts in the component audit procedures, and
• Consideration of the implementation of recommendations
made by experts engaged to assist in this matter and other
actions by the Katanga and Glencore boards to determine
whether misstatements involving management override
could exist at other components
We concur that the cumulative impact of the adjustments recorded in Glencore’s consolidated financial statements are fairly stated
in all material respects in accordance with IFRS. Based on the results of our testing, no additional reportable misstatements involving
management override were identified from our audit.
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Financial
Statements
Additional
Information
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
$200 million (2016: $150 million)
The applied materiality is approximately 7% of normalised 3-year average pre-tax profit (2016: 7%),
and equates to less than 1% (2016: 1%) of equity.
$m
Group materiality
Maximum allowed
component materiality
Audit Committee
reporting threshold
200
150
100
90
g
n
i
t
e
k
r
a
M
75
d
n
I
t
e
s
s
a
10
10
● 2017
● 2016
Basis for determining
materiality
Consistent with the methodology in the prior year, we have determined materiality by using a
percentage of a normalised 3-year average (2015–17) of pre-tax profits. The selected materiality
is 3% of current year normalised results without the effect of averaging.
Rationale for the
benchmark applied
These normalising items are outlined in notes 3 and 4 to the financial statements.
The pre-tax profits for the 2015–17 years have been normalised in determining materiality to exclude
items which, due to their variable financial impact and/or expected infrequency of the underlying
events, are not considered indicative of continuing operations of the Group. These items do not form
part of the Group’s internally or externally monitored primary key performance indicators, and which
if included, would distort materiality year-on-year.
We consider this approach of using a 3-year average to be more appropriate than an assessment
based on current year results alone given the nature of the mining industry which is exposed
to cyclical commodity price fluctuations and to therefore provide a more stable base reflective
of the scale of the Group’s size and operations.
We note that the maximum allowed component materiality for industrial assets has increased
to $100 million in the current year on the basis that the contribution to pre-tax profit by industrial
assets has significantly increased throughout the normalised 3-year average period used in the
determination of our materiality.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $10 million
(2016: $10 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the Group level. Based on our continuing assessment, we focused our Group audit
scope primarily on the audit work at 47 components (2016: 45 components), representing the Group’s most material marketing
operations and industrial assets, and utilised 23 component audit teams (2016: 21 component audit teams) in 20 countries
(2016: 18 countries).
• 27 of these were subject to a full scope audit (2016: 29 components), and
• 20 were subject to specified audit procedures where the extent of our testing was based on our assessment of the risk
of material misstatement and of the materiality of the Group’s operations at those locations (2016: 16 components)
These 47 components account for 93% of the Group’s net assets (2016: 92%), 97% of the Group’s revenue (2016: 95%) and 89%
of the Group’s adjusted EBITDA (2016: 89%).
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Glencore Annual Report 2017 Independent Auditor’s Report
to the members of Glencore plc
continued
Net assets
Revenue
Adjusted EBITDA
7
32
11
9
34
59
95
80
Coverage (%)
● Full scope audit
● Specified audit procedures
● Analytical procedures
Components are scoped based on their contribution to financial metrics (revenue, EBIT and Adjusted EBITDA), production and
qualitative criteria, such as being a significant development project or exhibiting particular risk factors.
Detailed audit instructions were sent to the auditors of these in-scope components. These detailed audit instructions specified areas
of audit focus, identified the risks of material misstatement assessed by the Group audit team and set out the information to be
reported back to the Group audit team.
The Group audit team continued to follow a programme of regular on-site meetings with components that has been designed
so that the Group Audit Partner or another senior member of the Group audit team periodically meets with local management
and the component audit team on a rotational basis. In 2017, the Group audit team held in-person meetings with 21 components
(2016: 13 components).
Additionally for all in-scope components, the Group audit team was involved in the audit work performed by the component
auditors through a combination of our global planning conference call meetings, provision of referral instructions, review and
challenge of related component inter-office reporting and of findings from their work (which included the audit procedures
performed to respond to risks of material misstatement), attendance at component audit closing conference calls and regular
interaction on any related audit and accounting matters which arose.
At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information of the remaining components
not subject to audit or audit of specified account balances.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
We have nothing
to report in respect
of these matters.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the directors that they consider the annual
report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s position and performance, business model
and strategy, is materially inconsistent with our knowledge obtained in the audit, or
• Audit committee reporting – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee, or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing
Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code
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Financial
Statements
Additional
Information
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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 assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Report on other legal and regulatory requirements
Opinion on other matter prescribed by our engagement letter
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.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit, or
• 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 accounting records and returns
We have nothing
to report in respect
of these matters.
Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Board of Directors on 22 August 2011 to audit
the financial statements of Glencore plc for the year ending 31 December 2011 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments of the firm as auditors of Glencore plc is 7 years,
covering the years ending December 2011 to December 2017.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance
with ISAs (UK).
Matthew Sheerin, ACA CA (AUS)
for and on behalf of Deloitte LLP
Recognised Auditor
London, UK
1 March 2018
121
Glencore Annual Report 2017 Consolidated statement of income
For the year ended 31 December 2017
US$ million
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates and joint ventures
Gains on disposals and investments
Other expense – net
Dividend income
Interest income
Interest expense
Income/(loss) before income taxes
Income tax expense
Income/(loss) for the year from continuing operations
Income from discontinued operations, net of tax
Income for the year
Attributable to:
Non-controlling interests
Equity holders of the Parent
Earnings/(loss) per share – continuing operations:
Basic (US$)
Diluted (US$)
Earnings per share – continuing and discontinued operations:
Basic (US$)
Diluted (US$)
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2017
205,476
(197,695)
9
3
4
6
24
16
16
16
16
(1,310)
1,158
1,309
(594)
28
168
(1,619)
6,921
(1,759)
5,162
–
5,162
(615)
5,777
0.41
0.40
0.41
0.40
2016
152,948
(149,763)
(1,102)
11
489
(1,626)
27
155
(1,688)
(549)
(638)
(1,187)
2,123
936
(443)
1,379
(0.05)
(0.05)
0.10
0.10
122
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Consolidated statement of comprehensive income
For the year ended 31 December 2017
US$ million
Income for the year
Notes
2017
5,162
2016
936
Other comprehensive income/(loss)
Items not to be reclassified to the statement of income in subsequent periods:
Defined benefit plan actuarial gains/(losses), net of tax of $32 million (2016: $14 million)
Discontinued operations – Actuarial losses net of tax of $Nil (2016: $1 million)
Net items not to be reclassified to the statement of income in subsequent periods:
Items that have or may be reclassified to the statement of income in subsequent periods:
Exchange gain on translation of foreign operations
(Losses)/gains on cash flow hedges, net of tax of $5 million (2016: $5 million)
Share of comprehensive gain from associates and joint ventures
Unrealised gain on available for sale financial instruments
Discontinued operations1
Items recycled to the statement of income upon disposal of subsidiaries
Net items that are or may be reclassified to the statement of income
in subsequent periods:
Other comprehensive income
Total comprehensive income
Attributable to:
Non-controlling interests
Equity holders of the Parent
22
22
9
9
24
81
–
81
446
(165)
93
500
–
(143)
731
812
5,974
(41)
(4)
(45)
472
99
–
365
43
602
1,581
1,536
2,472
(672)
6,646
(411)
2,883
1 2016 included exchange gain on translation of foreign operations of $22 million and gain on cash flow hedges net of tax of $21 million.
The accompanying notes are an integral part of the consolidated financial statements.
123
Glencore Annual Report 2017
Consolidated statement of financial position
As at 31 December 2017
US$ million
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Other investments
Advances and loans
Inventories
Deferred tax assets
Current assets
Inventories
Accounts receivable
Other financial assets
Prepaid expenses
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
Total equity
Non-current liabilities
Borrowings
Deferred income
Deferred tax liabilities
Other financial liabilities
Provisions including post-retirement benefits
Current liabilities
Borrowings
Accounts payable
Deferred income
Provisions
Other financial liabilities
Income tax payable
Liabilities held for sale
Total equity and liabilities
The accompanying notes are an integral part of the consolidated financial statements.
124
Notes
2017
2016
7
8
9
9
10
11
6
11
12
27
13
14
15
32
19
20
6
27
21
19
23
20
21
27
14
57,046
6,787
13,998
2,958
2,976
369
1,733
53,826
6,716
13,086
1,753
3,483
564
1,760
85,867
81,188
24,084
20,359
2,311
416
2,124
49,294
432
49,726
135,593
146
49,609
49,755
(300)
49,455
24,532
2,561
7,024
513
7,094
41,724
9,402
28,826
410
477
4,522
618
44,255
159
44,414
135,593
18,347
20,066
2,212
269
2,518
43,412
–
43,412
124,600
146
44,097
44,243
(462)
43,781
23,188
2,266
5,664
403
5,931
37,452
10,030
26,176
138
458
6,386
179
43,367
–
43,367
124,600
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Consolidated statement of cash flows
For the year ended 31 December 2017
US$ million
Operating activities
Income/(loss) before income taxes from continuing operations
Income before income taxes from discontinued operations
Adjustments for:
Depreciation and amortisation
Share of income from associates and joint ventures
Increase/(decrease) in employee benefit liabilities
Gains on disposals and investments
Unrealised mark-to-market movements on other investments
Impairments
Other non-cash items – net3
Interest expense – net
Cash generated by operating activities before working capital changes
Working capital changes
Increase in accounts receivable4
Increase in inventories
Increase in accounts payable5
Proceeds from gold and silver streaming
Total working capital changes
Income taxes paid
Interest received
Interest paid
Net cash generated by operating activities
Investing activities
Net cash (used)/received in acquisition of subsidiaries
Net cash received from disposal of subsidiaries
Purchase of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Dividends received from associates and joint ventures
Net cash (used)/generated by investing activities
1
2
3
4
5
Includes results from assets held for sale, see note 14.
Includes results from discontinued operations, see note 24.
Includes certain non-cash items as disclosed in note 4.
Includes movements in other financial assets, prepaid expenses and long-term advances and loans.
Includes movements in other financial liabilities, provisions and deferred income.
The accompanying notes are an integral part of the consolidated financial statements.
Notes
20171
20162
24
9
3/24
4
5
20
24
24
7/8
9
6,921
–
5,398
(1,158)
52
(1,321)
(290)
628
185
1,451
11,866
(1,165)
(5,614)
1,814
–
(4,965)
(921)
106
(1,269)
4,817
(674)
706
(378)
36
(3,586)
282
1,081
(2,533)
(549)
2,254
5,632
(26)
(17)
(2,421)
121
1,268
3
1,603
7,868
(5,005)
(2,707)
5,555
971
(1,186)
(584)
111
(1,376)
4,833
176
5,535
(15)
3
(3,048)
128
833
3,612
125
Glencore Annual Report 2017
Consolidated statement of cash flows
For the year ended 31 December 2017
US$ million
Financing activities3
Proceeds from issuance of capital market notes4
Repayment of capital market notes
Repurchase of capital market notes
Proceeds from/(repayment of) revolving credit facility
Proceeds from/(repayment of) other non-current borrowings
Repayment of finance lease obligations
Margin receipts/(payments) in respect of financing related hedging activities
Proceeds from U.S. commercial papers
(Repayment of)/proceeds from current borrowings
Acquisition of additional interests in subsidiaries
Return of capital/distributions to non-controlling interests
Disposal of own shares
Distributions paid to equity holders of the Parent
Net cash used by financing activities
Decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents reported in the statement of financial position
Cash and cash equivalents attributable to assets held for sale
Includes results from assets held for sale, see note 14.
1
2
Includes results from discontinued operations, see note 24.
3 Refer to note 19 for reconciliation of movement in borrowings.
4 Net of issuance costs relating to capital market notes of $20 million (2016: $9 million).
The accompanying notes are an integral part of the consolidated financial statements.
Notes
20171
20162
19
19
19
19
19
19
19
19
17
2,026
(4,539)
–
501
19
(105)
1,255
1,180
(1,266)
(561)
(194)
17
(998)
1,366
(4,748)
(2,629)
(2,644)
(79)
(125)
(695)
(15)
1,035
(7)
(91)
3
–
(2,665)
(8,629)
(381)
20
2,508
2,147
2,124
23
(184)
(15)
2,707
2,508
2,508
–
126
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Consolidated statement of changes of equity
For the year ended 31 December 2017
US$ million
1 January 2016
Income for the year
Other comprehensive (loss)/
income
Total comprehensive income
Own share disposal1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries
Disposal of business3
Distributions paid4
At 31 December 2016
1 January 2017
Income for the year
Other comprehensive income
Total comprehensive income
Own share disposal1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries
Disposal of business3
Distributions paid4
(Deficit)/
retained
earnings
Share
premium
Other
reserves
(Note 15)
Own
shares
Total
reserves
and
(deficit)/
retained
earnings
Total equity
attributable
to equity
holders
Non-
controlling
interests
(Note 32)
Share
capital
Total
equity
(5,099)
52,338
(4,419)
(1,712)
41,108
146
41,254
89
41,343
1,379
(45)
1,334
(9)
75
–
(40)
–
(3,739)
(3,739)
5,777
174
5,951
(60)
105
–
12
–
–
–
–
–
–
–
–
–
–
1,549
1,549
–
–
68
–
–
–
–
–
12
–
–
–
–
1,379
1,504
2,883
3
75
68
(40)
–
–
–
–
–
–
–
–
–
52,338
52,338
(2,802)
(2,802)
(1,700)
(1,700)
44,097
44,097
146
146
–
–
–
–
–
–
–
(998)
–
695
695
–
–
(318)
–
–
–
–
–
125
–
–
–
–
5,777
869
6,646
65
105
(318)
12
(998)
–
–
–
–
–
–
–
–
1,379
(443)
936
1,504
2,883
32
(411)
1,536
2,472
3
75
68
(40)
–
44,243
44,243
5,777
869
6,646
65
105
(318)
12
(998)
–
–
17
(66)
(91)
(462)
(462)
(615)
(57)
(672)
–
–
1,057
(29)
(194)
3
75
85
(106)
(91)
43,781
43,781
5,162
812
5,974
65
105
739
(17)
(1,192)
At 31 December 2017
2,269
51,340
(2,425)
(1,575)
49,609
146
49,755
(300)
49,455
1 See note 15.
2 See note 18.
3 See note 24.
4 See note 17.
The accompanying notes are an integral part of the consolidated financial statements.
127
Glencore Annual Report 2017 Notes to the financial statements
1. Accounting policies
Corporate information
Glencore plc (the “Company”, “Parent”, the “Group” or “Glencore”), is a leading integrated producer and marketer of natural resources,
with worldwide activities in the production, refinement, processing, storage, transport and marketing of metals and minerals, energy
products and agricultural products. Glencore operates on a global scale, marketing and distributing physical commodities 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 producers and consumers of
commodities. In this regard, Glencore seeks to capture value throughout the commodity supply chain. Glencore’s long experience
as a commodity producer and 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
geographic regions.
Glencore plc is a publicly traded limited company incorporated in Jersey and domiciled in Switzerland. Its ordinary shares are traded
on the London and Johannesburg stock exchanges. On 31 January 2018, the Company delisted its shares from the Hong Kong
stock exchange.
These consolidated financial statements were authorised for issue in accordance with a Directors’ resolution on 1 March 2018.
Statement of compliance
The consolidated financial statements have been prepared in accordance with:
• International Financial Reporting Standards (IFRS) and interpretations as adopted by the European Union (EU) effective
as of 31 December 2017, and
• IFRS and interpretations as issued by the International Accounting Standards Board (IASB) effective as of 31 December 2017
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires management to make judgements, 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. Estimates and assumptions
are continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable and relevant under the circumstances, independent estimates, quoted market prices and common,
industry standard modelling techniques. Actual outcomes could result in a material adjustment to the carrying amount of assets
or liabilities affected in future periods.
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 judgements, estimates and assumptions about matters that are
inherently uncertain:
Critical accounting judgements
In the process of applying Glencore’s accounting policies, management has made the following judgements based on the relevant
facts and circumstances including macro-economic circumstances and, where applicable, interpretation of underlying agreements,
which have the most significant effect on the amounts recognised in the consolidated financial statements.
(i) Determination of control of subsidiaries and joint arrangements (note 33)
Judgement is required to determine when Glencore has control of subsidiaries or joint control of joint arrangements. This requires an
assessment of the relevant activities (those relating to the operating and capital decisions of the arrangement, such as: the approval
of the capital expenditure programme for each year, and appointing, remunerating and terminating the key management personnel
or service providers of the operations) and when the decisions in relation to those activities are under the control of Glencore
or require unanimous consent. See note 24 for a summary of the acquisitions of subsidiaries completed during the year and the
key judgements made in determining control thereof.
Judgement is also required in determining the classification of a joint arrangement between a joint venture or a joint operation
through an evaluation of the rights and obligations arising from the arrangement and in particular, if the joint arrangement has
been structured through a separate vehicle, further consideration is required of whether:
(1) the legal form of the separate vehicle gives the parties rights to the assets and obligations for the liabilities;
(2) the contractual terms and conditions give the parties rights to the assets and obligations for the liabilities; and
(3) other facts and circumstances give the parties rights to the assets and obligations for the liabilities.
Joint arrangements in which the primary activity is the provision of output to the shareholders, typically convey substantially all the
economic benefits of the assets to the parties and judgement is required in assessing whether the terms of the offtake agreements
and any other obligations for liabilities of the arrangement result in the parties being substantially the only source of cash flows
contributing to the continuity of the operations of the arrangement.
128
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Certain joint arrangements that are structured through separate vehicles including Collahuasi, Glencore Agri and QHG are accounted
for as joint ventures. The Collahuasi arrangement is primarily designed for the provision of output to the shareholders sharing joint
control, the offtake terms of which are at prevailing market prices and the parties are not obligated to cover any potential funding
shortfalls. In management’s judgement, Glencore is not the only possible source of funding and does not have a direct or indirect
obligation to the liabilities of the arrangement, but rather shares in its net assets and, therefore, such arrangements have been
accounted for as joint ventures.
Differing conclusions around these judgements, may materially impact how these businesses are presented in the consolidated
financial statements – under the full consolidation method, equity method or recognition of Glencore’s share of assets, liabilities,
revenue and expenses, including any assets or liabilities held jointly. See note 9 for a summary of these joint arrangements and the
key judgements made in determining the applicable accounting treatment for the material joint arrangements entered during
the year.
(ii) Credit and performance risk (note 25)
The Group’s global marketing operations expose it to credit and performance (the risk that counterparties fail to sell or purchase
physical commodities on agreed terms) risks; these arise particularly in markets demonstrating significant price volatility with limited
liquidity and terminal markets and when global and/or regional macro-economic conditions are weak.
Continuously, but particularly during such times, judgement is required to determine whether receivables, loans and advances are
recoverable and if contracted product deliveries will be received. Judgements about recoverability and contractual performance
may materially impact both non-current and current assets as recognised in the statement of financial position. Any estimation
uncertainty related to these judgements is not anticipated to result in a material change to the carrying value of these assets
within the next financial year.
(iii) Classification of transactions which contain a financing element (notes 19, 20 and 23)
Transactions for the sale or purchase of commodities may contain a financing element such as extended payment terms.
Judgement is required to determine the most appropriate classification and presentation of these transactions within the statements
of cash flows and financial position. In determining the appropriate classification, management considers the underlying economic
substance of the transaction and the significance of the financing element to the transaction. Typically the economic substance
of the transaction is determined to be operating in nature, i.e. predominantly related to the sale or purchase of commodities as the
financing element is insignificant and the entire cash flow will therefore be presented as operating in the statement of cash flow
with a corresponding trade receivable or payable in the statement of financial position.
Key sources of estimation uncertainty
In the process of applying Glencore’s accounting policies, management has made key estimates and assumptions concerning
the future and other key sources of estimation uncertainty. The key assumptions and estimates at the reporting date that have
a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year,
are described below. Actual results may differ from these estimates under different assumptions and conditions and may materially
affect financial results or the financial position reported in future periods.
(i) Recognition of deferred tax assets (note 6)
Deferred tax assets are recognised only to the extent it is considered 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 there will be sufficient taxable
income available to offset the tax assets when they do reverse. These judgements and estimates are subject to risk and uncertainty
and therefore, to the extent assumptions regarding future profitability change, there can be a material increase or decrease in the
amounts recognised in the consolidated statement of income in the period in which the change occurs. The recoverability of
deferred tax assets including the estimates and assumptions contained therein are reviewed regularly by management.
(ii) Impairments and impairment reversals (notes 4 and 5)
Investments in associates and joint ventures, other investments, advances and loans, property, plant and equipment and intangible
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be fully
recoverable 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 recognised in the consolidated statement of income. For those assets which
were impaired in prior periods, if their recoverable amount exceeds their carrying amount, an impairment reversal is recorded
in the consolidated statement of income. Future cash flow estimates which are used to calculate the asset’s fair value are discounted
using asset specific discount rates and are based on expectations about future operations, primarily comprising estimates about
production and sales volumes, commodity prices (considering current and historical prices, price trends and related factors), reserves
and resources, operating costs, rehabilitation and restoration costs and capital expenditures. Estimates are reviewed regularly by
management. Changes in such estimates and in particular, deterioration in the pricing outlook, could impact the recoverable values
of these assets, whereby some or all of the carrying amount may be impaired or the impairment charge reversed (if pricing outlook
improves significantly) with the impact recorded in the statement of income.
129
Glencore Annual Report 2017 Notes to the financial statements
continued
1. Accounting policies continued
(iii) Restoration, rehabilitation and decommissioning costs (note 21)
A provision for future restoration, rehabilitation and decommissioning 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. Most of these rehabilitation and decommissioning events are expected to take place many years
in the future and the currently estimated requirements and costs that will have to be met when the restoration event occurs are
inherently uncertain and could materially change over time.
In calculating the appropriate provision for the expected restoration, rehabilitation or decommissioning obligations, cost estimates
of the future potential cash outflows based on current studies of the expected rehabilitation activities and timing thereof, are
prepared. These forecasts are then discounted to their present value using a risk free rate specific to the liability and the currency
in which they are denominated.
Any changes in the expected future costs are initially reflected in both the provision and the asset and subsequently in the
consolidated statement of income over the remaining economic life of the asset. As the actual future costs can differ from the
estimates due to changes in laws, regulations, technology, costs and timing, the provisions including the estimates and assumptions
contained therein are reviewed regularly by management.
Change in estimate
In the prior year, estimates for potential likely prolongation of the underlying timing assumptions and an anticipated benefit of
eventually realising costs lower than those estimated, were combined with the country/currency specific risk free rates in deriving
applicable liability specific discount rates. In the current year, these cost and timing considerations have been incorporated directly
into the underlying cash flow forecasts with the revised estimates discounted using a risk free rate specific to the liability and
currency in which the forecasts are denominated. As a result of this change in estimate, there was no initial impact on equity
as the rehabilitation provision increased by $312 million, with a resulting equivalent increase in property, plant and equipment.
(iv) Fair value measurements (notes 9, 11, 24, 26 and 27)
In addition to recognising derivative instruments at fair value, as discussed below, an assessment of the fair value of assets and
liabilities is also required in accounting for other transactions, most notably, business combinations and marketing inventories and
disclosures related to fair values of financial assets and liabilities. 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 period end, and are
therefore not necessarily reflective of the likely cash flow upon actual settlements. Where fair value measurements 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 information is by nature subject to
uncertainty, particularly where comparable market-based transactions often do not exist.
Derivative instruments are carried at fair value for which 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 13 Fair Value Measurement. Fair values
are determined in the following ways: externally verified via comparison to quoted market prices in active markets (Level 1); by using
models with externally verifiable inputs (Level 2); or by using alternative procedures such as comparison to comparable instruments
and/or using models with unobservable market inputs requiring Glencore to make market-based assumptions (Level 3). Level 3
inputs therefore include the highest level of estimation uncertainty.
Adoption of revised standards
In the current year, Glencore has applied revised IFRS standards which were adopted as of 1 January 2017:
(i) Amendments to IAS 12 – Recognition of deferred tax assets for unrealised losses
The amendment to IAS 12 clarifies the accounting treatment for deferred tax assets related to debt instruments measured
at fair value. The adoption of this amendment has had no material impact on the Group.
(ii) Amendments to IAS 7 – Statement of cash flows: Disclosure initiative
The amendment to IAS 7 requires entities to provide disclosures about changes in their liabilities arising from financing activities,
including changes arising from financing cash flows and non-cash changes (such as foreign exchange movements). The Group
has included a reconciliation of cash flow movements in borrowings in note 19 to comply with this amendment.
New and revised standards not yet effective
At the date of authorisation of these consolidated financial statements, the following new and revised IFRS standards, which are
applicable to Glencore, were issued but are not yet effective:
(i) Amendments to IFRS 2 – Classification and measurement of share-based payment transactions – effective for year ends
beginning on or after 1 January 2018
The amendments to IFRS 2 Share-based payments clarify the classification and measurement of share-based payments transactions
with respect to accounting for cash-settled share-based payment transactions that include a performance obligation, the
classification of share-based payment transactions with net settlement features and the accounting for modifications of share-based
payment transactions from cash-settled to equity-settled. The Group has assessed the impact of the change on its consolidated
financial statements and it does not expect any material impact.
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(ii) IFRS 9 – Financial Instruments – effective for year ends beginning on or after 1 January 2018
IFRS 9 will supersede IAS 39 “Financial Instruments: Recognition and Measurement” and covers classification and measurement
of financial assets and financial liabilities, impairment of financial assets and hedge accounting. The Group has undertaken
a comprehensive analysis of the impact of the new standard based on the financial instruments it holds and the way in which
they are used. As a result of the analysis, it is anticipated that there will be no material impact on the face of the statement of
financial position or in the statement of income, however, there will be presentational changes in some of our note disclosures, as
well as additional disclosures around classification and measurement of financial instruments which are summarised as follows:
Expected credit loss model
The new standard introduces an expected loss impairment model for financial assets held at amortised cost, which means that
anticipated as opposed to impending credit losses will be recognised resulting in the likely earlier recognition of impairment.
This change is not expected to have a material impact on the Group’s results, given the low exposure to counterparty default
risk as a result of the credit risk management processes that are in place.
Hedge accounting
The new standard introduces a less prescriptive basis to adopt hedge accounting. This change is not expected to materially impact
the amounts recognised in relation to existing hedging arrangements.
Classification and measurement
IFRS 9 modifies the classification and measurement of certain classes of financial assets and liabilities and will require the Group
to reassess classification of financial assets from four to three primary categories (amortised cost, fair value through profit and loss,
fair value through other comprehensive income), reflecting the business model in which assets are managed and their cash flow
characteristics. These modifications will result in presentational changes to the additional detail provided primarily in the advances
and loans (note 10), accounts receivable (note 12) and accounts payable (note 23) note disclosures to reflect the business model
and cash flow characteristics of these assets and liabilities and group them into their respective IFRS 9 category or other IFRS
classification. A summary of the expected presentational changes on our 31 December 2017 balances is as follows:
US$ million
Financial assets
Other non-current receivables and loans
Trade receivables
Trade advances
Other receivables
Financial liabilities
Trade payables
Trade advances from buyers
Other payables and accrued liabilities
Notes
Current
presentation
Held at
amortised cost
IFRS 9 Presentational changes
Held at fair value
through profit
and loss
Non-financial
instruments
10
12
12
12
23
23
23
2,475
11,915
2,110
2,259
24,664
451
2,216
804
4,623
19
621
8,642
–
2,015
–
7,292
–
–
16,022
–
–
1,671
–
2,091
1,638
–
451
201
Total
2,475
11,915
2,110
2,259
24,664
451
2,216
Classification of other investments
Upon implementation, IFRS 9 provides companies with the option to irrevocably designate investments in equity instruments
as at fair value through other comprehensive income, provided certain criteria are met. Such investments are presented as other
investments in note 9. The Group has evaluated the applicable criteria and intends to designate all its equity investments as fair value
through other comprehensive income upon adoption of IFRS 9. For the year ended 31 December 2017, the fair value movements
recognised on the investments currently classified as fair value through profit or loss in the consolidated statement of income were
$23 million, and as a result of the designation of these investments as fair value through other comprehensive income, the respective
fair value movements will be recognised in other comprehensive income subsequent to 1 January 2018.
(iii) IFRS 15 – Revenue from Contracts with Customers – effective for year ends beginning on or after 1 January 2018
IFRS 15 applies to revenue from contracts with customers and replaces all of the revenue standards and interpretations in IFRS.
The standard outlines the principles an entity must apply to measure and recognise revenue and the related cash flows. The Group
has undertaken a comprehensive analysis of the impact of the new standard based on a review of the contractual terms of its
principal revenue streams with the primary focus being to understand whether the timing and amount of revenue recognised
could differ under IFRS 15. As the majority of the Group’s revenue is derived from arrangements in which the transfer of risks and
rewards coincides with the fulfilment of performance obligations and transfer of control as defined by IFRS 15, no material changes
in respect of timing and amount of revenue currently recognised by the Group are expected. In addition, IFRS 15 requires that
“distinct” promised goods or services, such as insurance and freight services to deliver the contracted goods to the customers,
if material, be deferred and recognised over time as the obligation is fulfilled. The impact of this change is also not material,
however the revenue earned from these activities is required to be separately disclosed and thus there will be presentational
changes in our revenue related note disclosures.
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continued
1. Accounting policies continued
(iv) IFRS 16 – Leases – effective for year ends beginning on or after 1 January 2019
IFRS 16 provides a comprehensive model for identification of lease arrangements and their treatment (on-balance sheet) in
the financial statements of both lessees and lessors. It supersedes IAS 17 Leases and its associated interpretative guidance. Under
the new standard, a lessee is required to recognise the present value of the unavoidable lease payments as a lease liability on the
statement of financial position (including those currently classified as operating leases) with a corresponding right of use asset.
The unwind of the financial charge on the lease liability and amortisation of the leased asset are recognised in the statement
of income based on the implied interest rate and contract term respectively. Although the Group is still evaluating the potential
impact of IFRS 16 on the financial statements and performance measures, including an assessment of whether any arrangements
the Group enters into will be considered a lease under IFRS 16, the Group’s recognised assets and liabilities will increase and affect
the presentation and timing of related depreciation and interest charges in the consolidated statement of income. Upon adoption
of IFRS 16, the most significant impact will be the present value of the operating lease commitments (see note 29) being shown
as a liability on the statement of financial position together with an asset representing the right of use which are unwound and
amortised to the statement of income over time.
Basis of preparation
The financial statements are prepared under the historical cost convention except for certain financial assets, liabilities, marketing
inventories and pension obligations that are measured at revalued amounts or fair values at the end of each reporting period as
explained in the accounting policies below. Historical cost is defined as the amount of cash or cash equivalents paid or the fair value
of the consideration given to acquire them at the time of their acquisition. The principal accounting policies adopted are set out below.
The Directors have assessed that they have, at the time of approving the financial statements, a reasonable expectation that the
Group has adequate resources to continue in operational existence for the 12 months from the date of approval of the 2017 Annual
Report and Accounts. Therefore, they continue to adopt the going concern basis of accounting in preparing these financial
statements. Also see page 108. Further information on Glencore’s objectives, policies and processes for managing its capital and
financial risks are detailed in note 25.
All amounts are expressed in millions of United States Dollars, unless otherwise stated, consistent with the predominant functional
currency of Glencore’s operations.
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
and its subsidiaries.
Control is achieved when Glencore is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Specifically, Glencore controls an investee if, and only if, Glencore
has all of the following:
• power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
• exposure, or rights, to variable returns from its involvement with the investee, and
• the ability to use its power over the investee to affect its returns
When Glencore has less than a majority of the voting rights of an investee or similar rights of an investee, it considers all relevant
facts and circumstances in assessing whether it has power over the investee including:
• the size of Glencore’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders
• potential voting rights held by Glencore, other vote holders or other parties
• rights arising from other contractual arrangements, and
• any additional facts and circumstances that indicate that Glencore has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above. Consolidation of a subsidiary begins when Glencore obtains control over the
subsidiary and ceases when Glencore loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or
disposed of during the year are included in the consolidated statement of income and other comprehensive income from the date
Glencore gains control until the date when Glencore ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
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Changes in Glencore’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions with any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid
or received being recognised directly in equity and attributed to equity holders of Glencore.
When Glencore loses control of a subsidiary, a gain or loss is recognised in the consolidated statement of income and is calculated as
the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.
All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if Glencore had
directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category
of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date
when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable,
or the cost on the initial recognition of an investment in an associate or a joint venture.
Investments in associates and joint ventures
Associates and joint ventures (together “Associates”) in which Glencore exercises significant influence or joint control are accounted
for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies. Significant influence is presumed if Glencore holds between 20% and
50% of the voting rights, unless evidence exists to the contrary. A joint venture is a joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed
sharing of control over an arrangement, which exists only when decisions about relevant strategic and/or key operating decisions
require unanimous consent of the parties sharing control.
Equity accounting involves Glencore recording its share of the Associate’s net income and equity. Glencore’s interest in an Associate
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 recognised directly
in the consolidated statement of income.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets,
and obligations for the liabilities, relating to the arrangement.
When Glencore undertakes its activities under joint operations, Glencore recognises in relation to its interest in a joint operation:
• its assets, including its share of any assets held jointly
• its liabilities, including its share of any liabilities incurred jointly
• its revenue from the sale of its share of the output arising from the joint operation
• its share of the revenue from the sale of the output by the joint operation, and
• its expenses, including its share of any expenses incurred jointly
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with
the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
Where Glencore transacts with a joint operation, unrealised profits and losses are eliminated to the extent of Glencore’s interest
in that joint operation.
Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. The cost of the acquisition
is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred, liabilities incurred
to the former owners of the acquiree and the equity interests issued in exchange for control of the acquiree. The identifiable assets,
liabilities and contingent liabilities (“identifiable net assets”) are recognised at their fair value at the date of acquisition. Acquisition
related costs are recognised in the consolidated statement of income as incurred.
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 attains control) and the resulting gain or loss, if any, is recognised in the
consolidated statement of income.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed.
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continued
1. Accounting policies continued
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating units (CGU) that are
expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less
than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit
and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss is
recognised directly in profit or loss. An impairment loss recognised for goodwill is not able to be reversed in subsequent periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, Glencore reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted for additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised
at that date.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net
assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share
of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-
transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in
another IFRS.
Similar procedures are applied in accounting for the purchases of interests in Associates and joint operations. Any goodwill arising
from such purchases is included within the carrying amount of the investment in Associates, but not amortised thereafter. Any
excess of Glencore’s share of the net fair value of the Associate’s identifiable net assets over the cost of the investment is included
in the consolidated statement of income in the period of the purchase.
Non-current assets held for sale and disposal groups
Non-current assets and assets and liabilities included in disposal 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 Glencore has transferred to the buyer all significant risks and rewards of ownership of the assets sold.
Revenue excludes any applicable sales taxes and is recognised at the fair value of the consideration received or receivable 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 booking. Revenue
on provisionally priced sales is recognised based on the estimated fair value of the total consideration receivable. The revenue
adjustment mechanism embedded within provisionally priced sales arrangements has the character of a commodity 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 cases, fair value is estimated by reference to forward market prices.
Royalty, 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 income can be measured reliably. Royalty revenue is recognised on an
accrual basis in accordance with the substance of the relevant agreement. Interest income is accrued on a time basis, by reference
to the principal outstanding and the applicable effective interest rate.
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 it operates.
(i) Foreign currency transactions
Transactions in foreign currencies are converted into the functional currency of each entity using the exchange rate prevailing at the
transaction date. Monetary assets and liabilities outstanding at year end are converted at year-end rates. The resulting exchange
differences are recorded in the consolidated statement of income.
(ii) 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 translated using
average rates of exchange for the year.
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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 shareholders’ equity and have no consolidated statement of income impact to the extent that no disposal of the foreign
operation has occurred.
Borrowing costs
Borrowing costs are expensed as incurred except where they relate to the financing of construction or development of qualifying
assets in which case they are capitalised up to the date when the qualifying asset is ready for its intended use.
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 insurance
companies equal the contributions that are required under the plans and 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
related current service cost and, where applicable, past service cost. Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or asset.
The cost of providing pensions is charged to the consolidated statement of income so as to recognise current and past service costs,
interest cost on defined benefit obligations, and the effect of any curtailments or settlements, net of expected returns on plan assets.
Actuarial gains and losses are recognised directly in other comprehensive income and will not be reclassified to the consolidated
statement of income. The retirement benefit obligation/asset recognised in the consolidated statement of financial position
represents the actual deficit or surplus in Glencore’s defined benefit plans. Any surplus resulting from this calculation is limited
to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions
to the plans.
Glencore also provides post-retirement healthcare benefits to certain employees in Canada, South Africa and the United States.
These are accounted for in a similar manner to the defined benefit pension plans, however are unfunded.
Share-based payments
(i) 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 consolidated
statement of income and credited to retained earnings on a straight-line basis over the period the estimated awards are expected
to vest.
At each balance sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result
of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised
in the consolidated statement of income such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to retained earnings.
(ii) Cash-settled share-based payments
For cash-settled share-based payments, a liability is initially recognised 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 reporting period
until the liability is settled, it is remeasured to fair value with any changes in fair value recognised in the consolidated 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 period end on expected current taxable income, and any adjustment 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 taxable income, using enacted
or substantively enacted income tax rates which are expected to be effective at the time of reversal of the underlying 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 period end and amended to the extent that it is no longer probable that the related benefit will
be realised. To the extent that a deferred tax asset not previously recognised subsequently fulfils the criteria for recognition, an asset
is then 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 temporary 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.
Current and deferred tax are recognised as an expense or income in the consolidated statement of income, except when they relate
to items that are recognised outside the consolidated statement of income (whether in other comprehensive income or directly in
equity) or where they arise from the initial accounting for a business combination.
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Glencore Annual Report 2017 Notes to the financial statements
continued
1. Accounting policies continued
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 government’s
taxation authority and the amount payable is based on taxable income – rather than physical quantities produced or as a percentage
of revenues – after adjustment for temporary differences. For such arrangements, current and deferred tax is provided on the same
basis as described above for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy these criteria
are recognised as current provisions and included in cost of goods sold.
Glencore assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. Inherent
uncertainties exist in estimates of tax contingencies due to complexities of interpretation and changes in tax laws. For those matters
where it is probable that an adjustment will be made, the Group records its best estimate of these tax liabilities, including related
interest charges.
Property, plant and equipment
Property, plant and equipment are stated 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 condition necessary for operation and the direct
cost of dismantling and removing the asset, less accumulated depreciation and any accumulated impairment losses.
Property, plant and equipment are depreciated to their estimated residual value over the estimated useful life of the specific asset
concerned, or the estimated remaining life of the associated mine (LOM), field or lease.
Depreciation commences when the asset is available for use. The major categories of property, plant and equipment are
depreciated/amortised on a units of production (UOP) and/or straight-line basis as follows:
Buildings
Freehold land
Plant and equipment
Mineral and petroleum rights
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 recognised in the statement of income on a
straight-line basis over the lease term.
(i) Mineral and petroleum rights
Mineral and petroleum reserves, resources and rights (together “Mineral and petroleum rights”) which can be reasonably valued,
are recognised in the assessment of fair values on acquisition. Mineral and petroleum rights for which values cannot be reasonably
determined are not recognised. Exploitable Mineral and petroleum rights are amortised using the UOP basis over the commercially
recoverable reserves and, in certain circumstances, other mineral resources. Mineral resources are included in amortisation
calculations where there is a high degree of confidence that they will be extracted in an economic manner.
(ii) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to costs incurred in the exploration and evaluation of potential mineral and petroleum
resources and includes costs such as exploration and production licences, researching and analysing historical exploration data,
exploratory drilling, trenching, sampling and the costs of pre-feasibility studies. Exploration and evaluation expenditure for each area
of interest, other than that acquired from another entity, is charged to the consolidated statement of income as incurred except
when the expenditure is expected to 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 expenditure is
capitalised. As the intangible component (i.e. licences) represents an insignificant and indistinguishable portion of the overall
expected tangible amount to be incurred and recouped from future exploitation, these costs along with other capitalised exploration
and evaluation expenditure are recorded as a component of property, plant and equipment. Purchased exploration and evaluation
assets are recognised at their fair value at acquisition.
As the capitalised exploration and evaluation expenditure asset is not available for use, it is not depreciated. All capitalised exploration
and evaluation expenditure is monitored for indications of impairment. Where a potential impairment is indicated, an assessment
is performed for each area of interest or at the CGU level. To the extent that capitalised expenditure is not expected to be recovered
it is charged to the consolidated statement of income.
Administration costs that are not directly attributable to a specific exploration area are charged to the consolidated statement of
income. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over
the term of the permit.
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Development expenditure
When commercially recoverable reserves are determined and such proposed development receives the appropriate approvals,
capitalised exploration and evaluation expenditure is transferred to construction in progress, a component within the plant and
equipment asset sub-category. All subsequent development expenditure is similarly capitalised, provided commercial viability
conditions continue to be satisfied. Proceeds from the sale of product extracted during the development phase are netted against
development expenditure. Upon completion of development and commencement of production, capitalised development costs are
further transferred, as required, to the appropriate plant and equipment asset category and depreciated using the unit of production
method (UOP) or straight-line basis.
(iii) Deferred mining costs
Mainly comprises certain capitalised costs related to underground mining as well as pre-production and in-production stripping
activities as outlined below. Deferred mining costs are amortised using the UOP basis over the life of the ore body to which those
costs relate.
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 amortised over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an identifiable component of the ore body to realise benefits in the form of
improved access to ore to be mined in the future (stripping activity asset), are capitalised within deferred mining costs provided
all the following conditions are met:
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
(b) the component of the ore body for which access has been improved can be identified; and
(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of income as they
are incurred.
The stripping activity asset is subsequently depreciated on a UOP basis over the life of the identified component of the ore body
that became more accessible as a result of the stripping activity and is then stated at cost less accumulated depreciation and any
accumulated impairment losses.
(iv) Biological assets
Biological assets are carried at their fair value less estimated selling costs. Any changes in fair value less estimated selling costs are
included in the consolidated statement of income in the period in which they arise.
Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising from the installation of plant and other site preparation work,
discounted using a risk free rate specific to the liability and the currency in which they are denominated to their net present
value, are provided for and capitalised at the time such an obligation arises. The costs are charged to the consolidated statement
of income over the life of the operation 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 consolidated statement of income as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes to the estimated future costs are accounted for prospectively by
recognising an adjustment to the rehabilitation liability and a corresponding adjustment to the asset to which it relates, provided
a reduction, if any, in the provision is not greater than the depreciated capitalised cost of the related asset, in which case the
capitalised cost is reduced to Nil and the remaining adjustment recognised in the consolidated statement of income. In the
case of closed sites, changes to estimated costs are recognised immediately in the consolidated statement of income.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation (calculated on a straight-line basis over their useful lives) and accumulated impairment losses, if any.
Internally generated intangibles are not capitalised. Instead, the related expenditure is recognised in the consolidated statement
of income and other comprehensive income in the period in which the expenditure is incurred.
Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life. The amortisation
method and period are reviewed annually and impairment testing is undertaken when circumstances indicate the carrying amount
may not be recoverable. Other than goodwill which is not depreciated, Glencore has no identifiable intangible assets with an
indefinite life.
137
Glencore Annual Report 2017 Notes to the financial statements
continued
1. Accounting policies continued
The major categories of intangibles are amortised on a straight-line basis as follows:
Port allocation rights
Licences, trademarks and software
Royalty arrangements
Acquired offtake arrangements
30 – 40 years
3 – 20 years
20 – 30 years
5 – 10 years
Goodwill impairment testing
For the purpose of impairment testing, goodwill has been allocated to the CGUs, or groups of CGUs, that are expected to benefit
from the synergies of the business combination and which represent the level at which management monitors and manages the
goodwill. In assessing whether an impairment is required, the carrying value of the CGU is compared with its recoverable amount.
The recoverable amount is the higher of its fair value less costs of disposal (FVLC”) and its value in use (VIU). If the recoverable amount
of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any
goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis of the carrying amount of each asset in the
unit. Any impairment loss for goodwill is recognised directly in the consolidated statement of income. An impairment loss recognised
for goodwill is not reversed in subsequent periods.
Other investments
Equity investments, other than investments in Associates, are recorded at fair value unless such fair value is not reliably determinable
in which case they are carried at cost. Changes in fair value are recorded in the consolidated statement of income unless they
are classified as available for sale, in which case fair value movements are recognised in other comprehensive income and are
subsequently recognised in the consolidated statement of income when realised by sale or redemption, or when a reduction
in fair value is judged to be a significant or prolonged decline.
Impairment or impairment reversals
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 or impairment reversal. Formal impairment tests are carried 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.
A formal impairment or reversal test involves determining whether the carrying amounts are in excess (or below, as the case may be)
of their recoverable amounts. An asset’s recoverable amount is determined as the higher of its fair value less costs of disposal and its
value in use. Such reviews are undertaken on an asset-by-asset basis, except where assets do not generate cash flows independent
of other assets, in which case the review is undertaken at the CGU level.
If the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recorded in the consolidated statement
of income to reflect the asset at the lower amount.
For those assets which were impaired in prior periods, if their recoverable amount exceeds their carrying amount, an impairment
reversal is recorded in the consolidated statement of income to reflect the asset at the higher amount to the extent the increased
carrying amount does not exceed the carrying value of the asset that would have been determined had no impairment
been recognised.
Goodwill impairments and impairments of available for sale equity investments cannot be subsequently reversed.
Provisions
Provisions are recognised when Glencore has a present obligation (legal or constructive), 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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding the obligation, including interpretation of specific
laws and likelihood of settlement. Where a provision is measured using the cash flow estimated to settle the present obligation,
its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Onerous contracts
An onerous contract is considered to exist where Glencore has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received from the contract. Present obligations
arising under onerous contracts are recognised and measured as provisions.
Unfavourable contracts
An unfavourable contract is considered to exist when Glencore, in a business combination, acquires a contract under which
the terms of the contract require Glencore to sell products or purchase services on terms which are economically unfavourable
compared to current market terms at the time of the business combination. Unfavourable contracts are recognised at the
present value of the economic loss and amortised into the statement of income over the term of the contract.
138
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Governance
Financial
Statements
Additional
Information
Inventories
The vast majority of inventories attributable to the marketing activities (“marketing inventories”) are valued at fair value less costs of
disposal with the remainder valued at the lower of cost or net realisable value. Unrealised gains and losses from changes in fair value
are reported in cost of goods sold.
Inventories held by the industrial activities (“production inventories”) are valued at the lower of cost or net realisable 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 approximates their fair value.
Financial instruments
Financial assets are classified as either financial assets at fair value through profit or loss (FVTPL), loans and receivables, held-to-
maturity investments or available for sale financial assets depending 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 recorded at fair value
through profit or loss, directly attributable transaction costs. Subsequently, financial assets are carried at fair value (other investments,
derivatives and marketable securities) 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 carried at amortised cost.
(i) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial
assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s
carrying amount and the present value of estimated future cash flows. The amount of the loss is recognised in the statement
of income.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s
carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar
financial asset. Such impairment loss will not be reversed in subsequent periods.
(ii) Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income
and accumulated in equity is recognised in profit or loss.
Own shares
The cost of purchases of own shares is deducted from equity. Where they are purchased, issued to employees or sold, no gain or loss
is recognised in the consolidated statement of income. Such gains and losses are recognised directly in equity. Any proceeds received
on disposal of the shares or transfers to employees are recognised in equity.
Derivatives and hedging activities
Derivative instruments, which include physical contracts to sell or purchase commodities that do not meet the own use exemption,
are initially recognised at fair value when Glencore becomes 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 other 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 instrument and
counterparty risk.
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.
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 commitment, or (ii) a Cash Flow Hedge of the change in cash flows 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 consolidated statement of income.
139
Glencore Annual Report 2017 Notes to the financial statements
continued
1. Accounting policies continued
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 consolidated statement of income in the same periods during
which the hedged transaction affects the consolidated statement of income. Hedge ineffectiveness is recorded in the consolidated
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 cumulative
gain or loss existing in equity at that time remains in shareholders’ equity and is recognised in the consolidated statement of income
when the committed or forecast transaction is ultimately recognised in the consolidated statement of income. However, if a forecast
or committed transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately
transferred to the consolidated statement of income.
A derivative may be embedded in a “host contract”. Such combinations 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 standalone derivative if the
criteria for separation are met. The host contract is accounted for in accordance with its relevant accounting policy.
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 value-add 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, ferroalloys, 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, including investments in coal mining
and oil production operations, ports, vessels and storage facilities, and
• Agriculture products: Wheat, corn, canola, barley, rice, oil seeds, meals, edible oils, biofuels, cotton and sugar supported by
investments in storage, handling, processing and port facilities
Corporate and other: consolidated statement of income amount represents unallocated Group related expenses (including variable
pool bonus charges). Statement of financial position amounts represent Group related balances.
The financial performance of the segments is principally evaluated by management with reference to Adjusted EBIT/EBITDA which
is the net result of segmental revenue (revenue including Proportionate adjustments as defined in the Alternative performance
measure section) less cost of goods sold and selling and administrative expenses plus share of income from associates and joint
ventures, dividend income and the attributable share of Adjusted EBIT/EBITDA of relevant material associates and joint ventures,
which are accounted for internally by means of proportionate consolidation, excluding significant items. The 2016 segment
information includes the Agricultural products business which was disclosed as a discontinued operation until the close of its 50%
sale on 1 December 2016, see note 24. Following completion of the sale, the results from Agricultural products have been combined
under Marketing activities and the 2016 comparatives (relating to Agricultural 2016 Industrial revenue of $3,292 million and EBITDA/
EBIT of $138 million and $104 million respectively) in respect thereof have been reclassified from Industrial to Marketing activities in
the below tables, consistent with how the business’ performance is monitored by Glencore’s management.
The accounting policies of the operating segments are the same as those described in note 1 with the exception of relevant
material associates and joint ventures. Under IFRS 11, Glencore’s investments in the Antamina copper/zinc mine (34% owned) and
the Cerrejón coal mine (33% owned) are considered to be associates as they are not subject to joint control and the Collahuasi
copper mine (44% owned) and Glencore Agri (50% owned) are considered to be joint ventures. Associates and joint ventures are
required to be accounted for in Glencore’s financial statements under the equity method. For internal reporting and analysis,
Glencore evaluates the performance of these investments under the proportionate consolidation method, reflecting Glencore’s
proportionate share of the revenues, expenses, assets and liabilities of the investments. Under IFRS 5, 100% of the results of the
Agricultural business segment up to the date of completion of the sale were presented as a discontinued operation in the Group’s
statement of income, following the agreed sale of a 50% interest in Glencore Agri, see note 24. Prior to completion of the sale,
Glencore evaluated the performance of this segment under the full consolidation method, consistent with prior periods. The
balances as presented for internal reporting purposes are reconciled to Glencore’s statutory disclosures in the following tables
and/or in the Alternative performance measure section.
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Financial
Statements
Additional
Information
Glencore accounts for intra-segment sales and transfers where applicable as if the sales or transfers were to third parties,
i.e. at arm’s length commercial terms.
Metals and
minerals
51,017
29,448
80,465
(2,502)
77,963
Energy
products
118,199
10,067
128,266
(790)
127,476
2,029
(24)
–
2,005
8,281
(3,274)
(511)
4,496
10,310
(3,298)
(511)
6,501
1,054
(64)
–
990
3,599
(1,998)
(177)
1,424
4,653
(2,062)
(177)
2,414
Agricultural
products
Corporate
and other
12,611
–
12,611
(12,611)
–
316
–
(124)
192
–
–
–
–
316
–
(124)
192
–
37
37
–
37
(175)
–
–
(175)
(342)
(38)
–
(380)
(517)
(38)
–
(555)
2017 US$ million
Revenue – Marketing activities1
Revenue – Industrial activities
Revenue
Proportionate adjustment – revenue2
Revenue – reported measure
Marketing activities
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Industrial activities
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Total Adjusted EBITDA
Total depreciation and amortisation
Total depreciation proportionate adjustment
Total Adjusted EBIT
Share of associates’ significant items2,3
Unrealised intergroup profit elimination adjustments4
Mark-to-market valuation on certain coal hedging contracts5
Gains on disposals and investments
Other expense – net
Interest expense – net
Income tax expense
Proportionate adjustment – net finance and income tax expense2
Income for the year
Total
181,827
39,552
221,379
(15,903)
205,476
3,224
(88)
(124)
3,012
11,538
(5,310)
(688)
5,540
14,762
(5,398)
(812)
8,552
(6)
(523)
225
1,309
(594)
(1,451)
(1,759)
(591)
5,162
1 Balance is net of intra-segment sales arising from transactions between the Industrial and Marketing activities. Metals and minerals segment: $19,648 million, Energy
products segment $2,677 million and Agricultural products $Nil.
2 Refer to APMs section for definition.
3 Share of associates’ significant items comprise Glencore’s share of significant charges booked directly by various associates, primarily Century.
4 Represents the required adjustment to eliminate unrealised profit or losses arising on intergroup transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior
to any such adjustments, as if the sales were to third parties.
5 Represents the reversal of the 2016 “open” coal derivative position designated to hedge price exposure to 11 million tonnes of coal sales in 2017. The financial effect
of settling these contracts in 2017 is included in Energy products’ Industrial Adjusted EBITDA/EBIT above. Also see prior year footnote on next page.
141
Glencore Annual Report 2017 Notes to the financial statements
continued
2. Segment information continued
2016 US$ million
Revenue – Marketing activities2
Revenue – Industrial activities
Revenue
Proportionate adjustment – revenue3
Discontinued operations – revenue
Revenue – reported measure
Marketing activities
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation3
Discontinued operations – depreciation
Adjusted EBIT
Industrial activities
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation3
Adjusted EBIT
Total Adjusted EBITDA
Total depreciation and amortisation
Total depreciation proportionate adjustment and
discontinued operations
Total Adjusted EBIT
Share of associates’ significant items3,5
Unrealised intergroup profit elimination adjustments6
Mark-to-market valuation on certain coal hedging contracts7
Gains on disposals and investments
Other expense – net
Interest expense – net
Income tax expense
Proportionate adjustment – net finance and income tax expense3
Discontinued operations – net finance and income tax expense4
Income for the year from continuing and discontinued operations
Metals and
minerals
Energy
products
Agricultural
products1
Corporate
and other
42,142
24,196
66,338
(1,826)
–
81,872
7,149
89,021
(607)
–
64,512
88,414
21,970
–
21,970
(1,085)
(20,885)
–
–
22
22
–
–
22
Total
145,984
31,367
177,351
(3,518)
(20,885)
152,948
1,586
(24)
–
–
1,562
6,030
(3,331)
(517)
2,182
7,616
(3,355)
(517)
3,744
959
(50)
–
–
909
1,503
(2,167)
(178)
(842)
2,462
(2,217)
(178)
67
592
–
(10)
(60)
522
–
–
–
–
592
–
(70)
522
(74)
3,063
–
–
–
(74)
(10)
(60)
(74)
2,919
(328)
(1)
–
(329)
(402)
(1)
–
(403)
7,205
(5,499)
(695)
1,011
10,268
(5,573)
(765)
3,930
(132)
(374)
(225)
489
(1,626)
(1,533)
(638)
(609)
1,654
936
Includes Glencore’s proportionate share of the Agricultural products business (50%) since the disposal of Glencore Agri on 1 December 2016, see note 24.
1
2 Balance is net of intra-segment sales arising from transactions between the Industrial and Marketing activities. Metals and minerals segment: $16,602 million,
Energy products segment $2,263 million and Agricultural products $2,253 million.
3 Refer to APMs section for definition.
4 Comprise of gain on disposal of investments of $1,881 million, other expense of $26 million, net finance costs of $70 million and tax expense of $131 million, see note 24.
5 Share of associates’ significant items comprise Glencore’s share of significant charges booked directly by various associates, primarily impairment charges recognised within
coal shipping investments.
6 Represents the required adjustment to eliminate unrealised profit or losses arising on intergroup transactions. For Glencore, such adjustments arise on the sale of product,
in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such adjustments, as if the sales
were to third parties.
7 Represents an accounting measurement mismatch between the fair value of coal derivative positions in respect of portfolio risk management/hedging activities initiated
in Q2 2016 and the anticipated future revenue to be generated from the sale of future unsold coal production. The derivative positions manage forward sales price exposure
relating to some 11 million tonnes of future attributable coal production, which is expected to be settled before 31 December 2017. The derivative positions include
pre-existing trading contracts, for which mark-to-market movements, up until the time of them being ring-fenced for hedging activities, were included in trading results.
These transactions were not able to be designated as hedging instruments under IFRS, which would have allowed for the deferment of any income statement effect until
performance of the underlying future sale transactions. The fair value movements in the derivative portfolio will be offset against future revenue in the segment information
as the related sales (of production) are realised.
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Financial
Statements
Additional
Information
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
2017 US$ 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
Inventory
Allocatable non-current capital employed
Other assets1
Other liabilities2
32,642
(16,603)
16,039
37,030
3,643
8,767
1,128
369
15,464
(17,676)
(2,212)
19,607
3,127
4,868
1,773
–
–
–
–
–
–
3,321
–
–
50,937
29,375
3,321
Total net assets
66,976
27,163
3,321
Capital expenditure – Marketing activities
Capital expenditure – Industrial activities
Capital expenditure
Proportionate adjustment – capital expenditure3
Capital expenditure – reported measure
17
3,232
3,249
(439)
2,810
79
742
821
(54)
767
118
–
118
(118)
–
1 Other assets include deferred tax assets, cash and cash equivalents and assets held for sale.
2 Other liabilities include borrowings, non-current deferred income, deferred tax liabilities, non-current provisions, non-current financial liabilities and liabilities held for sale.
3 Refer to APMs section for definition.
2016 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
Inventory
Allocatable non-current capital employed
Other assets1
Other liabilities2
Metals and
minerals
Energy
products
Agricultural
products
Corporate
and other
23,904
(13,853)
10,051
32,635
3,671
7,963
1,737
564
17,456
(18,902)
(1,446)
20,795
3,028
3,721
1,737
–
–
–
–
–
–
3,155
–
–
46,570
29,281
3,155
Total net assets
56,621
27,835
3,155
Capital expenditure – Marketing activities
Capital expenditure – Industrial activities
Capital expenditure
Proportionate adjustment – capital expenditure3
Capital expenditure – reported measure
14
2,695
2,709
(359)
2,350
27
571
598
(33)
565
140
–
140
(15)
125
1 Other assets include deferred tax assets and cash and cash equivalents.
2 Other liabilities include borrowings, non-current deferred income, deferred tax liabilities, non-current provisions and non-current financial liabilities.
3 Refer to APMs section for definition.
(936)
(574)
(1,510)
409
17
–
75
–
501
4,289
(51,285)
(48,005)
–
46
46
–
46
(466)
(582)
(1,048)
396
17
–
9
–
422
4,278
(47,482)
(43,830)
1
49
50
–
50
Total
47,170
(34,853)
12,317
57,046
6,787
16,956
2,976
369
84,134
4,289
(51,285)
49,455
214
4,020
4,234
(611)
3,623
Total
40,894
(33,337)
7,557
53,826
6,716
14,839
3,483
564
79,428
4,278
(47,482)
43,781
182
3,315
3,497
(407)
3,090
143
Glencore Annual Report 2017 Notes to the financial statements
continued
2. Segment information continued
Geographical information
US$ million
Revenue from third parties1
The Americas
Europe
Asia
Africa
Oceania
Non-current assets2
The Americas
Europe
Asia
Africa
Oceania
2017
2016
33,930
72,459
82,694
4,800
11,593
22,401
55,021
61,060
3,934
10,532
205,476
152,948
23,121
10,917
4,605
19,604
19,953
78,200
18,713
10,434
4,895
19,596
20,554
74,192
1 Revenue by geographical destination is based on the country of incorporation of the sales counterparty, however this may not necessarily be the country of the
counterpart’s ultimate parent and/or final destination of product.
2 Non-current assets are non-current assets excluding other investments, advances and loans and deferred tax assets. Non-current assets comprise assets in Australia
of $18,353 million (2016: $19,215 million), in Peru of $10,721 million (2016: $6,093 million) and the DRC of $8,166 million (2016: $8,349 million).
3. Gains on disposals and investments
US$ million
Gain on sale of HG Storage
Gain on sale of Zinc Africa
Gain on sale of GRail
Gain on sale of other operations
Gain on disposal of property, plant and equipment and intangible assets1
Total
1 2017 primarily comprises the gain on sale of a royalty portfolio, see below.
2017
674
232
–
173
230
1,309
2016
–
–
430
22
37
489
HG Storage
In December 2017, Glencore disposed of a 51% interest in HG Storage, its petroleum products and logistics business, resulting
in a gain of $674 million, including remeasurement of the retained investment to its fair value (see note 24).
Zinc Africa
In August 2017, Glencore disposed of its African zinc operations (Perkoa and Rosh Pinah), resulting in a gain of $232 million
(see note 24).
GRail
In December 2016, Glencore disposed of its New South Wales’ coal rail haulage business, resulting in a gain of $430 million
(see note 24).
Other
The gain on sale of other operations arose primarily from the disposal of Eland Platinum, which resulted in a gain of $147 million,
mainly on account of recycling foreign currency translation reserves to income (see note 24).
Gain on disposal of property, plant and equipment – Royalty portfolio
In December 2017, Glencore disposed of a portfolio of selected base metals’ royalty assets for a combination of cash ($150 million)
and a 50% interest in a new base metals streaming and royalties joint venture (BaseCore Metals), resulting in a gain on disposal
of $210 million (see note 9).
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Information
4. Other expense – net
US$ million
Impairments – net
Net changes in mark-to-market valuations on investments held for trading
Net foreign exchange losses
Legal settlement
Katanga restatement
Other expenses – net1
Total
Notes
5
2017
(628)
290
(80)
(75)
(78)
(23)
2016
(1,268)
(121)
(70)
(92)
–
(75)
(594)
(1,626)
1 “Other expenses – net” for the year ended 31 December 2016 comprised restructuring and closure costs of $47 million and a settlement of a financial guarantee in relation
to Optimum of $28 million.
Together with foreign exchange movements and mark-to-market movements on investments held for trading, other expense
includes other 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 expenses – net includes, but is not limited to, gain/loss
on disposal of property, plant and equipment and restructuring and closure costs.
Net changes in mark-to-market valuations on investments held for trading
Primarily relates to movements on interests in investments classified as held for trading (see note 9) and the ARM Coal non-
discretionary dividend obligation (see note 27) carried at fair value.
Legal settlement
Glencore Ltd (GLtd), the U.S. branch of Glencore AG, is a defendant in a case relating to an alumina refinery located in St. Croix,
U.S. Virgin Islands which was acquired by Virgin Islands Alumina Corporation (Vialco), a former affiliate of GLtd in 1989, and was
subsequently disposed of by Vialco in 2005. GLtd guaranteed the obligations of Vialco under the 1989 agreement which included
certain environmental and other indemnities. The complaint alleges that GLtd is contractually obligated to indemnify the previous
owners for two environmental lawsuits arising out of ownership and operation of the refinery. GLtd intends to vigorously defend the
contention, but has nevertheless reserved $75 million for the possibility the plaintiff might prevail in the whole of its claims.
In September 2016, a subsidiary of the Group reached a settlement with U.S. agencies to pay a penalty of $27 million and retire
around $65 million of credits in relation to compliance with a U.S. biofuels programme in the years 2011/12.
Katanga restatement
During the year, Katanga Mining Limited (Katanga), an 86.3% controlled subsidiary of the Group listed on the Toronto Stock Exchange,
identified certain accounting matters affecting its results reported in prior years, the impact of which was considered material for
Katanga but not for the Group. Consequently, for the years ended 31 December 2016 and earlier, Katanga has restated its financial
statements, however the cumulative impact has only been corrected in the Group financial statements for the year ended
31 December 2017. Had the Group’s results been restated, income before taxes for the 2016 year would have been lower by
$10 million.
5. Impairments
US$ million
Property, plant and equipment and intangible assets1 – net
Investments
Advances and loans – non-current
Total impairments2
Notes
7/8
9
2017
(378)
(101)
(149)
(628)
2016
(1,268)
–
–
(1,268)
1
2
Includes impairment reversals of $243 million relating to Energy products as detailed below.
Impairments recognised during the year are allocated to Glencore’s operating segments as follows: Metals and minerals $318 million (2016: $50 million) and Energy
products $310 million (2016: $1,218 million).
As part of a regular portfolio review, Glencore carries out an assessment of whether there is an indication of asset impairment
or whether a previously recorded impairment may no longer be required.
The recoverable amounts of the property, plant and equipment and intangible assets were measured based on fair value less costs
of disposal (FVLCD), determined by discounted cash flow techniques based on the most recent approved financial budgets and
three-year business plans, which are underpinned and supported by life of mine plans of the respective operations. The valuation
models use the most recent reserve and resource estimates, relevant cost assumptions generally based on past experience and
where possible, market forecasts of commodity price and foreign exchange rate assumptions discounted using operation specific
discount rates ranging from 7% – 12% (2016: 7% – 11%). The valuations remain sensitive to price and a deterioration/improvement
in the pricing outlook may result in additional impairments/reversals. The determination of FVLCD uses Level 3 valuation techniques
for both years.
145
Glencore Annual Report 2017 Notes to the financial statements
continued
5. Impairments continued
As a result of the regular impairment assessment, the following significant impairment charges resulted:
2017
Property, plant and equipment
• Following a modest downward revision, compared to prior year, of the long-term oil price assumption used to determine the
remaining recoverable value of the E&P assets, offset by a combination of improved pricing differentials for the Chad crude
oil blend (Doba) and further cost savings, an overall impairment charge of $278 million has been recognised in the Chad oil
operations (Energy products segment). The remaining recoverable value of the Chad oil operations is $1,221 million. The valuation
remains sensitive to price and further deterioration or improvement in the pricing outlook may result in additional or reversal of
impairment. The short- to long-term Brent crude oil price assumptions used in the valuation were $65 – $70 per barrel and should
these decrease or increase by 10%, a further $535 million of impairment or reversal would be recognised.
• In January 2018, a farm-down agreement to divest a 50% interest in the Bolongo licence in Cameroon was signed. As a result,
the remaining recoverable value of the retained 37.5% working interest (on the assumption that the Cameroon State National Oil
Company will exercise its back-in right to the Oak development) was impaired by $81 million, to its recoverable value of $142 million.
The valuation remains sensitive to price and further deterioration or improvement in the pricing outlook may result in additional
or reversal of impairment. The short- to long-term Brent crude oil price assumptions used in the valuation were $65 – $70 per barrel
and should these decrease or increase by 10%, a further $13 million of impairment or reversal would be recognised.
• The Alen field gas production in Equatorial Guinea is currently reinjected back into the field. A project to commercialise gas
production has now progressed sufficiently, resulting in a partial reversal of impairments of $243 million in the Equatorial Guinea
oil operations (Energy products segment) and an increase in the recoverable value to $394 million. The valuation remains sensitive
to price and further deterioration or improvement in the pricing outlook may result in additional or reversal of impairment.
The short- to long-term Brent crude oil price assumptions and the Henry Hub price assumption used in the valuation were
$65 – $70 per barrel and $3 per million Btu respectively. Should these decrease or increase by 10%, a further $75 million of
impairment or reversal would be recognised.
• As a result of certain life of mine optimisation and design updates, alongside the finalisation phase of Katanga’s whole ore leach
project and its successful commissioning in late 2017, it was determined that certain processing equipment and non-current
inventories were no longer required and therefore the full carrying value of these assets were impaired by $76 million.
• The balance of property, plant and equipment related impairment charges (none of which were individually material) relates
to specific assets where utilisation is no longer required or projects progressed due to changes in production and development
plans. As a result, the full carrying value of these assets/projects was impaired, with $186 million recognised in our Metals and
minerals segment.
Investments
• Following strategic reviews of a copper and gold exploration investment and a coal investment it was determined, for the time
being, to cease further development and, as a result, the full carrying value of each investment, $56 million and $45 million
respectively, was impaired.
Advances and loans – non-current
• Glencore has reviewed the carrying value of its interest in subordinated debt and preference shares of a coal port following the
insolvencies of certain third party shippers which impact the expected return on these investments and as a result, such loans
were impaired by $149 million, to their estimated recoverable amount of $139 million.
2016
Property, plant and equipment
• Due to changes in estimated reserve life and revised mining plans, the estimated mine life of Tahmoor in Australia (Energy
products segment) was reduced from 2020 to 2017. As a result, the carrying value of this operation was impaired by $168 million,
to its estimated recoverable amount of $100 million, which is expected to be depleted over the following year as the mine
approaches its completion.
• As a result of a write down of appraisal expenditure and certain operational challenges at the Equatorial Guinea oil operations
(Energy products segment), an impairment charge of $311 million has been recognised resulting in a remaining recoverable value
of $194 million. The valuation remains sensitive to price and further deterioration in the pricing outlook may result in additional
impairment. The short- to long-term Brent crude oil price assumptions used in the valuation were between $50 – $75 per barrel
and should these fall by 10%, a further $46 million of impairment would be recognised.
• During 2016, Glencore’s long-term oil price assumptions were revised downwards, which together with delayed work
programmes, resulted in a $622 million impairment of the onshore Chad oil operations (Energy products segment), to their
estimated recoverable amount of $1,480 million. The valuation remains sensitive to price and further deterioration in the pricing
outlook may result in additional impairment. The short- to long-term Brent crude oil price assumptions used in the valuation
were between $50 – $75 per barrel and should these fall by 10%, a further $695 million of impairment would be recognised.
The balance of property, plant and equipment related impairment charges (none of which were individually material) arose
due to changes in production and development plans and resulted in impairments of $50 million and $117 million being
recognised in our Metals and minerals and Energy products segments respectively.
146
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
6. Income taxes
Income taxes consist of the following:
US$ million
Current income tax expense
Adjustments in respect of prior year income tax
Deferred income tax (expense)/credit
Adjustments in respect of prior year deferred income tax
Total tax expense reported in the statement of income
Current income tax (expense)/credit recognised directly in other comprehensive income
Deferred income tax (expense)/credit recognised directly in other comprehensive income
Total tax (expense)/credit recognised directly in other comprehensive income
2017
(1,367)
(18)
(370)
(4)
(1,759)
–
(37)
(37)
2016
(765)
3
117
7
(638)
–
24
24
The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the following reasons:
US$ million
Income/(loss) before income taxes and attribution from continuing operations
Income before income taxes and attribution from discontinued operations
Income before income taxes and attribution from continuing and discontinued operations
Less: Share of income from associates and joint ventures from continuing operations
Less: Share of income from associates and joint ventures from discontinued operations
Parent Company’s and subsidiaries’ income before income tax and attribution from continuing and
discontinued operations
Income tax expense calculated at the Swiss income tax rate of 15% (2016: 15%)
Tax effects of:
Different tax rates from the standard Swiss income tax rate
Tax exempt income ($125 million (2016: $160 million) from recurring items
and $248 million (2016: $283 million) from non-recurring items)
Items not tax deductible ($316 million (2016: $365 million) from recurring items
and $279 million (2016: $269 million) from non-recurring items)
Foreign exchange fluctuations
Changes in tax rates ($5 million (2016: $3 million) from recurring items and $188 million (2016: $Nil)
from non-recurring items)
Utilisation and changes in recognition of tax losses and temporary differences
Tax losses not recognised
Adjustments in respect of prior years
Other
Income tax expense
Income tax expense reported in the statement of income
Income tax expense attributable to discontinued operations
2017
6,921
–
6,921
(1,158)
–
5,763
(864)
(333)
373
(595)
(30)
(193)
290
(412)
(22)
27
(1,759)
(1,759)
–
2016
(549)
2,254
1,705
(11)
(15)
1,679
(252)
205
443
(634)
(19)
3
(41)
(483)
10
(1)
(769)
(638)
(131)
The non-tax deductible items of $826 million (2016: $634 million) primarily relate to non-deductible exploration charges, financing
costs, impairments and various other expenses. The impact of tax exempt income of $332 million (2016: $443 million) primarily
relates to non-taxable intra-group dividends, income that is not effectively connected to the taxable jurisdiction, and various
other items.
The tax impact of foreign exchange fluctuations relates to the foreign currency movements on deferred tax balances where the
underlying tax balances are denominated in a currency different to the functional currency determined for accounting purposes.
The impact of change in tax rates of $193 million arises primarily from significant corporate tax rate changes in the U.S., following
the announced U.S. tax reform.
147
Glencore Annual Report 2017
Notes to the financial statements
continued
6. Income taxes continued
Deferred taxes as at 31 December 2017 and 2016 are attributable to the items in the table below:
US$ million
Deferred tax assets1
Tax losses carried forward
Other
Total
Deferred tax liabilities1
Depreciation and
amortisation
Mark-to-market valuations
Other
Total
Total Deferred tax – net
US$ million
Deferred tax assets1
Tax losses carried forward
Other
Total
Deferred tax liabilities1
Depreciation and
amortisation
Mark-to-market valuations
Other
Total
Total Deferred tax – net
Recognised in
the statement
of income
Recognised
in other
comprehensive
income
Business
combination
and disposal
of subsidiaries
Foreign
currency
exchange
movements
Other
2016
(131)
50
(81)
(265)
20
(48)
(293)
(374)
–
(14)
(14)
(5)
(5)
(13)
(23)
(37)
–
2
2
(914)
–
–
(914)
(912)
1
18
19
(142)
(4)
(5)
(151)
(132)
–
47
47
17
–
4
21
68
1,653
107
1,760
(5,546)
(76)
(42)
(5,664)
(3,904)
Recognised in
the statement
of income
Recognised
in other
comprehensive
income
Business
combination
and disposal
of subsidiaries
Foreign
currency
exchange
movements
Other
2015
70
(85)
(15)
(27)
154
(60)
67
52
–
31
31
–
–
(7)
(7)
24
(97)
(7)
(104)
94
9
101
204
100
–
2
2
(130)
(1)
(1)
(132)
(130)
–
–
–
–
–
(19)
(19)
(19)
1,680
166
1,846
(5,483)
(238)
(56)
(5,777)
(3,931)
2017
1,523
210
1,733
(6,855)
(65)
(104)
(7,024)
(5,291)
2016
1,653
107
1,760
(5,546)
(76)
(42)
(5,664)
(3,904)
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 2017, $2,404 million (2016: $2,898 million) of deferred tax assets related to available loss carry
forwards have been brought to account, of which $1,523 million (2016: $1,653 million) are disclosed as deferred tax assets
with the remaining balance being offset against deferred tax liabilities arising in the same tax entity. This balance is primarily
comprised of:
• $470 million (2016: $462 million) in entities domiciled in the DRC (Katanga Mining Group), where these entities have been
loss making for tax purposes in both 2017 and 2016
• $478 million (2016: $657 million) in entities domiciled in Switzerland, and
• $425 million (2016: $430 million) in entities domiciled in the U.S.
In evaluating whether it is probable that taxable profits will be earned in future accounting periods prior to any tax loss expiry as may
be the case, all available evidence was considered, including approved budgets, forecasts and business plans and, in certain cases,
analysis of historical operating results. 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 and that no reasonably possible change in any of the key assumptions would result in
a material reduction in forecast headroom of tax profits so that the recognised deferred tax asset would not be realised, other than
the potential developments in the DRC discussed below.
The losses carried forward in the DRC have an unlimited carry forward period, subject to an annual utilisation limitation.
Katanga Mining has recently resumed operations and is expected to generate sufficient taxable profits in the future. Should these
expectations fully materialise, up to $633 million of available unrecognised tax effected losses could be recognised. However, in
January 2018, the DRC parliament passed a revised mining code which raises taxes and ceases existing tax stability agreements.
148
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
At 31 December 2017, these revisions were not substantively enacted and therefore do not impact the recognition of deferred
taxes at year end. However, if enacted as currently contemplated, the changes could significantly impact the currently recognised
tax losses, along with any unrecognised tax losses.
The recognised losses carried forward in Switzerland primarily relate to non-recurring events in 2011 and 2012. Based on the core
business activities conducted in Switzerland and taxable income in 2017, sufficient taxable profits are expected to fully utilise the
recognised tax losses prior to expiration.
The recognised losses carried forward in the U.S. primarily relate to non-recurring events in 2011 and have a carry forward period
of 20 years. The U.S. entities comprise our core U.S. marketing activities and based on taxable income in 2017 and forecasts going
forward, sufficient taxable profits are expected to fully utilise the recognised tax losses prior to expiration.
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been
recognised in the consolidated financial statements, are detailed below and will expire as follows:
US$ million
1 year
2 years
3 years
Thereafter
Unlimited
Total
2017
110
955
66
2,140
3,303
6,574
2016
34
320
2,408
13,507
2,149
18,418
As at 31 December 2017, unremitted earnings of $60,014 million (2016: $40,088 million) have been retained by subsidiaries
for reinvestment. No provision is made for income taxes.
7. Property, plant and equipment
Notes
Freehold land
and buildings
Plant and
equipment
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
Total
2,343
2,362
84,467
Reclassification to held for sale
14
US$ million
Gross carrying amount:
1 January 2017
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency
exchange movements
Other movements1
31 December 2017
Accumulated depreciation
and impairment:
1 January 2017
Disposal of subsidiaries
Depreciation
Disposals
Impairments
Effect of foreign currency
exchange movements
Reclassification to held for sale
Other movements1
31 December 2017
Net book value 31 December 2017
24
24
4,808
523
(88)
76
(31)
26
(43)
295
5,566
54,622
528
(728)
3,107
(407)
392
(644)
452
20,332
3,648
(118)
138
(10)
257
(126)
696
57,322
24,817
–
–
–
–
–
–
(173)
2,170
24
5
14
1,061
22,392
5,219
1,138
(44)
266
(6)
23
5
(6)
64
(369)
3,912
(245)
(114)
103
(513)
219
(34)
849
(9)
(8)
56
(73)
(3)
1,363
4,203
25,385
31,937
5,997
18,820
–
–
–
477
–
–
(31)
1,584
586
–
(126)
279
(1)
–
–
(139)
2,375
831
(121)
264
(1)
–
–
–
(98)
875
1,500
4,699
(1,060)
3,600
(449)
675
(813)
1,131
92,250
30,641
(568)
5,291
(261)
378
164
(592)
151
35,204
57,046
1
Include additions to restoration and rehabilitation of $786 million, see note 21.
Plant and equipment includes expenditure for construction in progress of $4,454 million (2016: $4,599 million) and a net book value
of $527 million (2016: $592 million) of lease assets under finance lease agreements. Mineral and petroleum rights include biological
assets of $21 million (2016: $21 million). Depreciation expenses included in cost of goods sold are $5,272 million (2016: $5,457 million),
in selling and administrative expenses $19 million (2016: $20 million) and in discontinued operations $Nil (2016: $60 million).
149
Glencore Annual Report 2017 Notes to the financial statements
continued
7. Property, plant and equipment continued
During 2017, $42 million (2016: $49 million) of interest was capitalised. With the exception of project specific borrowings, the rate
used to determine the amount of borrowing costs eligible for capitalisation was 3% (2016: 3%).
As at 31 December 2017, except for the purposes of finance leases, no property, plant or equipment was pledged as security for
borrowings (2016: $Nil).
US$ million
Gross carrying amount:
1 January 2016
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency
exchange movements
Other movements
31 December 2016
Accumulated depreciation
and impairment:
1 January 2016
Disposal of subsidiaries
Depreciation
Disposals
Impairments
Effect of foreign currency
exchange movements
Other movements
31 December 2016
Net book value 31 December 2016
Notes
Freehold land
and buildings
Plant and
equipment
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
Total
5,326
56,037
20,579
2,337
2,393
86,672
24
24
24
5
22
(694)
62
(85)
28
149
37
(4,012)
2,606
(409)
401
(38)
–
(712)
110
(14)
303
66
–
–
–
–
–
6
4,808
54,622
20,332
2,343
995
(137)
263
(44)
–
3
(19)
1,061
3,747
19,067
(1,284)
4,063
(404)
807
85
58
22,392
32,230
4,324
(224)
978
(3)
105
50
(11)
5,219
15,113
784
–
–
–
351
–
3
1,138
1,205
–
(95)
296
(14)
1
(219)
2,362
728
(80)
233
(2)
–
–
(48)
831
1,531
59
(5,513)
3,074
(522)
733
(36)
84,467
25,898
(1,725)
5,537
(453)
1,263
138
(17)
30,641
53,826
150
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Royalty
and other
24
24
24
5
13,293
1,408
–
–
–
–
–
–
–
–
–
–
–
147
–
–
13,293
1,555
8,243
–
–
–
–
–
–
8,243
5,050
100
–
36
–
–
13
–
149
1,406
385
76
(2)
6
(39)
1
(1)
42
468
163
(1)
53
–
(19)
1
40
237
231
258
–
(2)
17
(105)
1
–
14
183
122
–
18
–
(51)
–
(6)
83
100
Port allocation
rights
Licences,
trademarks
and software
Royalty
and other
Notes
Goodwill
24
14,122
(829)
–
–
–
–
13,293
8,243
–
–
–
–
–
–
24
5
1,252
(15)
–
(1)
166
6
1,408
67
(9)
28
–
–
14
–
8,243
5,050
100
1,308
394
(8)
13
(15)
2
(1)
385
156
(5)
31
5
(15)
1
(10)
163
222
318
(98)
3
–
2
33
258
104
(20)
36
–
–
–
2
122
136
8. Intangible assets
US$ million
Cost:
1 January 2017
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency exchange movements
Reclassification to held for sale2
Other movements
31 December 2017
Accumulated amortisation and impairment:
1 January 2017
Disposal of subsidiaries
Amortisation expense1
Impairments
Disposals
Effect of foreign currency exchange movements
Other movements
31 December 2017
Net carrying amount 31 December 2017
1 Recognised in cost of goods sold.
2 See note 14.
US$ million
Cost:
1 January 2016
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency exchange movements
Other movements
31 December 2016
Accumulated amortisation and impairment:
1 January 2016
Disposal of subsidiaries
Amortisation expense1
Impairments
Disposals
Effect of foreign currency exchange movements
Other movements
31 December 2016
Net carrying amount 31 December 2016
1 Recognised in cost of goods sold.
Total
15,344
76
(4)
23
(144)
149
(1)
56
15,499
8,628
(1)
107
–
(70)
14
34
8,712
6,787
Total
16,086
(950)
16
(16)
170
38
15,344
8,570
(34)
95
5
(15)
15
(8)
8,628
6,716
151
Glencore Annual Report 2017 Notes to the financial statements
continued
8. Intangible assets continued
Goodwill
The carrying amount of goodwill has been allocated to cash-generating units (CGUs), or groups of CGUs as follows:
US$ million
Metals and minerals marketing businesses
Coal marketing business
Metals warehousing business
Total
2017
3,326
1,674
50
5,050
2016
3,326
1,674
50
5,050
Metals and minerals and coal marketing businesses
Goodwill of $3,326 million and $1,674 million was recognised in connection with previous business combinations and was allocated
to the metals and minerals marketing and coal marketing CGUs respectively, based on the annual synergies expected to accrue
to the respective marketing departments as a result of increased volumes, blending opportunities and freight and logistics
arbitrage opportunities.
Metals warehousing business
Goodwill of $50 million (2016: $50 million) relates to the Access World (former Pacorini) logistics business CGU.
Port allocation rights
Port allocation rights represent contractual entitlements to export certain amounts of coal on an annual basis from Richard Bay Coal
Terminal in South Africa recognised as part of previous business combinations. The rights are amortised on a straight-line basis over
the estimated economic life of the port of 40 years.
Licences, trademarks and software
Intangibles related to internally developed technology and patents were recognised in previous business combinations and are
amortised over the estimated economic life of the technology which ranges between 10 – 15 years.
Royalty
The fair value of a royalty income stream related to output from the Antamina copper mine was recognised as part of a previous
business combination. This amount was being amortised on a unit of production basis. In December 2017, this royalty was disposed
of, see note 3.
Goodwill impairment testing
Given the nature of each CGU’s activities, information on its fair value is usually difficult to obtain unless negotiations with potential
purchasers or similar transactions are taking place. Consequently,
• the recoverable amount for each of the marketing CGUs is determined by reference to the FVLCD which utilises a price to earnings
multiple approach based on the 2017 approved financial budget which includes factors such as marketing volumes handled and
operating, interest and income tax charges, generally based on past experience. The price to earnings multiple of 15.0 times
(2016: 13.5 times) is derived from observable market data for broadly comparable businesses; and
• Glencore believes that no reasonably possible change in any of the above key assumptions would cause the recoverable amount
to fall below the carrying value of the CGU. The determination of FVLCD for each of the marketing CGUs used Level 3 valuation
techniques in both years.
152
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Financial
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Additional
Information
9. Investments in associates, joint ventures and other investments
Investments in associates and joint ventures
US$ million
1 January
Additions
Disposals
Share of income from associates and joint ventures
Share of income from associates and joint ventures from discontinued operations
Share of other comprehensive income from associates and joint ventures
Fair value of retained interest in HG Storage and other (2016: Glencore Agri)
Disposal of equity accounted investments
Investment in Trevali
Investment in BaseCore Metals
Impairments
Dividends received
Other movements
31 December
Of which:
Investments in associates
Investments in joint ventures
Notes
24
24
24
4
5
2017
13,086
8
(12)
1,158
–
93
563
(170)
242
150
(101)
(1,081)
62
2016
11,337
15
(9)
11
15
–
3,125
(624)
–
–
–
(833)
49
13,998
13,086
7,643
6,355
6,910
6,176
As at 31 December 2017, the fair value of listed associates and joint ventures, which have a carrying value of $808 million
(2016: $555 million), using published price quotations (a Level 1 fair value measurement) was $1,340 million (2016: $424 million).
As at 31 December 2017, the balance mainly comprises Century Aluminum and Trevali which have a carrying value of $478 million
(2016: $460 million) and $239 million (2016: $Nil) respectively. As at 31 December 2017, $270 million (2016: $Nil) of the carrying value
of Century Aluminum was secured under a loan facility, with proceeds received and recognised in current borrowings of $170 million
(2016: $Nil).
HG Storage
In December 2017, Glencore disposed of a 51% interest in HG Storage, its petroleum products and logistics business,
for $530 million (see note 24), subsequently accounting for its remaining share using the equity method.
Trevali
In August 2017, Glencore disposed of its African zinc operations (Perkoa and Rosh Pinah) for a combination of cash and a 25%
($222 million) interest in Trevali (see note 24).
BaseCore Metals
In December 2017, Glencore disposed of a portfolio of selected base metals’ royalty assets for a combination of cash and a 50%
($150 million) interest in BaseCore Metals LP (see note 3), subsequently accounting for its share using the equity method.
153
Glencore Annual Report 2017
Notes to the financial statements
continued
9. Investments in associates, joint ventures and other investments continued
Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
US$ million
2017
Non-current assets
Current assets
Non-current liabilities
Current liabilities
The above assets and liabilities include the following:
Cash and cash equivalents
Current financial liabilities1
Non-current financial liabilities1
Net assets 31 December 2017
Glencore’s ownership interest
Acquisition fair value and other adjustments
Carrying value
Cerrejón
Antamina
Total
material
associates
Collahuasi
Glencore
Agri
2,646
880
(612)
(522)
148
(2)
–
2,392
33.3%
967
1,764
4,383
1,174
(1,098)
(747)
56
(39)
(120)
3,712
33.8%
1,973
3,228
7,029
2,054
(1,710)
(1,269)
204
(41)
(120)
6,104
2,940
4,992
4,629
1,363
(1,084)
(636)
166
(2)
(77)
4,272
44.0%
1,154
3,034
4,732
5,839
(855)
(5,687)
146
(3,273)
(564)
4,029
50.0%
1,307
3,321
Total
material
associates
and
joint
ventures
Total
material
joint
ventures
9,361
7,202
(1,939)
(6,323)
312
(3,275)
(641)
16,390
9,256
(3,649)
(7,592)
516
(3,316)
(761)
8,301
14,405
2,461
6,355
5,401
11,347
1 Financial liabilities exclude trade, other payables and provisions.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures for the year ended 31 December 2017, including group adjustments relating to alignment
of accounting policies or fair value adjustments, is set out below.
US$ million
2017
Revenue
Income for the year
Other comprehensive loss
Total comprehensive income
Glencore’s share of dividends paid
The above profit for the year includes the following:
Depreciation and amortisation
Interest income1
Interest expense2
Income tax expense
Cerrejón
Antamina
Total
material
associates
Collahuasi
Glencore
Agri
2,371
388
–
388
147
(533)
–
(3)
(240)
3,550
1,300
–
1,300
493
(766)
23
(7)
(712)
5,921
1,688
–
1,688
640
(1,299)
23
(10)
(952)
2,960
25,222
841
(11)
830
356
(574)
2
(25)
(389)
198
(3)
195
–
(248)
59
(195)
(50)
1
2
Includes foreign exchange gains and other income of $62 million.
Includes foreign exchange losses of $81 million.
Total
material
associates
and
joint
ventures
34,103
2,727
(14)
2,713
996
(2,121)
84
(230)
(1,391)
Total
material
joint
ventures
28,182
1,039
(14)
1,025
356
(822)
61
(220)
(439)
154
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
US$ million
2016
Non-current assets
Current assets
Non-current liabilities
Current liabilities
The above assets and liabilities include the following:
Cash and cash equivalents
Current financial liabilities1
Non-current financial liabilities1
Net assets 31 December 2016
Glencore’s ownership interest
Acquisition fair value and other adjustments
Carrying value
Cerrejón
Antamina
Total
material
associates
Collahuasi
Glencore
Agri
2,487
670
(604)
(291)
108
(1)
–
2,262
33.3%
1,028
1,781
4,313
952
(1,064)
(470)
90
(77)
(135)
3,731
33.8%
2,021
3,282
6,800
1,622
(1,668)
(761)
198
(78)
(135)
5,993
3,049
5,063
4,504
1,164
(1,032)
(442)
127
(2)
(77)
4,194
44.0%
1,176
3,021
4,461
6,354
(841)
(6,286)
147
(3,420)
(603)
3,688
50.0%
1,311
3,155
Total
material
associates
and
joint
ventures
Total
material
joint
ventures
8,965
7,518
(1,873)
(6,728)
274
(3,422)
(680)
15,765
9,140
(3,541)
(7,489)
472
(3,500)
(815)
7,882
13,875
2,487
6,176
5,536
11,239
1 Financial liabilities exclude trade, other payables and provisions.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures for the year ended 31 December 2016, including group adjustments relating to alignment
of accounting policies or fair value adjustments, is set out below.
US$ million
2016
Revenue
(Loss)/income for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Glencore’s share of dividends paid
The above profit for the year includes the following:
Depreciation and amortisation
Interest income1
Interest expense2
Impairment, net of tax3
Income tax expense
Cerrejón
Antamina
Total
material
associates
Collahuasi
Glencore
Agri
1,822
(913)
–
(913)
105
(534)
–
(14)
(1,036)
(49)
2,429
584
–
584
338
4,251
(329)
–
(329)
443
(774)
(1,308)
28
(31)
–
(420)
28
(45)
(1,036)
(469)
2,285
2,170
459
(11)
448
352
(581)
1
(25)
–
(168)
76
10
86
–
(20)
12
(11)
–
(32)
Total
material
associates
and
joint
ventures
8,706
206
(1)
205
795
Total
material
joint
ventures
4,455
535
(1)
534
352
(601)
(1,909)
13
(36)
–
(200)
41
(81)
(1,036)
(669)
Includes foreign exchange gains and other income of $37 million.
Includes foreign exchange losses of $49 million.
1
2
3 Glencore’s attributable share of impairments relating to Cerrejón amounts to $345 million, net of taxes of $176 million, resulting from reduced near term production
estimates due to increased risks related to delays in securing approvals as a result of continued social and environmental challenges to current mine plans.
The valuation remains sensitive to price and a 10% decrease of the price assumptions would result in a further impairment of $293 million.
Aggregate information of associates that are not individually material:
US$ million
The Group’s share of income/(loss)
The Group’s share of other comprehensive income
The Group’s share of total comprehensive income/(loss)
Aggregate carrying value of the Group’s interests
2017
121
99
220
2,651
2016
(122)
–
(122)
1,847
The amount of corporate guarantees (excluding Glencore Agri) in favour of associates and joint ventures as at 31 December 2017
was $476 million (2016: $470 million). Issued guarantees in favour of Glencore Agri amounted to $518 million as at 31 December 2017
(2016: $7,339 million), mainly now only relating to a $400 million Viterra bond maturing in 2020. No amounts have been claimed
or provided as at 31 December 2017. Glencore’s share of joint ventures’ capital commitments amounts to $151 million
(2016: $154 million).
155
Glencore Annual Report 2017 Notes to the financial statements
continued
9. Investments in associates, joint ventures and other investments continued
Other investments
US$ million
Available for sale
United Company Rusal plc
OAO NK Russneft
Yancoal
Fair value through profit and loss
OSJC Rosneft Oil cash-settled equity swaps
Volcan Compania Minera S.A.A.
Century Aluminum Company cash-settled equity swaps
Other
Total
2017
2016
933
1,042
293
2,268
307
–
179
204
690
562
895
–
1,457
–
124
78
94
296
2,958
1,753
Available for sale investments
Glencore accounts for its interests in United Company Rusal plc, OAO NK Russneft (Russneft) and Yancoal Australia Limited (Yancoal)
as available for sale investments at fair value with mark-to-market movements recognised in other comprehensive income. Although
Glencore holds a 25% interest in Russneft, it does not exercise significant influence over its financial and operating policy decisions.
Yancoal
On 27 July 2017, Glencore and Yancoal signed agreements relating to the acquisition of a 49% interest in the Hunter Valley
Operations (HVO) coal mine in New South Wales, Australia following Yancoal’s acquisition of Coal & Allied from Rio Tinto.
In addition to this transaction, Glencore agreed to subscribe for $311 million worth of shares in Yancoal’s equity raising which
completed in September 2017. The HVO acquisition is subject to regulatory approvals, which are expected to be received during
the course of H1 2018. Also see note 29.
Fair value through profit and loss
Rosneft
On 3 January 2017, Glencore and Qatar Investment Authority (QIA) entered into various agreements establishing a 50:50 consortium
(QHG) to acquire 19.5% of OSJC Rosneft Oil (Rosneft) and enter into a 5 year offtake agreement with Rosneft. The joint investments
established constitute joint arrangements subject to joint control by virtue of the partnership agreements, in accordance with
IFRS 11, and are accounted for under the equity method and included within investments in joint ventures. The structure requires
unanimous consent for all key decisions regarding the relevant activities of the joint investments. As the joint arrangements are
structured through separate vehicles and Glencore is not the only possible source of funding, nor does it have a direct or indirect
obligation for the liabilities of the arrangements, the arrangements have been accounted for as joint ventures. Glencore’s initial
investment was EUR 2. In September 2017, QHG concluded an agreement with CEFC China Energy Company Limited to dispose
of the majority of the shares it held (amounting to a 14.16% stake in Rosneft). Following completion of the transaction, the margin
guarantees provided by Glencore (see note 30) will terminate. The transaction, subject to customary regulatory approval processes,
is expected to complete in H1 2018.
In relation to these arrangements, Glencore advanced EUR300 million in the form of a total return swap over 0.57% of Rosneft shares,
accounted for at fair value through profit and loss, which constitutes the substantial majority of Glencore’s investment in QHG.
Volcan
On 9 November 2017, Glencore completed the acquisition of additional shares in Volcan, thereby increasing its total economic
interest from 7.7% to 23.3% (see note 24). Prior to acquisition, Glencore’s interest in Volcan was accounted for at fair value through
profit and loss and a gain of $235 million was recognised in changes in mark-to-market valuations on investments held for trading
(see note 4).
156
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
10. Advances and loans
US$ million
Loans to associates
Rehabilitation trust fund
Pension surpluses
Other non-current receivables and loans1
Total
Notes
22
2017
220
213
68
2,475
2,976
2016
526
193
–
2,764
3,483
1
Includes advances, net of $1,654 million (2016: $2,039 million) provided by various banks.
Loans to associates
Loans to associates generally bear interest at applicable floating market rates plus a premium. In December 2017, loans extended
to associates were impaired by $149 million, see note 5.
Rehabilitation trust fund
Glencore makes contributions to controlled funds that were established to meet the costs of its restoration and rehabilitation
liabilities, primarily in South Africa. These funds are not available for the general purposes of the Group, and there is no present
obligation to make any further contributions.
Other non-current receivables and loans
Other non-current receivables and loans comprise the following:
US$ million
Counterparty
Secured marketing related financing arrangements1
Société Nationale d’Electricité (SNEL) power advances
Chad State National Oil Company
Société Nationale des Pétroles du Congo
Iron ore prepayment
Other
Total
2017
2016
992
307
339
123
38
676
1,043
295
389
292
89
656
2,475
2,764
1 Various marketing related financing facilities, generally secured against certain assets and/or payable from the future sale of production of the counterparty. The advances
and loans are interest-bearing and on average are to be repaid over a three-year period.
SNEL power advances
In early 2012, a joint agreement with Société Nationale d’Électricité (SNEL), the Democratic Republic of the Congo’s (DRC)
national electricity utility, was signed whereby Glencore’s operations will contribute $389 million to a major electricity infrastructure
refurbishment programme, including transmission and distribution systems. This is expected to facilitate a progressive increase
in power availability to 450 megawatts by the end of 2018. Funding commenced in the second quarter of 2012 and will continue
until Q1 2020. The loans are being repaid via discounts on electricity purchases, which will accelerate upon completion of the
refurbishment programme.
Chad State National Oil Company
Glencore has provided a net $398 million (2016: $418 million) to the Chad State National Oil Company (SHT) to be repaid through
future oil deliveries over seven years. As at 31 December 2017, the advance is net of $872 million (2016: $972 million) provided
by a syndicate of banks, the repayment terms of which are contingent upon and connected to the receipt of oil due from SHT
under the prepayment. Of the net amount advanced, $339 million (2016: $389 million) is receivable after 12 months and is presented
within Other non-current receivables and loans and $59 million (2016: $29 million) is due within 12 months and included within
Accounts receivable.
Société Nationale des Pétroles du Congo (SNPC)
Glencore has provided a net $212 million (2016: $336 million) to SNPC repayable through future oil deliveries over five years. As at
31 December 2017, the advance is net of $549 million (2016: $512 million) provided by the bank market, the repayment terms of
which are contingent upon and connected to the future receipt of oil contractually due from SNPC. Of the net amount advanced,
$123 million (2016: $292 million) is due after 12 months and is presented within Other long-term receivables and loans and
$89 million (2016: $44 million) is due within 12 months and included within Accounts receivable.
Iron ore prepayment
Glencore has advanced funds to iron ore suppliers to be repaid through future iron ore deliveries over two years. As at 31 December
2017, the total advance of $1,172 million (2016: $1,571 million) is recorded net of $1,092 million (2016: $1,414 million) provided by the
bank market, the repayment terms of which are contingent upon and connected to the future receipt of iron ore contractually due
from the counterparty. Of the net amount advanced, $38 million (2016: $89 million) is due after 12 months and presented within
Other long-term receivables and loans and $42 million (2016: $68 million) is due within 12 months and included within
Accounts receivable.
157
Glencore Annual Report 2017 Notes to the financial statements
continued
11. Inventories
Current inventory
Inventories of $24,084 million (2016: $18,347 million) comprise $15,344 million (2016: $11,323 million) of inventories carried at fair
value less costs of disposal and $8,740 million (2016: $7,024 million) valued at the lower of cost or net realisable value. The amount
of inventories and related ancillary costs recognised as an expense during the year was $185,371 million (2016: $137,903 million).
Fair value of inventories is a Level 2 fair value measurement (see note 27) using observable market prices obtained from exchanges,
traded reference indices or market survey services adjusted for relevant location and quality differentials. There are no significant
unobservable inputs in the fair value measurement of such inventories.
Glencore has a number of dedicated financing facilities, which finance a portion of its 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 current borrowings (see note 19). As at 31 December 2017, the total amount of inventory secured under such
facilities was $435 million (2016: $1,632 million). The proceeds received and recognised as current borrowings were $221 million
(2016: $1,320 million) and $80 million (2016: $61 million) as non-current borrowings.
Non-current inventory
$369 million (2016: $564 million) of inventories valued at lower of cost or net realisable value are not expected to be utilised or sold
within 12 months and are therefore classified as non-current inventory.
12. Accounts receivable
US$ million
Trade receivables1
Trade advances1,2
Margin calls paid3
Associated companies1
Income tax receivable
Other receivables1
Total
2017
11,915
2,110
3,380
517
178
2,259
20,359
2016
10,482
2,116
4,937
444
201
1,886
20,066
1 Collectively referred to as receivables presented net of allowance for doubtful debts.
2
Includes advances, net of $876 million (2016: $1,004 million) provided by banks, the repayment terms of which are contingent upon and connected to the future delivery
of contractual production over the next 12 months.
Includes $717 million (2016: $2,181 million) of cash collateral payments under margin arrangements related to cross currency swaps held to hedge non-U.S. dollar
denominated bonds.
3
The average credit period on sales of goods is 20 days (2016: 25 days). The carrying value of trade receivables approximates fair value.
As at 31 December 2017, 7% (2016: 7%) of receivables were between 1 to 60 days overdue, and 4% (2016: 4%) were greater than
60 days overdue. Such receivables, although contractually past their due dates, are not considered impaired as there has not been
a significant change in credit quality of the relevant counterparty, and the amounts are still considered recoverable taking into
account customary payment patterns and in many cases, offsetting accounts payable balances.
The movement in allowance for doubtful accounts is detailed below:
US$ million
1 January
Released during the year
Charged during the year
Utilised during the year
Disposal of subsidiaries
31 December
2017
295
(143)
153
(21)
–
284
2016
269
(58)
232
(46)
(102)
295
Glencore has a number of dedicated financing facilities, which finance a portion of its receivables. 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 19). As at 31 December 2017, the total amount of trade receivables secured was $748 million
(2016: $1,917 million) and proceeds received and classified as current borrowings amounted to $669 million (2016: $1,670 million).
158
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
13. Cash and cash equivalents
US$ million
Bank and cash on hand
Deposits and treasury bills
Total
As at 31 December 2017, $35 million (2016: $22 million) was restricted.
14. Assets and liabilities held for sale
2017
1,751
373
2,124
2016
2,060
458
2,518
On 29 December 2017, Glencore completed the sale of a 51% interest in HG Storage International Ltd (HG Storage), a group
comprising the majority of Glencore’s petroleum products storage and logistics businesses to HNA Innovation Finance Group Co Ltd
(HNA) (see note 24). Glencore and HNA also entered into a second agreement pursuant to which three of the original transaction
assets located in the USA (HG Storage U.S.) will be sold to HG Storage in 2018 for proceeds of $196 million, subject to receipt
of customary regulatory approvals.
In 2017, Glencore entered into an agreement to sell Tahmoor, a coal mining operation in New South Wales, as well as its manganese
plants located in France and Norway, with both transactions grouped under “other” in the table below. The transactions, subject
to customary regulatory approvals and closing conditions, are expected to complete during the first half of 2018. At the date of this
report, the sale of the manganese plants had closed.
As a result, assets of $432 million and liabilities of $159 million have been classified as held for sale within the Metals and minerals
and Energy segments as detailed below:
US$ million
Non-current assets
Property, plant and equipment1
Intangible assets
Investments in associates
Deferred tax assets
Current assets
Inventories
Accounts receivable
Other financial assets
Prepaid expenses
Cash and cash equivalents
Total assets held for sale
Non-current liabilities
Deferred tax liabilities
Provisions
Current liabilities
Accounts payable
Income tax payable
Total liabilities held for sale
Total net assets held for sale
1 Includes additions of $16 million since reclassification to held for sale.
HG Storage U.S.
Other
2017
141
1
8
–
150
4
39
–
3
12
58
96
–
–
33
129
49
27
7
–
12
95
208
224
(41)
–
(41)
(8)
(1)
(9)
(50)
158
(5)
(38)
(43)
(62)
(4)
(66)
(109)
115
237
1
8
33
279
53
66
7
3
24
153
432
(46)
(38)
(84)
(70)
(5)
(75)
(159)
273
159
Glencore Annual Report 2017 Notes to the financial statements
continued
15. Share capital and reserves
Number
of shares
(thousand)
Share capital
(US$ million)
Share premium
(US$ million)
Authorised:
31 December 2017 and 2016 Ordinary shares with a par value of $0.01 each
50,000,000
Issued and fully paid up:
1 January 2016 and 31 December 2016 – Ordinary shares
1 January 2017
Distributions paid (see note 17)
31 December 2017 – Ordinary shares
14,586,200
14,586,200
–
14,586,200
–
146
146
–
146
–
52,338
52,338
(998)
51,340
Own shares:
1 January 2016
Own shares disposed during the year
31 December 2016
1 January 2017
Own shares disposed during the year
31 December 2017
Treasury Shares
Trust Shares
Total
Number
of shares
(thousand)
Share
premium
(US$ million)
Number
of shares
(thousand)
Share
premium
(US$ million)
Number
of shares
(thousand)
Share
premium
(US$ million)
191,459
–
191,459
191,459
–
191,459
(948)
–
(948)
(948)
–
(948)
174,404
(7,474)
166,930
166,930
(37,080)
129,850
(764)
12
(752)
(752)
125
(627)
365,863
(7,474)
358,389
358,389
(37,080)
321,309
(1,712)
12
(1,700)
(1,700)
125
(1,575)
Own shares
Own shares comprise shares acquired under the Company’s previous share buy-back programme and shares of Glencore plc
held by Group employee benefit trusts (“the Trusts”) to satisfy the potential future settlement of the Group’s employee stock plans,
primarily assumed as part of previous business combinations.
The Trusts also coordinate the funding and manage the delivery of ordinary shares and free share awards under certain of Glencore’s
share plans. The shares have been acquired by either stock market purchases or share issues from the Company. The Trusts are
permitted to sell the shares and may hold up to 5% of the issued share capital of the Company at any one time. The Trusts have
waived the right to receive distributions from the shares that they hold. Costs relating to the administration of the Trust are expensed
in the period in which they are incurred.
As at 31 December 2017, 321,309,725 shares (2016: 358,389,443 shares), equivalent to 2.2% (2016: 2.5%) of the issued share capital
were held at a cost of $1,575 million (2016: $1,700 million) and market value of $1,694 million (2016: $1,227 million).
160
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Other reserves
US$ million
1 January 2017
Exchange gain on translation of foreign
operations
Loss on cash flow hedges, net of tax
Gain on available for sale financial instruments
Change in ownership interest in subsidiaries
Items recycled to the statement of income
upon disposal of subsidiaries (see note 24)
31 December 2017
1 January 2016
Exchange gain on translation of foreign
operations
Gain on cash flow hedges, net of tax
Gain on available for sale financial instruments
Reclassifications
Change in ownership interest in subsidiaries
Discontinued operations
Items recycled to the statement of income
upon disposal of subsidiaries (see note 24)
31 December 2016
Translation
adjustment
Cash flow
hedge reserve
Net
unrealised
gain/(loss)
Net ownership
changes in
subsidiaries
(2,553)
503
–
–
–
(271)
(2,321)
(3,579)
440
–
–
(31)
–
22
595
(2,553)
126
–
(165)
–
–
–
(39)
(21)
–
99
–
30
–
21
(3)
126
377
–
–
500
–
–
877
12
–
–
365
–
–
–
–
(752)
–
–
–
(318)
128
(942)
(831)
–
–
–
1
68
–
10
377
(752)
Total
(2,802)
503
(165)
500
(318)
(143)
(2,425)
(4,419)
440
99
365
–
68
43
602
(2,802)
16. Earnings per share
US$ million
Profit/(loss) attributable to equity holders of the Parent
Continuing operations
Discontinued operations
Profit attributable to equity holders of the Parent for basic earnings per share
Weighted average number of shares for the purposes of basic earnings per share (thousand)
Effect of dilution:
Equity-settled share-based payments (thousand)
Weighted average number of shares for the purposes of diluted earnings per share (thousand)
Basic earnings/(loss) per share (US$)
Continuing operations
Discontinued operations
Total basic earnings per share
Diluted earnings/(loss) per share (US$)
Continuing operations
Discontinued operations
Total diluted earnings per share
2017
2016
5,777
–
(744)
2,123
5,777
14,256,020
1,379
14,224,100
167,024
134,179
14,423,044
14,358,279
0.41
–
0.41
0.40
–
0.40
(0.05)
0.15
0.10
(0.05)
0.15
0.10
161
Glencore Annual Report 2017 Notes to the financial statements
continued
16. Earnings per share continued
Headline earnings:
Headline earnings is a Johannesburg Stock Exchange (JSE) defined performance measure. The calculation of basic and diluted
earnings per share, based on headline earnings as determined by the requirements of the Circular 2/2015 as issued by the
South African Institute of Chartered Accountants (SAICA), is reconciled using the following data:
US$ million
2017
2016
Profit attributable to equity holders of the Parent from continuing and discontinued
operations for basic earnings per share
Net gain on disposals2
Net gain on disposal – non-controlling interest
Net gain on disposals – tax
Impairments3
Impairments – non-controlling interest
Impairments – tax
Headline and diluted earnings for the year
Headline earnings per share (US$)
Diluted headline earnings per share (US$)1
5,777
(1,309)
7
107
479
(42)
(104)
4,915
0.34
0.34
1,379
(2,370)
–
148
1,789
(16)
(573)
357
0.03
0.03
In 2016 equity-settled share-based payments were only dilutive with respect to Headline earnings per share calculation.
1
2 2017 comprises gain on disposals of investments of $1,079 million and gain on disposals of property, plant and equipment of $230 million. 2016 comprises gain on disposals
of investments of $452 million, gain on disposals of property, plant and equipment of $37 million, gain on disposal of Glencore Agri of $1,848 million and gain on disposals
and investments as reported in discontinued operations of $33 million (see notes 3 and 24).
3 Comprises impairments of property, plant and equipment, intangible assets and investments (see note 5) and impairments related to Cerrejón of $521 million in 2016.
17. Distributions
US$ million
Paid during the year:
First tranche 2016 distribution – $0.035 per ordinary share
Second tranche 2016 distribution – $0.035 per ordinary share
Total
2017
2016
499
499
998
–
–
–
The proposed distribution of $0.20 per ordinary share amounting to $2.9 billion is subject to approval by shareholders at the Annual
General Meeting and has not been included as a liability in these financial statements. Distributions declared in respect of the year
ended 31 December 2017 are expected to be paid equally ($0.10 each) in May 2018 and September 2018.
162
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
18. Share-based payments
(US$ million)
Deferred Bonus Plan
2015 Series
2016 Series
2017 Series
Performance Share Plan
2013 Series
2014 Series
2015 Series
2016 Series
2017 Series
Total
Number of
awards granted
(thousand)
Fair value at
grant date
(US$ million)
Number
of awards
outstanding
2017
(thousand)
Number
of awards
outstanding
2016
(thousand)
Expense
recognised
2017
(US$ million)
Expense
recognised
2016
(US$ million)
14,315
14,851
16,506
45,672
20,908
77,816
24,017
6,280
129,021
174,693
36
35
64
115
107
84
30
3,909
14,023
16,506
34,438
5,302
54,250
23,439
6,280
89,271
123,710
14,315
14,177
–
28,492
10,485
75,316
6,835
–
92,636
121,128
7
–
64
71
–
9
30
47
–
86
157
–
34
–
34
6
21
48
–
–
75
109
Deferred Bonus Plan
Under the Glencore Deferred Bonus Plan (DBP), the payment of a portion of a participant’s annual bonus is deferred for a period of
one to two years as an award of either ordinary shares (a ‘‘Bonus Share Award’’) or cash (a “Bonus Cash Award”). The awards are vested
at grant date with no further service conditions, however they are subject to forfeiture for malus events. The Bonus Share Awards may
be satisfied, at Glencore’s option, 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 or in cash, with a value equal to the market value of the award at settlement,
including distributions paid between award and settling. Glencore currently intends to settle these awards in shares. The associated
expense is recorded in the statement of income/loss as part of the expense for performance bonuses.
Performance Share Plan
Under the Glencore Performance Share Plan (PSP), participants are awarded PSP awards which vest in annual tranches over
a specified period, subject to continued employment and forfeiture for malus events. At grant date, each PSP award is equivalent
to one ordinary share of Glencore. The awards vest in three or five equal tranches on 30 June, 31 December or 31 January of the
years following the year of grant, as may be the case. The fair value of the awards is determined by reference to the market price of
Glencore’s ordinary shares at grant date. The PSP awards may be satisfied, at Glencore’s option, 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 or in cash, with
a value equal to the market value of the award at vesting, including distributions paid between award and vesting. Glencore currently
intends to settle these awards in shares.
Share-based awards assumed in previous business combinations
1 January 2017
Lapsed
Exercised¹
31 December 2017
1 January 2016
Adjustment due to share issue
Lapsed
Exercised¹
31 December 2016
1 The weighted average share price at date of exercise of the share based awards was GBP3.45 (2016: GBP2.80).
Total options
outstanding
(thousands)
Weighted
average
exercise
price (GBP)
141,272
(8,756)
(7,913)
124,603
146,602
322
(5,424)
(228)
141,272
3.89
4.45
1.60
3.89
–
2.85
1.10
163
Glencore Annual Report 2017 Notes to the financial statements
continued
18. Share-based payments continued
As at 31 December 2017, a total of 124,602,481 options (2016: 141,271,783 options) were outstanding and exercisable, having
a range of exercise prices from GBP1.1 to GBP6.87 (2016: GBP1.1 to GBP6.87) and a weighted average exercise price of GBP4.00
(2016: GBP3.89). These outstanding awards have expiry dates ranging from March 2018 to February 2022 (2016: March 2017 to
February 2022) and a weighted average contractual life of 2.97 years (2016: 3.6 years). The awards may be satisfied at Glencore’s
option, 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. Glencore currently intends to settle these awards, when exercised, by the transfer of ordinary shares held
in treasury.
19. Borrowings
US$ million
Non-current borrowings
Capital market notes
Committed syndicated revolving credit facilities
Finance lease obligations
Other bank loans
Total non-current borrowings
Current borrowings
Secured inventory/receivables/other facilities
U.S. commercial paper
Capital market notes
Finance lease obligations
Other bank loans1
Total current borrowings
Total borrowings
1 Comprises various uncommitted bilateral bank credit facilities and other financings.
Reconciliation of cash flow to movement in borrowings
US$ million
Cash related movements in borrowings1
Proceeds from issuance of capital market notes
Repayment of capital market notes
Repurchase of capital market notes
Proceeds from/(repayment of) revolving credit facilities
Proceeds from/(repayment of) other non-current borrowings
Repayment of finance lease obligations
Proceeds from U.S. commercial papers
(Repayment of)/proceeds from current borrowings
Non-cash related movements in borrowings
Borrowings acquired/(disposed) in business combinations2
Foreign exchange movements
Hedge fair value movements
Change in finance lease obligations
Other non-cash movements
Increase/(decrease) in borrowings for the year
Total borrowings – opening
Total borrowings – closing
1 See consolidated statement of cash flows.
2 2016 includes a settlement of debt due from Glencore Agri of $1,670 million, see note 24.
164
Notes
2017
2016
29
9/11/12
29
22,628
21,968
994
328
582
476
326
418
24,532
23,188
1,060
1,230
3,550
64
3,498
9,402
33,934
2,990
–
4,388
75
2,577
10,030
33,218
2017
2016
2,026
(4,539)
–
501
19
(105)
1,180
(1,266)
(2,184)
761
1,840
192
73
34
2,900
716
33,218
33,934
1,366
(4,748)
(2,629)
(2,644)
(79)
(125)
(15)
1,035
(7,839)
(2,709)
(296)
(76)
67
22
(2,992)
(10,831)
44,049
33,218
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Capital Market Notes
US$ million
AUD 500 million 4.50% coupon bonds
Euro 1,250 million 4.625% coupon bonds
Euro 1,000 million 2.625% coupon bonds
Euro 750 million 3.375% coupon bonds
Euro 1,250 million 1.25% coupon bonds
Euro 600 million 2.75% coupon bonds
Euro 700 million 1.625% coupon bonds
Euro 1,000 million 1.875% coupon bonds
Euro 400 million 3.70% coupon bonds
Euro 750 million 1.75% coupon bonds
Euro 500 million 3.75% coupon bonds
Eurobonds
JPY 10 billion 1.075% coupon bonds
GBP 650 million 6.50% coupon bonds
GBP 500 million 7.375% coupon bonds
GBP 500 million 6.00% coupon bonds
Sterling bonds
CHF 450 million 2.625% coupon bonds
CHF 175 million 2.125% coupon bonds
CHF 500 million 1.25% coupon bonds
CHF 250 million 2.25% coupon bonds
Swiss Franc bonds
US$ 250 million LIBOR plus 1.06% coupon bonds
US$ 500 million 2.125% coupon bonds
US$ 200 million LIBOR plus 1.20% coupon bonds
US$ 500 million LIBOR plus 1.36% coupon bonds
US$ 1,500 million 2.50% coupon bonds
US$ 1,000 million 3.125% coupon bonds
US$ 1,000 million 2.875% coupon bonds
US$ 1,000 million 4.95% coupon bonds
US$ 600 million 5.375% coupon bonds¹
US$ 250 million LIBOR plus 1.65% coupon bonds
US$ 1,000 million 4.25% coupon bonds
US$ 500 million 3.00% coupon bonds
US$ 1,500 million 4.125% coupon bonds
US$ 1,000 million 4.625% coupon bonds
US$ 500 million 4.00% coupon bonds
US$ 1,000 million 4.00% coupon bonds
US$ 50 million 4.00% coupon bonds
US$ 500 million 3.875% coupon bonds
US$ 250 million 6.20% coupon bonds
US$ 500 million 6.90% coupon bonds
US$ 500 million 6.00% coupon bonds
US$ 500 million 5.55% coupon bonds
US$ bonds
Total non-current bonds
1 Assumed in the Volcan acquisition, see note 24.
Maturity
Sep 2019
Apr 2018
Nov 2018
Sep 2020
Mar 2021
Apr 2021
Jan 2022
Sep 2023
Oct 2023
Mar 2025
Apr 2026
May 2022
Feb 2019
May 2020
Apr 2022
Dec 2018
Dec 2019
Dec 2020
May 2021
Apr 2018
Apr 2018
May 2018
Jan 2019
Jan 2019
Apr 2019
Apr 2020
Nov 2021
Feb 2022
May 2022
Oct 2022
Oct 2022
May 2023
Apr 2024
Apr 2025
Mar 2027
Mar 2027
Oct 2027
Jun 2035
Nov 2037
Nov 2041
Oct 2042
2017
398
–
–
931
1,491
730
857
1,195
525
906
662
7,297
89
876
731
679
2,286
–
184
522
251
957
–
–
–
279
690
447
414
1,045
535
250
1,011
496
1,520
1,024
483
986
50
491
273
594
540
473
2016
370
1,296
1,055
781
1,294
617
733
1,048
420
784
524
8,552
86
798
689
621
2,108
443
172
492
246
1,353
48
159
200
279
690
451
416
1,056
250
1,013
–
1,536
1,034
484
–
–
–
273
597
540
473
11,601
22,628
9,499
21,968
165
Glencore Annual Report 2017 Notes to the financial statements
continued
19. Borrowings continued
Capital Market Notes
US$ million
Euro 1,250 million 5.25% coupon bonds
Euro 500 million 5.25% coupon bonds
Euro 1,250 million 4.625% coupon bonds
Euro 1,000 million 2.625% coupon bonds
Eurobonds
CHF 450 million 2.625% coupon bonds
US$ 700 million 3.60% coupon bonds
US$ 250 million 5.50% coupon bonds
US$ 1,750 million 2.70% coupon bonds
US$ 250 million LIBOR plus 1.06% coupon bonds
US$ 500 million 2.125% coupon bonds
US$ 200 million LIBOR plus 1.20% coupon bonds
US$ bonds
Total current bonds
Maturity
Mar 2017
Jun 2017
Apr 2018
Nov 2018
Dec 2018
Jan 2017
Jun 2017
Oct 2017
Apr 2018
Apr 2018
May 2018
2017
–
–
1,480
1,202
2,682
461
–
–
–
48
159
200
407
3,550
2016
1,244
514
–
–
1,758
–
660
254
1,716
–
–
–
2,630
4,388
2017 Bond activities
• In March, issued a 10 year $1,000 million, 4% coupon bond
• In August, issued a 10 year $50 million, 4% coupon bond as a private placement
• In October, issued a 5 year $500 million, 3% coupon bond
• In October, issued a 10 year $500 million, 3.875% coupon bond
2016 Bond activities
• In May, issued a 5 year CHF 250 million, 2.25% coupon bond
• In September, issued a 7 year Euro 1,000 million, 1.875% coupon bond
• In October, repurchased bonds with a nominal value of $1,492 million, comprising primarily 2018 and 2019 maturities
• In December, repurchased bonds with a nominal value of $1,137 million, comprising primarily 2019 and 2020 maturities
Committed syndicated revolving credit facilities
In May 2017, Glencore signed new one-year revolving credit facilities for a total amount of $7,335 million, refinancing the
$7,700 million one-year revolving facilities signed in February 2016. Funds drawn under the facilities bear interest at US$LIBOR
plus a margin of 40 basis points. Glencore also voluntarily reduced the medium term facility size from $6,800 million to
$5,425 million and extended its maturity by 24 months to 2022.
As at 31 December 2017, the active facilities comprise:
• a $7,335 million one year revolving credit facility with a 12 month borrower’s term-out option (to May 2019) and 12 month extension
option; and
• a $5,425 million medium-term revolving credit facility (to May 2022)
Secured facilities
US$ million
Syndicated committed metals
inventory facilities
Syndicated uncommitted metals
inventory/receivables facilities
Syndicated uncommitted oil
receivables facilities
Other secured facilities
Total
Maturity Borrowing base
Interest
2017
Nov 2018
83
3%
–
Feb1/Mar/Jul 2018
1,480
Oct 2018
750
Mar 2018
170
2,483
US$ JIBAR +110 bps
/ US$ LIBOR
+ 75/90/160 bps
US$ LIBOR
+ 75 bps
US$ LIBOR
+ 75 bps
590
300
170
1,060
2016
100
2,340
550
–
2,990
1 Since year-end, in the ordinary course of business, these maturities have been rolled/extended as required.
166
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
20. Deferred income
US$ million
1 January 2017
Additions
Accretion in the year
Utilised in the year
Effect of foreign currency exchange difference
31 December 2017
Current
Non-current
1 January 2016
Additions
Accretion in the year
Utilised in the year
Effect of foreign currency exchange difference
31 December 2016
Current
Non-current
Unfavourable
contracts
Prepayments
617
–
–
(64)
32
585
59
526
653
–
–
(74)
38
617
56
561
1,787
675
164
(240)
–
2,386
351
2,035
886
971
109
(179)
–
1,787
82
1,705
Total
2,404
675
164
(304)
32
2,971
410
2,561
1,539
971
109
(253)
38
2,404
138
2,266
Unfavourable contracts
In previous business combinations, Glencore recognised liabilities related to various assumed contractual agreements to deliver
tonnes of coal and zinc concentrates over periods ending between 2018 and 2034 at fixed prices lower than the prevailing market
prices on the respective acquisition dates.
These amounts are released to revenue as the underlying commodities are delivered to the buyers over the life of the contracts
at rates consistent with the implied forward price curves at the time of the acquisitions.
Prepayments
In November 2017, Glencore entered into a silver supply arrangement in exchange for an upfront advance payment of
$675 million. Under the terms of the arrangement, Glencore is required to deliver an average of 19 million ounces of silver per
annum, over a 3 year period. The arrangement has been accounted for as an executory contract whereby the advance payment
has been recorded as deferred revenue. The revenue from the advance payment is being recognised as the silver is delivered
consistent with the implied forward price curve at the time of the transaction. An accretion expense, representing the time
value of the upfront deposit on the deferred revenue balance, is also being recognised.
In 2015 and 2016, Glencore entered into various long-term streaming agreements for the future delivery of gold and/or silver
produced over the life of mine from our Antamina, Antapaccay and Ernest Henry operations in exchange for an upfront
prepayment and, for Antamina and Antapaccay, an ongoing amount equal to 20% of the spot silver and gold price. Once certain
delivery thresholds have been met at Antapaccay, the ongoing cash payment increases to 30% of the spot gold and silver prices.
The arrangements have been accounted for as executory contracts whereby the advance payments have been recorded as
deferred revenue. The revenue from the advance payments is being recognised as the gold and/or silver is delivered at an
amount consistent with the implied forward price curve at the time of the transaction along with ongoing cash payments,
if any. An accretion expense, representing the time value of the upfront deposit on the deferred revenue balance, is also
being recognised.
167
Glencore Annual Report 2017 Notes to the financial statements
continued
21. Provisions
US$ million
1 January 2017
Provision utilised in the year
Accretion in the year
Assumed in business combination1
Disposals of subsidiaries1
Reclassification to held for sale2
Additional provision in the year
Effect of foreign currency exchange difference
31 December 2017
Current
Non-current
1 January 2016
Provision utilised in the year
Accretion in the year
Assumed in business combination1
Disposals of subsidiaries1
Additional provision in the year
Effect of foreign currency exchange difference
31 December 2016
Current
Non-current
1 See note 24.
2 See note 14.
Post-retirement
employee
benefits
Other
employee
entitlements
860
(96)
–
–
–
–
35
48
847
–
847
803
(92)
–
–
(6)
160
(5)
860
–
860
218
(40)
–
–
(2)
(1)
118
1
294
56
238
221
(34)
–
5
(6)
32
–
218
–
218
Rehabilitation
costs
3,194
(191)
260
162
(45)
(37)
786
51
4,180
90
4,090
2,905
(140)
181
154
(107)
164
37
3,194
144
3,050
Onerous
contracts
1,305
(325)
1
–
–
–
111
–
1,092
176
916
1,478
(381)
2
84
–
122
–
1,305
178
1,127
Other
812
(106)
–
38
(10)
–
424
–
1,158
155
1,003
990
(555)
–
4
(78)
448
3
812
136
676
Total
6,389
(758)
261
200
(57)
(38)
1,474
100
7,571
477
7,094
6,397
(1,202)
183
247
(197)
926
35
6,389
458
5,931
Post-retirement employee benefits
The provision for post-retirement employee benefits includes pension plan liabilities of $392 million (2016: $428 million) and
post-retirement medical plan liabilities of $455 million (2016: $432 million), see note 22.
Other employee entitlements
The employee entitlement provision represents the value of 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
completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally at the end of a
project’s life, which ranges from two to in excess of 50 years with an average for all sites, weighted by closure provision, of some
21 years (2016: 16 years). As at 31 December 2017, the discount rate applied in calculating the restoration and rehabilitation provision
is a pre-tax risk free rate specific to the liability and the currency in which they are denominated as follows: US dollar (2.0%),
South African rand (4.0%), Australian dollar (3.0%), Canadian dollar (2.5%) and Chilean peso (3.0%). Decreasing the discount rates
used by 0.5% would result in an increase in the overall rehabilitation provision by $326 million, with a resulting equal movement in
property, plant and equipment. In the following year, the depreciation expense would increase by some $15 million, with an opposite
direction interest expense adjustment of $10 million. The resulting net impact in the statement of income would be a decrease
of $5 million, eventually netting to $Nil over the weighted average settlement date of the provision.
As outlined in note 1, significant estimates are required in determining the rehabilitation provisions and during the year, certain cost
and timing estimates that were previously incorporated into the discount rate are now incorporated into the underlying rehabilitation
cash flow forecasts. As a result of these changes in estimates, the rehabilitation provision increased by $312 million, with a resulting
equivalent increase in property, plant and equipment.
168
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Onerous contracts
Onerous contracts represent liabilities related to contractual take or pay commitments for securing coal logistics capacity at fixed
prices and quantities higher than the acquisition date forecasted usage and prevailing market price. The provision is released to costs
of goods sold as the underlying commitments are incurred.
Other
Other comprises provisions for possible demurrage, mine concession, tax and construction related claims.
Tax disputes
Glencore assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. Inherent
uncertainties exist in estimates of tax contingencies due to complexities of interpretation and changes in tax laws. For those matters
where it is probable that an adjustment will be made, the Group records its best estimate of these tax liabilities, including related
interest charges. The current open tax matters are spread across numerous jurisdictions and consist primarily of legacy transfer
pricing matters that have been open for a number of years and may take several more years to resolve. Reasonably possible adverse
outcomes are not considered to be individually material. Accordingly, management does not anticipate a significant risk of material
change in estimates within the next financial year.
22. Personnel costs and employee benefits
Total personnel costs, which include salaries, wages, social security, other personnel costs and share-based payments, incurred
for the years ended 31 December 2017 and 2016, were $4,656 million and $4,245 million, respectively. Personnel costs related to
consolidated industrial subsidiaries of $3,593 million (2016: $3,355 million) are included in cost of goods sold. Other personnel costs,
including the deferred bonus and performance share plans, are included in selling and administrative expenses.
The Company and certain subsidiaries sponsor various pension schemes in accordance with local regulations and practices.
Eligibility for participation in the various plans is either based on completion of a specified period of continuous service, or date
of hire. Among these schemes are defined contribution plans as well as defined benefit plans.
Defined contribution plans
Glencore’s contributions under these plans amounted to $133 million in 2017 (2016: $118 million).
Post-retirement medical plans
The Company participates in a number of post-retirement medical plans, principally in Canada, which provide coverage for
prescription drugs, medical, dental, hospital and life insurance to eligible retirees. Almost all of the post-retirement medical plans
in the Group are unfunded.
Defined benefit pension plans
The Company operates defined benefit plans in various countries, the main locations being Canada, Switzerland, UK and the U.S..
Approximately 72% of the present value of obligations accrued to date relates to the defined benefit plans in Canada, which are
pension plans that provide benefits to members in the form of a guaranteed level of pension payable for life. Contributions to the
Canadian plans are made to meet or exceed minimum funding requirements based on provincial statutory requirements and
associated federal taxation rules.
The majority of benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where
Glencore meets the benefit payments as they fall due. Plan assets held in trusts are governed by local regulations and practices in
each country. Responsibility for governance of the plans – overseeing all aspects of the plans including investment decisions and
contribution schedules – lies with Glencore. Glencore has set up committees to assist in the management of the plans and has
also appointed experienced, independent professional experts such as investment managers, actuaries, custodians, and trustees.
169
Glencore Annual Report 2017 Notes to the financial statements
continued
22. Personnel costs and employee benefits continued
The movement in the defined benefit pension and post-retirement medical plans over the year is as follows:
US$ million
1 January 2017
Current service cost
Past service cost – plan amendments
Settlement
Interest expense/(income)
Total expense recognised in consolidated statement
of income
Gain on plan assets, excluding amounts included
in interest expense – net
Gain from change in demographic assumptions
(Gain)/loss from change in financial assumptions
Loss/(gain) from actuarial experience
Change in asset ceiling, excluding amounts included in
interest expense
Actuarial (gains)/losses recognised in consolidated
statement of comprehensive income
Employer contributions
Employee contributions
Benefits paid directly by the Company
Benefits paid from plan assets
Net cash (outflow)/inflow
Exchange differences
31 December 2017
Of which:
Pension surpluses
Pension deficits
Post-retirement
medical plans
Notes
Defined benefit pension plans
Present value
of defined
benefit
obligation
Fair value
of plan
assets
Net liability
for defined
benefit
pension plans
2,946
55
(8)
(79)
98
66
–
(11)
87
(8)
–
68
–
1
(9)
(171)
(179)
189
(2,518)
–
–
75
(86)
(11)
(169)
–
–
–
–
(169)
(76)
(1)
9
171
103
(171)
3,090
(2,766)
432
8
–
–
17
25
–
–
(15)
3
–
(12)
–
–
(20)
–
(20)
30
455
–
455
428
55
(8)
(4)
12
55
(169)
(11)
87
(8)
–
(101)
(76)
–
–
–
(76)
18
324
(68)
392
10
21
The actual return on plan assets in respect of defined benefit pension plans amounted to a gain of $426 million (2016: $206 million),
comprising interest income and the remeasurement of plan assets.
During the next financial year, the Group expects to make a contribution of $105 million to the defined benefit pension and post-
retirement medical plans across all countries, including current service costs and contributions required by pension legislation.
Contributions over the next five years for the Canadian plans only, based on the most recently filed actuarial reports, approximate
$337 million. Future funding requirements and contributions are reviewed and adjusted on an annual basis.
170
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
US$ million
1 January 2016
Current service cost
Past service cost – plan amendments
Settlement
Termination benefit
Interest expense/(income)
Total expense recognised in consolidated statement
of income
Gain on plan assets, excluding amounts included
in interest expense – net
Gain from change in demographic assumptions
Loss from change in financial assumptions
Gain from actuarial experience
Change in asset ceiling, excluding amounts included
in interest expense
Actuarial losses/(gains) recognised in consolidated
statement of comprehensive income
Employer contributions
Employee contributions
Benefits paid directly by the Company
Benefits paid from plan assets
Net cash (outflow)/inflow
Disposal of subsidiaries1
Exchange differences
Other
31 December 2016
Of which:
Pension surpluses
Pension deficits
1 See note 24.
Defined benefit pension plans
Post-retirement
medical plans
Notes
Present value
of defined
benefit
obligation
457
3,405
Fair value
of plan
assets
(3,059)
67
(3)
(94)
4
126
100
–
(13)
137
(3)
(4)
117
–
1
(9)
(192)
(200)
(487)
11
(476)
–
–
90
–
(116)
(26)
(59)
–
–
–
–
(59)
(72)
(1)
9
192
128
529
(31)
498
2,946
(2,518)
7
1
–
–
18
26
–
–
5
(3)
–
2
–
–
(20)
–
(20)
(48)
15
(33)
432
–
432
10
21
Net liability
for defined
benefit
pension plans
346
67
(3)
(4)
4
10
74
(59)
(13)
137
(3)
(4)
58
(72)
–
–
–
(72)
42
(20)
22
428
–
428
The defined benefit obligation accrued in Canada represents the majority for the Company. The breakdown below provides details
of the Canadian plans for both the statement of financial position and the weighted average duration of the defined benefit
obligation as at 31 December 2017 and 2016. The defined benefit obligation of any of the Group’s defined benefit plans outside
of Canada as at 31 December 2017 does not exceed $230 million (2016: $227 million).
171
Glencore Annual Report 2017 Notes to the financial statements
continued
22. Personnel costs and employee benefits continued
2017 US$ million
Canada
Other
Total
Post-retirement medical plans
Present value of defined benefit obligation
of which: amounts owing to active members
of which: amounts owing to pensioners
Defined benefit pension plans
Present value of defined benefit obligation
of which: amounts owing to active members
of which: amounts owing to non-active members
of which: amounts owing to pensioners
Fair value of plan assets
Net defined benefit liability at 31 December 2017
Of which:
Pension surpluses
Pension deficits
Weighted average duration of defined benefit obligation – years
2016 US$ million
Post-retirement medical plans
Present value of defined benefit obligation
of which: amounts owing to active members
of which: amounts owing to pensioners
Defined benefit pension plans
Present value of defined benefit obligation
of which: amounts owing to active members
of which: amounts owing to non-active members
of which: amounts owing to pensioners
Fair value of plan assets
Net defined benefit liability at 31 December 2016
Of which:
Pension surpluses
Pension deficits
Weighted average duration of defined benefit obligation – years
425
132
293
2,217
586
40
1,591
(2,167)
50
(68)
118
12
30
4
26
873
389
214
270
(599)
274
–
274
17
455
136
319
3,090
975
254
1,861
(2,766)
324
(68)
392
13
Canada
Other
Total
402
123
279
2,112
545
44
1,523
(1,981)
131
–
131
12
30
4
26
834
383
241
210
(537)
297
–
297
18
432
127
305
2,946
928
285
1,733
(2,518)
428
–
428
14
Estimated future benefit payments of the Canadian plans, which reflect expected future service but exclude plan expenses, up until
2027 are as follows:
US$ million
2018
2019
2020
2021
2022
2023-2027
Total
The plan assets consist of the following:
US$ million
Cash and short-term investments
Fixed income
Equities
Other
Total
Post-retirement
medical plans
Defined benefit
pension plans
19
19
20
20
21
103
202
124
126
126
126
125
610
Total
143
145
146
146
146
713
1,237
1,439
2017
31
1,343
1,189
203
2,766
2016
105
1,210
1,076
127
2,518
All investments have been fair valued based on quoted market prices with the exception of securities of $23 million (2016: $18 million)
included in “Other”.
172
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
The fair value of plan assets includes none of Glencore’s own financial instruments and no property occupied by or other assets
used by Glencore. For many of the plans, representing a large portion of the global plan assets, asset-liability matching strategies are
in place, where the fixed-income assets are invested broadly in alignment with the duration of the plan liabilities, and the proportion
allocated to fixed-income assets is raised when the plan funding level increases. The asset mix for each plan reflects the nature,
expected changes in, and size of the liabilities and the assessment of long-term economic conditions, market risk, expected
investment returns as considered during a formal asset mix study, including sensitivity analysis and/or scenario analysis, conducted
periodically for the plans.
Through its defined benefit plans, Glencore is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will create a deficit. The funded plans hold a significant proportion of equities, which are expected to
outperform bonds in the long term while contributing volatility and risk in the short term. Glencore believes that due to the long-
term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of Glencore’s long-term strategy
to manage the plans efficiently.
Change in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in
the value of the plans’ bond holdings.
Inflation risk: Some of the plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities,
although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation.
Life expectancy: The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans’ liability.
Salary increases: Some of the plans’ benefit obligations related to active members are linked to their salaries. Higher salary increases
will therefore tend to lead to higher plan liabilities.
The principal weighted-average actuarial assumptions used were as follows:
Discount rate
Future salary increases
Future pension increases
Ultimate medical cost trend rate
Post-retirement medical plans
Defined benefit pension plans
2017
3.8%
–
–
2016
4.1%
–
–
4.3%
4.2%
2017
3.2%
2.7%
0.3%
–
2016
3.5%
2.8%
0.3%
–
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned.
As at 31 December 2017, these tables imply expected future life expectancy, for employees aged 65, 19 to 24 years for males
(2016: 19 to 24) and 23 to 25 years for females (2016: 22 to 25). The assumptions for each country are reviewed regularly and are
adjusted where necessary to reflect changes in fund experience and actuarial recommendations.
The sensitivity of the defined benefit obligation to changes in principal assumptions as at 31 December 2017 is set out below,
assuming that all other assumptions are held constant and the effect of interrelationships is excluded.
Increase/(decrease) in pension obligation
US$ million
Discount rate
Increase by 100 basis points
Decrease by 100 basis points
Rate of future salary increase
Increase by 100 basis points
Decrease by 100 basis points
Rate of future pension benefit increase
Increase by 100 basis points
Decrease by 100 basis points
Medical cost trend rate
Increase by 100 basis points
Decrease by 100 basis points
Life expectancy
Increase in longevity by one year
Post-retirement
medical plans
Defined benefit
pension plans
(71)
60
–
–
–
–
61
(50)
15
(360)
428
38
(35)
34
(32)
–
–
71
Total
(431)
488
38
(35)
34
(32)
61
(50)
86
173
Glencore Annual Report 2017 Notes to the financial statements
continued
23. Accounts payable
US$ million
Trade payables
Trade advances from buyers
Margin calls received1
Associated companies
Other payables and accrued liabilities
Total
2017
24,664
451
443
1,052
2,216
28,826
2016
22,438
892
179
635
2,032
26,176
1
Includes $325 million (2016: $Nil) of cash collateral receipts under margin arrangements related to cross currency swaps held to hedge non-U.S. dollar denominated bonds.
Trade payables are obligations to pay for goods and services. Trade payables typically have maturities up to 90 days depending on the
type of material and the geographic area in which the purchase transaction occurs and the agreed terms. The carrying value of trade
payables approximates fair value.
24. Acquisition and disposal of subsidiaries
2017 Acquisitions
In 2017, Glencore acquired controlling interests in Volcan Compania Minera S.A.A. (“Volcan”) and other businesses, none of which are
individually material. The net cash received/used in the acquisition of subsidiaries and the provisional fair value of assets acquired and
liabilities assumed on the acquisition date are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Other investments
Deferred tax assets
Advances and loans1
Current assets
Inventories
Accounts receivable1
Other financial assets
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Other financial liabilities
Total fair value of net assets acquired
Less: cash and cash equivalents acquired
Less: amounts previously recognised as other investments2
Net cash used in acquisition of subsidiaries
Volcan
Other
Total
4,656
76
52
–
32
4,816
80
206
30
81
397
(1,733)
(629)
(986)
(174)
(1,789)
(175)
(386)
(37)
(598)
1,093
(81)
(359)
653
43
–
–
2
1
46
2
5
–
3
10
–
–
–
(26)
(26)
–
(6)
–
(6)
24
(3)
–
21
4,699
76
52
2
33
4,862
82
211
30
84
407
(1,733)
(629)
(986)
(200)
(1,815)
(175)
(392)
(37)
(604)
1,117
(84)
(359)
674
1 There is no material difference between the gross contractual amounts for loans and advances and accounts receivable and their fair value.
2 See note 9.
174
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Volcan
On 9 November 2017, Glencore completed a tender offer, acquiring an additional 42.3% of the Class A common (voting) shares in
Volcan, a Peruvian zinc mining business listed on the Lima stock exchange, for a consideration of $734 million, thereby increasing its
voting shares interest from 20.7% to 63.0%. Glencore’s total economic interest (including the class B common (non-voting) shares and
excluding treasury shares) increased from 7.7% to 23.3%. As Glencore holds the majority of the voting shares, providing it the ability
to appoint a controlling number of directors to the board, Glencore is required to account for Volcan using the full consolidation
method in accordance with IFRS 10.
The fair values are provisional due to the complexity of the valuation process and the proximity of the transaction to year end.
The finalisation of the fair value of the acquired assets and liabilities will be completed within 12 months of the acquisition. It is
expected that adjustments could be made to the allocation of value between fixed asset classes, deferred taxes, rehabilitation
and other provisions.
If the acquisition had taken place effective 1 January 2017, the operation would have contributed additional revenue of $696 million
and additional attributable income of $93 million. From the date of acquisition, the operation contributed $160 million of revenue
and $Nil of attributable income.
2016 Acquisitions
In 2016, Glencore acquired controlling interests in Newlands Collinsville Abbot Point Joint Venture (NCA). The net cash received in the
acquisition of subsidiaries and the fair value of assets acquired and liabilities assumed on the acquisition date are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Advances and loans1
Current assets
Inventories
Accounts receivable1
Cash and cash equivalents
Non-current liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Provisions
Other financial liabilities
Total fair value of net (liabilities)/assets acquired
Less: cash and cash equivalents acquired
Net cash (received)/used in acquisition of subsidiaries
NCA
Other
Total
39
2
41
41
24
11
76
(242)
(242)
–
(33)
(1)
(8)
(42)
(167)
(11)
(178)
20
–
20
7
6
–
13
(4)
(4)
(10)
(17)
–
–
(27)
2
–
2
59
2
61
48
30
11
89
(246)
(246)
(10)
(50)
(1)
(8)
(69)
(165)
(11)
(176)
1 There is no material difference between the gross contractual amounts for loans and advances and accounts receivable and their fair value.
NCA
In September 2016, Glencore completed the acquisition of the remaining 45% interest in NCA, for cash consideration received
of $167 million. This increased Glencore’s ownership from 55% to 100%, providing the ability to exercise control over NCA.
If the acquisition had taken place effective 1 January 2016, the operation would have contributed additional revenue of $173 million
and an additional attributable loss of $21 million. From the date of acquisition, the operation contributed $72 million and $25 million
of revenue and attributable income, respectively.
The acquisition accounting for NCA has now been finalised, with no adjustments to the previously reported provisional fair values.
175
Glencore Annual Report 2017 Notes to the financial statements
continued
24. Acquisition and disposal of subsidiaries continued
2017 Disposals
In 2017, Glencore disposed of its controlling interest in the Rosh Pinah mine in Namibia (“Rosh Pinah”) and Perkoa mine in
Burkina Faso (“Perkoa”), together referred to as “Zinc Africa” and 51% of the large majority of its petroleum storage and logistics
businesses (“HG Storage”).
The carrying value of the assets and liabilities over which control was lost and the net cash received from these disposals are
detailed below:
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Advances and loans
Current assets
Inventories
Accounts receivable
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Income tax payable
Carrying value of net assets disposed
Cash and cash equivalents received
Shares received
Future consideration
Items recycled to the statement of income
Reclassified to investment in joint venture1
Provision for guarantees
Transaction fees
Net gain on disposal1
Cash and cash equivalents received
Less: Cash and cash equivalents disposed
Net cash received from disposal
Zinc Africa
HG Storage
Others
Total
266
3
–
–
269
58
43
23
124
(4)
–
(50)
(24)
(74)
(2)
(56)
–
(58)
257
(245)
(222)
–
(22)
–
–
–
(232)
245
(23)
222
169
–
170
11
350
4
68
28
100
–
(31)
(17)
–
(48)
–
(67)
(2)
(69)
333
(530)
–
–
–
(509)
20
12
(674)
530
(28)
502
57
–
–
–
57
7
15
18
40
(25)
(10)
(5)
(33)
(48)
–
(9)
–
(9)
15
–
–
(13)
(121)
(54)
–
–
492
3
170
11
676
69
126
69
264
(29)
(41)
(72)
(57)
(170)
(2)
(132)
(2)
(136)
605
(775)
(222)
(13)
(143)
(563)
20
12
(173)
(1,079)
–
(18)
(18)
775
(69)
706
1
Includes a gain of $383 million attributable to the remeasurement of the retained investment to its fair value upon change in control in HG Storage ($363 million)
and Other ($20 million).
Zinc Africa
On 31 August 2017, Glencore completed the transaction with Trevali Mining Corporation (“Trevali”) a TSX listed zinc company, to sell
its 80.1% equity interest in Rosh Pinah and its 90.0% equity interest in Perkoa. The aggregate consideration received was $467 million,
of which $245 million was cash and the remaining balance ($222 million) was 193.4 million shares in Trevali. As a result of the
transaction, Glencore’s direct ownership in Trevali increased from 4% to 25.6%.
Glencore is no longer able to unilaterally direct the key strategic, operating and capital decisions of Rosh Pinah and Perkoa and was
deemed to have disposed of its controlling interest at fair value. The difference to the net carrying value was recognised through the
statement of income, with Glencore subsequently accounting for its share in Trevali using the equity method in accordance with
IAS 28 (see note 9).
176
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
HG Storage
On 29 December, Glencore completed the sale of a 51% interest in HG Storage International Ltd (“HG Storage”), a group comprising
the majority of Glencore’s petroleum products storage and logistics businesses (excluding the U.S.) to HNA Innovation Finance
Group Co Ltd (HNA) for cash consideration of $530 million, including the assumption of certain debt. Glencore is no longer able
to unilaterally direct the key strategic, operating and capital decisions of HG Storage and was deemed to have disposed of its
controlling interest at fair value. The difference to the net carrying value was recognised through the statement of income, with
Glencore subsequently accounting for its remaining remeasured share in HG Storage using the equity method in accordance with
IAS 28 (see note 9).
2016 Disposals
In 2016, Glencore disposed of its controlling interest in the Glencore Agricultural Products business (“Glencore Agri”), Ernest Henry
mining operation (EHM) and its New South Wales coal rail haulage business (“GRail”).
The carrying value of the assets and liabilities over which control was lost and the net cash received from these disposals are
detailed below:
GRail
Others
Total
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Advances and loans
Deferred tax assets
Current assets
Inventories
Accounts receivable
Other financial assets
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Provisions
Other financial liabilities
Carrying value of net assets disposed
Cash and cash equivalents received
Future consideration
Items recycled to the statement of income
Reclassified to investment in joint venture1
Transaction fees
Net gain on disposal
Cash and cash equivalents received
Less: Cash and cash equivalents disposed
Settlement of debt due from Glencore Agri
Net cash received from disposal
Glencore Agri
2,919
892
624
116
103
4,654
2,725
2,774
746
469
6,714
(37)
(602)
(138)
(111)
(851)
(3,751)
(2,315)
(36)
(629)
(6,731)
3,749
(3,125)
–
602
(3,125)
51
(1,848)
3,125
(469)
1,670
4,326
EHM
244
–
–
–
–
413
–
–
–
–
244
413
6
1
–
–
7
–
–
(36)
(9)
(45)
–
(7)
(1)
–
(8)
198
(198)
–
–
–
–
–
198
–
–
198
–
2
–
–
2
–
–
–
–
–
–
(5)
–
–
(5)
410
(840)
–
–
–
–
(430)
840
–
–
840
212
24
–
13
1
250
57
77
2
27
163
(29)
(1)
(30)
(40)
(71)
(35)
(54)
–
(2)
(91)
222
(198)
(46)
–
–
–
(22)
198
(27)
–
171
1
Includes a gain of $1,252 million attributable to the remeasurement of the retained Glencore Agri investment to its fair value upon change in control.
3,788
916
624
129
104
5,561
2,788
2,854
748
496
6,886
(66)
(603)
(204)
(160)
(967)
(3,786)
(2,381)
(37)
(631)
(6,835)
4,579
(4,361)
(46)
602
(3,125)
51
(2,300)
4,361
(496)
1,670
5,535
177
Glencore Annual Report 2017 Notes to the financial statements
continued
24. Acquisition and disposal of subsidiaries continued
Glencore Agri
On 6 April 2016, Glencore announced that it had entered into an agreement with the Canada Pension Plan Investment Board for
the sale of a 40% equity interest in Glencore Agri and on 9 June 2016, entered into an agreement with British Columbia Investment
Management Corporation for the sale of a 10% equity interest in Glencore Agri. The aggregate equity consideration for the combined
50% interest, including the indirect assumption of certain levels of net working capital and debt, amounted to $3.125 billion, payable
in cash upon closing.
Glencore Agri represents the entire Agricultural products operating segment and was determined to be a discontinued operation
prior to the close of transaction on 1 December 2016, and has been disclosed as such. Upon closing of the sale, Glencore is no longer
able to unilaterally direct the key strategic, operating and capital decisions of Glencore Agri and was deemed to have disposed of
its controlling interest at fair value. The difference to the net carrying value was recognised through the statement of income, with
Glencore subsequently accounting for its share of the resulting joint venture using the equity method in accordance with IFRS 11
and IAS 28 (see note 9).
The results of Glencore Agri included in the consolidated statement of income until loss of control are detailed below:
US$ million
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates
Gain on disposals and investments
Other expense - net
Interest income
Interest expense
Income before income taxes from discontinued operations
Income tax expense
Gain on disposal of Glencore Agri, including items recycled to the statement of income of $602 million
Income for the year from discontinued operations
Attributable to:
Non-controlling interests
Equity holders of the Parent
Earnings per share – discontinued operations:
Basic (US$)
Diluted (US$)
The net cash flows incurred by Glencore Agri are as follows:
US$ million
Net cash used from operating activities, after working capital changes
Net cash used in investing activities
Net cash generated in financing activities
Net cash used in discontinued operations
2016
20,885
(20,256)
(175)
15
33
(26)
9
(79)
406
(131)
275
1,848
2,123
–
2,123
0.15
0.15
2016
(855)
(11)
671
(195)
EHM
In October 2016, Glencore entered into an agreement with Evolution Mining Limited (Evolution), whereby Glencore received
$669 million cash in return for a 30% economic interest in the Ernest Henry Mine mining operation (EHM) and an entitlement to
100% of the gold produced from Glencore’s remaining 70% interest in EHM. The consideration received was allocated between
the two elements of the transaction (sale of the 30% interest and the 70% gold prepaid streaming arrangement) by estimating
the fair value of the gold stream by reference to the net present value of the anticipated gold to be delivered over the life of mine
($471 million) with the residual amount representing the consideration for the 30% interest ($198 million). Also see note 20. As part
of the transaction, Glencore and Evolution entered into a 70/30 joint venture agreement governing the operations of EHM. As
Glencore is no longer able to unilaterally direct the key strategic, operating and capital decisions of EHM, it is deemed to have
lost control of EHM and, together with Evolution, jointly controls it. As the new arrangement is an unincorporated joint venture,
Glencore derecognised 30% of the identified assets and liabilities of EHM against the proceeds received as noted above.
GRail
In December 2016, Glencore disposed of its New South Wales coal rail haulage business to Genesee & Wyoming for cash
consideration of $840 million (A$1.1 billion).
178
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
25. 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 (for management of “margin” risk within Glencore’s
extensive and diversified industrial portfolio, refer net present value at risk below) to support its objectives in managing its capital
and future financial security and flexibility. Glencore’s overall risk management programme 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 and 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 attributable to equity holders” 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. Central to meeting these objectives is maintaining an investment grade credit rating status. Glencore’s
current credit ratings are Baa2 (stable) from Moody’s and BBB (positive outlook) from S&P.
Distribution policy and other capital management initiatives
Glencore’s cash distribution policy comprises two components: (1) a fixed $1 billion component and (2) a variable element
representing a minimum 25% of free cash flow generated by our industrial assets during the year. The actual variable distribution
component (minimum 25% pay-out guidance) will reflect prevailing balance sheet position, market conditions and outlook and be
confirmed annually in respect of prior period’s cash flows. Distributions are expected to be formally declared by the Board annually
(with the preliminary full-year results). Distributions, when declared, will be settled equally in May and September of the year they are
declared in. In addition, alongside our half-year results reporting, the Board could formally declare an additional distribution to be
included with the distribution confirmed with respect to the prior year. Notwithstanding that the distribution is declared and paid
in U.S. dollars, shareholders will be able to elect to receive their distribution payments in Pounds Sterling, Euros or Swiss Francs
based on the exchange rates in effect around the date of payment. Shareholders on the JSE will receive their distributions in
South African Rand.
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 exposure
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 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.
Value at risk
One of the tools used by Glencore to monitor and limit its primary market risk exposure, principally commodity price risk related
to its physical marketing activities, is of a value at risk (VaR) computation. VaR is a risk measurement technique which estimates a
threshold for 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 and based on a specific price history. 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 markets and commodities
and risk measures can be aggregated to derive a single risk value. Glencore’s Board has set an unchanged consolidated VaR limit
(one day 95% confidence level) of $100 million representing less than 0.5% of total equity, which the Board reviews annually.
There were no breaches of this limit during the year.
Glencore uses a VaR approach based on Monte Carlo simulations computed at a 95% confidence level and utilising a weighted data
history for a one-day time horizon.
Position sheets are regularly distributed and monitored and daily Monte Carlo simulations are applied to the various business groups’
net marketing positions to determine potential losses.
179
Glencore Annual Report 2017 Notes to the financial statements
continued
25. Financial and capital risk management continued
Market risk VaR (one-day 95% confidence level) ranges and year-end positions were as follows:
US$ million
Year-end position
Average during the year
High during the year
Low during the year
2017
18
25
41
13
2016
31
42
101
16
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 analysing forward looking stress scenarios, benchmarking against an alternative VaR computation based on historical
simulations and back testing calculated VaR against the hypothetical portfolio returns arising in the next business day.
Glencore’s VaR computation currently covers its business in the key base metals (including aluminium, nickel, zinc, copper and lead),
coal, iron ore and oil/natural gas and assesses the open priced positions which are 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,
molybdenum, cobalt, freight and some risk associated with concentrates as it does not consider the nature of these markets to be
suited to this type of analysis. Alternative measures are used to monitor exposures related to these products.
Net present value at risk
Glencore’s future cash flows related to its forecast energy and metals and minerals’ 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 cash flows and valuations.
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;
other methods include the use of interest rate swaps and similar derivative instruments. Floating rate debt which is predominantly
used to fund fast turning working capital (interest is internally charged on the funding of this working capital) is primarily based on
US$ 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 equity for the year ended
31 December 2017 would decrease/increase by $110 million (2016: $100 million).
Currency risk
The U.S. dollar is the predominant functional currency of the Group. Currency risk is the risk of loss from movements in exchange
rates related to transactions and balances in currencies other than the U.S. dollar. Such transactions include operating expenditure,
capital expenditure and to a lesser extent purchases and sales in currencies other than the functional currency. Purchases or sales
of commodities concluded in currencies other than the functional currency, apart from certain limited domestic sales at industrial
operations which act as a hedge against local operating costs, are ordinarily hedged through forward exchange contracts.
Consequently, foreign exchange movements against the U.S. dollar on recognised transactions would have an immaterial financial
impact. Glencore enters into currency hedging transactions with leading financial institutions.
Glencore’s debt related payments (both principal and interest) are primarily denominated in or swapped using hedging instruments
into U.S. dollars. Glencore’s operating expenses, being a small portion of its revenue base, are incurred in a mix of currencies of which
the U.S. dollar, Swiss Franc, Pound Sterling, Canadian dollar, Australian dollar, Euro, Kazakhstan Tenge, Colombian Peso and South
African Rand are the predominant currencies.
Glencore has issued Euro, Swiss Franc, Sterling, Yen and Australian dollar denominated bonds (see note 19). Cross currency swaps
were concluded to hedge the currency risk on the principal and related interest payments of these bonds. These contracts were
designated as cash flow hedges of the foreign currency risks associated with the bonds. The fair value of these derivatives is
as follows:
Notional amounts
Recognised fair values
Buy
–
–
Sell
15,387
14,179
Assets
Liabilities
421
26
1,137
2,873
Average
maturity¹
2020
2020
US$ million
Cross currency swap agreements – 2017
Cross currency swap agreements – 2016
1 Refer to note 19 for details.
180
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
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 and 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
industries 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 3.3% (2016: 2.9%) of its trade receivables
(on a gross basis taking into account credit enhancements) or accounting for more than 3.5% of its revenues over the year ended
31 December 2017 (2016: 3.9%).
The maximum exposure to credit risk (including performance risk – see below), 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
(see note 26).
Performance risk
Performance risk (part of the broader credit risk subject matter, discussed above) is inherent in contracts, with agreements in the
future, to physically purchase or sell commodities with fixed price attributes, and 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 vast majority of Glencore’s
commodity portfolio which does not fix prices beyond three months, with the main exception being coal, where longer-term
fixed price contracts are common, ensure that performance risk is adequately mitigated. The commodity industry has trended
towards shorter term fixed price contract periods, in part to mitigate against such potential performance risk, but also due to the
continuous development of transparent and liquid spot commodity markets, with their 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 and availability of adequate committed
funding facilities. Glencore has set itself an internal minimum liquidity target to maintain at all times, including via available
committed undrawn credit facilities of $3 billion (2016: $3 billion), which has purposely been substantially exceeded in recent years,
accounting for the more volatile market backdrop. 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 management,
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.
181
Glencore Annual Report 2017 Notes to the financial statements
continued
25. Financial and capital risk management continued
As at 31 December 2017, Glencore had available committed undrawn credit facilities and cash amounting to $12,874 million
(2016: $16,740 million). The maturity profile of Glencore’s financial liabilities based on the contractual terms is as follows:
2017 US$ million
Borrowings
Expected future interest payments
Accounts payable
Other financial liabilities
Total
Current assets
2016 US$ million
Borrowings
Expected future interest payments1
Accounts payable
Other financial liabilities
Total
Current assets
After 5 years Due 3 – 5 years Due 2 – 3 years Due 1 – 2 years
Due 0 – 1 year
10,071
3,256
–
513
7,637
1,116
–
–
2,710
728
–
–
4,114
913
–
–
13,840
8,753
3,438
5,027
9,402
964
28,826
4,522
43,714
49,726
After 5 years Due 3 – 5 years Due 2 – 3 years Due 1 – 2 years
Due 0 – 1 year
10,687
3,394
–
403
5,726
1,099
–
–
2,937
722
–
–
3,838
845
–
–
14,484
6,825
3,659
4,683
10,030
981
26,176
6,386
43,573
43,412
Total
33,934
6,977
28,826
5,035
74,772
49,726
Total
33,218
7,041
26,176
6,789
73,224
43,412
1 The amount of disclosed expected future interest payments have been restated to include omitted future interest payments of $804 million and to collect the
maturity profile.
26. Financial instruments
Fair value of financial instruments
The following tables present the carrying values and fair values of Glencore’s financial instruments. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (most advantageous) market at the
measurement date under current market conditions. 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 market interest and
exchange rates. The estimated fair values have been determined using market information and appropriate valuation methodologies,
but are not necessarily 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 approximate the
fair values with the exception of $33,934 million (2016: $33,218 million) of borrowings, the fair value of which at 31 December 2017
was $34,776 million (2016: $33,673 million) based on observable market prices applied to the borrowing portfolio (a Level 2 fair value
measurement).
2017 US$ million
Assets
Other investments3
Advances and loans
Accounts receivable
Other financial assets (see note 27)
Cash and cash equivalents4
Total financial assets
Liabilities
Borrowings
Non-current other financial liabilities (see note 27)
Accounts payable
Other financial liabilities (see note 27)
Total financial liabilities
Carrying
value1
Available
for sale
FVtPL2
Total
–
2,976
20,359
–
–
2,268
–
–
–
–
23,335
2,268
33,934
–
28,826
–
62,760
–
–
–
–
–
690
–
–
2,311
2,124
5,125
–
513
–
4,522
5,035
2,958
2,976
20,359
2,311
2,124
30,728
33,934
513
28,826
4,522
67,795
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 $2,871 million (2016: $1,715 million) are classified as Level 1 measured using quoted market prices with the remaining balance of $87 million
(2016: $38 million) being investments in private companies whose fair value cannot be reliably measured and therefore carried at cost.
4 Classified as Level 1, measured using quoted exchange rates and/or market prices.
182
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
2016 US$ million
Assets
Other investments3
Advances and loans
Accounts receivable
Other financial assets (see note 27)
Cash and cash equivalents4
Total financial assets
Liabilities
Borrowings
Non-current other financial liabilities (see note 27)
Accounts payable
Other financial liabilities (see note 27)
Total financial liabilities
Carrying
value1
Available
for sale
FVtPL2
Total
–
3,483
20,066
–
–
1,457
–
–
–
–
23,549
1,457
33,218
–
26,176
–
59,394
–
–
–
–
–
296
–
–
2,212
2,518
5,026
–
403
–
6,386
6,789
1,753
3,483
20,066
2,212
2,518
30,032
33,218
403
26,176
6,386
66,183
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 $1,715 million are classified as Level 1 measured using quoted market prices with the remaining balance of $38 million being investments in private
companies whose fair value cannot be reliably measured and therefore carried at cost. The movement in Level 1 measured investments compared to prior year (see below),
mainly relates to the Group’s share in Russneft, which after the listing on the Moscow stock exchange in November 2016, is measured at fair value.
4 Classified as Level 1, measured using quoted exchange rates and/or market prices.
Offsetting of financial assets and liabilities
In accordance with IAS 32 the Group reports financial assets and liabilities on a net basis in the consolidated statement of financial
position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or
to realise the asset and settle the liability simultaneously. The financial assets and liabilities subject to offsetting, enforceable master
netting and similar agreements as at 31 December 2017 and 2016 were as follows:
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
2017 US$ million
Derivative assets1
Derivative liabilities1
Gross
amount
13,220
(15,162)
Amounts
offset
(11,907)
11,907
Net
amount
Financial
instruments
Financial
collateral
Net
amount
1,313
(3,255)
(347)
347
(426)
2,430
540
(478)
1 Presented within current other financial assets and current other financial liabilities.
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
2016 US$ million
Derivative assets1
Derivative liabilities1
Gross
amount
10,679
(14,288)
Amounts
offset
Net
amount
Financial
instruments
Financial
collateral
Net
amount
(9,834)
9,834
845
(4,454)
(288)
288
(171)
3,784
386
(382)
1 Presented within current other financial assets and current other financial liabilities.
Total as
presented
in the
consolidated
statement
of financial
position
2,311
(4,522)
Total as
presented
in the
consolidated
statement
of financial
position
2,212
(6,386)
Amounts
not subject
to netting
agreements
998
(1,267)
Amounts
not subject
to netting
agreements
1,367
(1,932)
For the financial assets and liabilities subject to enforceable master netting or similar arrangements above, each agreement between
the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on
a net basis. In the absence of such an election, financial assets and liabilities may be settled on a gross basis, however, each party to
the master netting or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the
other party. Per the terms of each agreement, an event of default includes failure by a party to make payment when due, failure by
a party to perform any obligation required by the agreement (other than payment) if such failure is not remedied within periods
of 30 to 60 days after notice of such failure is given to the party or bankruptcy.
183
Glencore Annual Report 2017 Notes to the financial statements
continued
27. Fair value measurements
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
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Glencore can assess at the
measurement date, or
Level 2
Inputs other than quoted inputs included in Level 1 that are observable for the assets or liabilities, either directly or
indirectly, or
Level 3 Unobservable inputs for the assets or liabilities, 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, whereas Level
2 classifications 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 classifications
primarily include physical forward transactions which derive their fair value predominantly from models that use broker quotes and
applicable market-based estimates surrounding location, quality and credit differentials and financial liabilities linked to the fair value
of certain mining operations. 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 produce 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,
insolvency or bankruptcy by the counterparty.
The following tables show the fair values of the derivative financial instruments including trade related financial and physical forward
purchase and sale commitments by type of contract and non-current other financial liabilities as at 31 December 2017 and 2016.
Other assets and liabilities which are measured at fair value on a recurring basis are marketing inventories, other investments,
cash and cash equivalents and marketable securities. Refer to notes 11 and 26 for disclosures in connection with these fair value
measurements. There are no non-recurring fair value measurements.
Level 1
Level 2
Level 3
Total
227
93
131
–
–
–
451
42
37
339
582
421
83
1,504
–
–
–
356
–
–
356
Level 1
Level 2
Level 3
207
31
166
–
–
–
404
154
37
146
763
26
124
1,250
–
–
–
558
–
–
558
269
130
470
938
421
83
2,311
Total
361
68
312
1,321
26
124
2,212
Other financial assets
2017 US$ million
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Total
2016 US$ million
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Total
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Glencore Annual Report 2017 Strategic Report
Governance
Financial
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Additional
Information
Other financial liabilities
2017 US$ million
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Current other financial liabilities
Non-current other financial liabilities
Non-discretionary dividend obligation1
Non-current other financial liabilities
Total
2016 US$ million
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Current other financial liabilities
Non-current other financial liabilities
Non-discretionary dividend obligation1
Non-current other financial liabilities
Total
Level 1
Level 2
Level 3
2,029
37
121
–
–
–
2,187
–
–
84
29
372
468
1,137
53
2,143
–
–
2,187
2,143
–
8
–
184
–
–
192
513
513
705
Total
2,113
74
493
652
1,137
53
4,522
513
513
5,035
Level 1
Level 2
Level 3
Total
1,068
5
846
–
–
–
1,919
–
–
150
12
321
859
2,873
43
4,258
–
–
1,919
4,258
–
6
–
203
–
–
209
403
403
612
1,218
23
1,167
1,062
2,873
43
6,386
403
403
6,789
1 A ZAR denominated derivative liability payable to ARM Coal, one of the Group’s principal coal joint operations based in South Africa. The liability arises from ARM Coal’s
rights as an investor to a share of agreed free cash flows from certain coal operations in South Africa and is valued based on those cash flows using a risk adjusted discount
rate. The derivative liability is settled over the life of those operations (modelled mine life of 25 years as at 31 December 2017) and has no fixed repayment date and is not
cancellable within 12 months.
The following table shows the net changes in fair value of Level 3 other financial assets and other financial liabilities:
US$ million
1 January 2017
Total gain/(loss) recognised in cost of goods sold
Non-discretionary dividend obligation
Realised
31 December 2017
1 January 2016
Total gain/(loss) recognised in cost of goods sold
Non-discretionary dividend obligation
Realised
31 December 2016
Physical
forwards
Options
355
58
–
(241)
172
19
258
–
78
355
(6)
(8)
–
6
(8)
(1)
(6)
–
1
(6)
Other
(403)
–
(110)
–
(513)
(186)
–
(217)
–
(403)
During the year no amounts were transferred between Level 1 and Level 2 of the fair value hierarchy and no amounts were
transferred into or out of Level 3 of the fair value hierarchy for either other financial assets or other financial liabilities.
Total
Level 3
(54)
50
(110)
(235)
(349)
(168)
252
(217)
79
(54)
185
Glencore Annual Report 2017 Notes to the financial statements
continued
27. Fair value measurements continued
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
The following table provides information about how the fair values of these financial assets and financial liabilities are
determined, in particular, the valuation techniques and inputs used.
Fair value of financial assets/financial liabilities
US$ million
Futures – Level 1
Valuation techniques and key inputs:
Quoted bid prices in an active market
Significant unobservable inputs:
None
Futures – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
2017
227
(2,029)
2016
207
(1,068)
Assets
Liabilities
42
(84)
154
(150)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, as required.
Significant unobservable inputs:
None
Options – Level 1
Valuation techniques and key inputs:
Quoted bid prices in an active market
Significant unobservable inputs:
None
Options – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
Assets
Liabilities
93
(37)
37
(29)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, as required.
Significant unobservable inputs:
None
Options – Level 3
Valuation techniques and key inputs:
Standard option pricing model
Assets
Liabilities
–
(8)
31
(5)
37
(12)
–
(6)
Significant unobservable inputs:
Swaps – Level 1
Prices are adjusted by volatility differentials. This significant unobservable input generally
represents 2% – 20% of the overall value of the instruments. A change to a reasonably possible
alternative assumption would not result in a material change in the underlying value.
Valuation techniques and key inputs:
Quoted bid prices in an active market
Significant unobservable inputs:
None
Swaps – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
Assets
Liabilities
131
(121)
339
(372)
166
(846)
146
(321)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, as required.
Significant unobservable inputs:
None
Physical Forwards – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
582
(468)
763
(859)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, such as history
of non-performance, collateral held and current market developments, as required.
Significant unobservable inputs:
None
186
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
US$ million
Physical Forwards – Level 3
Assets
Liabilities
2017
356
(184)
2016
558
(203)
Valuation techniques and key inputs:
Discounted cash flow model
Significant unobservable inputs:
Valuation of the Group’s commodity physical forward contracts categorised within this level
is based on observable market prices that are adjusted by unobservable differentials, as required,
including:
– Quality;
– Geographic location;
– Local supply & demand;
– Customer requirements; and
– Counterparty credit considerations.
These significant unobservable inputs generally represent 2%–30% of the overall value of
the instruments. The valuation prices are applied consistently to value physical forward sale
and purchase contracts, and changing a particular input to reasonably possible alternative
assumptions does not result in a material change in the underlying value of the portfolio.
Cross currency swaps – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
421
(1,137)
26
(2,873)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, as required.
Significant unobservable inputs:
None
Foreign currency and interest rate contracts – Level 2
Valuation techniques and key inputs:
Discounted cash flow model
Assets
Liabilities
83
(53)
124
(43)
Inputs include observable quoted prices sourced from exchanges or traded reference indices
in active markets for identical assets or liabilities. Prices are adjusted by a discount rate which
captures the time value of money and counterparty credit considerations, as required.
Significant unobservable inputs:
None
Non-discretionary dividend obligation – Level 3
Valuation techniques:
Discounted cash flow model
Significant observable inputs:
– Forecast commodity prices;
– Discount rates using weighted average cost of
Assets
Liabilities
–
(513)
–
(403)
capital methodology;
– Production models;
– Operating costs; and
– Capital expenditures.
The resultant liability is essentially a discounted cash flow valuation of the underlying mining
operation. Increases/decreases in forecast commodity prices will result in an increase/decrease
to the value of the liability though this will be partially offset by associated increases/decreases
in the assumed production levels, operating costs and capital expenditures which are inherently
linked to forecast commodity prices. The valuation remains sensitive to price and a 10% increase/
decrease in commodity price assumptions would result in an $115 million adjustment to the
current carrying value.
187
Glencore Annual Report 2017 Notes to the financial statements
continued
28. Auditor’s remuneration
US$ million
Remuneration in respect of the audit of Glencore’s consolidated financial statements
Other audit fees, primarily in respect of audits of accounts of subsidiaries
Audit-related assurance services1
Total audit and related assurance fees
Transaction services
Taxation compliance services
Other taxation advisory services
Other assurance services
Total non-audit fees
Total professional fees
2017
2016
3
18
2
23
4
2
2
1
9
32
3
17
2
22
3
3
2
1
9
31
1 Audit-related assurance services primarily related to interim reviews of the Group’s half-year accounts and quarterly accounts of the Group’s publicly listed subsidiaries.
29. 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 2017, $987 million (2016: $776 million), of which 93% (2016: 81%) 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 licences require it to spend a minimum amount per year on development activities,
a significant portion of which would have been incurred in the ordinary course of operations. As at 31 December 2017, $139 million
(2016: $177 million) of such development expenditures are to be incurred, of which 36% (2016: 20%) are for commitments to be
settled over the next year.
Glencore procures seagoing vessels/chartering services to meet its overall marketing objectives and commitments. As at
31 December 2017, Glencore has committed to future hire costs to meet future physical delivery and sale obligations and
expectations of $247 million (2016: $217 million), of which $76 million (2016: $105 million) are with associated companies.
72% (2016: 46%) of the total charters are for services to be received over the next two 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. Similarly, Glencore is required to post rehabilitation and pension guarantees in respect of
some of these future, primarily industrial, long-term obligations. As at 31 December 2017, $17,578 million (2016: $17,358 million) of
procurement and $3,615 million (2016: $2,972 million) of rehabilitation and pension commitments have been issued on behalf of
Glencore, which will generally be settled simultaneously with the payment for such commodity and rehabilitation and pension
obligations.
Glencore has entered into various operating leases mainly as lessee for office and warehouse/storage facilities. Rental expenses for
these leases totalled respectively $173 million and $157 million for the years ended 31 December 2017 and 2016. Future net
minimum lease payments under non-cancellable operating leases are as follows:
US$ million
Within 1 year
Between 2 – 5 years
After 5 years
Total
2017
203
401
189
793
2016
106
245
97
448
Glencore has entered into finance leases for various plant and equipment items, primarily vessels and machinery. Future net
minimum lease payments under finance leases together with the future finance charges are as follows:
US$ million
Within 1 year
Between 1 and 5 years
After 5 years
Total minimum lease payments
Less: amounts representing finance lease charges
Present value of minimum lease payments
188
Undiscounted minimum
lease payments
Present value of minimum
lease payments
2017
92
255
209
556
164
392
2016
99
259
222
580
179
401
2017
64
182
146
392
–
392
2016
75
172
154
401
–
401
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Future development and related commitments
Acquisition of HVO
On 27 July 2017, Glencore and Yancoal signed agreements relating to the acquisition of a 49% interest in the Hunter Valley
Operations (HVO) coal mine in New South Wales, Australia following Yancoal’s acquisition of Coal & Allied (C&A) from Rio Tinto.
Under the terms of the agreements, Glencore will pay cash consideration of $1,139 million (effective 1 September 2017) plus a 27.9%
share of $240 million non-contingent royalties over five years and 49% of price contingent royalties payable by Yancoal to Rio Tinto
on production from HVO in respect of the C&A acquisition. The transaction is subject to customary regulatory approvals and is
expected to close in H1 2018.
Acquisition of Chevron South Africa and Botswana
On 6 October 2017, Glencore entered into an agreement with Off the Shelf Investments Fifty Six (RF) Proprietary Limited (OTS)
to acquire from OTS (i) a 75% stake in Chevron South Africa Proprietary Limited (Chevron SA) and certain related interests and
(ii) the entire issued share capital of Chevron Botswana Proprietary Limited (Chevron Botswana) following closing of OTS’s exercise
of its pre-emptive right to acquire these operations from the Chevron group. The aggregate consideration (subject to adjustment
for debt and working capital) is $973 million. The transaction is conditional on the receipt of all necessary regulatory approvals
by OTS and Glencore and is expected to close in mid-2018.
30. Contingent liabilities
The amount of corporate guarantees in favour of third parties as at 31 December 2017 was $Nil (2016: $Nil). Also see note 9.
The Group is subject to various claims which arise in the ordinary course of business as detailed below. These contingent liabilities
are reviewed on a regular basis and where practical an estimate is made of the potential financial impact on the Group. As at
31 December 2017 and 2016 it was not practical to make such an assessment.
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 defences 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, therefore resulting from any litigation will not
have a material adverse effect on its consolidated income, financial position or cash flows.
Environmental contingencies
Glencore’s operations 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. Any potential liability arising from these allegations is not expected
to have a material adverse effect on its consolidated income, financial position or cash flows.
Margin Call Guarantee
As part of the partnership with Qatar Investment Authority (see note 9) and in relation to the joint venture’s (QHG) ownership of
Rosneft shares, Glencore provided a margin guarantee up to EUR1.4 billion. The margin guarantee is subject to various loan to value
thresholds related to the financing provided to QHG. Appropriate Russian banks have in turn provided Glencore with a guarantee
which can and will be called upon in the event of drawdown under Glencore’s margin guarantee facility with QHG. As at
31 December 2017, $Nil has been called under the QHG margin guarantee.
In September 2017, QHG concluded an agreement with CEFC China Energy Company Limited to dispose of the majority of the
shares it held (amounting to a 14.16% stake in Rosneft). Following completion of the transaction, the margin guarantees provided by
Glencore will terminate. The transaction, subject to customary regulatory approval processes, is expected to complete in H1 2018.
31. Related party transactions
In the normal course of business, Glencore enters into various arm’s length transactions with related parties, 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 10, 12, and 23).
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, associates and joint ventures. In 2017, sales and purchases with associates and joint ventures amounted to
$1,859 million (2016: $1,570 million) and $7,485 million (2016: $3,194 million) respectively.
Remuneration of key management personnel
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO and the heads of the operating
segments. The remuneration of Directors and other members of key management personnel recognised in the consolidated
statement of income including salaries and other current employee benefits amounted to $22 million (2016: $13 million). There were
no other long-term benefits or share-based payments to key management personnel (2016: $Nil). Further details on remuneration
of Directors are set out in the Directors’ remuneration report on page 101.
189
Glencore Annual Report 2017 Notes to the financial statements
continued
32. Principal subsidiaries with material non-controlling interests
Non-controlling interest is comprised of the following:
US$ million
Volcan
Kazzinc
Koniambo
Katanga
Mutanda
Other1
Total
2017
1,733
1,438
(2,905)
(965)
–
399
(300)
2016
–
1,396
(2,653)
(511)
767
539
(462)
1 Other comprises various subsidiaries in which no individual balance attributable to non-controlling interests is material.
Summarised financial information in respect of Glencore’s subsidiaries that have material non-controlling interest
as at 31 December 2017, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
US$ million
31 December 2017
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
Equity attributable to owners of the Company
Non-controlling interests
Non-controlling interests in %
2017
Revenue
Expenses
Net profit/(loss) for the year
Profit attributable to owners of the Company
Profit attributable to non-controlling interests
Other comprehensive income attributable to owners of the Company
Other comprehensive income attributable to non-controlling interests
Total comprehensive income/(loss) for the year
Dividends paid to non-controlling interests
Net cash inflow/(outflow) from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Total net cash inflow
Kazzinc
Koniambo
Katanga
Volcan
4,659
1,234
5,893
763
378
1,141
4,752
3,314
1,438
30.3%
3,078
(2,517)
561
395
166
–
–
561
(124)
764
(196)
(511)
57
1,502
314
1,816
10,273
112
10,385
(8,569)
(5,664)
(2,905)
51.0%
–
(494)
(494)
(242)
(252)
–
–
(494)
–
–
(241)
256
15
4,333
889
5,222
3,760
2,593
6,353
(1,131)
(166)
(965)1
13.7%
25
(1,004)
(979)
(575)
(404)1
–
–
(979)
–
(177)
(369)
583
37
4,754
423
5,177
1,789
562
2,351
2,826
1,093
1,733
76.7%
160
(160)
–
–
–
–
–
–
–
–
–
–
–
1 Glencore has a 86.3% interest in Katanga Mining Limited, which in turn has a 75% interest in Kamoto Copper Company (KCC), the entity engaged in copper mining
activities. The “non-controlling interests” balance includes negative $939 million and the “profit attributable to non-controlling interests” balance includes negative
$310 million related to non-controlling interests arising at the KCC level.
190
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
US$ million
31 December 2016
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
Equity attributable to owners of the Company
Non-controlling interests
Non-controlling interests in %
2016
Revenue
Expenses
Net profit/(loss) for the year
Profit attributable to owners of the Company
Profit attributable to non-controlling interests
Other comprehensive income attributable to owners of the Company
Other comprehensive income attributable to non-controlling interests
Total comprehensive income/(loss) for the year
Dividends paid to non-controlling interests
Net cash inflow/(outflow) from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Total net cash inflow/(outflow)
Kazzinc
Koniambo
Katanga
Mutanda
4,703
1,014
5,717
719
391
1,110
4,607
3,211
1,396
30.3%
2,602
(2,211)
391
273
118
–
–
391
(38)
856
(122)
(567)
167
1,226
294
1,520
9,494
101
9,595
(8,075)
(5,422)
(2,653)
51.0%
152
(529)
(377)
(184)
(193)
–
–
(377)
–
–
(263)
210
(53)
4,424
652
5,076
3,380
1,848
5,228
(152)
359
(511)1
24.7%
–
(625)
(625)
(310)
(315)1
–
–
(625)
–
(161)
(213)
338
(36)
1 Glencore has a 75.3% interest in Katanga Mining Limited, which in turn has a 75% interest in Kamoto Copper Company (KCC), the entity engaged in copper mining
activities. The “non-controlling interests” balance includes negative $629 million and the “profit attributable to non-controlling interests” balance includes negative
$214 million related to non-controlling interests arising at the KCC level.
4,763
549
5,312
1,885
281
2,166
3,146
2,379
767
31.0%
1,322
(1,147)
175
121
54
–
–
175
–
428
(234)
(195)
(1)
191
Glencore Annual Report 2017 Notes to the financial statements
continued
33. Principal operating, finance and industrial subsidiaries and investments
Country
of incorporation
% interest
2017
% interest
2016
Main activity
Principal subsidiaries
Metals and minerals
Minera Alumbrera Limited1
Cobar Group
Compania Minera Lomas Bayas
Complejo Metalurgico Altonorte S.A.
Minera Altos de Punitaqui Limitada
Compania Minera Antapaccay S.A.
Pasar Group
Glencore Recycling Inc.
Mopani Copper Mines plc
Sable Zinc Kabwe Limited
Katanga Mining Limited2
Mutanda Group
Mount Isa Mines Limited
Kazzinc Ltd.
Zhairemsky GOK JSC
Vasilkovskoye Gold
Energia Austral Joint Venture
African Carbon Producers (Pty) Ltd
African Fine Carbon (Pty) Ltd
Char Technology (Pty) Ltd
Sphere Minerals Limited
Britannia Refined Metals Limited
Glencore Manganese Group
Access World Group
Murrin Murrin Group
Koniambo Nickel S.A.S.3
Glencore Nikkelverk AS
Eland Platinum Mines (Pty) Limited
McArthur River Mining Pty Ltd
Perkoa Group
Nordenhammer Zinkhütte GmbH
Asturiana de Zinc S.A.
Volcan Compania Minera S.A.A.4
AR Zinc Group
Portovesme S.r.L.
Rosh Pinah Zinc Corporation (Pty) Limited
Empresa Minera Los Quenuales S.A.
Sinchi Wayra Group
Antigua
Australia
Chile
Chile
Chile
Peru
Philippines
USA
Zambia
Zambia
Canada
DRC
Australia
Kazakhstan
Kazakhstan
Kazakhstan
Chile
South Africa
South Africa
South Africa
Australia
UK
France/Norway
Switzerland
Australia
New Caledonia
Norway
South Africa
Australia
Burkina Faso
Germany
Spain
Peru
Argentina
Italy
Namibia
Peru
Bolivia
50.0
100.0
100.0
100.0
100.0
100.0
78.2
100.0
73.1
100.0
86.3
100.0
100.0
69.7
69.7
69.7
66.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
100.0
0.0
100.0
0.0
100.0
100.0
23.3
100.0
100.0
0.0
97.6
100.0
50.0
100.0
100.0
100.0
100.0
100.0
78.2
100.0
73.1
100.0
75.3
69.0
100.0
69.7
69.7
69.7
66.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
100.0
74.0
100.0
90.0
100.0
100.0
7.3
100.0
100.0
80.1
97.6
100.0
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper/Cobalt production
Copper/Cobalt production
Copper/Zinc/Lead production
Copper/Zinc/Lead production
Copper/Zinc/Lead production
Gold production
Hydroelectric project
Char production
Char production
Char production
Iron Ore exploration
Lead production
Manganese furnace
Logistics services
Nickel production
Nickel production
Nickel production
Platinum production
Zinc production
Zinc production
Zinc production
Zinc production
Zinc production
Zinc/Lead production
Zinc/Lead production
Zinc/Lead production
Zinc/Lead production
Zinc/Tin production
1 This investment is treated as a subsidiary as the Group is entitled to elect the chairman of the Board who has the casting vote where any vote is split equally between
the four board positions. Minera Alumbrera Limited’s principal place of business is Argentina.
2 Publicly traded on the Toronto Stock Exchange under the symbol KAT.TO and principal place of business is DRC. Glencore owns 1,435,848,228 shares.
3 The Group has control of Koniambo Nickel S.A.S. as a result of the ability to direct the key activities of the operation and to appoint key management personnel
provided by the terms of the financing arrangements underlying the Koniambo project.
4 The Group has control of Volcan Compania Minera S.A.A. as a result of the ability to control the entity through the voting of its 63.0% of the voting shares (Class A);
the economic interest is diluted by the outstanding non-voting shares (Class B).
192
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Energy products
Cumnock No. 1 Colliery Pty Ltd
Enex Foydell Pty Ltd
Enex Liddell Pty Ltd
Oakbridge Pty Ltd
Glencore Coal Queensland Pty Limited
Jonsha Pty Limited
Mangoola Coal Operations Pty Limited
Mt Owen Pty Limited
Newlands, Collinsville
Oceanic Coal Australia Pty Limited
Ravensworth Operations Pty Ltd
Ulan Coal Mines Limited
United Collieries Pty Ltd
Prodeco Group
Izimbiwa Coal (Pty) Ltd5
Umcebo Mining (Pty) Ltd6
Tavistock Collieries (Pty) Limited
Topley Corporation
Glencore Exploration Cameroon Ltd.
Glencore Exploration (EG) Ltd.
Petrochad (Mangara) Limited
Chemoil Energy Limited
Country
of incorporation
% interest
2017
% interest
2016
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Colombia
South Africa
South Africa
South Africa
B.V.I.
Bermuda
Bermuda
Bermuda
Hong Kong
100.0
100.0
100.0
78.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.0
95.0
100.0
49.9
48.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
78.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.0
95.0
100.0
49.9
48.7
100.0
100.0
100.0
100.0
100.0
100.0
Main activity
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Ship owner
Oil production
Oil production
Oil exploration/production
Oil storage and bunkering
5 Although Glencore holds less than 50% of the voting rights, it has the ability to exercise control over Izimbiwa through the ability to direct the key activities of the operation
and to appoint key management personnel provided by the terms of the shareholder’s agreement.
6 Although Glencore holds less than 50% of the voting rights, it has the ability to exercise control over Umcebo as a result of shareholder agreements which provide Glencore
the ability to control the Board of Directors.
193
Glencore Annual Report 2017 Notes to the financial statements
continued
33. Principal operating, finance and industrial subsidiaries and investments continued
Country
of incorporation
% interest
2017
% interest
2016
Main activity
Other operating and finance
Xstrata Limited
Glencore Australia Investment Holdings Pty Ltd
Glencore Operations Australia Pty Limited
Glencore Queensland Limited
Glencore Investment Pty Ltd
Glencore Australia Holdings Pty Ltd
Glencore Finance (Bermuda) Ltd
Glencore Canada Financial Corp
Glencore Finance (Europe) Limited
Finges Investment B.V.
Glencore (Schweiz) AG
Glencore Group Funding Limited
Glencore Funding LLC
Glencore Australia Oil Pty Limited
Glencore Canada Corporation
Glencore Singapore Pte Ltd
ST Shipping & Transport Pte Ltd
Glencore AG
Glencore International AG
Glencore Commodities Ltd
Glencore Energy UK Ltd
Glencore UK Ltd
Principal joint ventures7
Glencore Agriculture Limited
Clermont Coal Group8
BaseCore Metals LP
Compania Minera Dona Ines de Collahuasi
El Aouj Joint Venture
Principal joint operations9
United Joint Venture
Wandoan Joint Venture
Bulga Joint Venture
Cumnock Joint Venture
Foybrook Joint Venture
Liddell Joint Venture
Oaky Creek Coal Joint Venture
Rolleston Joint Venture
Ulan Coal Mines Joint Venture
UK
Australia
Australia
Australia
Australia
Australia
Bermuda
Canada
Jersey
Netherlands
Switzerland
UAE
USA
Australia
Canada
Singapore
Singapore
Switzerland
Switzerland
UK
UK
UK
Jersey
Australia
Canada
Chile
Mauritania
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.9
25.1
50.0
44.0
50.0
95.0
75.0
68.3
90.0
67.5
67.5
55.0
75.0
90.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.9
25.1
0.0
44.0
50.0
95.0
75.0
68.3
90.0
67.5
67.5
55.0
75.0
90.0
Holding
Holding
Holding
Holding
Holding
Finance
Finance
Finance
Finance
Finance
Finance
Finance
Finance
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Agriculture business
Coal production
Copper production
Copper production
Iron Ore production
Coal exploration
Coal exploration
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
7 The principal joint arrangements are accounted for as joint ventures as the shareholder agreements do not provide the Group the ability to solely control the entities.
8 The Group’s effective 25.05% economic interest in Clermont Coal is held through GS Coal Pty Ltd, a 50:50 joint venture with Sumitomo Corporation.
9 Classified as joint operations under IFRS 11, as these joint arrangements are not structured through separate vehicles.
194
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Country
of incorporation
% interest
2017
% interest
2016
Principal joint operations continued
ARM Coal (Pty) Ltd.
Goedgevonden Joint Venture
Ernest Henry Mining Pty Ltd.
Merafe Pooling and Sharing Joint Venture
Kabanga Joint Venture
Mototolo Joint Venture
Rhovan Pooling and Sharing Joint Venture
Principal associates
Carbones del Cerrejon LLC
Port Kembla Coal Terminal Limited
Port Waratah Coal Services Ltd
Wiggins Island Coal Export Terminal
South Africa
South Africa
Australia
South Africa
Tanzania
South Africa
South Africa
Colombia
Australia
Australia
Australia
Richards Bay Coal Terminal Company Limited
South Africa
Polymet Mining Corp.
Century Aluminum Company10
HG Storage International Limited
Noranda Income Fund
Trevali Mining Company11
Compania Minera Antamina S.A.
Recylex S.A.
Other investments
United Company Rusal plc
OAO NK Russneft12
Canada
USA
Jersey
Canada
Canada
Peru
France
Jersey
Russia
49.0
74.0
70.0
79.5
50.0
38.0
74.0
33.3
29.7
15.5
20.0
26.7
28.4
47.4
49.0
25.0
25.6
33.8
32.2
8.8
25.0
49.0
74.0
70.0
79.5
50.0
37.0
74.0
33.3
29.7
15.5
16.7
26.7
28.4
47.5
100.0
25.0
5.3
33.8
32.2
8.8
25.0
Main activity
Coal production
Coal production
Copper production
Ferroalloys production
Nickel production
Platinum production
Vanadium production
Coal production
Coal terminal
Coal terminal
Coal terminal
Coal terminal
Copper production
Diversified production
Oil storage
Zinc production
Zinc production
Zinc/Copper production
Zinc/Lead production
Aluminium production
Oil production
10 Represents the Group’s economic interest in Century, comprising 42.9% (2016: 42.9%) voting interest and 4.5% non-voting interest (2016: 4.6%). Century is publicly
traded on NASDAQ under the symbol CENX.
11 In August 2017, the Group acquired an additional interest in Trevali Mining Corporation in exchange for interests in Rosh Pinah, Perkoa and cash consideration
of $245 million.
12 Although the Group holds more than 20% of the voting rights in Russneft, it is unable to exercise significant influence over the financial and operating policy decisions
of Russneft.
195
Glencore Annual Report 2017 Additional
information
197
202
204
211
219
Alternative performance measures
Other reconciliations
Production by quarter – Q4 2016 to Q4 2017
Resources and reserves
Shareholder information
196
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Alternative performance measures
Alternative performance measures are denoted by the symbol ◊
When assessing and discussing the Group’s reported financial performance, financial position and cash flows, Glencore makes
reference to Alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS, but
are derived from the financial statements prepared in accordance with IFRS. The APMs are consistent with how the business
performance is measured and reported within the internal management reporting to the Board and management and assist
in providing meaningful analysis of the Group’s results both internally and externally in discussions with the financial analyst and
investment community.
The Group uses APMs to improve the comparability of information between reporting periods and segments and to aid the
understanding of the activity taking place across the Group by adjusting for items that are of an infrequent nature and by
aggregating or disaggregating (notably in the case of relevant material associates and joint ventures accounted for on an equity
basis) certain IFRS measures. APMs are also used to approximate the underlying operating cash flow generation of the operations
(Adjusted EBITDA).
Investments in the extractive industry are typically significant and the initial spend generally occurs over several years, “upfront”,
prior to the operations generating cash. As a result, the investments are sometimes made with partners and an assessment to
approximate the operating cash flow generation/pay-back of the investment (Adjusted EBITDA) is required. Against this backdrop,
the key APMs used by Glencore are Adjusted EBITDA, Net funding/Net debt and the disaggregation of the equivalent key APMs
of our relevant material associates and joint ventures (“Proportionate adjustment”) to enable a consistent evaluation of the financial
performance and returns attributable to the Group.
Adjusted EBITDA is a useful approximation of the operating cash flow generation by eliminating depreciation and amortisation
adjustments. Adjusted EBITDA is not a direct measure of our liquidity, which is shown by our cash flow statement and needs to be
considered in the context of our financial commitments.
Proportionate adjustments are useful to enable a consistent evaluation of the financial performance and returns available to the
Group, irrespective of the differing accounting treatments required to account for our minority/joint ownership interests of our
relevant material investments.
Net funding is an aggregation of IFRS measures (Borrowings less cash and cash equivalents) and Net debt is Net funding less Readily
marketable inventories and provides a measure of our financial leverage and, through Net debt to Adjusted EBITDA relationships,
provides an indication of relative financial strength and flexibility.
APMs used by Glencore may not be comparable with similarly titled measures and disclosures by other companies. APMs have
limitations as an analytical tool, and a user of the financial statements should not consider these measures in isolation from,
or as a substitute for, analysis of the Group’s results of operations; and they may not be indicative of the Group’s historical operating
results, nor are they meant to be a projection or forecast of its future results.
Listed below are the definitions and reconciliations to the underlying IFRS measures of the various APMs used by the Group.
Proportionate adjustment
For internal reporting and analysis, management evaluates the performance of Antamina copper/zinc mine (34% owned),
Cerrejón coal mine (33% owned), Collahuasi copper mine (44% owned) and Glencore Agri (50% owned) under the proportionate
consolidation method reflecting Glencore’s proportionate share of the revenues, expenses, assets and liabilities of these investments.
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
associates and joint ventures” below.
APMs derived from the statement of income
Revenue
Revenue represents revenue by segment (see note 2 of the financial statements), as reported on the face of the statement
of income plus the relevant Proportionate adjustments. See reconciliation table below.
US$ million
Revenue – Marketing activities
Revenue – Industrial activities
Revenue
Proportionate adjustment – revenue
Discontinued operations – revenue
Revenue – reported measure
2017
181,827
39,552
221,379
(15,903)
–
205,476
2016
145,984
31,367
177,351
(3,518)
(20,885)
152,948
197
Glencore Annual Report 2017 Alternative performance measures
continued
Share of income from material associates and joint ventures
US$ million
Associates’ and joint ventures’ Adjusted EBITDA
Depreciation and amortisation
Associates’ and joint ventures’ Adjusted EBIT
Impairment, net of tax1
Net finance costs
Income tax expense
Share of income from material associates and joint ventures
Share of income/(loss) from other associates
Share of income from associates and joint ventures2
2017
2,440
(812)
1,628
–
(74)
(517)
(591)
1,037
121
1,158
2016
1,447
(705)
742
(345)
(16)
(248)
(609)
133
(122)
11
1
In 2016, Energy products segment comprises an impairment of $345 million, net of taxes of $176 million relating to Cerrejón, resulting from reduced near term production
estimates due to increased risk related to the possibility of delays in sourcing approvals as a result of the continued social and environmental challenges to current
mine plans.
2 Comprises share in earnings of $164 million (2016: $12 million) from Marketing activities and $994 million (2016: losses of $1 million) from Industrial activities.
Adjusted EBIT/EBITDA
Adjusted EBIT/EBITDA provide insight into our overall business performance (a combination of cost management, seizing market
opportunities and growth), and are the corresponding flow drivers towards our objective of achieving industry-leading returns.
Adjusted EBIT is the net result of revenue less cost of goods sold and selling and administrative expenses, plus share of income from
associates and joint ventures, dividend income and the attributable share of Adjusted EBIT of relevant material associates and joint
ventures, which are accounted for internally by means of proportionate consolidation, excluding Significant items, see definition
below. In addition, the segment information includes Glencore Agri, which was disclosed as a discontinued operation until close
of transaction on 1 December 2016, see note 24 of the financial statements.
Adjusted EBITDA consists of Adjusted EBIT plus depreciation and amortisation, including the related Proportionate adjustments.
See reconciliation table below.
2017
2016
205,476
(197,695)
(1,310)
1,158
28
7,657
6
523
(225)
591
–
8,552
5,398
812
–
14,762
152,948
(149,763)
(1,102)
11
27
2,121
132
374
225
609
469
3,930
5,573
705
60
10,268
US$ million
Reported measures
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates and joint ventures
Dividend income
Adjustments to reported measures
Share of associates’ significant items
Unrealised intergroup profit elimination
Mark-to-market valuation on certain coal hedging contracts
Proportionate adjustment – net finance and income tax expense
Adjusted EBIT from discontinued operations
Adjusted EBIT from continuing and discontinued operations
Depreciation and amortisation from continuing operations
Proportionate adjustment – depreciation
Discontinued operations – depreciation
Adjusted EBITDA from continuing and discontinued operations
198
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Significant items
Significant items of income and expense which, due to their variable financial impact 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. Refer to reconciliation below.
Reconciliation of net significant items 2017
US$ million
Share of Associates’ significant items1
Mark-to-market valuation on certain coal hedging contracts1
Unrealised intergroup profit elimination1
Gains on disposals and investments2
Other expense – net3
Income tax impact from significant items
Total significant items
1 See note 2 of the financial statements.
2 See note 3 of the financial statements.
3 See note 4 of the financial statements.
Reconciliation of net significant items 2016
US$ million
Share of Associates’ significant items1
Mark-to-market valuation on certain coal hedging contracts1
Unrealised intergroup profit elimination1
Gains on disposals and investments2
Gains on disposals and investments related to discontinued operations3
Gain on disposals of discontinued operations3
Other expense – net4
Other expense – net related to material associates and joint ventures5
Other expense – net related to discontinued operations3
Income tax impact from significant items
Total significant items
1 See note 2 of the financial statements.
2 See note 3 of the financial statements.
3 See note 24 of the financial statements.
4 See note 4 of the financial statements.
5 See Proportionate adjustment reconciliation above.
Gross significant
charges
Non-controlling
interests’ share
Equity holders’
share
(6)
225
(523)
1,309
(594)
(187)
224
–
–
–
–
45
–
45
(6)
225
(523)
1,309
(549)
(187)
269
Gross significant
charges
Non-controlling
interests’ share
Equity holders’
share
(132)
(225)
(374)
489
33
1,848
(1,626)
(345)
(26)
(276)
(634)
–
–
–
–
–
–
21
–
–
–
21
(132)
(225)
(374)
489
33
1,848
(1,605)
(345)
(26)
(276)
(613)
Net income attributable to equity shareholder pre-significant items
Net income attributable to equity shareholders pre-significant items is a measure of our ability to generate shareholder returns.
The calculation of tax items to be excluded from Net income, includes tax significant items and the tax effect of non-tax significant
items themselves. Refer to earnings summary in the financial review section and reconciliation of tax expense below.
199
Glencore Annual Report 2017 Alternative performance measures
continued
APMs derived from the statement of financial position
Net funding/Net debt and Net debt to Adjusted EBITDA
Net funding/debt demonstrates how our debt is being managed and is an important factor in ensuring we maintain an investment
grade rating status and a competitive cost of capital. Net debt is defined as total current and non-current borrowings less cash
and cash equivalents, readily marketable inventories and related Proportionate adjustments. The net debt assumed in the Volcan
acquisition (completed mid-November 2017) has also been adjusted to provide a more consistent and comparative analysis, but
mostly to reflect the Group’s relatively low 23.3% economic ownership (compared to its 63.0% voting interest) in this still fully
ring-fenced listed entity, with its standalone, independent and separate capital structure. In addition, the relationship of Net debt
to Adjusted EBITDA provides an indication of financial flexibility. See reconciliation table below.
Readily marketable inventories (RMI)
RMI comprising the core inventories which underpin and facilitate Glencore’s marketing activities, represent inventories, that in
Glencore’s assessment, are readily convertible into cash in the short term due to their liquid nature, widely available markets and
the fact that price risk is primarily covered either by a forward physical sale or hedge transaction. Glencore regularly assesses the
composition of these inventories and their applicability, relevance and availability to the marketing activities. As at 31 December 2017,
$22,225 million (2016: $17,093 million) of inventories were considered readily marketable. This comprises $16,649 million (2016:
$12,707 million) of inventories carried at fair value less costs of disposal and $5,576 million (2016: $4,386 million) carried at the lower of
cost or net realisable value. Total readily marketable inventories includes $1,559 million related to the relevant material associates and
joint ventures (see note 2) presented under the proportionate consolidation method, comprising $1,305 million of inventory carried
at fair value less cost of disposal and $254 million carried at lower of cost or net realisable value. Given the highly liquid nature of
these inventories, which represent a significant share of current assets, the Group believes it is appropriate to consider them together
with cash equivalents in analysing Group net debt levels and computing certain debt coverage ratios and credit trends.
Net funding/net debt at 31 December 2017
Reported
measure
Proportionate
adjustment
Volcan
Adjusted
measure
24,532
9,402
33,934
(2,124)
31,810
(20,666)
11,144
356
1,650
2,006
(214)
1,792
(1,559)
233
(629)
(177)
(806)
102
(704)
–
(704)
24,259
10,875
35,134
(2,236)
32,898
(22,225)
10,673
14,762
0.72x
Reported
measure
Proportionate
adjustment
Adjusted
measure
23,188
10,030
33,218
(2,518)
30,700
(15,375)
15,325
380
1,737
2,117
(198)
1,919
(1,718)
201
23,568
11,767
35,335
(2,716)
32,619
(17,093)
15,526
10,268
1.51x
US$ million
Non-current borrowings
Current borrowings
Total borrowings
Less: cash and cash equivalents
Net funding
Less: Readily marketable inventories
Net debt
Adjusted EBITDA
Net debt to Adjusted EBITDA
Net funding/net debt at 31 December 2016
US$ million
Non-current borrowings
Current borrowings
Total borrowings
Less: cash and cash equivalents
Net funding
Less: Readily marketable inventories
Net debt
Adjusted EBITDA
Net debt to Adjusted EBITDA
200
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
APMs derived from the statement of cash flows
Capital expenditure (“Capex”)
Capital expenditure is cash expenditure on property, plant and equipment. For internal reporting and analysis, Capex includes
related Proportionate adjustments. See reconciliation table below.
US$ million
Capital expenditure – Marketing activities
Capital expenditure – Industrial activities
Capital expenditure
Proportionate adjustment – capital expenditure
Capital expenditure – reported measure
2017
214
4,020
4,234
(611)
3,623
2016
182
3,315
3,497
(407)
3,090
Funds from operations (FFO) and FFO to Net debt
FFO is a measure that reflects our ability to generate cash for investment, debt servicing and distributions to shareholders.
It comprises cash provided by operating activities before working capital changes, less tax and net interest payments plus dividends
received, related Proportionate adjustments and Significant items, mainly comprising movements in coal related mark-to-market
items. In addition, the relationship of FFO to net debt is an indication of our financial flexibility and strength. See reconciliation
table below.
2017 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Share in earnings from associates included in EBITDA
Adjusted cash generated by operating activities before working capital changes
Coal related hedging included above (via statement of income – refer to note 2)
Income taxes paid
Interest received
Interest paid
Dividend received from associates and joint ventures
Funds from operations (FFO)
Net debt
FFO to Net debt
2016 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Adjusted cash generated by operating activities before working capital changes
Coal related hedging and legal costs included above (via statement of income – refer to note 2)
Income taxes paid
Interest received
Interest paid
Dividend received from associates and joint ventures
Funds from operations (FFO)
Net debt
FFO to Net debt
Reported
measure
Proportionate
adjustment
Adjusted
measure
11,866
–
–
11,866
(225)
(921)
106
(1,269)
1,081
10,638
–
2,440
(39)
2,401
–
(451)
8
(44)
(996)
918
Reported
measure
Proportionate
adjustment
7,868
–
7,868
368
(584)
111
(1,376)
833
7,220
–
1,447
1,447
–
(96)
–
(6)
(795)
550
11,866
2,440
(39)
14,267
(225)
(1,372)
114
(1,313)
85
11,556
10,673
108.3%
Adjusted
measure
7,868
1,447
9,315
368
(680)
111
(1,382)
38
7,770
15,526
50%
201
Glencore Annual Report 2017 Other reconciliations
Other reconciliations
Available committed liquidity1
US$ million
Cash and cash equivalents – reported
Proportionate adjustment – cash and cash equivalents
Headline committed syndicated revolving credit facilities
Amount drawn under syndicated revolving credit facilities
Amounts drawn under U.S. commercial paper programme
Total
1 Presented on an adjusted measured basis.
Cash flow related adjustments 2017
US$ million
Funds from operations (FFO)
Working capital changes
Net cash used in acquisitions of subsidiaries1
Net cash received from disposal of subsidiaries2
Purchase of investments1
Proceeds from sale of investments1
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment2
Margin receipts in respect of financing related hedging activities
Acquisition of additional interests in subsidiaries1
Return of capital/distributions to non-controlling interests
Disposal of own shares
Distributions paid to equity holders of the Parent
Coal related hedging
Cash movement in net funding
1 Cash flows related to capital efficient growth.
2 Cash flows related to disposals.
Cash flow related adjustments 2016
US$ million
Funds from operations (FFO)
Working capital changes (excluding gold and silver streaming proceeds)
Gold and silver streaming proceeds
Net cash received in acquisition of subsidiaries
Net cash received from disposal of subsidiaries
Purchase of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Margin calls in respect of financing related hedging activities
Acquisition of additional interest in subsidiaries
Return of capital/distributions to non-controlling interests
Proceeds from own shares
Coal related hedging and legal costs
Cash movement in net funding
202
2017
2,124
214
12,760
(994)
(1,230)
12,874
Reported
measure
Proportionate
adjustment
10,638
(4,965)
(674)
706
(378)
36
(3,586)
282
1,255
(561)
(194)
17
(998)
225
1,803
918
(108)
(57)
33
(8)
–
(605)
11
–
–
–
–
–
–
184
2016
2,518
198
14,500
(476)
–
16,740
Adjusted
measure
11,556
(5,073)
(731)
739
(386)
36
(4,191)
293
1,255
(561)
(194)
17
(998)
225
1,987
Reported
measure
Proportionate
adjustment
Adjusted
measure
7,220
(2,157)
971
176
5,535
(15)
3
(3,048)
128
(695)
(7)
(91)
3
(368)
7,655
550
(214)
–
–
233
(1)
–
(394)
8
–
–
–
–
–
182
7,770
(2,371)
971
176
5,768
(16)
3
(3,442)
136
(695)
(7)
(91)
3
(368)
7,837
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Reconciliation of tax expense 2017
US$ million
Adjusted EBIT, pre-significant items
Net finance costs
Adjustments for:
Net finance costs from material associates and joint ventures
Share of income from other associates pre-significant items
Profit on a proportionate consolidation basis before tax and pre-significant items
Income tax expense, pre-significant items
Adjustments for:
Tax expense from material associates and joint ventures
Tax expense on a proportionate consolidation basis
Applicable tax rate
US$ million
Total
8,552
(1,451)
(74)
(127)
6,900
(1,572)
(517)
(2,089)
30.3%
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures tax
Tax expense on the basis of the income statement
2,089
(517)
1,572
187
–
187
1 Represents the tax impact on current period significant items and tax significant items in their own right.
Reconciliation of tax expense 2016
US$ million
Adjusted EBIT, pre-significant items
Net finance costs
Adjustments for:
Net finance costs from material associates and joint ventures
Net finance costs from discontinued operations1
Share of income from other associates pre-significant items
Share of income from associates from discontinued operations1
Profit on a proportionate consolidation basis before tax and pre-significant items
Income tax expense, pre-significant items
Adjustments for:
Tax expense from material associates and joint ventures
Tax expense from discontinued operations1
Tax expense on a proportionate consolidation basis
Applicable tax rate
1 See note 24 of the financial statements.
US$ million
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures’ tax
Adjustment in respect of discontinued operations
Tax expense on the basis of the income statement
1 Represents the tax impact on current period significant items and tax significant items in their own right.
2,276
(517)
1,759
Total
3,930
(1,533)
(16)
(70)
(10)
(15)
2,286
(362)
(248)
(131)
(741)
32.4%
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
741
(248)
(131)
362
276
–
–
276
1,017
(248)
(131)
638
203
Glencore Annual Report 2017 Production by quarter – Q4 2016 to Q4 2017
Metals and minerals
Production from own sources – Total1
Copper
Zinc
Lead
Nickel
Gold
Silver
Cobalt
Ferrochrome
Platinum
Palladium
Rhodium
Vanadium Pentoxide
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
kt
kt
kt
kt
koz
koz
kt
kt
koz
koz
koz
mlb
364.6
304.9
74.6
32.7
282
324.1
279.2
68.9
24.9
259
318.8
291.6
70.3
26.3
265
303.6
256.6
71.5
29.5
247
363.2 1,309.7
1,425.8
262.8 1,090.2
1,094.1
61.8
28.4
262
272.5
109.1
1,033
294.2
115.1
1,027
10,079
9,295
10,215
9,298
8,935
37,743
39,069
7.3
417
32
45
3
5.5
6.3
439
37
46
4
5.1
6.4
397
28
36
4
4.4
7.1
271
28
43
2
6.1
7.6
424
23
36
3
5.3
27.4
1,531
116
161
13
20.9
28.3
1,523
148
209
16
21.1
Production from own sources – Copper assets1
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
(8)
–
(7)
(5)
1
(3)
(3)
1
(22)
(23)
(19)
(1)
–
(14)
(17)
(13)
(7)
(11)
4
2
(28)
(20)
–
(4)
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
African Copper (Katanga, Mutanda, Mopani)
Katanga
Copper metal
Copper in concentrates
Mutanda
Copper metal
Cobalt3
Mopani
Copper metal
kt
kt
kt
kt
kt
–
–
51.0
6.3
10.5
African Copper – total production including third party feed
Mutanda
Copper metal
Cobalt3
Mopani
Copper metal
Total Copper metal
Total Copper in concentrates
Total Cobalt3
Collahuasi4
Copper metal
Copper in concentrates
Silver in concentrates
Antamina5
Copper in concentrates
Zinc in concentrates
kt
kt
kt
kt
kt
kt
kt
kt
koz
kt
kt
51.0
6.3
28.4
61.5
–
6.3
0.3
58.3
761
33.2
26.7
n.m.
n.m.
1
6
43
4
6
44
12
n.m.
6
–
–
48.8
5.7
8.1
48.8
5.7
21.9
–
–
47.7
5.5
6.9
–
–
44.1
6.0
11.7
2.2
2.7
51.5
6.7
15.0
2.2
2.7
–
–
192.1
213.3
23.9
41.7
24.5
41.1
n.m.
n.m.
(10)
(2)
1
51.7
5.5
12.5
45.1
6.0
23.7
53.2
198.8
213.3
6.7
40.8
23.9
98.9
24.5
110.0
(7)
(2)
(10)
56.9
54.6
55.8
68.7
236.0
254.4
(7)
–
5.7
–
57.6
774
30.3
24.5
–
5.5
–
51.0
748
40.0
34.5
–
6.0
–
58.4
766
37.2
34.5
2.7
6.7
–
63.5
815
35.1
34.6
2.7
23.9
–
n.m.
24.5
(2)
–
2.1
(100)
(100)
230.5
3,103
220.8
3,276
142.6
128.1
6,579
145.5
66.8
6,778
4
(5)
(2)
92
(3)
9
7
6
30
(8)
Silver in concentrates
koz
1,607
1,445
1,882
1,772
1,480
204
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals
Production from own sources – Copper assets1 continued
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Other South America (Alumbrera, Lomas Bayas, Antapaccay, Punitaqui)
Alumbrera
Copper in concentrates
24.5
11.4
kt
Gold in concentrates and in doré koz
Silver in concentrates and in doré koz
Lomas Bayas Copper metal
Antapaccay
Copper in concentrates
Gold in concentrates
Silver in concentrates
Punitaqui
Copper in concentrates
Gold in concentrates
Silver in concentrates
Total Copper metal
Total Copper in concentrates
Total Gold in concentrates
and in doré
Total Silver in concentrates
and in doré
71
268
21.0
55.6
37
402
1.8
4
24
21.0
81.9
48
119
20.3
46.4
29
326
1.6
5
18
20.3
59.4
kt
kt
koz
koz
kt
koz
koz
kt
kt
9.1
49
79
20.7
50.1
26
324
1.2
6
17
20.7
60.4
7.3
53
64
19.9
47.3
34
359
1.4
4
14
19.9
56.0
5.5
38
44
17.2
62.7
50
446
1.3
6
11
33.3
188
306
78.1
81.9
256
748
80.0
206.5
219.9
139
115
1,455
1,536
5.5
21
60
7.0
11
82
17.2
69.5
78.1
80.0
245.3
308.8
koz
112
82
81
91
94
348
382
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
(59)
(27)
(59)
(2)
(6)
21
(5)
(21)
91
(27)
(2)
(21)
(9)
(78)
(46)
(84)
(18)
13
35
11
(28)
50
(54)
(18)
(15)
(16)
koz
694
463
420
437
501
1,821
2,366
(23)
(28)
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Mount Isa,
Ernest
Copper metal
kt
56.1
48.5
42.5
27.0
46.6
164.6
205.1
(20)
(17)
Henry,
Townsville
Copper in concentrates
Gold
Silver
Silver in concentrates
kt
koz
koz
koz
–
25
343
–
–
17
261
–
–
21
196
–
7.4
9
387
38
5.1
20
252
23
12.5
67
–
86
1,096
1,251
n.m.
n.m.
(22)
(12)
(20)
(27)
61
–
n.m.
n.m.
Mount Isa, Ernest Henry, Townsville – total production including third party feed
64.6
54.8
62.8
49.2
60.6
227.4
275.5
(17)
(6)
Copper metal
Copper in concentrates
Gold
Silver
Silver in concentrates
Cobar
Copper in concentrates
Silver in concentrates
Total Copper
Total Copper in concentrates
Total Gold
Total Silver
Total Copper department
Copper
Cobalt
Zinc
Gold
Silver
kt
kt
koz
koz
koz
kt
koz
kt
kt
koz
koz
kt
kt
kt
koz
koz
12.5
161
135
1,481
2,271
–
n.m.
n.m.
19
(35)
15
(52)
61
–
n.m.
n.m.
–
34
525
–
15.4
154
56.1
15.4
25
497
–
46
349
–
12.7
128
48.5
12.7
17
389
–
43
432
–
12.7
156
42.5
12.7
21
352
7.4
33
447
38
12.3
134
27.0
19.7
9
559
5.1
39
253
23
15.7
146
46.6
20.8
20
421
53.4
564
53.9
543
164.6
65.9
67
205.1
53.9
86
1,721
1,794
327.7
285.7
281.9
274.0
324.1
1,165.7 1,270.6
6.3
26.7
137
5.7
24.5
99
5.5
34.5
102
6.0
34.5
100
6.7
34.6
114
23.9
128.1
415
24.5
66.8
468
3,559
3,071
3,402
3,534
3,217
13,224
14,214
(1)
4
(20)
22
(22)
(4)
(8)
(2)
92
(11)
(7)
2
(5)
(17)
35
(20)
(15)
(1)
6
30
(17)
(10)
205
Glencore Annual Report 2017 Production by quarter – Q4 2016 to Q4 2017
continued
Metals and minerals
Production from own sources – Zinc assets1
Kazzinc
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Zinc metal
Lead metal
Lead in concentrates
Copper metal2
Gold
Silver
Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
51.0
11.8
1.5
12.4
137
48.1
11.3
2.3
12.7
150
54.1
13.8
1.6
15.2
156
54.9
16.1
0.8
6.3
138
53.4
11.7
–
15.5
141
210.5
187.6
52.9
4.7
49.7
585
44.0
15.2
53.9
521
1,277
1,152
1,702
1,591
1,335
5,780
4,510
29
55
51
19
7
132
469
Kazzinc – total production including third party feed
Zinc metal
Lead metal
Lead in concentrates
Copper metal
Gold
Silver
Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
77.4
32.3
1.5
15.3
175
75.3
36.5
2.3
15.2
172
77.2
36.9
1.6
18.9
187
81.9
38.4
0.8
7.8
169
82.4
34.5
–
20.8
184
316.8
146.3
4.7
62.7
712
305.5
133.6
15.2
68.2
658
6,346
5,572
6,396
5,201
5,483 22,652 27,408
29
55
51
19
7
132
469
Australia (Mount Isa, McArthur River)
Mount Isa
Zinc in concentrates
Lead in concentrates
Silver in concentrates
McArthur River Zinc in concentrates
Lead in concentrates
Silver in concentrates
kt
kt
75.3
39.5
68.7
31.8
64.0
30.1
51.3
27.2
42.0
22.5
koz
2,038
1,658
1,539
1,251
1,046
kt
kt
koz
62.9
10.8
293
Total Zinc in concentrates
Total Lead in concentrates
kt
kt
138.2
50.3
Total Silver in concentrates
koz
2,331
North America (Matagami, Kidd, Brunswick, CEZ Refinery)
Matagami
Zinc in concentrates
kt
Copper in concentrates
Kidd
Zinc in concentrates
Copper in concentrates
Silver in concentrates
Total Zinc in concentrates
Total Copper in concentrates
Total Silver in concentrates
kt
kt
kt
koz
kt
kt
koz
11.0
1.8
22.2
9.9
674
33.2
11.7
674
46.9
8.7
277
115.6
40.5
1,935
11.0
2.0
24.0
10.3
663
35.0
12.3
663
38.2
8.3
269
102.2
38.4
1,808
14.0
2.1
22.2
9.2
842
36.2
11.3
842
45.6
10.8
400
96.9
38.0
1,651
13.2
1.3
11.4
9.1
379
24.6
10.4
379
79.3
17.0
674
121.3
39.5
1,720
13.1
2.0
14.8
11.3
387
27.9
13.3
387
226.0
111.6
5,494
210.0
44.8
1,620
436.0
156.4
7,114
51.3
7.4
72.4
39.9
288.2
143.3
7,332
200.2
42.1
1,409
488.4
185.4
8,741
51.6
9.7
78.5
38.3
2,271
2,292
123.7
47.3
130.1
48.0
2,271
2,292
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
12
20
(69)
(8)
12
28
(72)
4
10
5
(1)
(100)
25
3
5
(76)
6
7
(69)
(100)
(8)
8
(17)
(72)
(22)
(22)
(25)
5
6
15
(11)
(16)
(19)
(1)
(24)
(8)
4
(1)
(5)
(1)
(1)
36
5
(14)
(76)
(44)
(43)
(49)
26
57
130
(12)
(21)
(26)
19
11
(33)
14
(43)
(16)
14
(43)
North America – total production including third party feed
Brunswick
Smelter
Lead metal
Silver metal
CEZ Refinery6 Zinc metal
kt
koz
kt
16.4
15.7
16.5
17.6
12.7
62.5
69.5
5,048
4,232
3,480
5,025
3,689 16,426 20,764
18.1
12.5
12.6
8.5
11.5
45.1
69.3
(10)
(21)
(35)
(23)
(27)
(36)
206
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals
Production from own sources – Zinc assets1 continued
Other Zinc: South America (Argentina, Bolivia, Peru)
Zinc in concentrates
Lead metal
Lead in concentrates
Copper in concentrates
Silver metal
Silver in concentrates
Other Zinc: Africa (Rosh Pinah, Perkoa)
Zinc in concentrates
Lead in concentrates
Silver in concentrates
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
kt
kt
kt
kt
koz
koz
kt
kt
koz
kt
kt
kt
koz
koz
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
22.5
3.5
6.1
0.5
206
24.9
2.6
11.3
0.5
108
26.3
23.0
25.6
3.6
11.4
0.6
182
3.5
11.8
1.0
155
3.9
6.7
1.3
192
99.8
13.6
41.2
3.4
637
99.0
12.7
29.7
2.1
666
1,852
2,081
2,011
1,764
1,919
7,775
7,271
1
7
39
62
(4)
7
14
11
10
160
(7)
4
33.3
1.4
53
31.1
0.9
47
38.3
22.7
1.5
74
1.3
36
–
–
–
92.1
3.7
157
122.2
7.2
282
(25)
(49)
(44)
(100)
(100)
(100)
278.2
254.7
257.1
222.1
228.2
962.1 1,027.3
74.6
24.6
137
68.9
25.5
150
70.3
27.1
156
71.5
17.7
138
61.8
30.1
141
272.5
100.4
585
294.2
104.0
521
6,422
6,041
6,670
5,595
5,560
23,866
24,231
(6)
(7)
(3)
12
(2)
(18)
(17)
22
3
(13)
South American production above excludes Volcan Compania Minera. Owing to the recent timing of the share tender in Q4 2017 (Glencore now has 63% of the voting shares
and a 23% overall economic interest), management is in preliminary stages of reviewing the operations and the associated reporting framework. Therefore production data
has been excluded, which currently provides a more consistent comparative analysis.
207
Glencore Annual Report 2017 Production by quarter – Q4 2016 to Q4 2017
continued
Metals and minerals
Production from own sources – Nickel assets1
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
Gold
Silver
Platinum
Palladium
Rhodium
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
18.3
13.9
15.5
14.0
13.6
0.2
4.6
7.7
0.3
8
98
19
36
1
0.2
3.9
9.0
0.1
10
0.1
4.2
5.6
0.3
7
0.1
3.9
8.0
0.2
8
0.1
3.6
5.4
0.2
7
183
143
169
158
23
37
2
13
27
1
20
38
1
19
34
2
Integrated Nickel Operations – total production including third party feed
23.3
22.6
21.2
21.4
21.3
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
Gold
Silver
Platinum
Palladium
Rhodium
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
0.1
5.9
6.5
1.0
9
211
19
41
2
0.1
5.9
9.6
0.8
11
0.2
5.0
6.7
0.9
10
258
232
29
62
1
25
58
2
57.0
0.5
15.6
28.0
0.8
32
653
75
136
6
86.5
0.6
22.7
33.0
3.5
43
976
103
211
7
65.6
0.6
16.6
34.6
1.0
37
624
90
173
6
92.7
0.7
28.1
40.6
3.5
50
994
123
254
8
0.2
6.9
9.1
1.0
11
141
25
52
2
13.2
0.8
0.2
5.9
10.2
0.8
13
275
30
50
2
6.2
0.5
8.2
0.5
7.3
0.6
11.1
0.9
9.5
0.7
34.1
2.7
35.3
2.8
9.5
0.8
13.0
0.9
11.3
0.8
42.0
3.0
46.0
3.2
4.1
4.6
3.4
4.3
5.2
17.5
13.6
29
27
32.7
12.3
1.0
8
98
19
36
1
24.9
12.9
0.6
10
183
23
37
2
26.3
9.8
0.9
7
143
13
27
1
29.5
11.9
1.1
8
169
20
38
1
28.4
9.0
0.9
7
158
19
34
2
109.1
43.6
115.1
51.2
3.5
32
653
75
136
6
3.8
37
624
90
173
6
(5)
(15)
(8)
(14)
5
(17)
(21)
–
(13)
(27)
(10)
(13)
61
–
(6)
100
Murrin Murrin
Total Nickel metal
Total Cobalt metal
kt
kt
10.1
0.7
Murrin Murrin – total production including third party feed
Total Nickel metal
Total Cobalt metal
Koniambo
Nickel in ferronickel
Total Nickel department
Nickel
Copper
Cobalt
Gold
Silver
Platinum
Palladium
Rhodium
kt
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
208
(13)
(17)
(6)
(19)
(20)
(14)
5
(17)
(21)
–
(7)
(14)
(19)
(19)
–
(14)
(2)
(16)
(17)
(13)
(3)
(4)
(9)
(6)
(26)
(50)
(22)
(30)
(33)
(13)
61
–
(6)
100
(9)
–
(28)
(26)
(10)
(9)
65
–
12
–
(6)
–
(14)
–
Glencore Annual Report 2017
Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals
Production from own sources – Ferroalloys assets1
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
Ferrochrome7
PGM8
Vanadium
Pentoxide
Platinum
Palladium
Rhodium
Gold
4E
kt
417
439
397
271
424
1,531
1,523
1
2
koz
koz
koz
koz
koz
13
9
2
–
24
14
9
2
–
25
15
9
3
–
27
8
5
1
1
15
4
2
1
–
7
41
25
7
1
74
58
36
10
1
105
(29)
(31)
(30)
–
(30)
(69)
(78)
(50)
n.m.
(71)
mlb
5.5
5.1
4.4
6.1
5.3
20.9
21.1
(1)
(4)
Total production – Custom metallurgical assets1
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
Copper (Altonorte, Pasar, Horne, CCR)
Copper metal
Copper anode
kt
kt
125.0
158.5
128.2
139.7
131.3
124.6
132.1
139.5
135.2
526.8
131.9
535.7
489.1
522.5
8
3
8
(17)
Zinc (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
Zinc metal
Lead metal
Silver
kt
kt
195.5
49.9
koz
4,270
197.2
53.3
3,243
198.0
46.5
196.6
196.2
788.0
44.1
49.9
193.8
789.8
216.6
4,222
2,890
3,301
13,656 14,845
–
(11)
(8)
–
–
(23)
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis, except as stated.
2 Copper metal includes copper contained in copper concentrates and blister.
3 Cobalt contained in concentrates and hydroxides.
4 The Group’s pro-rata share of Collahuasi production (44%).
5 The Group’s pro-rata share of Antamina production (33.75%).
6 The Group’s pro-rata share of CEZ production (25%).
7 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
8 Consolidated 50% of Mototolo and 100% of the Group’s PGM recovery plant.
209
Glencore Annual Report 2017
Production by quarter – Q4 2016 to Q4 2017
continued
Energy products
Production from own sources – Coal assets1
Australian coking coal
Australian semi-soft coal
Australian thermal coal (export)
Australian thermal coal (domestic)
South African thermal coal (export)
South African thermal coal (domestic)
Prodeco
Cerrejón2
Total Coal department
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
mt
mt
mt
mt
mt
mt
mt
mt
mt
1.7
1.1
1.7
1.0
1.0
1.2
14.7
12.8
13.4
1.0
4.3
3.1
4.3
2.8
1.6
4.2
2.6
4.2
2.8
1.7
4.5
2.2
3.8
2.4
1.8
1.0
11.2
1.6
5.4
2.7
3.7
2.5
1.6
0.8
11.7
2.6
4.6
2.5
2.9
2.9
6.1
4.0
49.1
7.5
18.7
10.0
14.6
10.6
5.3
4.2
52.5
5.6
17.2
12.1
17.3
10.7
33.0
30.9
30.2
29.9
29.6
120.6
124.9
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
15
(5)
(6)
34
9
(17)
(16)
(1)
(3)
(6)
(27)
(20)
160
7
(19)
(33)
4
(10)
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis except for joint ventures, where the Group’s attributable share of production is included.
2 The Group’s pro-rata share of Cerrejón production (33.3%).
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
kbbl
kbbl
kbbl
708
777
691
674
642
633
622
624
574
593
1,485
1,365
1,275
1,246
1,167
2,529
2,524
5,053
3,629
3,882
7,511
kbbl
kbbl
kbbl
3,309
1,063
4,372
3,249
3,048
2,896
2,721
11,914
16,909
921
866
853
810
3,450
5,308
4,170
3,914
3,749
3,531
15,364
22,217
Q4
2016
Q1
2017
Q2
2017
Q3
2017
Q4
2017
2017
2016
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
(30)
(35)
(33)
(30)
(35)
(31)
(19)
(24)
(21)
(18)
(24)
(19)
Change
2017 vs
2016
%
Change
Q4 17 vs
Q4 16
%
kt
kt
kt
kt
kt
kt
kt
kt
142
10
138
148
64
360
792
(55)
2,333
1,705
2,075
2,000
2,285
8,065
7,680
13
210
46
247
746
212
168
38
223
–
3,737
2,355
242
166
55
239
246
193
58
234
112
208
26
224
812
735
177
920
804
687
274
989
1,253
4,168
2,302
5,181
1,329
4,884
3,259
4,249
15,953
14,485
5
1
7
(35)
(7)
50
10
(55)
(2)
n.m.
(1)
(43)
(9)
78
14
Oil assets
Glencore entitlement interest basis
Equatorial Guinea
Chad
Total Oil department
Gross basis
Equatorial Guinea
Chad
Total Oil department
Agricultural products
Processing/production data1
Farming
Crushing
Long-term toll agreement
Biodiesel
Rice milling
Wheat milling
Sugarcane processing
Total Agricultural products
1 Reported on a 100% basis.
210
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Resources and reserves
The resource and reserve data in the following tables comprise summary extracts of the Glencore Resources and Reserves report
as at 31 December 2017, as published on the Glencore website on 1 February 2018. The Glencore Resources and Reserves report
was publicly reported, as appropriate for individual components, in accordance with the 2012 edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code), the 2016 edition of the South African Code for
Reporting of Mineral Resources and Mineral Reserves (SAMREC), the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
Standards on Mineral Resources and Reserves (2014 edition) and the Petroleum Resources Management System (PRMS) for
reporting of oil and natural gas reserves and resources.
Data is reported as at 31 December 2017, unless otherwise noted. For comparison purposes, data for 2016 has been included.
Metric units are used throughout, and all data is presented on a 100% asset basis with the exception of Oil assets which are
shown on a working interest basis. All tonnage information has been rounded to reflect the relative uncertainty in the estimates;
there may therefore be small differences in the totals.
Metals and minerals: Copper
Copper mineral resources
Name of operation
African copper
Katanga
Mutanda
Mopani
Collahuasi
Antamina
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
2017
2016
2017
2016
2017
2016
2017
2016
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Molybdenum (%)
(Mt)
Copper (%)
Zinc (%)
Silver (g/t)
16
3.58
0.57
256
1.36
0.51
211
2.09
0.08
934
0.85
0.02
254
0.89
0.76
11
16
3.58
0.57
245
1.52
0.60
202
2.11
0.08
859
0.80
0.02
239
0.91
0.72
10
267
3.60
0.53
200
1.11
0.41
74
2.01
0.08
4,471
0.81
0.02
816
0.89
0.76
11
259
3.66
0.54
194
1.10
0.40
74
2.00
0.08
4,263
0.79
0.02
846
0.88
0.79
11
284
3.60
0.54
456
1.24
0.46
285
2.07
0.08
5,405
0.82
0.02
276
3.66
0.55
439
1.33
0.51
277
2.08
0.08
5,122
0.80
0.02
168
3.79
0.44
202
0.71
0.31
78
2.07
0.09
168
3.78
0.44
235
0.81
0.24
77
2.06
0.10
4,444
4,853
0.75
0.01
0.76
0.01
1,070
1,085
1,372
1,247
0.89
0.76
11
0.89
0.78
11
0.91
0.55
10
0.88
0.62
10
Molybdenum (%)
0.024
0.025
0.020
0.019
0.021
0.021
0.020
0.018
Other South America
Australia
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
Other projects
(Mt)
(El Pachon, West Wall)
Copper (%)
Gold (g/t)
Silver (g/t)
Molybdenum (%)
651
0.43
0.10
0.6
116
1.82
0.09
0.6
534
0.67
–
2.4
0.01
701
0.41
0.09
0.6
122
1.89
0.08
0.6
534
0.67
–
2.4
0.01
2,132
0.38
0.03
0.6
177
1.37
0.23
0.4
2,195
0.37
0.04
0.6
182
1.37
0.23
0.4
2,782
2,896
0.39
0.05
0.6
293
1.54
0.18
0.5
0.38
0.05
0.6
304
1.58
0.17
0.5
838
0.34
0.03
0.4
165
1.1
0.06
0.7
886
0.33
0.05
0.4
162
1.1
0.03
0.8
1,551
1,551
2,085
2,085
2,498
2,537
0.51
0.02
1.4
0.01
0.51
0.02
1.4
0.01
0.55
0.01
1.7
0.01
0.55
0.01
1.7
0.01
0.44
0.02
1.1
0.01
0.44
0.02
1.1
0.01
211
Glencore Annual Report 2017 Resources and reserves
continued
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2017
2016
2017
2016
2017
2016
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
9
3.55
0.55
93
1.80
0.69
114
1.91
0.07
479
1.14
10
3.63
0.41
116
1.88
0.74
112
1.90
0.08
419
1.08
Molybdenum (%)
0.023
0.025
(Mt)
Copper (%)
Zinc (%)
Silver (g/t)
180
0.97
0.89
11
174
1.01
0.82
11
129
3.13
0.51
34
1.73
0.59
30
1.97
0.07
2,740
0.89
0.024
358
0.89
1.00
10
114
3.50
0.53
43
1.53
0.65
30
1.95
0.08
2,669
0.87
0.023
378
0.92
1.10
11
138
3.15
0.51
126
1.78
0.66
144
1.92
0.07
3,220
0.93
0.024
538
0.92
0.96
11
125
3.51
0.52
159
1.79
0.72
142
1.91
0.08
3,088
0.90
0.023
552
0.95
1.01
11
Molybdenum (%)
0.027
0.028
0.022
0.020
0.024
0.022
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
519
0.43
0.10
0.7
26
2.16
0.31
2.3
531
0.42
0.08
0.7
26
2.25
0.20
2.2
809
0.46
0.05
1.1
69
1.48
0.29
0.4
834
0.46
0.05
1.1
80
1.38
0.31
0.5
1,329
1,365
0.45
0.07
0.9
95
1.66
0.29
0.9
0.45
0.07
0.9
106
1.59
0.28
0.9
Copper ore reserves
Name of operation
African copper
Katanga
Mutanda
Mopani
Collahuasi
Antamina
Other South America
Australia
212
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals: Zinc
Zinc mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2017
2016
2017
2016
2017
2016
2017
2016
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold
(Vasilkovskoye)
Australia
Mount Isa
McArthur River
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
90
4.1
1.5
0.3
20
0.5
84
2.1
123
6.9
4.2
81
121
9.9
4.6
47
North America
Zinc North America
(Mt)
22.1
Copper North America
Other Zinc
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Copper (%)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
4.3
0.5
1.5
47
0.4
75
0.4
0.2
16.3
5.8
2.0
0.4
165
87
4.0
1.5
0.3
20
0.4
87
2.2
118
7.2
4.5
87.5
123
9.9
4.6
47
24.0
4.32
0.44
1.56
47.7
0.38
75
0.4
0.2
10.2
7.6
3.0
0.3
256
97
1.7
0.5
0.3
16
0.8
48
1.7
358
6.0
3.2
60
65
8.8
4.0
42
36.1
4.7
0.5
0.7
106
0.4
255
0.4
0.2
19.8
5.2
1.8
0.4
177
99
1.9
0.6
0.3
17
0.9
40
2.1
346
5.9
3.1
59
64
8.9
4.1
43
36.1
4.7
0.5
0.7
107
0.4
255
0.4
0.2
22.7
5.1
1.8
0.3
195
187
2.8
1.0
0.3
18
0.7
132
2.0
480
6.2
3.4
66
188
9.6
4.5
46
58
4.6
0.5
1.0
84
0.4
330
0.4
0.2
36.1
5.5
1.9
0.4
172
186
2.9
1.0
0.3
18
0.7
127
2.2
464
6.2
3.5
66
188
9.6
4.5
46
60
4.6
0.5
1.0
83
0.4
330
0.4
0.2
33.3
5.9
2.2
0.4
217
156
2.5
1.2
0.3
23
0.8
0.1
0.9
190
5
3
55
–
–
–
–
64
3.7
0.5
0.5
145
0.2
120
0.4
0.1
64
7.3
1.3
0.1
62
97
2
1
0.3
31
1
26
1.7
200
5
3
56
–
–
–
–
64
3.7
0.5
0.5
140
0.2
120
0.4
0.1
53.9
7.2
1.0
–
25
213
Glencore Annual Report 2017 Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2017
2016
2017
2016
2017
2016
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
(Mt)
Zinc (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
78
3.9
1.5
0.2
16
0.3
70.0
2.2
26.3
8.7
4.3
79
70
10.6
5.0
50
6.3
4.1
1.8
46
0.04
5.5
5.2
2.0
0.2
126
71
3.9
1.6
0.1
16
0.2
70.6
2.3
22.4
9.1
4.8
92
71
10.6
5.0
50
7.7
4.2
1.8
45
0.1
4.0
5.8
3.2
0.1
212
20
4.3
0.8
0.6
26
0.7
38
1.8
58
7.0
3.2
63
20
4.8
0.8
0.6
20
0.6
30
2.2
55
7.9
3.8
69
44.1
45.2
7.4
3.6
37
4.1
6.4
1.3
34
0.5
10.9
4.3
1.4
0.3
120
7.4
3.6
37
4.8
6.2
1.4
35
0.4
10.2
4.9
1.5
0.3
128
99
4.0
1.4
0.3
18
0.3
108
2.1
84
7.8
3.8
68
114
9.3
4.4
45
10
5.0
1.6
41
0.2
16.5
5.5
1.9
0.2
122
91
4.1
1.4
0.2
17
0.3
101
2.3
78
8.2
4.1
75
117
9.4
4.5
45
12
5.0
1.7
41
0.2
14.2
5.2
2.0
0.2
152
Resources and reserves
continued
Zinc ore reserves
Name of operation
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovskoye)
Australia
Mount Isa
McArthur River
North America
Other Zinc
214
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Metals and minerals: Nickel
Nickel mineral resources
Name of operation
Commodity
(Mt)
Nickel (%)
Copper (%)
Cobalt (%)
Platinum (g/t)
Palladium (g/t)
(Mt)
Nickel (%)
Cobalt (%)
(Mt)
Nickel (%)
(Mt)
Nickel (%)
Copper (%)
Cobalt (%)
Platinum (g/t)
Palladium (g/t)
INO
Murrin Murrin
Koniambo
Other Nickel
(Kabanga)
Nickel ore reserves
Name of operation
INO
Murrin Murrin
Koniambo
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
2017
14.6
2.65
1.28
0.06
0.91
1.55
140.9
1.00
0.074
13.8
2.49
13.8
2.49
0.34
0.21
0.16
0.19
2016
14.9
2.58
1.44
0.06
0.98
1.60
186.1
0.97
0.071
13.1
2.50
13.8
2.49
0.34
0.21
0.16
0.19
2017
34.6
2.61
1.81
0.06
0.92
1.55
77.4
0.99
0.084
43.2
2.40
23.4
2.72
0.36
0.19
0.42
0.28
2016
29.9
2.75
0.99
0.06
0.71
1.33
88.3
0.98
0.078
46.3
2.44
23.4
2.72
0.36
0.19
0.42
0.28
2017
49.3
2.62
1.66
0.06
0.91
1.55
218.3
1.00
0.078
57.0
2.42
37.2
2.63
0.35
0.20
0.32
0.25
2016
44.8
2.70
1.14
0.06
0.80
1.42
274.4
0.97
0.073
59.6
2.46
37.2
2.63
0.35
0.20
0.32
0.25
2017
2016
34
1.8
1.8
0.1
1.0
1.6
18
0.9
0.07
83
2.5
21
2.6
0.3
0.2
0.3
0.3
38
2.1
2.4
0.1
1.1
1.9
21
0.9
0.06
88
2.5
21
2.6
0.3
0.2
0.3
0.3
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Nickel (%)
Copper (%)
Cobalt (%)
Platinum (g/t)
Palladium (g/t)
(Mt)
Nickel (%)
Cobalt (%)
(Mt)
Nickel (%)
2017
11.1
2.03
1.15
0.04
0.78
1.24
85.5
1.04
0.080
11.2
2.30
2016
9.8
2.02
1.46
0.04
0.95
1.40
183.7
0.94
0.064
9.7
2.30
2017
21.9
2.39
0.92
0.05
0.54
1.00
18.9
1.06
0.077
25.9
2.22
2016
9.3
2.59
0.73
0.06
0.66
1.47
54.2
0.92
0.061
26.2
2.28
2017
33.0
2.27
1.00
0.05
0.62
1.08
104.3
1.05
0.079
37.1
2.25
2016
19.1
2.29
1.10
0.05
0.81
1.44
237.9
0.94
0.064
35.9
2.29
215
Glencore Annual Report 2017 Resources and reserves
continued
Metals and minerals: Ferroalloys
Ferroalloys mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
Western Chrome Mines
(Mt)
Cr2O3 (%)
2017
54.248
42.09
2016
54.108
42.11
Eastern Chrome Mines
(Mt)
Cr2O3 (%)
61.364
40.32
60.764
40.33
Vanadium
PGM
Silica
(Mt)
V2O5 (%)
49.68
0.48
49.18
0.48
(Mt)
20.988
24.294
3PGE + Gold (g/t)
4.21
3.89
2017
56.38
41.4
45.78
40.4
38.12
0.5
–
–
2016
57.54
41.4
24.98
40.2
39.4
0.5
–
–
2017
110.63
41.7
107.14
40.3
87.81
0.5
20.99
4.2
22.96
91
2016
111.65
41.7
85.75
40.3
88.5
0.5
24.29
3.9
23.27
91
2017
115.6
42
157.7
38
94
0.5
–
–
–
–
2016
115.5
42
181.7
38
95
0.5
–
–
–
–
(Mt)
SiO2 (%)
–
–
–
–
22.96
91
23.27
91
Ferroalloys ore reserves
Name of operation
Western Chrome Mines
Eastern Chrome Mines
Vanadium
PGM
Silica
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Cr2O3 (%)
2017
18.477
31.00
2016
17.157
31.13
(Mt)
Cr2O3 (%)
27.050
35.00
25.517
33.72
(Mt)
V2O5 (%)
25.30
0.47
26.83
0.47
(Mt)
12.992
12.795
3PGE + Gold (g/t)
4.02
3.58
(Mt)
SiO2 (%)
–
–
–
–
2017
7.37
28.4
9.09
35.9
12.1
0.5
–
–
1.70
90
2016
8.11
28.1
8.15
34.2
13.0
0.5
–
–
2.05
91
2017
25.84
30.4
36.14
35.2
37.4
0.5
12.99
4.0
1.70
90
2016
25.26
30.2
33.66
33.8
39.8
0.5
12.80
3.6
2.05
91
216
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
2017
470
36
215
36
–
–
2016
470
36
215
36
–
–
2,300
34
2,300
34
2017
1,435
36
190
35
2,180
32
2,500
30
2016
1,435
36
190
35
2,180
32
2,500
30
2017
1,905
36
405
36
2,180
32
4,800
32
2016
1,905
36
405
36
2,180
32
4,800
32
2017
2,520
35
251
35
560
32
2016
2,520
35
251
35
560
32
2,100
31
2,100
31
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Iron (%)
(Mt)
Iron (%)
2017
380
35
770
37
2016
380
35
770
37
2017
551
35
1,290
32
2016
551
35
1,290
32
2017
931
35
2,070
34
2016
931
35
2,070
34
Metals and minerals: Iron Ore
Iron ore mineral resources
Name of operation
Commodity
(Mt)
Iron (%)
(Mt)
Iron (%)
(Mt)
Iron (%)
(Mt)
Iron (%)
El Aouj Mining Company S.A.
Sphere Mauritania S.A.
(Askaf)
Sphere Lebtheinia S.A.
Jumelles Limited
(Zanaga)
Iron ore reserves
Name of operation
El Aouj Mining Company S.A.
Jumelles Limited
(Zanaga)
Energy products: Coal
Coal resources
Name of operation
Australia
New South Wales
Queensland
Measured
Coal Resources
Indicated
Coal Resources
Inferred
Coal Resources
Commodity
2017
2016
2017
2016
2017
2016
Coking/Thermal Coal (Mt)
Coking/Thermal Coal (Mt)
3,002
3,008
3,145
3,033
3,079
3,851
2,943
3,685
6,011
8,370
5,211
8,030
South Africa
Thermal Coal (Mt)
2,475
2,895
844
1,136
355
435
Prodeco
Cerrejón
Canada projects
(Suska, Sukunka)
Thermal Coal (Mt)
220
175
160
210
70
70
Thermal Coal (Mt)
3,150
3,000
1,050
1,250
700
650
Coking/Thermal Coal (Mt)
45
45
113
113
130
130
217
Glencore Annual Report 2017
Resources and reserves
continued
Coal reserves
Name of operation
Australia
New South Wales
Queensland
Coal Reserves
Marketable
Coal Reserves
Proved
Probable
Proved
Probable
Total Marketable
Coal Reserves
Commodity
2017
2017
2017
2017
2017
2016
Thermal Coal (Mt)
Coking Coal (Mt)
Thermal Coal (Mt)
Coking Coal (Mt)
771
18
881
66
714
120
207
41
390
42
253
55
40
568
11
789
46
450
120
420
148
29
345
27
145
55
40
715
40
1,134
73
595
175
460
780
39
1,152
83
646
180
540
South Africa
Thermal Coal (Mt)
Prodeco
Cerrejón
Energy products: Oil
Net reserves (Proven and Probable)1
Thermal Coal (Mt)
Thermal Coal (Mt)
430
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
31 December 2016
Revisions
Discoveries
Production
31 December 2017
Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf
13
7
–
(3)
17
–
146
–
–
146
152
(53)
–
(3)
96
–
–
–
–
–
–
–
3
–
3
–
–
–
–
–
165
(46)
3
(6)
116
–
146
–
–
146
Net contingent resources (2C)1
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf Oil mmbbl
Gas bcf
Combined
mmboe
165
(21)
3
(6)
141
Combined
mmboe
31 December 2016
Revisions
Divestments
31 December 2017
25
(2)
–
23
530
(76)
–
454
9
52
–
61
–
–
–
–
18
(3)
(11)
4
–
–
–
–
52
47
(11)
88
530
(76)
–
454
143
34
(11)
166
1 “Net” reserves or resources are equivalent to Glencore’s working interest in the asset/property.
218
Glencore Annual Report 2017 Strategic Report
Governance
Financial
Statements
Additional
Information
Shareholder information
Enquiries
Corporate Services
Glencore plc
Baarermattstrasse 3
P.O. Box 777
CH-6341 Baar
Switzerland
Tel.: +41 41 709 2000
Fax: +41 41 709 3000
Email: info@glencore.com
Glencore plc is registered in Jersey, with headquarters
in Switzerland and operations around the world.
Headquarters
Baarermattstrasse 3
P.O. Box 777
CH-6341 Baar
Switzerland
Registered Office
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
The Company has a primary listing on the
London Stock Exchange (LSE) and a secondary
listing on the Johannesburg Stock Exchange (JSE).
Share registrars
Jersey (for London listing)
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier, Jersey
JE1 1ES
Channel Islands
Tel.: +44 (0) 870 707 4040
Johannesburg
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001 South Africa
Tel.: +27 (0) 11 370 5000
219
Glencore Annual Report 2017 Important notice regarding compilation of report
Important notice concerning this document including forward
looking statements
This document contains statements that are, or may be deemed
to be, “forward-looking statements” which are prospective in
nature. These forward-looking statements may be identified
by the use of forward-looking terminology, or the negative
thereof such as “outlook”, “plans”, “expects” or “does not expect”,
“is expected”, “continues”, “assumes”, “is subject to”, “budget”,
“scheduled”, “estimates”, “aims”, “forecasts”, “risks”, “intends”,
“positioned”, “predicts”, “anticipates” or “does not anticipate”, or
“believes”, or variations of such words or comparable terminology
and phrases or statements that certain actions, events or results
“may”, “could”, “should”, “shall”, “would”, “might” or “will” be taken,
occur or be achieved. Such statements are qualified in their
entirety by the inherent risks and uncertainties surrounding
future expectations. Forward-looking statements are not
based on historical facts, but rather on current predictions,
expectations, beliefs, opinions, plans, objectives, goals, intentions
and projections about future events, results of operations,
prospects, financial condition and discussions of strategy.
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 in the Principal Risk and Uncertainties section
on page 42.
Neither Glencore nor any of its associates or directors, officers
or advisers, provides any representation, assurance or guarantee
that the occurrence of the events expressed or implied in any
forward-looking statements in this document will actually
occur. You are cautioned not to place undue reliance on these
forward-looking statements which only speak 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
Conduct Authority and the Rules Governing the Listing of
Securities on the Stock Exchange of Hong Kong Limited and
the Listing Requirements of the Johannesburg Stock Exchange
Limited), Glencore is not under any obligation and Glencore
and its affiliates expressly disclaim any intention, obligation
or undertaking to update or revise any forward looking
statements, whether as a result of new information, future events
or otherwise. This document shall not, under any circumstances,
create any implication that there has been no change in the
business or affairs of Glencore since the date of this document
or that the information contained herein is correct as at any time
subsequent to its date.
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.
The companies in which Glencore plc directly and indirectly
has an interest are separate and distinct legal entities. In this
document, “Glencore”, “Glencore group” and “Group” are used
for convenience only where references are made to Glencore plc
and its subsidiaries in general. These collective expressions are
used for ease of reference only and do not imply any other
relationship between the companies. Likewise, the words
“we”, “us” and “our” are also used to refer collectively to members
of the Group or to those who work for them. These expressions
are also used where no useful purpose is served by identifying
the particular company or companies.
220
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