G
l
e
n
c
o
r
e
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
9
Annual
Report
2019
Our purpose
Responsibly sourcing the commodities that
advance everyday life.
Our strategy
To sustainably grow total shareholder returns
while maintaining a strong investment grade
rating and acting as a responsible operator.
Read more
Page 12
Living our values
Our values reflect our purpose, our priorities
and the beliefs by which we conduct
ourselves. They define what it means to work
at Glencore, regardless of location or role.
They are the heart of our culture and the way
we do business.
Safety
Integrity
Responsibility
We never compromise on safety.
We look out for one another and
stop work if it’s not safe
We have the courage to do what’s
right, even when it’s hard. We do
what we say and treat each other
fairly and with respect
We take responsibility for our actions.
We talk and listen to others to
understand what they expect from us.
We work to improve our commercial,
social and environmental performance
Openness
Simplicity
Entrepreneurialism
We’re honest and straightforward when
we communicate. We push ourselves
to improve by sharing information and
encouraging dialogue and feedback
We work efficiently and focus on
what’s important. We avoid unnecessary
complexity and look for simple,
pragmatic solutions
We encourage new ideas and quickly
adapt to change. We’re always looking
for new opportunities to create value and
find better and safer ways of working
glencore.com
Highlights
Net (loss)/income
attributable
to equity holders
(US$ million)
(404)
5,777
(Loss)/earnings per share
(basic)
(US$)
Lost time injury frequency
rate
(LTIFR)
(0.03)
0.41
0.99
1.02
1.06
0.99
3,408
0.24
(404)
(0.03)
2017
2018
2019
2017
2018
2019
2017
2018
2019
Carbon emissions
(million tonnes CO2)
Adjusted EBITDA◊
(US$ million)
Adjusted EBIT◊
(US$ million)
29.2
21.8
18.8
18.3
11.5
11.8
10.9
11,601
15,767
14,545
11,601
4,151
9,143
8,459
4,151
Total borrowings
(US$ million)
37,043
33,934 34,994
37,043
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
Scope 1
Scope 2
Net debt/Net debt to
Adjusted EBITDA ratio◊
(US$ million %)
17,556
17,556
14,710
10,216
1.60x
1.20x
0.80x
0.40x
0.00x
2017
2018
2019
Net debt to Adjusted
EBITDA ratio
Cash generated by operating
activities before working
capital changes
(US$ million)
Funds from operations◊
(US$ million)
10,346
13,210
11,866
10,346
7,865
11,350
11,595
7,865
Community investment
(US$ million)
Community
investment
(US$ millon)
90
00
90
95
90
2017
2018
2019
2017
2018
2019
2017
2018
2019
◊ 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 228 for definition, explanation of use and
reconciliations and note 2 of the financial statements
for reconciliation of Adjusted EBIT/EBITDA.
Read more
Page 228
Contents
Stakeholder
engagement
Page 26
Sustainability
Page 34
Our strategy for a
sustainable future
Page 12
Our people
Page 30
Financial review
Page 46
Strategic Report
Chairman’s introduction
Chief Executive Officer’s review
At a glance
Investment case
Our market and emerging drivers
Business model
Our strategy for a sustainable future
Climate change
Key performance indicators
Section 172 statement
and stakeholder engagement
Our people
Sustainability
Ethics and compliance
Non-Financial Information Statement
Financial review
Our Marketing business
Market review and outlook
Our Industrial business
Principal risks and uncertainties
Corporate Governance
Chairman’s governance statement
Directors and officers
Corporate governance report
Directors’ remuneration report
Directors’ report
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
Notes to the financial statements
Additional information
Alternative performance measures
Other reconciliations
Production by quarter – Q4 2018 to Q4 2019
Resources and reserves
Shareholder information
1
2
4
6
8
10
12
16
24
26
30
34
42
45
46
54
58
64
74
92
94
96
110
120
126
137
138
139
140
142
143
228
234
236
242
250
Front cover
Kara Deneka, Mine Engineer in
Training, Craig Mine – Onaping
Depth Project, Sudbury
Integrated Nickel Operations.
glencore.com
Chairman’s introduction
Anthony
Hayward
Chairman
Dear shareholders
This year, a revised corporate
governance code came into force
for UK listed companies. At the
heart of the revised code is a focus
on ensuring a company’s purpose,
values, strategy and culture are
aligned. This has coincided with
a considerable debate on both
sides of the Atlantic as to whether
corporations should focus solely
on shareholder returns or whether
they should take a broader view of
their purpose.
For the modern quoted resources
sector there is no such discussion.
In order to maximise shareholder
returns, a resource company must
have a broad licence to operate. The
resource corporation is the guest of
the countries and communities in
which it operates. It can only survive
and thrive with the ongoing support
of all of its main stakeholders.
Glencore’s purpose is to responsibly
source the commodities that
advance everyday life. We do so
through our strategy of sustainably
growing total shareholder returns
while maintaining a strong
investment grade rating and acting
as a responsible operator. We fulfil
our purpose and deliver on our
strategy in a manner that reflects
our values of safety, integrity,
responsibility, openness, simplicity
and entrepreneurialism. Only by
actively living and breathing these
values are we able to ensure our
culture is conducive to fulfilling
our purpose and delivering on
our strategy.
From our trading roots and through
an accumulation of a rich mix of
assets, we have become one of the
world’s largest globally diversified
natural resource companies.
During 2019, we have reassessed our
culture and the values that define
it, ensuring they are as relevant as
possible and appropriately provide
the correct tone in which the
Company engages to fulfil its
purpose and deliver on its strategy
for the benefit of all stakeholders.
It is clear that in certain areas we
need to do better. In safety our
statistics do not bear comparison
with our peers. Although we mine
in more difficult locations and have
a far larger workforce, our total
number of fatalities for the year of
seventeen is simply unacceptable.
This report describes the multiple
initiatives that are ongoing,
particularly in more challenged
operations, in order to improve, on a
lasting basis, our safety performance.
Most frustrating of all, a majority of
our fatalities continue to arise as a
result of human carelessness. It is
our job as leaders of this business
to reverse this lack of discipline and
thoughtfulness and to embed strong
rules and behaviours that can lead
our assets in Central Africa, Bolivia
and Kazakhstan to mirror the
stronger safety records of our assets
in other countries such as Australia
and Canada.
Safety is not simply about addressing
our own known problems. The two
tailings dams tragedies in Brazil in
the last five years led to a Church of
England Pension Board request for
detailed information on tailings
facilities to some 700 mining
companies. We strongly
welcomed this disclosure process
which we believe can be used to
foster improvements across the
industry in standards, monitoring
and transparency.
The US DoJ, CFTC, SFO and other
investigations remain a priority
for the Investigations Committee
of the Board, and we continue
to cooperate with the relevant
authorities.
We were delighted to appoint
Kalidas Madhavpeddi to the Board
as an Independent Non-Executive
Director recently. Kalidas has over
30 years of experience in the
international mining industry
coupled with business experience
across all continents, including
over 10 years as the CEO of China
Moly. His experience and insights
will be a great benefit to us.
We also welcomed Peter Freyberg
to the position of Head of Industrial
Assets in 2019, supported by a newly
created central team. His team is
assisting in the drive for strengthened
operational risk and safety
performance across our various
operations. I am confident that
their rigour and experience will result
in an improved overall performance.
Glencore continues to be a unique
company in the large resources
space. We are more broad-based
both as to our commodity and
geographic mix in comparison to our
mining peers, and notwithstanding
the challenges that this gives us, your
Board believes that this continues
to be the best strategy for the long-
term benefit of all our stakeholders.
Anthony Hayward
Chairman
4 March 2020
Glencore Annual Report 2019
1
Strategic reportFinancial statementsGovernanceAdditional information Chief Executive
Officer’s review
Solid results in challenging pricing conditions
for our key commodities, supported by an
excellent oil marketing performance
Ivan
Glasenberg
Chief
Executive
Officer
A challenging market backdrop
for commodities
Rising trade barrier tensions and
associated uncertainty weighed
on sentiment and activity during
2019. In China and elsewhere, this
amplified certain cyclical and
structural slowdowns already
underway, limiting 2019 global
economic growth.
While price performances for our
key commodities’ benchmarks were
largely lower year over year, with
average copper price down 8%,
zinc 13%, cobalt 57%, thermal coals
27% and ferrochrome 14% (nickel
and gold were up), underlying
fundamental market supply/demand
balances for most commodities
remained reasonably healthy.
In particular, copper, zinc and nickel
markets were tightly balanced, with
global visible inventories falling to
multi-year lows. Cobalt was weak
and oversupplied in H1, however
conditions improved towards year
end, as the market rebalanced,
while coal saw continued growth
in Asian thermal demand, more
than offsetting declining imports
into Europe.
Transitioning to a low-carbon
economy
In many markets, there continues
to be a major drive and efforts
underway to significantly reduce
carbon emissions in energy supply,
which is expected to require
substantial growth in mobility
electrification and the development
of battery-backed energy storage
systems to support meaningful
renewables’ market share. Getting
to this point requires a seismic shift
in how we power the world and that
shift will, in part, only be enabled by
the metals and minerals that the
mining industry produces.
Our industry needs not only to
ensure that the metals and minerals
required are produced and sourced
responsibly, but also that we are
at the forefront of technology and
process innovation, supporting
further productivity gains and
emissions abatement going
forward. In this way, we can
achieve a reduction in our
own environmental footprint.
2
Glencore Annual Report 2019
Glencore is well positioned to play
a key role in aiding the various
transitions to a low-carbon economy,
with our responsible approach to
producing and sourcing a diversified
portfolio of commodities, some
of which, are absolutely critical
in enabling the shift to a low-
carbon world.
We also believe that high-quality
coal will continue to be part of
the overall energy mix well into
the future. Population growth,
urbanisation and rising living
standards are expected to contribute
to increased global energy
requirements in the coming
decades. The need for affordable
and stable baseload power
generation is expected to underpin
coal demand growth, primarily in
Asia, even as it declines in Europe
and the U.S. Our modelling, and
indeed that of the International
Energy Agency’s (IEA) Stated Policies
Scenario, indicates that thermal coal
demand is expected to continue to
grow to 2030, however, naturally
given faster growth elsewhere, its
share of primary energy demand
is expected to fall to c.24% in 2030,
from around 27% in 2018.
2019 Financial scorecard
Weaker year-on-year commodity
prices were largely responsible for
a 26% reduction in Adjusted EBITDA
to $11.6 billion. Net income, before
significant items, declined 58% to
$2.4 billion, while significant items
generated a Net loss attributable to
equity holders of $0.4 billion, mainly
due to $2.8 billion of impairment
charges, largely related to our
Colombian coal, Chad oil and African
copper assets.
Our marketing business reported a
steady year-on-year Adjusted EBIT
result of $2.4 billion, reflecting a
strong performance from oil, partially
offset by the previously reported and
recorded cobalt losses in relation to
inventory writedowns on material
sourced from Glencore mines in
earlier periods. We maintain our
long-term Marketing Adjusted EBIT
guidance range of $2.2 to $3.2 billion
Industrial Adjusted EBITDA of $9.0
billion was down 32% compared to
2018, primarily reflecting the lower
commodity prices noted above,
particularly coal and cobalt. The
benefit of a stronger US dollar
against many of our key producer
currencies provided some price
offset. While most of our assets
performed within expected ranges
during 2019, earnings were also
negatively impacted by operational
and cost challenges in our African
copper business and a poor
production performance at our
Koniambo ramp-up asset, in
conjunction with a change to
its accounting categorisation,
whereby until the end of 2018,
ramp-up development costs were
still being capitalised.
Across these copper and nickel
ramp-up/development assets,
we have implemented detailed
action plans targeting material
improvement, with the aim of
achieving consistent, cost-efficient
production at design capacity.
Performance at Katanga and
Mutanda progressed to plan during
the second half of the year, with
the latter transitioning to care and
maintenance in December.
Corporate governance and
sustainability
At Glencore, we are committed to
operating in a responsible manner
across all aspects of our business.
Glencore upholds the dignity,
fundamental freedoms and human
rights of our employees, contractors
and the communities in which
we live and work, as well as others
affected by our activities. Glencore
is committed to working in line
with the United Nations Universal
Declaration on Human Rights
and the UN Guiding Principles
on Business and Human Rights.
The safety and security of our
workforce and the communities
living around our assets is a
priority recognised in all of our
operational activities.
We have taken far-reaching action
to address the underlying issues
that led to the tragic loss of 17 lives
at Glencore’s managed operations
in 2019. This performance is
unacceptable and we have
implemented an enhanced and
sharper focused fatality reduction
programme, including safety
interventions at our Mopani and
Kazzinc operations during 2019.
This programme builds on our
investment in SafeWork, with the
goal of achieving a step-change in
performance. We are determined
to be a fatality-free business.
Glencore is committed to supplying
commodities in a transparent and
responsible manner. To improve
supply chain traceability,
transparency and integrate good
practice, with some of our industry
partners, we joined the Responsible
Sourcing Blockchain Network
covering cobalt initially and key
battery materials over time.
Climate change
We are pleased to report good
progress over the past year against
our commitments on the transition
to a low-carbon economy.
Firstly, we are on track to exceed
our current GHG target of reducing
Scope 1 and 2 emissions intensity by
at least 5% by 2020 compared to a
2016 base line. We expect to achieve
a reduction of close to 10%.
New longer-term Scope 1 and 2
reduction targets that support the
Paris Agreement (“Paris Goals”) are
being finalised and we expect to
release these during 2020.
We have also, for the first time,
disclosed our absolute Scope 3
emissions projections i.e. those
arising from the sale and use of our
own production, notably coal and
oil. We project an approximately
30% reduction in these emissions by
2035, including the natural depletion
of our underlying resource base
(oil and coal). In this regard, our
Colombian, and to a lesser extent,
South African and Australian coal
resource bases exhibit depletion
profiles. Our high-quality product
Australian business, however, is
expected to maintain a longer and
flatter production profile as a key
supplier to Asia’s growing steel and
energy industries.
In terms of capital priorities, our
capital expenditure in 2019 was
heavily weighted towards energy
transition materials, including copper
and cobalt in Africa and nickel in
Canada. Our coal capex was mainly
aimed at maintaining existing assets.
Shareholder returns
In line with healthy operating
cash flow generation in 2019,
we completed $4.7 billion of
distributions and buybacks,
comprising a $0.20 per share
($2.7 billion) base distribution
(in respect of 2018 cash flows)
and $2 billion of share buy-backs.
We are again recommending
to shareholders a 2020 base
distribution of $0.20 per share
(c.$2.6 billion), payable in two equal
instalments in 2020.
The continuing dislocation between
our share price and the prospects,
strength and embedded optionality
in our business means that we
continue to favour buybacks as a
means of returning excess cash to
shareholders. As and when cash flow
generation and balance sheet allow,
potentially aided by some return
of cash margin calls in respect of
Marketing’s hedging activities and
monetisation of select non-core
long-term assets, we will seek to
implement a new buyback
programme. In this regard, we would
like to see our Net debt/Adjusted
EBITDA ratio moving closer to 1x, and
our Net debt reaching the c.$14–15
billion range, excluding Marketing
related finance lease liabilities, before
considering the same.
Looking ahead
We remain focused on our strategy
to sustainably grow total shareholder
returns while operating in a
responsible manner across all
aspects of our business. Clearly in the
shorter term, we are closely watching
coronavirus developments and
potential scenario impacts on global
growth and markets and what
adjustments, if any, are appropriate
in our business planning.
Ivan Glasenberg
Chief Executive Officer
4 March 2020
Glencore Annual Report 2019
3
Strategic reportFinancial statementsGovernanceAdditional information At a glance
We are one of the world’s largest
natural resource companies. We fulfil
our purpose through our strategy
to be active at every stage of the
commodity supply chain. Our diversity
by geography, product and activity,
maximises the value we create for our
business and its diverse stakeholders
One of the world’s largest natural
resource companies
c.150
sites
35
countries
c.160,000
employees and contractors
>30
offices
Two business segments
Industrial
Marketing
Map key
Industrial sites
Head office
Marketing office/other
Grouped assets
Focused on sustainability
Adjusted EBITDA
Industrial 2019
Adjusted EBITDA
Marketing 2019
CO2e Scope 1
(million tonnes)
18.3
(2018: 18.8)
CO2 Scope 2
(million tonnes)
10.9
(2018: 11.8)
Lost time injury
frequency rate
(per million hours worked)
Total recordable injury
frequency rate
(per million hours worked)
0.99
(2018: 1.06)
2.86
(2018: 3.18)
Sustainability
Page 34
Business model
Page 10
4
Glencore Annual Report 2019
● Metal
● Energy
● Metal
● Energy
$9.0bn
(2018: $13.3bn)
$2.6bn
(2018: $2.5bn)
Total Adjusted EBITDA 2019
$11.6bn
(2018: $15.8bn)
Active at every stage of the commodity supply chain
1
Exploration,
acquisition and
development
2
Extraction
and production
3
Processing
and refining
4
Blending and
optimisation
5
Logistics
and delivery
Non-current assets1
by region
Revenue2 by region
and segment 2019
1 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.
2 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.
● Americas
● Europe
● Asia
● Africa
● Oceania
● Industrial
● Marketing
● Americas
● Europe
● Asia
● Africa
● Oceania
$75.9bn
(2018: $78.0bn)
$215bn
(2018: $220bn)
Glencore Annual Report 2019
5
Strategic reportFinancial statementsGovernanceAdditional information Investment case
We offer a differentiated value proposition to
investors through our focus on our strategy
to sustainably grow total shareholder returns
in accordance with our purpose
Wide
diversification
by commodity,
geography
and activity
A major supplier
of energy and
mobility transition
materials
Portfolio
containing
well-capitalised,
low-cost,
high-return
assets
• Fully integrated from
mine to customer
• Presence in over 35 countries
across 150 operating sites
• Responsibly producing and
marketing more than 60
commodities that advance
everyday life
• Diversified across multiple
suppliers and customers
• Future demand patterns are
• Since 2009, over $45 billion
likely to favour the
commodities that facilitate the
accelerating move towards
decarbonising energy supply
• We are a major producer of the
enabling commodities (copper,
cobalt, nickel) that underpin
the battery chemistry and
infrastructure likely to power
electric vehicles and energy
storage systems
has been invested in
industrial assets
• Many of our assets are low-cost
and long-life, supporting
sustainable long-term
cash flows
• Mine-life extension
potential embedded
in key commodities
Adjusted EBITDA◊ diversified by
commodity and geography (%)
● Copper
● Zinc
● Nickel
● Ferroalloys
● Coal
● Oil
● Marketing
● Americas
● Europe/Asia
● Africa
● Oceania
● Marketing
Additional nickel and cobalt
required to enable 11.5M new
electric vehicle sales by 2025
+330kt
Nickel compared to 2019E levels
+73kt
Cobalt compared to 2019E levels
Industrial Adjusted EBITDA
mining margins◊
28%
Metals and minerals
(down from 38%)
37%
Energy products
(down from 46%)
See page 68 for
definition and
calculation of
mining margins
6
Glencore Annual Report 2019
A unique
marketing
business that
extracts value
across the entire
supply chain
A conviction
to create value
Significant
cash flow
generation and
distribution
potential
• As a marketer of commodities,
• Capital allocation
we can extract value from
the full-range of physical
arbitrage opportunities
• We create value through
economies of scale, our
extensive (including third
parties) supply base, our
logistics, risk management
and working capital
financing capabilities
framework seeks to balance
preservation of capital
structure with attractive
business reinvestment/
growth opportunities and
shareholder returns
• Conviction to create value
through partnerships, M&A
and brownfield investment
• Unique ability to source and
structure deals using trading
and strategic relationships
• Adjusted EBITDA◊ down 26%
to $11.6 billion in 2019
• Net debt/adjust EBITDA◊
of 1.51x
• Minimum 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
assets free cash flow
Resilience of marketing earnings
2019 shareholder returns1
Loss per share
150
120
90
60
30
0
2012
2013
2014
2015
2016
2017
2018
2019
Marketing Adjusted EBIT Indexed
Industrial Adjusted EBITDA Indexed
$5.0bn
comprising $2.7bn distribution and
$2.3bn of buybacks
Investing in brownfield growth
$1.3bn
Expansionary capital investment
principally in African copper, Zhairem
(Kazzinc) and Integrated Nickel
Operations
1 $2.3bn buybacks includes $0.3bn completion
of the programme announced in 2018, and
$2.0bn announced and completed in 2019
$0.03
2018: $0.24 earnings per share
2020 distribution recommended
$2.6bn
($0.20/share)
Glencore Annual Report 2019
7
Strategic reportFinancial statementsGovernanceAdditional information Our market and emerging drivers
We are dependent upon the supply of and demand for our commodities
Key market drivers
Future
commodity
supply
Timing within the
economic cycle is
very important when
bringing new mine
supply online
Demand
for the
commodities
we produce
A change in growth
of developing economies
is generally impactful on
commodity demand
• 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 becomes available in the economic cycle is difficult to
predict and could become available at low points in the
economic cycle, creating excess supply in the market
• 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
China accounts for around
50%
of global demand for most commodities
Impact on our industry
• Over-investment creates oversupply and with it
• Current levels of industrialisation and urbanisation suggest
a potentially prolonged period of low commodity prices
• Although commodity prices have increased from the lows
demand growth rates for commodities may
be lower in the future
seen in early 2016, the experience
of the last economic cycle has increased 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
• Lower or negative demand growth 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 and agricultural products
$41bn
estimated 2019 sector reinvestment compared
to a 10 year average of $51bn (estimated)
An extra 1.7 billion people forecast
to increase global energy demand
>25%
by 2040 under IEA Stated Policies Scenario
How we are responding
• Our disciplined approach to capital allocation seeks to
reflect market supply and demand dynamics
• Given the unpredictability of costs, risks and timing of
large-scale greenfield projects, we prefer to add supply via
targeted capital efficient/lower risk brownfield expansions
when required
• With the expectation that growth drivers in the global
economy will remain weighted towards consumer
spending, and therefore commodity demand growth
will be focused in the higher-end, fast growing consumer
sectors, the part of our commodity portfolio which supplies
this demand, is well placed to benefit from this transition
• We are a major producer of the commodities
that underpin the current battery chemistry
and infrastructure growth initiatives that are expected
to power electric vehicles and energy storage systems.
2019 capex was weighted towards energy transition
metals, including African copper and cobalt and nickel
projects in Canada.
• In 2019, we placed Mutanda on temporary care and
maintenance for various reasons. Supply discipline in
an oversupplied cobalt market was one of these.
8
Glencore Annual Report 2019
Emerging drivers
Energy and
emissions
transformation
Efforts to minimise a
global temperature
rise will impact fossil
fuel demand
Substitution
Higher commodity
prices and resource
scarcity increases
the risk of material
substitution
• Momentum to decarbonise the global economy is
• Widespread adoption of renewable energy sources as a
gathering pace as nations increasingly coordinate efforts
aimed at minimising greenhouse gas emissions to achieve
the Paris Agreement climate change goals and transition
the world to a low-carbon economy
The Paris Agreement aims to keep the global
temperature rise this century to well below
2ºc
as well as pursue efforts to limit the
temperature increase even further to 1.5ºc
means to decarbonise energy supply will create significant
new demand for the enabling commodities, including
copper, nickel, cobalt and lithium
• The quantum of potential new demand is generally
of a size that is especially large relative to current
annual production and known defined global resources
of that commodity
Impact on our industry
• This transition is likely to increase the cost for fossil
fuels, impose levies for emissions, increase costs
for monitoring and reporting and reduce demand
• Third parties, including potential or actual investors,
may introduce policies materially adverse to Glencore
due to our interest in fossil fuels, particularly coal
• Technological advances are making renewable energy
sources more competitive with fossil fuels, which is likely to
increase renewable energy’s market share over the longer
run. Many analysts believe that demand projections for
coal are lower than previously expected
• The revenue and earnings of substantial parts of our
industrial asset activities, and to a lesser extent, our
marketing activities, are dependent on prevailing
commodity prices
• Under a rapid decarbonisation scenario, a significant
increase in demand for the commodities that currently
underpin renewable technologies is likely to generate
significantly higher commodity prices
• Higher sustained commodity prices will increase the risk
that consumers of these commodities will accelerate
efforts to either reduce the quantity of metal needed for
a certain application or substitute an alternative material
that provides similar technical performance at a lower
price. Demand for a commodity such as cobalt could fall if
newer battery chemistries can provide the same technical
performance with less or no cobalt content
• We continue to assess the risks and opportunities
• Diversification of our portfolio of commodities, currencies,
How we are responding
presented by decarbonisation of energy and mobility
across our product and operational portfolio
• 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
• Following on from our February 2019 commitments to
the Climate Action 100+ initiative, we have set ambitious
goals for ourselves, including the prioritisation of capital
investment into the commodities that support the
transition to a low-carbon economy, and publication
of our projections long-term Scope 3 reduction
assets and liabilities is likely to mitigate the financial
impact of a negative demand shift in the event of
commodity substitution
• Our market research teams continue to assess the
underlying demand for our commodities as well as the
new materials that could impact current renewable
technology solutions
Glencore Annual Report 2019
9
Strategic reportFinancial statementsGovernanceAdditional information 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 to create a unique culture and helps
us to generate value
Inputs and resources
on which our business
model depends
Assets and natural resources
• Our resources and reserves
feature many long-life and high
quality assets
• We are a disciplined producer,
seeking to align supply with
demand and value over volume
• Our established marketing
operations have global reach
and deep understanding of
their respective markets
Our people and partners
• We have established long-term
relationships with a broad
range of suppliers and
customers across diverse
industries and geographies
• c.160,000 employees and
contractors spread across
over 35 countries in both
established and emerging
regions for natural resources
Financial discipline
• We seek to deploy capital
in a disciplined manner,
seeking to create 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
Our industrial business
Our industrial business spans the
metals and energy markets, producing
more than 60 commodities
from 150 sites
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.
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.
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 security of supply as
well as valuable market knowledge.
Our values reflect our purpose, our
priorities and the beliefs by which
we seek to conduct ourselves and
carry out our business activities.
They define what it means to work
at Glencore, regardless of location
or role.
Safety
Openness
Integrity
Simplicity
Responsibility
Entrepreneurialism
10
Glencore Annual Report 2019
Geographic
arbitrage
Product
arbitrage
Time
arbitrage
Our marketing business
We move commodities
from where they are plentiful
to where they are needed
Our commodities in
everyday products
Logistics and delivery
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.
Blending and optimisation
Our ability to blend and optimise allows us to offer a wide
range of product specifications, resulting in a high-quality
service and an ability to meet our customer specific
requirements.
Safety
17 fatalities
10%
Decrease in total recordable
injury frequency rate
Minimising our impact
on the environment
9.7%
carbon emission intensity
reduction by 2019 compared
to 2016 (scope 1 and scope 2 –
location based)
Adjusted EBITDA◊
$11.6bn
Payments to Governments
$7.7bn
2019 shareholder returns
$5.0bn
Our marketing
business
Page 54
Our industrial
business
Page 64
Sustainability
framework
Page 34
Our strategy for a
sustainable future
Page 12
Glencore Annual Report 2019
11
Strategic reportFinancial statementsGovernanceAdditional information Our strategy for a
sustainable future
Reflecting our purpose, our ongoing
responsibility is to not only deliver financial
performance but also to 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
Our purpose
Strategic objective
Responsibly
sourcing the
commodities
that advance
everyday life
To sustainably grow
total shareholder returns
while maintaining a
strong investment grade
rating and acting as a
responsible operator
CEO’s review
Page 2
12
Glencore Annual Report 2019
Strategic priorities
Integration of
sustainability
throughout our
business
We believe that by being a
responsible 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
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.
Maintain a
robust and
flexible balance
sheet
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.
Focus on cost
control and
operational
efficiencies
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 high-
quality service to our
customers and a reliable
supply of quality product.
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
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.
17
fatalities
10%
decrease in
Total Recordable
Injury Frequency
Rate in 2019
$10–
$16bn
Target Net
debt◊ range
28%
Metals EBITDA
mining margin◊
37%
Energy EBITDA
mining margin◊
Glencore Annual Report 2019
13
Strategic reportFinancial statementsGovernanceAdditional information Our strategy for a
sustainable future
continued
Strategic priorities
Performance in 2019
Priorities going forward
KPIs
Principal risks
Safety
Regrettably, there were
seventeen fatalities during
the year.
We began the
implementation of
an enhanced fatality
reduction programme,
including safety
interventions at our
Mopani and Kazzinc
operations last year.
This programme builds
on our investment in
SafeWork, with the goal
of achieving a step-change
in performance.
We continue to work
towards the elimination of
fatalities from our business.
Our TRIFR and LTIFR
decreased by 10% and 6%
respectively compared
to 2018.
Climate change
We expect to exceed our
first GHG emissions target of
reducing our emissions
(Scope 1 and 2) intensity by 5%
by 2020. Since 2016, we have
reduced our overall group
emissions intensity by 9.7%.
As one of the world’s
largest diversified resource
companies, we have a key role
to play in enabling transition
to a low-carbon economy.
We do this through our well
positioned portfolio that
includes commodities that
underpin energy and mobility
transformation that is a key
part of the global response
to the increasing risks posed
by climate change.
Water management
Operations continue
to implement our water
management guideline
which aligns with the
International Council
for Mining & Metals’
(ICMM) position statement
on water and its water
management framework.
Community engagement
Our community
development programmes
are an integral part of our
community and stakeholder
engagement strategies.
In 2019, we spent $90 million
on these programmes
(2018: $95 million).
Conservatively positioned
Capital structure and credit
profile managed through
targeting a maximum 2x
Net debt/Adjusted EBITDA
throughout the cycle,
augmented by an upper
Net debt cap of c.$16 billion
excluding Marketing-related
lease liabilities ($0.6 billion
at 31 December 2019).
Year-end Net debt and
Net debt to Adjusted
EBITDA were $17.6 billion
and 1.51x respectively.
Net loss attributable
to equity holders for 2019
was $0.4 billion.
Conviction to create value
We seek to balance the
preservation of our capital
structure, with business
reinvestment and shareholder
distributions. Funds from
operations and working
capital release more than
covered net capex and
returns to shareholders
Bonds
We issued $1.7 billion,
GBP 500 million, EUR 1.1 billion
and CHF 250 million of bonds
across a range of maturities
from 5 to 10 years. Post-2019
maturities are capped at
c.$3 billion in any one year.
Credit rating
The Group’s credit
ratings are currently Baa1
(stable outlook) from
Moody’s and BBB+ (stable)
from Standard & Poor’s.
Credit facility
Revolving credit facility
refinanced and moderately
resized. Committed available
liquidity of $10.1 billion at year-
end covers more than three
years of bond maturities.
Industrial
$9.0 billion Adjusted EBITDA;
mining margins of 28%
and 37% respectively in
our metals and energy
operations, down on 2018,
reflecting price declines
notably in cobalt and coal,
and challenges in the African
copper business.
Marketing
Achieved $2.4 billion Adjusted
EBIT across our marketing
business. The benefits
of supportive oil market
conditions during the year,
were offset by the earlier
impact of negative net
realisable value adjustments
to cobalt inventory.
Supply
In line with our disciplined
approach to supply, our
potential 2020 cobalt
production plans were lowered
in response to oversupply in
the cobalt market by the idling
of capacity at Mutanda.
Integration of
sustainability
throughout
our business
Maintain
a robust
and flexible
balance sheet
Focus on cost
control and
operational
efficiencies
14
Glencore Annual Report 2019
• Health, safety
and environment
• Climate change
• Community
relations and
human rights
Sustainability
and will prioritise capital
We continue to implement
investment into the
activities that promote
commodities that support the
integration of sustainability
transition to a low-carbon
throughout our business
economy as well as publish our
to support our commitment
long-term Scope 3 reduction
to continuously improve
our standards of health,
safety, environmental and
community and human
rights performance.
We still believe that a level of
high quality coal continues to
be part of the overall energy
mix, well into the future.
However, as part of our
commitment to a low-carbon
economy, we have limited our
coal production capacity
broadly to current levels
projections.
Transparency
We are committed to
operating transparently,
responsibly and meeting or
exceeding applicable laws.
Responsible sourcing
We have joined the
Responsible Sourcing
Blockchain Network to help
us to deliver improved supply
chain traceability and
transparency. Blockchain
technology also allows us to
integrate good practice with
our supply chain partners.
• Safe and healthy
workplace –
fatalities, 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
through the cycle, augmented
• Returns to
shareholders –
Funds from
operations,
Net funding
and Net debt
• Value for our
shareholders –
Adjusted EBIT/
EBITDA, Net income
attributable
to equity holders
• Supply, demand
and prices for the
commodities
we produce
• Currency exchange
rates
• Liquidity
• Counterparty credit
and performance
it is capable of supporting
liabilities.
capital structure and business
range. This will require
Balance sheet strength
We are committed to
maintaining our balance
sheet strength to ensure
growth and shareholder
returns regardless of
the commodity price
environment.
Investment grade rating
We will preserve a robust
portfolio that reflects our
commitment to targeting,
receiving and maintaining a
strong BBB/Baa investment
grade rating. In this regard,
we continue to target a
maximum 2x Net debt/
Adjusted EBITDA
Industrial activities
Our industrial activities
will continue to focus
on delivering on their
production potential,
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.
by an upper Net debt cap
of c.$16 billion, excluding
Marketing-related lease
In the current uncertain
economic cycle backdrop, we
aim to target a Net debt/
Adjusted EBITDA ratio closer
to one times and Net debt
reaching the c.$14–15 billion
targeted management over
the next 12 months, including
ongoing cost control and
working capital management,
and some potential
monetisation of select
non-core long-term assets.
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.
• Geopolitical, permits
and licence to
operate
• Laws and
enforcement
• Operating risk
• Cyber risk
• Returns to
shareholders –
Funds from
operations,
Net funding
and net debt
• Value for our
shareholders –
Adjusted EBIT/
EBITDA, Net income
attributable
to equity holders
Strategic priorities
Performance in 2019
Priorities going forward
KPIs
Principal risks
Key performance
indicators
Page 24
Principal risks
and uncertainties
Page 74
Safety
Climate change
Regrettably, there were
We expect to exceed our
Water management
Operations continue
seventeen fatalities during
first GHG emissions target of
to implement our water
the year.
reducing our emissions
management guideline
(Scope 1 and 2) intensity by 5%
which aligns with the
by 2020. Since 2016, we have
International Council
reduced our overall group
for Mining & Metals’
emissions intensity by 9.7%.
(ICMM) position statement
As one of the world’s
largest diversified resource
companies, we have a key role
to play in enabling transition
to a low-carbon economy.
We do this through our well
underpin energy and mobility
transformation that is a key
part of the global response
to the increasing risks posed
by climate change.
on water and its water
management framework.
Community engagement
Our community
development programmes
are an integral part of our
community and stakeholder
engagement strategies.
In 2019, we spent $90 million
on these programmes
(2018: $95 million).
We began the
implementation of
an enhanced fatality
reduction programme,
including safety
interventions at our
Mopani and Kazzinc
operations last year.
This programme builds
on our investment in
in performance.
We continue to work
towards the elimination of
fatalities from our business.
Our TRIFR and LTIFR
decreased by 10% and 6%
respectively compared
to 2018.
SafeWork, with the goal
positioned portfolio that
of achieving a step-change
includes commodities that
Conservatively positioned
Conviction to create value
Credit rating
Capital structure and credit
We seek to balance the
The Group’s credit
profile managed through
preservation of our capital
ratings are currently Baa1
targeting a maximum 2x
structure, with business
(stable outlook) from
Net debt/Adjusted EBITDA
reinvestment and shareholder
Moody’s and BBB+ (stable)
throughout the cycle,
distributions. Funds from
from Standard & Poor’s.
Credit facility
Revolving credit facility
refinanced and moderately
resized. Committed available
liquidity of $10.1 billion at year-
end covers more than three
GBP 500 million, EUR 1.1 billion
years of bond maturities.
augmented by an upper
operations and working
Net debt cap of c.$16 billion
capital release more than
excluding Marketing-related
covered net capex and
lease liabilities ($0.6 billion
returns to shareholders
at 31 December 2019).
Year-end Net debt and
Net debt to Adjusted
EBITDA were $17.6 billion
and 1.51x respectively.
Net loss attributable
to equity holders for 2019
was $0.4 billion.
Bonds
We issued $1.7 billion,
and CHF 250 million of bonds
across a range of maturities
from 5 to 10 years. Post-2019
maturities are capped at
c.$3 billion in any one year.
Industrial
Marketing
Supply
$9.0 billion Adjusted EBITDA;
Achieved $2.4 billion Adjusted
In line with our disciplined
mining margins of 28%
and 37% respectively in
our metals and energy
EBIT across our marketing
approach to supply, our
business. The benefits
of supportive oil market
potential 2020 cobalt
production plans were lowered
operations, down on 2018,
conditions during the year,
in response to oversupply in
reflecting price declines
were offset by the earlier
the cobalt market by the idling
notably in cobalt and coal,
impact of negative net
of capacity at Mutanda.
and challenges in the African
realisable value adjustments
copper business.
to cobalt inventory.
Integration of
sustainability
throughout
our business
Maintain
a robust
and flexible
balance sheet
Focus on cost
control and
operational
efficiencies
• Health, safety
and environment
• Climate change
• Community
relations and
human rights
Sustainability
We continue to implement
activities that promote
integration of sustainability
throughout our business
to support our commitment
to continuously improve
our standards of health,
safety, environmental and
community and human
rights performance.
We still believe that a level of
high quality coal continues to
be part of the overall energy
mix, well into the future.
However, as part of our
commitment to a low-carbon
economy, we have limited our
coal production capacity
broadly to current levels
and will prioritise capital
investment into the
commodities that support the
transition to a low-carbon
economy as well as publish our
long-term Scope 3 reduction
projections.
Transparency
We are committed to
operating transparently,
responsibly and meeting or
exceeding applicable laws.
Responsible sourcing
We have joined the
Responsible Sourcing
Blockchain Network to help
us to deliver improved supply
chain traceability and
transparency. Blockchain
technology also allows us to
integrate good practice with
our supply chain partners.
• Safe and healthy
workplace –
fatalities, 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
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 continue to target a
maximum 2x Net debt/
Adjusted EBITDA
through the cycle, augmented
by an upper Net debt cap
of c.$16 billion, excluding
Marketing-related lease
liabilities.
In the current uncertain
economic cycle backdrop, we
aim to target a Net debt/
Adjusted EBITDA ratio closer
to one times and Net debt
reaching the c.$14–15 billion
range. This will require
targeted management over
the next 12 months, including
ongoing cost control and
working capital management,
and some potential
monetisation of select
non-core long-term assets.
Industrial activities
Our industrial activities
will continue to focus
on delivering on their
production potential,
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.
• Returns to
shareholders –
Funds from
operations,
Net funding
and Net debt
• Value for our
shareholders –
Adjusted EBIT/
EBITDA, Net income
attributable
to equity holders
• Supply, demand
and prices for the
commodities
we produce
• Currency exchange
rates
• Liquidity
• Counterparty credit
and performance
• Geopolitical, permits
and licence to
operate
• Laws and
enforcement
• Operating risk
• Cyber risk
• Returns to
shareholders –
Funds from
operations,
Net funding
and net debt
• Value for our
shareholders –
Adjusted EBIT/
EBITDA, Net income
attributable
to equity holders
Glencore Annual Report 2019
15
Strategic reportFinancial statementsGovernanceAdditional information Climate change
Glencore is proud of the role we have and play in
supporting the transition to a low-carbon economy
Financial Stability
Board’s Task Force
on Climate-related
Financial Disclosures
(TCFD)
We support the TCFD’s 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.
As one of the world’s largest
diversified resource companies,
Glencore is proud of the role we have
and play in supporting the transition
to a low-carbon economy. We see
this transition as a key part in the
global multi-participant response
to the risks and challenges created
and fuelled by climate change. Our
well-positioned portfolio includes
commodities that are essential to
energy and mobility transformations
such as copper, nickel and cobalt.
We recognise the global climate
change science as laid out by the
Intergovernmental Panel on Climate
Change (IPCC). We believe that the
global response to climate change
should pursue twin objectives: both
limiting temperatures in line with the
goals of Articles 2.1(a)i1 and 4.1ii2 of the
Paris Agreement (the Paris Goals)
and supporting the United Nations
Sustainable Development Goals,
including universal access to
affordable and clean energy.
Governance
Glencore’s Board oversees the
development of the Group’s strategic
direction. It tracks the performance
of our strategic priorities, which focus
on the delivery of long-term success
for our business and the generation
of sustainable returns, while
maintaining our licence to operate.
The Board considers climate change
and its related opportunities and
challenges for Glencore during its
discussions and decisions on the
Group’s strategy, risk management
and investment decisions. During
2019, five Board and HSEC
Committee meetings included
discussions on climate change-
related matters.
The Board’s health, safety,
environment, and communities
(HSEC) Committee (the Committee)
deals with sustainability matters,
which include climate change.
It sets the strategic direction for
our sustainability activities and
oversees the development and
implementation of strategic
sustainability programmes. The
Committee assesses the Group’s
ability to comply with relevant
regulatory requirements and the
impact of our sustainability decisions
and actions on our reputation. The
Committee meets five times a year.
Climate change working group
In 2016, following discussions with
the shareholder-led Aiming for
A initiative, Glencore’s Board agreed
to establish a Climate Change
Working Group (the Working Group).
The Working Group supports the
delivery of our public commitments
on climate change in a timely
manner through reviewing,
developing and progressing the
Group’s strategic approach to
climate change. Its work underpins
the identification, mitigation and
management of climate-related risks
and enables our business to also be
alert to developing opportunities.
Glencore’s Chairman, Tony Hayward,
leads the multi-disciplinary, cross-
commodity Working Group and
its members include commodity
department heads and
representatives from relevant
corporate functions. The Working
Group has formal, face-to-face
meetings twice per year, with
additional engagement on an
ongoing basis, as required to
support the advancement of its
various work programmes.
The Working Group reports on
its work plan and progress to
the Committee.
In addition, meetings of our
operational senior management
team include discussions on
Glencore’s approach to climate
change, as well as progress on
implementing management and
mitigation measures.
Strategy
Industrial assets – risks and
opportunities
Regulatory developments
We believe the measures
implemented by national and
intra-national governments, as
well as public sentiment, will drive
public policy developments and
programmes that restrict global
greenhouse gas emissions (GHGs).
This is likely to affect our business
and presents both risks and
opportunities that we need
to manage.
1 Article 2.1(a) of The Paris Agreement states the goal of “Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing
efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.”
2 Article 4.1 of The Paris Agreement reads: “In order to achieve the long-term temperature goal set out in Article 2, Parties aim to reach global peaking of greenhouse gas
emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions thereafter in accordance with
best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this
century, on the basis of equity, and in the context of sustainable development and efforts to eradicate poverty.”
16
Glencore Annual Report 2019
our goods. Changes in temperature
can lead to heat stress affecting our
workforce and equipment.
We track changing weather
conditions and amend operating
processes as appropriate. Looking
ahead, we will continue to review
current mitigating measures in
place at our operations and consider
opportunities to strengthen these.
Stakeholder perception
Negative stakeholder perception
around the role of the extractive
sector in contributing to climate
change may result in delays or
restrictions to permit approvals,
divestment of our shares, an increase
in the cost of finance or accessibility
of insurance. Further, stakeholder
opinion can drive regulatory changes.
We are engaging with a broad range
of stakeholders on diverse topics
including climate change and related
areas of concern.
Marketing business – risks
and opportunities
Technology
The growth in electric vehicle (EV)
uptake is driving demand for the
mass production of powerful
batteries that require raw materials
such as nickel and cobalt. In addition,
the growth of renewable energy in
the form of wind and solar is a
positive opportunity for our business,
given both technologies require
significant amounts of copper and
aluminium for construction.
Glencore has an opportunity to
supply this growing demand
given its position as a producer
and marketer of these materials,
particularly with respect to nickel
and cobalt for batteries.
The increased deployment of EVs
will also result in greater demand
for secure and reliable baseload
electricity and associated
infrastructure required to service
the EV fleet – this is likely to also
benefit our business through such
supporting demand for the
commodities we produce and
market. As emerging technologies,
the policies, standards and incentives
for batteries and EVs are liable to
change and evolve over time, which
may lead to volatility in market
demand for these materials.
Market impacts
New or increased opportunities
for our products from emerging
technologies and related policy
changes can drive demand for
some of our commodities.
Glencore Annual Report 2019
17
A transition to a low-carbon
economy and its associated
regulatory developments and public
policy may affect the development
or maintenance of our assets due
to restrictions in operating permits,
licenses or similar authorisations.
We play an active and constructive
role in public policy development
on carbon and energy issues.
Carbon pricing
We support a pragmatic and
practical global approach that
prioritises a least-cost, logical
transition towards lower global
emissions. Pricing carbon should be
part of an informed and considered
process, structured to provide
market signals to drive behaviours
and incentivise investments that
deliver the least cost pathway to
emissions reductions.
Glencore supports policy
mechanisms aimed at achieving
cost-efficient emissions reductions
without compromising the
development goals of nation states.
Our business continues to operate
successfully in multiple jurisdictions
that have direct and indirect carbon
pricing or regulation, including
Australia, Canada, Chile and South
Africa, as well as our customer
markets such as China, India and
Europe. We consider carbon price
sensitivities as part of our ongoing
business planning for existing
industrial assets, new investments
and as part of our marketing activities.
Energy costs
We are a significant energy consumer
and our use of fuel and power is
a key input and cost to our business
as well as being a material source of
our carbon emissions. As global
patchwork of energy and climate
change regulation evolves, we are
closely monitoring international and
national developments.
We incorporate energy costs and
our carbon footprint into our annual
planning process. Commodity
departments are required to provide
energy and GHG emissions forecasts
for each asset over the forward
budget/planning period and provide
details of mitigation projects that
may reduce such emissions.
The Working Group oversees the
ongoing integration of carbon
emissions and energy into our
annual business planning process
and the mapping of our forward
projected energy and carbon
footprint. It includes an assessment
of potential mitigation and
abatement projects, and underpins
the basis of our internal Marginal
Abatement Cost Curve.
Physical impacts
Extreme weather events, such as
floods, hurricanes and droughts, as
well as changes in rainfall patterns,
temperature, and storm frequency
can affect our industrial assets’
operating processes, related
infrastructure, and the communities
living close to our operations.
Water is an essential input for
our industrial activities. Concerns
regarding the long-term availability
and quality of water, and security of
access to water, have increased due
to changes to demography and
climate. Damage caused by storm
surges and strong winds can affect
the availability of ports and critical
infrastructure required to transport
Strategic reportFinancial statementsGovernanceAdditional information Climate change continued
Conversely, many developed
countries are pledging to stop using
fossil fuels (specifically coal) in power
generation. As the world’s largest
producer of seaborne thermal coal
and a significant marketer of fossil
fuels, the loss or significant decline of
the market for coal could materially
impact our business. However, our
Australian operations are expected
to maintain a longer and flatter
production profile and will continue
to produce high quality coal, which
will be required to meet expected
levels of global steel production
and energy demand in Asia.
The scale and diversity of our
business across commodities and
geographies is a key strength that
enhances our existing and future
investment optionality. We believe
that Glencore has the right
commodity mix to meet the
changing needs of key maturing
economies. We have leading low-
cost supply positions in mid- and
late-cycle commodities, for example
copper, cobalt, zinc and nickel, and
significant operational leverage to
improving fundamentals in key
commodities (additional details
on page 20).
As economies transition towards a
low carbon economy, we consider
Glencore well positioned to service
growing demand for many of the
raw materials that will be required
for decades to come.
Scenario analysis
Our publication 2017 Climate change
considerations for our business,
evaluated each of our commodity
departments against three key
scenarios established by the
International Energy Agency (IEA)
and detailed in its World Outlook
2016 to determine their resilience
and assess consequences for the
portfolio of commodities we market.
Our evaluation took into account
price, supply, demand and industry
structure, as well as the energy
market projections developed by
organisations such as the IEA
and World Energy Council (WEC),
leading climate science projections
from the IPCC and likely shifts
18
Glencore Annual Report 2019
Scope 1
(direct
emissions)1
(CO2e million
tonnes)
Scope 2
location-based2
(indirect
emissions) (CO2
million tonnes)
Total global
energy use at our
operated assets4
Carbon Scope 1
and 2 emissions
intensity3
(tonnes of
greenhouse
gases emitted
per tonne of copper
equivalent industrial
production,
tGHG/tCu)
21.8
18.8
18.3
11.5
11.8
10.9
4.35
4.40
4.13
3.93
201
209
210
2017
2018
2019
2017
2018
2019
2016
2017
2018
2019
2017
2018
2019
1 This includes emissions from reductants used in our metallurgical smelters. It also includes CO2e of
methane emissions from our operations, which is around 22% of our Scope 1 emissions.
2 We apply appropriate country-by-country grid emission factors to all of our purchased electricity,
regardless of specific renewable electricity contracts.
3 Scope includes industrial assets; the 2016 baseline is amended to reflect acquisitions and
divestments; Copper-equivalent production is calculated on the basis of fixed 2016 baseline year
average commodity prices.
4 Renewable energy sources deliver 12.5% of our total energy needs (2018: 11.7%). 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.
in policy and other conditions
corresponding to scientific
technology and economic changes.
As the Paris Agreement requires
each signatory country to outline
and communicate their post-2020
climate actions, its revised national
determined contributions (NDCs) by
2020 and we will provide an updated
analysis of Glencore’s portfolio
resilience in 2021. In the interim, we
are continuing to monitor policy
developments and review our
scenarios on an annual basis, taking
into account any material changes
to actual or proposed policies.
Risk Management
Assessing climate change-related
risk is part of our risk management
processes (see Climate change
risk, pages 87-88). For instance, our
new tailings storage facilities (TSF)
protocol, adopted in 2019, requires
operations to assess the impact
of climate change on the design,
operation, maintenance and
closure of TSFs.
Assessing and Managing risks
We recognise that the effective and
strategic management of climate
change-related risks across all
aspects of our business is vital to
ensure our growth and to provide
greater certainty to all stakeholders.
We integrate risk management
throughout our business through
a structured risk management
process that establishes a common
methodology for identifying,
assessing, treating and
monitoring risks.
We recognise the importance of
disclosing to investors how we are
ensuring that our material capital
expenditure and investments align
with the Paris Goals. This includes
each material investment in
the exploration, acquisition or
development of fossil fuel (including
thermal and coking coal) production,
resources and reserves, as well as in
resources, reserves and technologies
associated with the transition to
a low carbon economy.
Metrics and targets
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.
Our CO2 emissions reporting is
separated into Scope 1 and Scope 2 –
location-based emissions. Scope 1
(measured in CO2e) includes
emissions from combustion in
owned or controlled boilers, furnaces
and vehicles/vessels and coal
seam emissions (direct emissions).
Scope 2 – location-based emissions
(measured in CO2) applies the grid
emission factor to all our purchased
electricity, regardless of specific
renewable electricity contracts
(indirect emissions).
The majority of our Scope 1 emissions
include fugitive emissions from the
production of coal and consumption
of fuel and reductants. Scope 2
emissions principally relate to
purchased electricity for our
operations, in particular our metals
processing assets, which require
secure and reliable energy 24 hours
a day, 365 days a year.
Reporting by our oil department’s
shipping activities previously
included energy consumption and
associated GHG emissions for all of
their vessels. For 2019 data onwards,
their reporting will exclude vessels
not owned by the oil department,
i.e. time-chartered vessels. Emissions
from these vessels will now be
reported as Scope 3, as they stem
from activities outside of our
operational control.
Renewable energy sources delivered
12.5% of our total energy needs (2018:
11.7%). 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.
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 risks and opportunities.
• Climate change section: pages 16–19
• Board Committees: page 98
• Risk – Board leadership: page 100
(b) Describe management’s role in
assessing and managing climate-
related risks and opportunities.
• Climate change section: pages 16–19
• Board activities during 2019: page 99
• HSEC Committee report: page 106
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.
• Climate change section: pages 16–19
• Principal risks and uncertainties/climate
change: pages 87–88
(b) Describe the impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy,
and financial planning.
• Climate change section: pages 16–19
• Principal risks and uncertainties/climate
change: pages 87–88
(c) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-related
scenarios, including a 2°C or lower
scenario.
• Climate change section: pages 16–19
• 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.
• Climate change section: pages 16–19
• Approach to risk management: page 101
• 2017 Climate Change Considerations for
Our Business: Page 14
(b) Describe the organisation’s processes
for managing climate-related risks.
• Climate change section: pages 16–19
(c) Describe the targets used by the
organisation to manage climate-related
risks and opportunities and
performance against targets.
• Climate change section: pages 16–19
• Principal risks and uncertainties section:
pages 74–89
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.
• Climate change section: pages 16–19
• Our performance against our 2019 position
statement section: pages 20–22
(b) Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
• Climate change section: pages 16–19
• Our performance against our 2019 position
statement section: pages 20–22
• Key performance indicators: pages 24–25
(c) Describe the targets used by the
organisation to manage climate-related
risks and opportunities and
performance against targets.
• Climate change section: pages 16–19
• Our performance against our 2019 position
statement section: pages 20–22
Glencore Annual Report 2019
19
Strategic reportFinancial statementsGovernanceAdditional information Climate change continued
Our performance
against our 2019
position statement
Our position statement sets out
our commitment to delivering
shareholder value through
investing in assets resilient
to regulatory, physical and
operational risks related
to climate change and
continued public disclosure
of our carbon footprint and
progress against our emission
reduction targets
In February 2019, Glencore published
its climate change position
statement (our position statement)
Furthering our commitment to the
transition to a low-carbon economy,
which is available on our website.
Our position statement recognises
that to deliver a compelling
investment case to our financial
stakeholders, we should prioritise
our capital investment in assets
that, most likely, will be resilient to
regulatory, physical and operational
risks related to climate change.
In addition, we aim to prioritise
our capital investment to grow
production of commodities
essential to the energy and
mobility transition and maintain
a cap on our coal production.
1 When assessing the long-term projections for
our Scope 3 emissions arising from the use of
some of our products, we found an intensity
metric is a less useful measure than absolute
emissions. On this basis, and to support greater
transparency, we report a projection of our
absolute Scope 3 emissions.
2 IEA WEO 2019
20
Glencore Annual Report 2019
Performance against
our position statement
1. Paris-consistent strategy/
capital discipline
Extract from position statement
As we rebalance our portfolio
towards commodities supporting
the transition to a low-carbon
economy, we expect the intensity
of our Scope 3 emissions to
decrease. Starting in 2020, we will
start disclosing our longer-term
projections for the intensity
reduction of Scope 3 emissions,
including mitigation efforts.
We recognise the importance
of disclosing to investors how
we ensure our material capital
expenditure and investments align
with the Paris Goals. This includes
each material investment in
the exploration, acquisition or
development of fossil fuel
(including thermal and coking coal)
production, resources and reserves,
as well as in resources, reserves and
technologies associated with the
transition to a low carbon economy.
Starting in 2020, we intend to
report publicly on the extent to
which, in the Board’s opinion,
this was achieved in the prior year
and the methodology and core
assumptions for this assessment.
These disclosures will commence to
be made in our next Annual Report.
Performance during 2019
Our portfolio is well-positioned to
support the transition to a low-
carbon economy, while also meeting
the need for universal access to
reliable energy. Our business will
continue to evolve over time as
we look to deliver on our climate
objectives as part of a Paris
consistent strategy. At present, our
projection indicates a reduction of
our Scope 3 emissions – those arising
from the sale and use of our own
products, notably oil and coal –
of approximately 30% by 20351.
We expect the depletion of our coal
resource base in Colombia, and to
a lesser extent South Africa and
Australia, to contribute to this
reduction. Our Australian operations
are expected to maintain a longer
and flatter production profile and
will continue to produce high quality
coal, which will be required to meet
expected levels of global steel
production and energy demand
in Asia.
Our capital expenditure reflects
significant current investment
towards growth in production of
battery and conductive metals
required for the transition to a
low-carbon economy. During 2019,
our capital expenditure was
predominantly spent on our key
metals’ growth projects, including
the development of Katanga
(copper/cobalt) in the DRC, Mopani
(copper) in Zambia, the Zhairem
project (zinc) in Kazakhstan and new
nickel mines in Canada, one of which
will be one of the first fully electric
mines in the world. When complete,
Katanga is expected to produce
approximately 30,000 tonnes of
cobalt per annum, helping supply
a market that is expected to grow
substantially to more than 200,000
tonnes per annum by 2025.
Global energy demand has grown
at 1.4%2 per annum from 2010 to 2018
and scenarios reflecting Stated
Policies objectives indicate energy
demand shall continue to grow
through 2035. We believe that coal,
as a reliable and cost competitive
form of energy, will continue to have
a role in meeting future energy
demand, particularly in developing
countries, with carbon, capture,
utilisation and storage (CCUS)
adoption playing an increasingly
important role in achieving
emissions abatement3. In 2019, our
capital expenditure on coal-related
projects was mainly for maintaining
existing assets, including the
required accounting for capitalisation
of mine development costs (both
surface and underground operations),
where benefits are expected to be
realised beyond 12 months.
As our 2020 target ends, we have
committed to establish a new,
longer-term target that supports
the Paris Goals. During 2019, we
furthered our work on developing
this target by identifying and
quantifying our operations’
carbon reduction opportunities
through marginal abatement cost
curves (MACCs).
Through this work, we are identifying
opportunities to deliver substantial
emissions reductions by sourcing
more power from low-carbon
sources and delivering operational
improvements that enhance
efficiency.
We will communicate our longer-
term target in 2020.
When identifying, assessing
and ranking coal projects for
development, we consider a range
of indicators including the financial
payback period, based on a range
of future coal price assumptions.
We prioritise shorter payback
investment periods.
During the year, the New South
Wales state government approved
brownfield extensions for Mt Owen
and the United Wambo joint
venture project.
The Mt Owen and United Wambo
approvals will provide continued
employment for more than 750
people, additional employment
for 370 people, create additional
important State and Federal tax
and royalty sources, and increase
the Gross Regional Product in
the respective regions by an
estimated A$ 2.4 billion and
Gross State Product by an
estimated A$ 3.3 billion, through
supporting local businesses and
employment opportunities.
We remain committed to our annual
coal production cap of approximately
150 million tonnes.
2. Scope 1 and 2 targets
Extract from position statement
In 2017, we announced our first
target of reducing our greenhouse
gas emissions intensity by 5% by
2020 compared to a 2016 baseline.
We are currently on track to meet
this target.
Glencore recognises the
importance of continued
reductions of greenhouse gas
emissions from our operations.
We are developing new, longer-
term targets based on policy and
technological developments that
support the Paris Goals, and intend
to make these public in our annual
report for 2020. We will report
annually on our progress.
Performance during 2019
We are on track to exceed our
target. To date, we have reduced
our Scope 1 and 2 emissions
intensity by 9.7% compared to the
2016 baseline, achieved by a range
of measures including abatement,
use of renewable energy sources
and production changes at
our operations.
3 See IPCC SR1.5 sect 2.4. In addition, more
information about Glencore’s CCUS project
is available at http://ctsco.com.au/
Glencore Annual Report 2019
21
Strategic reportFinancial statementsGovernanceAdditional information Climate change continued
3. Review of progress
Extract from position statement
We are committed to transparency
and report annually on our
progress in meeting our climate
change objectives. We include this
disclosure in our annual report and
provide further details in our
sustainability report. In addition, we
publish data on our performance
on our website, including disclosure
of our Scope 3 emissions.
We will give consideration to how
our climate change objectives can
be reflected in the design of the
relevant schemes for executive
management.
Every three years, we review
changes to the Nationally
Determined Contributions (NDCs)
in line with the Paris Goals
mechanism, and other relevant
policy, economic and technology
developments to assess societal
progress in energy transition and
to update our scenario-based
portfolio assessment.
Performance during 2019
Details of our approach to climate
change are included on our website,
and in our annual and sustainability
reports. We disclose our
performance annually, including
data on our Scope 1, 2 and 34
emissions . We were pleased to
receive the ranking of 4, the top-tier
level, by the Transition Pathway
Initiative for our approach to the
management and disclosure of
climate-related risks.
We continuously monitor the policy
landscapes and steps countries are
taking to support achievement of
the goals of the Paris Agreement.
We are expecting the Nationally
Determined Contributions (NDCs)
to be updated in the course of 2020,
and will use these to update our
own scenarios.
4 Our Scope 3 emissions are disclosed in our
Sustainability Report, to be published in April 2020
22
Glencore Annual Report 2019
4. Alignment with the Task
force on Climate-related
Financial Disclosures (TCFD)
recommendations
Extract from position statement
We were an early supporter of the
voluntary guidance on consistent
climate related financial disclosures
produced by the TCFD. We are
pleased to support the TCFD
guidance and have started to
implement its recommendations
in our annual reporting.
Glencore will continue to disclose
the metrics, targets and scenarios
we use to assess and manage
relevant climate-related risks
and opportunities.
Performance during 2019
We continue to implement the
recommendations of the TCFD in
our annual reporting. Details of
our Scope 1 and 2 emissions are
available on page 25 and we will
publish our Scope 3 emissions in
our Sustainability Report 2019,
which will be available in April.
We monitor risks and opportunities
related to climate change and,
going forward, will be taking further
steps to roll out site-specific risk
assessments. We also continue to
incorporate climate change into
operational planning: for instance,
our new tailings storage facilities
(TSF) protocol, adopted in 2019,
requires operations to assess the
impact of climate change on the
design, operation, maintenance
and closure of TSFs.
Further details on the risks we have
identified in relation to climate
change are included in the Principal
Risks and Uncertainties section.
Our scenarios regarding global
responses to climate change were
developed in 2017 and took into
account energy market projections
developed by organisations such as
the IEA and World Energy Council
(WEC), leading climate science
projections from the IPCC and likely
shifts in policy and other conditions
corresponding to scientific
technology and economic changes.
We believe that national policies
play a critical role in shaping the
response to climate change. National
commitments and climate pledges
are required to be updated in 2020
and we will use these to update our
scenarios for achieving the goals of
the Paris Agreement and test the
resilience of our business.
5. Corporate climate change
lobbying
Extract from position statement
We believe that it is appropriate
that we take an active and
constructive role in public policy
development and participate in
relevant trade associations. We
acknowledge the IIGCC Investor
Expectations on Corporate Climate
Lobbying and recognise the
importance of ensuring that our
membership in relevant trade
associations does not undermine
our support for the Paris Goals.
Performance during 2019
During 2019, we undertook our
first review of our membership in
relevant trade associations to ensure
their activities and statements align
with those of Glencore and do not
undermine our support for the
Paris Goals.
We reported on our approach to the
review, and its findings, in our report
Review of our industry organisations’
positions on climate change. We will
review annually the activities and
positioning of our relevant trade
associations on the topic of climate
change, acknowledging that trade
associations represent industry
across multiple policy areas.
Stakeholder engagement
We hold regular meetings with
our investors, banks, governments
and customers on topics related
to climate change. We engage
constructively with the Climate
Action 100+ initiative and the
Transition Pathway Initiative.
These conversations help us
continue to update our approach
to climate change to reflect evolving
stakeholder expectations, changing
policy landscape and developments
in low emission technologies.
Petunia Mogashwa
Plant Manager – Glencore Coal,
South Africa
Mining was something Petunia’s father
encouraged her to pursue, as a mine
worker himself. Petunia studied
metallurgical engineering, and chose a
career path that would allow her to work
with people.
“Glencore will appoint a mentor for you,
and guide you throughout your career
journey,” she says, “I am excited about
my future.”
Petunia now leads a team of around
240 people. “I am a good motivator, and
I love my team so much.”
See more stories like this
Visit Glencore.com and
follow us on social media
Integrity
Nurturing talent
for future leaders
Glencore Annual Report 2019
23
Strategic reportFinancial statementsGovernanceAdditional information 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)
Net funding/Net debt◊
(US$ million)
11,601
14,545
15,767
8,459
9,143
11,601
17,556
31,053
32,138
4,151
10,216
17,556
14,710
1.60x
1.20x
0.80x
0.40x
0.00x
Funds from
operations (FFO)◊
(US$ million)
7,865
Net (loss)/income
attributable to equity
holders (US$ million)
(404)
34,366
11,350
11,595
5,777
7,865
3,408
2017
2018
2019
2017
2018
2019
2017
2018
2019
EBITDA
EBIT
Net debt
Net funding
Net debt to Adjusted
EBITDA ratio
(404)
2017
2018
2019
Links to strategy
Links to strategy
Links to strategy
Links to strategy
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.
2019 performance
Adjusted EBITDA was $11.6 billion
and Adjusted EBIT was $4.1 billion,
decreases of 26% and 55%
respectively compared to 2018,
primarily driven by the average
prices in our key commodities
being lower year-over-year, with
the cobalt market having been
in oversupply, and the Atlantic
steam coal market impacted by
weaker European demand and
low gas prices.
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.
Net debt is defined as total current
and non-current borrowings
less cash and cash equivalents,
readily marketable inventories
and related Proportionate
adjustments.
The relationship of Net debt to
Adjusted EBITDA is an indication
of our financial flexibility
and strength.
2019 performance
Net funding as at 31 December
2019 increased by $2.2 billion to
$34.4 billion, while Net debt (net
funding less readily marketable
inventories) increased by
$2.8 billion over the year to
$17.6 billion.
Such increases partially arose
from the adoption of the new
lease accounting standard,
effective 1 January 2019, which
resulted in $865 million of new
lease liabilities being recognised,
while $582 million of additional
new leases were booked as capital
expenditures and debt in 2019,
that previously would have been
classified as operating leases.
24
Glencore Annual Report 2019
Definition
Funds from operations (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 and related
Proportionate adjustments, as
appropriate.
2019 performance
FFO were down 32% compared to
2018, owing in large part to the
reduction in commodity prices
and operational challenges in the
African copper operations. FFO
also impacted by the lag effect
of tax paid in 2019 in respect of
2018 profitability (c.$755 million
reduction in balance sheet
income taxes payable) and $238
million of taxes paid in 2019 that
will be offset against future taxes
due, or refunded.
Definition
Net income attributable to equity
shareholders is a measure
of our ability to generate
shareholder returns.
2019 performance
Net loss attributable to equity
holders was $404 million in 2019
compared to a net income of
$3,408 million in 2018, driven
largely by lower commodity prices
compared to prior year, and
various impairments charges
across our portfolio, mainly
relating to our Colombian coal,
Chad oil and African copper
portfolios, owing to a lower
forecast Atlantic steam coal price
environment, the expiration of
certain oil exploration licences and
revisions to Mutanda’s mine plan.
Recommended distribution
for 2020 of $0.20 per share
($2.6 billion), in excess of net
income attributable to
shareholders, reflecting actual
FFO generation and confidence
in the sustainable underlying
cash generation of the business.
◊ Refer to APMs section on page 228 for definition and reconciliations.
Strategic priorities
Integration of
sustainability
throughout
our business
Maintain a
robust and
flexible
balance sheet
Focus on cost
control and
operational
efficiencies
Our strategy for
a sustainable future
Page 12
Financial
review
Page 46
Non-financial key performance indicators
Safety: Total recordable
injury frequency rate
(TRIFR) (per million hours
worked)
2.86
3.08
3.18
2.86
Water withdrawn
(million m3)
1,050
1,020
1,050
924
Community investment
(US$ million)
90
90
95
90
Carbon emissions
(million tonnes CO2)
29.2
33.4
11.5
30.6
29.2
11.8
10.9
21.8
18.8
18.3
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
Scope 1
Scope 2
Link to strategy
Link to strategy
Link to strategy
Link to strategy
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.
2019 performance
We are saddened to report that
in 2019 seventeen people lost
their lives at our operations (2018:
thirteen people). All loss of life
is unacceptable and we are
determined to eliminate fatalities
across our Group.
Our TRIFR is 2.86 per million hours
worked, a decrease of 10% on the
3.18 recorded in 2018.
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.
2019 performance
In 2019, we withdrew
1,050 million m3 of water
(2018: 1,020 million m3). The
modest increase in water
withdrawal, which includes
rainwater accumulating on site,
is due to improved reporting by
some assets and significantly
increased precipitation at certain
operations. 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.
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.
2019 performance
In 2019, the funds we made
available for community
investments were $90 million,
a decrease on the amount
invested in 2018 ($95 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.
Definition
Our CO2 emissions reporting is
separated into Scope 1 and
Scope 2 – location-based
emissions. Scope 1 (measured in
CO2e) includes emissions from
combustion in owned or
controlled boilers, furnaces and
vehicles/vessels and coal seam
emissions (direct emissions).
Scope 2 – location-based
emissions (measured in CO2)
applies the grid emission factor
to all our purchased electricity,
regardless of specific renewable
electricity contracts (indirect
emissions). We monitor and report
both the direct and indirect
emissions generated by the
industrial activities, entities
and facilities where we have
operational control.
2019 performance
During 2019, we emitted 18.3
million tonnes CO2e of Scope 1.
Additional Scope 1 emissions from
Astron Energy were offset by the
reclassification of non-controlled
vessels’ emissions to Scope 3. Coal
seam emissions were lower year
over year.
We emitted 10.9 million tonnes
CO2 of Scope 2 – location based.
The year over year decrease
mainly reflected reduced smelter
operations in the Ferroalloys
business in South Africa.
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.
Glencore Annual Report 2019
25
Strategic reportFinancial statementsGovernanceAdditional information Section 172 statement and
stakeholder engagement
Statement regarding Section 172 of the UK
Companies Act 2006 and our commitment
to transparent and constructive dialogue with
all of our stakeholders
• the desirability of the Company
maintaining a reputation for
high standards of business
conduct see our Ethics and
Compliance section from page
42 and Principal Risks and
Uncertainties section from
page 74
• the need to act fairly between
members of the Company: the
Corporate Governance section
from page 96 outlines
the material ways in which
the Board and management
interact with and communicate
to shareholders
When discharging its duty under
Section 172, the Directors have
focussed on mapping out the
Company’s key stakeholder
groups and reviewing their level of
engagement with them as a Board.
The following pages outline our
key stakeholders groups, how we
interact with them and how the
Board considers their interests
and opinions during its discussions
and decision-making processes.
Going forward, we want to increase
our stakeholder awareness, and
to do more to strengthen our
Directors understanding of the
broad range of views expressed
by Glencore’s stakeholders.
The UK Corporate Governance
Code (the Code) requires the
Board to understand the views
of the Company’s other key
stakeholders and report how
their interests and the matters
set out in section 172 of the UK
Companies Act 2006 have been
considered in Board discussions
and decision-making.
During the year, the Directors
consider that they have acted in
a way, and have made decision
that would, most likely promote
the success of the Group for the
benefit of its members as a whole,
with particular regard for:
• the likely consequences of any
decision in the long term: see
Investment Case on page 6,
Business Model on page 10 and
Principal Risks and Uncertainties
section from page 74
• the interests of the Group’s
employees: see Our People
section from page 30 and Ethics
and Compliance section from
page 42
• the need to foster the
Company’s business
relationships with suppliers,
customers and others: see
section below where we detail
our Stakeholder Engagement
• the impact on the Company’s
operations on the community
and environment: see our
Sustainability section from page
34 and our Sustainability Report
to be released in April this year,
Climate section from page 16
and Principal Risks and
Uncertainties section from
page 74
As a global resources business, we
recognise that robust, respectful
and two-way relationships with
stakeholders are essential for our
social licence to operate. We operate
assets in 35 countries and have
around 160,000 colleagues
(including contractors). Engaging
and responding to all of our
stakeholder groups, regardless
of their location or opinion, is
fundamental to how we operate.
Stakeholder scrutiny supports the
maintenance of the high standards
of business conduct that is vital to
our corporate culture and the
long-term success of the Group.
A central task of the Board and its
Committees is to oversee a strategy
that can achieve lasting success and
generate sustainable returns for
business, while maintaining our
licence to operate. The Board
recognises the need for transparent
and constructive stakeholder
engagement and consultation,
as well as acting on the needs of
stakeholders, in order to achieve this.
To enable this and ensure
stakeholder considerations are
reflected in our corporate decision-
making, we have standing agenda
items for Board and Committee
meetings that reflect our different
stakeholder groups’ interests.
Following the introduction of the
new UK Corporate Governance Code
2018 (Code), the Board has taken the
opportunity to review the Group’s
stakeholder identification and
engagement activities, especially
with respect to our workforce
engagement. The first key step
was establishing a new Board
committee, the Ethics, Compliance
and Culture (ECC) committee, to
oversee and report to the Board
on key engagement matters. For
further details on the work of the
ECC committee, see page 105.
26
Glencore Annual Report 2019
Stakeholder engagement continued
Stakeholder
and overview
NGOs
We engage both
globally and locally
with NGOs with
a wide range of
opinions. We welcome
the opportunities
arising from this
engagement to
further our
understanding of the
societal and policy
issues and local
matters that affect
and have the
potential to impact
our business.
Key issues for them
How we engage/Engagement during the year
• Operational and
environmental
management
• Public health
• Socio-economic
development
projects
• Tax payments and
transparency
• Human Rights
• Compliance with law
Our Sustainable Development function, at corporate, regional and local
levels engage with numerous NGOs and civil society representatives with
wide-ranging interests. Our engagement activities cover topics specific
to an operation such as local environmental concerns or the transition
to a lower carbon economy. Mostly, our engagement is constructive;
however, when unfairly critical, we seek to provide public responses to
increase understanding.
The Group Head of Sustainable Development reports on our NGO
engagement during the Board HSEC committee meetings. The Board is
informed of specific NGOs interests and activities when considering M&A
opportunities, expansion projects and life of mine scenarios as well as
potential reputational impacts to the Company. During 2019, the key
areas of NGO interest in Glencore included responsible supply chain
management, transparency in resource payments and security activities
in Peru.
Communities
We look to minimise
any negative impacts
from our operations
and to support
sustainable socio-
economic
development and
growth in our local
communities.
• Local employment
and procurement
opportunities
• Socio-economic
development
projects
• Environmental
management
• Operational impacts
• Potential site closure
The local communities living near our assets are part of the ecosystem
of our operations. Our engagement with these stakeholders is mainly
through our community-relations teams, who report into their asset’s
General Management team. We recognise that through proactive,
strategic stakeholder and community engagement, we can support the
advancement of the interests of both our host communities and our assets.
The Board, through its HSEC Committee, takes into account community
considerations when discussing operational decisions that will affect local
communities and the surrounding regions. In 2019, this included placing
Mutanda on care and maintenance, security incident reviews in Peru and
smelter emissions at Mopani.
Our people
Our people are
essential to our
success and growth.
We recognise that we
need a skilled and
committed workforce,
with a diverse range
of experience and
perspectives.
• Health, safety and
wellbeing
• Company culture
and reputation
• Compensation and
career opportunities
• Asset viability
During the year, the Board and senior management team discussed how
to improve the inclusivity of our internal engagement with Glencore’s
Group-wide workforce. Our Group’s geographical and cultural diversity
reflects our circa 150 sites, over 30 marketing offices and nearly 160,000
workers, making effective Group-wide engagement a significant task. As
such, the Board recognised that establishing the processes to strengthen
workforce engagement would take time and require regular refreshing.
Supported by designated non-executive directors, this process began
with culture surveys carried out in all of our marketing offices and at our
Australian industrial operations, including focus groups and town-hall style
meetings at a number of assets, offices and our Swiss headquarters.
The findings from the surveys, meetings and interviews, while being
broadly positive, are currently being consolidated and the Board, with
management, will consider how best to implement resulting
recommendations.
Glencore Annual Report 2019
27
Strategic reportFinancial statementsGovernanceAdditional information Stakeholder engagement continued
Stakeholder engagement continued
Stakeholder
and overview
Governments
and regulators
We look to develop
and maintain
constructive
relationships with the
national, regional and
local governments of
our host countries,
and maintain regular
dialogue with them.
• Tax and royalty
payments
• Climate change
• Socio-economic
development
projects
Key issues for them
How we engage/Engagement during the year
Executive management, corporate teams and operational management
engage with governments and regulators both in country and in multi-
national organisations, such as the OECD. Engagement activities are for
relationship building and to advance understanding on specific topics, such
as fiscal structures, operating licences and workforce expectations.
The Board recognises the role that transparency of government revenues
can make in empowering civil society and during the year, the Company
published its fourth report on economic contribution and payments to
governments. This yearly report provides an overview of our approach to
tax and transparency and discloses the payments made on a country-by-
country and project-by-project basis, in accordance with the reporting
requirements of the EU Accounting Directive. Each year, our Sustainable
Development and Legal teams engage with external transparency-focused
stakeholders to discuss how we can expand and improve our disclosures of
these payments. In 2019, this led to additional disclosures in relation to:
• the payments that were made in the DRC and South Africa
• practical examples on how and why we have subsidiaries in
offshore locations
• identification of specific governmental entities
• oil purchases from state-owned oil enterprises in support of the EITI
glencore.com/sustainability/reports-and-presentations
In addition, the Board discussed engagement strategies concerning
particular issues such as the placing of Mutanda into temporary care and
maintenance, retrenchments in certain locations and the restart of the
smelter in Mopani.
Investor Relations has the primary responsibility for managing and
developing the Group’s external relationships with existing and potential
institutional equity and debt investors. In addition, the corporate
Sustainable Development team often participates in these engagement
activities. Investor meetings and roadshows that mostly align with financial
results include the CEO and CFO with discussions on strategic progress,
financial and operational performance, and other matters relevant to
shareholders, including environmental, social and governance. The AGM
is an opportunity for shareholders, including non-institutional ones,
to hear directly from the Board on the Group’s performance and strategic
direction and to ask questions. The AGM is available by webcast to those
shareholders who cannot attend in person and voting results are released
shortly following the AGM. At the 2019 AGM there were no significant votes
against or withheld.
The Company communicates with its shareholders generally through
regular results and strategy announcements and has a comprehensive
website on which detailed company information is available. Furthermore,
external speeches and presentations by senior management are uploaded
to the website to enable all shareholders to have access to the same
information. The Chairman and the Senior Independent Director, supported
by the Company Secretary, have engaged with various institutional
shareholders during the year.
Glencore’s retail shareholder base is managed by the Company Secretarial
team, with support from the Company’s registrars, Computershare.
During the year, Glencore’s Chairman, senior management team and
Investor Relations and Sustainable Development representatives actively
engaged with investor groups on two key areas: climate change and
tailings storage facilities. Such engagement led to increased disclosure by
Glencore on these two topics, which is available on the corporate website.
Investors
We actively engage
with our investors and
financial institutions
to support a full
understanding of our
business, progress
against our strategic
priorities and to
address any concerns.
• Sustainable business
performance and
growth
• Return on
investment
• Operational
performance
• Financial
performance
• Climate change
• Industrial relations
28
Glencore Annual Report 2019
Stakeholder engagement continued
Stakeholder
and overview
Suppliers and
customers
Our products are
essential to enabling
modern life. We work
to provide safe and
quality-assured
materials that
meet regulatory
requirements and
industry standards
across the whole
supply chain.
Unions
We recognise and
uphold the rights
of our workforce
to freedom of
association, collective
representation,
collective bargaining,
just compensation,
job security and
development
opportunities.
Key issues for them
How we engage/Engagement during the year
• Transparency in
the supply chain
• Responsible
sourcing and
human rights
• Compliance
with laws
• Competitive pricing
Our approach to product stewardship helps us to ensure the products
we supply to customers are of the right quality and safe for people and
the environment.
The Sustainable Development team is responsible for the implementation
of the Glencore Supply Chain Due Diligence Programme and makes
updates to the Board on progress.
Senior management, including the CEO, attended a number of meetings
with customers throughout the year. Our customers are increasing their
focus on responsible supply chains and in 2019 the Board signed off on
Group Supplier Standards. These Standards set out our expectations for
ethical business practices, health and safety and human rights and
environment by our suppliers and procurement partners.
We host site visits for our customers and participate in a number of
commodity-specific responsible sourcing initiatives.
The Board recognises that to meet customer expectations and maintain
our access to markets, our products must meet the latest regulatory
requirements and industry standards.
• Negotiation of
workplace
agreements
• Industrial relations
and potential site
closures
• Occupational health
and safety
We uphold our workers’ rights to freedom of association, to unionise and
collective representation, regardless of their location or role. The majority
of our engagement with workers’ representatives take place within our
operations. Our commodity department management teams keep
the Board, via its HSEC Committee, informed of discussions during the
negotiations of enterprise agreements and provide regular updates
during any period of industrial unrest.
Glencore Annual Report 2019
29
Strategic reportFinancial statementsGovernanceAdditional information 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
Our people
Our success relies on our ability to
attract, develop and retain the best
talent at every level. We strive to
achieve and maintain a skilled and
committed workforce, with diverse
experience and perspectives, to
achieve our goals. We respect
and value every employee and
contractor. We create a fair and
inclusive working environment
where everyone can develop and
fulfil their potential.
Our unique advantage
We believe in empowering our
leaders and our people to drive the
performance of our business. This
philosophy results in an operating
model which is focused on building
deep specialist expertise within each
commodity and close integration of
both the supply and demand sides
of our business. This combination
of empowerment and alignment,
assisted by strong corporate
governance and capital
management from the centre, allows
us to maximise the opportunities
for the business, our staff and
our stakeholders.
Maintaining our position as an
attractive employer
Our employment branding
strategy promotes global career
opportunities, while fostering
employee engagement and
retention of key talent. Our
campaigns promote and highlight
existing employees as Ambassadors
of Glencore from entry-level
tradespeople and graduates
through to senior technical
professionals and management.
Our employment branding initiatives
align with Glencore values and adopt
real employee “Career Hero” success
stories that demonstrate credibility
and a track record of developing
employee talent pipelines from
entry level graduates to senior
management careers.
Throughout 2019, we led a proactive
and coordinated approach to
the deployment of the Glencore
Employer Brand across the assets
and marketing functions on a global
scale. This global approach ensures
our narrative, to both the external
market and to our employees, and
speaks with a consistent and united
voice on the value we place on
employees’ career development
Our aim is to provide rewarding
careers with significant opportunity
for advancement and remuneration.
We reward our people based on their
contribution to the business and in
line with our values. This year we
continued to evolve our performance
management arrangements
to ensure they support the
performance of the business and
our expectations of behaviour
consistent with our Values and
Code of Conduct.
30
Glencore Annual Report 2019
Providing development, access to representation
and support to everyone
Diversity
Glencore aims to engage and offer
opportunities to all workers. Our
workforce is multi-generational,
with each generation adding
value to our business and
possessing a different range of
needs. The rapid pace with which
our business and technology is
developing requires Glencore to
actively prepare our employees for
the future of work.
opportunities. We believe in
managing union relationships
locally, where issues are considered
part of the responsibility of our
local management teams.
However, representatives from
Group Human Resources and
Group Sustainability have also
participated in regional and global
meetings of the IndustriALL
Global Union.
Glencore Coal Australia “Sustaining
Digital Futures” project provides for
customised, intensive training in
foundation and intermediate digital
skills for resource sector employees,
urgently needed in an increasingly
automated environment. The
project should provide a valuable
contribution to workforce planning
by identifying skills needed to
further prepare a workforce that
is being disrupted by the rapid
advancement of a range of digital
technologies. Clermont mine
has been nominated to pilot this
programme.
Engaging with employee
representative bodies
We uphold the International
Labour Organization (ILO)
Declaration on Fundamental
Principles and Rights of Work.
We recognise and uphold the
rights of our colleagues to a safe
workplace, freedom of association,
collective representation, collective
bargaining, just compensation,
job security and development
Supporting our employees
wellbeing
Increased risk, awareness and
acceptance of mental health
considerations is becoming one
of the defining characteristics
of the 21st Century workplace.
Improving mental health and
resilience and spotting the signs
of mental health issues is a key
management topic and one we
are investing in. Glencore Coal
Australia and Glencore Zinc
Australia have been working
with our industry peers and
the national charity Mates in
Construction to establish the
“Mates in Mining” initiative.
The initiative offers programmes
developed specifically for
mineworkers, building on
leading international practice
in community-based suicide
prevention. Currently, Glencore
Coal Australia is conducting pilot
programmes at our Clermont and
Glendell assets to help establish
an industry-wide model.
89,092
employees at 31 December 2019
2018: 86,621
2017: 83,679
70,253
contractors at 31 December 2019
2018: 71,887
2017: 62,298
Employee diversity in 2019
● Male
84%
● Female 16%
2018: 15% female – 85% male
2017: 14% female – 86% male
Senior manager* diversity in 2019
● Male
87%
● Female 13%
2018: 16% female – 84% male
2017: 17% female – 83% male
* a senior manager as defined in section
414C of the UK Companies Act 2006 to
include members of the management
team and Glencore appointed directors on
the boards of subsidiaries. This definition is
only relevant to this data and does not apply
to other references of “senior management”
that are included in this Annual Report.
Glencore Annual Report 2019
31
Strategic reportFinancial statementsGovernanceAdditional information Our people continued
Increasing the dialogue with our
colleagues
We recognise that given the largely
decentralised nature of our business,
it is critical for us as an employer to
engage with and listen to our people.
In an effort to understand the extent
to which our culture and our values
are embedded in our businesses we
rolled-out culture surveys across our
head office, our marketing offices
globally and across our Australian
assets. In total, the survey was
available to 16,000 people and the
results provided the business with
valuable feedback on a range of
issues and opportunities.
In an increasingly technology-driven
world, we recognise the importance
and value in maintaining a dialogue
between our managers and
employees. Town Hall meetings
regularly occur across many of our
businesses, maintaining visibility and
access to leaders across the world.
These forums afforded our
employees and communities the
opportunity to bring topics to light.
In a similar way, our employees and
communities are always welcome to
bring topics directly to management
at site-level. All union representatives
have direct access and frequent
contact with our management.
Resourcing for performance and
for the future
We introduced a Corporate Global
Undergraduate Mining Engineering
Scholarship programme to provide
a future pipeline of talent. The aim
of this is to manage the anticipated
Entry-level graduates,
apprentices and students
in 2019
209
Graduate intake
454
Vacation programmes
214
Scholarships/bursaries
320
Apprenticeships/artisans
People survey results
Glencore’s values reflect
the way we do business
● Agree
● Partially Agree
● Disagree
● No opinion
My Direct managers convey the
importance of acting ethically
● Agree
● Partially Agree
● Disagree
● No opinion
We are encouraged to report
potential misconduct
● Yes
● No
● Not sure
The vast majority of our
employees report that they are
aware of and understand our
Code of Conduct or have received
training on the code and the
behaviours it requires. Almost all
our colleagues in corporate and
marketing roles feel encouraged
to report any concerns.
Particular effort has gone into
communicating and promoting
the channels that staff can access
to report any concerns, and the
results of the surveys, which are
above international benchmarks,
are very encouraging.
The surveys reported that there
is a high degree of confidence in
the reporting mechanisms and
most people feel that issues will
be dealt with appropriately.
Compliance bulletins are regularly
distributed throughout the
business, as appropriate, to
communicate, where possible,
the actions that the company has
taken in response to concerns to
further reinforce the company’s
commitment to resolving issues.
Engaging with our people
13,500 employees from our
Australian businesses plus a
further 2,500 from across our
marketing and corporate
functions in Head Office in
Switzerland and in more than 36
offices around the world were
invited to participate in culture
surveys in 2019. The surveys were
conducted in English, German,
Spanish and Russian and covered
topics including values, leadership,
performance measurement,
communications and compliance.
The overall results and employee
feedback are positive, with
considerable successes being
reported on the Company’s efforts
to cultivate a high-performing
organisation underpinned by
integrity and ethical behaviour,
supported by an effective
compliance programme.
A large majority of our colleagues
told us that senior management
and direct managers demonstrate
both ethical conduct and a
willingness to promote ethical
conduct across their business.
In addition, the majority of staff
also believe that our values are
promoted and embedded in
their daily work.
32
Glencore Annual Report 2019
Providing opportunities for Host Communities
Our Diversity and Inclusion
agenda also aims to ensure
our workforce reflects the local
communities we operate in.
We are proud that for the third
consecutive year, the Prix
Créateurs d’emplois gala in
Québec City honoured Raglan
Mine with an award in the
“Champion – Nord-du-Québec
Region” category.
These awards recognise the major
contribution of employment
creators to the development of
Quebec and its regions. With 1,150
direct jobs, of which 22% are
occupied by Nunavimmiut, this is
a testament to our involvement
in Nunavik’s economic growth.
McArthur River Mine, in Northern
Territory, Australia, has
implemented a strategic initiative
that drives greater local workforce
participation and delivers on its
sustainable development
objectives. We have initiated a
new partnership and employment
programme with “Pandanus
Development Group & IE Project”,
which offers ways to learn skills,
build knowledge, gain work
experience and win a permanent
role. Almost 20% of our McArthur
River Mine workforce is Aboriginal
and Torres Strait Islanders.
We are a diverse organisation, but
have further progress to make.
As a global organisation, diversity
and inclusion are integral to
our success. We believe that
employing people from different
cultures, countries, races,
ethnicities, genders, abilities,
beliefs and backgrounds is
essential to our culture. Diversity
brings new and innovative ideas
which allow us to advance our
business and continue to improve.
Like many of our peers, we are
trialling a number of approaches
to improve gender diversity in
our business. Examples include
our Australian coal operations’
Women’s Mentoring Program and
the WeLead Circle and #SheRocks
campaign in South Africa.
WeLead Circle
The WeLead Circle is a
professionally facilitated
programme where female leaders
are guided through six carefully
selected leadership areas focused
on the next steps needed to take
in their leadership journey. The
programme also provides a
network of women who can be
relied on for advice, insight,
experience and skills.
Feedback from the programme
has been firmly positive with
participants reporting improved
leadership skills and indicating
that the experience provided
them with a platform to make
challenging personal and
business decisions.
#SheRocks campaign
#SheRocks recognises the
women who “rock” our industry
in South Africa. This group of
phenomenal women mentor
and support the next generation
of women, encouraging them
to enter the mining industry,
allowing our industry to grow
and become more inclusive. The
campaign serves to challenge the
myths and gender bias of mining
by offering honest insights into
the experiences of women at
different stages in their careers.
A number of our diversity
programmes are starting to
yield results. Mopani’s Central
Training Centre in Kitwe, Zambia,
experienced a significant increase
in the number of female students
this year – rising from a previous
average of seven women per
intake to 36. We believe this is in
part due to the annual Career
Days hosted by Mopani for
students of public secondary
schools in Kitwe and Mufulira.
These Career Days encourage and
support female students to take
up technical courses at tertiary
education institutions, which
paves the way for their future
employment within the
mining industry.
Similarly in Australia a further
12 female students have
commenced our Coal Australia
Mentoring Program, intending
to transition into education for
careers in the resources sector.
skills shortage in critical engineering
roles across our commodities. Our
commitment to attraction and
development of entry-level graduate
engineering talent is part of our
wider set of talent initiatives, which
includes bursaries, summer vacation
placements, internships and
apprenticeship programmes.
Investment in talent, skills and
accelerating employees’ professional
and personal development are
essential components of Glencore’s
people agenda. We are committed
to strengthening the capability of our
workforce and our managers. Our
South African operations designed
career development programmes
for high-potential employees and
succession-planning candidates.
Amongst others, these programmes
include leadership and management
development programmes at
various levels including but not
limited to a Master in Business
Leadership.
Investing in Learning and HR
technologies
In 2019, Glencore selected
Cornerstone as our new learning
management system to drive
consistent online training across our
Group. Additionally, investments in
Workday and SAP are increasing
our ability to provide a consistent
HR service to the business, our
employees and the Board. Further
investments and innovation are
planned in recruitment and
performance management in the
coming year – enabling further
consistency and transparency to be
achieved in many of our divisions.
Listening and acting on concerns
We continue to promote our Raising
Concerns channel across our
business, making the hotline
available to our entire workforce, and
ensuring its accessibility to Glencore
permanent employees and
contractors alike. Please see page 44
for further information on our
Raising Concerns programme.
Glencore Annual Report 2019
33
Strategic reportFinancial statementsGovernanceAdditional information Sustainability
Responsibility is one of Glencore’s core values. Our commitment
to responsibility drives our approach to sustainability and
we put it into practice through prioritising safety, managing
and mitigating our environmental footprint and positively
contributing to local economies. The success of our business
and our creation of financial value relies on our ability to create
lasting benefits for all our stakeholders in a manner that
is transparent, sustainable and respects the rights of all
Lost time injury
frequency rate
(per million
hours worked)
Total recordable
injury frequency
rate (per million
hours worked)
Water withdrawn
(million m3)
CO2e Scope 1 –
(million tonnes)
CO2 Scope 2 –
location based
(million tonnes)
Community
investment
($ million)
1.02
1.06
0.99
3.08
3.18
2.86
924
1,020
1,050
21.8
18.8
18.3
11.5
11.8
10.9
90
95
90
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
2017
2018
2019
34
Glencore Annual Report 2019
Our approach
Our approach to sustainability
reflects our ambition to integrate
sustainability throughout our
business. We establish and progress
good and consistent business
practices and standards through our
sustainability strategy, policies and
procedures. Through an approach of
continuous improvement, we strive
to become a better operator with
a reputation for doing things the
right way.
Our sustainability strategy sets out
our ambitions against four core
pillars: health; safety; environment;
and community and human
rights, and drives positive change
throughout our business. Each
pillar has clearly defined strategic
imperatives, objectives, policies,
priority areas and targets.
Oversight for our Group sustainability
strategy and framework rests
with the Board HSEC Committee
(the Committee). Our senior
management team, including the
CEO and commodity business heads,
are responsible for implementing our
sustainability strategy.
We review our sustainability strategy
annually to confirm that it continues
to fulfil the needs of our business.
Further details on our sustainability
strategy, our approach to its
implementation, as well as its
performance and ambitions, are
available in our sustainability-related
publications. These include an
annual sustainability report
published in accordance with
the core requirements of Global
Reporting Initiative (GRI), as well
as the following:
• Our approach to sustainability
• Sustainability report and highlights
• Environmental, Social and
Governance (ESG) data book and
GRI references
• Human rights report
• Payments to governments report
• Modern slavery statement
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 – Integrity – Responsibility
Openness – Simplicity – Entrepreneurialism
Code of Conduct
Group sustainability strategy
Health
Become a leader in protecting and
improving the wellness of our
people and communities.
Safety
Become a leader in safety and
create a workplace free from
fatalities and injuries.
Environment
Become a leader in environmental
performance
Community and human rights
Foster socio-economic resilient
communities and respect human
rights everywhere 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 has
oversight and ultimate
responsibility for sustainability
matters. It receives regular
updates on 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
All of our sustainability
communications are
available on our website:
glencore.com/sustainability
Glencore Annual Report 2019
35
Strategic reportFinancial statementsGovernanceAdditional information Sustainability continued
Engaging with our stakeholders
We engage with relevant
stakeholder groups to build
meaningful relationships and
understand their expectations
and aspirations.
Key stakeholders include our
workforce and their labour unions,
host communities, civil society,
governments, business partners
and suppliers, non-governmental
organisations, investors and the
media. We engage on a broad
variety of topics with a wide range
of interested organisations and
individuals that hold diverse opinions.
We reach out to our stakeholders
at local, national, regional and
international levels. Our engagement
activities include holding transparent
negotiations with union officials,
regularly briefing our employees
on a range of sustainability-related
matters and hosting open days,
when local community members
can visit our sites and interact with
our operational teams.
Where appropriate, we take an
informed and constructive role
in public policy development
processes. For example, in a number
of jurisdictions, our regional teams
and representatives from our assets
undertake direct lobbying activities
on climate change-related topics,
such as carbon pricing and security
of energy supply. We have
established robust governance
processes to ensure that all our
public policy engagement
aligns with our climate change
commitments and supports
appropriate policy measures
to mitigate climate risks.
External commitments
We participate in a wide range
of external initiatives, supporting
our commitment to improve
continuously our approach and
performance across sustainability
topics. Our engagement varies from
reporting on our progress to taking
a role in driving strategic change.
We recognise the Sustainable
Development Goals (SDGs) and
their systematic global approach
Performance overview
Achieved
On track
Not achieved
Not applicable
Material topic
2015–2020 strategic priority
Performance indicator
2019
2018
Status
0
17
0
13
Catastrophic hazard
management
• No major or catastrophic
environmental incidents
Number of environmental incidents
(major and catastrophic)
Workplace health
and safety
• No fatalities
• 50% reduction of Group LTIFR
by the end of 2020, against
2015 figure of 1.341
• 50% reduction in TRIFR by the
end of 2020 using 2014 figure
of 5.021 as baseline
• Year on year reduction in
the number of new cases
of occupational disease
Fatalities at managed operations
Lost time injury frequency rate
0.99
1.06
Total recordable injury frequency rate
2.86
3.18
New occupational disease cases
106
32
Number of HPRIs reported
576
432
Climate change
• 5% (minimum) carbon
CO2e Scope 1 (million tonnes)
18.3
18.8
emission intensity reduction
on 2016 baseline2 of 4.35
tGHG/tCu by 2020
CO2 Scope 2 – Location based (million tonnes)
10.9
11.8
Total energy use (petajoules)
210
209
Carbon emissions intensity (tGHG/tCu)
3.93
4.13
Water and effluents
• Complete implementation of
water management guideline
Share of sites that have implemented the water
management guideline by the end of 2019
80%
n/a
Human rights and
grievance mechanisms
Community engagement
and social commitment
compliance
Product stewardship
• No serious human rights
Serious human rights incidents
0
1
incidents
• Implement our social value
Community investment spend ($ million)
90
95
creation strategy
• Distribute the community
leadership Programme Toolkit
• Ongoing engagement
with organisations and
interested stakeholders
on responsible sourcing
Continued engagement with a broad range of
stakeholders, including customers, regulatory
organisations and industry associations
n/a
n/a
Baseline figures include Glencore Agriculture
1
2 The baseline is for operated industrial assets and amended to reflect acquisitions and divestments
36
Glencore Annual Report 2019
Our approach to tailings management
Our assets generate tailings (residues
of mineral processing) that are stored in
purpose-built tailings storage facilities
(TSF). We are committed to align the
design, operation and closure of our
TSFs with international best practices.
We continually review and strengthen
our TSF management system.
Additionally, an external consultant
reviews and monitors progress against
recommended improvements.
For a number of years, TSFs have been
part of our catastrophic hazard
evaluation programme. We have drawn
on external expertise through applying
leading international standards.
We have published a comprehensive
database of all of our TSFs on our
website. This microsite includes an
interactive TSF register where the
information displayed for each TSF
shows its location and asset, as well as
supporting access to the data by
interested stakeholders, including
affected communities.
In 2019, as part of our ongoing
approach to manage our dams safely
from design through to closure, we
further strengthened our Group-wide
Tailings Storage Facility Management
Protocol. The revised Protocol reflects
learnings from across the business and
consultations with internal and external
experts. The Protocol aligns with the
recommendations of the ICMM and the
Canadian Dam Associations’ (CDA)
Dam Safety Guidelines. During 2020,
we will continue to embed these
leading dam design and management
requirements across our TSF portfolio.
During our catastrophic hazard
assurance process, we identified 17
TSFs with potential stability issues
during extreme weather or seismic
events. We are actively progressing our
work programme to upgrade these
facilities to meet CDA guidelines and
leading practices.
During 2019, we completed buttresses
at two Kazzinc dams and are on track
to finalise extreme flood mitigation
works at our Volcan zinc operations in
Peru. In South Africa, our ferroalloys
team have commenced buttressing at
Kroondaal, which we will complete
during 2020. Engineering works for
buttressing are also underway at
Rhovan. In Zambia, engineering work is
ongoing at Mopani, which will improve
the dam’s stability during extreme
earthquake events. We continue our
active participation in ICMM’s working
group to eliminate and reduce tailings.
to society’s overall development.
We believe that we can play a role
in supporting our host governments
to meet the SDGs.
We are signatories to the United
Nations (UN) Global Compact,
aligning our strategies and
operations with its principles,
which cover human rights, labour,
environment and anti-corruption.
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 Voluntary Principles on Security
and Human Rights.
annual reports detailing material
payments made to governments,
broken down by country and project.
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, both in our
operating countries and at a global
level, in the Extractive Industries
Transparency Initiative (EITI). We
comply with the EU Accounting and
Transparency Directives; in line with
those provisions, we publish separate
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, cobalt,
cadmium, sulphuric acid, lead and
precious metals.
Glencore Annual Report 2019
37
Strategic reportFinancial statementsGovernanceAdditional information Sustainability continued
Risk management and assurance
Our management of sustainability-
related risks aligns with Glencore’s
approach to the identification,
assessment and mitigation of risk.
Group-wide, we seek to manage
our risks proactively to create and
protect value, encourage ongoing
improvement and support
business decision-making; all
of our assets apply our risk
management framework and
its supporting guidelines.
We align our risk management
framework with international
standards.
Our assets use the framework to
identify hazards, including 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.
Our internal HSEC assurance
programme primarily focuses on
our systematic management of
the catastrophic hazards and their
relevant controls and critical controls.
Internal and external senior subject
matter experts participate in
this programme.
Multi-disciplinary assessments allow
us to audit complex issues from
a range of viewpoints for a more
robust appraisal. We use the
assessments to review operations
and activities with different risk
factors, such as underground
operations (where subjects may
include strata control, fire and
explosion, inrush and outburst,
infrastructure, power), open pit
mines and metal processing plants.
The Committee reviews the results
of all the audits, together with their
key findings, observations and
good practice.
38
Glencore Annual Report 2019
Implementing our Fatality
Reduction Programme at Kazzinc
The operations of Kazzinc, a major,
fully-integrated polymetallic producer,
are located in the eastern region of
Kazakhstan and consist of six mines
and four smelters producing zinc,
lead, copper, gold and silver. Kazzinc
engages approximately 20,000
employees. Tragically, during 2016 to
2019, nine people lost their lives at
Kazzinc’s operations.
At the end of 2019, the corporate HSEC
team initiated a new approach to
address our safety performance – a
multi-disciplinary, cross-commodity
fatality intervention at Kazzinc. The
intervention team visited every
operating area in every operation
while accompanied by site general
managers, with the objective of
reviewing operating processes and,
if necessary, closing operations with
unsafe conditions.
The fatality intervention team
populated a dashboard every day
with its findings, High Potential Risk
Incidents (HPRIs) and best practice
observations. The real-time collection
and consolidation of findings,
supported the identification of
emerging patterns, which resulted
in an early understanding of the
nature and scale of actions required
to address the findings.
The Kazzinc fatality intervention has
revealed these organisational traits,
which are critical for success:
• Leadership: bold, decisive and
determined leadership at multiple
levels, prepared to try new and
different approaches
• Organisational agility:
collaboration and focus to deliver
an intervention that involved the
deployment of 30+ operational
leaders from across the Group using
new, purpose-built digital tools for
real time data collection
• Resilience: strong internal
relationships delivering a respectful
manner throughout the large and
highly-intrusive intervention
• Competence and commitment: an
obvious commitment to achieving
safer operations evidenced through
the professional, mature and skilful
manner in which operational
leaders stopped operations with
unsafe conditions and acts and
raised HPRIs
Going forward, the Kazzinc
management team are focussing
on closing out findings, verifying
corrective actions, addressing the
HPRIs and preparing for the second
phase starting in early 2020. The
fatality intervention has already
resulted in safer plant, equipment and
behaviours and has created a shared
understanding of how to deliver safe
and stable operations and a clear
action plan to take forward.
Materiality assessment
We undertake a sustainability-related
materiality assessment every two
years that considers input from
within our business and from other
stakeholders. We use this assessment
to inform the sustainability strategy
and our reporting. Our approach
determines topics identified as being
material to our development,
performance and current position
as well as for our future prospects.
The materiality assessment also
establishes the material topics for
our sustainability strategic review
and publications.
We align our materiality assessments
with GRI requirements and consider
topics at global and local levels, as
well as considering information
relating to 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. In 2018, we
undertook our biannual sustainability-
related materiality assessment and
identified the following topics for the
2019–20 period:
• Catastrophic hazards
• Safety and health
• Climate change and energy
(see page 16)
• Water
• Responsible sourcing
• Human rights
• Land stewardship
• Responsible citizenship
• Our people
Our material topics
Catastrophic hazard
Catastrophic hazards are those
that could result in a catastrophic
event and include those relating
to safety, process safety, human
rights, environment and tailings.
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 recognise the exceptional
nature of catastrophic events.
Our Catastrophic and Fatal Hazard
Management Policy requires the
control of these hazards at all times.
We ensure that those who might be
directly exposed have appropriate
awareness of such hazards, along
with other legitimate stakeholders.
We review our catastrophic risks
to understand whether they are
adequately controlled. We require
our assets to put in place appropriate
management and mitigation
measures. Our assurance on
catastrophic hazards is developed
in line with our Group-wide
catastrophic hazard programme.
The Board receives and reviews
all assurance findings.
We target zero major or catastrophic
environmental incidents, which we
achieved during 2019.
Tailings, the fine waste materials
left over after the processing of ore,
are stored in tailings storage facilities
(TSFs). In recent years, a small
number of high-profile TSFs failures
at the operations of large mining
companies have resulted in
catastrophic consequences.
We seek to actively manage and
monitor our TSFs (see page 37).
During 2019, we welcomed the
opportunity to participate in the
Investor Mining & Tailings Safety
Initiative and have responded to the
Initiative’s request for information
concerning TSFs through launching
a microsite on our corporate website
that provides detailed information
on our TSFs, including their location,
type and size.
We recognise the need to establish
standards and guidelines that
address our stakeholder concerns
relating to TSFs. Through our
membership of ICMM, we are
participating in its development
of an international standard for TSFs.
Safety and health
The success of our business is
dependent on a safe and healthy
workforce and achieving this is our
top priority. We take a proactive,
preventative approach towards
health and safety. We believe that all
fatalities, injuries and occupational
diseases are preventable. A large
number of our assets have been
fatality free for multiple years.
However, our safety performance
over the last two years has been
unacceptable. We are saddened
that during 2019, seventeen people
lost their lives at our operations,
compared to thirteen during 2018.
All loss of life is unacceptable and
we are determined to eliminate
fatalities across our business.
Lost time injury
frequency rate1
(per million
hours worked)
Total recordable
injury frequency
rate2 (per million
hours worked)
1.02
1.06
0.99
3.08
3.18
2.86
2017
2018
2019
2017
2018
2019
1 LTIFR reflects the total number of lost time
injuries per million hours worked and does not
include restricted work injuries or fatalities.
Our LTIFR is 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.
2 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 taking a number of
immediate actions, including:
• Major fatality reduction
interventions at Mopani Copper
Mines in Zambia and Kazzinc in
Kazakhstan (see page 38) to
establish a performance baseline
and to identify and address
opportunities to improve
processes and behaviour
• A corporate-led deep dive on
SafeWork, our initiative to change
attitudes towards safety across
the Group, at our ten worst
performing assets
• The preparation of safety cases for
the Board’s HSEC Committee by
our zinc and copper departments.
Each safety case describes the new
safety management system being
implemented to identify and
understand hazards, and to apply
controls effectively and
consistently.
In addition to the immediate actions,
we are developing an enhanced
Group-wide Fatality Reduction
Programme to deliver a step-change
in safety performance. The
programme comprises six key
elements:
• Acceleration of SafeWork’s
implementation
• Strengthening leadership through
a high-impact safety and
operations leaders’ development
programme, which will also
support the strengthening of
management processes and
accountability frameworks
Glencore Annual Report 2019
39
Strategic reportFinancial statementsGovernanceAdditional information Sustainability continued
• Presentation to the HSEC
Committee of safety cases by
poor performing commodity
departments; if required, the
corporate HSEC team will
lead interventions
• Quarterly safety reviews
• Enhanced assessment of safety
and catastrophic risk for the
due diligence and integration
processes for acquired assets
to increase the speed at which
the asset and its management
processes reach Glencore
standards
• Improved reporting to the
HSEC Committee on fatal and
catastrophic risk assurance
We will continue to drive the
changes necessary for the
progressive improvement required
to achieve our long-term goal of a
fatality and injury free workplace.
Water
We recognise access to safe and
clean water and sanitation as a
human right. Water is also an
essential input into many of our
industrial activities and we ship our
products over marine and inland
water ways. Some of our assets
are located in areas that are water
stressed and others need to
manage surplus water.
We work on improving our
understanding of our water footprint
and minimise our water-related
impacts. 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 water
sources or compromising their
access to water.
Our assets have implemented our
water management guideline,
which applies a risk-based
approach. The guideline covers the
minimum requirements for water
governance, the identification and
evaluation of water-related risks and
opportunities, the mitigation of
identified risks and impacts, the
management of water in terms
of quality and quantity and
engagement with relevant
stakeholders.
40
Glencore Annual Report 2019
In 2019, we withdrew 1,050 million m3
of water (2018: 1,020 million m3). The
increase is mainly due to improved
reporting at some assets and
significantly increased precipitation
at two operations.
In 2019, 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).
Water withdrawn
(million m3)
1,020
1,050
924
2017
2018
2019
Responsible sourcing
Some of our products are vital to
today’s society through their use in
devices that are part of everyday
activities. We recognise that our
relationships with our customers is
dependent on being a responsible
supplier that delivers and markets
competitively priced commodities in
a timely manner while incorporating
health, safety, environmental and
human rights considerations
throughout our supply chain.
Our suppliers are critical partners
in our commitment to operate in
a manner that is responsible,
transparent and respects the human
rights of all. We undertake due
diligence of current and potential
suppliers to understand their
business practices using a risk
based approach. If we identify
unacceptable risks, we agree a set of
corrective actions with the supplier.
During 2019, we finalised our revised
Supplier Standards, which align with
the OECD’s responsible sourcing
guidance. These set out our
expectations for ethical business
practices, safety and health, human
rights and environment. When
appropriate, we consider ways to
support our suppliers in capacity
building and improving their
adherence to the expectations
of the Supplier Standards.
Human rights
We recognise that mining can
have an impact, both positive and
negative, on the rights of workers
and communities. We are also
aware of the need to ensure
unencumbered fair and transparent
access to remedy for any stakeholder
affected by our operations.
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 our Code of Conduct,
which lays out the essential
requirements for our people.
Our Group Human Rights Policy
reinforces this commitment.
We also endorse and align our
security procedures to the Voluntary
Principles on Security and Human
Rights (Voluntary Principles).
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.
During 2019, training was
undertaken with external experts
with our security teams from
countries we consider to have a high
risk of security-related human rights
incidents. The training set out the
expectations of our Security Protocol
and our commitments to the
Voluntary Principles.
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.
During the year, we improved our
approach to human rights-related
incident reporting, setting out
clear definitions of what constitutes
a human rights incident. We also
rolled out human rights training
programmes that covered
leadership, functional and
technical skills.
In 2019, we identified no serious
human rights incidents (2018: one
serious incident). In 2018, we
recorded a security incident at
Glencore’s Antapaccay copper mine
in the Espinar Province of Peru. This
related to a confrontation that took
place between a local family group,
Antapaccay’s security personnel
and the employees of its private
security contractor.
We engaged external human
rights experts to undertake an
independent human rights review
to build an understanding of
stakeholder perceptions and
concerns about Antapaccay. In the
spirit of transparent engagement
and reflecting Glencore’s and
Antapaccay’s commitment to
operate responsibly in line with the
Guiding Principles, we published a
summary of the results of the human
rights experts’ review on our website.
In 2019, we published our first,
standalone human rights report.
The report details our approach to
human rights and the key activities
we undertook in this area during
2018. It provides an overview of the
human rights risks that are salient
to Glencore and the actions we are
taking to manage and mitigate
those risks. Our human rights report
is available at: glencore.com/
sustainability/reports-and-
presentations.
Land stewardship
We are a significant land manager,
with around two million hectares
under our stewardship. We work
to minimise our potential impact,
complying with or exceeding
relevant regulations.
Our assets undertake responsible
land stewardship throughout their
lifecycles; this not only reduces
operational risks, but also minimises
our liabilities when our mines close
and influences our legal and societal
licence to operate. We continuously
look for ways to improve our land
stewardship performance, including
our use of resources, preserving
protected areas and biodiversity,
undertaking closure planning
and rehabilitation.
Our assets incorporate biodiversity
considerations into their
environmental impact assessments,
along with any risks that our
biodiversity impact may have for
local communities. Our approach
aims to avoid net losses or
degradation of natural habitats,
biodiversity and landscape functions.
We require each asset to have
a closure plan that includes
appropriate financial provisions to
support a responsible exit. Closure
plans align with good practices,
such as the ICMM’s Good Practice
Guide. Assets develop the plans in
collaboration with local communities
and reflect the societal risks and
opportunities associated with closure.
In addition, our mining assets
continually rehabilitate the areas
they disturb, restoring the land to a
state that is suitable for the final land
use agreed in the mining permit.
Responsible citizenship
We believe that our global presence
and economic strength have a
predominantly positive impact on
our host communities. Our activities
contribute to national and regional
economies, through the taxes and
royalties we pay and the socio-
economic initiatives we support, as
well as by our prioritisation of local
employment and procurement.
We require our assets to develop
transparent, constructive and
inclusive relationships with their
host communities. Each asset’s
stakeholder engagement strategy
identifies the societal impact of its
activities, community concerns,
needs and societal risks to
its operations.
Community
investment
(US$ million)
90
95
90
2017
2018
2019
Community
complaints
1,063
1,057
1,149
2017
2018
2019
Our community development
programmes are an integral part
of our community and stakeholder
engagement strategies and support
various initiatives to deliver
socio-economic benefits to those
living around our operations.
We provide our local communities
with information in a wide range of
different ways, tailored to the local
context and culturally appropriate.
These include radio broadcasts,
site publications, regular town hall
meetings, and individual meetings
with the community.
We also have mechanisms to receive
grievances and concerns. Senior
operational and departmental
management, as well as the
Committee receive regular reports
on grievances and concerns. All
complaints and grievances are
registered and investigated; we let
complainants know results and any
follow-up actions in a culturally and
locally appropriate manner.
In 2019, we spent $90 million on
community development
programmes (2018: $95 million).
Glencore Annual Report 2019
41
Strategic reportFinancial statementsGovernanceAdditional information Ethics and compliance
Glencore’s success is dependent on being an
honest and reliable business partner. We meet
our long-term objectives and remain a business
partner of choice by upholding our commitment
to ethical business practices
Our approach
We are committed to maintaining
a culture of ethics throughout the
Group, rather than simply
performing the minimum required
by laws and regulations. We do 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 a Group Ethics and
Compliance programme that
includes risk assessments, policies,
standards, procedures and
guidelines, training and awareness,
monitoring and investigations. We
work with leading advisers to ensure
that our programme aligns with
international best practices,
including guidance from relevant
authorities. Our permanent and
temporary employees, directors and
officers (as well as contractors, where
they are under a relevant contractual
obligation) must comply with our
relevant policies and procedures,
as well as 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 and procedures to ours
wherever possible.
Board oversight and governance
We provide training to the Board
of Directors emphasising the role
of the Board in the oversight and
implementation of an effective
Ethics and Compliance programme.
Furthermore, the Board receives
regular updates on the programme
through the relevant committees,
highlighted below. These updates
cover all focus areas (including
anti-corruption and sanctions) and
topics such as the compliance team
structure, status of risk assessments,
policies, standards, procedures or
guidelines under development,
updates on training and awareness
activities, overview of monitoring
visits and key findings, and material
investigations and reports that
have come into our Raising
Concerns programme.
The following Group committees
report to the Board on ethics and
compliance matters:
• The Ethics, Compliance and
Culture Committee (ECC) of the
Board, which comprises at least
two Non-Executive Directors.
The ECC oversees key ethics,
compliance and culture-related
matters within the Group.
• The Business Ethics Committee
(BEC), which comprises Glencore’s
CEO, CFO, General Counsel and
Head of Compliance and senior
management. The BEC considers
compliance issues relevant to
the Group and reviews and
approves our policies, standards
and procedures.
• The Business Approval Committee
(BAC), which comprises Glencore’s
CEO, CFO, General Counsel and
Head of Compliance, Head of
Sustainable Development and
business heads. The BAC,
a sub-committee of the BEC,
determines, sets guidance and
criteria, and reviews business
relationships, transactions or
counterparties that give rise to
ethical or reputational concerns.
Compliance function structure
We employ full-time, skilled
Compliance Officers in our Corporate
Compliance team. Our Compliance
Officers determine the Group Ethics
and Compliance programme and
provide dedicated compliance
support to the business. Our
Regional Compliance Officers
implement the programme in
specific geographical jurisdictions
and provide guidance to the
business and to their local
Compliance Coordinators. Our
Compliance Coordinators (sitting in
offices and assets across the globe)
support our employees seeking
advice on ethical and lawful
behaviour or policy implementation.
To be nominated and appointed
as Compliance Coordinator, the
individual must fulfil certain
established criteria. This structure
of qualified Compliance Officers,
Regional Compliance Officers and
local Compliance Coordinators
ensures the effective
implementation of our Ethics and
Compliance programme worldwide.
Risk assessments
We identify, assess and evaluate
compliance risks in line with our
Glencore Risk Management
Framework. Corporate Compliance
maintains the Compliance Risk
Register and reviews it annually.
To support our understanding of
ethics and compliance risks relevant
to each of our offices and assets
globally, we aim to conduct a
compliance risk assessment at
appropriate intervals. These risk
assessments help us understand
and document the specific
compliance risks faced by the
particular business, as well as
identify and document the
mitigating controls in place.
These risk assessments also form
the basis for the drafting of Group
policies, standards, procedures
and guidelines.
Group policy framework
Our Group policy framework
encompasses our values, Code
of Conduct, policies, standards,
procedures and guidelines on
various compliance topics, including
bribery and corruption, conflicts of
42
Glencore Annual Report 2019
interest, sanctions, anti-money
laundering, market conduct, the
prevention of the facilitation of tax
evasion, competition law and data
protection. This framework reflects
our commitment to uphold ethical
business practices and to meet
or exceed applicable laws and
external requirements. We
emphasise their importance in
our business activities, including
recruitment and induction.
Employees can access our
compliance policies, standards,
procedures and guidelines through
various channels, including the
Group intranet, or their local intranet
of the specific office or asset at
which they work. Our managers
and supervisors are responsible for
ensuring employees understand and
comply with the policies, standards
and procedures. We monitor and
test their implementation on a
regular basis. Employees who have
access to a work computer must
confirm their awareness and
understanding of our compliance
requirements when they begin
working at Glencore and annually
thereafter. Certain offices and assets
implement their own policies,
procedures and guidelines in
addition to those of the Group. These
are designed to address specific local
requirements, while being consistent
with our Group policies. Key Group
policies addressing two of our
biggest risks are:
Glencore’s Anti-Corruption Policy
Our Anti-Corruption Policy, available
on the Group website, clearly
documents our position on bribery
and corruption, i.e. the offering,
providing, authorising, requesting or
receiving of bribes is unacceptable.
We conduct analysis for corruption
risks within our businesses and
work towards addressing these
risks through policies, standards,
procedures, guidelines, training and
awareness and monitoring.
As per our Anti-Corruption Policy,
we do not engage in corruption or
bribery, including facilitation
payments. We do not permit the use
of any of our funds or resources as
contributions to any political
campaign, political party, political
candidate or any such affiliated
organisations. Although we do not
directly participate in party politics,
we do on occasion engage in policy
debate on subjects of legitimate
concern to our business, employees,
customers, end users and the
communities in which we operate.
All officers, employees and
associated persons who lobby on
our behalf must comply with all
applicable laws and regulations
(including but not limited to
complying with the laws and
regulations relating to registration
and reporting).
We may only give and receive
appropriate, lawful business gifts
and entertainment in connection
with our work, provided such gifts
and entertainment satisfy the
general principles in our Anti-
Corruption Policy and are not
given or received with the intent
or prospect of influencing the
recipient’s decision-making or other
conduct. Furthermore, we have local
approval procedures, which provide
specific requirements for gifts and
entertainment in certain offices and
assets, which can include value
thresholds and specific requirements
for public officials.
With regards to our third parties,
in addition to our standard “Know
Your Counterparty” programme, our
Third Party Due Diligence Procedure
seeks to ensure that our high-risk
third party engagements are
conducted in accordance with our
Anti-Corruption Policy, applicable
laws and regulations. The procedure
sets out a detailed risk-based
assessment process whereby we
identify, assess and mitigate the
corruption risk exposure of high-risk
third party relationships, particularly
intermediaries, joint ventures and
service providers. The procedure also
requires, where necessary, ongoing
monitoring and review of the
relationships to ensure compliance
with our Anti-Corruption Policy.
With regards to governments,
we annually report on our total
payments to governments, and
provide country-by-country and
project-by-project information in
this regard. Additionally, and where
applicable, we have aligned our
reporting on such payments with
the requirements of Chapter 10
of the EU accounting directive.
Glencore’s Sanctions Policy
Our Sanctions Policy sets out
our commitment to complying with
all applicable sanctions, appropriately
managing sanctions risk and not
participating in transactions
designed or intended to evade
applicable sanctions. Our Sanctions
Procedure outlines the steps we
take to ensure compliance with our
Sanctions Policy.
Training and awareness
Training on and awareness of our
policies, procedures and guidelines,
as well as strong leadership, are
critical components of our Ethics
and Compliance programme. They
ensure our employees understand
the behaviour expected of them and
provide guidance on how they can
identify and practically approach
ethics and compliance dilemmas
in their daily work.
Our new joiners receive new
employee compliance training
sessions and ongoing training on a
range of compliance issues. In 2019,
38,523 employees and contractors
(2018: 33,944) completed our Code
of Conduct e-Learning. In addition,
29,481 employees and contractors
(2018: 27,510) completed e-Learning
training on our Anti-Corruption
Policy, which includes guidance on
important topics such as facilitation
payments, the giving and receiving
of gifts and entertainment and
dealings with public officials. The
target audience of the Code of
Conduct e-Learning is employees
and contractors with regular access
to a work computer. The Anti-
Corruption e-Learning targets those
whose function may require them
to interact with third parties. For
those employees and contractors
who do not have regular access
to a work computer, we provide
training in other ways, including
induction sessions, pre-shift training
and toolbox talks. In addition,
Compliance conducts face-to-face
training to raise awareness about
compliance risks related to their
functions and to train them on
Glencore’s compliance policies,
standards, procedures and guidelines.
We tailor our training and awareness
materials and make them relevant
by including hypothetical scenarios
illustrating how ethics and
compliance dilemmas might
manifest themselves in employees’
daily work activities.
We also train and develop our own
compliance personnel to increase
their understanding of key
compliance risks and important
developments. In May, we hosted a
Compliance Summit at our offices
in Switzerland for over 70 of our
Compliance Coordinators, Regional
Compliance Officers and Corporate
Compliance team members.
Over two days, participants
engaged in training and interactive
workshops, providing them with the
Glencore Annual Report 2019
43
Strategic reportFinancial statementsGovernanceAdditional information Monitoring
We review the effectiveness of
Glencore’s compliance programme
through monitoring and testing the
implementation and execution of
our compliance policies, standards,
procedures and guidelines. We
achieve this through a combination
of desktop and onsite reviews,
which we perform in line with our
monitoring plan. The Corporate
Compliance team discusses and
reviews the results and decides on
the most appropriate course of
action. Through our Regional
Compliance Officer network, any
actions arising from our monitoring
activities are tracked and closed
upon completion.
Raising Concerns
Everybody working for Glencore
(including suppliers) must promptly
raise with a supervisor or manager
locally any situations in which
our Code of Conduct, policies,
procedures or the law appear to
be breached. Everybody should
feel comfortable raising concerns
without fear of retaliation. We have
a strict policy against retaliation
that we reinforce in all of our
communications in relation to the
Raising Concerns programme.
Where a concern remains
unresolved through these local
channels, or should an employee,
contractor, supplier or other
stakeholder, for whatever reason
and at any time, feel uncomfortable
utilising the local channels in
resolution of their concerns, they can
raise the concern via our “Raising
Concerns” web platform at glencore.
raisingconcerns.org. The website
allows individuals to raise concerns
on an anonymous basis. Additionally,
there are telephone numbers for
raising concerns, which are published
on the Raising Concerns website.
Concerns received through the
Raising Concerns web platform
are taken seriously and handled
promptly, using an objective, fact-
based rationale and prohibiting
any form of retaliation.
In 2019, we received a total of 500
reports (2018: 215 and 2017: 183)
regarding situations in which Group
policies appeared to be breached
and which were brought to the
attention of the Raising Concerns
programme. Of these, 37% related to
Human Resources concerns, 42% to
business integrity concerns (of which
78 matters were related to potential
conflicts of interest) and 9% to health,
safety or environmental matters. The
substantial increase in the number
of concerns received by the Raising
Concerns programme year-on-year
are attributable to increased
awareness of the programme
and the roll-out of new reporting
platforms for both web and
phone submissions.
Discipline
In accordance with our Code of
Conduct, anybody working for
Glencore who breaches our Code
of Conduct, policies, standards or
procedures or the law may face
disciplinary action including
dismissal.
Participation in external anti-
corruption organisations
We are a member of the Partnering
Against Corruption Initiative (PACI).
Members collaborate on collective
action and share leading practice
in organisational compliance. The
initiative has a commitment of
zero tolerance on bribery and the
requirement to implement practical
and effective anti-corruption
programmes. We are also an
associate member of the Maritime
Anti-Corruption Network (MACN).
We actively participate in PACI and
MACN’s annual events. We have
incorporated guidelines from both
organisations into our procedures.
Ethics and compliance continued
opportunity to share knowledge
and learn best practice. Attendees
enhanced their skills to support the
advancement of the Ethics and
Compliance programme at a local
level. Ivan Glasenberg, Glencore CEO,
addressed the Summit with a clear
message: Ethics and compliance are
vital to Glencore’s success.
Raising awareness activities and
initiatives, in addition to online
and classroom training, are key
to reminding employees of the
importance of ethics and
compliance. This year, we held
Glencore Ethics and Compliance
Days, a two-day event at our offices
in Switzerland. The focus of these
two days was how we all, and
particularly how our leaders, play
a critical role in promoting and
ensuring a culture of ethics and
compliance. The event was very
well-attended by members of the
Board, senior management and
employees from the business and
support functions. The event gave
employees the opportunity to
engage with and ask questions of
our senior leadership in panel
discussions, participate in interactive
workshops, as well as take part in
engaging ethics and compliance
activities, games and competitions.
To further raise awareness, we
launched the Glencore Ethics and
Compliance App in January, which
supports employees in making
choices in line with our values, our
Code of Conduct and the law. It
provides easy, user-friendly mobile
access to key ethics and compliance
principles, our Raising Concerns
platform as well as our Conflicts of
Interest declaration platform.
44
Glencore Annual Report 2019
Non-Financial
Information Statement
We aim to comply with the Non-Financial Reporting
Directive requirements from sections 414CA and 414CB
of the UK Companies Act 2006. The table below sets
out where relevant information is located in this report
Reporting requirement
Policies
Reference in 2019 annual report
1. Environmental Matters
• Sustainability Policy
• Code of Conduct
2. Employees
3. Human Rights
• Code of Conduct
• SafeWork programme
• Conflict of Interest Programme
• Sustainability Policy
• Diversity Policy
• Corporate Anti-Discrimination
and Harassment Policy
• Corporate Recruiting Policy
• Human Rights Policy
• Annual Modern Slavery Statement
• Sustainability Policy
• Code of Conduct
• Climate change, page 16
• Climate change risk, pages 87–88
• Health, safety, environment risk, pages 86–87
• Sustainability, page 34
• Operating risk, pages 83–84
• Our people, page 30
• Community relations and human rights risk page 89
• Sustainability, page 34
4. Social Matters
• Code of Conduct
• Sustainability Policy
• Community relations and human rights risk, page 89
• Sustainability, page 34
• Our people, page 30
5. Anti-corruption and anti-bribery
• Code of Conduct
• Global Anti-Corruption Policy
• Laws and enforcement risk, pages 80–81
• Ethics and Compliance, page 42
6. Business model
7. Principal Risk and Uncertainties
8. Non-financial key performance
indicators
• Business model, page 10
• Principal risk and uncertainties, pages 74–89
• Non-financial key performance indicators, page 25
Glencore Annual Report 2019
45
Strategic reportFinancial statementsGovernanceAdditional information Financial review
Lower commodity prices and production
along with cost challenges in the African
copper business, impacted earnings and
cash flows, but Marketing proved its
counter-cyclical nature
Steven
Kalmin
Chief
Financial
Officer
Robust financial performance
Adjusted EBITDA was $11.6 billion, down 26% compared to 2018 as
consistent year-over-year Marketing earnings tempered the lower
contribution from the Industrial segment, the results of which are more
exposed to movements in commodity prices. Lower Atlantic steam
coal price forecasts contributed to impairments of $2.8 billion being
recognised, resulting in a net loss of $404 million for the year. Cash
generation remains healthy, supporting $2.6 billion of shareholder
returns announced for 2020.
Group Adjusted
EBITDA
$11.6bn
2018: $15.8bn
Cash generated by
operating activities
before working
capital changes
$10.3bn
2018: $13.2bn
Net debt/Adjusted
EBITDA
1.51x
targeted for reduction
in 2020
15,767
14,545
11,601
13,210
11,866
10,346
25,889
10,268
8,694
7,454 7,868
15,526
14,710
10,216
3.5x
3.0x
17,556
2.5x
2.0x
1.5x
1.0x
0.5x
0.0x
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Net debt
Net debt to Adjusted
EBITDA ratio
Figures in charts are shown in US$ million.
46
Glencore Annual Report 2019
Financial results
Net income attributable to equity
holders decreased from
$3,408 million in 2018 to a loss of
$404 million in 2019 and EPS reduced
from $0.24 per share to negative
$0.03 per share, driven largely by
lower commodity prices compared
to prior year, and various impairment
charges across our portfolio, mainly
relating to our Colombian coal, Chad
oil and African copper portfolios,
owing, respectively, to a lower
forecasted Atlantic steam coal price
environment, the expiration of certain
oil exploration licenses and revisions
to the Mutanda mine plan. At the
total comprehensive income level, the
net 2019 loss reduces to $118 million,
due mainly to positive mark-to-
market valuation adjustments on
various Group investments.
Adjusted EBITDA was $11,601 million
and Adjusted EBIT was $4,151 million
in 2019, down 26% and 55%
respectively compared to 2018, as
the average price benchmarks for
most of our key commodities were
lower year-over-year, namely cobalt
(57%), coal (GC Newc 27%), copper
(8%), ferrochrome (14%) and zinc
(13%), as noted in the table on page
56. Particularly weak were cobalt,
which experienced material
oversupply, and the Atlantic steam
coal market, heavily impacted by low
competing gas prices. In addition
to these negative price factors,
Adjusted EBITDA/EBIT were
impacted by the operational
challenges in our African copper
portfolio and the slow ramp-up of
our Koniambo nickel operation.
Noting these variables, Adjusted
EBITDA mining margins were 28%
(37%, excluding African Copper and
Koniambo) in our metal operations
and 37% in our energy operations,
compared to 38% (41%, excluding
African Copper and Koniambo) and
46% respectively during 2018.
Highlights
US$ million
Key statement of income and cash flows highlights1:
Net (loss)/income attributable to equity holders
Adjusted EBITDA◊
Adjusted EBIT◊
(Loss)/earnings per share (Basic) (US$)
Funds from operations (FFO)2◊
Cash generated by operating activities before working capital changes
Net purchase and sale of property, plant and equipment2◊
US$ million
Key financial position highlights:
Total assets
Net funding2,3◊
Net debt2,3◊
Ratios:
FFO to Net debt2◊
Net debt to Adjusted EBITDA◊
2019
2018 Change %
(404)
11,601
4,151
(0.03)
7,865
10,346
4,966
3,408
15,767
9,143
0.24
11,595
13,210
4,899
(112)
(26)
(55)
(112)
(32)
(22)
1
31.12.2019
31.12.2018 Change %
124,076
128,672
34,366
17,556
44.8%
1.51x
32,138
14,710
78.8%
0.93x
(4)
7
19
(43)
62
Adjusted EBITDA/EBIT◊
Adjusted EBITDA by business segment is as follows:
US$ million
Metals and minerals
Energy products
Corporate and other4
Total
2019
2018
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Marketing
activities
Industrial
activities
1,169
1,515
(47)
5,555
3,854
(445)
6,724
5,369
(492)
1,767
795
(70)
8,478
5,312
(515)
Adjusted
EBITDA
10,245
6,107
(585)
2,637
8,964
11,601
2,492
13,275
15,767
Change
%
(34)
(12)
(16)
(26)
Adjusted EBIT by business segment is as follows:
US$ million
Metals and minerals
Energy products
Corporate and other4
Total
2019
2018
Marketing
activities
Industrial
activities
Adjusted
EBIT
Marketing
activities
Industrial
activities
Adjusted
EBIT
Change
%
1,089
1,324
(47)
1,016
1,274
(505)
2,366
1,785
2,105
2,598
(552)
4,151
1,742
742
(70)
4,053
3,209
(533)
2,414
6,729
5,795
3,951
(603)
9,143
(64)
(34)
(8)
(55)
1 Refer to basis of presentation below.
2 Refer to page 50, also noting that 2019 FFO materially impacted by the lag of income taxes paid in 2019, in respect of 2018 profitability (reduction in balance sheet income
tax payable of $755 million), as well as $238 million of taxes paid in 2019, expected to be offset against future taxes due or refunded.
3 Adoption of the new lease accounting standard, effective 1 January 2019, resulted in $865 million (non-cash) of new lease liabilities being recognised (see note 1), while
$582 million of additional new leases (non-cash) were booked as capital expenditures and debt in 2019, that previously would have been classified as operating leases.
4 Corporate and other Marketing activities includes $58 million pre-significant items (2018: $21 million) of Glencore’s equity accounted share of Glencore Agri.
◊ 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 228 for definition and reconciliations and note 2 of the financial statements for reconciliation
of Adjusted EBIT/EBITDA and to page 68 for reconciliations of Mining Margins.
Marketing activities
Marketing Adjusted EBITDA
increased by 6% to $2,637 million and
Adjusted EBIT decreased by 2% to
$2,366 million, the former benefiting
from the new lease accounting
standard, requiring the capitalisation
of various previously reported
operating lease expenses, including
many of our chartering and storage
commitments (see note 1). Such
previously reported lease expenses
are now split over time between
depreciation and interest expense.
Marketing Adjusted EBIT was
broadly in-line with 2018 as lower
contributions from Metals and
minerals were offset by increased
contributions in Energy products.
Metals and minerals Adjusted
Marketing EBIT was down 37%
primarily on account of the
challenging cobalt markets in H1 and
resulting inventory write down on
material sourced from Glencore
mines in earlier periods, as discussed
previously, and some overall
softening in end-user demand due
to global trade tensions, which
prevailed through most of 2019.
Energy products Adjusted EBIT was
up 78%, owing to oil, which delivered
particularly strong results on the
back of supportive physical
commodity marketing conditions.
Industrial activities
Industrial Adjusted EBITDA
decreased by 32% to $8,964 million
(Adjusted EBIT was $1,785 million,
compared to $6,729 million in 2018).
As noted above, the decrease was
primarily driven by lower average
year-over-year commodity prices
and, to a lesser extent, some
production/operational/cost
challenges in our African copper
portfolio (Mutanda’s copper
production was 49% lower than 2018,
as it scaled down operations,
Katanga, although recording higher
cobalt production, had limited sales
as it manages through a period
of excess uranium content and
delays in required drying capacity
commissioning, while Mopani’s
copper metal production was 64%
lower as, in June, it accelerated its
major triennial smelter shut down
(from the 2020 schedule) and
brought forward various planned
other maintenance activities to
address safety-related issues).
Glencore Annual Report 2019
47
Strategic reportFinancial statementsGovernanceAdditional information Financial review continued
Earnings
A summary of the differences between reported Adjusted EBIT and income attributable to equity holders,
including significant items, is set out in the following table:
US$ million
Adjusted EBIT◊
Net finance and income tax expense in relevant material associates and joint ventures1
Proportionate adjustment Volcan1
Net finance costs
Income tax expense2
Non-controlling interests
Income attributable to equity holders of the Parent pre-significant items
Earnings per share (Basic) pre-significant items (US$)◊
Significant items◊
Share of Associates’ significant items3
Movement in unrealised inter-segment profit elimination4
(Loss)/gain on disposals of non-current assets5
Other expense – net6
Impairments7
Income tax expense2
Non-controlling interests’ share of significant items8
Total significant items
(Loss)/income attributable to equity holders of the Parent
(Loss)/earnings per share (Basic) (US$)
2019
4,151
(337)
(106)
(1,713)
(369)
816
2,442
0.18
(292)
468
(43)
(173)
(2,843)
(249)
286
2018
9,143
(529)
(72)
(1,514)
(1,761)
498
5,765
0.41
(40)
237
(139)
(764)
(1,643)
(302)
294
(2,846)
(2,357)
(404)
(0.03)
3,408
0.24
1 Refer to note 2 of the financial statements and to APMs section for reconciliations.
2 Refer to other reconciliations section for the allocation of the total income tax expense between pre-significant and significant items.
3 Recognised within share of income from associates and joint ventures, see note 2 of the financial statements.
4 Recognised within cost of goods sold, see note 2 of the financial statements.
5 Refer to note 4 of the financial statements and to APMs section for reconciliations.
6 Recognised within other expense – net, see note 5 of the financial statements and to APMs section for reconciliations.
7 Refer to note 6 and 10 of the financial statements and to APMs section for reconciliations.
8 Recognised within non-controlling interests, refer to APMs section.
Significant items
Significant items are items of income
and expense, which, due to their
nature and 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 2019, Glencore recognised a net
expense of $2,846 million (2018:
$2,357 million) in significant items
comprised primarily of:
• Expenses of $292 million (2018:
$40 million) relating to Glencore’s
share of significant expenses
recognised directly by our
associates, notably impairments
and gains on revaluations of
investments in Glencore Agri
(net $73 million), impairments in
Trevali ($65 million) and Oil vessels’
entities ($62 million)
• Net loss on disposals of non-
current assets of $43 million (2018:
$139 million) see note 4. In 2019,
the loss primarily relates to the
revaluation of our existing interest
in Polymet, prior to acquisition
of a controlling stake. In 2018,
the loss primarily related to the
disposal of our interest in the
Mototolo PGM joint venture in
South Africa, mainly on account
of recycling foreign currency
translation reserves to the
statement of income
• Income tax expense of $249 million
(2018: $302 million) – see income
taxes below
• Other expenses – net expenses
of $173 million (2018: $764 million)
see note 5. Balance primarily
comprises:
– $47 million (2018: $139 million) of
mark-to-market gains on equity
investments/derivative positions
accounted for as held for trading
– $70 million net loss (2018:
$58 million) on foreign
exchange movements
– $159 million (2018: $86 million)
relating to certain legal matters
– $117 million (2018: $24 million) in
respect of various investigations
(legal, expert and compliance)
related costs (see note 31) and
$42 million (2018: $62 million) of
costs related to ongoing dispute
with the Strategic Fuel Fund
Association of South Africa
– $173 million (2018: $Nil) of closure
and severance costs related
to transition of the Mutanda
operation to temporary care and
maintenance, ongoing mine
optimisation review at Katanga
and closure of the Brunswick
lead smelter
48
Glencore Annual Report 2019
– $325 million gain (2018: loss
of $325 million) relating to
settlement of an outstanding
claim, through the effective sale
of previously recognised liabilities
that the Group assumed in 2018,
following termination of a 50:50
consortium with Qatar
Investment Authority and
its associated investment in
OSJC Rosneft
– $Nil (2018: $270 million) relating
to the costs incurred in settling
Katanga’s capital deficiency and
various historical commercial
disputes with Gécamines
($248 million) and settlement
with the Ontario Securities
Commission ($22 million).
Also see note 33
– $6 million (2018: $142 million)
of acquisition related expenses
incurred in connection with
the acquisition of HVO and
Hail Creek (see note 25).
The expenses are primarily
stamp duty/property transfer
related taxes
• Impairments of $2,843 million
(2018: $1,643 million), see note 6
and 10. The 2019 charge primarily
relates to the:
– Prodeco coal operations
($514 million) owing to global
LNG oversupply with resultant
low spot gas prices, and to a
lesser extent, higher carbon
prices, which placed
considerable pressure on the
API2 European coal market, the
primary price reference market
for Colombian coal. In addition,
a $435 million impairment was
recognised within share of
income from associates relating
to our investment in Cerrejón,
our 33.3% interest in a Colombian
coal operation (see note 10)
– Chad oil operations ($538 million)
resulting from the expensing
of historical cost allocation to
certain oil exploration licences
acquired via Caracal in 2014.
In advance of the expiry date
of these Chad East licences,
Glencore held discussions with
the Government with the aim
of extending them on terms
acceptable to both parties,
however no agreements
were reached
– Mutanda copper operations
($300 million) owing to the
decline in cobalt prices and the
transition to temporary care
and maintenance in November
– Oxidos and Cerro de Pasco
operations (separately
identifiable zinc and silver
processing areas within the
Volcan group – $378 million),
following reclassification of these
operations to “held for sale”
pending their expected disposal
during 2020
– $162 million of VAT impairments
in respect of long overdue
claims, predominantly in Zambia
Net finance costs
Net finance costs were $1,713 million
during 2019, a 13% increase
compared to $1,514 million in the
comparable reporting period,
primarily attributable to moderately
higher average gross debt balances,
along with additional lease interest
costs ($73 million), following the
introduction of the new lease
accounting standard on 1 January
2019. Interest expense for 2019 was
$1,940 million, up 11% over 2018 and
interest income was $227 million,
consistent with prior year.
Income taxes
An income tax expense of
$618 million was recognised during
2019, compared to $2,063 million in
2018. Adjusting for $249 million (2018:
$302 million) of net income tax
expense related to significant items
(primarily impairments and tax
losses not recognised), the 2019
pre-significant items income tax
expense was $369 million (2018:
$1,761 million). The 2019 effective tax
rate, pre-significant items, was 30.5%,
consistent with the 30.3% in 2018.
Statement of financial position
Current and non-current assets
Total assets were $124,076 million as
at 31 December 2019, compared to
$128,672 million as at 31 December
2018. Current assets decreased from
$44,268 million to $41,552 million,
due to a reduction in fair values of
our derivatives/hedging instruments
(other financial assets), on account of
movements in commodity prices
and foreign exchange rates, as well
as settlement of the Astron
exchangeable loan (2018: $1,044
million), following the closing of this
acquisition in April 2019. Non-current
assets decreased from $84,404
million to $82,238 million, primarily
due to impairments to property,
plant and equipment of $1,885
million. This decrease was partially
offset by capitalisation of lease assets
as a result of the adoption of IFRS 16
(see note 1) and mark-to-market
adjustments with respect to our
investments carried at fair value
through other comprehensive
income (see below).
Current and non-current liabilities
Total liabilities were $84,840 million
as at 31 December 2019, compared to
$83,289 million as at 31 December
2018. Current liabilities decreased
from $40,372 million to
$39,448 million, primarily due to a
reduction in income tax payable of
$755 million and current borrowings
of $594 million, offset by an increase
in fair values of our derivatives/
hedging instruments (other financial
liabilities), on account of movements
in commodity prices and foreign
exchange rates. Non-current
liabilities increased from
$42,917 million to $45,392 million,
primarily due to increases in non-
current borrowings of $2,643 million
(including $1,158 million of lease
liabilities under IFRS 16), an increase
in provisions of $478 million, mainly
due to the updated rehabilitation
estimates (primarily due to lower
risk-free discount rates), offset by
a decrease in deferred tax liabilities
of $865 million, primarily due to
the tax-effect of impairments
noted above.
Movements relating to current and
non-current borrowings are set out
below in the net funding and net
debt movement reconciliation.
Equity
Total equity was $39,236 million as
at 31 December 2019, compared to
$45,383 million as at 31 December
2018, owing primarily to share
buybacks of $2,318 million and
shareholder distributions of
$3,015 million (of which $2,710 million
was to Glencore shareholders and
$305 million to non-controlling
interests).
Glencore Annual Report 2019
49
Strategic reportFinancial statementsGovernanceAdditional information Financial review continued
Cash flow and net funding/debt
Net funding
US$ million
Total borrowings as per financial statements
Proportionate adjustment – net funding1
Cash and cash equivalents
Net funding◊
Cash and non-cash movements in net funding
US$ million
Cash generated by operating activities before working capital changes
Proportionate adjustment – Adjusted EBITDA1
Other non-cash adjustments included within EBITDA
Net interest paid1
Tax paid1
Dividends received from associates1
Funds from operations◊
Net working capital changes2
Acquisition and disposal of subsidiaries – net2
Exchangeable loan provided for a conditional acquisition of an oil refinery/downstream business
Purchase and sale of investments – net2
Purchase and sale of property, plant and equipment – net2
Net margin receipts/(calls) in respect of financing related hedging activities
Acquisition of non-controlling interests in subsidiaries
Distributions paid and transactions of own shares – net
Cash movement in net funding
Net funding acquired in business combinations
Impact of adoption of IFRS 16
Change in lease obligations
Foreign currency revaluation of borrowings and other non-cash items
31.12.2019
31.12.2018
37,043
34,994
(778)
(810)
(1,899)
(2,046)
34,366
32,138
31.12.2019 31.12.2018
10,346
1,522
13
(1,368)
(2,814)
166
13,210
1,893
(6)
(1,200)
(2,406)
104
7,865
11,595
2,175
(117)
–
(6)
1,526
(2,834)
(1,044)
(3)
(4,966)
(4,899)
529
(24)
(5,327)
129
(225)
(865)
(582)
(685)
(507)
(58)
(5,144)
(1,368)
(138)
–
(90)
511
(2,228)
(1,085)
(32,138)
(31,053)
(34,366)
(32,138)
16,810
17,428
(17,556)
(14,710)
Total movement in net funding
Net funding◊, beginning of the year
Net funding◊, end of year
Less: Readily marketable inventories2
Net debt◊, end of year
1 Refer to APMs section for definition and reconciliations.
2 Refer to Other reconciliations section.
Other comprehensive income/
(expense)
A gain of $285 million was
recognised during 2019, compared
to a loss of $1,518 million in 2018
primarily relating to mark-to-market
adjustments with respect to our
investment in EN+ and Russneft (see
note 10) and exchange gains on
translation of foreign operations.
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.
50
Glencore Annual Report 2019
Net funding as at 31 December 2019
increased by $2,228 million to
$34,366 million and net debt (net
funding less readily marketable
inventories) increased by
$2,846 million over the period to
$17,556 million. A major contributor
to the increase in both metrics was
the adoption of the new lease
accounting standard, effective
1 January 2019, which resulted in
$865 million (non-cash) of new
lease liabilities being recognised
(see note 1), while $582 million of
additional new leases (non-cash)
were booked as capital expenditures
and debt in 2019, that previously
would have been classified as
operating leases. Funds from
operations were down 32%
compared to 2018, owing in large
part to the reduction in commodity
prices (particularly coal and cobalt)
and cashflow underperformance
from the African copper portfolio as
noted above. Funds from operations
was also materially impacted by the
lag of income taxes paid in 2019, in
respect of 2018 profitability (note the
reduction in balance sheet income
tax payable of $755 million, mainly
attributable to the Australian
operations and Mutanda), as well as
$238 million of taxes paid in 2019,
expected to be offset against future
taxes due or refunded. Despite such
impacts, funds from operations
along with a net release of working
capital, more than covered the
$4,966 million of net capital
expenditure, $147 million of net
acquisitions of subsidiaries and
investments and $5,327 million of
distributions to shareholders and
non-controlling interests.
Business and investment
acquisitions and disposals
Net outflows on acquisitions/
investments were $147 million
(2018: $2,895 million) over the year,
comprising primarily minority
buy-outs within existing operations
(additional 10% in Ulan and 2.7% in
Hail Creek). The net outflow in 2018
was primarily due to the acquisition
of a 49% interest in the HVO coal
mine, an operation neighbouring
many of our existing New South
Wales operations, and an 82%
interest in the Hail Creek coking
coal mine in Queensland. In
October 2018, Glencore advanced
$1,044 million to acquire the
Astron Energy in South Africa.
Liquidity and funding activities
In 2019, the following significant
financing activities took place:
• In March 2019 (effective May 2019),
Glencore signed new one-year
revolving credit facilities of
$9,775 million, refinancing the
$9,085 million one-year revolving
facilities signed in March 2018.
Funds drawn under the facilities
bear interest at US$LIBOR plus a
margin of 40 basis points. Glencore
also voluntarily reduced the
medium term facility size from
$5,115 million to $4,650 million,
extended the facility to five years,
and replaced the two one-year
extension options. As at
31 December 2019, the
facilities comprise:
– a $9,775 million one-year
revolving credit facility with a
12-month borrower’s term-out
option (to May 2021) and a
one-year extension option; and
– a $4,650 million medium-term
revolving credit facility (to May
2024), with two one-year
extension options
• In March 2019, issued a 5-year
$1,000 million, 4.125% coupon bond
• In March 2019, issued a 10-year
$750 million, 4.875% coupon bond
• In March 2019, issued a 7-year GBP
500 million 3.125% coupon bond
• In April 2019, issued a 7-year EUR
500 million 1.50% coupon bond
• In September 2019, issued a
6-year CHF 250 million 0.35%
coupon bond
• In September 2019, issued a
5-year EUR 600 million 0.625%
coupon bond
As at 31 December 2019, Glencore
had available committed undrawn
credit facilities and cash amounting
to $10.1 billion.
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 Baa1
(stable outlook) from Moody’s and
BBB+ (stable) 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,
augmented by an upper Net debt
cap of c.$16 billion, excluding
Marketing related finance lease
liabilities ($0.6 billion as at
31 December 2019, representing
primarily charted vessels and various
storage facilities, where the majority
of such commitments expire within
2 years). As noted earlier in 2019, in
the current uncertain economic
cycle backdrop, Glencore aims to
limit the Net debt/Adjusted EBITDA
ratio to closer to 1x, which will require
some targeted management over
the next 12 months.
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. Glencore has set a
consolidated VaR limit (1 day 95%) of
$100 million representing some 0.2%
of equity, which was not exceeded
during the period. Glencore uses
a one-day VaR approach based
on a Monte Carlo simulation with
a weighted data history computed
at a 95% confidence level.
Average market risk VaR (1 day 95%)
during 2019 was $27 million,
representing less than 0.1% of equity.
Average equivalent VaR during 2018
was $34 million.
Recommended distribution
The Directors have recommended a
2019 financial year cash distribution
of $0.20 per share amounting to
$2.6 billion, accounting for own
shares held as at 31 December 2019.
Payment will be effected as a $0.10
per share distribution in May 2020
and a $0.10 per share distribution in
September 2020 (in accordance with
the Company’s announcement of
the 2020 Distribution timetable also
made on 18 February 2020).
The distribution is 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 2019, Glencore plc
had CHF 27 billion of such capital
contribution reserves in its statutory
accounts. The distribution is subject
to shareholders’ approval at its AGM
on 6 May 2020.
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 around this time.
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
glencore.com or from the
Company’s Registrars.
Glencore Annual Report 2019
51
Strategic reportFinancial statementsGovernanceAdditional information Financial review continued
Basis of presentation
The financial information in the
Financial and Operational 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. In
addition, the Peruvian listed
Volcan, while a subsidiary of the
Group, is accounted for under the
equity method for internal
reporting and analysis due to the
relatively low economic interest
(23%) held by the Group.
During the period, key members
of the Group’s Metals and minerals
and Energy products segments
retired and a new position with
oversight and responsibility for all
of Glencore’s industrial assets
(Head of Industrial Assets) was
created. Internal reporting lines
and organisational structures
were amended such that
Glencore’s industrial activities
report to the Head of Industrial
Assets and all of its marketing
activities report to the Head of
Marketing (being the Group CEO).
The change in oversight and
responsibility for the two differing
parts of our business (marketing
and industrial) and associated
remuneration has resulted in a
change in the “chief operating
decision makers” reporting and
accountability structures and, with
it, our reportable segments.
Aligning with the new executive
structure and respective
operational oversight and
responsibility, the new reportable
segments are – “Industrial” and
“Marketing” activities.
Comparative 2018 information has
been restated for the change in
reportable segments.
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 provided in
addition to IFRS measures to aid in
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 and
by 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 on page 48) are
items of income and expense,
which, due to their nature and
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 228.
52
Glencore Annual Report 2019
Responsibility
Managing our
impact where
we operate
Innocent Mtshweni
Environmental Officer –
Glencore Coal, South Africa
Innocent’s role as an environmental
officer is to implement Glencore’s
Environmental Management Programme
(EMPR), managing land rehabilitation,
water and air quality.
“It takes someone who is dedicated,
hardworking, driven, and who really
cares about the environment. What
encourages me is playing my part to
ensure we conduct our mining activities
in line with best-practice.”
See more stories like this
Visit Glencore.com and
follow us on social media
Glencore Annual Report 2019
53
Strategic reportFinancial statementsGovernanceAdditional information Market insight and customer understanding
Our global scale and presence in more than
60 commodities across 35 countries gives us
extensive market knowledge and insight
to help us fully understand the needs of
our customers.
Anticipating supply and demand
Our strategy seeks to maximise value through
our integrated marketing and industrial
businesses working 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.
Our Marketing
business
We responsibly source the
commodities that advance
everyday life – this means
moving them from where
they are plentiful to where
they are needed
Ivan
Glasenberg
Chief
Executive
Officer
54
Glencore Annual Report 2019
Marketed volumes (mt/bbl)
Copper
4.1m
Nickel
181k
Lead
1.1m
Alumina/
aluminium
11.0m
Zinc
3.1m
Ferroalloys
9.5m
Coal
93.5m
Crude oil
973m
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
Disparity
Different prices for the same
product in different
geographic regions, taking
into account transportation
and transaction costs.
Execution
Leverage global relationships
and production, processing
and logistical capabilities to
source product in one location
and deliver in another..
Product
arbitrage
Disparity
Pricing differences between
blends, grades or types
of commodity, taking into
account processing and
substitution costs.
Execution
Ensure optionality with
commodity supply contracts,
and look to lock-in profitable
price differentials through
blending, processing or
end-product substitution.
Time
arbitrage
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.
S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
Glencore Annual Report 2019
55
Strategic reportFinancial statementsGovernanceAdditional information
Our Marketing business
continued
Highlights
Marketing Adjusted EBITDA
increased by 6% to $2,637 million and
Adjusted EBIT decreased by 2% to
$2,366 million, the former benefiting
from the new lease accounting
standard, requiring the capitalisation
of various previously reported
operating lease expenses, including
many of our chartering and storage
commitments (see note 1). Such
previously reported lease expenses
are now split over time between
depreciation and interest expense.
Marketing Adjusted EBIT was in-line
with 2018, as lower contributions
from Metals and minerals were
offset by increased contributions in
Energy products.
Metals and minerals Adjusted
Marketing EBIT was down 37%,
primarily on account of the
challenging cobalt markets in H1
and resulting inventory writedown
on material sourced from Glencore
mines in earlier periods, as discussed
previously, and some overall
softening in end-user demand due
to global trade tensions, which
prevailed through most of 2019.
Energy products Adjusted EBIT was
up 78%, owing to oil, which delivered
particularly strong results on the
back of supportive physical
commodity marketing conditions.
Financial overview
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA margin
Metals and
minerals
Energy
products
Corporate
and other1
73,561
120,627
1,169
1,089
1.6%
1,515
1,324
1.3%
–
(47)
(47)
n.m.
2019
194,188
2,637
2,366
1.4%
Metals and
minerals
72,744
Energy
products
129,930
1,767
1,742
2.4%
795
742
0.6%
Corporate
and other1
–
(70)
(70)
n.m.
2018
Restated2
202,674
2,492
2,414
1.2%
1 Corporate and other Marketing activities includes $58 million (2018: $21 million) of Glencore’s equity accounted share of Glencore Agri.
2 Adjusted to present mark-to-market movements on forward physical sales contracts within revenue (see note 1)
Market variables
Selected average commodity prices
S&P GSCI Industrial Metals Index
S&P GSCI Energy Index
LME (cash) copper price ($/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)
Ferro-chrome 50% Cr import, CIF main Chinese ports, contained Cr (¢/lb)
Iron ore (Platts 62% CFR North China) price ($/DMT)
Coal API4 ($/t)
Coal Newcastle (6,000) ($/t)
Oil price – Brent ($/bbl)
Currency table
AUD : USD
USD : CAD
USD : COP
EUR : USD
GBP : USD
USD : CHF
USD : KZT
USD : ZAR
56
Glencore Annual Report 2019
2019
326
199
6,005
2,548
1,999
13,944
1,393
16
16
77
90
72
78
64
2018
362
224
6,527
2,919
2,239
13,118
1,269
16
37
90
66
100
107
72
Change %
(10)
(11)
(8)
(13)
(11)
6
10
–
(57)
(14)
36
(28)
(27)
(11)
Spot
31 Dec 2019
Spot
31 Dec 2018
Average
2019
Average
2018
Change in
average %
0.70
1.30
3,287
1.12
1.33
0.97
383
14.00
0.70
1.36
3,254
1.15
1.28
0.98
381
14.35
0.69
1.33
3,283
1.12
1.28
0.99
383
14.45
0.75
1.30
2,956
1.18
1.33
0.98
345
13.25
(7)
2
11
(5)
(4)
1
11
9
Market highlights
Copper
Zinc
Nickel
Coal
2019E global refined copper
production1
2019 Chinese zinc mine
supply3
2016-2019E cumulative
nickel market deficit6
+0.4%
-1%
keeping production
at 2015 levels4
395kt
2019E Pacific share of global
seaborne thermal coal
demand7
86%
Global visible copper
inventory end-2019
2019E global refined
zinc supply4
Global visible nickel
inventory end-2019
c.10 days’
consumption1
+1.9%
2019 forecast one year ago:
+6.4%5
c.22 days’
consumption6
2019E Pacific seaborne
thermal coal demand
growth7
+5.9%
Incremental copper demand
from wind power in 20292
1Mt pa
4th
Consecutive year of zinc
metal market deficits4
+23%
2019E global nickel demand
growth in batteries, to
around 184kt7
Required for new coal fired
generation capacity build in
Asia/Middle East by 20309
>150Mt
22Mt
Additional cumulative
copper needed by 2030 to
meet government CO2
emission targets2
Global visible zinc exchange
inventory end-2019
c.2 days’
consumption4
>400kt
New electric vehicle nickel
demand by 20258
Coal share of 2018 world
electricity generation10
38.1%
1 Wood Mackenzie Copper long-term outlook Q4 2019 update, visible inventories comprise LME, SHFE, Comex and estimated Chinese bonded warehouse stock
2 Bernstein, Metals & Mining: Copper and the Green economy – Thoughts from our decarbonisation conference, European Commission Joined Research Centre EDGAR,
International Energy Agency (IEA), U.S. Department of Energy, “Government Targets 2030” gradual reduction in emissions – Mid level scenario
3 National Bureau of Statistics of China
4 Wood Mackenzie Zinc long-term outlook Q4 2019 update, exchange inventories comprise LME and SHFE
5 Wood Mackenzie Zinc long-term outlook Q4 2018 update
6 Glencore estimates, visible inventories comprise LME and SHFE
7 Glencore estimates
8 Glencore estimates and B3 Corp, based on 11.5m new passenger EV sales by 2025, c.10% penetration rate
9 Glencore estimates excluding China
10 IEA World Energy Outlook 2019
Selected marketing volumes sold
Copper metal and concentrates1
Zinc metal and concentrates1
Lead metal and concentrates1
Gold
Silver
Nickel
Ferroalloys (incl. agency)
Alumina/aluminium
Iron ore
Thermal coal2
Metallurgical coal2
Coke2
Crude oil
Oil products
1 Estimated metal unit contained.
2 Includes agency volumes.
Units
mt
mt
mt
moz
moz
kt
mt
mt
mt
mt
mt
mt
mbbl
mbbl
2019
2018
Change %
4.1
3.1
1.1
2.1
68.3
181
9.5
11.0
65.5
86.7
6.5
0.3
973
779
4.5
3.2
0.9
2.0
81.4
199
9.0
10.2
79.6
94.4
3.6
0.6
944
760
(9)
(3)
22
5
(16)
(9)
6
8
(18)
(8)
81
(50)
3
3
Glencore Annual Report 2019
57
Strategic reportFinancial statementsGovernanceAdditional information Market review and outlook
Despite subdued 2019 demand, commodity markets remained
tightly balanced through the year. With inventory levels drawn
down to multi-year lows by year-end, our markets are well
positioned to benefit from key future demand growth trends
For 2020, annual treatment/refining charges settled
at their lowest levels in nearly 10 years and benchmark
annual cathode premiums were rolled over at 2019 levels,
signalling a positive demand outlook and anticipated
restocking through the supply chain.
In the longer term, we expect copper markets to grow at
solid rates, driven by population growth and rising living
standards in emerging economies. In addition, climate
change policies are likely to be a driver for key copper
growth sectors going forward, from renewable power
generation and distribution, to energy storage and
electric vehicles. Longer term, mine supply growth is
likely to be constrained by ageing assets, declining ore
grades and a diminished project pipeline.
Copper
During 2019, the copper price averaged $6,005/t, 8%
lower than 2018. Throughout much of 2019, demand
growth and sentiment was negatively impacted by
uncertainty on trade and tariffs. Mine supply contraction,
including production disruptions appeared to have had
little meaningful impact on copper market sentiment.
Demand in China, which accounts for approximately
50% of global refined copper consumption, improved
markedly towards the end of the year on prospects
of a trade agreement between China and the U.S. and
targeted monetary policy easing, resulting in world
refined copper demand increasing in 2019, albeit at
a lower rate than seen in recent years.
Refined copper inventories progressively reduced,
reaching multiyear lows in H2, while competition for
concentrates was driven by smelting capacity growth in
China. China imported record volumes of concentrates
which more than offset an anticipated decline in refined
copper imports. As a result, spot treatment/refining
charges in H1 reached the lowest level since 2013 which,
supported by stricter Chinese scrap import regulations,
remained at low levels through H2. Cathode premiums
also improved during H2, although decreased towards
year-end, given seasonal lower demand ahead of
Chinese New Year.
Average LME (cash) copper price
($/t)
6,173
6,527
6,005
Copper exchange inventory (kt)
(LME, SHFE, Comex)
543
351
315
-8%
The copper price
decreased during
2019 with market
sentiment
negatively impacted
by uncertainty on
trade and tariffs
-10%
Refined copper
inventories
progressively
reduced during 2019,
reaching multiyear
lows in H2
2017
2018
2019
2017
2018
2019
58
Glencore Annual Report 2019
Cobalt
Nickel
During 2019, the cobalt price averaged $16/lb, 57% lower
than 2018. The price decline in H2 2018 continued into
2019, with continuation of destocking across the supply
chain. Prices fell from $27/lb in January to a low of $12/lb
in late July. The resultant pressure on margins across the
cobalt mining and refining complex prompted supply
responses, with a reduction seen in artisanal sourced
cobalt and a number of industrial projects being delayed.
Within our own operations, we announced the transition
to care and maintenance of Mutanda due to various
factors including the weak cobalt price. The supply
response saw prices recover to $18/lb. Prices gave up
some gains into year-end, with sentiment negatively
impacted by weaker than anticipated Chinese electric
vehicle sales. Nevertheless, the market found price
support at c.$15/lb, given lower stock levels across the
cobalt supply chain and expectations of improved
demand conditions in 2020.
2020 marks the start of significant electric vehicle model
releases by global automakers, which should underpin
electric vehicle (EV) sales growth in key markets
including Europe. While Chinese EV sales were lower in
H2 2019, the scale of continued investment, the strategic
status of the industry within China and the continued
roll-out of models, points to strong future demand.
Sentiment in the mobile phone market, a major cobalt
demand segment, has also improved with the onset of
5G handset sales.
In 2019, primary nickel consumption exceeded supply for
a fourth consecutive year, showing a deficit of around
25kt, with a resultant 4-year cumulative deficit of
approximately 395kt. A significant deficit developed in H1
2019, which was partially reversed in H2, basis weaker
demand growth and a significant increase in Nickel Pig
Iron (NPI) production in both China and Indonesia.
Nickel demand from stainless steel manufacturing in
China was strong all year, driven by increased production
of high nickel content 300-series steel. Stainless production
across other regions was relatively weak. Nickel usage in
specialist steels and alloys was below expectations, mainly
due to ongoing weakness in the automotive sector, and
to a lesser extent, oil and gas. Growth of primary nickel
demand in batteries remained strong, albeit slower in H2
after China substantially cut subsidies for New Energy
Vehicles. Overall, we estimate primary nickel demand in
2019 of 2.45Mt, representing a 2.7% increase on 2018.
Meanwhile, Chinese and Indonesian NPI increased
by 23% and 50% respectively on the prior year, driving
a significant increase in overall supply, despite the
continued underperformance from non-NPI suppliers.
Overall, global nickel output in 2019 is estimated at
2.425Mt, marking a 10% increase on 2018.
A critical development during 2019 was Indonesia’s
decision to advance the ban on nickel ore exports to
the beginning of 2020 rather than 2022, as originally
scheduled, which should result in a reduction of NPI
production in China. Nevertheless, we forecast such
decline to be offset by the continued ramp up of NPI
capacity in Indonesia. Overall, we project a balanced
market in 2020.
Average MB cobalt price 99.3% ($/lb)
37
26
16
-56%
The cobalt price
decline in H2 2018
progressed into
2019, as destocking
continued across the
supply chain
Nickel exchange inventory (kt)
(LME, SHFE)
411
222
188
2017
2018
2019
2017
2018
2019
-15%
Nickel exchange
stocks decreased
in 2019 as primary
nickel consumption
exceeded supply
for a fourth
consecutive year
Glencore Annual Report 2019
59
Strategic reportFinancial statementsGovernanceAdditional information Market review and outlook
continued
Looking ahead, zinc mine supply is expected to continue
growing, given the current project pipeline. However, the
current combination of low prices and high treatment
charges is pressuring mining profitability, which may
result in supply disruption in the short to medium term.
We believe that metal production increases are
necessary for the market to restock from the current
multi-year lows.
Lead recorded an average price of $1,998 in 2019 (down
by 11% vs 2018). The metal price has been under pressure
throughout the year as demand growth has been soft,
while metal production in China, as well as from
secondary sources, has continued to grow.
Zinc
The anticipation of large increases in both zinc
concentrate and metal supply, plus the global
macroeconomic uncertainty, weighed negatively on
zinc market sentiment during 2019. Despite recording
another metal deficit year in 2019, resulting in historically
low visible zinc metal stocks, the zinc price averaged
$2,549/t, 13% lower than 2018. Concentrates supply, ex
China, grew YoY, but the effect was considerably lower
than initially expected, increasing by only 150–200kt.
Delays in project ramp-ups, operational issues and
labour strikes were the primary drivers of such
underperformance. In China, per the National Bureau
of Statistics (NBS), 2019 mine production decreased 1%
on the prior year.
Metal production in China (per NBS) did respond in
H2 2019. Smelters resumed partially idled production,
following additional environmental controls imposed
in 2018, with such capacity filled with imported
concentrates. Chinese metal production is reported to
have grown by 526kt (9.2%). In the rest of the world
however, negative growth of 130k (-1.7% year on year) has
been reported. Despite the increase in reported global
metal production, visible zinc metal stocks continued to
be drawn. Compared to December 2018, LME and SHFE
stocks dropped by 60% and 40% respectively to 51kt and
28kt at December 2019, signalling that zinc demand was
sufficient to absorb the additional units.
Average LME (cash) zinc price ($/t)
2,893
2,919
2,548
-13%
The anticipation of
large increases in
zinc supply and
macroeconomic
uncertainty weighed
on the zinc price in
2019
Zinc exchange inventory (kt)
(LME, SHFE)
250
149
79
-47%
2019 marked another
zinc metal deficit
year, reducing visible
exchange stocks to
historically low
levels
2017
2018
2019
2017
2018
2019
60
Glencore Annual Report 2019
Alumina/Aluminium
2019 saw an easing of nearly all the tensions that drove
the market during 2018, including Rusal sanctions being
lifted in January and the Alunorte production embargo
ending in May.
The aluminium price in 2019 traded in its narrowest
range since 2002, between $1,704/t and $1,952/t. This
contrasts sharply with the price volatility seen in 2018,
which saw the widest price range (~$700/t) since the
2008/09 Global Financial Crisis.
In the U.S., the delivered Midwest premium declined
throughout the year from 19c/lb at the beginning of the
year to 14.5c/lb at the end of the year, following the
relaxation of tariffs on Canadian imports.
Alumina prices declined over the year, finding a floor in
H2 at just below $280/t (FOB Australia), supported by
Chinese buying interest. The decline in alumina prices
provided some relief for aluminium smelters after a
challenging alumina/aluminium price ratio prevailing
during the preceding 2 years.
LME (cash) aluminium price ($/t)
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
2017
2017
2018
2018
2019
2019
Range
Average
-4%
The aluminium price
decreased in 2019,
trading in its
narrowest range
since 2002
Iron ore
Supply disruptions,
primarily the Brumadinho
dam failure, affected the
market throughout 2019.
From around $70/t at the
start of 2019, prices peaked
around $120/t in July,
before a sharp sell-off in
August, as the market
reassessed the extent of
disruptions. After a volatile
few months, prices settled
in the high 80’s. High
grade premiums reduced
significantly in H1 as steel
margins decreased, basis
the higher iron ore prices,
however once prices
began to fall, and with the
Chinese steelmaking
market in good health,
high grade premiums then
stabilised and improved.
Ferroalloys
Chinese stainless steel
production grew 13%
during 2019, contrasting a
5% decline in ROW melt
rates. Ferrochrome
production in China
increased 13% year-on-year,
supported by a 20%
increase in chrome ore
exports from South Africa.
On the other hand, South
African smelted
ferrochrome exports
declined 4% during 2019,
owing to the relatively high
costs of smelting in South
Africa (versus China)
exacerbated by power
shortages in H2 2019.
Ferrochrome demand ex
China was weak. The
environment for
ferrochrome producers in
South Africa is expected to
remain challenging, with
further capacity additions
expected in China.
Vanadium prices
continued to decline
throughout 2019 as a
result of weaker demand
from Western steel
markets and continued
substitution from niobium.
In China, increased output
from vanadium-bearing
slag was met by stronger
domestic demand
from the construction
sector (rebar).
Glencore Annual Report 2019
61
Strategic reportFinancial statementsGovernanceAdditional information Market review and outlook
continued
Coal
In 2019, global seaborne thermal coal demand was
characterised by continuation of the strong growth trend
in Pacific markets and demand decline in the Atlantic,
principally Europe. This trend was accelerated by surplus
global LNG supply, resulting in enhanced competition
from low spot gas prices in European markets. Together
with higher EU CO2 prices and increased renewables
power generation, some thermal coal supply was
displaced from the Atlantic market into the Pacific and
sub-continent.
Global 2019 seaborne thermal coal demand is estimated
to have grown some 1.5% versus 2018, with strong Pacific
demand growth of 5.9% or 47Mt, more than offsetting
an 18% or 30Mt demand decline in the smaller Atlantic
market. Seaborne thermal coal supply growth came
principally from Indonesia and Russia, with Australia
being almost flat YoY. Supply declined from Colombia
and the U.S., where prices fell below costs and from
South Africa where strong domestic demand reduced
export availability.
In 2019, Vietnamese imported thermal coal volumes
increased 95% or 15Mt YoY, India was up 5.3% or 9Mt,
while China was up 13% or 24Mt. The Asia Pacific
(excluding China) market is expected to see 29GW of
coal fired generation capacity enter service through
2020/2021, which will continue to support coal demand
growth across the region.
The various coal indices/qualities responded in distinct
ways to changing market dynamics over 2019. High
European CO2 prices and low LNG prices resulted in the
API2 coal price index declining 34% from the January
2019 high to December. While prices for high-quality
South African thermal coal declined substantially
through to mid-year, Indian demand strength in Q4 saw
API4 prices recover strongly to end 2019 only 8% below
January levels. The Newcastle globalCoal index ended
the year 33% below January levels, while prices for
Australian high ash coals declined 16% over the course
of 2019.
Global pig iron production was up 2.4% YoY, with China
and India up 5.3% and 3.6% respectively. Metallurgical
coal import countries, excluding China, reported a 2.1%
reduction in pig iron production with declines in Europe
(-4.3%), South America (-8.0%) and Japan (-4.8%) being
most significant. Reflecting such, global seaborne coking
coal demand is estimated to have declined just over 1% in
2019. The weaker coal demand saw spot HCC prices fall
during H2 2019, to end 32% below January’s price levels.
Coal % of global electricity demand
12,856
8,666
2010
15,738
16,480
23,732
9,863
10,123
2017
2018
10,408
2030
60
45
30
15
0
Coal
Global electricity generation ex Coal
Coal (%)
Source: IEA
62
Glencore Annual Report 2019
38.1%
While coal’s share
of global electricity
demand declined
in 2018, coal
demand increased
in volume terms
Seaborne thermal coal demand
86
83
82
81
2016
2017
2018
2019
Pacific
ROW
Pacific share (%)
Source: IEA
86%
The thermal coal
demand swing to
Asia continued in
2019, reflecting the
start up of new
coal-fired power
generation capacity
Oil
Most commodity and capital markets, including oil,
responded through 2019 to the U.S.-China trade tensions
and the perceived impact it may have on global growth
expectations and oil demand. Initial optimism on the
trade front, coupled with signs of tightening supply, saw
oil prices stage a strong recovery at the start of 2019 from
$50/bbl for Brent in late December 2018 to almost $75/
bbl by April. However, markets subsequently sold off as
trade tensions intensified, with Brent dropping below
$60/bbl. It was only towards the end 2019, where
renewed optimism on trade issues and OPEC+ signalling
deeper production cuts, that oil prices rose to close the
year above $65/bbl.
During the year, geopolitical tensions in the Middle East
escalated with sporadic attacks on vessels and
infrastructure, causing oil price and volatility spikes, none
more so, than the drone strikes on Saudi Arabia’s oil
producing facilities in September, which interrupted
equivalent to 5% of the world’s oil production. Brent
surged almost 20% and implied volatility jumped to over
45%, however swift action to restore production in the
following weeks, calmed markets and oil sold off again.
The oil curve structure flipped from contango into
backwardation at the start of 2019, signalling tightening
markets. Refining margins recovered from the lows
registered in late 2018. With the advent of the IMO 2020
international fuel standard for shipping, it was a year with
significant changes in refinery configurations, resulting
in large divergences of realised margins for those
refineries able to upgrade or adapt to produce lower
sulphur fuels. Towards the end the year, refining margins
weakened across most regions, owing to various factors,
including milder weather, lower demand and a surge in
freight rates.
The rally in freight rates in H2 was driven by multiple
forces. One important factor was U.S. sanctions being
imposed on two subsidiaries of China’s state-owned
Cosco Shipping in September, placing nearly 300 oil
carriers off-limits for traders. Although rates stabilised
somewhat since then, it remains a relatively tight tanker
freight market.
Average oil price – Brent ($/bbl)
72
64
55
-11%
While oil prices
staged a strong
recovery at the start
of 2019, markets
subsequently sold
off as trade tensions
intensified
Shipping rates (BIDY index)
(’000 points)
2.0
1.5
1.0
0.5
0.0
The Baltic Dirty
Tanker Index is
made up of 12 routes
taken from the
Baltic International
Tanker Routes.
Source: Bloomberg
2017
2018
2019
2018
2019
Glencore Annual Report 2019
63
Strategic reportFinancial statementsGovernanceAdditional information Our Industrial
business
We are a major producer
of commodities that support
the energy and mobility
transition, including copper,
cobalt, nickel and zinc,
while our high-quality
coal provides affordable
and reliable energy
Although most of our assets
performed as planned during
2019, our African copper
business faced operational
and cost challenges. We
are implementing targeted
strategies to achieve
consistent, cost-effective
production in the
coming years
Peter
Freyberg
Head of
Industrial
Assets
Adjusted EBITDA
(US$ million)
Adjusted EBIT
(US$ million)
13,275
11,538
8,964
6,729
5,540
1,785
2017
2018
2019
2017
2018
2019
Katanga copper
production
235kt
2018: 152kt
Delivering on its
ramp-up
Capex
$5.3bn
2018: $5.1bn
Expansion capex
$1.3bn
Projects in Africa
(copper/cobalt),
Kazakhstan (zinc)
and Canada (nickel)
Metals and minerals
mining margin
28%
2018: 38%
Short-term impact
of African Copper
cash flow challenges,
including the impact
of lower cobalt sales
Energy products
mining margin
37%
2018: 46%
Lower coal earnings,
particularly in the
Atlantic market
Equity coal production
139.5mt
Comfortably inside our
c.150mt production cap
64
Glencore Annual Report 2019
Safe working
Fatalities
17
2018: 13
TRIFR
2.86
2018: 3.18
LTIFR
0.99
2018: 1.06
Socio-economic
contribution
Community support
initiatives
$90m
Headcount
c.157,000
Employees & contractors
Own mineral resources
Reserve Life (approx. years)
Copper
22
Zinc
17
Nickel
24
Coal
14
In-house smelting/refining capability (ktpy)
Copper metal
Zinc metal
1,560
1,390
Lead metal
360
Ferrochrome
Nickel metal
2,339
139
Own sourced production in 2019
Copper (kt)
1,371
Lead (kt)
280
Cobalt (kt)
Zinc (kt)
46
1,078
Coal (mt)
139.5
Nickel (kt)
Ferrochrome (kt)
Oil (mbbl)
121
1,438
5.5
Glencore Annual Report 2019
65
Strategic reportFinancial statementsGovernanceAdditional information Our Industrial business
continued
Financial overview
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA mining margin
Metals and
minerals
Energy
products
Corporate
and other
Metals and
minerals
Energy
products
Corporate
and other
2019
2018
27,672
5,555
1,016
28%
15,067
3,854
1,274
37%
4
42,743
31,385
12,660
24
44,069
(445)
(505)
8,964
1,785
8,478
4,053
38%
5,312
3,209
46%
(515)
(533)
13,275
6,729
Highlights
Industrial Adjusted EBITDA
decreased by 32% to $8,964 million
compared to $13,275 million in 2018.
The decrease was primarily driven
by lower commodity prices, notably
various coal markets, primarily
impacted by weaker European
demand/low gas price competition
and ferrochrome and cobalt, where
these markets were in oversupply
throughout much of the year.
Further to these negative price
factors, Adjusted EBITDA/EBIT
was impacted by the operational
challenges in our African copper
portfolio, which recorded an
Adjusted EBITDA of negative $349
million, a significant drop from the
$1,323 million contribution in 2018
(57% cobalt price reduction was the
key driver; however material negative
volume and cost variances also
prevailed). Mutanda’s copper
production was 49% lower than 2018,
as it scaled down operations,
Katanga, although reporting higher
cobalt production, had limited sales
as it manages through a period of
excess uranium content and delays
in required drying capacity
commissioning, while Mopani’s
copper metal production was 64%
lower as, in June, it accelerated its
major triennial smelter shut down
(from 2020 schedule) and brought
forward various other planned
maintenance activities to address
safety related issues. Adjusted
EBITDA from Coal assets was $1,535
million lower than 2018, as lower coal
prices (Benchmarks GC Newc down
26%, API4 down 28% and API2 down
38%) compared to 2018, outweighed
the increased production
contribution from the interests in the
HVO and Hail Creek, acquired in late
H1 2018 and H2 2018, respectively.
Reflecting the above challenges,
Adjusted EBITDA mining margins
were 28% in our metals operations
(37% excluding African Copper and
Koniambo) and 37% in our energy
operations, down from 38% (41%
excluding African Copper and
Koniambo) and 46% respectively,
in 2018. See page 68.
Reported capex at $5.3 billion was
up 5% over the comparable period
reflecting the impact of the new
leasing standard ($295 million) and
incremental capex from the HVO,
Hail Creek and Astron acquisitions
($213 million). Two key ongoing
projects advanced through the year
(Kazzinc’s Zhairem and INO Nickel),
offsetting the reported decline at
Koniambo, as it ceased capitalizing
its development costs at the end
of 2018.
66
Glencore Annual Report 2019
Financial information
US$ million
Revenue◊
Copper assets
Collahuasi1
Antamina1
Other South America (Alumbrera, Lomas Bayas, Antapaccay)
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Custom metallurgical (Altonorte, Pasar, Horne, CCR)
Africa (Katanga, Mutanda, Mopani)
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, CEZ Refinery)
Other Zinc (Argentina, Bolivia, Peru)
Zinc
Nickel assets
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Australia (Murrin Murrin)
Koniambo
Nickel
Ferroalloys
Aluminium/Alumina
Metals and minerals revenue◊
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejòn1
Coal revenue (own production)
Coal other revenue (buy-in coal)
Oil E&P assets
Oil refining assets
Energy products revenue◊
Corporate and other revenue
Total Industrial Activities revenue◊
1
Represents the Group’s share of these JVs.
2019
2018
Change %
1,385
1,025
1,709
1,836
7,107
2,829
(212)
15,679
2,906
1,292
922
2,226
400
7,746
1,551
664
315
2,530
1,716
1
27,672
1,544
5,951
1,279
793
494
10,061
768
350
3,888
15,067
1,426
1,179
2,113
1,941
7,190
4,493
(142)
18,200
3,163
1,481
1,189
2,474
468
8,775
1,462
748
–
2,210
2,197
3
31,385
1,286
6,309
1,629
1,112
838
11,174
1,160
326
–
12,660
4
24
42,743
44,069
(3)
(13)
(19)
(5)
(1)
(37)
n.m.
(14)
(8)
(13)
(22)
(10)
(15)
(12)
6
(11)
n.m.
14
(22)
(67)
(12)
20
(6)
(21)
(29)
(41)
(10)
(34)
7
n.m.
19
(83)
(3)
Glencore Annual Report 2019
67
Strategic reportFinancial statementsGovernanceAdditional information Our Industrial business
continued
US$ million
Copper assets
Collahuasi1
Antamina1
Other South America
Australia
Polymet
Custom metallurgical
Copper, excluding African assets
Adjusted EBITDA mining margin2
Africa
Copper
Adjusted EBITDA mining margin2
Zinc assets
Kazzinc
Australia
European custom metallurgical
North America
Volcan
Other Zinc
Zinc
Adjusted EBITDA mining margin2
Nickel assets
Integrated Nickel Operations
Australia
Koniambo
Nickel
Adjusted EBITDA margin
Adjusted EBITDA margin excl. Koniambo
Ferroalloys
Aluminium/Alumina
Iron ore
Adjusted EBITDA◊
Adjusted EBIT◊
2019
2018 Change %
2019
2018 Change %
885
737
859
449
(7)
377
3,300
49%
(349)
2,951
29%
1,097
406
166
155
(44)
(5)
1,775
33%
657
105
(136)
626
25%
34%
246
(40)
(3)
902
923
936
424
(5)
227
3,407
48%
1,323
4,730
40%
1,160
667
196
249
(36)
81
2,317
37%
592
206
–
798
36%
36%
670
(38)
1
(2)
(20)
(8)
6
n.m.
66
(3)
603
462
264
121
(7)
227
1,670
633
656
234
92
(5)
46
1,656
n.m.
(38)
(1,279)
391
296
1,952
(5)
(39)
(15)
(38)
n.m.
n.m.
(23)
11
(49)
n.m.
(22)
(63)
n.m.
n.m.
641
6
50
(59)
(44)
(109)
485
235
81
(249)
67
116
(40)
(3)
747
387
91
138
(36)
(42)
1,285
158
157
–
315
542
(42)
1
(5)
(30)
13
32
n.m.
n.m.
1
n.m.
(80)
(14)
(98)
(45)
n.m.
n.m.
n.m.
(62)
49
(48)
n.m.
(79)
(79)
n.m.
n.m.
(75)
3
(50)
(94)
n.m.
n.m.
(58)
(100)
n.m.
(60)
n.m.
(73)
Metals and minerals Adjusted EBITDA/EBIT◊
Adjusted EBITDA mining margin2
Adjusted EBITDA mining margin excl. African Copper and
Koniambo2
5,555
28%
8,478
38%
37%
41%
(34)
1,016
4,053
Coking Australia
Thermal Australia
Thermal South Africa
Prodeco
Cerrejòn1
Coal
Adjusted EBITDA margin3
Oil E&P assets
Oil refining assets
Energy products Adjusted EBITDA/EBIT◊
Adjusted EBITDA margin3
793
2,332
324
43
132
3,624
36%
215
15
3,854
37%
673
3,206
685
208
387
5,159
46%
153
–
5,312
46%
18
(27)
(53)
(79)
(66)
(30)
41
n.m.
546
1,018
23
(180)
(56)
1,351
–
(77)
529
2,043
389
32
197
3,190
19
–
1,274
3,209
Corporate and other
Industrial activities Adjusted EBITDA/EBIT◊
(445)
(515)
8,964
13,275
n.m.
(32)
(505)
(533)
1,785
6,729
1 Represents the Group’s share of these JVs.
2 Adjusted EBITDA mining margin for Metals and Minerals is Adjusted EBITDA excluding non-mining assets as described below ($4,941 million (2018: $7,880 million))
divided by Revenue excluding non-mining assets and intergroup revenue elimination ($ 17,628 million (2018: $20,671 million) i.e. the weighted average EBITDA margin of
the mining assets. Non-mining assets are the Copper custom metallurgical assets, Zinc European custom metallurgical assets, Zinc North America (principally smelting/
processing), the Aluminium/Alumina group and Volcan (equity accounted with no relevant revenue) as noted in the table above.
3 Energy products EBITDA margin is Adjusted EBITDA for coal and Oil E&P (but excluding Oil refining) ($3,839 million (2018: $5,312 million)), divided by the sum of coal
revenue from own production and Oil E&P revenue ($10,411 million (2018: $11,500 million)).
68
Glencore Annual Report 2019
US$ million
Capital expenditure◊
Copper assets
Collahuasi1
Antamina1
Other South America
Australia
Polymet
Custom metallurgical
Africa
Copper
Zinc assets
Kazzinc
Australia
European custom metallurgical
North America
Other Zinc
Zinc
Nickel assets
Integrated Nickel Operations
Australia
Koniambo
Nickel
Ferroalloys
Aluminium/Alumina
2019
2018
Sustaining Expansion
Total
Sustaining Expansion
Total
298
228
403
203
–
234
381
1,747
209
293
106
68
104
780
164
16
39
219
141
–
323
233
424
203
9
234
858
263
201
397
233
–
204
510
2,284
1,808
25
5
21
–
9
–
477
537
236
–
–
6
–
445
293
106
74
104
242
1,022
289
–
–
289
8
–
453
16
39
508
149
–
165
279
114
100
116
774
160
22
–
182
159
–
25
7
31
7
–
–
422
492
171
–
–
11
–
182
182
1
215
398
1
–
288
208
428
240
–
204
932
2,300
336
279
114
111
116
956
342
23
215
580
160
–
Metals and minerals capital expenditure◊
2,887
1,076
3,963
2,923
1,073
3,996
Australia (thermal and coking)
Thermal South Africa
Prodeco
Cerrejòn
Coal
Oil E&P assets
Oil refining assets
358
200
229
53
840
201
121
121
29
–
–
150
–
–
479
229
229
53
990
201
121
Energy products capital expenditure◊
1,162
150
1,312
240
176
254
81
751
157
–
908
103
31
1
–
135
–
–
343
207
255
81
886
157
–
135
1,043
Corporate and other
–
74
74
–
38
38
Industrial activities capital expenditure◊
4,049
1,300
5,349
3,831
1,246
5,077
1 Represents the Group’s share of these JVs.
Glencore Annual Report 2019
69
Strategic reportFinancial statementsGovernanceAdditional information Our Industrial business
continued
Operating highlights
Copper assets
Own sourced copper production of
1,371,200 tonnes was 82,500 tonnes
(6%) lower than in 2018.
Approximately half of this (40,800
tonnes) related to the African Copper
assets, with Katanga’s ramp-up
(+82,100 tonnes) partially offsetting
Mutanda scaling down and
placement into temporary care and
maintenance and Mopani’s extensive
smelter refurbishment shutdown.
The remainder primarily comprised
relatively minor portfolio changes
and maintenance.
Own sourced cobalt production of
46,300 tonnes was 4,100 tonnes
(10%) higher than the comparable
prior period, primarily reflecting
Katanga’s ramp-up.
Collahuasi
Attributable copper production of
248,800 tonnes was in line with 2018.
Antamina
Attributable copper production of
151,400 tonnes was in line with 2018.
Attributable zinc production of
102,400 tonnes was 35,700 tonnes
(26%) lower than in 2018, reflecting
the expected progression of the
mine plan.
Other South America
The 2018 base included 20,500
tonnes of copper and 124,000
ounces of gold relating to Alumbrera
(open pit mining completed in Q3
2018) and Punitaqui (sold Q4 2018).
After adjusting for such, 2019 copper
production of 276,500 tonnes was in
line with 2018 and gold production
of 85,000 ounces was down 47,000
ounces (36%) due to expected lower
grades at Antapaccay.
Australia
Own sourced copper production of
194,600 tonnes was 15,800 tonnes
(8%) lower than in 2018, mainly
relating to weather-related
disruptions in Q1, the impact of
which has been progressively caught
up over the following quarters.
Custom metallurgical assets
Copper metal production of 432,900
tonnes was in line with 2018. Copper
anode production of 510,700 tonnes
was 31,400 tonnes (7%) higher than
in 2018, mainly reflecting Altonorte’s
plant turnaround in the base period.
Africa
Own sourced copper production of
369,900 tonnes was 40,800 tonnes
(10%) lower than in 2018, reflecting
Mutanda scaling down before
entering temporary care and
maintenance (from November) and
Mopani’s comprehensive smelter
refurbishment during H2, partially
offset by Katanga’s continued
ramp-up to 235,000 tonnes (from
152,400 tonnes).
Reflecting Mopani’s lengthy smelter
maintenance shutdown in H2 2019,
African copper production includes
10,600 tonnes of copper contained in
concentrate that will either be sold or
processed into cathode once the
smelter restarts.
Own sourced cobalt production of
42,200 tonnes was 3,800 tonnes
(10%) higher than in 2018, reflecting
Katanga’s ramp-up, partly offset by
Mutanda scaling down as it entered
care and maintenance in Q4 2019.
Zinc assets
Own sourced zinc production of
1,077,500 tonnes was in line with
2018, reflecting the effects of
stronger production (mine restarts)
in Australia and Peru, largely offset
by reduced own sourced production
at Kazzinc for safety reasons and
expected lower zinc production from
Antamina due to mine scheduling.
Kazzinc
Own sourced zinc production of
172,500 tonnes was 28,700 tonnes
(14%) lower than in 2018, mainly
reflecting slower than expected
mining at Tishinsky mine, due to
safety considerations. A mechanical
failure at the Ridder concentrator in
Q4 resulted in ore being stockpiled
in front of the concentrator, in
advance of its processing in 2020.
Own sourced lead production of
34,400 tonnes was 21,200 tonnes
(38%) lower than in 2018, reflecting
completion of one of the older
Zhairem pits. Workers and
equipment have moved to the
new Zhairem zinc mine currently
being developed.
Own sourced copper production
of 44,000 tonnes was 8,400 tonnes
(16%) lower than in 2018, mainly
due to rebricking of the Isa furnace
in H1 2019.
Own sourced gold production
of 634,000 ounces was in line
with 2018.
Australia
Zinc production of 597,600 tonnes
was 65,100 tonnes (12%) higher
than in 2018, reflecting the full-year
contribution from Lady Loretta mine
(Mount Isa), following its 2018 restart,
and improved processing rates at
McArthur River.
Lead production of 213,300 tonnes
was 37,500 tonnes (21%) higher
than in 2018, mainly relating to
Lady Loretta.
North America
Zinc production of 111,400 tonnes
was 10,300 tonnes (10%) higher
than in 2018, mainly reflecting
higher throughput at Matagami
as it accesses a wider section of
the deposit.
Copper production of 39,100 tonnes
was in line with 2018.
South America
Own sourced zinc production of
93,600 tonnes was in line with 2018,
reflecting the recent restart of the
Iscaycruz mine in Peru, offset by
challenging mining conditions at
Aguilar in Argentina.
Own sourced lead production of
32,300 tonnes was 9,600 tonnes
(23%) lower than in 2018, mainly
relating to Aguilar.
European custom
metallurgical assets
Zinc metal production of 805,700
tonnes and lead metal production
of 190,500 tonnes were in line
with 2018.
70
Glencore Annual Report 2019
Nickel assets
Own sourced nickel production of
120,600 tonnes was 3,200 tonnes
(3%) lower than in 2018, mainly
reflecting a number of maintenance
stoppages at Koniambo.
Integrated Nickel Operations (INO)
Own sourced nickel production of
60,300 tonnes was in line with 2018.
Own sourced copper production of
44,200 tonnes was 2,800 tonnes (7%)
higher; however copper production
is expected to reduce over the
medium term as the existing Sudbury
mines deplete, pending transition to
the new Sudbury projects, currently
under construction.
Murrin Murrin
Murrin’s own sourced nickel
production of 36,600 tonnes was
1,100 tonnes (3%) higher than in 2018.
Own sourced cobalt production of
3,400 tonnes was 500 tonnes (17%)
higher, reflecting strong plant
performance and higher year-over-
year grades.
Koniambo
Nickel production of 23,700 tonnes
was 4,600 tonnes (16%) lower than in
2018, mainly reflecting a number of
maintenance stoppages. These were
primarily in H1 (production of 10,200
tonnes) with H2 up 32% half on half
at 13,500 tonnes.
Ferroalloys assets
Attributable ferrochrome production
of 1,438,000 tonnes was 142,000
tonnes (9%) lower than in 2018,
mainly reflecting additional
maintenance days taken
opportunistically in Q3 2019 during
a period of high energy costs and
low selling prices.
Vanadium pentoxide production
of 20.2 million pounds was in line
with 2018.
Coal assets
Coal production of 139.5 million
tonnes was 10.1 million tonnes (8%)
higher than in 2018, mainly reflecting
the full-year effects of the
acquisitions of HVO (acquired in May
2018) and Hail Creek (August 2018).
Prodeco’s year-over-year contribution
reflected a period of additional mine
development in the base period,
while Cerrejòn’s 2019 production was
constrained by dust emissions
control requirements.
Australian coking
Production of 9.2 million tonnes was
1.7 million tonnes (23%) higher than
in 2018, mainly reflecting the full-year
contribution of Hail Creek.
Australian thermal and semi-soft
Production of 79.2 million tonnes
was 6.5 million tonnes (9%) higher
than in 2018, reflecting the full-year
contributions from HVO and
Hail Creek.
South African thermal
Production of 26.9 million tonnes
was broadly in line with 2018.
Prodeco
Production of 15.6 million tonnes was
3.9 million tonnes (33%) higher than
in 2018, reflecting additional mine
development activities carried out in
the base period.
Cerrejòn
Attributable production of 8.6 million
tonnes was 1.6 million tonnes (16%)
lower than in 2018, primarily
reflecting constraints on production
to limit dust emissions.
Oil assets
Exploration and production
Entitlement interest production of
5.5 million barrels was 0.9 million
barrels (19%) higher than in 2018,
reflecting the benefits of the drilling
campaign in Chad and first oil from
the Bolongo field in Cameroon.
Glencore Annual Report 2019
71
Strategic reportFinancial statementsGovernanceAdditional information Production from own sources – Zinc assets1
2019
2018
Change
%
Kazzinc
Zinc metal
Lead metal
Lead in concentrates
Copper metal5
Gold
Silver
Silver in concentrates
Australia (Mount Isa,
McArthur River)
Zinc in concentrates
Lead in concentrates
Silver in concentrates
North America
(Matagami, Kidd)
Zinc in concentrates
Copper in concentrates
Silver in concentrates
Other Zinc: South America
(Argentina, Bolivia, Peru)6
Zinc in concentrates
Lead metal
Lead in concentrates
Copper in concentrates
Silver metal
Silver in concentrates
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
kt
kt
kt
kt
koz
koz
koz
kt
kt
koz
kt
kt
koz
kt
kt
kt
kt
koz
koz
kt
kt
kt
koz
koz
172.5
31.6
2.8
44.0
634
4,546
92
201.2
46.9
8.7
52.4
643
6,210
303
597.6
213.3
7,193
532.5
175.8
6,362
111.4
39.1
101.1
39.0
1,654
1,893
93.6
–
32.3
2.7
–
95.2
13.9
28.0
4.5
744
6,906
6,989
975.1
280.0
85.8
634
930.0
273.3
95.9
643
20,391
22,501
(14)
(33)
(68)
(16)
(1)
(27)
(70)
12
21
13
10
–
(13)
(2)
(100)
15
(40)
(100)
(1)
5
2
(11)
(1)
(9)
Our Industrial business
continued
Production data
Production from own sources – Total1
Copper
Cobalt
Zinc
Lead
Nickel
Gold
Silver
Ferrochrome
2019
2018
1,371.2
1,453.7
46.3
42.2
1,077.5
1,068.1
280.0
120.6
848
273.3
123.8
1,003
32,018
34,879
1,438
1,580
kt
kt
kt
kt
kt
koz
koz
kt
Change
%
(6)
10
1
2
(3)
(15)
(8)
(9)
Production from own sources – Copper assets1
African Copper
(Katanga, Mutanda, Mopani)
Copper metal
Copper in concentrates
Cobalt2
Collahuasi3
Copper in concentrates
Silver in concentrates
Antamina4
Copper in concentrates
Zinc in concentrates
Silver in concentrates
kt
kt
kt
kt
koz
kt
kt
koz
Other South America (Alumbrera,
Lomas Bayas, Antapaccay)
Copper metal
Copper in concentrates
kt
kt
Gold in concentrates and in doré
koz
Silver in concentrates and in doré koz
Australia (Mount Isa, Ernest Henry,
Townsville, Cobar)
Copper metal
Copper in concentrates
Gold
Silver
Total Copper department
Copper
Cobalt
Zinc
Gold
Silver
kt
kt
koz
koz
kt
kt
kt
koz
koz
2019
2018
Change
%
359.3
410.7
(13)
10.6
42.2
–
38.4
n.m.
10
248.8
2,878
246.0
3,244
151.4
102.4
5,051
150.6
138.1
5,550
78.9
197.6
85
1,576
151.1
43.5
100
1.615
72.8
225.9
256
1,722
151.5
58.9
74
1,399
1,241.2
1,316.4
42.2
102.4
185
38.4
138.1
330
11,120
11,915
1
(11)
1
(26)
(9)
8
(13)
(67)
(8)
–
(26)
35
15
(6)
10
(26)
(44)
(7)
72
Glencore Annual Report 2019
Production from own sources – Nickel assets1
Coal assets1
Integrated Nickel Operations (INO)
(Sudbury, Raglan, Nikkelverk)
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
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
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
kt
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
2019
2018
Change
%
59.8
0.5
15.8
28.4
0.7
29
507
51
112
4
36.6
3.4
59.5
0.5
14.4
27.0
0.9
29
464
58
119
4
35.5
2.9
1
–
10
5
(22)
–
9
(12)
(6)
–
3
17
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
Cerrejòn8
Total Coal department
Oil assets
23.7
28.3
(16)
120.6
44.2
4.1
29
507
51
112
4
123.8
41.4
3.8
29
464
58
119
4
(3)
7
8
–
9
(12)
(6)
–
Glencore entitlement
interest basis
Equatorial Guinea
Chad
Cameroon
Total Oil department
Gross basis
Equatorial Guinea
Chad
Cameroon
Total Oil department
2019
2018
9.2
6.4
7.5
3.9
64.2
59.4
Change
%
23
64
8
8.6
9.4
(9)
13.0
17.3
(25)
13.9
15.6
8.6
10.0
11.7
10.2
139.5
129.4
39
33
(16)
8
2019
2018
Change
%
1,895
3,371
252
1,827
2,799
4
20
–
n.m.
5,518
4,626
19
9,236
4,608
730
8,818
3,827
5
20
–
n.m.
14,574
12,645
15
mt
mt
mt
mt
mt
mt
mt
mt
mt
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
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 Cobalt contained in concentrates and hydroxides.
3 The Group’s pro-rata share of Collahuasi production (44%).
4 The Group’s pro-rata share of Antamina production (33.75%).
5 Copper metal includes copper contained in copper concentrates and blister.
6 South American production excludes Volcan Companie Minera.
7 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
8 The Group’s pro-rata share of Cerrejòn production (33.3%).
Production from own sources – Ferroalloys assets1
Ferrochrome7
Vanadium Pentoxide
kt
mlb
2019
1,438
20.2
2018
1,580
20.2
Change
%
(9)
–
Total production – Custom metallurgical assets1
Copper (Altonorte, Pasar,
Horne, CCR)
Copper metal
Copper anode
Zinc (Portovesme, San Juan de
Nieva, Nordenham, Northfleet)
Zinc metal
Lead metal
2019
2018
Change
%
kt
kt
kt
kt
432.9
510.7
438.8
479.3
805.7
190.5
799.6
186.3
(1)
7
1
2
Glencore Annual Report 2019
73
Strategic reportFinancial statementsGovernanceAdditional information
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. Our principal risks and uncertainties
are highly dynamic and our assessment and
our responses to them are critical to our future
business and prospects
Risk management is one of the core
responsibilities of the Board and
its Committees, and it is central
to the decision-making process.
The Board’s fundamental duties as
to management are:
• making a robust assessment of
emerging and principal risks
• monitoring risk management
and internal controls
• promoting a risk aware culture
The Board also assesses and
approves our overall risk appetite,
monitors our risk exposure and sets
the Group-wide financial limits,
which are reviewed on an ongoing
basis. This process is supported
by the Audit, HSEC and ECC
Committees, whose roles include
evaluating and monitoring the risks
inherent in their respective areas as
described on pages 101–108.
Established in 2019, the ECC is
responsible in particular for
monitoring that the Group’s risk
culture is appropriately promoted,
lived and linked to the Group’s
purpose, values and strategy.
In accordance with UK Financial
Reporting Council guidance, we
define a principal risk as a risk or
combination of risks that could
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.
74
Glencore Annual Report 2019
We define an emerging risk as a risk
that has not yet occurred but is at an
early stage of becoming known and/
or coming into being and expected
to grow greatly in significance in
the longer term. The Board seeks
to identify and assess emerging
risks using the regular reports it
receives from Management and its
Committees and by staying abreast
of the issues and concerns arising in
the industry. This identification and
assessment follows the same
processes as for principal risks.
Our risk management framework
sets out to identify and manage risk
in a way that is supportive of our
strategic objectives, while protecting
our future financial security and
flexibility. Our approach towards risk
management is determined by our
ongoing understanding of the risks
that we are exposed to, our risk
appetite and how these risks change
over time. 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 opposite.
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,
including ensuring that the
quantum of bonds maturing in
any one year does not exceed
some $3 billion
• Our 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) – see
page 104
The assessment of our principal risks,
according to exposure and impact,
is detailed on the following pages.
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 page 76.
Evolution in principal risks
We believe that our principal risks,
our assessment of their possible
negative effect and the scale of
impact have remained the same,
except for climate change related
risks. We believe that the probability
and severity of impact for this
category of risk has increased,
including the ongoing pressure for
divestment from, and or reducing
support for, coal and the broader
hydrocarbon industry.
1
9
4
3
8
10
2
3
4
5
2019 developments and overview
of principal risks and uncertainties
5
11
2
6
7
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
Key
External risks
1
Supply, demand and prices
of commodities
Currency exchange rates
Geopolitical, permits and licences
to operate
Laws and enforcement
Liquidity
Business risks
6
Counterparty credit
and performance
Operating
Cyber
7
8
Sustainability risks
9
10
11
Health, Safety, Environment
Climate change
Community relations and
human rights
Risk impact
Moderate
Major
Severe
Indicates change in 2019
Unlikely
Possible
Likely
Almost certain
Probability
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.
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
2020. 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 forecast 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
• An increase in costs associated
with open investigations by
regulatory and enforcement
authorities and adverse
geopolitical developments
• 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.
Glencore Annual Report 2019
75
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
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, sustainability 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 251.
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.
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.
• 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
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: glencore.com/who-we-are/
governance
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
and would not be subject to the
Group’s operational control, these
interests should be assumed to be
subject to these risks .“Business”
refers to these and any business of
the Group
• 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 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
2019 financial statements
• A reference to the sustainability
report is our 2019 sustainability report
to be published in April 2020
76
Glencore Annual Report 2019
Strategic priorities
Integration of sustainability
throughout our business
Maintain a robust and flexible
balance sheet
Focus on cost control and
operational efficiencies
External risks
1
Supply, demand and prices of commodities
Risk movement in 2019: 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 usually hedged, when possible. Additionally, we seek to ensure this risk is minimised through scale
of operations and diversity of product.
Risk description and potential impact
The revenue and earnings of substantial parts of our industrial asset 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.
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 and demand in end markets for products in which the commodities are used. Supply and
demand volumes can also be impacted by 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.
Future demand for certain commodities might decline (e.g. fossil fuels), whereas others might increase (such as copper, cobalt,
and nickel for their use in electric vehicles and batteries), taking into consideration the transition to a low carbon economy.
Furthermore, changes in expected supply and demand conditions impact the expected future prices (and thus the price curve)
of each commodity and significant falls in the prices of certain commodities (e.g. copper, coal and cobalt) can have a severe drag
on our financial performance, impede shareholder returns and could lead to concerns by external stakeholders as to the
strength of the Group’s balance sheet.
Government policy decisions can be very important, e.g. in reducing the demand for coal or increasing its pricing (via carbon
taxes) – see Climate change risk on page 87. This risk is more prevalent in certain commodities, such as steel, coal and oil. In
particular, many analysts believe that demand for coal will reduce sooner than previously expected due to political pressures,
cost reductions for alternatives (renewables and LNG) and possible carbon taxes.
The dependence of the Group (especially our industrial business) on commodity prices, supply and demand of commodities,
make this the Group’s foremost risk.
Developments
Divergence has been observed across different commodities over the past 12 months, with increasing levels of volatility seen,
driven by global shifts in the supply-demand balance. Given the volatility of commodity prices over the past year and historically,
we continue to focus on the partially controllable element of the margin equation – production and costs.
The recent emergence of the novel coronavirus could lead to substantial disruptions in China which could impact the demand
for the commodities supplied by the Group in this and other markets. Although, the risk of a large scale spreading of the virus
remains uncertain in 2020, near term weakness is a reality, and it could have additional longer-term material adverse effects on
commodity markets.
New or improved energy production or technologies can also reduce the demand for some commodities such as coal. Major
decisions by governments can also lead to lower growth of some countries or regions, such as U.S./China trade decisions and
Brexit. Any adverse economic developments, particularly impacting China and fast growing developing countries, could lead
to reductions in demand for, and consequently price reductions of, commodities.
See the Chief Executive Officer’s review on page 2, our market and emerging drivers on page 8 and the financial review on
page 46.
Mitigating factors
We continue to maintain focus on cost discipline and achieving greater operational efficiency.
We maintain both a diverse portfolio of commodities, geographies, currencies, assets and liabilities and a global portfolio of
customers and contracts.
We prepare for anticipated shifts in commodity demand, for example by putting a special focus on the parts of the business
that will potentially grow with increases in usage of electric vehicles and battery production, and by closely monitoring fossil fuel
(particularly thermal coal) demands. We can also reduce the production of any commodity within our portfolio in response to
changing market conditions.
Glencore Annual Report 2019
77
Strategic reportFinancial statementsGovernanceAdditional information
Principal risks and uncertainties
continued
External risks continued
2
Currency exchange rates
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Low. Where possible foreign exchange (FX) exposure to non-operating FX risks is hedged. FX risk inherent in the operating costs
of industrial activities is assumed to be naturally hedged through movements in commodity prices.
Risk description and potential impact
FX changes are usual but are often difficult to predict.
Producer country currencies tend to increase in correlation with relevant higher commodity prices. Similarly, decreases in
commodity prices are generally associated with increases in the US dollar relative to local producer currencies.
The vast majority of our transactions are denominated in US dollars, while operating costs are spread across many different
countries, the currencies of which fluctuate against the US dollar. A depreciation in the value of the US dollar against one or more
of these currencies will result in an increase in the cost base of the relevant operations in US 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 56.
Developments
During 2019, relevant FX movements reflected, in general, US dollar appreciation. Among our most important producer
currencies, against the US dollar, the Australian dollar depreciated by 7% (average 2019 versus average 2018), the South African
rand by 9%, the Kazakhstan tenge by 11% and the Canadian dollar by 2%.
Near term confidence in stability of global demand (and thus indirectly FX rates for relevant producer countries) hinges on many
factors, particularly those that relate to the prospects of global economic growth, such as the U.S./China trade tensions, political/
economic stability in the Middle East and the impact of the coronavirus disruption.
Mitigating factors
The inverse FX correlation usually provides a partial natural FX hedge for the industrial business. In respect of commodity
purchase and sale transactions denominated in currencies other than US 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.
78
Glencore Annual Report 2019
External risks continued
3
Geopolitical, permits and licences to operate
Risk movement in 2019: Stable
Link to strategic priorities
Risk appetite
High. We operate in countries with less developed political and regulatory regimes. To be considered a truly diversified
commodities group, operations in these jurisdictions are required.
Risk description and potential impact
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 or nationalisation. 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. Additionally, governments have sought additional sources of
revenue by increasing rates of taxation, royalties or resource rent taxes or may increase sustainability obligations.
The terms attaching to any permit or licence to operate may be onerous and obtaining these and other approvals, which may be
revoked, can be particularly difficult. Furthermore, in certain countries title to land and rights and permits in respect of resources
are not always clear or may be challenged.
Adverse actions by governments and others can result in operational/project delays or loss of permits or licences to operate.
Policies or laws in the countries in which we do business may change in a manner that may negatively affect the Group.
The suspension or loss of our permits or licences to operate could have a material adverse effect on the Group and could also
preclude Glencore from participating in bids and tenders for future business and projects, therefore affecting the Group’s
long-term viability.
Our licences to operate through mining rights are dependent on a number of factors, including compliance with regulations.
It also depends on constructive relationships with a wide and diverse range of stakeholders.
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 Operating
risks concerning workforce disputes.
The New DRC Mining Code came into effect in 2018, introducing different measures and requirements that, depending how
they are enforced more restrictive procurement requirements may have a significant impact on the Group’s investments in the
DRC and their value.
Developments
Resource nationalism continues to be a challenging issue in many countries.
Ongoing scrutiny by governments and tax authorities has increased potential tax exposures for the Group, with some tax
authorities taking a tougher approach to engaging with the Group, which has in some cases led to litigation.
Mitigating factors
See map on pages 4–5 which sets out our global operational footprint.
The Group’s industrial assets are diversified across various countries. The Group also continues to actively engage with
governmental authorities in light of upcoming changes and developments in legislation and enforcement policies.
We endeavour to design and execute our projects according to high legal, ethical, social, and human rights standards, and to
ensure that our presence in host countries leaves a positive lasting legacy (see sustainability risks later in this section). This
commitment is essential to effectively manage these risks and to maintain our permits and licences to operate.
The Group has an active engagement strategy with the governments, regulators and other stakeholders within the countries in
which it operates or intends to operate. Through strong relationships with stakeholders we endeavour to secure and maintain
our licences to operate.
In 2019, we also published our Payments to Governments report. This detailed total government contributions in 2018 of over
$5.7 billion. It also set out details of payments on a project by project basis. We also continue to be an active member of the
Extractive Industries Transparency Initiative (EITI).
Glencore Annual Report 2019
79
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
External risks continued
4
Laws and enforcement
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Medium. The Group maintains programmes which seek to ensure that we comply with the laws and external requirements
applicable to our operations and products, and has invested significant resources in enhancing these compliance programmes
in recent years. This investment reflects the fact that the Group has a low risk appetite when considering entering into
transactions or business activities that present compliance risk. Nevertheless, some of our existing industrial and marketing
activities are located in countries that are categorised as developing or as having complex political or social climates, and/or
where corruption is generally understood to exist, and therefore there will always be residual risk in relation to our compliance
with laws and external requirements.
Risk description and potential impact
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. The legal system and dispute resolution mechanisms in some countries
in which we operate may be uncertain, meaning that we may be unable to enforce our understanding of our rights and
obligations under these laws.
The costs associated with compliance with these laws and regulations, including the costs of 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 and/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 particularly
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, corrupt or other unlawful transactions difficult to detect.
In addition, some of our industrial activities are located in countries where corruption is more commonly seen; and some of our
counterparties have in the past, and may in the future, become the targets of economic sanctions. 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.
Governmental and other authorities have commenced, and may in the future commence, investigations against the Group
(including those listed under “Developments”) in relation to alleged non-compliance with these laws, and/or may bring
proceedings against the Group in relation to alleged non-compliance. The cost of cooperating with investigations and/or
defending proceedings can be substantial. Investigations or proceedings could lead to reputational damage, the imposition of
material fines, penalties, redress or other restitution requirements, or other civil or criminal sanctions on the Group (and/or on
individual employees of the Group), the curtailment or cessation of operations, orders to pay compensation, orders to remedy
the effects of violations and/or orders to take preventative steps against possible future violations. The impact of any monetary
fines, penalties, redress or other restitution requirements, and the reputational damage that could be associated with them
as a result of proceedings that are decided adversely to the Group, could be material.
In addition, the Group may be the subject of legal claims brought by private parties in connection with alleged non-compliance
with these laws, including class action suits in connection with governmental and other investigations and proceedings, and
lawsuits based upon damage resulting from operations. Any successful claims brought against the Group could result in
material damages being awarded against the Group, the cessation of operations, compensation and remedial and/or
preventative orders.
80
Glencore Annual Report 2019
External risks continued
Developments
During the year, the Group has become subject to further investigations by certain authorities:
1. In April 2019, the Group was informed that the United States Commodity Futures Trading Commission (CFTC) had begun
investigating whether Glencore and its subsidiaries may have violated certain provisions of the Commodity Exchange Act
and/or CFTC Regulations including through corrupt practices in connection with commodities trading
2. In December 2019, the Group was notified that the United Kingdom Serious Fraud Office had opened an investigation into
suspicions of bribery in the conduct of business of the Group
In addition to the investigations commenced in 2019, the Group remains subject to investigation by other authorities, including
the following:
a. The United States Department of Justice is investigating the Group with respect to compliance with the Foreign Corrupt
Practices Act and United States money laundering statutes related to the Group’s business in certain overseas jurisdictions,
from 2007
b. The Brazilian authorities are investigating the Group in relation to “Operation car wash”, which relates to bribery allegations
concerning Petrobras
It is also possible that other authorities may open investigations into the Group and the final scope and outcome of the
investigations listed above is not possible to predict and estimate.
The Group is cooperating with each of the authorities listed above. The Investigations Committee of the Board manages the
Group’s responses to these investigations.
The Group is named in a securities class action suit in the United States District Court of New Jersey in connection with the
above investigations and various other class action and securities laws suits have been threatened against the Group.
Mitigating factors
We seek to ensure compliance through our commitment to complying with or exceeding the laws and regulations 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 seek to mitigate the risk of breaching applicable laws and external requirements through our risk management framework
which is described on page 101.
We have implemented a Group compliance programme that includes a range of policies, standards, procedures, guidelines,
training and awareness, monitoring and investigations.
We have increased in recent years our focus on, and resources dedicated to, the Group compliance programme, including
through increasing the number of dedicated compliance professionals, enhancing our compliance policies and procedures and
controls and strengthening the Group’s Raising Concerns programme and investigations function.
However, there can be no assurance that such policies, standards, procedures and controls will adequately protect the Group
against fraud, corruption, sanctions breaches or other unlawful activities.
The Board has established an Ethics, Compliance and Culture Committee, which focuses on monitoring ethics and compliance,
and seeking to ensure that business practices are aligned with the Group’s culture, see page 105.
Glencore Annual Report 2019
81
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
External risks continued
5
Liquidity
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Low. It is the Group’s policy to operate a BBB rating or above balance sheet and to ensure that a minimum level of cash and/or
committed funding is available at any given time.
Risk description and potential impact
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.
Our failure to access funds (liquidity) would severely limit our ability to engage in desired activities.
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.
Developments
The Group’s Net debt has increased from $14.7 billion at 31 December 2018 to $17.6 billion at 31 December 2019, including the
c.$1.3 billion net impact of the new IFRS leasing standard.
Our net funding at 31 December 2019 was $34.4 billion (31 December 2018: $32.1 billion). The Group’s business model relies on
ready access to substantial borrowings at reasonable cost.
We remain cognisant that access to credit is vital and that market conditions could deteriorate rapidly.
Note 27 details the fair value of our financial assets and liabilities.
Note 26 details our financial and capital risk management including liquidity risk.
Mitigating factors
Diversification of our funding sources (bank borrowings, bonds and trade finance, further diversified by currency, interest rate
and maturity).
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 Baa1 (positive outlook) from Moody’s and BBB+ (stable 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 of this, Glencore targets a maximum 2x Net debt/Adjusted
EBITDA ratio through the cycle, augmented by an upper Net debt cap of ~$16 billion, excluding marketing related lease liabilities
(c.$0.6 billion as at 31 December 2019). This financial policy facilitates access to funds, even in periods of market volatility. The
major contributor to the increase in Net debt in 2019, to a level over the $16 billion target cap, was the adoption of the new lease
accounting standard on 1 January 2019, which resulted in approximately $1.3 billion of lease liabilities being recognised as at 31
December 2019, which previously would have been accounted for as operating leases. The resulting net debt balance will be
subject to targeted management to reduce to levels back within the target cap.
The Financial Review on page 46 sets out the Group’s Net Funding and Net Debt in 2019. However, it should be noted that the
credit ratings agencies make certain adjustments, including a discount to the value of our Readily Marketable Inventory, such
that their calculated net debt is higher.
We have, since 2016, reduced our bond portfolio significantly, although in a given year (including in 2019) we may issue more
than we repay, depending on cost of funding. We have optimised our bond debt maturity profile to no more than c. $3 billion of
bonds maturing per annum.
82
Glencore Annual Report 2019
Business risks
6 Counterparty credit and performance
Risk movement in 2019: Stable
Link to strategic priorities
Risk appetite
Medium. Where desirable and possible, credit exposure is covered through credit mitigation products.
Risk description and potential impact
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 may find themselves unable to honour their contractual obligations due to financial distress
or other reasons
Open account risk is taken but this is generally guided by the Group-wide Credit Risk Policy for higher levels of credit risk
exposure, with an established threshold for referral of credit decisions by department heads to CFO/CEO, relating to unsecured
amounts in excess of $75 million with BBB or lower rated counterparts, which occurs from time to time, in relation to various key
strategic relationships.
Developments
The Group is alert to counterparty performance risk, especially when prepayments have been entered into and the price of the
relevant commodity has fallen.
Mitigating factors
We seek to diversify our counterparties.
We try to ensure adherence to open account limits.
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 with counterparts.
We monitor the credit quality of our physical and hedge counterparties and seek to reduce the risk of customer default or
non-performance by requiring credit support from creditworthy financial institutions.
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 26 details our financial and capital risk management approach.
7
Operating
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Low. It is the Company’s strategic objective to focus on its people and to conduct safe, reliable and efficient operations.
Risk description and potential impact
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.
The maintenance of positive employee and union relations and engagement, 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 employees may be exposed
to other hazardous conditions.
Glencore Annual Report 2019
83
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
Business risks continued
Risk description and potential impact continued
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.
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
personal injury or death, third party damage or loss or require greater infrastructure spending. Also, the realisation of these risks
could require significant 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.
Severe operating or market difficulties may result in impairments, details of which are recorded in note 6.
Developments
This year we continued to see material examples of operating challenges, particularly at our identified transition assets.
Equipment rebuilds and maintenance were required at Katanga (cobalt dryers and electrowinning) and Mopani (smelter
refurbishment) in order to support their higher production ramp-up profiles as the benefits of our multi-year investments
in both projects are expected to flow through in due course.
At the other end of the cycle, Mutanda was placed on temporary care and maintenance to preserve its copper and cobalt
resources while a long-term processing solution for its copper sulphides is developed. An orderly ramp-down was conducted.
Furthermore, following an extensive review, it was determined to permanently close the 53-year-old Brunswick lead smelter,
which had been “stranded” following closure of the Brunswick mine in 2013.
Both Colombian coal operations were under margin pressure this year due to substantially lower API2 coal prices (a proxy for the
European market), but also increased risk around obtaining certain additional mining/environmental licences and related
approvals. This resulted in downward revision to future production and revenue estimates in our life of mine models.
Cost control and reduction remains a significant area of management focus, noting that in the context of mineral resources,
absolute costs will tend to increase over time as incremental resources are likely further from the processing plant and/or
deeper, and dilution factors may be higher. A number of operations have adopted structured programmes to analyse their
costs, identify marginal savings and implement these. Maintenance and, where possible, reduction of unit costs is regularly
reviewed by management.
Infrastructure availability remains a key risk, though this has been mitigated by certain long-term measures taken. Katanga’s
metallurgical plant received sufficient continuous high-voltage power to deliver on its ramp-up on schedule, though we are not
complacent and continue to monitor the situation.
This year, we have launched several engagement campaigns with employees to receive direct feedback on the Group’s culture
and practices. These campaigns will continue to be rolled out to different operations in 2020.
Mitigating factors
Development and operating risks and hazards are managed through our continuous project 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 our production results quarterly and our assessment of reserves and resources based on available drilling and other
data sources annually. Conversion of resources to reserves and, eventually, reserves to production is an ongoing process that
takes into account technical and operational factors, economics of the particular commodities concerned and the impact on
the communities in which we operate.
The creation of a new role – Head of Industrial Assets – one of the objectives of which, is to ensure an efficient and consistent
approach to managing Industrial Assets.
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.
One of the key factors in our success is a good and trustworthy relationship with our people and developing a direct
engagement with them. 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: glencore.com/careers/our-culture and in the Our people
section on page 30.
84
Glencore Annual Report 2019
Business risks continued
8
Cyber
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Low. Where possible, cyber exposure risks are mitigated through layered cyber security, proactive monitoring and routine
penetration testing to confirm security of systems.
Risk description and potential impact
Cyber risks for firms have increased significantly in recent years owing in part to the proliferation of new digital technologies,
increasing degree of connectivity and a material increase in monetisation of cybercrime.
A cybersecurity breach, incident or failure of Glencore’s IT systems could disrupt our businesses, put employees at risk, result
in the disclosure of confidential information, damage our reputation and create significant financial and legal exposure for
the Group.
Our activities depend on technology for industrial production, efficient operations, environmental management, health and
safety, communications, transaction processing and risk management. We recognise that the increasing convergence of IT and
Operational Technology (OT) networks 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.
Although Glencore invests heavily to monitor, maintain and regularly upgrade its systems, processes and networks, absolute
security is not possible.
Developments
Our IT security monitoring platforms frequently detect attempts to breach our networks and systems. During 2019, none of
these events resulted in a material breach of our IT environment nor resulted in a material business impact.
Whilst not a new risk, the security of long interconnected commodity supply chains is an area of increasing concern that we
monitor closely to reduce the impact on the Group.
We believe the emergence of machine learning and artificial intelligence will increase the volume and sophistication of fraud
attempts. The rise of “Deepfake” technology using machine learning will make it easier to manipulate audio content that could
be used in phishing or fraud attacks by impersonating senior executives.
Mitigating factors
We have implemented a training and awareness programme, which is designed to increase awareness of cyber risk and ensure
that employees take the appropriate care.
We have invested in global IT security platforms in order to proactively monitor and manage our cyber risks. We conduct routine
third party penetration tests to independently confirm the security of our IT systems and we seek to enhance monitoring of our
Operational Technology (OT) platforms.
We publish security standards and educate our employees in order to raise awareness of cybersecurity threats.
We have started a programme to evaluate the cybersecurity posture of third parties that hold materially sensitive information
about Glencore.
Our designated IT Security Council sets the global cybersecurity strategy, conducts regular risk assessments and designs
cybersecurity solutions that seek to defend against emerging malware, virus, vulnerabilities and other cyber threats.
Our Cyber Defence Centre is responsible for day-to-day monitoring of cyber vulnerabilities across the world and driving
remediation of threats.
We have an incident response team that is responsible for coordinating the response in the event of a major cyber incident.
Glencore Annual Report 2019
85
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
Sustainability risks
9
Health, safety, environment
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Medium. We strive to comply with our own health, safety and environmental policies and relevant external laws
and requirements.
Risk description and potential impact
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 a substantial financial cost.
The success of our business is dependent on a safe and healthy workforce. Managing risks to the safety and health of our people
is essential for their long-term wellbeing. It also helps us to maintain our productivity and reduce the likelihood of workplace
compensation claims.
A number of our assets are in regions with poor approaches towards personal safety, little or no access to health facilities, and
poor working conditions, and organisational cultures.
Our operations around the world can have direct and indirect impacts on the environment. Our ability to manage and mitigate
these may impact maintenance of our operating licences as well as affecting future projects and acquisitions.
Our operations are often located close to communities with limited healthcare. Local health services might be in the early
stages of development, or local authorities may not have the resources to cope with the scale of need.
Our diversity, in terms of geographical locations, working conditions, organisational cultures and workforce, means that we need
to take a local approach to transforming attitudes towards catastrophic hazard management, including safety and health
practices as well as resolving environmental challenges.
Environmental, safety and health regulations 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. These include,
those arising from (1) interruptions in production, litigation and imposition of penalties and sanctions and (2) having licences and
permits withdrawn or suspended while being forced to undertake extensive remedial clean-up action or to pay for government-
ordered remedial clean-up actions.
Liability may also arise from the actions of any previous or subsequent owners or operators of the property, by any past or
present owners of adjacent properties, or by third parties.
Developments
We remain focused on the significant risks facing our industry arising from operational catastrophes such as the examples of
mining dam collapses in Brazil in the last five years. During 2019, the HSEC Committee continued to sponsor and monitor the
Group’s sustainability risks assurance process. Its focus continues to be on the Group’s catastrophic hazards.
We continued to take a flexible local approach to transforming our workforces’ safety and health attitudes and culture. Although
we seek to improve our policies and their implementation over time, we continue to experience shortcomings, which result in
health and safety and environmental issues.
We regret that we recorded 17 fatalities at our operations in 2019 (2018: 13). There is full commitment from senior management
and the Board to improve our performance.
During the year, no major or catastrophic environmental (category 4-5 and above) incidents occurred.
86
Glencore Annual Report 2019
Sustainability risks continued
Mitigating factors
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.
The creation of a new role – Head of Industrial Assets together with supporting central team – one of the objectives of which, is
to ensure an efficient and consistent approach to managing Industrial Assets. Considerable ongoing investment continues in
the Group’s SafeWork health and safety programme. Our commitment to complying with or exceeding the health, safety and
environmental laws, regulations and best practice guidelines applicable to our operations and products through our
sustainability framework.
We remain focused on the significant risks facing our industry arising from operational catastrophes. For example, the
considerable verification work undertaken and enhanced monitoring of tailings storage facilities is assisting in greater visibility
and control of these risks, and we continue to undertake work to improve the safety and stability of these facilities.
We monitor catastrophic risks, in particular, across our portfolio and operate emergency response programmes. We are working
towards creating a workplace without fatalities, injuries or occupational diseases through establishing a positive safety culture.
We aim to minimise any potential water-related impacts as it is a vital resource to our operations and the communities in which
we operate.
We recognise the contribution a healthy community makes towards the robustness of our production processes. Community
members are often our employees, contractors, procurement partners and service providers. We work with local authorities,
local community representatives and other partners, such as NGOs, to help to overcome major public health issues in the
regions where we work, such as HIV/AIDS, malaria and tuberculosis. See also the Sustainability review on page 34 and the HSEC
Committee report on page 106. Further details will also be published in our 2019 sustainability report.
10
Climate change
Link to strategic priorities
Risk movement in 2019: Increase
Risk appetite
High. Our business involves producing and consuming fossil fuels along with processing minerals, all of which inevitably entails
emitting a level of greenhouse gases.
Risk description and potential impact
Climate change is a material issue that can affect our business. As a significant producer, marketer and consumer of energy
products, energy is a key output, input, cost and revenue driver for our business, and a material source of our greenhouse
gas emissions.
A number of governments have already introduced, or are contemplating the introduction of regulatory responses to
greenhouse gas emissions to support the achievement of the goals of the Paris Agreement and the transition to a low-carbon
economy. This includes countries where we have assets such as Australia, Canada, Chile and South Africa, as well as our
customer markets such as China, India and Europe.
A transition to a low-carbon economy and its associated public policy and regulatory developments may lead to:
• the imposition of new regulations, and climate change related policies adverse to our interests in fossil fuels by
actual or potential investors, customers and banks, potentially impacting Glencore’s reputation, access to capital
and financial performance
• increased costs for energy and for other resources, which may impact the productivity of our assets and associated
costs the imposition of levies related to greenhouse gas emissions
• increased costs for monitoring and reporting related to our carbon footprint
• reduced demand for our fossil fuel products
• impacts on the development or maintenance of our assets due to restrictions in operating permits, licences or
similar authorisations
• closing of coal assets and consequent loss of investment
Climate change may increase physical risks to our assets and related infrastructure, largely driven from extreme weather events
and water related risks such as flooding or water scarcity.
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.
There has been a significant increase in litigation (including class action), in which climate change and its impacts are a
contributing or key consideration, including administrative law cases, tortious cases and claims brought by investors. In
particular, a number of lawsuits have been brought against fossil fuel companies in various jurisdictions seeking damages
related to climate change.
Glencore Annual Report 2019
87
Strategic reportFinancial statementsGovernanceAdditional information Principal risks and uncertainties
continued
Sustainability risks continued
Developments
In 2019, the Group wrote down the value of its Colombian coal assets by c.$1.0 billion (see note 6 and 10).
Many developed countries are pledging to stop using fossil fuels (specifically coal) in power generation. The European coal
market has seen reduced demand affecting our Colombian coal production in particular, also impacted by the low competing
gas prices, which resulted in impairments in the year. In December 2018, global investors collectively representing $11.5tn have
set out their requirements to investee power companies to set out transition plans consistent with the goal of the Paris
Agreement. They also expect explicit time lines and commitments for the rapid elimination of coal use by utilities in EU and
OECD countries by 2030.
This is particularly relevant for us as a large producer of seaborne thermal coal and a significant marketer of fossil fuels.
As a result of these factors, some market participants and analysts have a more bearish view (some strongly so) in relation to
coal and oil. Some investors may not invest in our shares or divest their holdings due to our significant operations in fossil fuels.
To date, the Norwegian sovereign fund is the only previous large investor that can no longer invest in Glencore shares due to the
absolute size of our thermal coal production levels, rather than coal’s relative contribution. However, a number of other investors
may make various commitments in the future, which would cause them to reduce or divest their holdings in Glencore securities.
Mitigating factors
Through our focused climate change programme, we strive to ensure emissions and climate change issues are identified,
understood and monitored in order to meet international best practice standards, ensure regulatory compliance and meet
the commitments we have made in support of the goals of the Paris Agreement.
We disclose our energy and greenhouse gas emissions footprint, including our annual Scope 3 emissions. This supports our
identification, understanding and monitoring of emissions, the setting of targets and reporting of projections.
We seek to manage our coal business tightly around cash generation, including ensuring that ongoing/further investment has
shorter cost pay-backs so as to mitigate “stranded-assets” risk.
Climate change also creates opportunities for our business. We are one of the major producers of key metals (including copper,
cobalt and 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.
To understand better and plan for the effects of climate change on our business, we have a framework for identifying,
understanding, quantifying and, ultimately, managing climate-related challenges and opportunities facing our portfolio:
• Government policy: we take an active and constructive role in public policy development of carbon and energy issues and
seek to ensure that there is a balanced debate with regard to the ongoing use of fossil fuels
• Lobbying activities: we acknowledge IIGCC Investor Expectations on Corporate Climate Lobbying and recognise the
importance of ensuring our membership in relevant trade associations does not undermine our support for the Paris
Agreement and the Paris Goals
• Energy costs: projected price changes within our operating regions may affect our assets’ operating cost sensitivities.
We review the potential energy cost impacts on our operating costs
• Physical impacts: changes in weather patterns: floods; droughts; and storm frequency as well as storm surge have the
potential to impact on ports and critical infrastructure and on local communities. We review risk registers and conduct risk
assessments at our assets for projected impacts
• Stakeholder perceptions: negative perception may result in impacts to permit approvals, divestiture or cost of finance and
affect our operating policy environments. We consider policy and financial consequences for our business and operations
• Market impacts: potential impacts on existing commodity markets through new or increased opportunities for our products
from emerging technologies and policy changes. We determine how significant the potential impacts are (both positive and
negative) and act accordingly
Last year, following engagement with investor signatories of the Climate Action 100+ initiative, we furthered our commitment to
a low-carbon economy, amongst others by limiting our coal production broadly to approximately 150 million tonnes. In addition,
we undertook to ensure that our material capital expenditure and investments align with the Paris Goals, and to report publicly
on how this is achieved. At present, we project a c. 30% reduction in Scope 3 emissions by 2035. Please refer to pages 16-23 for
further details.
Our internal, cross-function and multi-commodity working group, led by our Chairman, co-ordinates our understanding and
planning for the effects of climate change on our business, as well as the steps we have put in place to meet our Group-wide
carbon emission intensity reduction target of 5% on 2016 levels by 2020. We are comfortably on track to exceed our target.
We are continuing to invest in a range of emission reduction projects.
We participate in a wide range of public policy discussions on carbon and energy issues and seek to ensure that there is
a balanced debate with regard to the ongoing use of fossil fuels. We review our membership of trade associations to ensure
that these do not undermine our support for the goals of the Paris Agreement.
Further information is available at: glencore.com/sustainability/climate-change
88
Glencore Annual Report 2019
Sustainability risks continued
11
Community relations and human rights
Link to strategic priorities
Risk movement in 2019: Stable
Risk appetite
Low. It is our policy to ensure we proactively engage with local communities to maintain our social licence to operate.
Risk description and potential impact
Community relations, in particular in developing countries such as Colombia, Zambia, DRC and Peru, are important for the
Group’s local operations.
Our operations have a significant effect on our workforce, and surrounding communities and on society as a whole. We
recognise the contribution our business activities make to the national and local economies in which we operate. As a result,
the continued success of our existing operations and our future projects are in part dependent on broad support and a healthy
relationship with the communities surrounding our operations as well as our ability to promote diversified and resilient local
economies.
A perception that we are not respecting human rights or generating local sustainable benefits 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 adverse community reaction or allegations of human rights incidents 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. Locally
based events could escalate to disputes with regional and national governments as well as with other stakeholders and
potentially result in reputational damage and social instability that may affect the perceived and real value of our assets.
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.
Developments
We have faced community unrest at a number of our operations, most notably in South Africa, largely driven by lack of
economic opportunities and poverty. The unrest has resulted in protests and blockades, leading to operational shutdowns and
putting our workforce at risk of injury.
Illegal artisanal mining continues to be a challenge at certain operations, most notably in the DRC. In 2019, an incident resulted
in multiple fatalities and injuries of illegal miners at our Kamoto Copper Company (KCC) industrial operations. The illegal miners
were working two galleries (underground tunnels) in benches overlooking the extraction area. Two of these galleries caved in,
resulting in thirty fatalities. These incidents were not linked to KCC operations or activities. Further details on this incident and
our response are available on our website at: glencore.com/media-and-insights/updates-regarding-illegal-mining-at-KCC
Mitigating factors
We take a proactive and strategic approach to our stakeholder and community engagement. We support the advancement of
the interests of both our host communities and our assets. Through our sustainability programme, we seek to manage these
vital relationships by adhering 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 community. We aim for continuous monitoring and
reporting of community initiatives and complaints. In the DRC, we operate a number of programmes to offer alternative
livelihoods to people engaged in illegal artisanal mining.
We uphold and respect the human rights of our people and our local communities. Where we may cause adverse impacts on
our stakeholders, we seek to apply relevant international standards to understand, control and mitigate the impact. We also
seek to apply the Voluntary Principles on Security and Human Rights in regions where there is a high risk to human rights. At
Antapaccay, we have engaged external human rights experts to undertake an independent human rights review to build an
understanding of stakeholder perceptions and concerns about the operation.
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.
We seek to make our grievance mechanisms available to the community members impacted by our operations. We review all
complaints received and take actions when necessary to address the issues raised.
Further information is available on our website at: glencore.com/sustainability/community-and-human-rights
Glencore Annual Report 2019
89
Strategic reportFinancial statementsGovernanceAdditional information 90
Glencore Annual Report 2019
Entrepre-
neurialism
Opportunities
to learn, grow
and deliver
Kapil Reddy Kunta
Nickel Trader – Glencore Head
Office, Switzerland
Kapil joined Glencore in 2011 and quickly
noticed the company was different; he
could walk into the head of department’s
office and talk like any other colleague.
“For a 26-year-old who had just joined,
being able to access the boss – and for
them to give me their time – was a huge
positive. Your responsibilities grow, and
it’s very entrepreneurial.
“If you have the ambition to learn, grow
and deliver, you’ll be really successful.”
See more stories like this
Visit Glencore.com and
follow us on social media
Corporate
Governance
Chairman’s governance
statement
Directors and officers
Corporate governance report
Directors’ remuneration report
Directors’ report
92
94
96
110
120
Glencore Annual Report 2019
91
Strategic reportFinancial statementsGovernanceAdditional information Chairman’s Governance
statement
Anthony
Hayward
Chairman
In this Annual Report the Board has sought
to ensure that our reporting reflects our
mission to ensure that the Group fulfils its
purpose and that it has the culture and
strategy to do so.
Although there are difficult challenges
ahead, your Board is determined to guide
this remarkable Company to the next stage
of its journey.
Glencore is a company in transition.
Up until the end of 2018, the
management team that built the
Company and led it through the
IPO in 2011 and subsequent merger
with Xstrata in 2013, remained largely
in place.
Succession planning
One of the Board’s central objectives
has been to oversee an orderly
management succession. Over
the past 15 months we have seen
the retirement of the marketing
heads of copper, oil, ferroalloys,
and agriculture. This process will
continue this year.
The quality and capability of the
new generation is impressive
and considerable credit to the
development plans overseen
by Ivan and his colleagues.
The 2018 UK Corporate Governance
Code (the Code) introduced a new
provision that a chairman should
also be subject to a nine year term
limit from first appointment as a
director. However, the Board has
recommended to shareholders that
I remain as Chairman while the
senior management succession
is concluded and for the ongoing
investigations. This will be reviewed
at the end of the year.
The replacement of Mr Fischer
(who has also served for nine years)
as Chair of the Audit Committee
will occur in the second half of 2020.
Both of these Code issues have
been pre-discussed with our largest
institutional shareholders.
92
Glencore Annual Report 2019
We continue the process of Board
renewal and the Board was very
pleased to welcome Kalidas
Madhavpeddi as a new Independent
Non-Executive Director. We will seek
to make further appointments,
particularly of a new Audit
Committee Chair and a further
female Director, later this year.
Effective corporate governance
It is an important pillar of corporate
governance that the chairman
manages the Board and the CEO
and senior executives manage the
business. However, the Board must
also ensure that it has a genuine
oversight of all material aspects of
the Group and its operations.
In my introduction to this Annual
Report on page 1, I highlight the
importance of our purpose.
Obviously, the Board needs to
understand and ensure appropriate
leadership of the Group’s business
and implementation of its strategy.
As well as through consideration of
Board materials and discussions with
and questions of the CEO, CFO and
Head of Industrial Assets, the Board
regularly meets other senior leaders
of the Group’s business.
The Group’s corporate functions are
also vital. The General Counsel is a
contributor to every Board and ECC
meeting. He also attends every
Audit Committee meeting, during
which the Directors also have
an opportunity to question the
Chief Risk Officer, who is responsible
for market and credit risk, the
Head of Internal Audit and the
Financial Controller.
At ECC and Remuneration
Committee meetings we also
engage with the Head of
Human Resources.
At HSEC meetings we have
discussions with the Head of
HSEC, the Head of Sustainable
Development and the Head of HSEC
Assurance. At these meetings there
is also a management presentation
whenever there is a fatality. This is
another opportunity for the Directors
to hold management to account
and to carefully scrutinise our
management teams in action.
This is not just about the prevention
of future fatalities – fundamental
as that is – but it is also about the
Directors clearly and forcefully
engaging with the business
managers to assess their qualities
and strengths and to determine
whether they are genuinely agents
for change.
As a Board, we strongly support
our Raising Concerns programme,
which is a channel for employees
to raise concerns. We review the
procedures in place to ensure that
all concerns are appropriately
investigated and addressed and
review individually the high risk
concerns which are required to be
brought to the Board’s attention.
Realising our purpose
At the beginning of this report,
I explained the material nature of the
changes to the Code and why they
are important.
The constant yet varied interaction
with the business and function
leaders is a crucial part of our
governance. As well as providing
direct and real interaction, it also
provides another insight into
the Group’s culture and allows
the Directors to assess whether
our purpose and strategy are
being realised.
In this Annual Report the Board has
sought to ensure that our reporting
reflects our mission to ensure that
the Group fulfils its purpose and
that it has the culture and strategy
to do so. This is an ongoing matter
and as well as assessing our own
performance we will carefully
consider what other major UK listed
companies, particularly in the global
resources space, have done and are
doing to fulfil these objectives and
clearly report on their progress
I sign off this report at a time of
considerable uncertainty for the
markets in which the Group
operates. Although there are difficult
challenges ahead, your Board is
determined to guide this remarkable
Company through the next stage
of its journey.
Tony Hayward
Chairman
4 March 2020
Glencore Annual Report 2019
93
Strategic reportFinancial statementsGovernanceAdditional information Directors and officers
Directors
Experience
Dr Hayward is managing partner
of St James’s Asset Management,
a partner and member of the
European advisory Board of AEA
Capital and has other private
equity interests.
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
Mr Gilbert is vice chairman of
Standard Life Aberdeen plc (LON:SLA)
and chairman of Revolut Limited.
Mr. Gilbert was formerly co-CEO
of Standard Life Aberdeen and
co-founder of Aberdeen Asset
Management, which was established
in 1983.
Mr Gilbert is a member of the
international advisory panel of the
Monetary Authority of Singapore
and the international advisory board
of British American Business.
Mr Gilbert was educated in
Aberdeen. He has an LLB, an
MA in Accountancy and is a
Chartered Accountant.
Experience
Mr Fischer is founder and chairman
of the investment committee of
DFG Deutsche Fondsgesellschaft
SE Invest.
He was CEO of BHF Kleinwort
Benson group S.A. from 2009–16,
before that 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
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.
Experience
Mr Coates worked in senior positions
in a range of resource companies
before joining Glencore’s coal unit
as a senior executive in 1994. When
Glencore sold its Australian and
South African coal assets to Xstrata
in 2002 he became CEO of Xstrata’s
coal business, stepping down in
December 2007.
He was non-executive chairman
of Xstrata Australia (2008–09),
Minara Resources Ltd (2008–11) and
Santos Ltd (2009–13 and 2015–18).
He is currently a non-executive
director of Event Hospitality and
Entertainment Ltd (ASX:EVT).
Mr Coates holds a Bachelor
of Science degree in Mining
Engineering from the University of
New South Wales. He was appointed
to the Office of the Order of Australia
in June 2009 and awarded the
Australasian Institute of Mining
and Metallurgy Medal for 2010.
Experience
Mr Mack is a non-executive
director of New Fortress Energy
(NASDAQ:NFE) 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.
From 2001 to 2005, Mr Mack served
as co-CEO of Credit Suisse.
Mr Mack is a graduate of
Duke University.
Ivan Glasenberg
Chief Executive
Officer (63)
H
Joined Glencore in April 1984;
Chief Executive Officer since
January 2002.
Peter Coates AO
Non-Executive
Director (74)
E H
Non-Executive Director since
January 2014; previously
Executive Director from
June to December 2013
and Non-Executive Director
from April 2011 to May 2013.
John Mack
Non-Executive
Director (75)
R N
Appointed in June 2013.
Anthony Hayward
Chairman (62)
I
E H
Chairman since May 2013; he
joined the Board in 2011 as the
Senior Independent Director.
Chair of Nomination
Committee during 2019.
Martin Gilbert
Senior Independent
Director (64)
I
R
A
Senior Independent Director
since May 2018; appointed in
May 2017.
Leonhard Fischer
Non-Executive
Director (57)
I
A
Appointed in April 2011.
Member of Nomination and
Remuneration Committees
during 2019.
94
Glencore Annual Report 2019
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
appointed as the deputy minister
of finance and from 1999 to 2004
was deputy governor of the Reserve
Bank. Ms Marcus was the non-
executive chair of the Absa Group
from 2007–09 and has been a
non-executive director of Gold Fields
Ltd and Bidvest. She has acted as
chair of a number of South African
regulatory bodies. In 2018, she was
appointed to the Judicial Commission
of Inquiry into allegations of
impropriety at the Public Investment
Corporation. Ms Marcus is a graduate
of the University of South Africa.
Experience
Mr Madhavpeddi has over 30 years
of experience in the international
mining industry, including being
CEO of China Molybdenum
International (China Moly) from 2008
to 2018. He started his career at
Phelps Dodge, where he worked
from 1980 to 2006, ultimately
becoming senior vice president
responsible for the company’s global
business development, acquisitions
and divestments, as well as its global
exploration programs.
Mr Madhavpeddi is currently a
director of Novagold Resources (TSX:
NG) and Trilogy Metals (TSX:TMQ). He
was formerly director and chair of the
governance committee of Capstone
Mining (TSX:CS). He has degrees from
the Indian Institute of Technology,
Madras, India and the University
of Iowa and has completed the
Advanced Management Program
at Harvard Business School.
Experience
Mr Kalmin 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 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.
Gill Marcus
Non-Executive
Director (70)
A E
Appointed in January 2018.
Member of Nomination
Committee during 2019.
Kalidas Madhavpeddi
Non-Executive
Director (64)
N R
Appointed in February 2020.
Officers
Steven Kalmin
Chief Financial
Officer (49)
Appointed as Chief Financial
Officer in June 2005.
Experience
Following initial roles with Molson
and Canadian Pacific, Ms Merrin
worked at Sherritt for ten years until
2004, latterly as COO. She then
became CEO of Luscar, Canada’s
largest thermal coal producer. She
is currently a non-executive director
of Samuel, Son & Co. Limited.
She has been a non-executive chair
of Detour Gold Corporation
(TSX:DGC) from June 2019 to January
2020, chairman of CML Healthcare,
of Enssolutions, NB Power, and
Arconic. Ms Merrin was a non-
executive director of Kew Media
Group Inc. (TSX:KEW), and a director
of the Alberta Climate Change and
Emissions Management Corporation
from 2009 to 2014.
Ms Merrin is a graduate of Queen’s
University, Ontario and completed
the Advanced Management
Programme at INSEAD.
Patrice Merrin
Non-Executive
Director (71)
I
N
E H
Appointed in June 2014.
Chair of Nomination
Committee from 2020.
Notes
All the Directors are non-executive apart
from Mr Glasenberg. The Non-Executive
Directors are designated as independent
apart from Mr Coates and Dr Hayward.
Committee membership is as follows:
Board
diversity
Page 97
A
E
H
I
N
R
Audit
Ethics, Compliance and Culture (ECC)
Health, Safety, Environment and Communities (HSEC)
Investigations
Nomination
Remuneration
denotes Committee chair
Experience
From 2006 to 2011, Mr Burton was
company secretary and general
counsel of Informa plc, where
he established the group legal
function and a new company
secretarial team. Before that he had
been a partner of CMS in London for
8 years, advising on a broad range
of corporate and securities laws
matters.
Mr Burton holds a B.A. degree
in Law from Durham University.
He was admitted as a Solicitor
in England and Wales in 1990.
John Burton
Company
Secretary (55)
Appointed Company
Secretary in September 2011.
Glencore Annual Report 2019
95
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance
report
This report should be read in conjunction with
the Directors’ report and the remainder of the
Governance section
Board governance and structure
This Governance report, along with
the Strategic report and the
Directors’ report, sets out how
Glencore has applied the principles
of the new 2018 UK Corporate
Governance Code (the Code) in a
manner which enables shareholders
to evaluate how these principles
have been applied. The Board
believes that the Company has
throughout the year complied with
all relevant provisions contained in
the Code.
This new Code brought in material
changes, including a strong
emphasis on a company’s purpose,
strategy, values and culture. The
Board welcomed these changes
and has sought to embrace them in
its work and that of its committees.
In particular in response to the new
requirements, at the beginning of
the year we established the new
ECC committee in order to
focus, along with ethical and
compliance matters, on culture
and stakeholder engagement.
Directors
During 2019 the Board comprised
seven Non-Executive Directors
(including the Chairman) and one
Executive Director. On 4 February
2020 Mr Kalidas Madhavpeddi was
appointed as Non-Executive Director.
For 2020, the composition of the
Nomination and Remuneration
Committees have been changed
(see pages 94 and 95).
A list of the current Directors, with
their brief biographical details and
other significant commitments, is
provided in the previous pages.
We have consulted with major
shareholders on the following
arrangements:
1. Dr Hayward will this year have
served on the Board for nine years.
However, due to the management
succession taking place and the
ongoing investigations, the Board
has recommended to shareholders
that he remains as Chairman, with
the position to be reconsidered in
one year’s time
2. The Company has not appointed
a new director to be chairman
of the Audit Committee. In the
circumstances the Board has asked
Mr Fischer to remain in place, until
his successor is appointed. This
extension shall expire by year-end.
Also the audit tender process (see
page 108) will not commence until
the new Chair is appointed.
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.
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:
Anthony Hayward
Peter Coates
Leonhard Fischer
Martin Gilbert
Ivan Glasenberg
John Mack
Gill Marcus
Patrice Merrin
Board
of 6
HSEC
of 5
6
6
6
6
6
5
5
6
5
5
–
–
5
–
–
5
ECC
of 5
5
5
–
–
–
–
5
5
Audit
of 4
Remuneration
of 3
Nomination
of 3
–
–
4
4
–
–
4
–
–
–
3
3
–
3
–
–
3
–
3
–
–
3
3
–
In addition, there were another four limited agenda meetings of the Board.
Most Directors also attend by invitation the meetings of the Committees of
which they are not members.
96
Glencore Annual Report 2019
Roles and responsibilities
Chairman
• Leading the Board
• Shaping the culture in the
boardroom
• Promoting sound and effective
Board governance
• Ensuring effective communication
with shareholders
• Leading the annual performance
evaluation of the Board
Senior Independent Director
• Acting as confidant of the
Chairman and, when appropriate,
as an intermediary for other
independent Directors
• Acting as Chair of the Board if
the Chairman is unable to attend
• Leading the Chairman’s
performance appraisal along with
other independent Directors
• Answering shareholders’ queries
when usual channels of
communication are unavailable
Chief Executive Officer
• Leading the management team
• Developing the Group’s strategy
in conjunction with the Board
• Implementing the decisions of
the Board and its Committees
• Achieving the Group’s commercial
objectives
• Developing Group policies and
ensuring effective implementation
Other Non-Executive Directors
• Challenging the Chief Executive
Officer and senior management
constructively
• Bringing an independent mindset
and a variety of backgrounds and
experience around the Board table
• Providing leadership and challenge
as chairs or members of the Board
Committees, which (except HSEC)
comprise only Non-Executive
Directors
• Assisting the Senior Independent
Director in assessing the
Chairman’s performance and
leadership
Company Secretary
• Ensuring that Board procedures
are complied with and that papers
are provided in sufficient detail
and on time
• Informing and advising the Board
on all governance matters
• Informing the Board on all matters
reserved to it
• Assisting the Chairman and the
Board regarding the annual
performance evaluation process
Board diversity
and experience
Tenure
Gender
0–2 yrs
3–6 yrs
7–9 yrs
10+ yrs
Male
Female
Tony
Hayward
British
Ivan
Glasenberg
S. African
Martin
Gilbert
British
Leonhard
Fischer
German
Peter
Coates
Australian
John
Mack
American
Gill
Marcus
S. African
Patrice
Merrin
Canadian
Kalidas
Madhavpeddi
American
Experience
Resources
Non-executive
directorship
C-suite
Global transactions
Technical Skills
Leadership &
Strategy
Financial Expertise
Ethics & Governance
Health & Safety
Investor Relations
Communications
& Reputation
Risk Management
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 approved
by the Board and reviewed annually.
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, CFO and
General Counsel have line of sight
across the Group.
The Company Secretary is
responsible for ensuring that there
is clear and effective information
flow to the Non-Executive
Directors. Further details of these
responsibilities are set out opposite.
From 2019, the new position of
Head of Industrial Assets was
created with Mr Peter Freyberg
appointed to the role, reporting to
the CEO. Internal reporting lines
and organisational structures were
amended such that Glencore’s
industrial activities report to the
Head of Industrial Assets and all of
its marketing activities report to the
Head of Marketing (being the CEO).
The CEO, the Head of Industrial
Assets, the CFO and General Counsel
lead our management team
supported by the heads of each
department for marketing and
industrial business and the heads
of corporate functions.
Senior Independent Director
Mr Gilbert is the Senior Independent
Non-Executive Director. He 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.
Non-Executive Directors
The Company’s Non-Executive
Directors provide a broad range of
skills and experience to the Board
(see table above), 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 Mr Peter
Coates, due to his employment
by the Group during 2013 and the
Chairman, all are regarded by the
Board 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. However, as noted on
page 96, from May this year Mr
Fischer shall, if re-elected, exceed
nine year terms. In line with Provision
10 of the Code, the Board considered
the independence of Mr Fischer
against the different circumstances
and factors included in the Code
and the FRC’s Guidance on Board
Effectiveness, concluding that in
absence of any other circumstance
or factor but that of the slight excess
of his tenure, he remained fully
capable of demonstrating objective
judgement and promoting
constructive challenge for the Board
and management. Therefore the
Board considers Mr Fischer as an
independent director.
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 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
Glencore Annual Report 2019
97
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance report
continued
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
2019, no abstention procedures
for conflicts had to be activated.
Related Party Transactions
In the course of its business, the
Group enters into transactions with
organisations which may constitute
related parties.
All material related party
transactions are required to be
reviewed and approved by the
Board. In the event that a conflict
exists for a Director, he or she will not
be allowed to vote on the resolution
approving the transaction, as noted
above. Additionally, the Board seeks
advice whenever an assessment is to
be made as to whether any material
transaction may be a related party
transaction under the terms of FCA
Listing Rule 11.
Transactions between the Group
and its significant joint ventures
and associates are summarised in
note 32 to the Financial Statements.
Acquisition and disposal of assets
The Board reviews and approves
all material proposed transactions,
including acquisitions and disposals
of assets. Additionally, there is an
assessment as to whether material
transactions comply with FCA
Listing Rule 10 requirements.
If required, the Board may engage
an independent third party as
consultant to review the proposed
transaction and provide an
independent opinion for the
Board to consider before making
a decision.
Board Committees
The following permanent
Committees are in place to assist
the Board in exercising its functions:
Audit, Nomination, Remuneration,
HSEC and ECC. The Board is
provided with technical and
Corporate Governance
Shareholders
Ongoing
engagement
Elect
Directors
Chief Executive Officer
and
Chief Financial Officer
Board of
Directors
Investigations
committee
ECC
committee
HSEC
committee
Audit
committee
Remuneration
committee
Nomination
committee
98
Glencore Annual Report 2019
commercial updates as appropriate
during the year, including as to
compliance and our Raising
Concerns programme. The Board
may also establish temporary
Committees for specific purposes,
such as the Investigations
Committee. As each Committee
reports to the Board, meetings
are held prior to Board meetings,
during which the Chair of each
Committee leads a discussion
concerning the Committee’s
activities since the previous
Board meeting.
A report for 2019 from each Chair of
the permanent Committees is set
out later in this Corporate
Governance report.
All permanent Committees’ terms of
reference are available at: glencore.
com/who-we-are/governance
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
regularly reviews its terms of
reference to ensure they reflect
the Board’s expectations as to the
Committee’s role as well as the latest
corporate governance requirements
and recommended practices.
In July 2018, following receipt of a
subpoena from the US Department
of Justice (DOJ), the Board
reconstituted the ad-hoc
Investigations Committee to direct
the Company’s response. The
Investigations Committee’s mandate
continued throughout 2019 and
includes oversight of the Company’s
response to the CFTC, Brazilian and
SFO investigations.
Board meetings
The Board has approved a schedule
that sets out the matters solely
reserved for its approval, including
Group strategy, financial statements
and annual budget, risk appetite,
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 on page 96.
The Board and its Committees
have standing agenda items to cover
their proposed business at their
scheduled meetings. The Chairman
Board activities during 2019
Below are details of the main topics which were reviewed, discussed,
and when required, approved by the Board during 2019:
Regular updates
• Chairman’s report
• Reports from Committee
Chairs
• Reports from CEO, CFO,
Company Secretary,
General Counsel and
senior management
• Group performance report
• Customer performance
dashboard
Financial & Risk
• Finance reports, forecasts
and capital position updates
• 2020 budget/2021–23
business plan
• Dividend & buyback
programmes
• Financial statements
• Group risk appetite
• Group risk management
framework
Legal, Regulatory
& Compliance
• Group policies
• Legal matters updates
and investigations
• Regulatory &
Compliance updates
• Group Compliance
Programme
• Raising Concerns reports
Health, Safety
& Environment
• Fatalities, major incidents
and other safety issues
• Environmental incidents
reports
• Human Rights and
Communities reports
• Carbon/Climate reports
• Tailings Storage Facilities
reviews
• Supply chain traceability
Governance
& Stakeholders
• Annual report
• AGM and voting results
• Investor relations reports
• Analysts updates
• Corporate governance
framework
• Stakeholder engagement
Other activities
• Board and Directors’
evaluation
• Chairman’s performance
• Succession planning for
Board and senior
management
• Senior management
remuneration
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
receive support from senior
management through reports
and presentations, which among
others vary from operational,
financial, audit, risk, legal and
compliance, governance, and
investor relations to cover all aspects
of the Group. These reports and
presentations allow Directors to
further their understanding of the
business and provide the insights
necessary for defining the
Company’s strategy and objectives,
in turn contributing to a more
effective Board. A summary of the
Board’s main activities during 2019
is set out on the next page.
Appointment and
re-election of Directors
All Directors will be offering
themselves for re-election at the
2020 AGM, see previous page.
All of the Non-Executive Directors
have 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.
During 2019, Directors have visited
Group operations and offices to
discuss aspects of the business with
employees and executives. It is
intended that a greater number of
visits will take place in 2020,
reflecting more employee
engagement. Directors have also
participated in internal events, such
as the HSEC and Compliance
summits, giving them the
opportunity to engage directly
with those who deal with some
of the key challenges the Group
faces. For further details of these,
please refer to sections on
stakeholder engagement and
ethics and compliance (pages 26–29
and 42–44). Directors also attend
appropriate external seminars
and briefings.
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.
Director induction and information
New Directors receive a full, formal
and tailored induction on joining
the Board, including meetings
with senior management.
The induction process of Mr
Madhavpeddi has commenced and
will continue throughout 2020,
including a comprehensive
introduction to the main aspects
Glencore Annual Report 2019
99
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance report
continued
Risk – Board leadership
The Board provides leadership and oversight on risk management. Specifically it:
2
Reassesses the Group’s
long-term viability
Taking account of the
Group’s financial 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 75.
3
Monitors the Group’s risk
management and internal
control systems
The Board monitors the
soundness of the Group’s
risk management and
internal control systems and
carries out reviews of their
effectiveness, including
reviewing the Group’s
internal financial controls.
This monitoring and review
covers all material controls
relative to financial,
operational and compliance
functions. Further details
on pages 101–104.
4
Promotes a risk aware
culture
The Board sets the tone
on the Group’s overall
culture, including the risk
management culture
by giving clear mandate
related to risk and reward
to Management, aiming
to ensure that there is
an appropriate balance
between the level of risk
assumed, the quality of
internal controls and the
expected return. Further
details on page 102.
1
Provides a robust
assessment of the
emerging and principal
risks facing the Group
The Board has carried out
a robust assessment of the
emerging and principal risks
facing the Group, including
those that would threaten
its business model, future
performance, solvency or
liquidity. This assessment
is essential in enabling the
Board to determine the
Group’s risk appetite, which
is one of the critical factors
used when setting the
Group’s strategy and
objectives. The Directors’
description of those risks
and how they are being
managed or mitigated is set
out on pages 74–89.
of the Group, its business and
functions, the roles and
responsibilities of a UK premium
listed company director, and the
Company’s Code of Conduct.
The Directors receive training on
legal and compliance matters and
regular updates on relevant business
and governance matters.
Board performance and
effectiveness
Since an external evaluation was
carried out during 2018 and no
material governance issue arose
during 2019, a performance
evaluation was conducted internally.
As part of this process, each Director
completed questionnaires that
covered various key indicators of
Board and Committee performance
and effectiveness, including the
findings from the 2018 external
evaluation (summarised in the 2018
Annual Report). Results were
provided to the Chairman and
the Senior Independent Director
by the Company Secretary.
Additionally, the Chairman
conducted an individual session with
each Director to discuss individual
100
Glencore Annual Report 2019
performance. The Senior
Independent Director conducted the
Chairman’s individual assessment.
Final results were presented to the
Board collectively for discussion.
The Board was assessed as
performing well, with confidence
also in the effectiveness of its HSEC,
ECC and Audit Committees (its main
risk and oversight committees).
Particular issues of focus raised for
the Board included:
• health and safety, especially
fatalities reduction
• pursuing the investigations
• ensuring stability during the senior
management changes
• seeking strong resource industry
experience on the Board
• greater diversity on the Board
• risk management, compliance and
the role of internal audit continuing
to be an area of focus
Remuneration
Remuneration is covered in the
Directors’ remuneration report
which follows this section and
includes a description of the work
of the Remuneration Committee.
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.
The Board is very cognisant of the
ongoing desire from stakeholders
for greater diversity in senior
management and boards. In
particular, leading UK institutional
shareholders have set a target for
women to comprise 33% of senior
management and boards of FTSE
100 companies by the end of 2020.
For the Board we are confident that
we will achieve this target. For senior
management, while we support the
aims of diversity, we do not believe
that a one size fits all policy is
appropriate or currently achievable.
Still today we find it challenging to fill
senior positions in remote mining
locations and for the marketing of
commodities, by women.
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 auditors in evaluating
their impact, if any.
Risk management
and internal control
The Board has applied provisions 28
to 31 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 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
and emerging 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.
Investigations
The Group is subject to the
investigations listed on page 81
which are overseen by the
Investigations Committee.
It operates entirely separately from
the Group’s executives, who have no
decision-making power concerning
the investigations. The Investigations
Committee also monitors the
Group’s exposure arising from
investigations by regulatory and
enforcement authorities, and
conclude on the appropriate
disclosure in the financial statements:
see note 31 for further details.
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 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 the authority for
assessing and approving the Group’s
overall risk appetite and sets overall
limits which are reviewed annually.
Risk Management Framework
• Risk culture
• Risk strategy and appetite
• Risk governance
Oversight
Tone from
the top
• Board of Directors
• Audit Committee
• HSEC Committee
• Ethics, Compliance and Culture 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
Compliance
risk process
• Principal risks
and uncertainties
(see pages 74–89)
External
Business
Sustainability
Prices, supply
& demand
Laws &
enforcement
Currency
Operating
Climate change
Geopolitical
Liquidity
Credit
Cyber
Health, Safety,
Environment
Community
relations &
human rights
Glencore Annual Report 2019
101
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance report
continued
It is assisted by the work of the
Audit Committee for oversight, by
the Internal Audit function and by
senior management for day-to-day
operational matters, in order
to maintain an effective risk
management governance apparatus
for the Group.
Additionally, the General Counsel
reports at each scheduled meeting
of the ECC Committee on all material
compliance risks and matters.
Risk culture
Glencore recognises the critical
importance of the development
and maintenance of an appropriate
institutional risk culture. The
effectiveness of risk management
and internal control ultimately
depends on the individuals
responsible for operating the
systems that are put in place
and Glencore’s risk culture is built
around 4 key pillars recognising this:
• Competence – relying on
management capability and
experience
• Motivation – aligning the interest of
shareholders and management
• Communication – clear direction
from the top permeating all layers
of the business
• Organisation – flat organisational
structure for more effective
monitoring and reporting
Risk is an essential part of our
business, from individual trader
decisions to the most fundamental
investment choices – risk is
constantly analysed and considered.
Our organisational culture promotes
risk awareness, encouraging
proactive risk management
behaviours. The risk management
framework enables a high level
of ownership by management
and employees.
Risk Management Framework
Management engagement
The Company’s senior management
reviews the major risks facing the
Group and decides if the level of
risk fits within the appetite approved
by the Board or whether further
steps need to be taken to mitigate
these risks.
102
Glencore Annual Report 2019
Together, central and business
management risk culture aims
to strike an appropriate balance
between the level of risk assumed
and the expected return.
Board committees
The Audit Committee is responsible
for reviewing the risk management
framework and internal controls.
Mandated by the Board, the Audit,
ECC and HSEC Committees were
responsible in 2019 for ensuring that
the significant risks identified are
properly managed. See our Principal
Risks and Uncertainties section
pages 74-89 for more details.
Group functions
Group functions (Risk Management,
Compliance, Legal, HSEC 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 management.
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 key risk areas
identified in the Group’s budgeting
process, emerging risks, operational
changes, new investments and
capital projects.
The key results from this process
assist in forming the audit plan and
scope, which are reported to the
Audit Committee for their review
and ratification.
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 risks (not limited to hazards),
whether potential or realised, 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.
Any significant risks are reported
to the relevant Industrial Lead and
escalated to the Head of Industrial
Assets, who in turn reports to the
Audit, ECC or HSEC Committees
as appropriate. A Corporate Risk
Management Framework is
implemented on a Group-wide
basis to ensure consistency in the
assessment and reporting of risks.
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.
HSEC risk management
These risk management processes
are managed at asset level, with the
support and guidance from the
central sustainability and HSEC
teams, and subject to the leadership
and oversight of the HSEC
Committee.
The Group’s internal assurance
programme assesses compliance
with leading practices in health
and safety, environment and
communities, but mainly focuses
on catastrophic risks.
Further information is provided
in the report from the HSEC
Committee on page 106 and will
be published in the Group’s
sustainability report for 2019.
Marketing risk management
Glencore’s marketing activities are
exposed to a variety of risks, such
as commodity price, basis, volatility,
foreign exchange, interest rate,
credit and performance, liquidity
and regulatory. 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 that are intended
to mitigate and manage commodity
price, credit and other related risks.
Led by the Head of Industrial Assets
and Industrial Leads, management
teams at each industrial operation
are responsible for implementing
processes that identify, assess and
manage risk.
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 the
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. The main oversight
role is performed by the Audit
Committee which receives a
report from the CRO at each of
its scheduled meetings. It also
approves the Group-wide risk profile,
and any exceptions to agreed
positional thresholds.
At the heart of the risk management
regime is the process of continuous
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, subject to the Audit
Committee’s oversight. 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 healthy tension
is designed to manage risk
effectively while facilitating the fast,
commercial decision-making that 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 and weekly reporting. For
example, daily risk reports showing
Group Value at Risk (VaR) as shown
on page 104 and various other stress
tests and analysis are distributed to
the CEO, CFO and CRO. Additionally,
business risk summaries showing
positional exposure and other
relevant metrics, together with
potential margin call requirements,
are also circulated daily. The MR
function strives to enhance its stress
and scenario testing as well as
improving measures to capture risk
exposure within the specific areas
of the business, e.g. within metals,
concentrate treatment and refining
charges are analysed.
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
the CFO and the CEO (relating to
unsecured amounts in excess of
$75 million with BBB (or equivalent)
or lower rated counterparts). At lower
levels of materiality, decisions may
be taken by the business heads
where key strategic transactions or
established relationships, together
with credit analysis, suggest that
some level of open account exposure
may be warranted.
Legal and compliance Risk
The Group has dedicated legal and
compliance resources to assist Group
businesses in complying with
regulatory obligations and internal
policies, procedures and guidelines.
For further details see pages 43–45.
Systems and reporting
The Group has not yet identified
a single trading system able to
manage the broad range of
requirements that its different
business profiles operate within.
Therefore, interfacing with multiple
source systems and transferring
data from one system to another
heightens risks relative to data
integrity, granularity, consistency
and timeliness.
Glencore also regularly reviews
its requirements and systems in
the light of changes to applicable
regulations.
The impact 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,
and thus enhance and protect
organisational value.
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 main
conclusions, its KPIs and the
effectiveness and timeliness
of management’s responses
to its findings.
The Audit Committee has concluded
that the Internal Audit function
remains effective, taking into
account the successful review
undertaken in 2017 by KPMG. As
part of this work, it considered the
function’s management framework
and its improvement programme.
Interactions 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
individual meetings. The full- and
half-year reporting is followed by
investor meetings in a variety
Glencore Annual Report 2019
103
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance report
continued
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,
Head of Industrial Assets and
senior members of the Investor
Relations team.
In addition, 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. The matters
covered by meetings with the
Chairman and Company Secretary
included the work of each of the
Board’s committees.
AGM
The Company’s next AGM is due to
be held in Zug on 6 May 2020. Full
details of the meeting will be set out
in the AGM notice of meeting, which
will be sent to shareholders in April.
Shareholders unable to attend are
encouraged to vote by proxy as
detailed in the notice.
All documents relating to the AGM
will be available on the Company’s
website at: glencore.com/agm
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 2019, 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 2019
Glencore’s reported average daily
VaR was approximately $27 million,
with an observed high of $43 million
and a low of $18 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 $100 million
for 2020.
VaR development ($m)
50
40
30
20
10
0
Jan
2019
Mar
2019
May
2019
Jul
2019
Sep
2019
Nov
2019
● Metals and minerals
● Energy products
104
Glencore Annual Report 2019
Ethics, Compliance and
Culture (ECC) report
Chair
Anthony Hayward
Other members
Patrice Merrin
Gill Marcus
Peter Coates
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 an
agenda which reflected the
Committee’s objective of overseeing
key ethics and compliance matters
and the Group’s culture. Nicola Leigh
is the secretary of this Committee.
Responsibilities
The main responsibilities of the
Committee are:
• Overseeing the implementation of
the Group Ethics and Compliance
Programme including Group
policies, procedures, systems
and controls for the prevention
of unethical business practices
and misconduct
• Reviewing reports and the
activities of the following
management committees:
business ethics committee and
business approval committee (see
page 43 for further information)
• Assessing and monitoring culture
to ensure alignment with the
Company’s purpose and values
• Monitoring the Group’s
stakeholder engagement
Main activities
During the year, the Committee:
• Provided oversight on the
implementation of the key
compliance policies and
procedures relating to anti-
corruption, sanctions, anti-money
laundering, market abuse, the
prevention of the facilitation of tax
evasion, competition law, data
protection and conflicts of interest
• Reviewed the compliance
structure and resourcing to assess
whether it is sufficient for the
Group
• Considered a variety of other
material ethics and compliance
issues arising from risk
assessments, internal monitoring
and reviews conducted by third
party specialists
• Considered the matters set out in
section 172 of the UK Companies
Act 2006 which involved reviewing
and discussing the Company’s key
stakeholder groups (see page 26)
• Reviewed workforce engagement
and provided guidance for culture
surveys and focus groups in the
Australian industrial operations
and in all of the marketing offices
Workforce engagement
During the year, a key task for this
Committee has been to assess
and monitor company culture.
The Board designated three Non-
Executive Directors (NEDs) as
workforce engagement NEDs
who were appointed to engage
with our workforce based on
geographic location.
Peter Coates – Australia
Patrice Merrin – North America
Gill Marcus – Africa
I am also participating in this work
and will assist them in helping to
ensure that workers’ views and
concerns are brought to the Board
and, where appropriate, taken into
account in Board decision-making.
Additionally, and in order to ensure
there was effective engagement
with, and encourage participation
and feedback from, our workforce,
culture surveys were launched. The
purpose of the surveys was, amongst
others, to gauge our compliance
culture, determine how our
workforce perceives management’s
commitment to ethics and
compliance, test alignment with our
values and measure feedback on key
cultural elements. Participation rates
and results were positive, with areas
for improvement being highlighted
to this Committee, the Board and
management.
For further information on the
culture survey results see Our people
section on page 32.
Mr Coates began the NED
engagement process with visits
to certain coal, copper and zinc
operations in Australia. At these
industrial assets, the survey
responses were supplemented by
face-to-face focus group discussions.
Focus groups included a cross
section of the workforce; frontline
workers, supervisors and managers.
Mr Coates led these focus groups
and reported that workers
were engaged and spoke openly
regarding the topics in the survey
and related matters. Similar
engagement site visits are planned
for 2020 at other major industrial
assets in Canada, Kazakhstan, South
America and Africa.
Tony Hayward
Chair of the ECC Committee
4 March 2020
Glencore Annual Report 2019
105
Strategic reportFinancial statementsGovernanceAdditional information • Monitored the Group’s tailings
storage facilities assurance
processes, including participation
in the comprehensive disclosure
initiative led by the Church
of England
• Provided ongoing support for
management’s carbon/climate
policies. This included reviewing
the work of the climate change
working group, chaired by
Dr Hayward
• 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
• Advised on the programme
and hosted the internal HSEC
Summit for the year
• Considered a variety of other
material HSEC issues such as
resettlement programmes,
incident reporting and
health strategy
Peter Coates
Chair of the HSEC Committee
4 March 2020
Health, Safety,
Environment
& Communities
(HSEC) report
Chair
Peter Coates
Other members
Ivan Glasenberg
Anthony Hayward
Patrice Merrin
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 monitoring the
achievement by management
of ongoing improvements in
HSEC performance.
John Burton is the Secretary of
this Committee.
Responsibilities
The main responsibilities of the
Committee are:
• Ensuring 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, community
and human rights risks
• Ensuring that the policies
are effectively communicated
throughout the Company
and that appropriate processes
and procedures are developed
at an operational level to comply
and evaluate the effectiveness
of these policies through:
– assessment of operational
performance
– review of updated internal
and external reports
– independent audits and reviews
of performance with regard to
HSEC matters, and action plans
developed by management
in response to issues raised
• Evaluate and oversee the quality
and integrity of any reporting
to external stakeholders
concerning HSEC matters
• Reporting to the Board
Main activities
During the year, the Committee:
• Reviewed and approved the
Group’s HSEC strategy
• Supported an enhanced Fatality
Reduction Programme (FRP)
which consisted of major
interventions (Mopani and Kazzinc)
and deep dive SafeWork reviews
(see page 39 for further details).
The FRP will roll into 2020 and
will involve enhanced leadership
development programmes
• Provided leadership for
catastrophic hazard management
which is amongst the most
important non-financial risk
management issues for the
Group Continued oversight
of the SafeWork programme
implementation, focusing on
identification of fatal hazards
and an appropriate safety culture
• Oversaw the operation of the
Group’s assurance programme
for sustainability matters with
an emphasis on catastrophic
hazards and approved the
assurance plan for 2020
106
Glencore Annual Report 2019
Audit Committee
report
Chair
Leonhard Fischer
Other members
Martin Gilbert
Gill Marcus
The Committee met four times
during the year. Each Committee
member served throughout
the year and attended all of the
meetings. All Committee members
are considered by the Board to be
Independent Non-Executive
Directors and to be financially literate
by virtue of their relevant financial
experience and competence
in accounting. As a whole, the
Committee has the skills and
experience relevant to the sector.
John Burton is Secretary to the
Committee.
The Committee usually invites the
CEO, CFO, General Counsel, 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 also usually
attend its meetings. The Committee
also holds closed sessions with the
external auditors 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 auditors
on the basis set out below.
Role and responsibilities
The primary function of the
Committee is to assist the Board in
fulfilling its responsibilities with
regard to financial reporting, external
and internal audit, financial risk
management and controls.
During the year, the Committee’s
principal work included the following:
• Reviewing the full-year (audited),
and half-year (unaudited), financial
statements with management
and the external auditor
• Considering the scope and
methodologies to determine the
Company’s going concern and
longer-term viability statements
• Reviewing and agreeing the
preparation and scope of the
year-end reporting process
• Considering applicable regulatory
changes to reporting obligations
• Evaluating the Group’s procedures
for ensuring that the Annual
Report and accounts, taken as
a whole, are fair, balanced and
understandable
• Reviewing the Group’s financial
and accounting policies and
practices including discussing
material issues with management
and the external auditors,
especially matters that influence
or could affect the presentation
of accounts and key figures
• Reviewing the Group’s internal
financial controls and financial risk
management systems
• Considering the output from the
Group-wide processes used to
identify, evaluate and mitigate
financial risks, including credit
and performance risks, across the
industrial and marketing activities
• Monitoring and reviewing the
effectiveness of Glencore’s internal
controls for which there were
no significant failings or
weaknesses noted
• Reviewing the global audit
plan, scope and fees of the audit
work to be undertaken by 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 auditors in respect
of non-audit services
• Evaluating the effectiveness
of the external auditor
• Reviewing the Internal Audit
department’s annual audit plan
and reviewing the effectiveness
of the Internal Audit function
Risk analysis
The Committee receives reports and
presentations at each meeting on
management of marketing and
other risks (excluding operational
and sustainability risks which are
reviewed by the HSEC Committee
and compliance risks reviewed by
the ECC) and at least once a year
considers an in-depth study of
the perceived main risks and
uncertainties and the Group’s risk
management framework as a whole.
Significant issues
The Committee assesses whether
suitable accounting policies
including the implementation of
new accounting standards, primarily
IFRS 16 Leases, have been adopted
and whether management has
made appropriate estimates and
judgements. It also reviews the
external auditor’s 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. Acquisitions and disposals
Accounting for acquisitions involve
significant management judgements
and estimates. In 2019, the
Committee analysed the accounting
treatment for the acquisitions of
Astron Energy and Polymet.
2. 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 including
Glencore Annual Report 2019
107
Strategic reportFinancial statementsGovernanceAdditional information Corporate Governance report
continued
the impact of climate change. 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 and their sensitivities
within the models. Assets based in
Colombia, Chad, DRC, New Caledonia,
Peru, South Africa and Zambia were
subject to particular scrutiny. The
Committee discussed with the
external auditor their work in respect
of the impairment review, which was
a key area of focus for them.
3. 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 assets. 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. The
African copper assets and tax risk
exposures in the UK have been
particular areas of focus.
4. 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
108
Glencore Annual Report 2019
the estimates made by management
are reasonable and that financial
statements disclosures included in
the accounts are appropriate.
5. Other material issues
These have included in 2019, the
segment disclosure change, going
concern and long-term viability
assessments and analysis of the
internal control environment.
Internal and external audit
The Committee monitored the
internal audit function as described
under Internal Audit on page 103.
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 and the proven stability that
is gained from the continued
engagement of Deloitte as
external auditor
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.
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) the
fees for all non-audit work may
exceed $15 million in a particular year.
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
2019, fees paid to the external auditor
were $30 million, the total non-audit
fees of which were $6 million; further
details are contained in note 29 to
the financial statements.
A new policy will be adopted next
year to reflect regulatory changes
which will considerably restrict the
scope of non-audit services from 2021.
Deloitte has been the auditor of the
listed entity since its IPO in 2011. In
2018, a lead audit engagement
partner rotation occurred.
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 forthcoming AGM for the
reappointment of Deloitte LLP as
external auditor.
A search for my successor as Chair
of the committee is underway
(see page 96). As stated last year,
following this appointment, the
Committee will operate a tender
process for the appointment of the
Company’s external auditor for a
period up to ten years. This process
will be implemented next year and
the appointment will be with effect
from the audit of the financial
statements for the following year.
Leonhard Fischer
Chair of the Audit Committee
4 March 2020
Nomination Committee
report
Chair
Patrice Merrin
Other members
John Mack
Kalidas Madhavpeddi
During 2019, the committee
comprised Anthony Hayward (Chair),
John Mack, Leonhard Fischer and
Gill Marcus.
The Committee met three times
during the year. Each Committee
member served throughout
the year and attended all of the
meetings. In addition, some of the
discussions and deliberations
in respect of the matters
summarised below were carried
out at Board meetings.
John Burton is the Secretary of
this Committee.
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, and senior
management.
Thirdly, the Committee
considered the composition
of the Board and refreshment.
The Committee continued its
work on succession planning.
This has led to the appointment of
Kalidas Madhavpeddi who brings
extensive mining experience and
further diversity to the Board table.
Further refreshment is planned in
respect of a new Audit committee
Chair and another female director.
The Committee notes
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.
Following the appointment of Mr
Madhavpeddi, the Board meets the
ethnic diversity target of the Parker
Review. We also expect that one
third of our Directors will be female
by the end of 2020, which will
therefore satisfy the Board target
of the Hampton Alexander Review.
Patrice Merrin
Chair of the Nomination Committee
4 March 2020
Glencore Annual Report 2019
109
This involves:
• Evaluating the balance and
skills, knowledge and experience
of the Board and identifying
the capabilities required for
a particular appointment
• Overseeing the search process
• Evaluating the need for Board
refreshment and succession
planning generally
• Overseeing planning for CEO
and CFO succession planning
• Monitoring the CEO’s planning for
senior management succession
to seek to ensure that the
Company has a suitable pipeline
of candidates
• Considering diversity in
appointments
Main activities
The Committee focused on
three main tasks during this year.
The most important has been senior
management succession, as
described on page 92.
Secondly, prior to the notice of
2019 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 Director at the 2019 AGM.
Strategic reportFinancial statementsGovernanceAdditional information Directors’ remuneration report
For the year ended 31 December 2019
Accordingly, we have presented this 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.
The Committee also notes that it has been following with
interest the wider discussion relating to the design of
long-term incentives in UK listed companies and can
see considerable merit in the use of restricted stock in
a cyclical sector such as resources, particularly if such
shares are held over longer periods to be aligned with
the cycle. It also notes that the policy level of 2x salary
is considerably below the market level both relative to
resources companies and to the FTSE 30 more generally.
Rather than seek to address these issues in the 2020
policy renewal, the Committee considers it appropriate
to defer such design issues until succession occurs and
any replacement CEO can, therefore, make an
appropriate contribution to this planning. Accordingly,
it is highly likely that a new policy will be required as
and when succession occurs. The Committee would
undertake appropriate consultation at the time before
submitting a further policy to shareholders.
As at the 2014 and 2017 AGMs, to reflect best practice,
we shall be seeking shareholder approval of our
remuneration arrangements through two votes, one
on the Directors’ remuneration report (excluding the
Directors’ Remuneration Policy) and a separate vote
on our Directors’ Remuneration Policy. Both will
technically be advisory only as the Company is not
subject to the UK statutory regime to make the latter
binding although, clearly, the Committee will take any
voting outcome very seriously.
The Committee continues to ensure that the Directors’
Remuneration Policy and its implementation are
attractive to shareholders in reflecting good governance,
simplicity and reasonable terms.
John Mack
Chair of Remuneration Committee
4 March 2020
Chairman
John Mack
Other members
Kalidas
Madhavpeddi
Martin Gilbert
Introduction
On behalf of the Remuneration Committee, I am pleased
to present our Directors’ remuneration report for the year
ended 31 December 2019. As ever, we have sought to
make this report as short, simple and straightforward
as possible.
During 2019, the Committee comprised Leonhard
Fischer, Martin GIlbert and myself.
As a Jersey registered company headquartered in
Switzerland, Glencore is not subject to the UK’s reporting
regime although as we consider it to be reflective of
good practice, this report is prepared in compliance with
the regime, unless stated otherwise. Accordingly, over
the following pages, we have set out:
• The Group’s forward-looking Directors’ Remuneration
Policy will be proposed to shareholders at the 2020
AGM as it was last approved in 2017 and practice is to
renew the policy every third year. The changes to the
Directors’ Remuneration Policy reflect increasing the
salary cap to the current maximum market level and
developments in best practice guidance since it was
last renewed. The increase in the salary cap is simply to
provide suitable future flexibility as Mr Glasenberg has
confirmed that he would not accept any salary increase
over the life of the policy.
• Details of the implementation of our reward policy in
2019 including:
– the governance surrounding pay decisions in 2019,
members of the Committee and its advisers in 2019
– details of what was paid to Directors in respect of
their service on the Board during the financial year
ended 31 December 2019.
110
Glencore Annual Report 2019
Part A–Directors’ Remuneration Policy
The Directors’ Remuneration Policy as set out in this
section of the report will take effect for all payments
made to Directors from the date of the 2020 AGM. Whilst
it does not differ materially from that approved at the
2017 AGM, the Policy approved by shareholders at the
2017 AGM will apply until approval is obtained for the
new Policy. Any changes to the policy are highlighted
where relevant.
UK legislation and related investor guidance encourages
companies to disclose a cap within which each element
of remuneration policy will operate. Although not subject
to this legislation, the Committee has set an annual cap
for each element of remuneration under the maximum
opportunity column which will apply until a revised
policy is approved by shareholders.
The General Policy table must be read alongside the
notes set out on page 114 which together set out and
explain our Remuneration Policy. The Policy for the
Executive Directors currently only applies to Mr
Glasenberg as he is the only Executive Director.
General Policy
Elements of the package
Remuneration Policy for the Directors is summarised
in the table below:
General Policy for Executive Directors
(this section does not technically form part of the
Directors’ Remuneration Policy and is for information only)
We have the same philosophy as any other Remuneration
Committee, namely to set the Company’s remuneration
policies and practices so that they promote the
long-term success of the Company and support the
implementation of the Group’s strategy while aligning
the interests of the Executive Directors and executives
with those of shareholders generally. This policy has
consistently underpinned our entire approach to
executive remuneration.
The Committee is satisfied that the remuneration policy is
in the best interests of shareholders and does not raise
any environmental, social or governance issues and does
not promote excessive risk taking.
One exceptional aspect of our CEO’s remuneration is that,
at his instigation and reflecting his status as a major
shareholder, he does not participate in bonus or LTI
arrangements, a policy which will continue into 2020. As a
result, we are currently able to set overall remuneration for
our CEO at significantly lower levels than in comparable
companies. The Committee believes that his significant
personal shareholding creates sufficient alignment of
interest with shareholders in the absence of participation
in a bonus or LTI arrangement. However, the Committee
accepts that any successor would require participation in
variable pay plans on market competitive terms which
would necessitate further changes to this policy.
Glencore Annual Report 2019
111
Strategic reportFinancial statementsGovernanceAdditional information Directors’ remuneration report
For the year ended 31 December 2019 continued
Elements of the package
Base salary
Benefits
Provides market competitive fixed remuneration that
rewards relevant skills, responsibilities and contribution
To provide appropriate supporting non-monetary benefits
Policy and operation
Provides appropriate insurance cover benefits.
Values are shown in the single figure table on page 116 but
may fluctuate without the Committee taking action.
The Company may periodically change the benefits available
to staff for the office at which an Executive Director works in
which case the Director would normally be eligible to receive
the amended benefits on similar terms to all relevant staff. In
the case of Mr Glasenberg, this would be expected to mean
employees generally in the Baar office.
Maximum opportunity
Benefits received by Mr Glasenberg comprise salary loss
(long-term sickness) and accident insurance/travel insurance.
A monetary limit of $20,000 p.a for Mr Glasenberg has been
set with a limit of $100,000 applying to any successor.
Performance measures
n/a
Key changes to last approved policy
Setting limit in line with market levels
Policy and operation
Salaries are positioned within a market competitive range for
companies of a similar size and complexity.
The Committee does not slavishly follow data but uses it
as a reference point in considering, in its judgement, the
appropriate level having regard to other relevant factors,
including corporate and individual performance and any
changes in an individual’s role and responsibilities. Base
salary is paid monthly in cash.
Maximum opportunity
Base salaries are reviewed annually with the next review due
to take place in December 2020.
The Committee has not increased Executive Director salary
levels since the Company’s IPO in May 2011, reflecting his
status as a significant shareholder.
Mr Glasenberg, the CEO, is the only Executive Director on
the Board. A base salary cap of $2 million p.a. has been set
This cap will increase in line with UK RPI from 24 May 2020
being the date at which the cap is proposed to be approved.
This is simply a cap and, in practice, we would expect actual
increases to be limited to the average level of increase
awarded to staff at the Company’s headquarters in Baar,
Switzerland (except where there is a meaningful increase in
the scope of the role or an appointment is initially at a below
market level).
Performance measures
Not applicable (n/a)
Key changes to last approved policy
Increase salary cap to $2 million and include an RPI uplift to
the salary cap
Pension
Significant Personal Shareholdings
Provides basic retirement benefits which reflects local
market practice
Aligns the interests of executives and shareholders
Policy and operation
Mr Glasenberg participates in the defined contribution
scheme for all Baar-based employees.
Policy and operation
The Committee has set a formal shareholding requirement
for Executive Directors of 500% of salary.
Maximum opportunity
An annual cap on the cost of provision of retirement benefits
of $150,000 per Executive Director has been set.
Any Executive Director’s benefit will be aligned with the
average percentage contribution or entitlement available to
staff in the relevant market.
Performance measures
n/a
Key changes to last approved policy
None
Usually to be achieved within 5 years of Board appointment.
An Executive Director will normally be required to retain the
lower of the actual holding on stepping down from the Board
and such shares as then represents the policy level of 500% of
salary for 2 years after stepping down (although the Board
may relax this requirement in appropriate cases) with such
policy enforceable through a requirement to lodge such
shares at the Company’s request.
Maximum opportunity
n/a
Performance measures
n/a
Key changes to last approved policy
Increased the headline level to 5x salary.
Added post-cessation guidelines.
112
Glencore Annual Report 2019
Elements of the package continued
Annual Bonus Plan
Long-Term Incentives
Supports delivery of short-term operational, financial and
strategic goals
Glencore Performance Share Plan incentivises the creation
of shareholder value over the longer term
Policy and operation
Annual Bonus plan levels and the appropriateness of
measures are reviewed annually to ensure they continue to
support the strategy.
50% of any Annual Bonus plan outcome to be deferred into
shares for a period of up to three years although the
Committee reserves discretion to alter the current practice
of deferral (whether by altering the portion deferred, the
period of deferral or whether amounts are deferred into
cash or shares).
The Committee to reserve discretion to reduce any formulaic
outcome if it is not considered appropriate in all the
circumstances.
Cash element paid in one tranche following the year-end.
Malus provisions apply to any amounts deferred.
Maximum opportunity
The Committee has set a maximum annual bonus level
of 200% of base salary p.a.
Performance measures
The performance measures applied may be financial,
non-financial and corporate, divisional or individual and in
such proportions as the Committee considers appropriate.
Additionally, the Committee will consider the outcomes
against pre-set targets following their calculation and may
moderate these outcomes to take account of a range of
factors including the Committee’s view of overall Company
performance in the year and the Committee specifically
reserves the ability to reduce payments if not satisfied that
any formulaic outcome is appropriate in all the
circumstances.
Key changes to last approved policy
Consistent with developments in best practice, deferral to
apply to at least 50% of the bonus and broad discretion to
reduce payment as required by the UK’s Corporate
Governance Code introduced.
Policy and operation
No Executive Director has, to date, participated, although this
will be kept under review to ensure it remains appropriate.
Awards will be subject to a performance period of at least
3 years followed by a further holding period of at least 2 years
during which shares may not ordinarily be sold (other than to
meet any tax liabilities arising).
Malus clauses apply.
The Company will honour the vesting of all awards granted
under previous policies in accordance with the terms of
such awards.
Maximum opportunity
Overall annual Executive Directors’ limit of 200% of salary for
LTI grants (recognising that this is less than the formal limit in
the plan).
Performance measures
Executive Directors do not at present participate in the plan
reflecting, in the case of the CEO, the significant alignment
achieved through his personal shareholding.
Accordingly, no performance conditions have been
established for Executive Directors. On any future
participation, the Committee may set such performance
conditions on LTI awards as it considers appropriate
(whether financial or non-financial and whether corporate,
divisional or individual).
The Committee specifically reserves the ability to reduce
payments if not satisfied that any formulaic outcome is
appropriate in all the circumstances.
Key changes to last approved policy
Clarify that awards will be subject to a holding period.
Glencore Annual Report 2019
113
Strategic reportFinancial statementsGovernanceAdditional information Directors’ remuneration report
For the year ended 31 December 2019 continued
Elements of the package continued
Notes to the Policy table
1.
2.
Mr Glasenberg, the only Executive Director, has
received no salary increase since it was set in May 2011,
although the currency of payment for all Directors was
changed to the US dollar, the Company’s functional
currency, on 1 January 2014.
Differences between the policy on remuneration for
Directors from the policy on remuneration of other
employees: the only Executive Director has waived
any entitlement to participate in the variable pay
arrangements. Arrangements also differ from its pay
policies for Group employees as necessary to reflect the
appropriate market rate position for the relevant roles.
In particular, Mr Glasenberg’s pension benefits are in
accordance with those provided to other Swiss-based
employees and do not include any enhancement.
3.
For 2019, all remuneration and fees were paid in
US Dollars except for pension contributions and
the provision of benefits which were provided in
Swiss Francs.
Chairman and Non-Executive Director fees
Reflects time commitment, experience, global nature and
size of the Company
Policy and operation
The objective in setting the fees paid to the Chairman and
the other Non-Executive Directors is to be competitive with
other listed companies of equivalent size and complexity.
Fee levels are periodically reviewed by the Board (for
Non-Executives) and the Committee (for the Chairman). In
both cases, the Company does not adopt a quantitative
approach to pay positioning and exercises judgement as to
what it considers to be reasonable in all the circumstances as
regards quantum.
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.
Reasonable business related expenses are reimbursed
(including any tax thereon).
Non-Executive Directors are not eligible for any other
remuneration or benefits of any nature.
Reviewed every year with the next review due to take place in
December 2020.
Maximum opportunity
Fees are paid monthly in cash.
Aggregate fees for all Non-Executive Directors (including
the Chairman) are subject to the cap set in the Articles of
Association. This is currently set at $5,000,000.
Performance measures
n/a
Key changes to last approved policy
None
114
Glencore Annual Report 2019
Recruitment Remuneration Policy
The Company’s Recruitment Remuneration Policy aims to give the Committee sufficient flexibility to secure the
appointment and promotion of high-calibre executives to strengthen the management team and secure the skill
sets to deliver our strategic aims.
• The starting point for the Committee will be to look to the
General Policy for Executive Directors as set out above
and structure a package in accordance with that Policy.
However, the Policy was developed having regard to the
specific circumstances of the current Executive Director and
therefore (consistent with the UK regulations) for a newly
appointed Executive Director the Committee is not
constrained by the caps on fixed pay within the Policy on
a recruitment or at any subsequent annual review within
the life of this Policy as approved by shareholders. The
Committee will not pay more than it considers to be
necessary to secure the recruitment having regards to
appropriate market rates and evolving best practice
• For an internal appointment, any variable pay element
awarded in respect of the prior role may either continue on
its original terms or be adjusted to reflect the new
appointment as appropriate
• For external and internal appointments, the Committee
may agree that the Company will meet certain relocation
expenses as they consider appropriate and/or to make a
contribution towards legal fees in connection with agreeing
employment terms. Such costs will be outside the formal
caps and will be limited to two years
• The Committee reserves the right to make awards of
incentive pay that are necessary to secure a candidate, which
may include either awards to compensate for the forfeiture
of incentive awards in a previous employer or to provide
appropriate incentives for a new recruit to the Group. Details
of any such awards will be appropriately disclosed
• Where it is necessary to make a recruitment related pay
award to an external candidate, the Company will not pay
more than is, in the view of the Committee, necessary and
will in all cases seek, in the first instance, to deliver any
such awards under the terms of the existing incentive pay
structure. It may, however, be necessary in some cases to
make such awards on terms that are more bespoke than
the existing annual and equity-based pay structures in the
Group in order to secure a candidate
• All such awards for external appointments, whether
under the Annual Bonus plan, Performance Share Plan or
otherwise, to compensate for awards forfeited on leaving
a previous employer will take account of the nature,
time-horizons and performance requirements on those
awards. In particular, the Committee’s starting point will be
to ensure that any awards being forfeited which remain
subject to outstanding performance requirements (other
than where these are substantially complete) are bought-
out with replacement requirements and any awards with
service requirements are bought out with similar terms.
However, exceptionally the Committee may relax those
obligations where it considers it to be in the interests of
shareholders and those factors are, in the view of the
Committee, equally reflected in some other way, for
example through a significant discount to the face value of
the awards forfeited. It will only include guaranteed sums
where the Committee considers that it is necessary to
secure the recruitment
• For the avoidance of doubt, where recruitment related
awards are intended to replace existing awards held by a
candidate in an existing employer, the maximum amounts
for incentive pay as stated in the general policies will not
apply to such awards. The Committee has not placed a
maximum limit on any such awards which it may be
necessary to make as it is not considered to be in
shareholders’ interests to set any expectations for
prospective candidates regarding such awards. Any
recruitment-related awards which do not replace awards
with a previous employer will be subject to the limits on
incentive awards as detailed in the general policy
The elements of any package for a new recruit and the approach taken by the Committee in relation to setting each
element of the package will be consistent with the Executive Directors’ Remuneration Policy described in this report,
as modified by the above statement of principles where appropriate.
A new Non-Executive Director would be recruited on the terms explained above in respect of the main Policy for
such Directors.
Glencore Annual Report 2019
115
Strategic reportFinancial statementsGovernanceAdditional information Directors’ remuneration report
For the year ended 31 December 2019 continued
Termination Policy Summary
In practice, the facts surrounding any termination do not always fit neatly into defined categories for good or bad
leavers. Therefore, it is appropriate for the Committee to consider the suitable treatment on a termination having
regard to all of the relevant facts and circumstances available at that time. Further, in practice no Executive Director
has, to date, participated in the PSP so the Policy remains to be tested. This Policy applies both to any negotiations
linked to notice periods on a termination and any treatment which the Committee may choose to apply under the
discretions available to it under the terms of the annual bonus and LTI arrangements. The potential treatments on
termination under these plans are summarised below.
Incentives
Good leaver
Bad leaver
If a leaver is deemed to be a “good leaver”; i.e. leaving
through, serious ill health or death or otherwise at the
discretion of the Committee
If a leaver is deemed to be a “bad leaver”; typically
voluntary resignation or leaving for disciplinary reasons
Annual Bonus
Pro-rated bonus
No awards made
Deferred element
of bonus
LTIP
Typically retained for the balance of the deferral period
(although the Committee may exceptionally approve
early release)
Will receive a pro-rated award (if applicable, subject to
the application of the performance conditions at the
normal measurement date.)
Committee discretion to disapply pro-rating
May be retained or forfeited at Committee discretion
All awards will normally lapse.
The UK legislation does not require the inclusion of a cap or limit in relation to payments for loss of office. The
Committee will take all relevant factors into account in deciding whether any discretion should be exercised in an
individual’s favour in these circumstances, and the Committee will aim to ensure that any payments made are,
in its view, appropriate having regard to prevailing best practice guidelines. The Committee may also, after taking
appropriate legal advice, sanction the payment of additional sums in the settlement of potential legal claims.
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 waived entitlement to all
variable elements for 2019, 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 is set at a moderately 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 2019, Mr Glasenberg’s base salary was paid in US
dollars and his benefits and pension contributions were
paid in Swiss francs, as described above and in the
following single figure table.
Fixed
• Consists of base salary, benefits and pension
• Base salary is applicable to both 2018 and 2019
• 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
Benefits
$’000
Pension
$’000
Total Fixed
$’000
1,447
4
52
1,503
On-target
and
Maximum
Based on what the Executive 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
• LTI: He does not currently participate in the
Performance Share Plan
Directors’ service contracts
Executive Director’s Contract
The table below summarises the key features of the
service contract for Mr Glasenberg, the only person who
served as an Executive Director during 2019.
All Directors’ contracts and letters of appointment will be
available for inspection on the terms to be specified in
the Notice of 2020 AGM.
Provision
Service contract terms
Notice period Twelve months’ notice by either party
Contract date 28 April 2011 (as amended on 30 October 2013)
Expiry date
Rolling service contract
Termination
payment
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)
Change
in control
On a change of control of the Company, no
provision for any enhanced payments, nor for any
liquidated damages
116
Glencore Annual Report 2019
External appointments
None currently although Mr Glasenberg was for part
of 2019 a non-executive director of Rosneft.
He assigned to the Group the compensation received
in relation to that appointment.
The appropriateness of any future appointment 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.
The annual fees are paid in accordance with a
Non-Executive Director’s role and responsibilities.
The Chairman’s fee is inclusive of all his committee
responsibilities. The fees payable for 2019, which were
unchanged from 2018 except for the addition of fees
for membership of the ECC Committee, are as follows:
US$‘000
Directors
Chairman
Senior Independent Director
Non-Executive Director
Committee Fees:
ECC
Member
Remuneration
Chair
Member
Audit
Chair
Member
Nomination
Chair
Member
HSEC
Chair
Member
Investigations
Member
1,150
200
135
50
45
25
60
35
40
20
125
40
40
Part B – Implementation Report
Implementation Report – Unaudited Information
Remuneration Committee
Membership and experience of the Remuneration
Committee
The members of the Committee provide a useful balance
of skills, experience and perspectives to provide the
critical analysis required in carrying out the Committee’s
function. Each of Messrs John Mack, Martin Gilbert, and
Leonhard Fischer (until 2019), and Kalidas Madhavpeddi
(from 2020) has had a long career in the management
of large 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 97.
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:
glencore.com/who-we-are/governance
Its principal responsibilities are, on behalf of the Board, to:
• Determine and agree with the Board the framework
for the remuneration of the Company’s Chairman,
the Chief Executive and the Executive Directors
• Regularly review the appropriateness and relevance
of the Remuneration Policy
• Establish the remuneration package for the Executive
Directors including the scope of pension benefits
• Determine the remuneration package for the
Chairman, in consultation with the Chief Executive
• Oversee schemes of performance related
remuneration (including share incentive plans),
and determine awards for the Executive Directors
(as appropriate)
• Ensure that the contractual terms on termination
for the Executive Directors 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. Additionally, the Committee
seeks to ensure that the incentive structure for the
Group’s senior management does not raise HSEC or
governance risks by inadvertently promoting and/or
rewarding behaviours that are not aligned with the
Group policies, values and culture.
Remuneration Committee meetings
The Committee met two times during the year and
considered, amongst other matters, the Remuneration
Policy and the packages applicable to the Chairman,
the CEO and senior management, 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; however, they do not participate
in any decisions concerning their own remuneration.
Glencore Annual Report 2019
117
Strategic reportFinancial statementsGovernanceAdditional information Directors’ remuneration report
For the year ended 31 December 2019 continued
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.
Performance graph and table
This graph shows the value to 31 December 2019, 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.
FIT’s fees for this advice in respect of 2019 were $58,491
(2018: $13,921). FIT’s fees were charged on the basis of
the firm’s standard terms of business for advice provided.
FIT also provided advice to Glencore Agriculture Limited,
in which Glencore owns a 49.9% interest, on the
development of a remuneration policy, for which it
charged $36,900.
The Committee also receives advice from the
Company Secretary.
Relative importance of remuneration spend
The table below illustrates the change in total
remuneration, distributions paid and net profit from
2018 to 2019.
Distributions and buy-backs
attributable to equity holders
Net income/(loss) attributable
to equity holders
Total remuneration
2019
US$m
2018
US$m
5,028
4,841
(404)
5,231
3,408
5,063
The figures presented have been calculated on the
following bases:
• Distributions and buy-backs – distributions paid
and shares bought back during the year
• Net income/(loss) attributable to equity holders
– our reported net loss in respect of the financial year.
• Total remuneration – represents total personnel costs
as disclosed in note 23 to the financial statements
which includes salaries, wages, social security, other
personnel costs and share-based payments
The UK reporting regulations also require that a TSR
performance graph is supported by a table summarising
aspects of CEO remuneration, as shown below for the
same period as the TSR performance graph:
Performance
20
0
-20
-40
-60
-80
-100
19 May
2011
4.6
(41.8)
30 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
30 Dec
2016
29 Dec
2017
31 Dec
2018
31 Dec
2019
Glencore
FTSE 350 Mining
CEO single figure remuneration since 2011
Annual
variable
element
award rates
against
maximum
opportunity2
Long-term
incentive
vesting
rates against
maximum
opportunity2
Single figure
of total
remuneration1
(US$’000)
2019
Ivan Glasenberg
2018
2017
2016
2015
2014
2013
2012
2011
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
1,503
1,503
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 2019. 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.
118
Glencore Annual Report 2019
CEO pay ratio
The table below shows the ratio of CEO single figure
remuneration for 2019 to the comparable, indicative,
full-time equivalent total remuneration for employees
globally, whose pay is ranked at the 25th percentile,
median and 75th percentile. As we are a global group,
which is not headquartered in the UK and whose UK
employees represents less than one per cent. of all our
employees worldwide, we have decided to amend
this comparison to all employees. Our methodology
is fully compliant with the UK Remuneration
Regulations except that we have substituted all of
our employees for just the UK employees as specified
in the Regulations.
Year
Method
(A)
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
2019
A
176 : 1
71 : 1
23 : 1
Percentage change in pay of Chief Executive Officer
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. 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 comparison
has been made.
Most recent shareholder voting outcomes
The votes cast to approve the Directors’ remuneration
report, for the year ended 31 December 2018 at the 2019
AGM were:
Implementation Report – Audited Information
Non-Executive fees
The emoluments of the Non-Executive Directors for 2019
were as follows:
Name
Non-Executive Chairman
Anthony Hayward
Non-Executive Directors
Peter Coates
Leonhard Fischer
Martin Gilbert
Peter Grauer1
John Mack
Patrice Merrin
Gill Marcus
1 Retired on 6 March 2018.
Single figure table
Ivan Glasenberg
Salary
Benefits
Annual Bonus
Long-term incentives
Pension
Total
Total 2019
US$’000
Total 2018
US$’000
1,150
1,150
310
280
300
n/a
200
265
240
US$’000
2019
1,447
4
–
–
52
260
280
157
48
200
224
190
2018
1,447
4
–
–
52
1,503
1,503
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.
Votes “For”
Directors’ remuneration report
Votes
“Against”
Votes
“Withheld1”
The aggregate fees for all Non-Executive Directors for
2019 were $2,745,000 (2018: $2,509,000).
97.16%
(10,432,283,849)
2.84%
(305,386,249)
(85,133,166)
1
A vote withheld is not counted in the calculation of the proportion of votes for and
against the resolution.
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.
The total emoluments of all Directors for 2019
(including pension contributions for Mr Glasenberg)
were $4,248,000 (2018: $4,012,000).
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
proposed formal share ownership guideline for Executive
Directors of 500% 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
Chair of Remuneration Committee
4 March 2020
Glencore Annual Report 2019
119
Strategic reportFinancial statementsGovernanceAdditional information Directors’ report
For the year ended 31 December 2019
Company
Secretary
John Burton
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 2019. 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.
120
Glencore Annual Report 2019
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.
Financial results and distributions
The Group’s financial results are set out in the financial
statements section of this Annual Report.
A total capital distribution of US$0.20 per share was
paid in two instalments in 2019 in respect of the 2018
financial year.
The Board is recommending to shareholders an
aggregate capital distribution of US$0.20 per share
in respect of the 2019 financial year as further detailed
on page 51.
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 25
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 26 and 27 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.
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.
Greenhouse gas emissions
A summary of the Group’s greenhouse gas emissions
is included on pages 16–23.
Taxation policy
Our Tax Policy: glencore.com/group-tax-policy
and our most recent Payments to Governments report:
glencore.com/payments-to-governments-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.
Directors’ interests
Details of interests in the ordinary shares of the Company
of those Directors who held office during 2019 are
given below:
Employee policies and involvement
Glencore has a diversity and recruitment policies that
aim to treat individuals fairly and not to discriminate
on the basis of gender, race, ethnicity, disability,
religion or beliefs, 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.
If disability occurs during employment, the Group seeks
to accommodate that disability where reasonably
possible, including with appropriate training.
The Group’s Code of Conduct and other policies support
and protect the interests of employees in a number
of ways such as requiring 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, corporate website and via emails.
A range of information is made available to employees,
including all policies and procedures 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 30–33.
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 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 2019, together with their
biographical details and other information, are shown
on pages 94–95.
Name
Executive Directors
Ivan Glasenberg
Non-Executive Directors
Anthony Hayward
Peter Coates
Leonhard Fischer
Martin Gilbert
John Mack
Gill Marcus
Patrice Merrin
Number of
Glencore
Shares
Percentage
of Total Voting
Rights
1,211,957,850
9.09
244,907
1,585,150
–
50,000
750,000
–
43,997
0.00
0.01
–
0.00
0.00
–
0.00
Share capital and shareholder rights
As at 31 January 2020, 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
1,261,887,525 shares are held in treasury and 108,374,217
shares are held by Group employee benefit trusts.
Major interests in shares
Taking into account the information available to
Glencore as at 31 January 2020, the table below shows
the Company’s understanding of the interests in 3% or
more of the total voting rights attaching to its issued
ordinary share capital:
Name of holder
Qatar Holding
Ivan Glasenberg
BlackRock Inc
Harris Associates
Daniel Maté
Aristotelis Mistakidis
Number
of shares
1,221,497,099
1,211,957,850
759,873,369
727,656,874
454,136,143
450,175,134
Percentage of
Total Voting
Rights
9.16
9.09
5.70
5.46
3.41
3.38
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 glencore.com/who-we-are/
governance/. 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 submit resolutions for proposal
at AGMs. None of the ordinary shares carry any special
rights with regard to control of the Company.
Glencore Annual Report 2019
121
Strategic reportFinancial statementsGovernanceAdditional information Directors’ report
For the year ended 31 December 2019 continued
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. On a poll, every
holder of ordinary shares present in person or by proxy
shall have one vote for every share of which he or she 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 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.
122
Glencore Annual Report 2019
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.
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
In February 2019, the Company renewed its buyback
programme, which had started in July 2018.
In 2019, the Company purchased 678,315,262 of its own
ordinary shares. The authority to purchase own shares
was approved by the shareholders on 9 May 2019. The
Directors will seek a similar authority at the Company’s
AGM to be held in 2020.
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 26 and 27 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, which starts on page 46.
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.
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. The
legislation governing the preparation and dissemination
of the Company’s financial statements may differ from
legislation in other jurisdictions.
Signed on behalf of the Board
John Burton
Company Secretary
4 March 2020
Longer-term viability
In accordance with provision 31 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 75 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 or she
ought to have taken as a director in order to make
himself or herself 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.
In virtually all circumstances, a fair presentation will
be achieved by compliance with all applicable IFRSs.
The Directors confirm that the Annual Report and
accounts taken, as a whole, is fair, balanced and
understandable, and provides the information necessary
for shareholders to assess the performance, strategy and
business model of the Company.
Glencore Annual Report 2019
123
Strategic reportFinancial statementsGovernanceAdditional information Directors’ report
For the year ended 31 December 2019 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 8 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 18 to the financial statements
See note 18 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
• 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 2019 were approved on the date
below by the Board of Directors.
Signed on behalf of the Board:
Anthony Hayward
Chairman
4 March 2020
Ivan Glasenberg
Chief Executive Officer
124
Glencore Annual Report 2019
Sharing
knowledge and
experience
across sites
Openness
Danielle Bell
Plant Metallurgist – Mount Isa
Mines, Australia
Danielle joined Glencore’s graduate
programme in 2013 and now works as a
metallurgist at the copper concentrator.
“There is a generous mentoring spirit,” she
says, “Mining sites share their knowledge
and experience.”
It’s this openness – one of our core
values – that has helped her to learn the
complexities of mining and succeed in
her role.
See more stories like this
Visit Glencore.com and
follow us on social media
Financial
statements
137
Independent Auditor’s Report
to the members of Glencore plc 126
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
140
138
143
142
139
Glencore Annual Report 2019
125
Strategic reportFinancial statementsGovernanceAdditional information 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 of Glencore plc and its subsidiaries (together “the Group”):
• give a true and fair view of the state of affairs of the Group as at 31 December 2019 and of the Group’s loss 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 34.
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 Financial Reporting Council’s (the “FRC’s”) Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
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:
• Government investigations;
• Impairments of non-current assets;
• Revenue recognition;
• Fair value measurements;
• Classification of financial instruments;
• Credit and performance risk; and
• Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes.
Our assessment of the Group’s key audit matters is broadly consistent with 2018, with the “United States
Department of Justice Investigation” key audit matter of 2018 now expanded and renamed “Government
investigations” to incorporate additional audit focus areas following announcements of the Commodity
Futures Trading Commission (the “CFTC”) and the UK Serious Fraud Office (the “SFO”) investigations in 2019.
We determined materiality for the Group to be $250 million (2018: $250 million), based on the average 3-year
adjusted pre-tax profit.
We focused our Group audit scope primarily on the audit work at 42 components, representing the Group’s
most material marketing operations and industrial assets. These 42 components account for 96% of the
Group’s net assets, 96% of the Group’s revenue and 90% of the Group’s Adjusted EBITDA (refer to segment
information in note 2 to the financial statements).
Materiality
Scoping
Significant changes
in our approach
There were no significant changes to our audit approach when compared to 2018 other than the increased
procedures on the “Government investigations” key audit matter following the announcements of additional
government investigations during the year.
126
Glencore Annual Report 2019
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in the Basis of preparation section of note 1 to the
financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements and their identification of any
material uncertainties to the Group’s ability to continue as a going concern over a period of
at least twelve months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and
related risks including where relevant the impact of Brexit, the requirements of the applicable
financial reporting framework and the system of internal control. We evaluated the directors’
assessment of the Group’s ability to continue as a going concern, including challenging the
underlying data and key assumptions used to make the assessment, and evaluated the
directors’ plans for future actions in relation to their going concern assessment.
Going concern is the basis of
preparation of the financial
statements that assumes an
entity will remain in operation
for a period of at least 12 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 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 74 to 89 that describe the principal risks, procedures to identify
emerging risks, and an explanation of how these are being managed or mitigated;
• the directors’ confirmation on page 100 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 75 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
Viability means the ability of the
group to continue over the time
horizon considered appropriate
by the directors.
We confirm that we have
nothing material to report, add
or draw attention to in respect
of these 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.
Glencore Annual Report 2019
127
Strategic reportFinancial statementsGovernanceAdditional information Independent Auditor’s Report to the members of Glencore plc
continued
Government investigations
Description of key audit matter
The Group is subject to certain investigations by regulatory and
enforcement authorities as disclosed in Note 31 to the financial
statements. Plaintiffs have also filed a securities class action in
connection with these investigations. The Board discussions on
this matter are set out on page 101 and the Group’s discussion
on the Laws and enforcement principal risk and uncertainty are
set out on pages 80–81.
The Investigations Committee of the Board, is overseeing
the Group’s response to these investigations. The Group has
engaged external legal counsel and forensic experts to assist
the Group in responding to the various investigations, to
represent it in litigation and to perform additional investigations
at the request of the Investigations Committee covering various
aspects of the Group’s business.
The Group has identified facts that may be relevant to
the investigations and has shared these facts with the
relevant authorities.
The Group is continuing to co-operate with the various
regulatory and enforcement authorities on further subpoenas
and information requests received.
At this stage of the investigations, the Group and its legal
advisors believe that the length of the investigations and the
monetary impact from the resolutions thereof, such as these
may be, cannot be determined but may be material.
The judgement of the Investigations Committee (guided by the
General Counsel) is needed to determine whether an obligation
exists and a provision should be recorded at 31 December 2019
in accordance with the accounting criteria set out under IAS 37
Provisions, Contingent Liabilities and Contingent Assets.
The Investigations Committee has concluded that no present
obligation exists as at 31 December 2019. The Group has thus
disclosed as a contingent liability (under IAS 37) that the timing
and amount of any financial obligations (such as fines, penalties
or damages, which could be material) or other consequences,
including external costs arising from any of the various
investigations and the class action suit, are not possible to
predict and estimate at the end of the reporting period.
Consequently no liability has been recognised, nor has any
estimate of the contingent liability been disclosed, in relation to
these matters in the consolidated statement of financial
position at 31 December 2019.
We identified a key audit matter related to the risk that
a material provision is required to settle the various
investigations, which is not recorded in the current year’s
financial statements. As a result, the disclosure as a contingent
liability may not be adequate.
How the scope of our audit responded
to the key audit matter
Our procedures regarding compliance with laws and
regulations included:
• We obtained an understanding of the Group’s compliance
policies, procedures and controls, including the Group’s
procedures to mitigate the risk of and respond to allegations
of fraud, bribery and corruption.
• We tested the Group’s controls over the selection,
appointment and renewal of intermediaries.
• We increased our professional scepticism and maintained
a high level of vigilance to possible indications of significant
non-compliance with laws and regulations relating to fraud,
bribery and corruption whilst carrying out our other audit
procedures. We enhanced our audit procedures to identify
and investigate any suspicious payments in cash or
otherwise. Specifically, we reassessed and customised
search parameters within journal entry testing for key words
relevant to cash payments and payments to governments.
We scrutinised expense accounts for evidence of improper
payments and expanded inquiries with local management
regarding the payment process and compliance with group
compliance policies in regards to payments to intermediaries
or governments. This analysis was in addition to our standard
journal entry testing procedures.
• We made enquiries from Group and in-scope component
management whether the Group is in compliance with laws
and regulations relating to fraud, money laundering, bribery
and corruption.
In addition and more specifically in response to the government
investigations we performed the following:
• We attended regular briefings from the General Counsel and
the external legal counsel during the year.
• We continued to understand and challenge the adequacy of
the scope and outcomes of the work of external legal counsel
and the appointed forensic experts (“the advisors”).
• We considered whether the advisors’ scope and outcomes as
described to us were sufficient to inform the Investigations
Committee’s assessment and representation of whether
an obligation exists and a provision should be recorded at
31 December 2019, and as to whether a reliable estimate of
any contingent liability could be disclosed.
• We enquired of the Investigations Committee and the
General Counsel as to their awareness of any identified
known or likely non-compliance from the investigations to
date and whether any such non-compliance could result in a
potential material outflow (penalty or fine) and whether there
is a present obligation at 31 December 2019.
• We cross checked the results of these enquires against
the written confirmations received from the Group’s
legal advisers to identify any inconsistencies in
representations made.
• We worked with our Deloitte forensic experts, experienced
in similar investigations to assess the reasonableness of
the position of the Investigations Committee, the General
Counsel and the external counsel that the recognition criteria
of IAS 37 had not been met as at 31 December 2019.
Key observations
Based on the results of our procedures, we concluded that the timing of the completion of the investigations, and the outcome
thereof, are uncertain. Consistent with the Investigations Committee and the General Counsel, we concurred that no present
obligation exists to settle any potential fines or penalties associated with these investigations. We concurred that no estimate of
the contingent liability can yet be made and that the disclosure on “Legal and regulatory proceedings” in note 31 of the financial
statements is appropriate.
128
Glencore Annual Report 2019
Impairments of non-current assets
Description of key audit matter
The carrying value of the Group’s non-current assets within
the scope of IAS 36 Impairment of assets includes intangible
assets, property, plant and equipment (“PPE”), non-financial
instruments advances and loans, non-financial instruments
accounts receivable, and investments in associates and
joint ventures, and amounted to $80,496 million at
31 December 2019.
Various factors influence the demand for and profitability of
Glencore’s commodities and services, which management
need to monitor closely in assessing the recoverability of
non-current assets such as:
• The volatility in expected future prices of certain commodities
key to the Group (particularly coal, oil, copper, cobalt, zinc,
ferroalloys and nickel), foreign exchange rates, production
levels, operating costs and discount rates;
• Changes in mining and tax legislation, political and other
macro-economic developments;
• Responses to climate change impacts by regulators and
consumers, which could negatively impact demand for the
Group’s products, particularly coal; and
• Geological and other operational challenges that negatively
affect an assets performance over time.
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 assets and investments annually, as part of
the Group’s budgeting process.
As disclosed in note 6, pre-tax impairments totalling $1,954
million were recorded in PPE and intangible assets and $248
million of other impairments were recognised on various other
items. In addition, as disclosed in note 10, $785 million of pre-tax
impairments were recognised in investments in associates and
joint ventures. No impairment reversals were recorded during
the period.
The outcome of impairment assessments could vary
significantly were different assumptions applied. Refer to
sensitivity disclosures within “Key sources of estimation
uncertainty” in note 1, additional disclosures within notes 6 and
10, as well as the Audit Committee Report on page 107. As a
result, we have identified a potential risk of fraud through
management bias due to the significant estimation uncertainty
and subjectivity in certain judgements and key assumptions
applied by management in the impairment assessment.
Climate-related risks and considerations:
As described on pages 16 to 22, climate change, and the world’s
response to climate change, presents significant risks,
opportunities and uncertainties for Glencore’s business and
many of the commodity markets in which it operates. In
February 2019, Glencore announced a number of commitments
following engagement with investor signatories of the Climate
Action 100+ initiative as part of the global initiative to transition
to a low-carbon economy. In February 2020, Glencore
announced steps to further its commitment to the transition to
a low-carbon economy. Management’s assessment is that the
greatest risk posed by climate change to the Group’s financial
reporting is the risk of impairment of certain of the Group’s
non-current assets, specifically its thermal coal portfolio and
in particular, its Colombian coal assets which are exposed to
the decarbonisation of their main market in Europe.
How the scope of our audit responded
to the key audit matter
• We obtained an understanding of relevant controls in
management’s impairment assessment process.
• We reviewed management’s assessment of impairment risk
and their assessment of the indicators of impairment and
challenged the significant assumptions used. We considered
the risk of management bias in forecast assumptions and
estimates by analysing management’s inputs against third
party forecast and macroeconomic data, Deloitte’s
independent assessment of discount rates, and
reconciliations to latest internal budget information. For
certain benchmark coal prices we specifically performed a
look back assessment on actual sales prices achieved
compared to previous management price forecasts used in
impairment models.
• We performed an independent assessment of impairment
indicators and challenged management in areas where our
assessments differed.
• We challenged management’s sensitivity analysis by
performing independent sensitivity analyses with
management’s models, including for certain assets which
were not identified as having indicators of impairment but
have a higher risk of impairment due to lower available
headroom in discounted cash flow models, volatility in key
pricing assumptions, or the existence of operational
circumstances which may indicate potential for impairment.
• We challenged management’s determination of cash-
generating units (“CGUs”) against the requirements of the
accounting standards and our understanding of the nature of
the mining operations and the interdependency of cash
inflows between various assets/groups of assets.
• Where indicators of impairment (or impairment reversals)
were identified, we performed detailed testing on
management’s impairment model and where appropriate
based on our risk assessment, we utilised Deloitte valuation
and mining specialists to assess the appropriateness of
management’s underlying model inputs and key
assumptions and the integrity of technical mining inputs (e.g.
production parameters, recovery rates and resource
conversion rates). Production assumptions were cross
checked against life of mine plans, where applicable, as well
as reserves and resources estimates. Where possible,
benchmarking across similar assets in the same commodity
was performed.
• For non-financial instruments advances and loans and
non-financial instruments accounts receivable with a
combined carrying value of $5,149 million (see notes 11 and 13,
respectively), we challenged management’s assessment
of recoverability by reviewing supporting agreements and
obtaining evidence of current performance, correspondence
with the third party and any other information we are aware
of that may influence the third party’s ability to perform.
• 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.
Climate-related audit response:
• We worked with internal environmental experts in
considering potential climate change risk factors such as
stranded assets, green taxes, the potential impact of activities
of investors and other stakeholders, environmental
legislation, loss of customers or demand, and loss of sources
of–and access to–funding.
• We challenged management’s assertion on the impact of
climate-related risks relating to its thermal coal portfolio by
comparing management’s impact assessment with
reputable public industry projections of demand into the
future, such as the International Energy Agency’s (the “IEA”)
Stated- and Sustainable Development Policy Scenarios
and using management’s impairment models to perform
sensitivities on long-term price assumptions based
on external broker consensus price projections and
IEA projections.
Glencore Annual Report 2019
129
Strategic reportFinancial statementsGovernanceAdditional information Independent Auditor’s Report to the members of Glencore plc
continued
Impairments of non-current assets continued
Description of key audit matter
How the scope of our audit responded
to the key audit matter
• We reviewed the time period through which coal CGUs are
valued to assess if the assumptions are consistent with
management’s long-term investment plans, public
disclosures and external evidence about energy transition
timing and effects.
• We considered whether management’s sensitivity and
estimation uncertainty disclosures were adequate in the
context of climate change risks and uncertainties.
Key observations
Based on the results of our testing, we concluded that management’s assessment of impairment indicators was appropriate,
including in the context of climate change.
We concluded that key commodity pricing, foreign exchange and discount rate assumptions were in line with third party evidence
and our specialists’ acceptable ranges. We concluded that reasonable considerations and weight had been given by management
to the possible impacts of climate change on its thermal coal impairment assessments.
We found management’s disclosures on key assumptions and impairment sensitivities to be in compliance with
IFRS requirements.
Revenue recognition
Description of key audit matter
How the scope of our audit responded
to the key audit matter
Revenue for the year was $215,111 million (2018: $219,754 million).
Refer to note 1 for the revenue recognition accounting policies.
Due to the nature of marketing transactions as well as the fact
that substantially all output from industrial assets is sold by
the Group’s marketing divisions, we have identified revenue
recognition in the Marketing operations as a key audit matter.
We have reviewed Glencore’s revenue recognition policies for
compliance with the requirements of IFRS.
For marketing operations we:
• tested relevant controls surrounding the completeness and
accuracy of trade capture and the revenue and trade cycle;
• tested general IT controls surrounding major technology
Marketing operations:
Marketing related activities depend on the reliability of the
trade capture systems and their IT infrastructure environment.
applications and critical interfaces involving revenue
recognition and the completeness and accuracy of
trade capture;
• obtained third party confirmations where relevant to assess
completeness and accuracy of trade books and challenged
management where there were identified inconsistencies;
• tested the accuracy of trades entered into around the
reporting date within the trade book system by tracing and
agreeing a sample of trades from their source documents to
the trade book system;
• utilised data analytics tools to test the completeness,
occurrence and accuracy of realised revenue and to enhance
audit effectiveness over large transaction volumes
• agreed, on a sample basis, deliveries occurring on or around
31 December 2019 between the trade book system and the
relevant shipping documents to assess whether the IFRS
revenue recognition criteria were met for recorded sales; and
• challenged management on their interpretation and
application of the New IFRIC Guidance and reconciled
management’s assessment of the restatement impact to
appropriate supporting information.
We identified a risk that the capture of trades and their key
contractual terms within the trade book is incomplete or
inaccurate, either due to fraud or error, 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 control is transferred
under certain contractual arrangements with third parties,
especially on or around year-end, and in particular where the
sale of goods is connected with an agreement to repurchase
goods at a later date.
As the 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.
As described in note 1, the Group has updated its accounting
policies in line with the clarification and guidance from the IFRS
Interpretations Committee (“IFRIC”) on accounting for contracts
to sell a non-financial item that is physically settled (the “New
IFRIC Guidance”). It has resulted in the 2018 Revenue balance
being restated by reclassifying $770 million of credits from
“Cost of goods sold” to “Revenue”, in line with the requirements
of IAS 8. Refer to note 1.
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.
130
Glencore Annual Report 2019
Fair value measurements
Description of key audit matter
The Group holds $38,389 million in marketing inventories, loans,
accounts receivable, accounts payable, and other financial
assets and liabilities that are measured at fair value at 31
December 2019. These fair value measurements significantly
impact the Group’s results.
Determination of fair values of marketing inventories, and
financial assets and liabilities is a complex and subjective area
often requiring significant estimates, particularly where
valuations utilise unobservable inputs (e.g. price differentials,
credit risk assessments, market volatility and forecast
operational estimates). At 31 December 2019, total ‘Level 3’
financial assets and liabilities amounted to $433 million and
$464 million respectively.
We refer readers to “Key sources of estimation uncertainty”
within note 1 and additionally notes 11, 12, 13, 24, 25, 27, and 28.
Key observations
How the scope of our audit responded
to the key audit matter
We tested relevant 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.
We worked with financial instrument specialists embedded
within the audit team with experience in commodity trading,
to specifically test the evidence supporting significant
unobservable inputs utilised in ‘Level 3’ measurements in the
fair value hierarchy as set out in notes 11 and 28 to the financial
statements, which included assessing management’s valuation
assumptions against independent price quotes, recent
transactions, and other relevant documentation.
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 to be appropriate.
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.
The classification of contracts relating to the Group’s marketing
operations can be complex, particularly distinguishing sales
contracts where the Group physically delivers its own
production to a third party with no history of net settlement
occurring (“own use”), from those which form part of the
Group’s regular marketing operations and which are measured
at fair value through profit and loss.
We obtained an understanding of the trading strategies and
associated product flows within the Group’s marketing
departments, including assessment of the design and
implementation of the key controls over market risk
management using financial instrument specialists embedded
within the audit team with experience in commodity trading.
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 IFRS 9 Financial Instruments “own use” criteria.
Differences in classification affect the recognition of
associated gains and losses. Contracts which are designated
as “own use” are exempt from fair value measurement
(i.e. 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 challenged management’s judgement and conclusions
associated with the classification and accounting for new
significant arrangements and/or significant changes to existing
arrangements containing a financing element. Our challenge
included evaluation of the commercial substance of the
arrangements in the context of applicable IFRS guidance and
industry practice.
We assessed the adequacy of related disclosures in the financial
statements in accordance with the requirements of IFRS.
Refer to notes 1, 21, 27 and 28.
Key observations
Based on the results of our testing, we are satisfied that all significant assumptions applied in respect of the classification and
valuation of financial instruments are appropriate and that disclosures given around financial instruments are in accordance with
the requirements of IFRS.
Glencore Annual Report 2019
131
Strategic reportFinancial statementsGovernanceAdditional information Independent Auditor’s Report to the members of Glencore plc
continued
Credit and performance risk
Description of key audit matter
How the scope of our audit responded
to the 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 may be unwilling to take the deliveries or unable
to pay.
At 31 December 2019, total advances and loans and accounts
receivable classified as financial assets, as well as advances
repayable with product, amounted to $16,904 million.
Refer to notes 11, 13 and 27 and the Audit Committee Report on
page 108.
We obtained an understanding of internal controls relevant to
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 across the Group at year-end, with particular
focus on commodities demonstrating high price volatility
during the year, where the risk of non-performance is higher.
Key observations
We concluded that the Group’s provisioning in relation to counterparty and performance risk was appropriately assessed.
Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes
How the scope of our audit responded
to the key audit matter
We engaged Deloitte tax experts to assist in executing the
following audit procedures:
• We considered the appropriateness of management’s
assumptions and estimates to support the recognition of
deferred tax assets with reference to forecast taxable profits.
We challenged the appropriateness of management’s tax
utilisation model by comparing these forecasts against the
tax entities’ budgets or underlying asset life of mine plans;
• We challenged management’s current position regarding the
application of the 2018 DRC Mining Code, and negotiations
with the DRC tax authorities;
• We reviewed and challenged management’s assessment of
uncertain tax positions by reviewing correspondence with
local tax authorities and reviewing third party expert tax
opinions where appropriate, to assess the adequacy of
associated provisions and disclosures having consideration
of the new IFRIC 23 guidance; and
• We challenged management on the adequacy of disclosures
in the financial statements in relation to taxation, specifically
on the requirement for adequate assessment of uncertainties
and contingent liabilities.
Description of key audit matter
The global tax environment is complex, particularly with respect
to cross border transactions. There continues to be an increase in
enforcement activities, and increasingly stringent interpretations
of existing legislation by local revenue authorities.
As described in note 7, and the Audit Committee Report on
page 108, the legality of the immediate application of the 2018
DRC Mining Code enacted in 2018 is subject to legal challenge,
therefore judgement is required on how this legislation should
be interpreted and applied.
These developments give 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 and other exposures.
The new accounting interpretation, IFRIC 23 Uncertainty over
Income Tax Treatments, applicable from 1 January 2019,
provides further guidance on the recognition and
measurement requirements in IAS 12 Income Taxes when
there is uncertainty over income tax treatments, and the
Group is required to reassess its various tax exposures under
the measurement approach introduced by IFRIC 23.
As disclosed in note 7, at 31 December 2019, the Group has
recorded total deferred tax liabilities of $5,974 million and total
deferred tax assets of $1,477 million. Additionally, the Group has
$12,857 million of available 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 is disclosed in note 22.
Refer to “Key sources of estimation uncertainty” within note 1
and additional disclosures in notes 7 and 22, and the Audit
Committee Report on page 108.
Key observations
The results of our testing were satisfactory and we concurred that the recorded deferred tax assets and uncertain tax provisions
and related disclosures are appropriate.
132
Glencore Annual Report 2019
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
and performance
materiality
Group materiality: $250 million (2018: $250 million)
Group performance materiality: $175 million (2018: $175 million)
The applied materiality is approximately 5% of average 3-year adjusted pre-tax profit (2018: 5%), and equates
to less than 1% (2018: less than 1%) of equity.
Group
materiality
(US$ million)
250
250
Performance
materiality
(US$ million)
175
175
Maximum allowed
component
performance
materiality
(US$ million)
105
g
n
i
t
e
k
r
a
M
87.5 87.5
t
e
s
s
a
d
n
I
g
n
i
t
e
k
r
a
M
70.0
t
e
s
s
a
d
n
I
Audit Committee
reporting threshold
(US$ million)
12
12
● 2019
● 2018
Basis for determining
materiality and
performance
materiality
Consistent with the methodology applied in prior years, we have determined materiality by using a
percentage of the 3-year average (for 2019: 2017 – 2019) of adjusted pre-tax profits. The selected materiality
is 12.3% of current year adjusted pre-tax profit without the effect of averaging (2018: 3.5%).
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.
Group performance materiality for the 2019 audit has been set at $175 million (70% of Group materiality),
based on our past audit experience, which has indicated a low number of uncorrected misstatements noted
in prior years and the size and complexity of the Group. Similarly, component audit procedures are
performed with reference to the component performance materiality (see ranges applied below), which is
set at an appropriate percentage of the materiality applied at the individual component level.
Due to the diversified nature of the Group’s operations, we have historically introduced a maximum
allowed component performance materiality such that our scoping and component level procedures are
set at a level that is commensurate with the contributions of each component. The maximum permitted
component performance materiality for marketing operations is $105 million. Component performance
materiality for industrial assets is limited to $87.5 million owing to their lower contribution to pre-tax profits
on an individual basis.
The performance materialities applied to individual components ranged from $8 million to $105 million.
Rationale for the
benchmark applied
The pre-tax profits for the 2017-2019 years have been adjusted in determining materiality to exclude items
which, due to their nature and variable financial impact and/or expected infrequency of the underlying
events, are not considered indicative of the continuing operations of the Group. These ‘adjusting items’ are
outlined in notes 5 and 6 to the financial statements and include impairments and gains and losses of asset
disposals for example. If included, these would distort materiality year-on-year.
We consider 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 therefore provides a more appropriate base reflective of the scale of the Group’s size
and operations.
We have reported to the Audit Committee all audit differences in excess of $12 million (2018: $12 million), as well as differences
below this 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 and assessing the risks of material
misstatement at the Group level. Our scoping considered both quantitative and qualitative factors including a component’s
contribution to financial metrics (revenue, EBIT and Adjusted EBITDA), production output and qualitative criteria, such as being a
significant development project or exhibiting particular risk factors. Based on our continuing assessment, we scoped in audit work
at 42 components (2018: 42 components), representing the Group’s most material marketing operations and industrial assets, and
utilised 25 component audit teams (2018: 24 component audit teams) in 18 countries (2018: 20 countries).
• 24 components (2018: 27 components) were subject to a full scope audit; and
• 18 components (2018: 15 components) 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.
These 42 components account for 88% of the Group’s net assets (2018: 87%), 96% of the Group’s revenue (2018: 96%) and 90% of the
Group’s Adjusted EBITDA (2018: 93%).
Glencore Annual Report 2019
133
Strategic reportFinancial statementsGovernanceAdditional information
Independent Auditor’s Report to the members of Glencore plc
continued
Net assets (%)
Revenue (%)
Adjusted EBITDA (%)
12
18
70
4
96
10
90
Coverage
● Full audit scope
● Specified audit procedures
● Review and analytical procedures
Detailed audit instructions were sent to the auditors of these in-scope components. These instructions identified the significant
audit risks, areas of audit focus, the account balances, classes of transactions and disclosures considered material and their relevant
risks of material misstatement as assessed by the Group audit team. The instructions also set out the audit procedures to be
performed and set out the information to be reported back to the Group audit team and other matters relevant to the audit.
The Group audit team continued to follow a programme of regular telephone calls and on-site meetings with components
throughout the year. The on-site meetings are designed to enable the Group Audit Partner or another senior member of the Group
audit team to periodically meet with local management and the component audit team on a rotational basis. In 2019, the Group
audit team held in-person meetings with 17 components (2018: 11 components).
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 tested the consolidation process and carried out analytical procedures to confirm our conclusion that
there was no reasonable possibility of a risk of material misstatement in 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.
We have nothing to report
in respect of these matters.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
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 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.
134
Glencore Annual Report 2019
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.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud, are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then
design and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with
laws and regulations, our procedures included the following:
• Enquiring of senior management, internal audit, members of the legal and compliance functions, and the Audit and
Investigations Committees, including obtaining and reviewing supporting documentation, concerning the group’s policies and
procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
and
– reviewing internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations.
• Understanding the nature of the industry and sector, control environment and business performance including the design
of the Group’s remuneration policies, key drivers for directors’ and senior management remuneration, bonus levels and
performance targets.
• Discussing among the engagement team, including significant component audit teams, and involving relevant internal
specialists, including forensic, tax, mining, valuations and IT regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
As a result of the above, we identified potential for fraud in the following areas:
• Matters arising from the ongoing government investigations which could highlight control weaknesses in management’s
processes;
• Key sources of estimation uncertainty within management’s testing of impairment of non-current assets within the scope
of IAS 36; and
• Revenue transactions in marketing operations that occur close to period end and have a significant gross margin impact
which contain complex terms and/or may be reversed subsequent to period end.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on the provisions
of those laws and regulations that had a direct effect in the determination of material amounts and disclosures in the financial
statements or that had a fundamental effect on the operations of the group. The key laws and regulations we considered in this
context included the Companies (Jersey) Law 1991, Primary and Secondary Listing Rules, Disclosure and Transparency rules on
audit committees and corporate governance statements, the UK Corporate Governance code and related guidance, the FRC
Ethical Standards, the US Foreign Corrupt Practices Act, the US Anti-Money Laundering regulations and the UK Bribery Act 2010. In
addition, compliance with the Group’s various operating licenses, environmental regulations, and tax legislation in the jurisdictions
in which it operates are fundamental to the Group’s ability to continue operating in those jurisdictions.
Glencore Annual Report 2019
135
Strategic reportFinancial statementsGovernanceAdditional information Independent Auditor’s Report to the members of Glencore plc
continued
Audit response to risks identified
As a result of our risk identification and assessment as described above, the key audit matters related to the detection of
irregularities, including fraud, were: “Government investigations”, “Impairments of non-current assets” and “Revenue recognition”.
The key audit matters section of our report explains these matters in more detail and also describes the specific procedures we
performed in response to these key audit matters. In addition, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the Audit Committee, the Investigations Committee, General Counsel and external legal counsel
(where applicable) concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• performing focused analytical procedures on key financial metrics of non-significant components to identify any unusual or
material transactions that may indicate a risk of material misstatement and evaluating the business rationale of such
transactions;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence
with relevant regulatory and taxation authorities, where applicable; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments, assessing whether the judgements made in making accounting estimates are indicative of a potential bias, and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members,
including internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
Opinion on other matters 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 nothing to report
in respect of these matters.
• we have not received all the information and explanations we require for our audit;
• 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.
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 9 years,
covering the years ending December 2011 to December 2019. The Engagement Partner has rotated twice during this period, with
the most recent rotation being after the 2017 audit.
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).
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.
Geoffrey Pinnock, CA (SA)
for and on behalf of Deloitte LLP
Recognised Auditor
London, UK
4 March 2020
136
Glencore Annual Report 2019
Consolidated statement of income
For the year ended 31 December 2019
US$ million
Revenue
Cost of goods sold
Selling and administrative expenses
Share of income from associates and joint ventures
Net loss on disposals of non-current assets
Other expense – net
Impairments of non-current assets
Impairments of non-current financial assets
Dividend income
Interest income
Interest expense
(Loss)/income before income taxes
Income tax expense
(Loss)/income for the year
Attributable to:
Non-controlling interests
Equity holders of the Parent
(Loss)/earnings per share:
Basic (US$)
Diluted (US$)
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
The accompanying notes are an integral part of the consolidated financial statements.
Notes
3
10
4
5
6
6
10
7
17
17
2019
215,111
(210,434)
(1,391)
114
(43)
(173)
(2,322)
(86)
49
227
(1,940)
(888)
(618)
(1,506)
(1,102)
(404)
(0.03)
(0.03)
2018
Restated1
220,524
(211,468)
(1,381)
1,043
(139)
(764)
(1,452)
(191)
21
228
(1,742)
4,679
(2,063)
2,616
(792)
3,408
0.24
0.24
Glencore Preliminary Results 2019
Glencore Annual Report 2019
137
137
Strategic reportFinancial statementsGovernanceAdditional information Consolidated statement of comprehensive income
For the year ended 31 December 2019
US$ million
(Loss)/income for the year
Notes
2019
(1,506)
2018
2,616
Other comprehensive income
Items not to be reclassified to the statement of income in subsequent periods:
Defined benefit plan actuarial losses, net of tax of $19 million (2018: $10 million)
Gain/(loss) on equity investments accounted for at fair value through other comprehensive
income, net of tax of $11 million (2018: $2 million)
Gain due to changes in credit risk on financial liabilities accounted for at fair value through
profit and loss
Net items not to be reclassified to the statement of income in subsequent periods
Items that have been or may be reclassified to the statement of income in
subsequent periods:
Exchange gain/(loss) on translation of foreign operations
Losses on cash flow hedges, net of tax of $4 million (2018: $1 million)
Share of other comprehensive loss from associates and joint ventures
Items recycled to the statement of income
Net items that have been or may be reclassified to the statement of income
in subsequent periods
Other comprehensive income/(loss)
Total comprehensive (loss)/income
Attributable to:
Non-controlling interests
Equity holders of the Parent
The accompanying notes are an integral part of the consolidated financial statements.
23
10
16
10
25
(80)
337
(1)
256
117
(51)
(37)
–
29
285
(1,221)
(1,103)
(118)
(35)
(848)
–
(883)
(711)
(18)
(124)
218
(635)
(1,518)
1,098
(841)
1,939
Glencore Preliminary Results 2019
138
Glencore Annual Report 2019
138
Consolidated statement of comprehensive income
Consolidated statement of financial position
For the year ended 31 December 2019
As at 31 December 2019
US$ million
(Loss)/income for the year
Other comprehensive income
Items not to be reclassified to the statement of income in subsequent periods:
Defined benefit plan actuarial losses, net of tax of $19 million (2018: $10 million)
Gain/(loss) on equity investments accounted for at fair value through other comprehensive
income, net of tax of $11 million (2018: $2 million)
Gain due to changes in credit risk on financial liabilities accounted for at fair value through
profit and loss
subsequent periods:
Net items not to be reclassified to the statement of income in subsequent periods
Items that have been or may be reclassified to the statement of income in
Exchange gain/(loss) on translation of foreign operations
Losses on cash flow hedges, net of tax of $4 million (2018: $1 million)
Share of other comprehensive loss from associates and joint ventures
Items recycled to the statement of income
Net items that have been or may be reclassified to the statement of income
23
10
16
10
25
in subsequent periods
Other comprehensive income/(loss)
Total comprehensive (loss)/income
Attributable to:
Non-controlling interests
Equity holders of the Parent
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2019
(1,506)
2018
2,616
(80)
337
(1)
256
117
(51)
(37)
–
29
285
(1,221)
(1,103)
(118)
(35)
(848)
–
(883)
(711)
(18)
(124)
218
(635)
(1,518)
1,098
(841)
1,939
US$ million
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates and joint ventures
Other investments
Advances and loans
Other financial assets
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.
Notes
2019
2018
8
9
10
10
11
27
12
7
12
13
27
14
15
16
33
20
21
7
27
22
20
24
21
22
27
15
55,357
7,006
12,984
2,387
2,427
25
575
1,477
56,770
6,971
13,909
2,067
2,555
51
353
1,728
82,238
84,404
19,936
17,021
2,381
315
1,899
41,552
286
41,838
124,076
146
40,128
40,274
(1,038)
39,236
29,067
2,670
5,974
379
7,302
45,392
7,976
26,193
558
489
3,722
354
39,292
156
39,448
124,076
20,564
17,787
3,482
389
2,046
44,268
–
44,268
128,672
146
45,592
45,738
(355)
45,383
26,424
2,301
6,839
529
6,824
42,917
8,570
26,484
412
554
3,243
1,109
40,372
–
40,372
128,672
Glencore Preliminary Results 2019
138
Glencore Preliminary Results 2019
Glencore Annual Report 2019
139
139
Strategic reportFinancial statementsGovernanceAdditional information Consolidated statement of cash flows
For the year ended 31 December 2019
US$ million
Operating activities
(Loss)/income before income taxes
Adjustments for:
Depreciation and amortisation
Share of income from associates and joint ventures
Streaming revenue and other non-current provisions
Loss on disposals of non-current assets
Unrealised mark-to-market movements on other investments
Impairments
Other non-cash items – net1
Interest expense – net
Cash generated by operating activities before working capital changes
Working capital changes
Decrease in accounts receivable2
Decrease in inventories
Increase/(decrease) in accounts payable3
Total working capital changes
Income taxes paid
Interest received
Interest paid
Net cash generated by operating activities
Investing activities
Net cash used in acquisition of subsidiaries
Net cash received from disposal of subsidiaries
Exchangeable loan provided for the conditional acquisition of Astron Energy
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 by investing activities
1
2
3
Includes certain non-cash items as disclosed in note 5, share based remuneration and inventory net realisable value adjustments.
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
2019
2018
(888)
4,679
10
4
5
6
25
25
13/25
10
7,160
(114)
(296)
43
(47)
2,408
367
1,713
10,346
1,211
678
199
2,088
(2,301)
200
(1,604)
8,729
(123)
5
–
(125)
119
(4,712)
178
942
(3,716)
6,325
(1,043)
(647)
139
(139)
1,643
739
1,514
13,210
2,734
3,539
(4,948)
1,325
(1,740)
183
(1,419)
11,559
(2,922)
88
(1,044)
(19)
16
(4,687)
136
1,139
(7,293)
Glencore Preliminary Results 2019
140
Glencore Annual Report 2019
140
Consolidated statement of cash flows
For the year ended 31 December 2019
Consolidated statement of cash flows
For the year ended 31 December 2019
US$ million
Operating activities
(Loss)/income before income taxes
Adjustments for:
Depreciation and amortisation
Share of income from associates and joint ventures
Streaming revenue and other non-current provisions
Loss on disposals of non-current assets
Unrealised mark-to-market movements on other investments
Impairments
Other non-cash items – net1
Interest expense – net
Cash generated by operating activities before working capital changes
Working capital changes
Decrease in accounts receivable2
Decrease in inventories
Increase/(decrease) in accounts payable3
Total working capital changes
Income taxes paid
Interest received
Interest paid
Investing activities
Net cash generated by operating activities
Net cash used in acquisition of subsidiaries
Net cash received from disposal of subsidiaries
Exchangeable loan provided for the conditional acquisition of Astron Energy
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 by investing activities
1
Includes certain non-cash items as disclosed in note 5, share based remuneration and inventory net realisable value adjustments.
2 Includes movements in other financial assets, prepaid expenses and long-term advances and loans.
3 Includes movements in other financial liabilities, provisions and deferred income.
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2019
2018
(888)
4,679
10
4
5
6
25
25
13/25
10
7,160
(114)
(296)
43
(47)
2,408
367
1,713
10,346
1,211
678
199
2,088
(2,301)
200
(1,604)
8,729
(123)
5
–
(125)
119
(4,712)
178
942
(3,716)
6,325
(1,043)
(647)
139
(139)
1,643
739
1,514
13,210
2,734
3,539
(4,948)
1,325
(1,740)
183
(1,419)
11,559
(2,922)
88
(1,044)
(19)
16
(4,687)
136
1,139
(7,293)
US$ million
Financing activities1
Proceeds from issuance of capital market notes2
Proceeds from issuance of non-dilutive convertible bonds2
Purchase of call options on non-dilutive convertible bonds
Repayment of capital market notes
(Repayment)/proceeds from revolving credit facility
Proceeds from other non-current borrowings
Repayment of other non-current borrowings
Repayment of finance lease obligations under IAS 17
Repayment of lease liabilities under IFRS 16
Margin receipts/(calls) in respect of financing related hedging activities
(Repayment of)/proceeds from current borrowings
Proceeds from/(repayment of) U.S. commercial papers
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Purchase of own shares
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 period
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
1 Refer to note 20 for reconciliation of movement in borrowings.
2 Net of issuance costs relating to capital market notes of $25 million (2018: $4 million).
The accompanying notes are an integral part of the consolidated financial statements.
Notes
2019
2018
3,866
–
–
(3,167)
(29)
291
(325)
–
(358)
529
(682)
79
(24)
(305)
(2,318)
6
(2,710)
(5,147)
(134)
(11)
2,046
1,901
1,899
2
185
576
(95)
(3,650)
4,624
15
–
(72)
–
(507)
439
(634)
(58)
(343)
(2,005)
27
(2,836)
(4,334)
(68)
(33)
2,147
2,046
2,046
–
16
18
Glencore Preliminary Results 2019
140
Glencore Preliminary Results 2019
Glencore Annual Report 2019
141
141
Strategic reportFinancial statementsGovernanceAdditional information Consolidated statement of changes of equity
For the year ended 31 December 2019
Retained
earnings
2,244
3,408
(159)
3,249
(153)
–
8
–
–
(5)
–
Share
premium
51,340
–
–
–
–
–
–
–
–
–
(2,836)
Other
reserves
(Note 16)
(2,425)
–
(1,310)
(1,310)
–
–
Own
shares
(Note 16)
(1,575)
–
–
–
262
(2,005)
–
(1,207)
–
5
–
–
–
–
–
–
Total
reserves
and
retained
earnings
49,584
3,408
(1,469)
1,939
109
(2,005)
8
(1,207)
–
–
(2,836)
Total equity
attributable
to equity
holders
49,730
3,408
(1,469)
Share
capital
146
–
–
Non-
controlling
interests
(Note 33)
(300)
(792)
(49)
1,939
109
(2,005)
(841)
–
–
Total
equity
49,430
2,616
(1,518)
1,098
109
(2,005)
8
–
8
(1,207)
–
–
(2,836)
1,108
21
–
(343)
(355)
(99)
21
–
(3,179)
45,383
–
–
–
–
–
–
–
–
5,343
48,504
(4,937)
(3,318)
45,592
146
45,738
5,343
(404)
48,504
–
(4,937)
–
(3,318)
–
45,592
(404)
146
–
45,738
(404)
(355)
(1,102)
45,383
(1,506)
(118)
(522)
(115)
–
12
–
–
24
–
–
–
–
–
–
–
–
–
(2,710)
404
404
–
–
–
(418)
–
(20)
–
–
286
–
199
(2,318)
–
–
–
–
–
(118)
84
(2,318)
12
(418)
–
4
(2,710)
–
–
–
–
–
–
–
–
–
286
(1)
285
(118)
84
(2,318)
(1,103)
–
–
(1,221)
84
(2,318)
12
–
12
(418)
–
4
(2,710)
358
371
(4)
(305)
(60)
371
–
(3,015)
4,742
45,794
(4,971)
(5,437)
40,128
146
40,274
(1,038)
39,236
1 January 2018
Income for the year
Other comprehensive income
Total comprehensive income
Own share disposal1
Own share purchases1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries3
Acquisition/disposal of business4
Reclassifications
Distributions paid5
31 December 2018
1 January 2019
Loss for the year
Other comprehensive
(loss)/income
Total comprehensive loss
Own share disposal1
Own share purchases1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries3
Acquisition/disposal of business4
Reclassifications
Distributions paid5
31 December 2019
1 See note 16.
2 See note 19.
3 See note 33.
4 See note 25.
5 See note 18.
The accompanying notes are an integral part of the consolidated financial statements.
Glencore Preliminary Results 2019
142
Glencore Annual Report 2019
142
Consolidated statement of changes of equity
For the year ended 31 December 2019
Notes to the financial statements
Retained
earnings
Share
premium
Other
reserves
(Note 16)
Own
shares
(Note 16)
Total equity
Non-
attributable
controlling
Share
capital
to equity
holders
interests
(Note 33)
Total
equity
51,340
(2,425)
(1,575)
49,584
146
49,730
(300)
49,430
(1,207)
(1,207)
(1,207)
1,108
(2,836)
(2,836)
(2,836)
5,343
48,504
(4,937)
(3,318)
45,592
146
45,738
48,504
(4,937)
(3,318)
45,592
146
45,738
Total
reserves
and
retained
earnings
3,408
(1,469)
1,939
109
262
(2,005)
(2,005)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,310)
(1,310)
–
–
–
–
5
–
–
404
404
–
–
–
(418)
–
(20)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
199
(2,318)
8
–
–
(404)
286
(118)
84
(2,318)
12
(418)
–
4
(2,710)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,408
(1,469)
1,939
109
(2,005)
8
–
–
(404)
286
(118)
84
(2,318)
12
(418)
–
4
(2,710)
(792)
(49)
(841)
–
–
–
21
–
(343)
(355)
–
–
–
358
371
(4)
(305)
2,616
(1,518)
1,098
109
(2,005)
8
(99)
21
–
(3,179)
45,383
84
(2,318)
12
(60)
371
–
(3,015)
(355)
(1,102)
45,383
(1,506)
(1)
285
(1,103)
(1,221)
(2,710)
4,742
45,794
(4,971)
(5,437)
40,128
146
40,274
(1,038)
39,236
2,244
3,408
(159)
3,249
(153)
–
8
–
–
(5)
–
5,343
(404)
(118)
(522)
(115)
–
12
–
–
24
–
1 January 2018
Income for the year
Other comprehensive income
Total comprehensive income
Own share disposal1
Own share purchases1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries3
Acquisition/disposal of business4
Reclassifications
Distributions paid5
31 December 2018
1 January 2019
Loss for the year
Other comprehensive
(loss)/income
Total comprehensive loss
Own share disposal1
Own share purchases1
Equity-settled share-based
expenses2
Change in ownership interest
in subsidiaries3
Acquisition/disposal of business4
Reclassifications
Distributions paid5
31 December 2019
1 See note 16.
2 See note 19.
3 See note 33.
4 See note 25.
5 See note 18.
The accompanying notes are an integral part of the consolidated 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 and energy 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 battery, electronic, construction,
automotive, steel, energy and oil 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 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.
These consolidated financial statements were authorised for issue in accordance with the Director’s resolution on 4 March 2020.
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 for the
year ended 31 December 2019, and
• IFRS and interpretations as issued by the International Accounting Standards Board (IASB) effective for the year ended
31 December 2019.
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 (see note 34)
Judgement is required to determine when Glencore has control of subsidiaries or joint control of joint or other unincorporated
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 25 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.
Glencore Preliminary Results 2019
142
Glencore Preliminary Results 2019
Glencore Annual Report 2019
143
143
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
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.
Certain joint arrangements that are structured through separate vehicles including Collahuasi and Glencore Agri 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 10 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) Classification of transactions which contain a financing element (notes 20, 21 and 24)
Transactions for the purchase of commodities may contain a financing element such as extended payment terms. Under such an
arrangement, a financial institution may issue a letter of credit on behalf of Glencore and act as the paying party upon delivery of
product by the supplier and Glencore will subsequently settle the liability directly with the financial institution, generally from 30 up
to 90 days after physical supply. 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 as the financing element is
insignificant and the time frame in which the original arrangement is extended by, is consistent and within supply terms commonly
provided in the market. As a result, the entire cash flow is presented as operating in the statement of cash flow with a corresponding
trade payable in the statement of financial position. As at 31 December 2019, trade payables include $5,687 million (2018:
$5,152 million) of such liabilities arising from supplier financing arrangements, the weighted average of which have extended the
settlement of the original payable to 73 days (2018: 59 days) after physical supply and are due for settlement 38 days (2018: 29 days)
after year end. These payables are not included within net funding and net debt as defined in the APMs section.
(iii) Classification of trade receivables and liabilities at amortised cost or fair value through profit and loss (notes 13, 24 and 28)
Judgement is required to determine the appropriate IFRS 9 classification of trade receivables containing provisional pricing features
(i.e. the final selling price is subject to movements in market prices after the date of sale) to be measured at amortised cost or fair
value through profit and loss. This requires an assessment of the exposure of the underlying trade receivable to future movements
in market prices at the date of initial recognition of such receivable, which is typically the date of delivery of the goods. Those
receivables that are exposed to future movements in market prices have contractual cash flow characteristics that are not solely
payments of principal and interest and are therefore measured at fair value through profit or loss (see notes 13 and 28). For those
receivables that are not exposed to future movements in market prices, a further assessment of the business model for managing
the receivables is required to determine the appropriate classification and measurement. The business model pertaining to those
receivables that do not contain provisional pricing features is to hold the assets to collect the contractual cash flows and as such,
these financial assets are classified as at “amortised cost” (see note 13).
A similar assessment is undertaken for trade payables, and for those payables that contain provisional price features, the Group
elected to designate the entire payable as at fair value through profit and loss consistent with the accounting for provisionally priced
receivables. The balance of trade payables are classified as at “amortised cost” (see notes 24 and 28).
Differing conclusions around classification of these instruments, may impact the presentation of these financial assets or liabilities
within their respective note disclosures. However, as these types of financial assets and liabilities have short maturities, any
estimation uncertainty related to these judgements and/or a differing measurement criteria (i.e. an expected credit loss impairment
model or fair value methodology) is not anticipated to result in a material change to the carrying value of the financial asset or
liability within the next financial year.
Glencore Preliminary Results 2019
144
Glencore Annual Report 2019
144
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
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.
Certain joint arrangements that are structured through separate vehicles including Collahuasi and Glencore Agri 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 10 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) Classification of transactions which contain a financing element (notes 20, 21 and 24)
Transactions for the purchase of commodities may contain a financing element such as extended payment terms. Under such an
arrangement, a financial institution may issue a letter of credit on behalf of Glencore and act as the paying party upon delivery of
product by the supplier and Glencore will subsequently settle the liability directly with the financial institution, generally from 30 up
to 90 days after physical supply. 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 as the financing element is
insignificant and the time frame in which the original arrangement is extended by, is consistent and within supply terms commonly
provided in the market. As a result, the entire cash flow is presented as operating in the statement of cash flow with a corresponding
trade payable in the statement of financial position. As at 31 December 2019, trade payables include $5,687 million (2018:
$5,152 million) of such liabilities arising from supplier financing arrangements, the weighted average of which have extended the
settlement of the original payable to 73 days (2018: 59 days) after physical supply and are due for settlement 38 days (2018: 29 days)
after year end. These payables are not included within net funding and net debt as defined in the APMs section.
(iii) Classification of trade receivables and liabilities at amortised cost or fair value through profit and loss (notes 13, 24 and 28)
Judgement is required to determine the appropriate IFRS 9 classification of trade receivables containing provisional pricing features
(i.e. the final selling price is subject to movements in market prices after the date of sale) to be measured at amortised cost or fair
value through profit and loss. This requires an assessment of the exposure of the underlying trade receivable to future movements
in market prices at the date of initial recognition of such receivable, which is typically the date of delivery of the goods. Those
receivables that are exposed to future movements in market prices have contractual cash flow characteristics that are not solely
payments of principal and interest and are therefore measured at fair value through profit or loss (see notes 13 and 28). For those
receivables that are not exposed to future movements in market prices, a further assessment of the business model for managing
the receivables is required to determine the appropriate classification and measurement. The business model pertaining to those
receivables that do not contain provisional pricing features is to hold the assets to collect the contractual cash flows and as such,
these financial assets are classified as at “amortised cost” (see note 13).
A similar assessment is undertaken for trade payables, and for those payables that contain provisional price features, the Group
elected to designate the entire payable as at fair value through profit and loss consistent with the accounting for provisionally priced
receivables. The balance of trade payables are classified as at “amortised cost” (see notes 24 and 28).
Differing conclusions around classification of these instruments, may impact the presentation of these financial assets or liabilities
within their respective note disclosures. However, as these types of financial assets and liabilities have short maturities, any
estimation uncertainty related to these judgements and/or a differing measurement criteria (i.e. an expected credit loss impairment
model or fair value methodology) is not anticipated to result in a material change to the carrying value of the financial asset or
liability within the next financial year.
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 7)
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 6 and 10)
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 of an individual
asset or a cash-generating unit (CGU) may not be fully recoverable, or at least annually for CGUs to which goodwill and other
indefinite life intangible assets have been allocated. Indicators of impairment may include changes in the Group’s operating and
economic assumptions, including those arising from changes in reserves or mine planning, updates to the Group’s commodity
supply, demand and price forecasts, or the possible impacts from emerging risks such as those related to climate change and the
transition to a lower carbon economy. If an asset or CGU’s recoverable amount is less than its carrying amount, an impairment loss
is recognised in the consolidated statement of income. For those assets of CGUs 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 or CGU’s fair value are discounted using asset or CGU specific
discount rates and are based on expectations about future operations, primarily comprising estimates about production and sales
volumes, commodity prices (considering current and future prices and price trends including factors such as the current global
trajectory of climate change), reserves and resources, operating costs and capital expenditures. Estimates are reviewed regularly
by management. Changes in such estimates and in particular, deterioration in the commodity pricing outlook, could impact the
recoverable values of these assets or CGUs, 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.
As noted above and further described below in the ‘impairment or impairment reversal’ accounting policy, the Group carries out, at
least annually, an impairment assessment. Following this review, indicators of impairment were identified for various CGUs primarily
due to a deterioration in the underlying commodity prices most influencing the respective operation. Accordingly, the Group
assessed the recoverable value of these CGUs and as at 31 December 2019, except for those CGUs disclosed in notes 6 and 10, the
estimated recoverable values exceeded the carrying values. However, for certain CGUs where no impairment was recognised,
should there be a significant deterioration in the key assumptions (mainly price curves over the life of mine), a material impairment
could result within the next financial year. A summary of the carrying values, the key / most sensitive assumptions and a sensitivity
impact of potential (10% assumed to be a reasonably possible change within the next year) movements in these assumptions for
each such CGU with limited headroom (relative to their estimated recoverable value) is as follows:
• Coal South Africa – carrying value ($2,748 million), short to long-term API 4 coal price assumptions ($73–86/mt), a 10% fall (across
the curve) in the API 4 coal price assumptions could result in an impairment of $703 million.
• Mopani – carrying value ($1,672 million), long-term copper price assumption ($6,500/t), a 10% fall in the copper price assumption
could result in an impairment of $181 million. A 10% reduction in estimated annual production over the life of mine could result in
an impairment of $116 million.
• Koniambo – carrying value ($1,645 million), long-term nickel price assumption ($15,400/t), a 10% fall in the nickel price assumption
could result in an impairment of $715 million. A 10% reduction in estimated annual production over the life of mine could result in
an impairment of $668 million.
• Chad Oil – carrying value ($804 million), short to long-term oil price assumptions ($65–$72/bbl), a 10% fall (across the curve) in the
oil price assumptions could result in an impairment of $202 million.
• Volcan – carrying value ($3,272 million), long-term zinc price assumption ($2,500/t), a 10% fall (across the curve) in the zinc price
assumption could result in an impairment of $234 million.
Glencore Preliminary Results 2019
144
Glencore Preliminary Results 2019
Glencore Annual Report 2019
145
145
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
(iii) Restoration, rehabilitation and decommissioning costs (note 22)
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 or risk-free rate 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.
(iv) Fair value measurements (notes 10, 11, 12, 13, 24, 25, 27 and 28)
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 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 new and revised standards
In the current year, Glencore has adopted all new and revised IFRS standards that became effective as of 1 January 2019, the material
changes being:
(i) IFRS 16 – Leases
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 superseded IAS 17 Leases and its associated interpretative guidance. The Group
applied the modified retrospective approach. Under this approach, the Group did not restate prior-year amounts reported and
applied the practical expedient to retain the classification of existing contracts as leases under the previous accounting standard (i.e.
IAS 17) instead of reassessing whether existing contracts are/or contain a lease at the date of initial application.
The Group has elected to apply the following other practical expedients available under the standard:
• The application of a single discount rate for portfolios of leases with reasonably similar characteristics;
• The use of hindsight for determination of the lease term as of the date of initial application;
• The use of onerous provision assessment under IAS 37 immediately prior to the date of initial application rather than impairment
assessment of right-of-use assets under IAS 36;
• The exclusion of initial direct costs of obtaining a lease from the measurement of right-of-use assets at the date of initial
application; and
• Leases with a remaining lease term of less than 12 months from the date of initial application have not been recognised under
IFRS 16 and will remain accounted for as operating expenditures.
Upon adoption of IFRS 16, right-of-use assets of $792 million (net of $9 million of previously recognised onerous lease provisions),
lease receivables of $64 million and lease liabilities of $865 million were recognised as at 1 January 2019. The reconciliation
between the operating lease commitments as at 31 December 2018 and the opening balance for the lease liabilities as at
1 January 2019 is as follows:
Glencore Preliminary Results 2019
146
Glencore Annual Report 2019
146
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
US$ million
Operating lease commitments at 31 December 2018
Vessels/chartering commitments at 31 December 2018
Total lease commitments at 31 December 2018
Leases not yet commenced
Leases of low-value assets
Short-term leases
Effect of discounting
Total additional lease liabilities recognised on adoption of IFRS 16
Existing finance lease obligations at 31 December 2018
Total lease liabilities at 1 January 2019
Of which:
Current lease liabilities
Non-current lease liabilities
1,052
335
1,387
(72)
(31)
(163)
(256)
865
387
1,252
149
1,103
The lease liabilities were discounted using asset and company specific incremental borrowing rates as at 1 January 2019. The
weighted-average discount rate was 7.5%. In order to calculate the incremental borrowing rates, reference interest rates were
derived from the yields of corporate bonds in major countries and currencies, for a period up to 10 years. The reference interest rates
were supplemented by a lessee and asset class risk premium, as appropriate.
The current period lease disclosures can be found in notes 8 and 20.
(ii) IFRIC 23 – Uncertainty over income tax treatment
The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application
of IAS 12 Income Taxes. Due to its global reach, including operating in high-risk jurisdictions, the Group’s global tax position is subject
to enhanced complexity and uncertainty, which may lead to uncertain tax treatments and the corresponding recognition and
measurement of current and deferred taxes. The judgements and estimates made to separately recognise and measure the effect
of each uncertain tax treatment are re-assessed whenever circumstances change or when there is new information that affects
those judgements. The Group has re-assessed its global tax exposure and the key estimates taken in determining the positions
recorded for adopting IFRIC 23. As of 1 January 2019, the global tax exposure has been determined by reference to the uncertainty
that the tax authority may not accept the Group’s proposed treatment of tax positions. The adoption of the interpretation had no
material impact on the Group.
(iii) IFRIC agenda decision on the Physical Settlement of Contracts to Buy or Sell a non-Financial Item
In March 2019, the International Financial Reporting Interpretations Committee (IFRIC) issued an agenda decision on the Physical
Settlement of Contracts to Buy or Sell a non-Financial Item. The committee concluded that, for physical commodity contracts
within the scope of IFRS 9 Financial instruments, entities should not transfer previously recognised unrealised mark-to-market
movements to different income statement line items upon realisation. The Group previously recognised mark-to-market
movements on the re-measurement of physical forward sales contracts that do not meet own use exemption, within cost of goods
sold up to the point of realisation.
Following the agenda decision, the Group has revised its accounting policy to recognise mark-to-market movements on physical
forward sales contracts that do not meet own use exemption within the revenue line item and no longer within cost of goods sold.
For physical forward purchase contracts that do meet the own use exemption, the mark-to-market movements continue to be
recognised within cost of goods sold. Upon adoption of this change, the prior year revenue and cost of goods sold balances
increased by an equal amount of $770 million (0.3% of pre-adjusted revenue), resulting in no impact on net income.
(iv) Amendments to IFRS 9, IAS 39 and IFRS 7 (September 2019) – Interest Rate Benchmark Reform
The Group has chosen to early adopt the amendments to IFRS 9 and IFRS 7, which are mandatory for annual reporting periods
beginning on or after 1 January 2020.
These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges
during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks
are amended as a result of the on
going interest rate benchmark reforms.
1. Accounting policies continued
(iii) Restoration, rehabilitation and decommissioning costs (note 22)
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 or risk-free rate 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.
(iv) Fair value measurements (notes 10, 11, 12, 13, 24, 25, 27 and 28)
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 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 new and revised standards
In the current year, Glencore has adopted all new and revised IFRS standards that became effective as of 1 January 2019, the material
changes being:
(i) IFRS 16 – Leases
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 superseded IAS 17 Leases and its associated interpretative guidance. The Group
applied the modified retrospective approach. Under this approach, the Group did not restate prior-year amounts reported and
applied the practical expedient to retain the classification of existing contracts as leases under the previous accounting standard (i.e.
IAS 17) instead of reassessing whether existing contracts are/or contain a lease at the date of initial application.
The Group has elected to apply the following other practical expedients available under the standard:
• The application of a single discount rate for portfolios of leases with reasonably similar characteristics;
• The use of hindsight for determination of the lease term as of the date of initial application;
• The use of onerous provision assessment under IAS 37 immediately prior to the date of initial application rather than impairment
assessment of right-of-use assets under IAS 36;
• The exclusion of initial direct costs of obtaining a lease from the measurement of right-of-use assets at the date of initial
application; and
• Leases with a remaining lease term of less than 12 months from the date of initial application have not been recognised under
IFRS 16 and will remain accounted for as operating expenditures.
Upon adoption of IFRS 16, right-of-use assets of $792 million (net of $9 million of previously recognised onerous lease provisions),
lease receivables of $64 million and lease liabilities of $865 million were recognised as at 1 January 2019. The reconciliation
between the operating lease commitments as at 31 December 2018 and the opening balance for the lease liabilities as at
1 January 2019 is as follows:
The Group has issued foreign currency and US dollar
fixed to USD LIBOR cross currency interest rate swaps and interest rate swaps (see note 26). The amendments permit continuation
of hedge accounting even if in the future USD LIBOR may no longer be separately identifiable. However, this relief does not extend
to the requirement that the designated interest rate risk component must continue to be reliably measureable. If the risk
component is no longer reliably measureable, the hedging relationship is discontinued.
denominated fixed rate debt (see note 20) which it fair value hedges using
‑
‑
Glencore Preliminary Results 2019
146
Glencore Preliminary Results 2019
Glencore Annual Report 2019
147
147
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
The amendments are applied retrospectively to those hedging relationships that existed at the beginning of the reporting period in
which an entity first applies the amendments or that were designated thereafter.
The Group will continue to apply the amendments to IFRS 9 until the uncertainty arising from the interest rate benchmark reforms
with respect to the timing and the amount of the underlying cash flows that the Group is exposed ends. The Group has assumed
that this uncertainty will not end until the Group’s contracts that reference IBORs are amended to specify the date on which the
interest rate benchmark will be replaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment.
This will, in part, be dependent on the introduction of fall back clauses which have yet to be added to the Group’s contracts and the
negotiation with counterparties.
Following adoption of the amendments to IFRS 9 there is no impact upon the Group’s financial statements and existing hedge
relationships except for additional disclosures provided within note 26.
Revised standards not yet effective
At the date of the authorisation of these consolidated financial statements, the following revised IFRS standards, which are
applicable to Glencore, were issued but not yet effective:
(i) Amendments to IFRS 3 – Definition of business – effective for year ends beginning on or after 1 January 2020
The amendments intend to assist the determination of whether a transaction should be accounted for as a business combination or
as an asset acquisition. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input
and a substantive process that together significantly contribute to the ability to create outputs. IFRS 3 continues to adopt a market
participant’s perspective to determine whether an acquired set of activities and assets is a business, but clarifies the minimum
requirements to be a business and removes the assessment of a market participant’s ability to replace missing elements.
The amendments also introduce an optional concentration test that permits a simplified assessment of whether an acquired set
of activities and assets is not a business – it is not a business if substantially all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or group of similar identifiable assets.
The amended definitions shall be applicable for any future acquisition within the scope of IFRS 3 following the effective date.
(ii) Amendments to IAS 1 and IAS 8 – Definition of material – effective for year ends beginning on or after 1 January 2020
The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until
now has been featured elsewhere in IFRS Standards, and ensures that the definition of material is consistent across all IFRS
Standards. Information is considered material if omitting, misstating or obscuring it could reasonably be expected to influence the
decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which
provide financial information about a specific reporting entity.
No significant changes to presentation or disclosures within these financial statements are expected following adoption of
this amendment.
Glencore Preliminary Results 2019
148
Glencore Annual Report 2019
148
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
The amendments are applied retrospectively to those hedging relationships that existed at the beginning of the reporting period in
which an entity first applies the amendments or that were designated thereafter.
The Group will continue to apply the amendments to IFRS 9 until the uncertainty arising from the interest rate benchmark reforms
with respect to the timing and the amount of the underlying cash flows that the Group is exposed ends. The Group has assumed
that this uncertainty will not end until the Group’s contracts that reference IBORs are amended to specify the date on which the
interest rate benchmark will be replaced, the cash flows of the alternative benchmark rate and the relevant spread adjustment.
This will, in part, be dependent on the introduction of fall back clauses which have yet to be added to the Group’s contracts and the
negotiation with counterparties.
Following adoption of the amendments to IFRS 9 there is no impact upon the Group’s financial statements and existing hedge
relationships except for additional disclosures provided within note 26.
Revised standards not yet effective
At the date of the authorisation of these consolidated financial statements, the following revised IFRS standards, which are
applicable to Glencore, were issued but not yet effective:
(i) Amendments to IFRS 3 – Definition of business – effective for year ends beginning on or after 1 January 2020
The amendments intend to assist the determination of whether a transaction should be accounted for as a business combination or
as an asset acquisition. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input
and a substantive process that together significantly contribute to the ability to create outputs. IFRS 3 continues to adopt a market
participant’s perspective to determine whether an acquired set of activities and assets is a business, but clarifies the minimum
requirements to be a business and removes the assessment of a market participant’s ability to replace missing elements.
The amendments also introduce an optional concentration test that permits a simplified assessment of whether an acquired set
of activities and assets is not a business – it is not a business if substantially all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or group of similar identifiable assets.
The amended definitions shall be applicable for any future acquisition within the scope of IFRS 3 following the effective date.
(ii) Amendments to IAS 1 and IAS 8 – Definition of material – effective for year ends beginning on or after 1 January 2020
The amendments clarify the definition of material and how it should be applied by including in the definition guidance that until
now has been featured elsewhere in IFRS Standards, and ensures that the definition of material is consistent across all IFRS
Standards. Information is considered material if omitting, misstating or obscuring it could reasonably be expected to influence the
decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which
provide financial information about a specific reporting entity.
No significant changes to presentation or disclosures within these financial statements are expected following adoption of
this amendment.
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 these 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 2019 Annual
Report and Accounts. Therefore, they continue to adopt the going concern basis of accounting in preparing these financial
statements. Also see page 122. Further information on Glencore’s objectives, policies and processes for managing its capital and
financial risks are detailed in note 26.
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.
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 IFRS 9, when applicable,
or the cost on the initial recognition of an investment in an associate or a joint venture.
Glencore Preliminary Results 2019
148
Glencore Preliminary Results 2019
Glencore Annual Report 2019
149
149
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
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.
Other unincorporated arrangements
In some cases, Glencore participates in unincorporated arrangements where it has the rights to its share of the assets and
obligations for its share of the liabilities of the arrangement, rather than a right to the net returns of the arrangement, but does not
share joint control. In such cases, Glencore accounts for its share of the assets, liabilities, revenues and expenses in accordance with
the IFRSs applicable to the particular assets, liabilities, revenues and expenses and obligations for the liabilities relating to the
arrangement, similar to a joint operation noted above.
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.
Glencore Preliminary Results 2019
150
Glencore Annual Report 2019
150
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
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.
Other unincorporated arrangements
In some cases, Glencore participates in unincorporated arrangements where it has the rights to its share of the assets and
obligations for its share of the liabilities of the arrangement, rather than a right to the net returns of the arrangement, but does not
share joint control. In such cases, Glencore accounts for its share of the assets, liabilities, revenues and expenses in accordance with
the IFRSs applicable to the particular assets, liabilities, revenues and expenses and obligations for the liabilities relating to the
arrangement, similar to a joint operation noted above.
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.
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 CGUs 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 derived principally from the sale of goods and in some instances the goods are sold on Cost and Freight (CFR) or Cost,
Insurance and Freight (CIF) Incoterms. When goods are sold on a CFR or CIF basis, the Group is responsible for providing these
services (shipping and insurance) to the customer, sometimes after the date at which Glencore has lost control of the goods.
Revenue is recognised when the performance obligations have been satisfied, which is once control of the goods and/or services
has transferred from Glencore to the buyer. Revenue is measured based on consideration specified in the contract with a customer
and excludes amounts collected on behalf of third parties. The same recognition and presentation principles apply to revenues
arising from physical settlement of forward sale contracts that do not meet the own use exemption.
Revenue related to the sale of goods 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 and the buyer has gained
control through their ability to direct the use of and obtain substantially all the benefits from the asset. Where the sale of goods
is connected with an agreement to repurchase goods at a later date, revenue is recognised when the repurchase terms are at
prevailing market prices, the goods repurchased are readily available in the market, and the buyer gained control of the goods
originally sold to them. As at 31 December 2019, the outstanding repurchase commitments under such agreements were
approximately $1.4 billion (2018: $1.3 billion). Should it be determined that control has not transferred or the buyer does not have the
ability to benefit substantially from ownership of the asset, revenue is not recognised and any proceeds received are accounted for
as a financing arrangement. 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 (provisionally priced sales). 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.
Revenue from the sale of material by-products are included within revenue. Where a by-product is not regarded as significant,
revenue may be credited against cost of goods sold.
Glencore Preliminary Results 2019
150
Glencore Preliminary Results 2019
Glencore Annual Report 2019
151
151
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
Revenue related to the provision of shipping and insurance related activities is recognised over time as the service is rendered.
Payments received for future metal deliveries (prepayments) are accounted for as executory contracts whereby the prepayment is
initially recorded as deferred revenue in the consolidated statement of financial position. The initial deferred revenue amount is
unwound and revenue is recognised in the consolidated statement of income as and when Glencore physically delivers the metal
and loses control of it. Where these prepayments are in excess of one year and contain a significant financing component, the
amount of the deferred revenue is adjusted for the effects of the time value of money. Glencore applies the practical expedient to
not adjust the promised amount of consideration for the effects of time value of money if the period between delivery and the
respective payment is one year or less.
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. 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. Where an
intragroup balance is, in substance, part of the Group’s net investment in an entity, exchange gains and losses on that balance are
taken to the currency translation reserve. Cumulative translation differences are recycled from equity and recognised as income or
expense on disposal of the operation to which they relate.
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.
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.
Glencore Preliminary Results 2019
152
Glencore Annual Report 2019
152
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
Revenue related to the provision of shipping and insurance related activities is recognised over time as the service is rendered.
Payments received for future metal deliveries (prepayments) are accounted for as executory contracts whereby the prepayment is
initially recorded as deferred revenue in the consolidated statement of financial position. The initial deferred revenue amount is
unwound and revenue is recognised in the consolidated statement of income as and when Glencore physically delivers the metal
and loses control of it. Where these prepayments are in excess of one year and contain a significant financing component, the
amount of the deferred revenue is adjusted for the effects of the time value of money. Glencore applies the practical expedient to
not adjust the promised amount of consideration for the effects of time value of money if the period between delivery and the
respective payment is one year or less.
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.
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.
Foreign currency translation
(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. 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. Where an
intragroup balance is, in substance, part of the Group’s net investment in an entity, exchange gains and losses on that balance are
taken to the currency translation reserve. Cumulative translation differences are recycled from equity and recognised as income or
expense on disposal of the operation to which they relate.
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.
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.
Borrowing costs
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.
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, taking into account the range of possible outcomes.
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.
Glencore Preliminary Results 2019
152
Glencore Preliminary Results 2019
Glencore Annual Report 2019
153
153
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
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
Right-of-use assets
Mineral and petroleum rights
Deferred mining costs
10–45 years
not depreciated
3–30 years/UOP
2–30 years
UOP
UOP
(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.
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:
Glencore Preliminary Results 2019
154
Glencore Annual Report 2019
154
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
Depreciation commences when the asset is available for use. The major categories of property, plant and equipment are
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
depreciated/amortised on a units of production (UOP) and/or straight-line basis as follows:
Buildings
Freehold land
Plant and equipment
Right-of-use assets
Mineral and petroleum rights
Deferred mining costs
(i) Mineral and petroleum rights
10–45 years
not depreciated
3–30 years/UOP
2–30 years
UOP
UOP
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.
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
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
production method (UOP) or straight-line basis.
(iii) Deferred mining costs
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:
(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.
Leases
As lessee, the Group assesses whether a contract contains a lease at inception of the contract. The Group recognises a right-of-use
asset and corresponding lease liability in the statement of financial position for all lease arrangements where it is the lessee, except
for short-term leases with a term of twelve months or less and leases of low value assets. For these leases, the Group recognises the
lease payments as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the future lease payments from the commencement date of the
lease. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, the asset and
company specific incremental borrowing rates. Lease liabilities are recognised within borrowings on the statement of financial
position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group
remeasures the lease liability, with a corresponding adjustment to the related right-of-use assets, whenever:
• The lease term changes or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate;
• The lease payments change due to the changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged
discount rate;
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount
rate at the effective date of modification.
The right-of-use assets are initially recognised on the balance sheet at cost, which comprises the amount of the initial measurement
of the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease, any
lease incentive received and any initial direct costs incurred, and expected costs for obligations to dismantle and remove right-of-
use assets when they are no longer used. Right-of-use assets are recognised within property, plant and equipment on the
statement of financial position. Right-of-use assets are depreciated on a straight-line basis from the commencement date of the
lease over the shorter of the useful life of the right-of-use asset or the end of the lease term.
The Group enters into lease arrangements as a lessor with respect to some of its time charter vessels. Leases for which the Group is
an intermediate lessor are classified as finance or operating leases by reference to the right-of-use asset arising from the head lease.
Income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Amounts due from lessees
under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. Finance lease income
is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in
respect of these leases.
The comparative period lease contracts were accounted for under IAS 17. Assets under finance leases, where substantially all of the
risks and rewards of ownership transferred to the Group as lessee, were 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 were classified as operating leases,
the expenditures for which were recognised in the statement of income on a straight-line basis over the lease term.
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.
Glencore Preliminary Results 2019
154
Glencore Preliminary Results 2019
Glencore Annual Report 2019
155
155
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
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.
The major categories of intangibles are amortised on a straight-line basis as follows:
Port allocation rights
Licences, trademarks and software
Customer relationships
Acquired offtake arrangements
30–40 years
3–20 years
5–9 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 (FVLCD) 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 can not be reversed in subsequent periods.
Other investments
Equity investments, other than investments in Associates, are recorded at fair value. Glencore designated investments that
are not held for trading as at fair value through other comprehensive income. As a result, changes in fair value are recorded in the
consolidated statement of other comprehensive income. Dividends from these investments are recognised in the consolidated
statement of income, unless the dividend represents a recovery of part of the cost of the equity investment.
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 FVLCD and its VIU. 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 previously
been recognised. Goodwill impairments cannot be subsequently reversed.
Glencore Preliminary Results 2019
156
Glencore Annual Report 2019
156
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
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
The major categories of intangibles are amortised on a straight-line basis as follows:
30–40 years
3–20 years
5–9 years
5–10 years
indefinite life.
Port allocation rights
Licences, trademarks and software
Customer relationships
Acquired offtake arrangements
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 (FVLCD) 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 can not be reversed in subsequent periods.
Other investments
Equity investments, other than investments in Associates, are recorded at fair value. Glencore designated investments that
are not held for trading as at fair value through other comprehensive income. As a result, changes in fair value are recorded in the
consolidated statement of other comprehensive income. Dividends from these investments are recognised in the consolidated
statement of income, unless the dividend represents a recovery of part of the cost of the equity investment.
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 FVLCD and its VIU. 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 previously
been recognised. Goodwill impairments 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 or purchase products or 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.
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. Where the production process results in more than one product being produced (joint
products), cost is allocated between the various products according to the ratio of contribution of these metals to gross sales
revenue. Financing and storage costs related to inventory are expensed as incurred.
Non-financial instruments (physical advances or prepayments)
The Group enters into physical advances and prepayment agreements with certain suppliers and customers. When such advances
and prepayments are primarily settled in cash or another financial asset, they are classified as financial instruments (see below).
When settlement is satisfied primarily through physical delivery or receipt of an underlying product they are classified as non-
financial instruments.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (FVTOCI)
or at fair value through profit or loss (FVTPL) depending upon the business model for managing the financial assets and the nature
of the contractual cash flow characteristics of the financial asset. 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, other investments, provisionally priced trade receivables and derivatives are carried at fair value and trade
receivables that do not contain provisional price features, loans and other receivables are carried at amortised cost adjusted for
any loss allowance.
Financial liabilities, other than derivatives and those containing provisional price features, are initially recognised at fair value of
consideration received net of transaction costs as appropriate and subsequently carried at amortised cost. Financial liabilities that
contain provisional pricing features and derivatives are carried at FVTPL.
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for all financial assets, other than those at FVTPL, at the end of each
reporting period. The expected credit loss recognised represents a probability-weighted estimate of credit losses over the expected
life of the financial instrument.
The Group applies the simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the
lifetime expected loss provision. The expected credit losses on these financial assets is estimated using a provision matrix by
reference to past default experience and an equivalent credit rating, adjusted as appropriate for current observable data and
forward-looking information.
Glencore Preliminary Results 2019
156
Glencore Preliminary Results 2019
Glencore Annual Report 2019
157
157
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
1. Accounting policies continued
For all other financial assets at amortised cost, the Group recognises lifetime expected credit losses when there has been
a significant increase in credit risk since initial recognition, which is determined by:
• A review of overdue amounts,
• Comparing the risk of default at the reporting date and at the date of initial recognition, and
• An assessment of relevant historical and forward-looking quantitative and qualitative information.
For those balances that are beyond 30 days overdue it is presumed to be an indicator of a significant increase in credit risk.
If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-months expected credit loss, which comprises the expected
lifetime loss from the instrument were a default to occur within 12 months of the reporting date.
The Group considers an event of default has materialised and the financial asset is credit impaired when information developed
internally or obtained from external sources indicates that the debtor is unlikely to pay the Group without taking into account any
collateral held by the Group or if the financial asset is more than 90 days past due, unless the Group has reasonable and supportable
information to demonstrate that a more lagging default criterion is more appropriate. The Group writes off a financial asset when
there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.
(ii) Derecognition of financial assets and financial liabilities
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.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its entirety, the difference between the carrying amount of the financial
asset/financial liability and the sum of the consideration received and receivable/paid and payable is recognised in profit and loss.
On derecognition of equity investments designated and measured at FVTOCI, the cumulative gain or loss recognised in other
comprehensive income is reclassified directly to retained earnings.
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.
Glencore Preliminary Results 2019
158
Glencore Annual Report 2019
158
Notes to the financial statements
continued
Notes to the financial statements
continued
1. Accounting policies continued
1. Accounting policies continued
For all other financial assets at amortised cost, the Group recognises lifetime expected credit losses when there has been
a significant increase in credit risk since initial recognition, which is determined by:
• A review of overdue amounts,
• Comparing the risk of default at the reporting date and at the date of initial recognition, and
• An assessment of relevant historical and forward-looking quantitative and qualitative information.
For those balances that are beyond 30 days overdue it is presumed to be an indicator of a significant increase in credit risk.
If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-months expected credit loss, which comprises the expected
lifetime loss from the instrument were a default to occur within 12 months of the reporting date.
The Group considers an event of default has materialised and the financial asset is credit impaired when information developed
internally or obtained from external sources indicates that the debtor is unlikely to pay the Group without taking into account any
collateral held by the Group or if the financial asset is more than 90 days past due, unless the Group has reasonable and supportable
information to demonstrate that a more lagging default criterion is more appropriate. The Group writes off a financial asset when
there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.
(ii) Derecognition of financial assets and financial liabilities
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.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its entirety, the difference between the carrying amount of the financial
asset/financial liability and the sum of the consideration received and receivable/paid and payable is recognised in profit and loss.
On derecognition of equity investments designated and measured at FVTOCI, the cumulative gain or loss recognised in other
comprehensive income is reclassified directly to retained earnings.
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 and mark-to-market movements on physical forward sales contracts, 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.
At the inception of the hedge and on an ongoing basis, Glencore documents whether the hedging instrument is effective in
offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging
relationship meets the qualifying hedge effectiveness requirements.
Glencore discontinues hedge accounting when the qualifying criteria for the hedged relationship is no longer met.
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.
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 non-derivative “host contract” such as provisionally priced sales and purchases. Such
combinations are known as hybrid instruments. If a hybrid contract contains a host that is a financial asset within the scope of IFRS
9, then the relevant classification and measurement requirements are applied to the entire contract at the date of initial recognition.
Should the host contract not be a financial asset within the scope of IFRS 9, the embedded derivative is separated from the host
contract and accounted for as a standalone derivative. Where the embedded derivative is separated, the host contract is accounted
for in accordance with its relevant accounting policy, unless the entire instrument is designated at FVTPL in accordance with IFRS 9.
Glencore Preliminary Results 2019
158
Glencore Preliminary Results 2019
Glencore Annual Report 2019
159
159
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
2. Segment information
Changes in segmental reporting
During the period, key members of the Group’s Metals and minerals, Energy products and Agricultural products segments retired
and a new position with oversight and responsibility for all of Glencore’s industrial assets (Head of Industrial Assets) was created.
Internal reporting lines and organisational structures were amended such that Glencore’s industrial activities report to the Head of
Industrial Assets and all of its marketing activities report to the Head of Marketing (being the Group CEO). This change in oversight
and responsibility for the two differing parts of our business (marketing and industrial) and associated remuneration has resulted in
a change in the ‘chief operating decision makers’ reporting and accountability structures and, with it, our reportable segments.
Aligning with the new executive structure and respective operational oversight and responsibility, the new reportable segments are
– ‘Industrial’ and ‘Marketing’ activities.
Comparative 2018 information has been restated for the change in reportable segments.
Segment information
Glencore is organised and operates on a worldwide basis in two core business segments – Marketing activities and Industrial
activities, reflecting the reporting lines and structure used by Glencore’s Management to allocate resources and assess the
performance of Glencore.
The business segments’ contributions to the Group are primarily derived from a) the net margin or premium earned from physical
Marketing activities (net sale and purchase of physical commodities) and the provision of marketing and related value-add services
and b) the net margin earned from Industrial asset activities (resulting from the sale of physical commodities over the cost of
production and/or cost of sales). Due to similar economic characteristics of the operating segments within the Marketing activities
and Industrial activities, these operating segments have been aggregated under the two reportable segments.
Corporate and other: consolidated statement of income amount represents Group related income and expenses (including
share of Glencore Agri earnings and certain variable bonus charges). Statement of financial position amounts represent Group
related balances.
The financial performance of the operating segments is principally evaluated by management with reference to Adjusted
EBIT/EBITDA. Adjusted EBIT 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 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. In addition,
Volcan, while a subsidiary of the Group, is accounted for under the equity method for internal reporting and analysis due to the
relatively low economic ownership held by the Group.
The accounting policies of the operating segments are the same as those described in note 1 with the exception of relevant material
associates, the Collahuasi joint venture and Volcan. 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) is considered to be a joint venture. 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. For internal reporting and analysis, management evaluates the
performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic ownership in this fully ring-
fenced listed entity, with its stand-alone, independent and separate capital structure. 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
measures section.
Glencore Preliminary Results 2019
160
Glencore Annual Report 2019
160
Notes to the financial statements
continued
Notes to the financial statements
continued
2. Segment information
Changes in segmental reporting
During the period, key members of the Group’s Metals and minerals, Energy products and Agricultural products segments retired
and a new position with oversight and responsibility for all of Glencore’s industrial assets (Head of Industrial Assets) was created.
Internal reporting lines and organisational structures were amended such that Glencore’s industrial activities report to the Head of
Industrial Assets and all of its marketing activities report to the Head of Marketing (being the Group CEO). This change in oversight
and responsibility for the two differing parts of our business (marketing and industrial) and associated remuneration has resulted in
a change in the ‘chief operating decision makers’ reporting and accountability structures and, with it, our reportable segments.
Aligning with the new executive structure and respective operational oversight and responsibility, the new reportable segments are
– ‘Industrial’ and ‘Marketing’ activities.
Comparative 2018 information has been restated for the change in reportable segments.
Glencore is organised and operates on a worldwide basis in two core business segments – Marketing activities and Industrial
activities, reflecting the reporting lines and structure used by Glencore’s Management to allocate resources and assess the
Segment information
performance of Glencore.
The business segments’ contributions to the Group are primarily derived from a) the net margin or premium earned from physical
Marketing activities (net sale and purchase of physical commodities) and the provision of marketing and related value-add services
and b) the net margin earned from Industrial asset activities (resulting from the sale of physical commodities over the cost of
production and/or cost of sales). Due to similar economic characteristics of the operating segments within the Marketing activities
and Industrial activities, these operating segments have been aggregated under the two reportable segments.
Corporate and other: consolidated statement of income amount represents Group related income and expenses (including
share of Glencore Agri earnings and certain variable bonus charges). Statement of financial position amounts represent Group
related balances.
The financial performance of the operating segments is principally evaluated by management with reference to Adjusted
EBIT/EBITDA. Adjusted EBIT 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 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. In addition,
Volcan, while a subsidiary of the Group, is accounted for under the equity method for internal reporting and analysis due to the
relatively low economic ownership held by the Group.
The accounting policies of the operating segments are the same as those described in note 1 with the exception of relevant material
associates, the Collahuasi joint venture and Volcan. 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) is considered to be a joint venture. 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. For internal reporting and analysis, management evaluates the
performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic ownership in this fully ring-
fenced listed entity, with its stand-alone, independent and separate capital structure. 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
measures section.
2. Segment information continued
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.
Marketing
activities
Industrial
activities
Inter-segment
eliminations
73,561
120,627
–
194,188
–
194,188
1,169
(80)
–
1,089
1,515
(191)
–
1,324
(47)
–
(47)
2,637
(271)
–
2,366
27,672
15,067
4
42,743
(2,148)
40,595
5,555
(4,438)
(101)
1,016
3,854
(2,392)
(188)
1,274
(445)
(60)
(505)
8,964
(6,890)
(289)
1,785
(16,751)
(2,921)
–
(19,672)
–
(19,672)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2019
US$ million
Revenue
Metals and minerals
Energy products
Corporate and other
Revenue – segmental
Proportionate adjustment – revenue1
Revenue – reported measure
Metals and minerals
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation1
Adjusted EBIT
Energy products
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation1
Adjusted EBIT
Corporate and other
Adjusted EBITDA2
Depreciation and amortisation
Adjusted EBIT
Total Adjusted EBITDA
Total depreciation and amortisation
Total depreciation proportionate adjustment
Total Adjusted EBIT
Share of associates’ significant items1,3
Share of associates’ significant items – Volcan
Movement in unrealised inter-segment profit elimination adjustments4
Loss on disposals of non-current assets
Other (expense)/income – net
Impairments
Interest expense – net
Income tax expense
Proportionate adjustment – net finance and income tax expense1
Loss for the year
1 Refer to APMs section for definition.
Total
84,482
132,773
4
217,259
(2,148)
215,111
6,724
(4,518)
(101)
2,105
5,369
(2,583)
(188)
2,598
(492)
(60)
(552)
11,601
(7,161)
(289)
4,151
(219)
(73)
468
(43)
(173)
(2,408)
(1,713)
(618)
(878)
(1,506)
2 Marketing activities include $58 million, pre-significant items, of Glencore’s equity accounted share of Glencore Agri.
3 Share of associates’ significant items comprise Glencore’s share of significant charges relating to impairments and other items booked directly by various associates, notably Glencore
Agri ($73 million), Trevali ($65 million) and Oil vessels’ entities ($62 million).
4 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Glencore Preliminary Results 2019
160
Glencore Preliminary Results 2019
Glencore Annual Report 2019
161
161
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
2. Segment information continued
2018
US$ million
Revenue
Metals and minerals
Energy products
Corporate and other
Revenue – segmental
Proportionate adjustment – revenue2
Revenue – reported measure
Metals and minerals
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Energy products
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Corporate and other
Adjusted EBITDA3
Depreciation and amortisation
Adjusted EBIT
Total Adjusted EBITDA
Total depreciation and amortisation
Total depreciation proportionate adjustment
Total Adjusted EBIT
Share of associates’ significant items2,4
Movement in unrealised inter-segment profit elimination adjustments5
Loss on disposals of non-current assets
Other (expense)/income – net
Impairments
Interest expense – net
Income tax expense
Proportionate adjustment – net finance and income tax expense2
Income for the year
Marketing
activities
Industrial
activities
Inter-segment
eliminations
Total
Restated1
72,744
129,930
–
202,674
–
202,674
1,767
(25)
–
1,742
795
(53)
–
742
(70)
–
(70)
2,492
(78)
–
2,414
31,385
12,660
24
44,069
(2,643)
41,426
8,478
(4,316)
(109)
4,053
5,312
(1,913)
(190)
3,209
(515)
(18)
(533)
13,275
(6,247)
(299)
6,729
(20,291)
(3,285)
–
(23,576)
–
(23,576)
83,838
139,305
24
223,167
(2,643)
220,524
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,245
(4,341)
(109)
5,795
6,107
(1,966)
(190)
3,951
(585)
(18)
(603)
15,767
(6,325)
(299)
9,143
(40)
237
(139)
(764)
(1,643)
(1,514)
(2,063)
(601)
2,616
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
2 Refer to APMs section for definition.
3 Marketing activities include $21 million of Glencore’s equity accounted share of Glencore Agri.
4 Share of associates’ significant items comprise Glencore’s share of significant charges relating to impairments booked directly by various associates.
5 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Glencore Preliminary Results 2019
162
Glencore Annual Report 2019
162
Notes to the financial statements
continued
Notes to the financial statements
continued
2. Segment information continued
2018
US$ million
Revenue
Metals and minerals
Energy products
Corporate and other
Revenue – segmental
Proportionate adjustment – revenue2
Revenue – reported measure
Metals and minerals
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Energy products
Adjusted EBITDA
Depreciation and amortisation
Proportionate adjustment – depreciation2
Adjusted EBIT
Corporate and other
Adjusted EBITDA3
Depreciation and amortisation
Adjusted EBIT
Total Adjusted EBITDA
Total depreciation and amortisation
Total depreciation proportionate adjustment
Total Adjusted EBIT
Marketing
activities
Industrial
activities
Inter-segment
eliminations
Total
Restated1
(20,291)
(3,285)
(23,576)
(23,576)
83,838
139,305
24
223,167
(2,643)
220,524
72,744
129,930
–
–
202,674
202,674
1,767
(25)
–
1,742
795
(53)
–
742
(70)
–
(70)
2,492
(78)
–
2,414
31,385
12,660
24
44,069
(2,643)
41,426
8,478
(4,316)
(109)
4,053
5,312
(1,913)
(190)
3,209
(515)
(18)
(533)
13,275
(6,247)
(299)
6,729
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,245
(4,341)
(109)
5,795
6,107
(1,966)
(190)
3,951
(585)
(18)
(603)
15,767
(6,325)
(299)
9,143
(40)
237
(139)
(764)
(1,643)
(1,514)
(2,063)
(601)
2,616
Share of associates’ significant items2,4
Movement in unrealised inter-segment profit elimination adjustments5
Loss on disposals of non-current assets
Other (expense)/income – net
Impairments
Interest expense – net
Income tax expense
Income for the year
Proportionate adjustment – net finance and income tax expense2
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
2 Refer to APMs section for definition.
3 Marketing activities include $21 million of Glencore’s equity accounted share of Glencore Agri.
4 Share of associates’ significant items comprise Glencore’s share of significant charges relating to impairments booked directly by various associates.
5 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
2. Segment information continued
2019
US$ 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
Inventories
Allocatable non-current capital employed
Other assets1
Other liabilities2
Total net assets
Capital expenditure
Metals and minerals
Energy products
Corporate and other
Capital expenditure – segmental3
Proportionate adjustment – capital expenditure4
Capital expenditure – reported measure
2018
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
Inventories
Allocatable non-current capital employed
Other assets1
Other liabilities2
Total net assets
Capital expenditure
Metals and minerals
Energy products
Corporate and other
Capital expenditure – segmental
Proportionate adjustment – capital expenditure4
Capital expenditure – reported measure
Marketing
activities
27,198
(24,359)
2,839
921
5,293
6,202
1,511
–
13,927
Industrial
activities
12,455
(6,957)
5,498
54,436
1,713
9,169
916
575
66,809
16,766
72,307
94
344
–
438
–
438
Marketing
activities
31,514
(25,065)
6,449
457
5,559
6,122
1,575
–
13,713
3,963
1,312
74
5,349
(419)
4,930
Industrial
activities
10,708
(6,737)
3,971
56,313
1,412
9,854
980
353
68,912
20,162
72,883
34
55
–
89
–
89
3,996
1,043
38
5,077
(389)
4,688
Corporate
and other
–
–
–
–
–
–
–
–
–
3,687
(53,524)
(49,837)
–
–
–
–
–
–
Corporate
and other
–
–
–
–
–
–
–
–
–
3,825
(51,487)
(47,662)
–
–
–
–
–
–
Total
39,653
(31,316)
8,337
55,357
7,006
15,371
2,427
575
80,736
3,687
(53,524)
39,236
4,057
1,656
74
5,787
(419)
5,368
Total
42,222
(31,802)
10,420
56,770
6,971
15,976
2,555
353
82,625
3,825
(51,487)
45,383
4,030
1,098
38
5,166
(389)
4,777
1 Other assets include non-current financial asset, 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
Includes $656 million ($361 million in Marketing activities and $295 million in Industrial activities) of ‘right-of-use assets’ capitalised in accordance with IFRS 16 – Leases.
4 Refer to APMs section for definition.
Glencore Preliminary Results 2019
162
Glencore Preliminary Results 2019
Glencore Annual Report 2019
163
163
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
2. Segment information continued
Geographical information
US$ million
Revenue from third parties2
The Americas
Europe
Asia
Africa
Oceania
Non-current assets3
The Americas
Europe
Asia
Africa
Oceania
2019
38,114
75,749
82,988
8,214
10,046
215,111
21,702
11,048
4,669
17,548
20,955
75,922
2018
Restated1
36,939
76,761
94,643
5,240
6,941
220,524
23,491
10,824
4,453
16,921
22,314
78,003
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
2 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 counterparty’s
ultimate parent and/or final destination of product.
3 Non-current assets are non-current assets excluding other investments, advances and loans, other financial assets and deferred tax assets. Non-current assets comprise assets in
Australia of $19,277 million (2018: $20,500 million), in Peru of $9,923 million (2018: $10,596 million) and the DRC of $6,911 million (2018: $7,272 million).
3. Revenue
US$ million
Sale of commodities
Freight, storage and other services
Total
2019
212,244
2,867
215,111
2018
Restated1
217,889
2,635
220,524
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
Revenue is derived principally from the sale of commodities, recognised once control of the goods has transferred from Glencore to
the buyer. Revenue from sale of commodities includes $221 million (2018: $770 million) of mark-to-market related adjustments on
provisionally priced sales arrangements. Revenue derived from freight, storage and other services is recognised over time as the
service is rendered. Revenue is measured based on consideration specified in the contract with the customer and excludes
amounts collected on behalf of third parties. This is consistent with the revenue information disclosed for each reportable segment
(see note 2).
4. Net loss on disposals of non-current assets
US$ million
Revaluation of previously held interest in newly acquired business (Polymet)
Loss on sale of Mototolo
Gain on sale of Terminales Portuarios Chancay S.A.
Net (loss)/gain on sale of other investments/operations
Loss on disposal of property, plant and equipment
Total
Notes
25
25
25
2019
(38)
–
26
(8)
(23)
(43)
2018
–
(137)
–
15
(17)
(139)
Polymet
In June 2019, Glencore concluded the acquisition of an additional 42.9% interest in Polymet Mining Corp. Prior to acquisition,
Glencore owned a 28.8% interest in Polymet which was accounted for as an associate. The revaluation of the existing interest at the
date of acquisition resulted in a reported loss of $38 million (see note 25).
Terminales Portuarios Chancay S.A.
In April 2019, Glencore disposed of a 60% interest in Terminales Portuarios Chancay S.A. for $11 million, subsequently accounting for
its remaining share of 40% using the equity method (see notes 10 and 25).
Mototolo
In November 2018, Glencore disposed of its 40% interest in the Mototolo joint venture, a PGM mine in South Africa, resulting in a loss
of $137 million, mainly on account of recycling foreign currency translation reserves to the statement of income (see note 25).
Glencore Preliminary Results 2019
164
Glencore Annual Report 2019
164
Notes to the financial statements
continued
Notes to the financial statements
continued
2019
38,114
75,749
82,988
8,214
10,046
215,111
21,702
11,048
4,669
17,548
20,955
75,922
2018
Restated1
36,939
76,761
94,643
5,240
6,941
220,524
23,491
10,824
4,453
16,921
22,314
78,003
2019
212,244
2,867
215,111
2018
Restated1
217,889
2,635
220,524
2. Segment information continued
Geographical information
US$ million
Revenue from third parties2
The Americas
Europe
Asia
Africa
Oceania
Europe
Asia
Africa
Oceania
Non-current assets3
The Americas
3. Revenue
US$ million
Sale of commodities
Freight, storage and other services
Total
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
2 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 counterparty’s
ultimate parent and/or final destination of product.
3 Non-current assets are non-current assets excluding other investments, advances and loans, other financial assets and deferred tax assets. Non-current assets comprise assets in
Australia of $19,277 million (2018: $20,500 million), in Peru of $9,923 million (2018: $10,596 million) and the DRC of $6,911 million (2018: $7,272 million).
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
Revenue is derived principally from the sale of commodities, recognised once control of the goods has transferred from Glencore to
the buyer. Revenue from sale of commodities includes $221 million (2018: $770 million) of mark-to-market related adjustments on
provisionally priced sales arrangements. Revenue derived from freight, storage and other services is recognised over time as the
service is rendered. Revenue is measured based on consideration specified in the contract with the customer and excludes
amounts collected on behalf of third parties. This is consistent with the revenue information disclosed for each reportable segment
(see note 2).
US$ million
Total
Polymet
Mototolo
4. Net loss on disposals of non-current assets
Revaluation of previously held interest in newly acquired business (Polymet)
Loss on sale of Mototolo
Gain on sale of Terminales Portuarios Chancay S.A.
Net (loss)/gain on sale of other investments/operations
Loss on disposal of property, plant and equipment
Notes
2019
25
25
25
(38)
–
26
(8)
(23)
(43)
2018
–
(137)
–
15
(17)
(139)
In June 2019, Glencore concluded the acquisition of an additional 42.9% interest in Polymet Mining Corp. Prior to acquisition,
Glencore owned a 28.8% interest in Polymet which was accounted for as an associate. The revaluation of the existing interest at the
date of acquisition resulted in a reported loss of $38 million (see note 25).
Terminales Portuarios Chancay S.A.
In April 2019, Glencore disposed of a 60% interest in Terminales Portuarios Chancay S.A. for $11 million, subsequently accounting for
its remaining share of 40% using the equity method (see notes 10 and 25).
In November 2018, Glencore disposed of its 40% interest in the Mototolo joint venture, a PGM mine in South Africa, resulting in a loss
of $137 million, mainly on account of recycling foreign currency translation reserves to the statement of income (see note 25).
5. Other expense – net
US$ million
Net changes in mark-to-market valuations on investments
Net foreign exchange losses
Legal related costs
Closed site rehabilitation costs
Closure and severance costs
Disposal of Rosneft stake related income/(costs)
KCC debt restructuring
Katanga OSC settlement and restatement
Acquisition related costs
Other expenses – net
Total
Notes
33
25
2019
47
(70)
(159)
(81)
(173)
325
–
–
(6)
(56)
(173)
2018
139
(58)
(86)
(8)
–
(325)
(248)
(22)
(142)
(14)
(764)
Together with foreign exchange movements and mark-to-market movements on investments, other expense includes other items
that, due to their nature and variable financial impact or infrequency of the events giving rise to these items, are reported separately
from operating segment results.
Net changes in mark-to-market valuations on investments
Primarily relates to movements on interests in investments (see note 10) and the ARM Coal non-discretionary dividend obligation
(see note 28) carried at fair value.
Legal related costs
Includes various investigations (legal, expert and compliance) related costs of $117 million (2018: $24 million)(see note 31).
In 2018, the Strategic Fuel Fund Association of South Africa (SFF) brought various claims against Glencore Energy UK (GENUK), a
subsidiary of the Group, asserting that certain purchases of oil from SFF were invalid on the basis that SFF did not comply with its
necessary approval and procurement processes and that GENUK is therefore not entitled to remove the inventory until the dispute
is resolved. Over the period, holding costs and related charges recognised in relation to this inventory amounted to $42 million (2018:
$62 million).
Closed site rehabilitation costs
Relates to movements in restoration, rehabilitation and decommissioning estimates related to sites that are no longer operational
(classified as “closed sites”) (see note 22).
Closure and severance related costs
As a result of the sharp decline in cobalt prices and weak, oversupplied cobalt markets, it was determined in H2 2019, to put
Mutanda on temporary care and maintenance. Furthermore, in Q4 2019, following an extensive business review, it was determined
to permanently close the Brunswick lead smelter in Canada. As a result of these decisions, severance and inventory write downs of
$27 million and $56 million respectively were recognised at Mutanda (Industrial activities segment) and inventory write downs and
future rehabilitation costs of $18 million and $15 million respectively were recognised at the Brunswick smelter (Industrial activities
segment). Also, as a result of the ongoing mine optimisation review at Katanga (Industrial activities segment), $10 million of
severance and $47 million of inventory write downs were recognised due to organisational, production and development updates.
Disposal of Rosneft stake related income/(costs)
In 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. In September 2018, the
consortium arrangements were terminated with each member taking a direct ownership in Rosneft shares – QIA received an 18.93%
stake and Glencore retained a 0.57% equity stake commensurate with its original equity swap investment in 2017 (see note 10) and
the QHG group of entities being wholly owned by Glencore. Upon completion of the transaction, the QHG group had incurred a
liability for funding and other closure costs totalling $325 million. While QHG had a legally enforceable contractual claim to recover
these costs, the ability to recognise the potential claim as an asset was not virtually certain and thus, in 2018, these costs were
expensed in full.
Glencore Preliminary Results 2019
164
Glencore Preliminary Results 2019
Glencore Annual Report 2019
165
165
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
5. Other expense – net continued
In September 2019, an agreement was reached to settle QHG’s outstanding claim through the effective sale of the liability for
these funding and closure costs which were carried in various QHG group companies. This resulted in a gain of $325 million
being recognised.
Katanga OSC settlement and restatement
In December 2018, Katanga Mining Limited (Katanga), a controlled subsidiary of the Group listed on the Toronto Stock Exchange,
entered into a settlement agreement with the Ontario Securities Commission (OSC) including a payment of $22 million. The
settlement agreement resolved an investigation by the OSC into certain of Katanga’s historic accounting practices, corporate
governance and disclosure practices.
6. Impairments
US$ million
Property, plant and equipment and intangible assets
Investments
Advances and loans – non-current
VAT receivables
Inventory and other
Total impairments1
Notes
8/9
10
11
2019
(1,954)
(137)
(86)
(162)
(69)
(2,408)
2018
(1,452)
–
(191)
–
–
(1,643)
1
Impairments recognised during the year are allocated to Glencore’s operating segments as follows: Marketing activities $201 million (2018: $92 million) and Industrial activities
$2,207 million (2018: $1,551 million).
As part of a regular portfolio review, Glencore carries out an assessment of whether there are indicators 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 6.6%–13.5% (2018: 7%–13.5%). 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.
As a result of the regular impairment assessment, the following significant impairment charges resulted:
2019
Property, plant and equipment and intangible assets
• Following the sharp further decline in cobalt prices over H1 2019 and in response thereof, significant updates were made to
Mutanda’s mine plans, culminating in the decision to place the operation on temporary care and maintenance in December 2019,
for future restart, once the current weak and oversupplied cobalt market sufficiently recovers. As a result, the Mutanda operations
(Industrial activities segment) were impaired by $300 million to its estimated recoverable amount of $2,600 million, including
continued value recognition for the long-term copper sulphide resource potential. The valuation remains sensitive to price and
a prolonged temporary care and maintenance scenario and further deteriorations in these key assumptions may result in
additional impairment. The operation specific discount rate used in the valuation was 13.5%. The short to long-term copper and
cobalt price assumptions were $6,500/mt and $20.00–$27.00/lb, respectively. Should the copper and cobalt assumptions fall
by 10% (across the curve), or should it be determined that the temporary care and maintenance scenario be prolonged for an
additional 2 years, with all other assumptions held constant, a further impairment ranging between $317 million and $468 million
would be recognised.
• During H1 2019, Glencore’s exploration licenses in Chad East expired and Glencore entered into discussions with the Government
of the Republic of Chad with a view to extending the exploration licenses on terms acceptable to both parties. The discussions
did not result in any agreement to extend the licenses. As a result, the full carrying value pertaining to the acreage held under
exploration licenses ($538 million) (Industrial activities segment) was impaired. The expiry of the exploration licences has no
impact on Glencore’s current production and development assets in the Mangara, Badila and Krim fields (Chad West), which are
held under exploitation licences.
• During H1 2019, challenging warehousing conditions persisted and as a result, the remaining goodwill of $50 million related to the
Access World warehousing business (Marketing activities segment) was impaired.
Glencore Preliminary Results 2019
166
Glencore Annual Report 2019
166
Notes to the financial statements
continued
Notes to the financial statements
continued
5. Other expense – net continued
6. Impairments continued
In September 2019, an agreement was reached to settle QHG’s outstanding claim through the effective sale of the liability for
these funding and closure costs which were carried in various QHG group companies. This resulted in a gain of $325 million
being recognised.
Katanga OSC settlement and restatement
In December 2018, Katanga Mining Limited (Katanga), a controlled subsidiary of the Group listed on the Toronto Stock Exchange,
entered into a settlement agreement with the Ontario Securities Commission (OSC) including a payment of $22 million. The
settlement agreement resolved an investigation by the OSC into certain of Katanga’s historic accounting practices, corporate
governance and disclosure practices.
6. Impairments
US$ million
Investments
VAT receivables
Inventory and other
Total impairments1
Property, plant and equipment and intangible assets
Advances and loans – non-current
Notes
8/9
10
11
2019
(1,954)
(137)
(86)
(162)
(69)
2018
(1,452)
(191)
–
–
–
(2,408)
(1,643)
1
Impairments recognised during the year are allocated to Glencore’s operating segments as follows: Marketing activities $201 million (2018: $92 million) and Industrial activities
$2,207 million (2018: $1,551 million).
As part of a regular portfolio review, Glencore carries out an assessment of whether there are indicators 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 6.6%–13.5% (2018: 7%–13.5%). 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
As a result of the regular impairment assessment, the following significant impairment charges resulted:
for both years.
2019
Property, plant and equipment and intangible assets
• Following the sharp further decline in cobalt prices over H1 2019 and in response thereof, significant updates were made to
Mutanda’s mine plans, culminating in the decision to place the operation on temporary care and maintenance in December 2019,
for future restart, once the current weak and oversupplied cobalt market sufficiently recovers. As a result, the Mutanda operations
(Industrial activities segment) were impaired by $300 million to its estimated recoverable amount of $2,600 million, including
continued value recognition for the long-term copper sulphide resource potential. The valuation remains sensitive to price and
a prolonged temporary care and maintenance scenario and further deteriorations in these key assumptions may result in
additional impairment. The operation specific discount rate used in the valuation was 13.5%. The short to long-term copper and
cobalt price assumptions were $6,500/mt and $20.00–$27.00/lb, respectively. Should the copper and cobalt assumptions fall
by 10% (across the curve), or should it be determined that the temporary care and maintenance scenario be prolonged for an
additional 2 years, with all other assumptions held constant, a further impairment ranging between $317 million and $468 million
would be recognised.
• During H1 2019, Glencore’s exploration licenses in Chad East expired and Glencore entered into discussions with the Government
of the Republic of Chad with a view to extending the exploration licenses on terms acceptable to both parties. The discussions
did not result in any agreement to extend the licenses. As a result, the full carrying value pertaining to the acreage held under
exploration licenses ($538 million) (Industrial activities segment) was impaired. The expiry of the exploration licences has no
impact on Glencore’s current production and development assets in the Mangara, Badila and Krim fields (Chad West), which are
held under exploitation licences.
• During H1 2019, challenging warehousing conditions persisted and as a result, the remaining goodwill of $50 million related to the
Access World warehousing business (Marketing activities segment) was impaired.
• Global LNG oversupply with resultant low spot gas prices, and to a lesser extent, higher EU carbon prices, placed considerable
pressure on the API2 European coal market, the primary price reference market for our Colombian coal operations. This impact,
including reflecting our latest Colombian mine-life approval expectations, resulted in a reduction in future production and
revenue estimates. As a result, the Prodeco operation (Industrial activities segment) was impaired by $514 million, along with an
inventory write down of $41 million to its estimated recoverable amount of $778 million. The valuation remains sensitive to price
and a further deterioration in the pricing outlook may result in a further impairment. The operation specific discount rate used in
the valuation was 8.1%. The short to long-term API2 price assumptions were $70–83/mt. Should the price assumptions fall by 10%
(across the curve) with all other assumptions held constant, a further impairment of $466 million would be recognised.
• In November 2019, an agreement to dispose of the Oxidos and Cerro de Pasco operations (separately identifiable zinc and silver
processing areas within the Volcan group) (Industrial activities segment), which predominantly comprise an oxide processing
plant, environmental and rehabilitation provisions and old tailings dumps, was reached with $30 million due over a two year
period plus a royalty, contingent upon the price of silver and gold over certain thresholds, estimated to be worth $100 million on a
discounted basis. The transaction is subject to customary regulatory approvals and is expected to close during 2020. As a result of
the agreed disposal, it has been determined that these operations meet the requirements of IFRS 5, which requires that its assets
and liabilities be presented as current assets and liabilities “held for sale” as at 31 December 2019 at the lower of their carrying value
or fair value less costs to sell, and as a result of this reclassification to assets held for sale, an impairment charge of $354 million was
recognised as well as a VAT impairment of $24 million. Also see note 15.
• The balance of the impairment charges on property, plant and equipment (none of which were individually material) relate
to specific assets where utilisation is no longer required or to projects no longer processed due to changes in production and
development plans. As a result, the full carrying amount of these asses/projects was impaired, with $168 million recognised in
our Industrial activities segment and $30 million recognised in our Marketing activities segment.
VAT receivables
As a result of the continued decline in the Zambian government’s cash flow position and continued challenge by the Zambian
Revenue Authority on the validity of Mopani’s (Industrial activities segment) Value Added Tax (“VAT”) claims pertaining to 2013–15
submissions, such claims amounting to $127 million were impaired in full.
The balance of the impairment charges on VAT receivables (none of which were individually material) were recognised in our
Industrial activities segment ($5 million) and in our Marketing activities segment ($6 million).
2018
Property, plant and equipment
• As a result of delays in various expansion programs, cost increases owing to inflation, tax and other regulatory pressures and,
in particular, a materially lower acid price assumption (by-product from smelting), the Mopani copper operations in Zambia
(Industrial activities segment) were impaired by $803 million, to its estimated recoverable amount of $1,427 million. The valuation
remains sensitive to price and a further deterioration in the pricing outlook may result in additional impairment. The operation
specific discount rate used in the valuation was 11.1%. The short to long-term copper and cobalt price assumptions were $6,500/mt
and $27.22/lb, respectively, and acid price assumptions were $220/mt for 2019 and 2020 and $50/mt over the remaining life of
mine. As at 31 December 2018, had the copper, cobalt and acid price assumptions fallen by 10%, a further $390 million of
impairment would have been recognised. In addition, had operating costs risen by 5% as a result of further operational challenges
and delays, a further $165 million of impairment would have been recognised.
• In Q4 2018, a significant downward revision in the amount and timing of copper oxide reserves at our Mutanda copper operations
in the DRC was highlighted, which lowers near term forecast annual copper production. In addition, the significant increased
costs and elevated political risk stemming from the introduction of the 2018 Mining Code, has reduced the value of the base
business, as well as reduced the value and probability of approving the development of new facilities to treat the sulphide
reserves. As a result of these changes, the Mutanda operations (Industrial activities segment) were impaired by $600 million, to its
estimated recoverable amount of $3,006 million. The valuation remains sensitive to price and adverse applications of the 2018
Mining Code. A further deterioration in these assumptions may result in additional impairment. The operation specific discount
rate used in the valuation was 13.5%. The short to long-term copper and cobalt price assumptions were $6,500/mt and $27.22/lb,
respectively, and it was assumed that no super profits tax would be incurred. As at 31 December 2018, had the copper and cobalt
price assumptions fallen by 10% and it was determined that super profits tax was due, a further impairment ranging between
$479 million and $1,008 million would have been recognised.
• The balance of the impairment charges on property, plant and equipment (none of which were individually material) relate to
specific assets where utilisation is no longer required or to projects no longer progressed due to changes in production and
development plans. As a result, the full carrying amount of these assets/projects was impaired, with $49 million recognised in our
Industrial activities segment.
Glencore Preliminary Results 2019
166
Glencore Preliminary Results 2019
Glencore Annual Report 2019
167
167
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
6. Impairments continued
Advances and loans – non-current
In 2018, certain loans and physical advances were restructured over the period due to various non-performance factors, resulting
in the following impairments being recognised:
• $92 million impairment of a loan provided under an Energy related financing arrangement (Marketing activities segment).
The estimated recoverable amount of the advance was $23 million.
• $99 million impairment of a financial loan arrangement (Industrial activities segment). The estimated recoverable amount of the
loan was $155 million, see note 11.
7. Income taxes
Income taxes consist of the following:
US$ million
Current income tax expense
Adjustments in respect of prior year current income tax
Deferred income tax credit
Adjustments in respect of prior year deferred income tax
Total tax expense reported in the statement of income
Deferred income tax credit recognised directly in other comprehensive income
Total tax credit recognised directly in other comprehensive income
2019
(1,315)
74
603
20
(618)
4
4
The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the
following reasons:
US$ million
(Loss)/income before income taxes
Less: Share of income from associates and joint ventures
Parent Company’s and subsidiaries’ (loss)/income before income tax and attribution
Income tax credit/(expense) calculated at the Swiss income tax rate of 15% (2018: 15%)
Tax effects of:
Different tax rates from the standard Swiss income tax rate
Tax-exempt income ($175 million (2018: $275 million) from recurring items
and $37 million (2018: $77 million) from non-recurring items)
Items not tax deductible ($689 million (2018: $585 million) from recurring items
and $200 million (2018: $187 million) from non-recurring items)
Foreign exchange fluctuations
Changes in tax rates ($Nil (2018: $Nil) from recurring items
and $13 million (2018: $1 million) from non-recurring items)
Utilisation and changes in recognition of tax losses and temporary differences
Recognition of temporary differences arising from retrospective changes in tax restructuring regulations
Tax losses not recognised
Adjustments in respect of prior years
Other
Income tax expense
2019
(888)
(114)
(1,002)
150
450
212
(889)
(12)
(13)
(187)
120
(543)
94
–
(618)
2018
(2,290)
21
264
(58)
(2,063)
8
8
2018
4,679
(1,043)
3,636
(545)
(227)
352
(772)
(130)
1
(357)
–
(340)
(37)
(8)
(2,063)
The non-tax deductible items of $889 million (2018: $772 million) primarily relate to financing costs, impairments and various
other expenses.
The impact of tax-exempt income of $212 million (2018: $352 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.
Glencore Preliminary Results 2019
168
Glencore Annual Report 2019
168
Notes to the financial statements
continued
Notes to the financial statements
continued
6. Impairments continued
Advances and loans – non-current
In 2018, certain loans and physical advances were restructured over the period due to various non-performance factors, resulting
in the following impairments being recognised:
• $92 million impairment of a loan provided under an Energy related financing arrangement (Marketing activities segment).
The estimated recoverable amount of the advance was $23 million.
• $99 million impairment of a financial loan arrangement (Industrial activities segment). The estimated recoverable amount of the
loan was $155 million, see note 11.
7. Income taxes
Income taxes consist of the following:
US$ million
Current income tax expense
Adjustments in respect of prior year current income tax
Deferred income tax credit
Adjustments in respect of prior year deferred income tax
Total tax expense reported in the statement of income
2019
(1,315)
74
603
20
(618)
4
4
2019
(888)
(114)
(1,002)
150
450
212
(889)
(12)
(13)
(187)
120
(543)
94
–
(618)
2018
(2,290)
21
264
(58)
(2,063)
8
8
2018
4,679
(1,043)
3,636
(545)
(227)
352
(772)
(130)
(357)
1
–
(340)
(37)
(8)
(2,063)
The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the
Deferred income tax credit recognised directly in other comprehensive income
Total tax credit recognised directly in other comprehensive income
following reasons:
US$ million
(Loss)/income before income taxes
Less: Share of income from associates and joint ventures
Parent Company’s and subsidiaries’ (loss)/income before income tax and attribution
Income tax credit/(expense) calculated at the Swiss income tax rate of 15% (2018: 15%)
Tax effects of:
Different tax rates from the standard Swiss income tax rate
Tax-exempt income ($175 million (2018: $275 million) from recurring items
and $37 million (2018: $77 million) from non-recurring items)
Items not tax deductible ($689 million (2018: $585 million) from recurring items
and $200 million (2018: $187 million) from non-recurring items)
Foreign exchange fluctuations
Changes in tax rates ($Nil (2018: $Nil) from recurring items
and $13 million (2018: $1 million) from non-recurring items)
Utilisation and changes in recognition of tax losses and temporary differences
Recognition of temporary differences arising from retrospective changes in tax restructuring regulations
Tax losses not recognised
Adjustments in respect of prior years
Other
Income tax expense
other expenses.
The non-tax deductible items of $889 million (2018: $772 million) primarily relate to financing costs, impairments and various
The impact of tax-exempt income of $212 million (2018: $352 million) primarily relates to non-taxable intra-group dividends, income
that is not effectively connected to the taxable jurisdiction, and various other items.
The tax impact of foreign exchange fluctuations relates to the foreign currency movements on deferred tax balances where the
underlying tax balances are denominated in a currency different to the functional currency determined for accounting purposes.
7. Income taxes continued
Deferred taxes
Deferred taxes as at 31 December 2019 and 2018 are attributable to the items in the table below:
US$ 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
(308)
54
(254)
742
(10)
145
877
623
–
4
4
–
9
(9)
–
4
6
7
13
(69)
3
–
(66)
(53)
–
(1)
(1)
(35)
–
(1)
(36)
(37)
Recognised in
the statement
of income
Recognised in
other
comprehensive
income
Business
combination
and disposal of
subsidiaries
Foreign
currency
exchange
movements
(58)
38
(20)
487
(5)
(256)
226
206
–
(2)
(2)
2
(1)
9
10
8
–
–
–
(157)
–
(105)
(262)
(262)
(1)
(32)
(33)
224
(2)
8
230
197
2019
1,212
265
1,477
(5,680)
(71)
(223)
(5,974)
(4,497)
2018
1,514
214
1,728
(6,318)
(73)
(448)
(6,839)
(5,111)
Other
2018
–
(13)
(13)
–
–
90
90
77
1,514
214
1,728
(6,318)
(73)
(448)
(6,839)
(5,111)
Other
2017
50
–
50
(19)
–
–
(19)
31
1,523
210
1,733
(6,855)
(65)
(104)
(7,024)
(5,291)
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 2019, $1,571 million (2018: $2,140 million) of deferred tax assets related to available loss carry forwards
have been brought to account, of which $1,212 million (2018: $1,514 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:
• $517 million (2018: $520 million) in entities domiciled in the DRC (Katanga Mining Group),
• $287 million (2018: $452 million) in entities domiciled in Switzerland, and
• $366 million (2018: $403 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 recognised losses carried forward in Switzerland primarily relate to non-recurring events. Based on the core business activities
conducted in Switzerland and taxable income forecasts going forward, 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 forecasts going forward,
sufficient taxable profits are expected to fully utilise the recognised tax losses prior to expiration.
Glencore Preliminary Results 2019
168
Glencore Preliminary Results 2019
Glencore Annual Report 2019
169
169
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
7. Income taxes continued
DRC related income tax judgements
The losses carried forward in the DRC have an unlimited carry forward period, but are subject to an annual utilisation limitation.
Katanga Mining resumed processing operations in December 2017 and is expected to generate taxable profits in the future.
Should this potential fully materialise, up to $824 million (2018: $705 million) of unrecognised tax effected losses are available to
be recognised.
During 2018, the DRC parliament adopted a new mining code (“2018 Mining Code”) introducing wide-ranging reforms including the
introduction of higher royalties, a new Super Profits Tax regime and further regulatory controls. This triggered a re-assessment of
our tax positions in the DRC. Based on the potential challenge of historical tax positions and uncertainties of the 2018 Mining Code,
specifically, the application and interpretation of the Super Profits Tax, which cannot be offset by carry forward income tax losses,
consideration was given to the range of possible outcomes to determine the expected value of the tax losses available for future
offset, including to what extent previously incurred tax losses would be available to offset future taxable profits. Any adverse
challenge by the DRC tax authorities could significantly impact the currently recognised tax losses.
Available gross tax losses
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been
recognised in the consolidated financial statements, are detailed below and will expire as follows:
US$ million
1 year
2 years
3 years
Thereafter
Unlimited
Total
2019
41
45
307
3,172
9,292
2018
1,418
36
35
2,791
7,807
12,857
12,087
As at 31 December 2019, unremitted earnings of $55,282 million (2018: $55,029 million) have been retained by subsidiaries for
reinvestment. No provision is made for income taxes.
Glencore Preliminary Results 2019
170
Glencore Annual Report 2019
170
7. Income taxes continued
DRC related income tax judgements
The losses carried forward in the DRC have an unlimited carry forward period, but are subject to an annual utilisation limitation.
Katanga Mining resumed processing operations in December 2017 and is expected to generate taxable profits in the future.
Should this potential fully materialise, up to $824 million (2018: $705 million) of unrecognised tax effected losses are available to
be recognised.
During 2018, the DRC parliament adopted a new mining code (“2018 Mining Code”) introducing wide-ranging reforms including the
introduction of higher royalties, a new Super Profits Tax regime and further regulatory controls. This triggered a re-assessment of
our tax positions in the DRC. Based on the potential challenge of historical tax positions and uncertainties of the 2018 Mining Code,
specifically, the application and interpretation of the Super Profits Tax, which cannot be offset by carry forward income tax losses,
consideration was given to the range of possible outcomes to determine the expected value of the tax losses available for future
offset, including to what extent previously incurred tax losses would be available to offset future taxable profits. Any adverse
challenge by the DRC tax authorities could significantly impact the currently recognised tax losses.
Available gross tax losses
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been
recognised in the consolidated financial statements, are detailed below and will expire as follows:
US$ million
1 year
2 years
3 years
Thereafter
Unlimited
Total
2019
41
45
307
3,172
9,292
12,857
2018
1,418
36
35
2,791
7,807
12,087
As at 31 December 2019, unremitted earnings of $55,282 million (2018: $55,029 million) have been retained by subsidiaries for
reinvestment. No provision is made for income taxes.
Notes to the financial statements
continued
Notes to the financial statements
continued
8. Property, plant and equipment
2019
Freehold land
and buildings
Plant and
equipment
Right-of-use
assets
Notes
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
US$ million
Gross carrying amount:
1 January 2019
Impact of adoption of IFRS 161
Restatement2
1 January 2019 (restated)
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency
exchange movements
Reclassification to held for sale
Other movements
31 December 2019
Accumulated depreciation and
impairment:
1 January 2019
Impact of adoption of IFRS 161
1 January 2019 (restated)
Disposal of subsidiaries
Disposals
Depreciation
Impairment
Effect of foreign currency
exchange movements
Reclassification to held for sale
Other movements
31 December 2019
Net book value 31 December 2019
25
25
25
15
25
6
15
6,060
–
2
6,062
200
(59)
65
(33)
4
(176)
148
6,211
1,655
–
1,655
(4)
(6)
377
20
1
(27)
1
2,017
4,194
43,629
(843)
(7)
42,779
772
(32)
3,558
(679)
81
(36)
(218)
46,225
21,742
(312)
21,430
(32)
(553)
3,059
264
26
–
452
24,646
21,579
–
1,635
–
1,635
169
–
656
(90)
(1)
(1)
(55)
2,313
–
312
312
–
(77)
396
–
–
–
2
633
1,680
29,687
–
–
29,687
467
–
104
(40)
74
(16)
(53)
30,223
8,758
–
8,758
–
(1)
1,709
804
15
(14)
(361)
10,910
19,313
2,183
–
–
2,183
–
–
1
–
–
(1)
65
2,248
1,588
–
1,588
–
–
6
532
–
(1)
33
2,158
90
Total
98,625
792
(5)
99,412
1,623
(91)
5,346
(1,474)
17,066
–
–
17,066
15
–
962
(632)
9
167
(8)
597
18,009
(238)
484
105,229
8,112
–
8,112
–
(611)
1,469
265
–
–
273
9,508
8,501
41,855
–
41,855
(36)
(1,248)
7,016
1,885
42
(42)
400
49,872
55,357
1 Gross finance lease arrangements of $843 million and related depreciation of $312 million previously presented within plant and equipment, have been reclassified to the ‘right-of-use
assets’ heading. There has been no change in the amount recognised.
2 Adjustment to provisionally reported purchase price allocation in relation to Ale.
Plant and equipment includes expenditure for construction in progress of $4,161 million (2018: $3,268 million). Mineral and
petroleum rights include biological assets of $19 million (2018: $18 million). Depreciation expenses included in cost of goods sold
are $6,970 million (2018: $6,224 million) and in selling and administrative expenses, $46 million (2018: $19 million).
During 2019, $66 million (2018: $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 4% (2018: 4%).
As at 31 December 2019, with the exception of leases, no property, plant or equipment was pledged as security for borrowings
(2018: $Nil).
Glencore Preliminary Results 2019
170
Glencore Preliminary Results 2019
Glencore Annual Report 2019
171
171
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
8. Property, plant and equipment continued
Leases
The Group leases various assets including land and buildings and plant and equipment. As at 31 December 2019, the net book
value of recognised right-of use assets relating to land and buildings was $595 million and plant and equipment $1,085 million.
The depreciation charge for the period relating to those assets was $103 million and $293 million, respectively.
Disclosure of amounts recognised as lease liabilities in the statement of financial position and cash outflows for leases in the year are
included within note 20.
Amounts recognised in the statement of income are detailed below:
US$ million
Depreciation on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to low-value leases
Expense relating to variable lease payments not included in the measurement of the lease liability
Income from subleasing right-of-use assets
Total
2019
(396)
(101)
(758)
(3)
(1)
231
(1,028)
At 31 December 2019, the Group is committed to $224 million of short-term lease payments and $146 million related to capitalised
leases not yet commenced.
2018
US$ million
Gross carrying amount:
1 January 2018 (restated)1
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency exchange
movements
Reclassification from held for sale
Other movements
31 December 2018
Accumulated depreciation and impairment:
1 January 2018 (restated)1
Disposal of subsidiaries
Disposals
Depreciation
Impairment
Effect of foreign currency exchange
movements
Reclassification from held for sale
Other movements
31 December 2018
Net book value 31 December 2018
Freehold land
and buildings
Plant and
equipment
Notes
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
25
25
25
6
5,711
130
(74)
72
(24)
(27)
3
269
6,060
1,363
(45)
(10)
354
3
(3)
3
(10)
1,655
4,405
41,310
555
(467)
3,611
(1,066)
(452)
237
(99)
43,629
18,731
(377)
(968)
3,059
415
(134)
54
962
21,742
21,887
28,619
1,534
(248)
195
(90)
(419)
16
80
29,687
6,778
(180)
(184)
1,539
861
(91)
11
24
8,758
20,929
2,170
–
–
–
–
14,674
938
(105)
860
(200)
Total
92,484
3,157
(894)
4,738
(1,380)
–
(49)
(947)
–
13
2,183
1,584
–
–
4
–
–
–
–
1,588
595
25
923
17,066
281
1,186
98,625
6,748
(98)
(66)
1,287
173
35,204
(700)
(1,228)
6,243
1,452
(8)
(236)
72
4
8,112
8,954
140
980
41,855
56,770
1 Certain balances in the prior year have been restated to reflect appropriate reclassification. The restatements were only within property, plant and equipment headings, there were no
depreciation and amortisation changes..
Glencore Preliminary Results 2019
172
Glencore Annual Report 2019
172
Notes to the financial statements
continued
Leases
8. Property, plant and equipment continued
The Group leases various assets including land and buildings and plant and equipment. As at 31 December 2019, the net book
value of recognised right-of use assets relating to land and buildings was $595 million and plant and equipment $1,085 million.
The depreciation charge for the period relating to those assets was $103 million and $293 million, respectively.
Disclosure of amounts recognised as lease liabilities in the statement of financial position and cash outflows for leases in the year are
included within note 20.
Amounts recognised in the statement of income are detailed below:
Expense relating to variable lease payments not included in the measurement of the lease liability
Income from subleasing right-of-use assets
At 31 December 2019, the Group is committed to $224 million of short-term lease payments and $146 million related to capitalised
US$ million
Depreciation on right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to low-value leases
Total
2018
leases not yet commenced.
US$ million
Gross carrying amount:
1 January 2018 (restated)1
Business combination
Disposal of subsidiaries
Additions
Disposals
movements
Effect of foreign currency exchange
Reclassification from held for sale
Other movements
31 December 2018
1 January 2018 (restated)1
Disposal of subsidiaries
Disposals
Depreciation
Impairment
movements
Effect of foreign currency exchange
Reclassification from held for sale
Other movements
31 December 2018
Net book value 31 December 2018
depreciation and amortisation changes..
Accumulated depreciation and impairment:
2019
(396)
(101)
(758)
(3)
(1)
231
(1,028)
3,157
(894)
4,738
(1,380)
(947)
281
1,186
35,204
(700)
(1,228)
6,243
1,452
(236)
140
980
Freehold land
Plant and
petroleum
and
Deferred
Notes
and buildings
equipment
rights
evaluation
mining costs
Total
Mineral and
Exploration
28,619
2,170
14,674
92,484
6,060
43,629
29,687
2,183
17,066
98,625
25
25
25
6
5,711
130
(74)
72
(24)
(27)
3
269
1,363
(45)
(10)
354
3
(3)
3
(10)
41,310
555
(467)
3,611
(1,066)
(452)
237
(99)
18,731
(377)
(968)
3,059
415
(134)
54
962
1,534
(248)
195
(90)
(419)
16
80
6,778
(180)
(184)
1,539
861
(91)
11
24
–
–
–
–
–
–
13
–
–
4
–
–
–
–
1,584
938
(105)
860
(200)
(49)
25
923
6,748
(98)
(66)
1,287
173
(8)
72
4
1 Certain balances in the prior year have been restated to reflect appropriate reclassification. The restatements were only within property, plant and equipment headings, there were no
1,655
4,405
21,742
21,887
8,758
20,929
1,588
595
8,112
8,954
41,855
56,770
Notes to the financial statements
continued
9. Intangible assets
2019
US$ million
Cost:
1 January 2019
Restatement1
1 January 2019 (restated)
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency exchange movements
Other movements
31 December 2019
Accumulated amortisation and impairment:
1 January 2019
Disposals
Amortisation expense2
Impairment
Effect of foreign currency exchange movements
Other movements
31 December 2019
Net book value 31 December 2019
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Customer
relationships
and other
25
25
25
6
13,293
–
13,293
–
–
–
–
–
–
13,293
8,243
–
–
50
–
–
8,293
5,000
1,336
–
1,336
–
–
–
(1)
40
(1)
1,374
159
–
33
–
7
(1)
198
1,176
434
87
521
24
–
10
(11)
(4)
56
596
268
(11)
35
–
–
23
315
281
664
(240)
424
347
(33)
12
(1)
(1)
(28)
720
86
(1)
76
19
–
(9)
171
549
1 Adjustment to provisionally reported purchase price allocation in relation to Ale.
2 Recognised in cost of goods sold.
2018
US$ million
Cost:
1 January 2018
Restatement1
1 January 2018 (restated)
Business combination
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency exchange movements
Reclassification from held for sale
Other movements
31 December 2018
Accumulated amortisation and impairment:
1 January 2018
Disposal of subsidiaries
Disposals
Amortisation expense2
Effect of foreign currency exchange movements
Other movements
31 December 2018
Net book value 31 December 2018
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Customer
relationships
and other
25
25
25
15
25
13,293
–
13,293
–
–
–
–
–
–
–
13,293
8,243
–
–
–
–
–
8,243
5,050
1,555
–
1,555
–
–
1
(1)
(219)
–
–
1,336
149
–
–
37
(27)
–
159
1,177
468
(76)
392
2
–
25
(8)
(2)
1
24
434
237
–
(8)
35
(2)
6
268
166
183
29
212
425
(4)
13
–
(7)
–
25
664
83
(4)
–
10
(1)
(2)
86
578
1 Adjustment to provisionally reported purchase price allocation in relation to Volcan.
2 Recognised in cost of goods sold.
Total
15,727
(153)
15,574
371
(33)
22
(13)
35
27
15,983
8,756
(12)
144
69
7
13
8,977
7,006
Total
15,499
(47)
15,452
427
(4)
39
(9)
(228)
1
49
15,727
8,712
(4)
(8)
82
(30)
4
8,756
6,971
Glencore Preliminary Results 2019
172
Glencore Preliminary Results 2019
Glencore Annual Report 2019
173
173
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
9. 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 business
Coal marketing business
Metals warehousing business
Total
2019
3,326
1,674
–
5,000
2018
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
During the period, the goodwill of $50 million related to the Access World warehousing business was impaired (see note 6).
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.
Customer relationships
Customer relationships mainly represent intangible assets related to long-standing customer relationships recognised in respect of
business combinations completed in 2019 and 2018 (see note 25). These intangible assets are being amortised on a straight-line
basis over their estimated economic life which ranges between 5–9 years.
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 2019 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 times (2018: 15 times) is derived from observable market data for broadly comparable businesses; and
• Glencore believes that no reasonably possible changes 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.
Glencore Preliminary Results 2019
174
Glencore Annual Report 2019
174
Notes to the financial statements
continued
Notes to the financial statements
continued
The carrying amount of goodwill has been allocated to cash-generating units (CGUs), or groups of CGUs as follows:
9. Intangible assets continued
Goodwill
US$ million
Metals and minerals marketing business
Coal marketing business
Metals warehousing business
Total
2019
3,326
1,674
–
5,000
2018
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
During the period, the goodwill of $50 million related to the Access World warehousing business was impaired (see note 6).
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
logistics arbitrage opportunities.
Metals warehousing business
Port allocation rights
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.
Customer relationships
Customer relationships mainly represent intangible assets related to long-standing customer relationships recognised in respect of
business combinations completed in 2019 and 2018 (see note 25). These intangible assets are being amortised on a straight-line
basis over their estimated economic life which ranges between 5–9 years.
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 2019 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 times (2018: 15 times) is derived from observable market data for broadly comparable businesses; and
• Glencore believes that no reasonably possible changes 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.
10. 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 other comprehensive loss from associates and joint ventures
Additions from business combinations
Transfer of previously equity accounted investment to subsidiary
Fair value of retained interest in Terminales Portuarios Chancay S.A.
Impairments
Dividends received
Other movements
31 December
Of which:
Investments in associates
Investments in joint ventures
Notes
25
25
25
6
2019
13,909
104
(96)
114
(37)
–
(40)
150
(137)
(942)
(41)
12,984
6,858
6,126
2018
13,998
19
(1)
1,043
(124)
109
–
–
–
(1,139)
4
13,909
7,707
6,202
As at 31 December 2019, the carrying value of our listed associates is $605 million (2018: $772 million), mainly comprising Century
Aluminum and Trevali, which have a carrying value of $395 million (2018: $441 million) and $119 million (2018: $244 million),
respectively. The fair value of our listed associates and joint ventures, using published price quotations (a Level 1 fair value
measurement) is $427 million (2018: $463 million). As at 31 December 2019, $104 million (2018: $101 million) of the carrying amount
of Glencore’s investment in Century Aluminium was pledged under a loan facility, with proceeds received and recognised in current
borrowings of $80 million (2018: $90 million)(see note 20).
Impairments
Primarily comprise impairment charges in respect of our investments in Trevali ($48 million) and Oil vessels’ entities ($67 million).
Terminales Portuarios Chancay S.A.
In April 2019, Glencore disposed of a 60% interest in Terminales Portuarios Chancay S.A. for $11 million (see notes 4 and 25),
subsequently accounting for its remaining share of 40% using the equity method.
Glencore Preliminary Results 2019
174
Glencore Preliminary Results 2019
Glencore Annual Report 2019
175
175
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
10. Investments in associates, joint ventures and other investments continued
2019 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
Cerrejón
US$ million
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 2019
Glencore’s ownership interest
Acquisition fair value and other adjustments
Carrying value
2,399
630
(768)
(57)
157
(21)
(15)
2,204
33.3%
409
1,143
Total
material
associates
Antamina
Collahuasi
Glencore
Agri
4,589
1,276
(1,170)
(486)
55
(53)
(146)
4,209
33.8%
1,872
3,295
6,988
1,906
(1,938)
(543)
212
(74)
(161)
6,413
2,281
4,438
4,905
1,306
(1,207)
(794)
163
(15)
(95)
4,210
44.0%
1,116
2,968
5,712
7,363
(3,855)
(5,389)
184
(2,770)
(3,450)
3,831
49.9%
1,246
3,158
Total
material
associates
and
joint
ventures
17,605
10,575
(7,000)
(6,726)
559
(2,859)
(3,706)
14,454
Total
material
joint
ventures
10,617
8,669
(5,062)
(6,183)
347
(2,785)
(3,545)
8,041
2,362
6,126
4,643
10,564
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 2019 including group adjustments relating to alignment of
accounting policies or fair value adjustments, is set out below.
US$ million
Revenue
(Loss)/income for the year
Other comprehensive loss
Total comprehensive (loss)/income
Glencore’s share of dividends paid
Cerrejón
1,483
(1,440)
–
(1,440)
66
The above (loss)/income for the year includes the following:
Depreciation and amortisation
Interest income1
Interest expense2
Impairment, net of tax3
Income tax credit/(expense)
(565)
–
(12)
(1,305)
46
Antamina
3,038
892
–
892
243
(811)
15
(3)
–
(489)
Total
material
associates
4,521
(548)
–
(548)
309
Collahuasi
3,147
945
(23)
922
467
Glencore
Agri
25,057
(29)
(3)
(32)
–
Total
material
associates
and
joint
ventures
32,725
368
(26)
342
776
Total
material
joint
ventures
28,204
916
(26)
890
467
(1,376)
15
(15)
(1,305)
(443)
(640)
35
(25)
–
(437)
(524)
28
(202)
–
(40)
(1,164)
63
(227)
–
(477)
(2,540)
78
(242)
(1,305)
(920)
Includes foreign exchange gains and other income of $68 million.
Includes foreign exchange losses of $16 million.
1
2
3 Glencore’s attributable share of impairment relating to Cerrejón amounts to $435 million, net of taxes of $213 million, resulting from lower API2 coal price assumptions and reduced
production estimates, including in relation to updated mine-life approval expectations. The operation specific discount rate used in the valuation was 8.1%. The short to long-term API 2
price assumptions were $70–83/mt. Should the price assumptions fall by 10% (across the curve) with all other assumptions held constant a further impairment of $312 million would be
recognised.
Glencore Preliminary Results 2019
176
Glencore Annual Report 2019
176
Notes to the financial statements
continued
Notes to the financial statements
continued
10. Investments in associates, joint ventures and other investments continued
10. Investments in associates, joint ventures and other investments continued
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
2019 Details of material associates and joint ventures
and joint ventures’ relevant figures, is set out below.
2018 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
Cerrejón
2,554
876
(652)
(409)
307
(2)
–
2,369
33.3%
900
1,689
US$ million
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 2018
Glencore’s ownership interest
Acquisition fair value and other adjustments
Carrying value
Total
material
associates
Antamina
Collahuasi
Glencore
Agri
4,428
1,120
(1,132)
(534)
77
(34)
(144)
3,882
33.8%
1,925
3,237
6,982
1,996
(1,784)
(943)
384
(36)
(144)
6,251
2,825
4,926
4,751
1,170
(1,161)
(483)
161
(12)
(96)
4,277
44.0%
1,136
3,018
4,549
6,917
(2,968)
(4,739)
180
(1,995)
(2,669)
3,759
49.9%
1,309
3,184
Total
material
associates
and
joint
ventures
16,282
10,083
(5,913)
(6,165)
725
(2,043)
(2,909)
14,287
Total
material
joint
ventures
9,300
8,087
(4,129)
(5,222)
341
(2,007)
(2,765)
8,036
2,445
6,202
5,270
11,128
Cerrejón
Antamina
associates
Collahuasi
Agri
ventures
ventures
The above assets and liabilities include the following:
US$ million
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Cash and cash equivalents
Current financial liabilities1
Non-current financial liabilities1
Net assets 31 December 2019
Glencore’s ownership interest
Acquisition fair value and other adjustments
Carrying value
1 Financial liabilities exclude trade, other payables and provisions.
2,399
630
(768)
(57)
157
(21)
(15)
2,204
33.3%
409
1,143
4,589
1,276
(1,170)
(486)
55
(53)
(146)
4,209
33.8%
1,872
3,295
Total
material
Glencore
6,988
1,906
(1,938)
(543)
212
(74)
(161)
6,413
2,281
4,438
4,905
1,306
(1,207)
(794)
163
(15)
(95)
4,210
44.0%
1,116
2,968
5,712
7,363
(3,855)
(5,389)
184
(2,770)
(3,450)
3,831
49.9%
1,246
3,158
Total
material
Total
associates
material
joint
and
joint
10,617
8,669
(5,062)
(6,183)
347
(2,785)
(3,545)
8,041
17,605
10,575
(7,000)
(6,726)
559
(2,859)
(3,706)
14,454
2,362
6,126
4,643
10,564
US$ million
Revenue
(Loss)/income for the year
Other comprehensive loss
Total comprehensive (loss)/income
Glencore’s share of dividends paid
Depreciation and amortisation
Interest income1
Interest expense2
Impairment, net of tax3
Income tax credit/(expense)
The above (loss)/income for the year includes the following:
Cerrejón
Antamina
associates
Collahuasi
Agri
ventures
ventures
3,147
25,057
28,204
32,725
Total
material
4,521
(548)
–
(548)
309
3,038
892
–
892
243
(811)
(1,376)
15
(3)
–
(489)
15
(15)
(1,305)
(443)
1,483
(1,440)
–
(1,440)
66
(565)
–
(12)
(1,305)
46
Total
material
Total
associates
material
joint
and
joint
Glencore
945
(23)
922
467
(640)
35
(25)
–
(437)
(29)
(3)
(32)
–
(524)
28
(202)
–
(40)
916
(26)
890
467
(1,164)
63
(227)
–
(477)
368
(26)
342
776
(2,540)
78
(242)
(1,305)
(920)
1
2
Includes foreign exchange gains and other income of $68 million.
Includes foreign exchange losses of $16 million.
3 Glencore’s attributable share of impairment relating to Cerrejón amounts to $435 million, net of taxes of $213 million, resulting from lower API2 coal price assumptions and reduced
production estimates, including in relation to updated mine-life approval expectations. The operation specific discount rate used in the valuation was 8.1%. The short to long-term API 2
price assumptions were $70–83/mt. Should the price assumptions fall by 10% (across the curve) with all other assumptions held constant a further impairment of $312 million would be
recognised.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures for the year ended 31 December 2019 including group adjustments relating to alignment of
accounting policies or fair value adjustments, is set out below.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’ and
joint ventures’ relevant figures for the year ended 31 December 2018, including group adjustments relating to alignment of
accounting policies or fair value adjustments, is set out below.
1 Financial liabilities exclude trade, other payables and provisions.
US$ million
Revenue
Income for the year
Other comprehensive loss
Total comprehensive income
Glencore’s share of dividends paid
Cerrejón
2,516
359
–
359
194
The above profit for the year includes the following:
Depreciation and amortisation
Interest income1
Interest expense2
Income tax expense
(571)
–
–
(231)
1
2
Includes foreign exchange gains and other income of $73 million.
Includes foreign exchange losses of $24 million.
Antamina
3,489
1,224
–
1,224
405
(789)
–
(6)
(711)
Aggregate information of associates that are not individually material:
US$ million
The Group’s share of (loss)/income
The Group’s share of other comprehensive loss
The Group’s share of total comprehensive loss
Aggregate carrying value of the Group’s interests
Total
material
associates
6,005
1,583
–
1,583
599
Collahuasi
3,241
963
(20)
943
440
Glencore
Agri
26,304
(15)
2
(13)
–
Total
material
associates
and
joint
ventures
35,550
2,531
(18)
2,513
1,039
Total
material
joint
ventures
29,545
948
(18)
930
440
(1,360)
–
(6)
(942)
(611)
46
(25)
(496)
(261)
59
(171)
(123)
(872)
105
(196)
(619)
(2,232)
105
(202)
(1,561)
2019
(110)
(25)
(135)
2,420
2018
93
(116)
(23)
2,781
Glencore Preliminary Results 2019
176
Glencore Preliminary Results 2019
Glencore Annual Report 2019
177
177
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
10. Investments in associates, joint ventures and other investments continued
The amount of corporate guarantees (excluding Glencore Agri) in favour of associates and joint ventures as at 31 December 2019
was $483 million (2018: $419 million). Issued guarantees in favour of Glencore Agri amounted to $500 million as at 31 December 2019
(2018: $506 million), mainly relating to a $400 million Viterra bond maturing in 2020. No amounts have been claimed or provided as
at 31 December 2019. Glencore’s share of joint ventures’ capital commitments amounts to $108 million (2018: $19 million).
Other investments
US$ million
Fair value through other comprehensive income1
United Company Rusal plc2
EN+ GROUP PLC2
OAO NK Russneft3
Yancoal
OSJC Rosneft
Other
Fair value through profit and loss
Century Aluminum Company cash-settled equity swaps
Champion Iron Limited share warrants4
2019
2018
–
674
869
172
440
135
2,290
69
28
97
440
–
744
233
376
207
2,000
67
–
67
Total
2,387
2,067
1 Fair value through other comprehensive income includes net disposals of $36 million for the period.
2 In January 2019, Glencore agreed to exchange its interest in United Company Rusal plc into a 10.6% interest in EN+ GROUP PLC.
3 Glencore’s investment in OAO NK Russneft is pledged under a loan facility issued to OAO NK Russneft.
4 The warrants are exercisable until October 2025 for conversion into direct share ownership.
Although Glencore holds a 25% interest in Russneft, it does not exercise significant influence over its financial and operating
policy decisions.
During the year, dividend income from equity investments designated as at fair value through other comprehensive income
amounted to $49 million (2018: $21 million).
Glencore Preliminary Results 2019
178
Glencore Annual Report 2019
178
Notes to the financial statements
continued
Notes to the financial statements
continued
10. Investments in associates, joint ventures and other investments continued
11. Advances and loans
The amount of corporate guarantees (excluding Glencore Agri) in favour of associates and joint ventures as at 31 December 2019
was $483 million (2018: $419 million). Issued guarantees in favour of Glencore Agri amounted to $500 million as at 31 December 2019
(2018: $506 million), mainly relating to a $400 million Viterra bond maturing in 2020. No amounts have been claimed or provided as
at 31 December 2019. Glencore’s share of joint ventures’ capital commitments amounts to $108 million (2018: $19 million).
Fair value through other comprehensive income1
United Company Rusal plc2
Other investments
US$ million
EN+ GROUP PLC2
OAO NK Russneft3
Yancoal
OSJC Rosneft
Other
Fair value through profit and loss
Century Aluminum Company cash-settled equity swaps
Champion Iron Limited share warrants4
2019
2018
–
674
869
172
440
135
69
28
97
440
–
744
233
376
207
67
–
67
2,290
2,000
Total
2,387
2,067
1 Fair value through other comprehensive income includes net disposals of $36 million for the period.
2 In January 2019, Glencore agreed to exchange its interest in United Company Rusal plc into a 10.6% interest in EN+ GROUP PLC.
3 Glencore’s investment in OAO NK Russneft is pledged under a loan facility issued to OAO NK Russneft.
4 The warrants are exercisable until October 2025 for conversion into direct share ownership.
Although Glencore holds a 25% interest in Russneft, it does not exercise significant influence over its financial and operating
policy decisions.
During the year, dividend income from equity investments designated as at fair value through other comprehensive income
amounted to $49 million (2018: $21 million).
US$ million
Financial assets at amortised cost
Loans to associates
Other non-current receivables and loans
Rehabilitation trust fund
Financial assets at fair value through profit and loss
Other non-current receivables and loans
Non-financial instruments
Pension surpluses
Advances repayable with product1
Other non-current receivables
Total
Notes
2019
2018
294
511
147
116
42
1,172
145
2,427
275
376
120
155
41
1,387
201
2,555
23
1 Net of $1,216 million (2018: $1,142 million) provided by various banks, the repayment terms of which are contingent upon and connected to the future delivery of contractual production.
Financial assets at amortised cost
Loans to associates
Loans to associates generally bear interest at applicable floating market rates plus a premium.
Other non-current receivables and loans
Other non-current receivables and loans comprise the following:
US$ million
Secured financing arrangements
Other
Total
2019
493
18
511
2018
360
16
376
Various financing facilities, generally marketing related and secured against certain assets and/or payable from the future sale of
production of the counterparty. The non-current receivables and loans are interest-bearing and on average are to be repaid over
a three-year period.
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.
Loss allowances of financial assets at amortised cost
The Group determines the expected credit loss of other non-current receivables and loans (at amortised cost) based on different
scenarios of probability of default and expected loss applicable to each of the material underlying balances. The movement in loss
allowance for financial assets classified at amortised cost is detailed below:
US$ million
Gross carrying value 31 December 2019
Loss allowances
1 January 2019
Released during the period
Charged during the period
Reclassifications
31 December 2019
Net carrying value 31 December 2019
Other non-
current
receivables and
loans
Loans to
associates
325
866
323
(10)
43
(1)
355
511
Total
1,191
350
(10)
47
(1)
386
805
27
–
4
–
31
294
Glencore Preliminary Results 2019
178
Glencore Preliminary Results 2019
Glencore Annual Report 2019
179
179
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
11. Advances and loans continued
Financial assets at fair value through profit and loss
Other non-current receivables and loans
In 2018, the terms of a loan arrangement were substantially restructured and modified. Under the new terms, repayment of the
loan is dependent upon the underlying performance of the operations and as such, the contractual cash flows no longer represent
“solely payments of principal and interest” and therefore the loan is accounted for at fair value through profit and loss (FVTPL).
Following the substantial modification, the loan was de-recognised as a financial asset at amortised cost and the new loan was
recognised at a fair value of $155 million. During 2019 fair value movements of negative $39 million were recognised (see note 6).
Fair value was determined using a Level 3 discounted cash flow model technique, with the key unobservable inputs being a
discount rate specific to the operation of 13% and a repayment profile dependent upon the underlying business plans and forecasts
over the next 5 years. The valuation is sensitive to timing of the underlying cash flows and could result in a $42 million reduction of
fair value if the repayment schedule is extended by an additional 9 years.
Non-financial instruments
Advances repayable with product
US$ million
Counterparty
Société Nationale d’Electricité (SNEL) power advances
Chad State National Oil Company
Société Nationale des Pétroles du Congo
Other
Total
2019
2018
303
360
18
491
1,172
340
393
65
589
1,387
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 would contribute $375 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 Q1 2020. 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 $379 million (2018: $393 million) to the Chad State National Oil Company (SHT) to be repaid through
future oil deliveries over ten years. As at 31 December 2019 the advance is net of $778 million (2018: $805 million) provided by
a syndicate of lenders, 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, $360 million (2018: $393 million) is receivable after 12 months and is
presented within Other non-current receivables and loans and $19 million (2018: $Nil) is due within 12 months and included
within Accounts receivable.
Société Nationale des Pétroles du Congo (SNPC)
Glencore has provided a net $156 million (2018: $183 million) to SNPC repayable through future oil deliveries over five years.
As at 31 December 2019, the advance is net of $498 million (2018: $530 million) provided by the lenders, 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,
$18 million (2018: $65 million) is due after 12 months and is presented within Other long-term receivables and loans and $138 million
(2018: $118 million) is due within 12 months and included within Accounts receivable. SNPC has indicated to Glencore and the
syndicate of banks that it wishes to restructure the terms of this arrangement. Whilst no agreement has been reached at the
reporting date, a future restructuring may materially impact the portion of this advance that is realised within one year.
Glencore Preliminary Results 2019
180
Glencore Annual Report 2019
180
Notes to the financial statements
continued
11. Advances and loans continued
Financial assets at fair value through profit and loss
Other non-current receivables and loans
In 2018, the terms of a loan arrangement were substantially restructured and modified. Under the new terms, repayment of the
loan is dependent upon the underlying performance of the operations and as such, the contractual cash flows no longer represent
“solely payments of principal and interest” and therefore the loan is accounted for at fair value through profit and loss (FVTPL).
Following the substantial modification, the loan was de-recognised as a financial asset at amortised cost and the new loan was
recognised at a fair value of $155 million. During 2019 fair value movements of negative $39 million were recognised (see note 6).
Fair value was determined using a Level 3 discounted cash flow model technique, with the key unobservable inputs being a
discount rate specific to the operation of 13% and a repayment profile dependent upon the underlying business plans and forecasts
over the next 5 years. The valuation is sensitive to timing of the underlying cash flows and could result in a $42 million reduction of
fair value if the repayment schedule is extended by an additional 9 years.
Non-financial instruments
Advances repayable with product
US$ million
Counterparty
Société Nationale d’Electricité (SNEL) power advances
Chad State National Oil Company
Société Nationale des Pétroles du Congo
Other
Total
SNEL power advances
2019
2018
303
360
18
491
1,172
340
393
65
589
1,387
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 would contribute $375 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 Q1 2020. 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 $379 million (2018: $393 million) to the Chad State National Oil Company (SHT) to be repaid through
future oil deliveries over ten years. As at 31 December 2019 the advance is net of $778 million (2018: $805 million) provided by
a syndicate of lenders, 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, $360 million (2018: $393 million) is receivable after 12 months and is
presented within Other non-current receivables and loans and $19 million (2018: $Nil) is due within 12 months and included
within Accounts receivable.
Société Nationale des Pétroles du Congo (SNPC)
Glencore has provided a net $156 million (2018: $183 million) to SNPC repayable through future oil deliveries over five years.
As at 31 December 2019, the advance is net of $498 million (2018: $530 million) provided by the lenders, 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,
$18 million (2018: $65 million) is due after 12 months and is presented within Other long-term receivables and loans and $138 million
(2018: $118 million) is due within 12 months and included within Accounts receivable. SNPC has indicated to Glencore and the
syndicate of banks that it wishes to restructure the terms of this arrangement. Whilst no agreement has been reached at the
reporting date, a future restructuring may materially impact the portion of this advance that is realised within one year.
Notes to the financial statements
continued
12. Inventories
Current inventory
Inventories of $19,936 million (2018: $20,564 million) comprise $10,516 million (2018: $11,449 million) of inventories carried at fair value
less costs of disposal and $9,420 million (2018: $9,115 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 period was $192,418 million (2018: $196,509 million).
Fair value of inventories is a Level 2 fair value measurement (see note 28) 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 has not transferred control. The proceeds received are recognised as current borrowings (see note
20). As at 31 December 2019, the total amount of inventory pledged under such facilities was $430 million (2018: $562 million). The
proceeds received and recognised as current borrowings were $339 million (2018: $366 million) and $80 million (2018: $139 million)
as non-current borrowings.
Non-current inventory
$575 million (2018: $353 million) of inventories valued at lower of cost or net realisable value are not expected to be utilised or sold
within 12 months and are therefore classified as non-current inventory.
13. Accounts receivable
US$ million
Financial assets at amortised cost
Trade receivables
Trade advances
Margin calls paid1
Associated companies
Other receivables2
Financial assets at fair value through profit and loss
Trade receivables containing provisional pricing features
Exchangeable loan (see below)
Finance lease receivable
Non-financial instruments
Advances repayable with product3
Income tax receivable
Other tax and related receivables
Total
Notes
2019
2018
28
28
3,724
44
2,198
326
399
6,526
–
14
1,433
350
2,007
17,021
4,163
321
1,388
546
422
6,471
1,044
–
1,535
121
1,776
17,787
1
2
3
Includes $635 million (2018: $1,041 million) of cash collateral payments under margin arrangements related to cross currency swaps held to hedge non-U.S. dollar denominated bonds.
Includes current portion of non-current loans receivable in amount of $129 million (2018: $104 million).
Includes advances, net of $1,248 million (2018: $1,136 million) provided by banks, the repayment terms of which are contingent upon and connected to the future delivery of contractual
production over the next 12 months.
The average credit period on sales of goods is 18 days (2018: 19 days). The carrying value of trade receivables approximates fair value.
Glencore Preliminary Results 2019
180
Glencore Preliminary Results 2019
Glencore Annual Report 2019
181
181
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
13. Accounts receivable continued
The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the
lifetime expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to
past default experience and credit rating, adjusted as appropriate for current observable data. The following table details the risk
profile of trade receivables based on the Group’s provision matrix.
US$ million
As at 31 December 2019
Gross carrying amount
Expected credit loss rate
Lifetime expected credit loss
Total
Trade receivables – days past due
Not past due
3,077
0.28%
(9)
3,068
<30
356
0.55%
(2)
354
31–60
56
0.83%
–
56
61–90
59
1.10%
(1)
58
The movement in allowance for doubtful accounts is detailed below:
US$ million
1 January
Released during the period
Charged during the period
Utilised during the period
Reclassifications
31 December
>90
192
2.34%
(4)
188
2019
317
(31)
195
(84)
1
398
Total
3,740
(16)
3,724
2018
304
(54)
99
(11)
(21)
317
Impairment losses recognised on trade receivables are recorded within cost of goods sold.
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 20). As at 31 December 2019, the total amount of trade receivables pledged was $837 million
(2018: $1,943 million) and proceeds received and classified as current borrowings amounted to $719 million (2018: $1,539 million)
and $Nil (2018: $126 million) as non-current borrowings.
Exchangeable loan
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) (together the “Operations”) following
closing of OTS’s exercise of its pre-emptive right to acquire these Operations from the Chevron group. OTS’s acquisition from
Chevron closed on 1 October 2018, at which time Glencore advanced $1,044 million to OTS under an exchangeable loan
arrangement. The transaction completed on 6 April 2019, whereby the loan advanced was exchanged into the shares in the
underlying businesses (see note 25).
14. Cash and cash equivalents
US$ million
Bank and cash on hand
Deposits and treasury bills
Total
2019
1,618
281
1,899
2018
1,860
186
2,046
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.
As at 31 December 2019, $92 million (2018: $63 million), including $15 million(2018: $18 million) held in “on-shore” accounts in our DRC
operations, was restricted. In 2018, the DRC made various changes to its mining code, including various restrictions on a company’s
ability to repatriate excess funds earned above its initial investment amounts. The “on-shore” cash in our DRC operations can only be
used to fund DRC related expenditures and any excess currently cannot be repatriated out of the DRC to the Group.
Glencore Preliminary Results 2019
182
Glencore Annual Report 2019
182
Notes to the financial statements
continued
Notes to the financial statements
continued
13. Accounts receivable continued
15. Assets and liabilities held for sale
The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the
lifetime expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to
past default experience and credit rating, adjusted as appropriate for current observable data. The following table details the risk
profile of trade receivables based on the Group’s provision matrix.
Trade receivables – days past due
Not past due
3,077
0.28%
(9)
3,068
<30
356
0.55%
(2)
354
31–60
56
0.83%
–
56
61–90
59
1.10%
(1)
58
The movement in allowance for doubtful accounts is detailed below:
US$ million
As at 31 December 2019
Gross carrying amount
Expected credit loss rate
Lifetime expected credit loss
Total
US$ million
1 January
Released during the period
Charged during the period
Utilised during the period
Reclassifications
31 December
Impairment losses recognised on trade receivables are recorded within cost of goods sold.
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 20). As at 31 December 2019, the total amount of trade receivables pledged was $837 million
(2018: $1,943 million) and proceeds received and classified as current borrowings amounted to $719 million (2018: $1,539 million)
and $Nil (2018: $126 million) as non-current borrowings.
Exchangeable loan
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) (together the “Operations”) following
closing of OTS’s exercise of its pre-emptive right to acquire these Operations from the Chevron group. OTS’s acquisition from
Chevron closed on 1 October 2018, at which time Glencore advanced $1,044 million to OTS under an exchangeable loan
arrangement. The transaction completed on 6 April 2019, whereby the loan advanced was exchanged into the shares in the
>90
192
2.34%
(4)
188
2019
317
(31)
195
(84)
1
398
Total
3,740
(16)
3,724
2018
304
(54)
99
(11)
(21)
317
2019
1,618
281
1,899
2018
1,860
186
2,046
underlying businesses (see note 25).
14. Cash and cash equivalents
US$ million
Bank and cash on hand
Deposits and treasury bills
Total
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.
As at 31 December 2019, $92 million (2018: $63 million), including $15 million(2018: $18 million) held in “on-shore” accounts in our DRC
operations, was restricted. In 2018, the DRC made various changes to its mining code, including various restrictions on a company’s
ability to repatriate excess funds earned above its initial investment amounts. The “on-shore” cash in our DRC operations can only be
used to fund DRC related expenditures and any excess currently cannot be repatriated out of the DRC to the Group.
In November 2019, an agreement was reached to dispose the Oxidos and Cerro de Pasco operations (separately identifiable zinc and
silver processing areas within the Volcan group) which predominantly comprise an oxide processing plant, environmental and
rehabilitation provisions and old tailings dumps for $30 million, due over a two year period, and a royalty contingent upon the price
of silver and gold over certain thresholds, estimated to be worth $100 million on a discounted basis. The transaction is subject to
customary regulatory approvals and is expected to close during 2020. As a result of the agreed disposal, it has been determined that
these operations meet the requirements of IFRS 5 which requires that its assets and liabilities be presented as current assets and
liabilities “held for sale” as at 31 December 2019 at the lower of their carrying value or fair value less costs to sell and as a result of this
reclassification to assets held for sale, an impairment charge of $378 million ($272 million net of tax) was recognised. Also see note 6.
Assets of $286 million and liabilities of $156 million have been classified as held for sale within the Industrial activities segment as
detailed below:
US$ million
Non-current assets
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Accounts receivable
Cash and cash equivalents
Total assets held for sale
Non-current liabilities
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Total liabilities held for sale
Total net assets held for sale
Cerro de Pasco
196
13
209
22
53
2
77
286
(68)
(52)
(120)
(2)
(34)
(36)
(156)
130
Glencore Preliminary Results 2019
182
Glencore Preliminary Results 2019
Glencore Annual Report 2019
183
183
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
16. Share capital and reserves
Authorised:
31 December 2019 and 2018 Ordinary shares with a par value of $0.01 each
Issued and fully paid up:
1 January 2018 and 31 December 2018 – Ordinary shares
Distributions paid (see note 18)
31 December 2019 – Ordinary shares
Number
of shares
(thousand)
Share capital
(US$ million)
Share
premium
(US$ million)
50,000,000
14,586,200
–
14,586,200
146
–
146
48,504
(2,710)
45,794
Own shares:
1 January 2018
Own shares purchased during the year
Own shares disposed during the year
Own shares transferred to satisfy employee
share awards
31 December 2018
1 January 2019
Own shares purchased during the year
Own shares disposed during the year
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
422,113
–
(30,000)
583,572
583,572
678,315
–
(948)
(1,684)
–
149
(2,483)
(2,483)
(2,318)
–
129,850
63,420
(53,140)
30,000
170,130
170,130
–
(40,138)
(627)
(321)
262
(149)
(835)
(835)
–
199
321,309
485,533
(53,140)
–
753,702
753,702
678,315
(40,138)
(1,575)
(2,005)
262
–
(3,318)
(3,318)
(2,318)
199
31 December 2019
1,261,887
(4,801)
129,992
(636)
1,391,879
(5,437)
Own shares
Own shares comprise shares acquired under the Company’s share buy-back programmes 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
Trusts are expensed in the period in which they are incurred.
As at 31 December 2019, 1,391,879,129 shares (2018: 753,702,088 shares), equivalent to 9.54% (2018: 5.17%) of the issued share capital
were held at a cost of $5,437 million (2018: $3,318 million) and market value of $4,347 million (2018: $2,798 million).
Glencore Preliminary Results 2019
184
Glencore Annual Report 2019
184
Notes to the financial statements
continued
Notes to the financial statements
continued
16. Share capital and reserves
Authorised:
Issued and fully paid up:
31 December 2019 and 2018 Ordinary shares with a par value of $0.01 each
1 January 2018 and 31 December 2018 – Ordinary shares
Distributions paid (see note 18)
31 December 2019 – Ordinary shares
Number
of shares
(thousand)
Share capital
(US$ million)
premium
(US$ million)
Share
50,000,000
14,586,200
–
14,586,200
146
–
146
48,504
(2,710)
45,794
Own shares:
1 January 2018
Own shares purchased during the year
Own shares disposed during the year
Own shares transferred to satisfy employee
Own shares purchased during the year
Own shares disposed during the year
share awards
31 December 2018
1 January 2019
31 December 2019
Own shares
Treasury Shares
Number
of shares
Share
premium
Trust Shares
Total
Number
of shares
Share
premium
Number
of shares
Share
premium
(thousand)
(US$ million)
(thousand)
(US$ million)
(thousand)
(US$ million)
191,459
422,113
–
(30,000)
583,572
583,572
678,315
–
(948)
(1,684)
–
149
(2,483)
(2,483)
(2,318)
129,850
63,420
(53,140)
30,000
170,130
170,130
–
–
(40,138)
(627)
(321)
262
(149)
(835)
(835)
–
199
321,309
485,533
(53,140)
–
753,702
753,702
678,315
(40,138)
(1,575)
(2,005)
262
–
(3,318)
(3,318)
(2,318)
199
1,261,887
(4,801)
129,992
(636)
1,391,879
(5,437)
Own shares comprise shares acquired under the Company’s share buy-back programmes 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
Trusts are expensed in the period in which they are incurred.
As at 31 December 2019, 1,391,879,129 shares (2018: 753,702,088 shares), equivalent to 9.54% (2018: 5.17%) of the issued share capital
were held at a cost of $5,437 million (2018: $3,318 million) and market value of $4,347 million (2018: $2,798 million).
16. Share capital and reserves continued
Other reserves
US$ million
1 January 2019
Exchange gain on translation of foreign operations
Loss on cash flow hedges, net of tax
Gain on equity investments accounted for at fair value
through other comprehensive income
Change in ownership interest in subsidiaries (see note 33)
Gain due to changes in credit risk on financial liabilities
accounted for at fair value through profit and loss
Reclassifications
31 December 2019
1 January 2018
Exchange loss on translation of foreign operations
Loss on cash flow hedges, net of tax
Loss on equity investments accounted for at fair value
through other comprehensive income
Change in ownership interest in subsidiaries (see note 33)
Reclassifications
Items recycled to the statement of income upon disposal of
subsidiaries (see note 25)
31 December 2018
Translation
adjustment
(2,779)
114
–
Cash flow
hedge reserve
(47)
–
(51)
Net
unrealised
gain/(loss)
38
–
–
Net ownership
changes in
subsidiaries
(2,149)
–
–
–
–
–
–
(2,665)
(2,321)
(662)
–
–
–
(14)
218
–
–
–
1
(97)
(39)
–
(18)
–
–
10
–
342
–
(1)
(15)
364
877
–
–
(848)
–
9
–
–
(418)
–
(6)
(2,573)
(942)
–
–
–
(1,207)
–
–
Total
(4,937)
114
(51)
342
(418)
(1)
(20)
(4,971)
(2,425)
(662)
(18)
(848)
(1,207)
5
218
(2,779)
(47)
38
(2,149)
(4,937)
Glencore Preliminary Results 2019
184
Glencore Preliminary Results 2019
Glencore Annual Report 2019
185
185
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
17. Earnings per share
US$ million
(Loss)/income 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 (loss)/earnings per share (US$)
Diluted (loss)/earnings per share (US$)1
2019
(404)
13,684,091
2018
3,408
14,151,826
92,474
13,776,565
101,701
14,253,527
(0.03)
(0.03)
0.24
0.24
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 1/2019 as issued by the
South African Institute of Chartered Accountants (SAICA), is reconciled using the following data:
US$ million
(Loss)/income attributable to equity holders of the Parent for basic earnings per share
Net loss on disposals2
Net loss on disposals – tax
Impairments3
Impairments – non-controlling interest
Impairments – tax
Headline and diluted earnings for the year
Headline earnings per share (US$)
Diluted headline earnings per share (US$)
2019
(404)
43
(6)
3,191
(270)
(323)
2,231
0.16
0.16
2018
3,408
139
(38)
1,452
(218)
(181)
4,562
0.32
0.32
1 These equity-settled share-based payments could potentially dilute basic earnings per share in the future, but did not impact diluted loss per share because they were anti-dilutive..
2 See note 4.
3 Comprises impairments of property, plant and equipment, intangible assets, investments, advances and loans and VAT receivables (see note 6), Glencore’s share of impairments
booked directly by various associates (see note 2) and impairments related to Cerrejón (see note 10).
18. Distributions
US$ million
Paid during the year:
First tranche distribution – $0.10 per ordinary share (2018: $0.10)
Second tranche distribution – $0.10 per ordinary share (2018: $0.10)
Total
2019
2018
1,368
1,342
2,710
1,427
1,409
2,836
The proposed distribution in respect of the year ended 31 December 2019 of $0.20 per ordinary share amounting to $2.6 billion
is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements. These distributions declared are expected to be paid equally ($0.10 each) in May 2020 and September 2020.
Glencore Preliminary Results 2019
186
Glencore Annual Report 2019
186
Notes to the financial statements
continued
Notes to the financial statements
continued
17. Earnings per share
US$ million
(Loss)/income 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)
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 1/2019 as issued by the
South African Institute of Chartered Accountants (SAICA), is reconciled using the following data:
(Loss)/income attributable to equity holders of the Parent for basic earnings per share
Basic (loss)/earnings per share (US$)
Diluted (loss)/earnings per share (US$)1
Headline earnings:
US$ million
Net loss on disposals2
Net loss on disposals – tax
Impairments3
Impairments – non-controlling interest
Impairments – tax
Headline and diluted earnings for the year
Headline earnings per share (US$)
Diluted headline earnings per share (US$)
2 See note 4.
18. Distributions
US$ million
Paid during the year:
Total
1 These equity-settled share-based payments could potentially dilute basic earnings per share in the future, but did not impact diluted loss per share because they were anti-dilutive..
3 Comprises impairments of property, plant and equipment, intangible assets, investments, advances and loans and VAT receivables (see note 6), Glencore’s share of impairments
booked directly by various associates (see note 2) and impairments related to Cerrejón (see note 10).
First tranche distribution – $0.10 per ordinary share (2018: $0.10)
Second tranche distribution – $0.10 per ordinary share (2018: $0.10)
The proposed distribution in respect of the year ended 31 December 2019 of $0.20 per ordinary share amounting to $2.6 billion
is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements. These distributions declared are expected to be paid equally ($0.10 each) in May 2020 and September 2020.
2019
(404)
2018
3,408
13,684,091
14,151,826
92,474
101,701
13,776,565
14,253,527
(0.03)
(0.03)
0.24
0.24
2019
(404)
43
(6)
3,191
(270)
(323)
2,231
0.16
0.16
2018
3,408
139
(38)
1,452
(218)
(181)
4,562
0.32
0.32
2019
2018
1,368
1,342
2,710
1,427
1,409
2,836
19. Share-based payments
US$ million
Deferred Bonus Plan – Bonus
share award
2017 Series
2018 Series
2019 Series
Performance Share Plan
2014 Series
2015 Series
2016 Series
2017 Series
2018 Series
2019 Series
Total
Number of
awards
granted
(thousands)
Fair value at
grant date
(US$ million)
Number
of awards
outstanding
2019
(thousands)
Number
of awards
outstanding
2018
(thousands)
Expense
recognised
2019
(US$ million)
Expense
recognised
2018
(US$ million)
16,506
12,891
9,552
38,949
21,584
79,787
23,984
19,732
28,210
12,171
185,468
224,417
64
65
33
119
109
84
95
103
37
–
11,052
9,552
20,604
–
11,878
7,407
12,498
27,912
12,171
71,866
92,470
9,088
12,891
–
21,979
826
33,026
15,190
18,904
7,758
–
75,704
97,683
–
–
33
33
–
5
9
27
54
–
95
128
–
65
–
65
1
11
27
52
2
–
93
158
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 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 2019
Lapsed
Exercised1
31 December 2019
1 January 2018
Lapsed
Exercised1
31 December 2018
1 The weighted average share price at date of exercise of the share based awards was GBP3.03 (2018: GBP3.91).
Total options
outstanding
(thousands)
Weighted
average
exercise
price (GBP)
106,637
–
(4,014)
102,623
124,603
(9,626)
(8,340)
106,637
3.88
–
1.10
3.98
4.00
6.58
2.62
3.88
Glencore Preliminary Results 2019
186
Glencore Preliminary Results 2019
Glencore Annual Report 2019
187
187
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
19. Share-based payments continued
As at 31 December 2019, a total of 102,623,112 options (2018: 106,637,103 options) were outstanding and exercisable, having a range
of exercise prices from GBP3.37 to GBP4.80 (2018: GBP1.10 to GBP4.80) and a weighted average exercise price of GBP3.98 (2018:
GBP3.88). These outstanding awards have expiry dates ranging from February 2020 to February 2022 (2018: March 2019 to February
2022) and a weighted average contractual life of 1.2 years (2018: 2.19 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.
20. Borrowings
US$ million
Non-current borrowings
Capital market notes
Committed syndicated revolving credit facilities
Finance lease obligations under IAS 17
Lease liabilities under IFRS 16
Other bank loans
Total non-current borrowings
Current borrowings
Secured inventory/receivables/other facilities
U.S. commercial paper
Capital market notes
Finance lease obligations under IAS 17
Lease liabilities under IFRS 16
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
Proceeds from issuance of non-dilutive convertible bond
Repayment of capital market notes
(Repayment of)/proceeds from revolving credit facilities
Proceeds from other non-current borrowings
Repayment of other non-current borrowings
Repayment of finance lease obligations under IAS 17
Repayment of lease liabilities under IFRS 16
Proceeds from/(repayment of) U.S. commercial papers
(Repayment of)/proceeds from current borrowings
Non-cash related movements in borrowings
Borrowings acquired/(disposed) in business combinations
Reclassification of the derivative component of the non-dilutive convertible bond
Foreign exchange movements
Fair value hedge movements
Impact of adoption of IFRS 16
Change in finance lease obligations under IAS 17
Change in lease liabilities under IFRS 16
Interest on convertible bonds
Other non-cash movements
Increase in borrowings for the year
Total borrowings – opening
Total borrowings – closing
1 See consolidated statement of cash flows
Glencore Preliminary Results 2019
188
Glencore Annual Report 2019
Notes
2019
2018
10/12/13
21,452
5,615
–
1,158
842
19,804
5,623
277
–
720
29,067
26,424
1,138
675
2,455
–
484
3,224
7,976
37,043
1,995
596
2,775
110
–
3,094
8,570
34,994
Notes
2019
2018
25
3,866
–
(3,167)
(29)
291
(325)
–
(358)
79
(682)
(325)
284
–
231
387
865
–
582
19
6
2,374
2,049
34,994
37,043
185
576
(3,650)
4,624
15
–
(72)
–
(634)
439
1,483
263
(95)
(557)
(143)
–
90
–
12
7
(423)
1,060
33,934
34,994
188
Notes to the financial statements
continued
Notes to the financial statements
continued
19. Share-based payments continued
As at 31 December 2019, a total of 102,623,112 options (2018: 106,637,103 options) were outstanding and exercisable, having a range
of exercise prices from GBP3.37 to GBP4.80 (2018: GBP1.10 to GBP4.80) and a weighted average exercise price of GBP3.98 (2018:
GBP3.88). These outstanding awards have expiry dates ranging from February 2020 to February 2022 (2018: March 2019 to February
2022) and a weighted average contractual life of 1.2 years (2018: 2.19 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.
20. Borrowings
US$ million
Non-current borrowings
Capital market notes
Committed syndicated revolving credit facilities
Finance lease obligations under IAS 17
Lease liabilities under IFRS 16
Other bank loans
Total non-current borrowings
Current borrowings
Secured inventory/receivables/other facilities
U.S. commercial paper
Capital market notes
Finance lease obligations under IAS 17
Lease liabilities under IFRS 16
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
Proceeds from issuance of non-dilutive convertible bond
Repayment of capital market notes
(Repayment of)/proceeds from revolving credit facilities
Proceeds from other non-current borrowings
Repayment of other non-current borrowings
Repayment of finance lease obligations under IAS 17
Repayment of lease liabilities under IFRS 16
Proceeds from/(repayment of) U.S. commercial papers
(Repayment of)/proceeds from current borrowings
Foreign exchange movements
Fair value hedge movements
Impact of adoption of IFRS 16
Change in finance lease obligations under IAS 17
Change in lease liabilities under IFRS 16
Interest on convertible bonds
Other non-cash movements
Increase in borrowings for the year
Total borrowings – opening
Total borrowings – closing
1 See consolidated statement of cash flows
Non-cash related movements in borrowings
Borrowings acquired/(disposed) in business combinations
Reclassification of the derivative component of the non-dilutive convertible bond
25
Notes
2019
2018
Notes
2019
2018
29,067
26,424
10/12/13
21,452
5,615
–
1,158
842
1,138
675
2,455
–
484
3,224
7,976
37,043
3,866
–
(3,167)
(29)
291
(325)
–
(358)
79
(682)
(325)
284
–
231
387
865
–
582
19
6
2,374
2,049
34,994
37,043
19,804
5,623
277
–
720
1,995
596
2,775
110
–
3,094
8,570
34,994
185
576
(3,650)
4,624
15
–
(72)
–
(634)
439
1,483
263
(95)
(557)
(143)
–
90
–
12
7
(423)
1,060
33,934
34,994
20. Borrowings continued
Capital Market Notes
US$ million
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 600 million 0.625% coupon bonds
Euro 750 million 1.75% coupon bonds
Euro 500 million 3.75% coupon bonds
Euro 500 million 1.50% coupon bonds
Eurobonds
JPY 10 billion 1.075% coupon bonds
GBP 500 million 7.375% coupon bonds
GBP 500 million 6.00% coupon bonds
GBP 500 million 3.125% coupon bonds
Sterling bonds
CHF 500 million 1.25% coupon bonds
CHF 250 million 2.25% coupon bonds
CHF 175 million 1.25% coupon bonds
CHF 250 million 0.35% coupon bonds
Swiss Franc 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 4.125% coupon bonds
US$ 1,000 million 4.625% coupon bonds
US$ 625 million non-dilutive convertible 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$ 750 million 4.875% 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 25.
Maturity
Sep 2020
Mar 2021
Apr 2021
Jan 2022
Sep 2023
Oct 2023
Sep 2024
Mar 2025
Apr 2026
Oct 2026
May 2022
May 2020
Apr 2022
Mar 2026
Dec 2020
May 2021
Oct 2024
Sep 2025
Apr 2020
Nov 2021
Feb 2022
May 2022
Oct 2022
Oct 2022
May 2023
Mar 2024
Apr 2024
Mar 2025
Apr 2025
Mar 2027
Mar 2027
Oct 2027
Mar 2029
Jun 2035
Nov 2037
Nov 2041
Oct 2042
2019
–
1,386
667
793
1,118
480
672
860
616
568
7,160
92
–
664
672
1,336
–
254
184
258
696
–
1,022
535
250
1,005
498
1,542
993
1,042
513
502
1,030
50
514
801
271
589
538
473
12,168
21,452
2018
865
1,413
688
814
1,140
492
–
858
618
–
6,888
91
669
640
–
1,309
513
249
182
–
944
412
1,034
535
250
1,008
497
1,495
–
1,004
494
475
964
50
479
–
272
591
539
473
10,572
19,804
Glencore Preliminary Results 2019
188
Glencore Preliminary Results 2019
Glencore Annual Report 2019
189
189
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
20. Borrowings continued
US$ million
AUD 500 million 4.50% coupon bonds
GBP 650 million 6.50% coupon bonds
GBP 500 million 7.375% coupon bonds
Euro 750 million 3.375% coupon bonds
CHF 175 million 2.125% coupon bonds
CHF 500 million 1.250% 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
Total current bonds
2019 Bond activities
• In March 2019, issued a 5 year $1,000 million, 4.125% coupon bond
• In March 2019, issued a 10 year $750 million, 4.875% coupon bond
• In March 2019, issued a 7 year GBP 500 million 3.125% coupon bond
• In April 2019, issued a 7 year EUR 500 million 1.50% coupon bond
• In September 2019, issued a 6 year CHF 250 million 0.35% coupon bond
• In September 2019, issued a 5 year EUR 600 million 0.625% coupon bond
Maturity
Sep 2019
Feb 2019
May 2020
Sep 2020
Dec 2019
Dec 2020
Jan 2019
Jan 2019
Apr 2019
Apr 2020
2019
–
–
675
842
–
519
–
–
–
419
2,455
2018
355
829
–
–
179
–
279
688
445
–
2,775
2018 Bond activities
• In March 2018, Glencore issued a $500 million non-dilutive cash settled guaranteed convertible bond due 2025. In September
2018, a further $125 million was issued on similar terms. On the date of issuance, the Bonds were bifurcated into a debt and
derivative component with the debt component carried at amortised cost accreting to par value ($625 million) at an effective
interest rate of 3.7% per annum and the option component carried at fair value with mark-to-market movements recognised
through the statement of income. See note 28.
• Concurrent with the placing of the Bonds, Glencore purchased cash-settled call options over the same number of Glencore shares
underlying the convertible bonds to economically hedge the exposure to the potential exercise of conversion rights embedded in
the Bonds. These purchased call options are carried at fair value with mark-to-market movements recognised through the
statement of income. See note 28.
• In October 2018, Glencore issued a 6-year CHF 175 million, 1.25% coupon bond
Committed syndicated revolving credit facilities
In March 2019 (effective May 2019), Glencore signed new one-year revolving credit facilities of $9,775 million, refinancing the
$9,085 million one-year revolving facilities signed in March 2018. Funds drawn under the facilities bear interest at US$LIBOR plus a
margin of 40 basis points. Glencore also voluntarily reduced the medium term facility size from $5,115 million to $4,650 million,
extended the facility to five-years, and replaced the two one-year extension options.
As at 31 December 2019, the active facilities comprise:
• a $9,775 million one year revolving credit facility with a one-year borrower’s term-out option (to May 2021) and a one-year
extension option; and
• a $4,650 million medium-term revolving credit facility (to May 2024), with two one-year extension options.
Glencore Preliminary Results 2019
190
Glencore Annual Report 2019
190
Notes to the financial statements
continued
Notes to the financial statements
continued
20. Borrowings continued
US$ million
AUD 500 million 4.50% coupon bonds
GBP 650 million 6.50% coupon bonds
GBP 500 million 7.375% coupon bonds
Euro 750 million 3.375% coupon bonds
CHF 175 million 2.125% coupon bonds
CHF 500 million 1.250% 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
Total current bonds
2019 Bond activities
• In March 2019, issued a 5 year $1,000 million, 4.125% coupon bond
• In March 2019, issued a 10 year $750 million, 4.875% coupon bond
• In March 2019, issued a 7 year GBP 500 million 3.125% coupon bond
• In April 2019, issued a 7 year EUR 500 million 1.50% coupon bond
• In September 2019, issued a 6 year CHF 250 million 0.35% coupon bond
• In September 2019, issued a 5 year EUR 600 million 0.625% coupon bond
2018 Bond activities
• In March 2018, Glencore issued a $500 million non-dilutive cash settled guaranteed convertible bond due 2025. In September
2018, a further $125 million was issued on similar terms. On the date of issuance, the Bonds were bifurcated into a debt and
derivative component with the debt component carried at amortised cost accreting to par value ($625 million) at an effective
interest rate of 3.7% per annum and the option component carried at fair value with mark-to-market movements recognised
through the statement of income. See note 28.
• Concurrent with the placing of the Bonds, Glencore purchased cash-settled call options over the same number of Glencore shares
underlying the convertible bonds to economically hedge the exposure to the potential exercise of conversion rights embedded in
the Bonds. These purchased call options are carried at fair value with mark-to-market movements recognised through the
statement of income. See note 28.
• In October 2018, Glencore issued a 6-year CHF 175 million, 1.25% coupon bond
Committed syndicated revolving credit facilities
In March 2019 (effective May 2019), Glencore signed new one-year revolving credit facilities of $9,775 million, refinancing the
$9,085 million one-year revolving facilities signed in March 2018. Funds drawn under the facilities bear interest at US$LIBOR plus a
margin of 40 basis points. Glencore also voluntarily reduced the medium term facility size from $5,115 million to $4,650 million,
extended the facility to five-years, and replaced the two one-year extension options.
As at 31 December 2019, the active facilities comprise:
• a $9,775 million one year revolving credit facility with a one-year borrower’s term-out option (to May 2021) and a one-year
extension option; and
• a $4,650 million medium-term revolving credit facility (to May 2024), with two one-year extension options.
Maturity
Sep 2019
Feb 2019
May 2020
Sep 2020
Dec 2019
Dec 2020
Jan 2019
Jan 2019
Apr 2019
Apr 2020
2019
–
–
675
842
–
519
–
–
–
419
2,455
2018
355
829
–
–
–
179
279
688
445
–
2,775
20. Borrowings continued
Secured facilities
US$ million
Syndicated committed metals
inventory/receivables facilities2
Syndicated uncommitted metals and oil
inventory/receivables facilities
Other secured facilities
Total
Current
Non-current
Maturity1
Oct 2024
Interest
3.2%
Jan3/Jul/Aug/Oct 2020
US$ LIBOR + 65 bps
Dec 2020
US$ LIBOR + 62 bps
2019
82
1,056
80
1,218
1,138
80
1 Uncommitted facilities are re-drawn several times until actual expiry of the facility contract.
2 Comprises various facilities. The maturity and interest detail represent the weighted average of the various debt balances outstanding at year end.
3 Since year-end, in the ordinary course of business, these maturities have been rolled/extended as required.
21. Deferred income
US$ million
1 January 2019
Additions
Accretion in the year
Utilised in the year
Effect of foreign currency exchange difference
31 December 2019
Current
Non-current
1 January 2018
Additions
Accretion in the year
Utilised in the year
Acquired in business combination
Effect of foreign currency exchange difference
31 December 2018
Current
Non-current
Notes
Unfavourable
contracts Prepayments
2,029
940
134
(484)
–
2,619
480
2,139
684
–
–
(83)
8
609
78
531
25
585
–
–
(77)
220
(44)
684
80
604
2,386
40
140
(537)
–
–
2,029
332
1,697
2018
328
1,842
90
2,260
1,995
265
Total
2,713
940
134
(567)
8
3,228
558
2,670
2,971
40
140
(614)
220
(44)
2,713
412
2,301
Glencore Preliminary Results 2019
190
Glencore Preliminary Results 2019
Glencore Annual Report 2019
191
191
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
21. Deferred income continued
Unfavourable contracts
In several business combinations, Glencore recognised liabilities related to various assumed contractual agreements to deliver
tonnes of coal over various periods ending until 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 extrapolated forward price curves at the time of the acquisitions.
Prepayments
Prepayments comprise various medium and long-term product supply agreements whereby an upfront prepayment is received in
exchange for the future delivery of a specific product, such as gold, silver or cobalt. The arrangements are accounted for as executory
contracts whereby the advance payment is recorded as deferred revenue. The revenue from the advance payment is recognised as
the specific product identified in the contract is delivered consistent with the implied forward price curve at the time of the
transaction and an accretion expense, representing the time value of the upfront deposit, is also recognised.
Non-current prepayments predominantly comprise:
• Life of mine arrangements – 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 addition to the upfront payment received, for product
delivered from the Antamina and Antapaccay operations, Glencore receives 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. As at 31 December 2019, $1,396 million (2018: $1,518 million) of product delivery obligations remain.
• Silver supply arrangement – In December 2019, Glencore signed an extension of a silver prepayment arrangement, in exchange
for an upfront advance payment of $500 million. Under the terms of the arrangement, Glencore is required to deliver an average
of 19 million ounces of silver per annum, over a three year period. As at 31 December 2019, $415 million (2018: $178 million) of
product delivery obligations remain.
• Cobalt supply arrangement – In March 2019, Glencore signed a six year cobalt prepayment arrangement in exchange for an
upfront advance payment of $100 million. Under the terms of the arrangement, Glencore is required to deliver an average of 1,621
metric tons of cobalt per annum over a four year period starting 2021. As at 31 December 2019, $101 million (2018: $Nil) of product
delivery obligations remain.
• Palladium supply arrangement – In June 2019, Glencore signed a five year palladium prepayment arrangement in exchange for
an upfront advance payment of $200 million. Under the terms of the arrangement, Glencore is required to deliver a minimum of
44 thousand ounces of palladium per annum over a five year period starting 2020. As at 31 December 2019, $160 million (2018: $Nil)
of product delivery obligations remain.
Glencore Preliminary Results 2019
192
Glencore Annual Report 2019
192
Notes to the financial statements
continued
21. Deferred income continued
Unfavourable contracts
acquisition dates.
Prepayments
In several business combinations, Glencore recognised liabilities related to various assumed contractual agreements to deliver
tonnes of coal over various periods ending until 2034 at fixed prices lower than the prevailing market prices on the respective
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 extrapolated forward price curves at the time of the acquisitions.
Prepayments comprise various medium and long-term product supply agreements whereby an upfront prepayment is received in
exchange for the future delivery of a specific product, such as gold, silver or cobalt. The arrangements are accounted for as executory
contracts whereby the advance payment is recorded as deferred revenue. The revenue from the advance payment is recognised as
the specific product identified in the contract is delivered consistent with the implied forward price curve at the time of the
transaction and an accretion expense, representing the time value of the upfront deposit, is also recognised.
Non-current prepayments predominantly comprise:
• Life of mine arrangements – 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 addition to the upfront payment received, for product
delivered from the Antamina and Antapaccay operations, Glencore receives 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. As at 31 December 2019, $1,396 million (2018: $1,518 million) of product delivery obligations remain.
• Silver supply arrangement – In December 2019, Glencore signed an extension of a silver prepayment arrangement, in exchange
for an upfront advance payment of $500 million. Under the terms of the arrangement, Glencore is required to deliver an average
of 19 million ounces of silver per annum, over a three year period. As at 31 December 2019, $415 million (2018: $178 million) of
product delivery obligations remain.
• Cobalt supply arrangement – In March 2019, Glencore signed a six year cobalt prepayment arrangement in exchange for an
upfront advance payment of $100 million. Under the terms of the arrangement, Glencore is required to deliver an average of 1,621
metric tons of cobalt per annum over a four year period starting 2021. As at 31 December 2019, $101 million (2018: $Nil) of product
delivery obligations remain.
• Palladium supply arrangement – In June 2019, Glencore signed a five year palladium prepayment arrangement in exchange for
an upfront advance payment of $200 million. Under the terms of the arrangement, Glencore is required to deliver a minimum of
44 thousand ounces of palladium per annum over a five year period starting 2020. As at 31 December 2019, $160 million (2018: $Nil)
of product delivery obligations remain.
Notes to the financial statements
continued
22. Provisions
US$ million
1 January 2019
Utilised
Released
Accretion
Assumed in business combination
Additions
Impact of adoption of IFRS 16
Reclassification to held for sale
Effect of foreign currency
exchange movements
31 December 2019
Current
Non-current
1 January 2018
Utilised
Released
Accretion
Assumed in business combination
Disposal of subsidiaries
Additions
Effect of foreign currency
exchange movements
31 December 2018
Current
Non-current
Notes
Post-retirement
employee
benefits
798
(93)
–
28
44
153
–
–
25
15
28
958
–
958
847
(92)
–
–
–
–
95
(52)
798
–
798
25
25
Other
employee
entitlements
243
(25)
(8)
–
–
19
–
–
Rehabilitation
costs
4,457
(171)
(46)
139
80
419
–
(45)
Onerous
contracts
722
(1)
(195)
40
–
36
(8)
–
(1)
228
10
218
294
(71)
(36)
–
26
(1)
31
–
243
16
227
14
4,847
239
4,608
4,180
(211)
–
135
82
(41)
391
(79)
4,457
116
4,341
1
595
98
497
1,092
–
(476)
–
31
–
75
–
722
227
495
Other
1,158
(118)
(18)
3
2
151
–
(7)
(8)
1,163
142
1,021
1,158
(136)
(43)
–
134
(31)
92
(16)
1,158
195
963
Total
7,378
(408)
(267)
210
126
778
(8)
(52)
34
7,791
489
7,302
7,571
(510)
(555)
135
273
(73)
684
(147)
7,378
554
6,824
Post-retirement employee benefits
The provision for post-retirement employee benefits includes pension plan liabilities of $446 million (2018: $393 million) and post-
retirement medical plan liabilities of $512 million (2018: $405 million), see note 23.
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
24 years (2018: 24 years).
As at 31 December 2019, 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 1.8% (2018: 2.0%), South African rand 3.8%
(2018: 4.0%), Australian dollar 2.5% (2018: 2.8%), Canadian dollar 2.0% (2018: 2.3%), and Chilean peso 2.8% (2018: 3.0%). The effect of
decreasing the discount rates used by 0.5% would result in an increase in the overall rehabilitation provision by $351 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 $5 million. The resulting net impact in the statement
of income would be a decrease of $10 million, eventually netting to $Nil over the weighted average settlement date of the provision.
Glencore Preliminary Results 2019
192
Glencore Preliminary Results 2019
Glencore Annual Report 2019
193
193
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
22. Provisions continued
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 reasoned estimate of these tax liabilities, including
related interest charges. These 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, therefore management does not anticipate a significant risk of
material change in estimates within the next financial year.
DRC 2018 Mining Code
Owing to the lack of guidance and clarification on the practical application of the “Super Profits Tax” legislation under the 2018
Mining Code (see also note 7), the Group has taken the view that no Super Profits Tax is due in the current year and that any
potential amount payable will not result in a material adjustment to the tax provision in the current year and within the next
financial year.
UK Tax Audit
HMRC have issued formal transfer pricing, unallowable purposes and diverted profits tax assessments for the 2008–2018 tax years,
amounting to $774 million. The Group has appealed against, and continues to vigorously contest, these assessments, following, over
the years, various legal opinions received and detailed analysis conducted, supporting its positions and policies applied. Therefore,
the Group has not provided for the amount assessed. The matter is now proceeding through the Mutual Agreement Process,
pursuant to article 24 of the Switzerland – United Kingdom Income Tax Treaty 1977. Management does not anticipate a significant
risk of material changes in estimates in this matter in the next financial year.
23. 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 2019 and 2018, were $5,231 million and $5,063 million, respectively. Personnel costs related to
consolidated industrial subsidiaries of $4,035 million (2018: $3,887 million) are included in cost of goods sold. Other personnel costs,
including 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 $141 million in 2019 (2018: $140 million).
Post-retirement medical plans
The Company participates in a number of post-retirement medical plans, principally in Canada, which provide coverage for
prescription drugs, medical, dental, hospital and life insurance to eligible retirees. Almost all of the post-retirement medical plans
in the Group are unfunded.
Defined benefit pension plans
The Company operates defined benefit plans in various countries, the main locations being Canada, Switzerland, UK and the U.S..
Approximately 67% of the present value of obligations accrued relates to the defined benefit plans in Canada, which are pension
plans that provide benefits to members in the form of a guaranteed level of pension payable for life. Contributions to the Canadian
plans are made to meet or exceed minimum funding requirements based on provincial statutory requirements and associated
federal taxation rules.
The majority of benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where
Glencore meets the benefit payments as they fall due. Plan assets held in trusts are governed by local regulations and practices in
each country. Responsibility for governance of the plans – overseeing all aspects of the plans including investment decisions and
contribution schedules – lies with Glencore. Glencore has set up committees to assist in the management of the plans and has also
appointed experienced, independent professional experts such as investment managers, actuaries, custodians, and trustees.
Glencore Preliminary Results 2019
194
Glencore Annual Report 2019
194
Notes to the financial statements
continued
Notes to the financial statements
continued
23. Personnel costs and employee benefits continued
The movement in the defined benefit pension and post-retirement medical plans over the year is as follows:
Defined benefit pension plans
US$ million
1 January 2019
Current service cost
Past service cost – plan amendments
Settlement of pension plan disposal
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
Loss from actuarial experience
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
Acquisition of business
Exchange differences
31 December 2019
Of which:
Pension surpluses
Pension deficits
Notes
Post-retirement
medical plans
405
7
(1)
–
21
Present value
of defined
benefit
obligation
2,651
52
(5)
(86)
93
Fair value
of plan
assets
(2,299)
–
–
85
(83)
54
–
(2)
256
12
266
–
1
(8)
(153)
(160)
25
115
2,951
2
(207)
–
–
–
(207)
(72)
(1)
8
153
88
(25)
(106)
(2,547)
27
–
–
39
1
40
–
–
(21)
–
(21)
44
17
512
–
512
25
11
22
Net liability
for defined
benefit
pension plans
352
52
(5)
(1)
10
56
(207)
(2)
256
12
59
(72)
–
–
–
(72)
–
9
404
(42)
446
The actual return on plan assets in respect of defined benefit pension plans amounted to a gain of $396 million (2018: loss of
$222 million), comprising interest income and the re-measurement of plan assets.
During the next financial year, the Group expects to make a contribution of $90 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
$120 million. Future funding requirements and contributions are reviewed and adjusted on an annual basis.
22. Provisions continued
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 comprises provisions for possible demurrage, mine concession, tax and construction related claims.
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 reasoned estimate of these tax liabilities, including
related interest charges. These 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, therefore management does not anticipate a significant risk of
material change in estimates within the next financial year.
DRC 2018 Mining Code
Owing to the lack of guidance and clarification on the practical application of the “Super Profits Tax” legislation under the 2018
Mining Code (see also note 7), the Group has taken the view that no Super Profits Tax is due in the current year and that any
potential amount payable will not result in a material adjustment to the tax provision in the current year and within the next
Other
Tax disputes
financial year.
UK Tax Audit
HMRC have issued formal transfer pricing, unallowable purposes and diverted profits tax assessments for the 2008–2018 tax years,
amounting to $774 million. The Group has appealed against, and continues to vigorously contest, these assessments, following, over
the years, various legal opinions received and detailed analysis conducted, supporting its positions and policies applied. Therefore,
the Group has not provided for the amount assessed. The matter is now proceeding through the Mutual Agreement Process,
pursuant to article 24 of the Switzerland – United Kingdom Income Tax Treaty 1977. Management does not anticipate a significant
risk of material changes in estimates in this matter in the next financial year.
23. 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 2019 and 2018, were $5,231 million and $5,063 million, respectively. Personnel costs related to
consolidated industrial subsidiaries of $4,035 million (2018: $3,887 million) are included in cost of goods sold. Other personnel costs,
including 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 $141 million in 2019 (2018: $140 million).
The Company participates in a number of post-retirement medical plans, principally in Canada, which provide coverage for
prescription drugs, medical, dental, hospital and life insurance to eligible retirees. Almost all of the post-retirement medical plans
Post-retirement medical plans
in the Group are unfunded.
Defined benefit pension plans
The Company operates defined benefit plans in various countries, the main locations being Canada, Switzerland, UK and the U.S..
Approximately 67% of the present value of obligations accrued relates to the defined benefit plans in Canada, which are pension
plans that provide benefits to members in the form of a guaranteed level of pension payable for life. Contributions to the Canadian
plans are made to meet or exceed minimum funding requirements based on provincial statutory requirements and associated
federal taxation rules.
The majority of benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where
Glencore meets the benefit payments as they fall due. Plan assets held in trusts are governed by local regulations and practices in
each country. Responsibility for governance of the plans – overseeing all aspects of the plans including investment decisions and
contribution schedules – lies with Glencore. Glencore has set up committees to assist in the management of the plans and has also
appointed experienced, independent professional experts such as investment managers, actuaries, custodians, and trustees.
Glencore Preliminary Results 2019
194
Glencore Preliminary Results 2019
Glencore Annual Report 2019
195
195
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
23. Personnel costs and employee benefits continued
US$ million
1 January 2018
Current service cost
Past service cost – plan amendments
Settlement of pension plan disposal
Interest expense/(income)
Total expense recognised in consolidated statement
of income
Loss on plan assets, excluding amounts included
in interest expense – net
Loss from change in demographic assumptions
Gain from change in financial assumptions
Loss/(gain) from actuarial experience
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 2018
Of which:
Pension surpluses
Pension deficits
Notes
Post-retirement
medical plans
455
7
–
–
16
Defined benefit pension plans
Present value
of defined
benefit
obligation
3,090
52
2
(155)
89
Fair value
of plan
assets
(2,766)
–
–
153
(87)
Net liability
for defined
benefit
pension plans
324
52
2
(2)
2
(12)
–
6
(95)
24
(65)
–
1
(8)
(159)
(166)
(196)
2,651
66
127
–
–
–
127
(74)
(1)
8
159
92
182
(2,299)
23
–
–
(16)
(1)
(17)
–
–
(18)
–
(18)
(38)
405
–
405
54
127
6
(95)
24
62
(74)
–
–
–
(74)
(14)
352
(41)
393
11
22
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 2019 and 2018. The defined benefit obligation of any of the Group’s defined benefit plans outside
of Canada as at 31 December 2019 does not exceed $250 million (2018: $206 million).
Glencore Preliminary Results 2019
196
Glencore Annual Report 2019
196
Notes to the financial statements
continued
Notes to the financial statements
continued
23. Personnel costs and employee benefits continued
23. Personnel costs and employee benefits continued
US$ million
1 January 2018
Current service cost
Past service cost – plan amendments
Settlement of pension plan disposal
Interest expense/(income)
Total expense recognised in consolidated statement
of income
Loss on plan assets, excluding amounts included
in interest expense – net
Loss from change in demographic assumptions
Gain from change in financial assumptions
Loss/(gain) from actuarial experience
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 2018
Of which:
Pension surpluses
Pension deficits
Post-retirement
Notes
medical plans
Defined benefit pension plans
Present value
of defined
benefit
obligation
455
3,090
Net liability
for defined
benefit
pension plans
Fair value
of plan
assets
(2,766)
52
2
(155)
89
(12)
–
6
(95)
24
(65)
–
1
(8)
(159)
(166)
(196)
2,651
–
–
153
(87)
66
127
–
–
–
127
(74)
(1)
8
159
92
182
(2,299)
7
–
–
16
23
–
–
(16)
(1)
(17)
–
–
(18)
–
(18)
(38)
405
–
405
324
52
2
(2)
2
54
127
6
(95)
24
62
(74)
–
–
–
(74)
(14)
352
(41)
393
11
22
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 2019 and 2018. The defined benefit obligation of any of the Group’s defined benefit plans outside
of Canada as at 31 December 2019 does not exceed $250 million (2018: $206 million).
2019
US$ 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 2019
Of which:
Pension surpluses
Pension deficits
Weighted average duration of defined benefit obligation – years
2018
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 2018
Of which:
Pension surpluses
Pension deficits
Weighted average duration of defined benefit obligation – years
Canada
Other
Total
443
140
303
1,967
525
24
1,418
(1,882)
85
(40)
125
12
69
13
56
984
453
188
343
(665)
319
(2)
321
17
512
153
359
2,951
978
212
1,761
(2,547)
404
(42)
446
14
Canada
Other
Total
378
118
260
1,829
488
19
1,322
(1,745)
84
(40)
124
12
27
2
25
822
378
164
280
(554)
268
(1)
269
17
405
120
285
2,651
866
183
1,602
(2,299)
352
(41)
393
14
Estimated future benefit payments of the Canadian plans, which reflect expected future service but exclude plan expenses, up until
2029 are as follows:
US$ million
2020
2021
2022
2023
2024
2025–2029
Total
Post-retirement
medical plans
19
19
19
20
20
100
197
Defined benefit
pension plans
146
105
149
102
101
506
1,109
Total
165
124
168
122
121
606
1,306
Glencore Preliminary Results 2019
196
Glencore Preliminary Results 2019
Glencore Annual Report 2019
197
197
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
23. Personnel costs and employee benefits continued
The plan assets consist of the following:
US$ million
Cash and short-term investments
Fixed income
Equities
Other
Total
2019
34
1,085
960
468
2,547
2018
38
1,060
839
362
2,299
All investments have been fair valued based on quoted market prices with the exception of securities of $2 million (2018: $2 million)
included in “Other”.
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
2019
3.9%
–
–
4.5%
2018
4.0%
–
–
4.2%
2019
2.7%
2.6%
0.4%
–
2018
3.5%
2.6%
0.3%
–
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned. As at
31 December 2019, these tables imply expected future life expectancy, for employees aged 65, 16 to 24 years for males (2018: 16 to 24)
and 20 to 25 years for females (2018: 20 to 25). The assumptions for each country are reviewed regularly and are adjusted where
necessary to reflect changes in fund experience and actuarial recommendations.
Glencore Preliminary Results 2019
198
Glencore Annual Report 2019
198
2019
34
1,085
960
468
2,547
2018
38
1,060
839
362
2,299
The plan assets consist of the following:
Cash and short-term investments
US$ million
Fixed income
Equities
Other
Total
included in “Other”.
All investments have been fair valued based on quoted market prices with the exception of securities of $2 million (2018: $2 million)
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.
the value of the plans’ bond holdings.
Change in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in
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
2019
3.9%
–
–
4.5%
2018
4.0%
–
–
4.2%
2019
2.7%
2.6%
0.4%
–
2018
3.5%
2.6%
0.3%
–
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned. As at
31 December 2019, these tables imply expected future life expectancy, for employees aged 65, 16 to 24 years for males (2018: 16 to 24)
and 20 to 25 years for females (2018: 20 to 25). The assumptions for each country are reviewed regularly and are adjusted where
necessary to reflect changes in fund experience and actuarial recommendations.
Notes to the financial statements
continued
Notes to the financial statements
continued
23. Personnel costs and employee benefits continued
23. Personnel costs and employee benefits continued
The sensitivity of the defined benefit obligation to changes in principal assumptions as at 31 December 2019 is set out below,
assuming that all other assumptions are held constant and the effect of interrelationships is excluded.
US$ million
Discount rate
Increase by 50 basis points
Decrease by 50 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
24. Accounts payable
US$ million
Financial liabilities at amortised cost
Trade payables
Margin calls received1
Associated companies
Other payables and accrued liabilities
Financial liabilities at fair value through profit and loss
Trade payables containing provisional pricing features
Non-financial instruments
Advances settled in product
Other tax and related payables
Total
Increase/(decrease) in pension obligation
Defined benefit
pension plans
Post-retirement
medical plans
Total
(36)
39
–
–
–
–
77
(61)
15
(177)
199
40
(38)
50
(37)
–
–
70
(213)
238
40
(38)
50
(37)
77
(61)
85
Notes
2019
2018
7,099
310
1,501
1,776
7,569
753
824
1,710
28
14,808
15,073
240
459
251
304
26,193
26,484
1
Includes $263 million (2018: $139 million) of cash collateral receipts under margin arrangements related to cross currency swaps held to hedge non-U.S. dollar denominated bonds.
Trade payables are obligations to pay for goods and services. Trade payables typically have maturities up to 90 days depending on
the type of material and the geographic area in which the purchase transaction occurs and the agreed terms. The carrying value of
trade payables approximates fair value.
Glencore Preliminary Results 2019
198
Glencore Preliminary Results 2019
Glencore Annual Report 2019
199
199
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities
2019 Acquisitions
In 2019, Glencore acquired a 75% controlling interest in Chevron South Africa Proprietary Limited and a 100% interest in Chevron
Botswana Proprietary Limited (together “Astron Energy”), a 42.9% additional interest in Polymet Mining Corp (“Polymet”) and
increased its interest in Ulan and Hail Creek.
The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the
acquisition date are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Advances and loans1
Current assets
Inventories
Accounts receivable1
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions including post-retirement benefits
Current liabilities
Borrowings
Accounts payable
Provisions
Total fair value of net assets acquired
Less: cash and cash equivalents acquired
Less: amounts previously recognised
as exchangeable loan
Less: amounts previously recognised
as investments
Less: amounts previously recognised
as non-current loan
Net cash (received)/used in acquisition
of subsidiaries
Acquisition related costs
Astron Energy
Polymet
Ulan
Hail Creek
Other
Total
1,013
335
7
1,355
584
294
50
928
(260)
(151)
(199)
(48)
(398)
(130)
(487)
(3)
(620)
1,005
(50)
(1,005)
–
–
(50)
–
420
24
13
457
–
2
6
8
(111)
(1)
–
(63)
(64)
–
(7)
(4)
(11)
279
(6)
–
(36)
(243)
(6)
–
134
–
–
134
3
8
1
12
–
–
–
(5)
(5)
–
(17)
–
(17)
124
(1)
–
–
–
123
6
40
–
–
40
3
3
1
7
–
–
–
(2)
(2)
–
(5)
(1)
(6)
39
(1)
–
–
–
38
–
16
12
1
29
–
–
1
1
–
(2)
(4)
–
(6)
–
(1)
–
(1)
23
(1)
–
(4)
–
18
–
1,623
371
21
2,015
590
307
59
956
(371)
(154)
(203)
(118)
(475)
(130)
(517)
(8)
(655)
1,470
(59)
(1,005)
(40)
(243)
123
6
1 There is no material difference between the gross contractual amounts for loans and advances and accounts receivable and their fair value.
Astron Energy
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 (together the “Astron Energy”) following closing of OTS’s
exercise of its pre-emptive right to acquire Astron Energy from the Chevron group. OTS’s acquisition from Chevron closed on
1 October 2018, at which time Glencore advanced $1,044 million to OTS under an exchangeable loan arrangement. On 8 April 2019,
the loan was exchanged into the 75% stake in Chevron SA and the 100% stake in Chevron Botswana acquired by OTS. 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 Astron Energy using the full consolidation method in accordance with IFRS 10.
The fair values are provisional and expected to be finalised within 12 months of the acquisition. It is expected that adjustments could
be made to the allocation of value between intangible assets, plant and equipment, deferred taxes and provisions.
If the acquisition had taken place effective 1 January 2019, the operation would have contributed additional revenue of $1,914 million
and additional attributable net loss of $1 million. From the date of acquisition, the operation contributed $3,888 million of revenue
and $71 million of attributable net loss.
Glencore Preliminary Results 2019
200
Glencore Annual Report 2019
200
Notes to the financial statements
continued
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities
25. Acquisition and disposal of subsidiaries and other entities continued
Polymet
On 26 June 2019, Glencore concluded the acquisition (via a rights issue) of an additional 42.9% interest in Polymet Mining Corp
(“Polymet”), a company in the early stages of developing the NorthMet polymetallic (copper, nickel and precious metals) deposit in
Minnesota for a total consideration of $243 million. Polymet is listed on the Toronto and New York stock exchanges. As noted, the
consideration was satisfied through Glencore’s participation in Polymet’s rights issue, in which the proceeds raised were used to
repay loans previously extended to Polymet by Glencore. As such, Glencore did not commit any new funds to Polymet. Following
the capital raise, Glencore’s voting interest increased from 28.8% to 71.7%.
As Glencore holds the majority of the voting rights, providing it the ability to appoint a controlling number of directors to the board,
Glencore is required to account for Polymet using the full consolidation method in accordance with IFRS 10.
Prior to acquisition, Glencore owned a 28.8% interest in Polymet which was accounted for as an associate. In accordance with IFRS 3:
Business Combinations, this equity interest is required to be revalued, at the date of acquisition, to its fair value with any resulting
gain or loss recognised in the statement of income. The fair value of the existing interest was determined to be $36 million, by
reference to the Polymet share price on the date of acquisition and as a result, a loss of $38 million was recognised in loss on
disposals and investments.
The fair values are provisional and expected to be finalised within 12 months of the acquisition. It is expected that adjustments could
be made to the allocation of value between intangible assets, plant and equipment, deferred taxes and provisions.
If the acquisition had taken place effective 1 January 2019, the operation would have contributed additional revenue of $Nil and
additional attributable net loss of $2 million. From the date of acquisition, the operation contributed $Nil of revenue and attributable
net loss of $3 million.
Ulan/Hail Creek
In January 2019, Glencore completed the acquisition of an additional 10% of Ulan and 2.7% of Hail Creek for a net consideration of
$124 million and $39 million respectively, increasing Glencore’s interest in Ulan and Hail Creek to 100% and 84.7%, respectively.
2019 Acquisitions
In 2019, Glencore acquired a 75% controlling interest in Chevron South Africa Proprietary Limited and a 100% interest in Chevron
Botswana Proprietary Limited (together “Astron Energy”), a 42.9% additional interest in Polymet Mining Corp (“Polymet”) and
increased its interest in Ulan and Hail Creek.
The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the
Astron Energy
Polymet
Ulan
Hail Creek
Other
Total
Provisions including post-retirement benefits
acquisition date are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Advances and loans1
Current assets
Inventories
Accounts receivable1
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred tax liabilities
Current liabilities
Borrowings
Accounts payable
Provisions
Total fair value of net assets acquired
Less: cash and cash equivalents acquired
Less: amounts previously recognised
as exchangeable loan
Less: amounts previously recognised
as investments
Less: amounts previously recognised
as non-current loan
Net cash (received)/used in acquisition
of subsidiaries
Acquisition related costs
Astron Energy
1,013
335
7
1,355
584
294
50
928
(260)
(151)
(199)
(48)
(398)
(130)
(487)
(3)
(620)
1,005
(50)
(1,005)
–
–
(50)
–
420
24
13
457
–
2
6
8
(111)
(1)
–
(63)
(64)
–
(7)
(4)
(11)
279
(6)
–
(36)
(243)
(6)
–
134
–
–
134
3
8
1
12
–
–
–
(5)
(5)
–
(17)
–
(17)
124
(1)
–
–
–
123
6
40
–
–
40
3
3
1
7
–
–
–
(2)
(2)
–
(5)
(1)
(6)
39
(1)
–
–
–
38
–
16
12
1
29
–
–
1
1
–
(2)
(4)
–
(6)
–
(1)
–
(1)
23
(1)
–
(4)
–
18
–
1,623
371
21
2,015
590
307
59
956
(371)
(154)
(203)
(118)
(475)
(130)
(517)
(8)
(655)
1,470
(59)
(1,005)
(40)
(243)
123
6
1 There is no material difference between the gross contractual amounts for loans and advances and accounts receivable and their fair value.
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 (together the “Astron Energy”) following closing of OTS’s
exercise of its pre-emptive right to acquire Astron Energy from the Chevron group. OTS’s acquisition from Chevron closed on
1 October 2018, at which time Glencore advanced $1,044 million to OTS under an exchangeable loan arrangement. On 8 April 2019,
the loan was exchanged into the 75% stake in Chevron SA and the 100% stake in Chevron Botswana acquired by OTS. 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 Astron Energy using the full consolidation method in accordance with IFRS 10.
The fair values are provisional and expected to be finalised within 12 months of the acquisition. It is expected that adjustments could
be made to the allocation of value between intangible assets, plant and equipment, deferred taxes and provisions.
If the acquisition had taken place effective 1 January 2019, the operation would have contributed additional revenue of $1,914 million
and additional attributable net loss of $1 million. From the date of acquisition, the operation contributed $3,888 million of revenue
and $71 million of attributable net loss.
Glencore Preliminary Results 2019
200
Glencore Preliminary Results 2019
Glencore Annual Report 2019
201
201
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities continued
2018 Acquisitions
In 2018, Glencore acquired a 49% interest in Hunter Valley operations coal mine in New South Wales (“HVO”), an 82% interest in Hail
Creek coal mine as well as a 71% interest in the Valeria coal resource in Queensland (“Hail Creek”), a 78% interest in ALE Combustiveis (“Ale”),
a Brazilian fuel distributor and other businesses, none of which are individually material. The net cash used in the acquisition of
subsidiaries and the fair value of assets acquired and liabilities assumed on the acquisition date are detailed below:
US$ million
Non-current assets
Property, plant and
equipment
Intangible assets
Investments in associates and
joint ventures
Advances and loans1
Deferred tax assets
Current assets
Inventories
Accounts receivable1
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred income
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Deferred income
Provisions
Total fair value of net assets
acquired
Less: cash and cash
equivalents acquired
Less: deferred consideration
Net cash used in acquisition
of subsidiaries
Acquisition related costs
Ale provisional
fair values as
reported at
31 December
2018
Fair value
adjustments to
the provisional
allocation in
2019
Total Ale fair
values
HVO
Hail Creek
Other
Total
46
426
–
54
–
526
90
100
90
280
(41)
(189)
–
(140)
(41)
(370)
(74)
(98)
–
–
(172)
223
(90)
(82)
51
–
(5)
(153)
–
–
14
(144)
7
–
–
7
–
–
–
137
–
137
–
–
–
–
–
–
–
–
–
–
41
273
–
54
14
382
97
100
90
287
(41)
(189)
–
(3)
(41)
(233)
–
(74)
(98)
–
–
(172)
223
(90)
(82)
51
–
1,402
–
32
14
–
1,448
50
69
11
130
–
–
(200)
–
(66)
(266)
–
(52)
(20)
(9)
(81)
1,701
–
77
5
–
1,783
68
114
23
205
–
–
–
–
(69)
(69)
–
(166)
–
(2)
(168)
1,231
1,751
(11)
(82)
1,138
59
(23)
–
1,728
83
8
1
–
–
–
9
–
2
1
3
–
–
–
(2)
–
(2)
–
–
–
–
–
10
(1)
(4)
5
–
3,152
274
109
73
14
3,622
215
285
125
625
(41)
(189)
(200)
(5)
(176)
(570)
(74)
(316)
(20)
(11)
(421)
3,215
(125)
(168)
2,922
142
1 There is no material difference between the gross contractual amounts for advances and loans and accounts receivable and their fair value.
ALE Combustiveis
On 31 August 2018, Glencore completed the acquisition of a 78% interest in ALE Combusitveis, a Brazilian fuel distributor, for a cash
consideration of $141 million on closing and $82 million due over six years. The investment provides Glencore with a strong platform
to participate in the expected significant domestic growth opportunities across the fuels sector in Brazil with the majority of the
demand increase expected to be met by imports. 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 ALE using the full consolidation method
in accordance with IFRS 10.
The above fair value adjustments to the provisionally reported values primarily relate to the allocation of value between intangible
asset and fixed asset classes and deferred taxes. The acquisition accounting for Ale has now been finalised.
If the acquisition had taken place effective 1 January 2018, the operation would have contributed additional revenue of $2,439 million
and additional attributable net loss of $15 million for the year ended 31 December 2018. From the date of acquisition, the operation
contributed $969 million of revenue and $2 million of attributable net loss for the year ended 31 December 2018.
Glencore Preliminary Results 2019
202
Glencore Annual Report 2019
202
Notes to the financial statements
continued
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities continued
25. Acquisition and disposal of subsidiaries and other entities continued
Hunter Valley operations
On 4 May 2018, Glencore completed the acquisition of a 49% interest in the HVO coal mine in New South Wales for a consideration
of $1,231 million, comprising $1,149 million cash and $82 million of deferred consideration payable over 5 years, $61 million of which is
contingent on future coal prices. Under the coal price contingent royalty arrangement, a production based royalty amount is due
should actual prevailing prices be in excess of a royalty trigger price of $75/mt, commencing in September 2020 and lasting for a
period of 10 years. The contingent portion of the deferred consideration is a level 3 fair value measurement, and was determined
using forecasted production estimates and assumed actual coal prices higher than the royalty trigger price over the royalty period.
Should production volumes increase/decrease by 10%, the contingent consideration due would increase/decrease by $6 million and
for any given quarter should prevailing coal prices be lower than $75/mt (escalating by CPI), no amounts would be due under the
price contingent royalty arrangement. HVO lies adjacent to numerous existing Glencore mines in the Hunter Valley and is expected
to unlock significant mining and operating synergies. The investment is structured through an unincorporated joint venture with
each party’s exposure equating to its rights to the assets and obligations for the liabilities of HVO. As a joint operation, the 49%
interest is accounted for by recognising the Group’s share of HVO’s assets, liabilities, revenue and expenses as prescribed by IFRS 11.
In conjunction with the acquisition, $59 million of stamp duty and related costs were incurred. The acquisition accounting for HVO
has now been finalised, with no adjustments to the previously reported provisional fair values.
If the acquisition had taken place effective 1 January 2018, the operation would have contributed additional revenue of $192 million
and additional attributable net income of $29 million for the year ended 31 December 2018. From the date of acquisition, the
operation contributed $611 million of revenue and $118 million of attributable net income for the year ended 31 December 2018.
Hail Creek coal mine
On 1 August 2018, Glencore completed the acquisition of an 82% interest in the Hail Creek coal mine and adjacent coal resources,
as well as a 71% interest in the Valeria coal resource in central Queensland for a total cash consideration of $1,751 million. Hail Creek
is a large-scale, long-life and low-cost mine producing two-thirds premium quality hard coking coal and one-third thermal coal for
export. The investment is structured as an unincorporated joint venture with each party’s exposure equating to its rights to the
assets and obligations for the liabilities of Hail Creek. However, the key decision making powers do not require unanimous consent
of the participants. As there is neither control nor joint control over the entire arrangement, Hail Creek is considered a deemed
separate entity under IFRS 10 and is accounted for by recognising the Group’s share of Hail Creek’s assets, liabilities, revenue and
expenses as prescribed by IFRS 10. In conjunction with the acquisition, $83 million of stamp duty and related costs were incurred.
The acquisition accounting for Hail Creek has now been finalised, with no adjustments to the previously reported provisional
fair values.
If the acquisition had taken place effective 1 January 2018, the operation would have contributed additional revenue of $639 million
and additional attributable net income of $149 million for the year ended 31 December 2018. From the date of acquisition, the
operation contributed $345 million of revenue and $95 million of attributable net income for the year ended 31 December 2018.
2018 Acquisitions
In 2018, Glencore acquired a 49% interest in Hunter Valley operations coal mine in New South Wales (“HVO”), an 82% interest in Hail
Creek coal mine as well as a 71% interest in the Valeria coal resource in Queensland (“Hail Creek”), a 78% interest in ALE Combustiveis (“Ale”),
a Brazilian fuel distributor and other businesses, none of which are individually material. The net cash used in the acquisition of
subsidiaries and the fair value of assets acquired and liabilities assumed on the acquisition date are detailed below:
Ale provisional
Fair value
fair values as
adjustments to
reported at
the provisional
31 December
allocation in
Total Ale fair
2018
2019
values
HVO
Hail Creek
Other
Total
US$ million
Non-current assets
Property, plant and
equipment
Intangible assets
joint ventures
Advances and loans1
Deferred tax assets
Investments in associates and
Current assets
Inventories
Accounts receivable1
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Borrowings
Deferred income
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Deferred income
Provisions
Total fair value of net assets
acquired
Less: cash and cash
equivalents acquired
Less: deferred consideration
Net cash used in acquisition
of subsidiaries
Acquisition related costs
ALE Combustiveis
46
426
–
54
–
526
90
100
90
280
(41)
(189)
–
(140)
(41)
(370)
(74)
(98)
–
–
(172)
223
(90)
(82)
51
–
(5)
(153)
–
–
14
(144)
137
–
137
7
–
–
7
–
–
–
–
–
–
–
–
–
–
–
–
–
41
273
–
54
14
382
97
100
90
287
(41)
(189)
–
(3)
(41)
(233)
–
(74)
(98)
–
–
(172)
223
(90)
(82)
51
–
1,448
1,783
1,402
–
32
14
–
50
69
11
130
–
(200)
–
–
(66)
(266)
–
(52)
(20)
(9)
(81)
(11)
(82)
1,138
59
1,701
–
77
5
–
68
114
23
205
–
–
–
–
(69)
(69)
–
(166)
–
(2)
(168)
(23)
–
1,728
83
1,231
1,751
8
1
–
–
–
9
–
2
1
3
–
–
–
(2)
–
(2)
–
–
–
–
–
10
(1)
(4)
5
–
3,152
274
109
73
14
3,622
215
285
125
625
(41)
(189)
(200)
(5)
(176)
(570)
(74)
(316)
(20)
(11)
(421)
3,215
(125)
(168)
2,922
142
1 There is no material difference between the gross contractual amounts for advances and loans and accounts receivable and their fair value.
On 31 August 2018, Glencore completed the acquisition of a 78% interest in ALE Combusitveis, a Brazilian fuel distributor, for a cash
consideration of $141 million on closing and $82 million due over six years. The investment provides Glencore with a strong platform
to participate in the expected significant domestic growth opportunities across the fuels sector in Brazil with the majority of the
demand increase expected to be met by imports. 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 ALE using the full consolidation method
in accordance with IFRS 10.
The above fair value adjustments to the provisionally reported values primarily relate to the allocation of value between intangible
asset and fixed asset classes and deferred taxes. The acquisition accounting for Ale has now been finalised.
If the acquisition had taken place effective 1 January 2018, the operation would have contributed additional revenue of $2,439 million
and additional attributable net loss of $15 million for the year ended 31 December 2018. From the date of acquisition, the operation
contributed $969 million of revenue and $2 million of attributable net loss for the year ended 31 December 2018.
Glencore Preliminary Results 2019
202
Glencore Preliminary Results 2019
Glencore Annual Report 2019
203
203
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities continued
2019 Disposals
In 2019, Glencore disposed of its controlling interest in Terminales Portuarios Chancay S.A.. The carrying value of the assets and
liabilities over which control was lost and the net cash received from the disposal are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Intangible assets
Advances and loans
Deferred tax asset
Current assets
Accounts receivable
Cash and cash equivalents
Current liabilities
Accounts payable
Carrying value of net assets disposed
Cash and cash equivalents received
Retained interest recognised as investment
Future consideration
Net gain on disposal
Cash and cash equivalents received
Less: cash and cash equivalents disposed
Net cash (used in)/received from disposal
Terminales
Portuarios
Chancay
Other
Total
55
33
2
1
91
44
1
45
(1)
(1)
135
–
(150)
(11)
(26)
–
(1)
(1)
–
–
–
–
–
–
–
–
(3)
(3)
(3)
(6)
–
(6)
(15)
6
–
6
55
33
2
1
91
44
1
45
(4)
(4)
132
(6)
(150)
(17)
(41)
6
(1)
5
Terminales Portuarios Chancay
In April 2019, Glencore disposed of a 60% interest in Terminales Portuarios Chancay S.A., a Peruvian port, for cash consideration of
$11 million. Glencore is no longer able to unilaterally direct the key strategic, operating and capital decisions of Terminales Portuarios
Chancay S.A. 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 share using the equity
method in accordance with IAS 28 (see note 10).
Glencore Preliminary Results 2019
204
Glencore Annual Report 2019
204
Notes to the financial statements
continued
Notes to the financial statements
continued
25. Acquisition and disposal of subsidiaries and other entities continued
25. Acquisition and disposal of subsidiaries and other entities continued
2019 Disposals
In 2019, Glencore disposed of its controlling interest in Terminales Portuarios Chancay S.A.. The carrying value of the assets and
liabilities over which control was lost and the net cash received from the disposal are detailed below:
2018 Disposals
In 2018, Glencore disposed of its controlling interest in Glencore Manganese France SAS, Glencore Manganese Norway AS and
Tahmoor Coal Pty Ltd.
Mototolo
On 1 November 2018, Glencore disposed of its 40% interest of the Mototolo joint venture, a Platinum mine in South Africa, for
a cash consideration of $68 million.
The carrying value of the assets and liabilities over which control was lost and the net cash received from these disposals are
detailed below:
US$ million
Non-current assets
Property, plant and equipment
Current assets
Inventories
Accounts receivable
Cash and cash equivalents
Non-controlling interest
Non-current liabilities
Deferred tax liabilities
Provisions
Current liabilities
Accounts payable
Provisions
Carrying value of net assets disposed
Cash and cash equivalents received
Intangible assets (offtake agreement)
Items recycled to the statement of income
Future consideration
Transaction costs
Net loss/(gain) on disposal
Cash and cash equivalents received
Less: cash and cash equivalents disposed
Net cash received from disposal
Glencore
Manganese
and
Tahmoor Coal
Mototolo
Others
Total
68
68
3
34
7
44
(19)
–
(4)
(4)
(20)
(4)
(24)
65
(68)
–
197
(57)
–
137
68
(7)
61
87
87
27
39
32
98
–
–
(37)
(37)
(85)
–
(85)
63
(48)
(36)
14
–
3
(4)
48
(32)
16
39
39
4
6
3
13
(1)
(3)
(28)
(31)
(24)
–
(24)
(4)
(14)
–
7
–
–
(11)
14
(3)
11
194
194
34
79
42
155
(20)
(3)
(69)
(72)
(129)
(4)
(133)
124
(130)
(36)
218
(57)
3
122
130
(42)
88
Property, plant and equipment
US$ million
Non-current assets
Intangible assets
Advances and loans
Deferred tax asset
Current assets
Accounts receivable
Cash and cash equivalents
Current liabilities
Accounts payable
Carrying value of net assets disposed
Cash and cash equivalents received
Retained interest recognised as investment
Future consideration
Net gain on disposal
Cash and cash equivalents received
Less: cash and cash equivalents disposed
Net cash (used in)/received from disposal
Terminales Portuarios Chancay
Terminales
Portuarios
Chancay
Other
Total
55
33
2
1
91
44
1
45
(1)
(1)
135
–
(150)
(11)
(26)
–
(1)
(1)
–
–
–
–
–
–
–
–
(3)
(3)
(3)
(6)
–
(6)
(15)
6
–
6
55
33
2
1
91
44
1
45
(4)
(4)
132
(6)
(150)
(17)
(41)
6
(1)
5
In April 2019, Glencore disposed of a 60% interest in Terminales Portuarios Chancay S.A., a Peruvian port, for cash consideration of
$11 million. Glencore is no longer able to unilaterally direct the key strategic, operating and capital decisions of Terminales Portuarios
Chancay S.A. 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 share using the equity
method in accordance with IAS 28 (see note 10).
Glencore Preliminary Results 2019
204
Glencore Preliminary Results 2019
Glencore Annual Report 2019
205
205
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
26. 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 Baa1 (stable outlook) from Moody’s and BBB+ (stable) 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 and acknowledging the cyclical nature of the industry, in periods of strong earnings and cash generation
the Board, considering all relevant factors, could formally declare an additional distribution to be included with the distribution
confirmed with respect to the prior year and/or initiate or continue share buy-back programmes. 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.
Glencore Preliminary Results 2019
206
Glencore Annual Report 2019
206
Notes to the financial statements
continued
Notes to the financial statements
continued
26. Financial and capital risk management
26. Financial and capital risk management continued
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 Baa1 (stable outlook) from Moody’s and BBB+ (stable) 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 and acknowledging the cyclical nature of the industry, in periods of strong earnings and cash generation
the Board, considering all relevant factors, could formally declare an additional distribution to be included with the distribution
confirmed with respect to the prior year and/or initiate or continue share buy-back programmes. 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 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. Glencore’s Board has set an unchanged consolidated VaR limit (one day 95% confidence level) of
$100 million representing less than 0.2% of total equity, which the Board reviews annually. There were no breaches of this limit
during the year.
Position sheets are regularly distributed and monitored and daily Monte Carlo simulations are applied to the various business
groups’ net marketing positions to determine potential losses.
Market risk VaR (one-day 95% confidence level) ranges and year-end positions were as follows:
US$ million
Year-end position
Average during the year
High during the year
Low during the year
2019
18
27
43
18
2018
33
34
76
16
VaR does not purport to represent actual gains or losses in fair value in 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 metals’ 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 Industrial 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
2019 would decrease/increase by $126 million (2018: $135 million).
Interest rate benchmark reform
The Group is closely monitoring the market and the output from the various industry working groups managing the transition to
new benchmark interest rates. This includes announcements made by LIBOR regulators including the Bank of England regarding
the transition away from GBP LIBOR to the Sterling Overnight Index Average Rate (SONIA) and the Federal Reserve Bank of New
York regarding the transition away from USD LIBOR to the Secured Overnight Financing Rate (SOFR). In the UK, the Financial
Conduct Authority has made clear that, at the end of 2021, it will no longer seek to persuade, or compel, banks to submit to LIBOR.
Glencore Preliminary Results 2019
206
Glencore Preliminary Results 2019
Glencore Annual Report 2019
207
207
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
26. Financial and capital risk management continued
In response to the announcements, the Group is working to prepare and deliver on an action plan, encompassing treasury, legal, risk
management, accounting and IT functions, to enable a smooth transition to alternative benchmark rates. The Group’s existing USD
LIBOR linked contracts do not include adequate and robust fall back provisions for a cessation of the referenced benchmark interest
rate. Different working groups within the finance industry are working on fall back language for different instruments and different
IBORs, which the Group is monitoring closely and will look to implement these when appropriate and can be practically
implemented by the Group and its financial counterparties.
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 economically 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 and Yen denominated bonds (see note 20). 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 fair
value or cash flow hedges of the associated foreign currency risks. The critical terms of these swap contracts and their
corresponding hedged items are matched and the Group expects a highly effective hedging relationship with the swap contracts
and the value of the corresponding hedged items to change systematically in opposite direction in response to movements in the
underlying exchange rates. The corresponding fair value and notional amounts of these derivatives is as follows:
US$ million
Cross currency swap agreements
Cash flow hedges – currency risk
Eurobonds
Sterling bonds
Australian dollar bonds
Swiss franc bonds
Fair value hedges – currency and interest
rate risk
Eurobonds
Yen bonds
Sterling bonds
Swiss franc bonds
Interest rate swap agreements
Fair value hedges – interest rate risk
US$ bonds
1 Refer to note 20 for details.
Notional amounts
Average FX
rates
Carrying amount
Assets
(Note 28)
Carrying amount
Liabilities
(Note 28)
Average
maturity1
2019
2018
2019
2018
2019
2018
2019
2018
1,777
1,783
–
256
1,117
2,906
453
–
6,664
81
663
956
12,180
6,100
81
–
1,148
11,805
1.11
1.79
–
1.02
1.24
0.01
1.33
1.04
1.12
1.77
0.91
–
1.26
0.01
–
1.04
6
–
–
–
128
10
28
–
172
53
–
3
–
153
10
–
–
219
4
454
–
4
513
–
–
2
977
–
785
101
–
435
–
–
28
1,349
2024
2021
–
2025
2022
2022
2026
2022
5,670
17,850
5,584
17,389
–
–
235
407
11
230
1
978
62
1,411
2025
Glencore Preliminary Results 2019
208
Glencore Annual Report 2019
208
Notes to the financial statements
continued
Notes to the financial statements
continued
26. Financial and capital risk management continued
26. Financial and capital risk management continued
In response to the announcements, the Group is working to prepare and deliver on an action plan, encompassing treasury, legal, risk
management, accounting and IT functions, to enable a smooth transition to alternative benchmark rates. The Group’s existing USD
LIBOR linked contracts do not include adequate and robust fall back provisions for a cessation of the referenced benchmark interest
rate. Different working groups within the finance industry are working on fall back language for different instruments and different
IBORs, which the Group is monitoring closely and will look to implement these when appropriate and can be practically
implemented by the Group and its financial counterparties.
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 economically 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 and Yen denominated bonds (see note 20). 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 fair
value or cash flow hedges of the associated foreign currency risks. The critical terms of these swap contracts and their
corresponding hedged items are matched and the Group expects a highly effective hedging relationship with the swap contracts
and the value of the corresponding hedged items to change systematically in opposite direction in response to movements in the
underlying exchange rates. The corresponding fair value and notional amounts of these derivatives is as follows:
US$ million
Cross currency swap agreements
Cash flow hedges – currency risk
Eurobonds
Sterling bonds
Australian dollar bonds
Swiss franc bonds
Fair value hedges – currency and interest
rate risk
Eurobonds
Yen bonds
Sterling bonds
Swiss franc bonds
Interest rate swap agreements
Fair value hedges – interest rate risk
US$ bonds
1 Refer to note 20 for details.
Notional amounts
rates
Average FX
Assets
(Note 28)
Liabilities
(Note 28)
Average
maturity1
Carrying amount
Carrying amount
2019
2018
2019
2018
2019
2018
2019
2018
1,777
1,783
–
256
1,117
2,906
453
1.11
1.79
–
–
1.02
6,664
6,100
81
663
956
81
–
1,148
12,180
11,805
1.24
0.01
1.33
1.04
1.12
1.77
0.91
–
1.26
0.01
–
1.04
6
–
–
–
128
10
28
–
172
53
–
3
–
153
10
–
–
4
454
–
4
–
–
2
–
785
101
–
–
–
28
2024
2021
–
2025
2022
2022
2026
2022
513
435
219
977
1,349
5,670
5,584
–
–
17,850
17,389
235
407
11
230
1
978
62
1,411
2025
The gross liquidity risk relating to the above cross currency swaps entered into for the purposes of hedging foreign currency and
interest rate risks arising from the Group’s non-U.S. dollar denominated bonds is presented below. The amounts reflect the expected
gross settlement of the U.S. dollar pay leg of these swaps. The inflows from the related foreign currency receive leg of these swaps
are not presented in the below table, but would approximate the foreign currency equivalent of the US dollar pay leg. Counterparty
settlement date risk related to these swaps is limited, as the Group has entered into margining arrangements for both the outflow
and inflow legs of the swap.
US$ million
2019
2018
After 5 years Due 3–5 years Due 2–3 years Due 1–2 years
Due 0–1 year
3,099
1,809
2,804
3,722
1,987
2,650
2,688
1,896
1,909
1,738
Total
12,487
11,815
The carrying amounts of the fair value hedged items are as follows:
US$ million
Foreign exchange and interest rate risk
Eurobonds
Yen bonds
Swiss franc bonds
Sterling bonds
US$ bonds
Carrying amount of the
hedged item
(Note 20)
2019
2018
Of which,
accumulated
amount of fair value
hedge adjustments
2019
2018
6,213
92
957
672
5,850
13,784
5,748
91
1,122
–
5,492
12,453
(154)
–
(1)
(12)
(213)
(380)
(143)
–
(2)
–
60
(85)
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. Margin calls paid are similarly held
with credit rated financial institutions. Glencore determines these instruments to have low credit risk at the reporting date. 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 4.7% (2018: 3.9%) 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 2019 (2018: 2.6%).
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 27) and physically-settled advances (see notes 11 and 13).
Glencore Preliminary Results 2019
208
Glencore Preliminary Results 2019
Glencore Annual Report 2019
209
209
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
26. Financial and capital risk management continued
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 (2018: $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, working capital needs and proposed
investments, as well as credit facility refinancing/extension requirements, well ahead of time (see notes 1, 11, 20, 21 and 24).
As at 31 December 2019, Glencore had available committed undrawn credit facilities and cash amounting to $10,141 million
(2018: $10,163 million), refer to Other reconciliations section. The maturity profile of Glencore’s financial liabilities based on the
contractual terms is as follows:
2019
US$ million
Borrowings excluding lease liabilities
Expected future interest payments
Lease liabilities under IFRS 16 – undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
2018
US$ million
Borrowings excluding finance lease
obligations
Expected future interest payments
Finance lease obligations under IAS 17 –
undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
After 5 years Due 3–5 years Due 2–3 years Due 1–2 years
9,272
834
385
–
–
4,000
613
239
–
–
8,294
2,586
618
–
379
6,343
866
289
–
–
11,877
7,498
4,852
10,491
Due 0–1 year
7,492
925
569
26,193
3,722
38,901
41,838
Total
35,401
5,824
2,100
26,193
4,101
73,619
41,838
After 5 years Due 3–5 years Due 2–3 years Due 1–2 years
Due 0–1 year
Total
7,104
2,651
174
–
529
7,134
842
43
–
–
3,561
8,348
8,460
34,607
621
83
–
–
779
77
–
–
828
134
26,484
3,243
39,149
44,268
5,721
511
26,484
3,772
71,095
44,268
10,458
8,019
4,265
9,204
Glencore Preliminary Results 2019
210
Glencore Annual Report 2019
210
Notes to the financial statements
continued
Notes to the financial statements
continued
26. Financial and capital risk management continued
27. Financial instruments
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 (2018: $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, working capital needs and proposed
investments, as well as credit facility refinancing/extension requirements, well ahead of time (see notes 1, 11, 20, 21 and 24).
As at 31 December 2019, Glencore had available committed undrawn credit facilities and cash amounting to $10,141 million
(2018: $10,163 million), refer to Other reconciliations section. The maturity profile of Glencore’s financial liabilities based on the
contractual terms is as follows:
2019
US$ million
Borrowings excluding lease liabilities
Expected future interest payments
Lease liabilities under IFRS 16 – undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
2018
US$ million
obligations
Borrowings excluding finance lease
Expected future interest payments
Finance lease obligations under IAS 17 –
undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
8,294
2,586
618
–
379
7,104
2,651
174
–
529
6,343
866
289
–
–
7,134
842
43
–
–
After 5 years Due 3–5 years Due 2–3 years Due 1–2 years
Due 0–1 year
4,000
613
239
–
–
9,272
834
385
–
–
11,877
7,498
4,852
10,491
After 5 years Due 3–5 years Due 2–3 years Due 1–2 years
Due 0–1 year
Total
3,561
8,348
8,460
34,607
621
83
–
–
779
77
–
–
10,458
8,019
4,265
9,204
7,492
925
569
26,193
3,722
38,901
41,838
828
134
26,484
3,243
39,149
44,268
Total
35,401
5,824
2,100
26,193
4,101
73,619
41,838
5,721
511
26,484
3,772
71,095
44,268
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 $37,043 million (2018: $34,994 million) of borrowings, the fair value of which at 31 December 2019
was $37,670 million (2018: $34,863 million) based on observable market prices applied to the borrowing portfolio (a Level 2 fair
value measurement).
2019
US$ million
Assets
Other investments3
Non-current other financial assets (see note 28)
Advances and loans
Accounts receivable
Other financial assets (see note 28)
Cash and cash equivalents
Total financial assets
Liabilities
Borrowings
Non-current other financial liabilities (see note 28)
Accounts payable
Other financial liabilities (see note 28)
Total financial liabilities
Amortised
cost
FVTPL1
FVTOCI2
Total
–
–
952
6,691
–
1,899
9,542
37,043
98
10,686
–
47,827
97
25
116
6,540
2,381
–
9,159
–
281
14,808
3,722
18,811
2,290
–
–
–
–
–
2,290
–
–
–
–
–
2,387
25
1,068
13,231
2,381
1,899
20,991
37,043
379
25,494
3,722
66,638
1 FVTPL – Fair value through profit and loss.
2 FVTOCI – Fair value through other comprehensive income.
3 Other investments of $2,345 million are classified as Level 1 measured using quoted market prices with the remaining balance of $42 million being investments in private companies,
classified as Level 2 measured using discounted cash flow models.
2018
US$ million
Assets
Other investments3
Non-current other financial assets (see note 28)
Advances and loans
Accounts receivable
Other financial assets (see note 28)
Cash and cash equivalents
Total financial assets
Liabilities
Borrowings
Non-current other financial liabilities (see note 28)
Accounts payable
Other financial liabilities (see note 28)
Total financial liabilities
Amortised
cost
FVTPL1
FVTOCI2
Total
–
–
771
6,840
–
2,046
9,657
34,994
189
10,856
–
46,039
67
51
155
7,515
3,482
–
11,270
–
340
15,073
3,243
18,656
2,000
–
–
–
–
–
2,000
–
–
–
–
–
2,067
51
926
14,355
3,482
2,046
22,927
34,994
529
25,929
3,243
64,695
1 FVTPL – Fair value through profit and loss.
2 FVTOCI – Fair value through other comprehensive income.
3 Other investments of $1,979 million are classified as Level 1 measured using quoted market prices with the remaining balance of $88 million being investments in private companies,
classified as Level 2 measured using discounted cash flow models.
Glencore Preliminary Results 2019
210
Glencore Preliminary Results 2019
Glencore Annual Report 2019
211
211
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
27. Financial instruments continued
Offsetting of financial assets and liabilities
In accordance with IAS 32 the Group reports financial assets and liabilities on a net basis in the consolidated statement of financial
position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or
to realise the asset and settle the liability simultaneously. The financial assets and liabilities subject to offsetting, enforceable master
netting and similar agreements as at 31 December 2019 and 2018 were as follows:
2019
US$ million
Derivative assets1
Derivative liabilities1
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
Gross
amount
7,334
(7,959)
Amounts
offset
(6,190)
6,190
Net
amount
1,144
(1,769)
Financial
instruments
(365)
365
Financial
collateral
(275)
1,135
Net
amount
504
(269)
Total as
presented
in the
consolidated
statement
of financial
position
2,381
(3,722)
Amounts
not subject
to netting
agreements
1,237
(1,953)
1 Presented within current other financial assets and current other financial liabilities.
2018
US$ million
Derivative assets1
Derivative liabilities1
Amounts eligible for set off
under netting agreements
Gross
amount
17,135
(16,577)
Amounts
offset
(14,823)
14,823
Net
amount
2,312
(1,754)
1 Presented within current other financial assets and current other financial liabilities.
Related amounts not set off
under netting agreements Amounts
not subject
to netting
agreements
1,170
(1,489)
Financial
collateral
(719)
914
Net
amount
1,253
(499)
Financial
instruments
(341)
341
Total as
presented
in the
consolidated
statement
of financial
position
3,482
(3,243)
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.
28. 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.
Glencore Preliminary Results 2019
212
Glencore Annual Report 2019
212
Notes to the financial statements
continued
Notes to the financial statements
continued
27. Financial instruments continued
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 2019 and 2018 were as follows:
1 Presented within current other financial assets and current other financial liabilities.
2019
US$ million
Derivative assets1
Derivative liabilities1
2018
US$ million
Derivative assets1
Derivative liabilities1
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
Gross
Amounts
Net
Financial
amount
offset
amount
instruments
Financial
collateral
Net
to netting
amount
agreements
7,334
(7,959)
(6,190)
6,190
1,144
(1,769)
(365)
365
(275)
1,135
504
(269)
1,237
(1,953)
2,381
(3,722)
Amounts
consolidated
not subject
Total as
presented
in the
statement
of financial
position
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements Amounts
consolidated
Gross
Amounts
Net
Financial
amount
offset
amount
instruments
Financial
collateral
not subject
statement
Net
to netting
of financial
amount
agreements
position
17,135
(16,577)
(14,823)
14,823
2,312
(1,754)
(341)
341
(719)
914
1,253
(499)
1,170
(1,489)
3,482
(3,243)
Total as
presented
in the
1 Presented within current other financial assets and current other financial liabilities.
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.
28. 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
indirectly, or
Level 2
Inputs other than quoted inputs included in Level 1 that are observable for the assets or liabilities, either directly 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.
28. Fair value measurements continued
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 2019 and
2018. Other assets and liabilities which are measured at fair value on a recurring basis are marketing inventories, other investments,
cash and cash equivalents. There are no non-recurring fair value measurements.
Financial assets
2019
US$ million
Accounts receivable
Other financial assets
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Current other financial assets
Non-current other financial assets
Purchased call options over Glencore shares1
Non-current other financial assets
Total
Level 1
–
Level 2
6,540
Level 3
–
377
14
80
–
–
–
471
–
–
471
80
63
122
898
175
255
1,593
25
25
8,158
–
–
–
317
–
–
317
–
–
317
1 Call options over the Company’s shares in relation to conversion rights of the $500 million non-dilutive convertible bond, due in 2025. See note 20.
2018
US$ million
Accounts receivable
Other financial assets
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Foreign currency and interest rate contracts
Current other financial assets
Non-current other financial assets
Purchased call options over Glencore shares1
Non-current other financial assets
Total
Level 1
–
Level 2
6,471
Level 3
–
1,353
15
149
–
–
–
1,517
–
–
1,517
79
–
483
598
219
34
1,413
51
51
7,935
–
–
–
552
–
–
552
–
–
552
1 Call options over the Company’s shares in relation to conversion rights of the $500 million non-dilutive convertible bond, due in 2025. See note 20.
Total
6,540
457
77
202
1,215
175
255
2,381
25
25
8,946
Total
6,471
1,432
15
632
1,150
219
34
3,482
51
51
10,004
Glencore Preliminary Results 2019
212
Glencore Preliminary Results 2019
Glencore Annual Report 2019
213
213
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
28. Fair value measurements continued
Financial liabilities
2019
US$ million
Accounts payable
Other financial liabilities
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
Option over non-controlling interest in Ale2
Deferred consideration
Embedded call options over Glencore shares3
Non-current other financial liabilities
Total
2018
US$ million
Accounts payable
Other financial liabilities
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
Option over non-controlling interest in Ale2
Deferred consideration2
Embedded call options over Glencore shares3
Non-current other financial liabilities
Total
Level 1
–
Level 2
14,808
Level 3
–
Total
14,808
1,141
85
90
–
–
–
1,316
–
–
–
–
–
1,316
151
11
179
852
979
26
2,198
–
–
–
25
25
17,031
–
–
–
208
–
–
208
161
36
59
–
256
464
1,292
96
269
1,060
979
26
3,722
161
36
59
25
281
18,811
Level 1
–
Level 2
15,073
Level 3
–
Total
15,073
318
93
45
–
–
–
456
–
–
–
–
–
456
72
–
432
615
1,349
69
2,537
–
–
–
51
51
17,661
–
3
–
247
–
–
250
188
40
61
–
289
539
390
96
477
862
1,349
69
3,243
188
40
61
51
340
18,656
1 A ZAR denominated derivative liability payable to ARM Coal, a partner in 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 2019) and has no fixed repayment date and is not cancellable within
12 months.
2 See note 25.
3 Embedded call option bifurcated from the 2025 convertible bond. See note 20.
Glencore Preliminary Results 2019
214
Glencore Annual Report 2019
214
Notes to the financial statements
continued
Notes to the financial statements
continued
28. Fair value measurements continued
28. Fair value measurements continued
The following table shows the net changes in fair value of Level 3 other financial assets and other financial liabilities:
US$ million
1 January 2019
Total gain/(loss) recognised in cost of goods sold
Non-discretionary dividend obligation
Option over non-controlling interest
Deferred consideration
Realised
31 December 2019
1 January 2018
Total gain/(loss) recognised in cost of goods sold
Non-discretionary dividend obligation
Option over non-controlling interest
Deferred consideration
Realised
31 December 2018
Physical
forwards
305
(105)
–
–
–
(91)
109
172
207
–
–
–
(74)
305
Options
(3)
–
–
–
–
3
–
(8)
(3)
–
–
–
8
(3)
Other
(289)
–
27
4
2
–
(256)
(513)
–
325
(40)
(61)
–
(289)
Total
Level 3
13
(105)
27
4
2
(88)
(147)
(349)
204
325
(40)
(61)
(66)
13
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.
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.
Financial liabilities
2019
US$ million
Accounts payable
Other financial liabilities
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
Option over non-controlling interest in Ale2
Deferred consideration
Embedded call options over Glencore shares3
Non-current other financial liabilities
Total
2018
US$ million
Accounts payable
Other financial liabilities
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
Option over non-controlling interest in Ale2
Deferred consideration2
Embedded call options over Glencore shares3
Non-current other financial liabilities
Level 1
–
Level 2
14,808
Level 3
Total
14,808
1,316
17,031
Level 1
–
Level 2
15,073
Level 3
1,141
85
90
–
1,316
–
–
–
–
–
–
–
318
93
45
–
456
–
–
–
–
–
–
–
151
11
179
852
979
26
2,198
–
–
–
25
25
72
–
432
615
1,349
69
2,537
–
–
–
51
51
–
–
–
–
–
–
208
208
161
36
59
–
256
464
–
–
3
–
–
–
247
250
188
40
61
–
289
539
1,292
96
269
1,060
979
26
3,722
161
36
59
25
281
18,811
Total
15,073
390
96
477
862
1,349
69
3,243
188
40
61
51
340
18,656
1 A ZAR denominated derivative liability payable to ARM Coal, a partner in 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 2019) and has no fixed repayment date and is not cancellable within
456
17,661
Total
12 months.
2 See note 25.
3 Embedded call option bifurcated from the 2025 convertible bond. See note 20.
Glencore Preliminary Results 2019
214
Glencore Preliminary Results 2019
Glencore Annual Report 2019
215
215
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
28. Fair value measurements continued
Fair value of financial assets/financial liabilities
US$ million
Futures – Level 1
Valuation techniques and key inputs:
Significant unobservable inputs:
Futures – Level 2
Valuation techniques and key inputs:
Significant unobservable inputs:
Options – Level 1
Valuation techniques and key inputs:
Significant unobservable inputs:
Options – Level 2
Valuation techniques and key inputs:
Significant unobservable inputs:
Options – Level 3
Valuation techniques and key inputs:
Significant unobservable inputs:
Swaps – Level 1
Valuation techniques and key inputs:
Significant unobservable inputs:
Swaps – Level 2
Valuation techniques and key inputs:
Significant unobservable inputs:
Quoted bid prices in an active market
None
Assets
Liabilities
Assets
Liabilities
2019
377
(1,141)
80
(151)
2018
1,353
(318)
79
(72)
Discounted cash flow model
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.
None
Quoted bid prices in an active market
None
Assets
Liabilities
Assets
Liabilities
14
(85)
63
(11)
15
(93)
–
–
Discounted cash flow model
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.
None
Standard option pricing model
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.
Assets
Liabilities
–
–
–
(3)
Quoted bid prices in an active market
None
Assets
Liabilities
Assets
Liabilities
80
(90)
122
(179)
149
(45)
483
(432)
Discounted cash flow model
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.
None
Glencore Preliminary Results 2019
216
Glencore Annual Report 2019
216
Notes to the financial statements
continued
Notes to the financial statements
continued
28. Fair value measurements continued
US$ million
Physical Forwards – Level 2
Valuation techniques and key inputs:
Significant unobservable inputs:
Physical Forwards – Level 3
Valuation techniques and key inputs:
Significant unobservable inputs:
Assets
Liabilities
–
–
–
(3)
Cross currency swaps – Level 2
Valuation techniques and key inputs:
28. Fair value measurements continued
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
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
Assets
Liabilities
Assets
Liabilities
2019
377
(1,141)
80
(151)
14
(85)
63
(11)
2018
1,353
(318)
79
(72)
15
(93)
–
–
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
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.
Valuation techniques and key inputs:
Standard option pricing model
Significant unobservable inputs:
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.
Swaps – Level 1
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
Significant unobservable inputs:
None
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.
Assets
Liabilities
Assets
Liabilities
80
(90)
122
(179)
149
(45)
483
(432)
Significant unobservable inputs:
Foreign currency and interest rate contracts – Level 2
Assets
Liabilities
2019
898
(852)
2018
598
(615)
Discounted cash flow model
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.
None
Assets
Liabilities
317
(208)
552
(247)
Discounted cash flow model
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.
Assets
Liabilities
175
(979)
219
(1,349)
Discounted cash flow model
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.
None
Assets
Liabilities
255
(26)
34
(69)
Valuation techniques and key inputs:
Significant unobservable inputs:
Call options over Glencore shares – Level 2
Valuation techniques and key inputs:
Significant unobservable inputs:
Discounted cash flow model
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.
None
Assets
Liabilities
25
(25)
51
(51)
Option pricing model
– Current price of Glencore shares;
– Strike price;
– Maturity date of the underlying convertible debt security;
– Risk-free rate; and
– Volatility.
None
Glencore Preliminary Results 2019
216
Glencore Preliminary Results 2019
Glencore Annual Report 2019
217
217
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
28. Fair value measurements continued
US$ million
Accounts receivable and payable – Level 2
Assets
Liabilities
2019
6,540
(14,808)
2018
6,471
(15,073)
Comprised of trade receivables/payables containing an embedded commodity
derivative, which are designated and measured at fair value through profit and loss
until final settlement.
Valuation techniques and key inputs:
Discounted cash flow model
Inputs include observable quoted commodity 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.
None
Assets
Liabilities
–
(161)
–
(188)
Significant unobservable inputs:
Non-discretionary dividend obligation – Level 3
Valuation techniques:
Significant observable inputs:
Discounted cash flow model
– Forecast commodity prices;
– Discount rates using weighted average cost
of 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 $109 million
adjustment to the current carrying value.
Option over non-controlling interest in Ale – Level 3
Assets
Liabilities
–
(36)
–
(40)
Valuation techniques and key inputs:
Significant unobservable inputs:
Discounted cash flow model
The resultant liability is the value of the remaining minority stake in the subsidiary, measured
as the higher value of the acquisition date valuation of the shares, and a discounted future
earnings based valuation. The valuation is additionally sensitive to movement in the spot
exchange rates between the Brazilian Real and US Dollar.
Glencore Preliminary Results 2019
218
Glencore Annual Report 2019
218
Notes to the financial statements
continued
Notes to the financial statements
continued
Assets
Liabilities
2019
6,540
(14,808)
2018
6,471
(15,073)
Inputs include observable quoted commodity prices sourced from exchanges or traded
reference indices in active markets for identical assets or liabilities. Prices are adjusted by a
discount rate which captures the time value of money and counterparty credit considerations,
28. Fair value measurements continued
US$ million
Accounts receivable and payable – Level 2
Comprised of trade receivables/payables containing an embedded commodity
derivative, which are designated and measured at fair value through profit and loss
until final settlement.
Valuation techniques and key inputs:
Discounted cash flow model
Significant unobservable inputs:
Non-discretionary dividend obligation – Level 3
as required.
None
Valuation techniques:
Significant observable inputs:
Discounted cash flow model
– Forecast commodity prices;
– Discount rates using weighted average cost
of 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 $109 million
adjustment to the current carrying value.
Assets
Liabilities
–
(36)
–
(40)
Option over non-controlling interest in Ale – Level 3
Valuation techniques and key inputs:
Discounted cash flow model
Significant unobservable inputs:
The resultant liability is the value of the remaining minority stake in the subsidiary, measured
as the higher value of the acquisition date valuation of the shares, and a discounted future
earnings based valuation. The valuation is additionally sensitive to movement in the spot
exchange rates between the Brazilian Real and US Dollar.
29. Auditor’s remuneration
US$ 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
Taxation compliance services
Other taxation advisory services
Other assurance services
Total non-audit fees
Total professional fees
2019
3
18
3
24
2
2
2
6
30
2018
3
18
3
24
2
2
2
6
30
Assets
Liabilities
–
(161)
–
(188)
30. Future commitments
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.
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 2019, $1,240 million (2018: $1,321 million), of which 89% (2018: 88%) 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 2019,
$126 million (2018: $86 million) of such development expenditures are to be incurred, of which 37% (2018: 20%) are for commitments
to be settled over the next year.
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 2019, $9,628 million (2018: $10,842 million)
of procurement and $3,953 million (2018: $3,692 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.
Astron related commitments
As part of the regulatory approval process pertaining to the acquisition of a 75% shareholding in Astron Energy, Glencore and Astron
Energy entered into certain commitments (subject to variation for good cause) with the South Africa Competition Tribunal and the
South African Economic Development Department. These commitments include investment expenditure of up to ZAR 6.5 billion
($467 million) over the period to 2024 so as to debottleneck and improve the performance of the Cape Town oil refinery, contribute
to the rebranding of certain retail sites and establish a development fund to support small and black-owned businesses in Astron
Energy’s value chain. In addition, Glencore has agreed to increase the level of BEE shareholding in Astron Energy from 25% to 35% in
tranches up to 2026 which will include a minimum additional 3% held by qualifying employee stock ownership plans in 2021.
Acquisition of land by Katanga
On 19 December 2019, Kamoto Copper Company (“KCC”) entered into an agreement with La Générale des Carrières et des Mines
(“Gécamines”), Katanga Mining Limited’s 25% joint venture partner in KCC, to acquire from Gécamines a comprehensive land
package covering areas adjacent to KCC’s existing mining concessions for $250 million. The land includes multiple blocks for
construction of a new long-term tailings facility and the possible exploitation of additional resources that will enhance KCC’s ability
to more efficiently operate its mines, facilities and other key infrastructure requirements. The acquisition is expected to close during
the course of 2020.
Glencore Preliminary Results 2019
218
Glencore Preliminary Results 2019
Glencore Annual Report 2019
219
219
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
31. Contingent liabilities
The amount of corporate guarantees in favour of third parties as at 31 December 2019 was $Nil (2018: $Nil). Also see note 10.
The Group is subject to various legal and regulatory proceedings as detailed below. These contingent liabilities are reviewed on
a regular basis and where appropriate an estimate is made of the potential financial impact on the Group. As at 31 December 2019
and 2018, it was not feasible to make such an assessment.
Legal and regulatory proceedings
The Group is subject to a number of investigations by regulatory and enforcement authorities
• The United States Department of Justice is investigating the Group with respect to compliance with the Foreign Corrupt
Practices Act and United States money laundering statutes related to the Group’s business in certain overseas jurisdictions,
from 2007.
• The United States Commodity Futures Trading Commission (“CFTC”) is investigating whether Glencore and its subsidiaries may
have violated certain provisions of the Commodity Exchange Act and/or CFTC Regulations including through corrupt practices in
connection with commodities trading.
• The United Kingdom Serious Fraud Office is investigating the Group in respect of suspicions of bribery in the conduct of business
of the Group.
• The Brazilian authorities are investigating the Group in relation to “Operation car wash”, which relates to bribery allegations
concerning Petrobras.
The Group is named in a securities class action suit in the United States District Court of New Jersey in connection with the
various investigations.
The Group has engaged external legal counsel and forensic experts to assist the Group in responding to the various investigations
and to perform additional investigations at the request of the Investigations Committee covering various aspects of the Group’s
business.
The timing and amount of any financial obligations (such as fines, penalties or damages, which could be material) or other
consequences, including external costs arising from any of the various investigations and the class action suit are not possible to
predict and estimate at the end of the reporting period.
Other claims and unresolved disputes that are pending against Glencore, along with the timing of resolution and potential outcome
(including any future financial obligations), are not possible to predict and estimate.
As no present obligation exists at 31 December 2019, the recognition criteria of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets have not been met. Consequently, no liability has been recognised in relation to these matters in the
consolidated statement of financial position at the end of the reporting period.
Environmental contingencies
Glencore’s operations are subject to various environmental laws and regulations. Glencore is not aware of any material non-
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 environmental incidents in the ordinary course of the Group’s business would not usually be expected to have a
material adverse effect on its consolidated income, financial position or cash flows.
32. 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 11, 13 and 24).
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 2019, sales and purchases with associates and joint ventures amounted to
$3,727 million (2018: $1,690 million) and $4,923 million (2018: $4,211 million) respectively.
Remuneration of key management personnel
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO and other senior management. 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 $18 million (2018: $16 million). There were no other long-term
benefits or share-based payments to key management personnel (2018: $Nil). Further details on remuneration of Directors are set
out in the Directors’ remuneration report on page 110.
Glencore Preliminary Results 2019
220
Glencore Annual Report 2019
220
Notes to the financial statements
continued
Notes to the financial statements
continued
31. Contingent liabilities
33. Principal subsidiaries with material non-controlling interests
of the Group.
concerning Petrobras.
various investigations.
business.
The amount of corporate guarantees in favour of third parties as at 31 December 2019 was $Nil (2018: $Nil). Also see note 10.
The Group is subject to various legal and regulatory proceedings as detailed below. These contingent liabilities are reviewed on
a regular basis and where appropriate an estimate is made of the potential financial impact on the Group. As at 31 December 2019
and 2018, it was not feasible to make such an assessment.
Legal and regulatory proceedings
The Group is subject to a number of investigations by regulatory and enforcement authorities
• The United States Department of Justice is investigating the Group with respect to compliance with the Foreign Corrupt
Practices Act and United States money laundering statutes related to the Group’s business in certain overseas jurisdictions,
from 2007.
• The United States Commodity Futures Trading Commission (“CFTC”) is investigating whether Glencore and its subsidiaries may
have violated certain provisions of the Commodity Exchange Act and/or CFTC Regulations including through corrupt practices in
connection with commodities trading.
• The United Kingdom Serious Fraud Office is investigating the Group in respect of suspicions of bribery in the conduct of business
• The Brazilian authorities are investigating the Group in relation to “Operation car wash”, which relates to bribery allegations
The Group is named in a securities class action suit in the United States District Court of New Jersey in connection with the
The Group has engaged external legal counsel and forensic experts to assist the Group in responding to the various investigations
and to perform additional investigations at the request of the Investigations Committee covering various aspects of the Group’s
The timing and amount of any financial obligations (such as fines, penalties or damages, which could be material) or other
consequences, including external costs arising from any of the various investigations and the class action suit are not possible to
predict and estimate at the end of the reporting period.
Other claims and unresolved disputes that are pending against Glencore, along with the timing of resolution and potential outcome
(including any future financial obligations), are not possible to predict and estimate.
As no present obligation exists at 31 December 2019, the recognition criteria of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets have not been met. Consequently, no liability has been recognised in relation to these matters in the
consolidated statement of financial position at the end of the reporting period.
Environmental contingencies
Glencore’s operations are subject to various environmental laws and regulations. Glencore is not aware of any material non-
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 environmental incidents in the ordinary course of the Group’s business would not usually be expected to have a
material adverse effect on its consolidated income, financial position or cash flows.
32. 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 11, 13 and 24).
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 2019, sales and purchases with associates and joint ventures amounted to
$3,727 million (2018: $1,690 million) and $4,923 million (2018: $4,211 million) respectively.
Remuneration of key management personnel
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO and other senior management. 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 $18 million (2018: $16 million). There were no other long-term
benefits or share-based payments to key management personnel (2018: $Nil). Further details on remuneration of Directors are set
out in the Directors’ remuneration report on page 110.
Non-controlling interest is comprised of the following:
US$ million
Volcan
Kazzinc
Koniambo
Katanga (see KML and KCC debt restructuring notes below)
Other1
Total
2019
1,217
1,298
(3,607)
159
(105)
(1,038)
2018
1,608
1,356
(3,177)
11
(153)
(355)
1 Other comprises various subsidiaries in which no individual balance attributable to non-controlling interests is material.
2019 KML Debt Restructuring
On 19 December 2019, Katanga Mining Limited (“KML”), the entity publically listed on the Toronto Stock Exchange which in turn
owns a 75% interest in KCC (see below) completed a $5.8 billion (Canadian $7,678 million) rights offering fully underwritten by
Glencore. The proceeds raised under the rights offering were used to repay loans extended to KML by Glencore, such that, Glencore
did not commit any new funds to KML. Following the capital raise, Glencore’s voting interest increased from 86.3% to 99.5%.
Under IFRS 10, changes in a parent’s ownership interests in a subsidiary that do not result in the parent losing control of the
subsidiary are equity transactions (i.e. transactions with owners in their capacity as owners) whereby the carrying amounts of the
controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid
or received is recognised directly in equity and attributed to the owners of the parent. As a result of the essentially ‘debt for equity’
conversion, an amount of $378 million was recognised directly in ‘other equity reserves’ (see note 16).
2018 KCC Debt Restructuring
Kamoto Copper Company (“KCC”), the 75% owned Katanga (in turn then 86% held by Glencore) group entity carrying out mining
activities in the DRC, had a significant net deficit balance sheet position that was required to be recapitalised under DRC law by
31 December 2017. Notwithstanding the various discussions with KCC’s state-owned minority partner, La Générale des Carrières
et des Mines (“Gécamines”) in this regard, in April 2018, Gécamines commenced legal proceedings in the DRC to dissolve KCC,
following KCC’s failure to address its capital deficiency.
In June 2018, an agreement was reached with Gécamines to regularise the capital deficiency by converting $5.6 billion of existing
intercompany debt owed by KCC to Katanga Mining Limited (“KML”) Group (eliminated on consolidation) into equity. To ensure
Gécamines’ 25% interest was not diluted (contractually required), $1.4 billion (25%) of the total debt converted to equity was
effectively transferred from KML to Gécamines.
Under IFRS 10, changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the
subsidiary are equity transactions (i.e. transactions with owners in their capacity as owners) whereby the carrying amounts of the
controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to the owners of the parent. As a result of the debt for equity conversion /
transaction, the transferred portion of the converted debt resulted in a $1,207 million loss being recognised directly in ‘other equity
reserves’, offset by a gain of an equal amount recognised in the ‘non-controlling interests’ equity reserve account.
In addition, it was agreed to:
• pay Gécamines $150 million to settle various historical commercial disputes;
• fund, on behalf of Gécamines, $41 million of outstanding unpaid invoices for contractors in charge of an earlier replacement
reserves program; and
• waive KCC’s right to $57 million of exploration and drilling expenditures incurred on behalf of Gécamines.
These amounts, totalling $248 million, have been expensed in the consolidated financial statements.
Glencore Preliminary Results 2019
220
Glencore Preliminary Results 2019
Glencore Annual Report 2019
221
221
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
33. Principal subsidiaries with material non-controlling interests continued
Summarised financial information in respect of Glencore’s subsidiaries that have material non-controlling interest as at
31 December 2019, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
US$ million
31 December 2019
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 interest
Non-controlling interest %
2019
Revenue
Expenses
Net profit/(loss) for the year
Profit/(loss) attributable to owners of the Company
Profit/(loss) 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 (outflow)/inflow
Kazzinc
Koniambo
Katanga
Volcan
4,229
1,133
5,362
785
287
1,072
4,290
2,992
1,298
30.3%
2,917
(2,458)
459
320
139
–
–
459
(196)
750
(427)
(325)
(2)
1,648
369
2,017
11,857
106
11,963
(9,946)
(6,339)
(3,607)
51.0%
315
(1,159)
(844)
(414)
(430)
–
–
(844)
–
(172)
(39)
219
8
5,340
1,261
6,601
1,674
1,285
2,959
3,642
3,483
159
0.5%
1,386
(2,302)
(916)
(765)
(151)
–
–
(916)
–
(115)
(509)
828
204
4,230
255
4,485
1,778
555
2,333
2,152
935
1,217
76.7%
756
(1,259)
(503)
(117)
(386)
–
–
(503)
–
178
(172)
(33)
(27)
Glencore Preliminary Results 2019
222
Glencore Annual Report 2019
222
Notes to the financial statements
continued
Notes to the financial statements
continued
33. Principal subsidiaries with material non-controlling interests continued
33. Principal subsidiaries with material non-controlling interests continued
Summarised financial information in respect of Glencore’s subsidiaries that have material non-controlling interest as at
31 December 2019, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
Kazzinc
Koniambo
Katanga
Volcan
US$ million
31 December 2019
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
2019
Revenue
Expenses
Equity attributable to owners of the Company
Non-controlling interest
Non-controlling interest %
Net profit/(loss) for the year
Profit/(loss) attributable to owners of the Company
Profit/(loss) 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 (outflow)/inflow
4,229
1,133
5,362
785
287
1,072
4,290
2,992
1,298
30.3%
2,917
(2,458)
459
320
139
–
–
459
(196)
750
(427)
(325)
(2)
1,648
369
2,017
11,857
106
11,963
(9,946)
(6,339)
(3,607)
51.0%
315
(1,159)
(844)
(414)
(430)
–
–
(844)
–
(172)
(39)
219
8
5,340
1,261
6,601
1,674
1,285
2,959
3,642
3,483
159
0.5%
1,386
(2,302)
(916)
(765)
(151)
–
–
(916)
–
(115)
(509)
828
204
4,230
255
4,485
1,778
555
2,333
2,152
935
1,217
76.7%
756
(1,259)
(503)
(117)
(386)
–
–
–
(503)
178
(172)
(33)
(27)
US$ million
31 December 2018
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 interest
Non-controlling interest %
2018
Revenue
Expenses
Net profit/(loss) for the year
Profit/(loss) attributable to owners of the Company
Profit/(loss) 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 from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Total net cash outflow
Kazzinc
Koniambo
Katanga
Volcan
4,623
972
5,595
855
260
1,115
4,480
3,124
1,356
30.3%
3,169
(2,737)
432
301
131
–
–
432
(211)
979
(319)
(854)
(194)
1,718
338
2,056
11,044
115
11,159
(9,103)
(5,926)
(3,177)
51.0%
–
(533)
(533)
(261)
(272)
–
–
(533)
–
–
(215)
205
(10)
4,488
899
5,387
6,354
984
7,338
(1,951)
(1,962)
11 1
13.7%
1,269
(2,033)
(764)
(587)
(177) 1
–
–
(764)
–
48
(377)
296
(33)
4,738
387
5,125
1,910
553
2,463
2,662
1,054
1,608
76.7%
800
(950)
(150)
(35)
(115)
–
–
(150)
(13)
259
(217)
(81)
(39)
1 Glencore has an 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 interest” balance includes $321 million and the “profit/(loss) attributable to non-controlling interests” balance includes negative $84 million, related to non-controlling
interest arising at the KCC level.
Glencore Preliminary Results 2019
222
Glencore Preliminary Results 2019
Glencore Annual Report 2019
223
223
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
34. Principal operating, finance and industrial subsidiaries and investments
Principal subsidiaries
Industrial activities
Minera Alumbrera Limited1
Cobar Group
Compania Minera Lomas Bayas
Complejo Metalurgico Altonorte S.A.
Compania Minera Antapaccay S.A.
Pasar Group
Glencore Recycling Inc
Mopani Copper Mines plc
Sable Zinc Kabwe Limited
Polymet Mining Corp.
Katanga Mining Limited2
Mutanda Group
Mount Isa Mines Limited
Kazzinc Ltd
Zhairemsky GOK JSC
Vasilkovskoye Gold
African Carbon Producers (Pty) Ltd
African Fine Carbon (Pty) Ltd
Char Technology (Pty) Ltd
Sphere Minerals Limited
Britannia Refined Metals Limited
Access World Group
Murrin Murrin Group
Koniambo Nickel S.A.S.3
Glencore Nikkelverk AS
McArthur River Mining Pty Ltd
Nordenhammer Zinkhütte GmbH
Asturiana de Zinc S.A.
Volcan Companja Minera S.A.A.4
AR Zinc Group
Portovesme S.r.L.
Empresa Minera Los Quenuales S.A.
Sinchi Wayra Group
Country of
incorporation
% interest
2019
% interest
2018
Main activity
Antigua
Australia
Chile
Chile
Peru
Philippines
USA
Zambia
Zambia
Canada
Canada
DRC
Australia
Kazakhstan
Kazakhstan
Kazakhstan
South Africa
South Africa
South Africa
Australia
UK
Switzerland
Australia
New Caledonia
Norway
Australia
Germany
Spain
Peru
Argentina
Italy
Peru
Bolivia
50.0
100.0
100.0
100.0
100.0
78.2
100.0
73.1
–
71.7
99.5
100.0
100.0
69.7
69.7
69.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
100.0
100.0
100.0
100.0
23.3
100.0
100.0
97.6
100.0
Copper production
50.0
Copper production
100.0
Copper production
100.0
Copper production
100.0
Copper production
100.0
Copper production
78.2
Copper production
100.0
Copper production
73.1
Copper production
100.0
Copper production
29.0
Copper/Cobalt production
86.3
100.0
Copper/Cobalt production
100.0 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
Gold production
69.7
Char production
100.0
100.0
Char production
Char production
100.0
Iron Ore exploration
100.0
Lead production
100.0
Logistics services
100.0
Nickel production
100.0
Nickel production
49.0
Nickel production
100.0
Zinc production
100.0
Zinc production
100.0
Zinc production
100.0
Zinc production
23.3
Zinc/Lead production
100.0
Zinc/Lead production
100.0
Zinc/Lead production
97.6
Zinc/Tin production
100.0
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 60,870,439,242 (2018: 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).
Glencore Preliminary Results 2019
224
Glencore Annual Report 2019
224
Notes to the financial statements
continued
Notes to the financial statements
continued
34. Principal operating, finance and industrial subsidiaries and investments
34. Principal operating, finance and industrial subsidiaries and investments continued
Country of
% interest
% interest
incorporation
2019
2018
Main activity
Country of
incorporation
% interest
2019
% interest
2018
Main activity
Principal subsidiaries
Industrial activities
Minera Alumbrera Limited1
Cobar Group
Compania Minera Lomas Bayas
Complejo Metalurgico Altonorte S.A.
Compania Minera Antapaccay S.A.
Pasar Group
Glencore Recycling Inc
Mopani Copper Mines plc
Sable Zinc Kabwe Limited
Polymet Mining Corp.
Katanga Mining Limited2
Mutanda Group
Mount Isa Mines Limited
Kazzinc Ltd
Zhairemsky GOK JSC
Vasilkovskoye Gold
African Carbon Producers (Pty) Ltd
African Fine Carbon (Pty) Ltd
Char Technology (Pty) Ltd
Sphere Minerals Limited
Britannia Refined Metals Limited
Access World Group
Murrin Murrin Group
Koniambo Nickel S.A.S.3
Glencore Nikkelverk AS
McArthur River Mining Pty Ltd
Nordenhammer Zinkhütte GmbH
Asturiana de Zinc S.A.
Volcan Companja Minera S.A.A.4
AR Zinc Group
Portovesme S.r.L.
Empresa Minera Los Quenuales S.A.
Sinchi Wayra Group
Copper/Cobalt production
Copper/Cobalt production
100.0 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
Antigua
Australia
Chile
Chile
Peru
Philippines
USA
Zambia
Zambia
Canada
Canada
DRC
Australia
Kazakhstan
Kazakhstan
Kazakhstan
South Africa
South Africa
South Africa
Australia
UK
Switzerland
Australia
Norway
Australia
Germany
Spain
Peru
Argentina
Italy
Peru
Bolivia
New Caledonia
50.0
100.0
100.0
100.0
100.0
78.2
100.0
73.1
–
71.7
99.5
100.0
100.0
69.7
69.7
69.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
100.0
100.0
100.0
100.0
23.3
100.0
100.0
97.6
100.0
50.0
100.0
100.0
100.0
100.0
78.2
100.0
73.1
100.0
29.0
86.3
100.0
69.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
100.0
100.0
100.0
100.0
23.3
100.0
100.0
97.6
100.0
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Copper production
Gold production
Char production
Char production
Char production
Iron Ore exploration
Lead production
Logistics services
Nickel production
Nickel production
Nickel production
Zinc production
Zinc production
Zinc production
Zinc 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 60,870,439,242 (2018: 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
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
of the financing arrangements underlying the Koniambo project.
interest is diluted by the outstanding non-voting shares (Class B).
Industrial activities
Oakbridge Pty Limited
Rolleston Coal Holdings Pty Limited
Mangoola Coal Operations Pty Limited
Mt Owen Pty Limited
NC Coal Company Pty Limited
Ravensworth Operations Pty Ltd
Ulan Coal Mines Ltd
Prodeco group
Izimbiwa Coal (Pty) Ltd5
Umcebo Mining (Pty) Ltd6
Tavistock Collieries (Pty) Ltd
Glencore Exploration Cameroon Ltd.
Glencore Exploration (EG) Ltd.
Petrochad (Mangara) Limited
Astron Energy South Africa
Astron Energy Botswana (Pty) Ltd
Marketing activities and 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
ALE Combustiveis
Topley Corporation
Glencore Canada Financial Corp
Chemoil Energy Limited
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Colombia
South Africa
South Africa
South Africa
Bermuda
Bermuda
Bermuda
South Africa
Botswana
UK
Australia
Australia
Australia
Australia
Australia
Bermuda
Brazil
B.V.I.
Canada
Hong Kong
Jersey
Netherlands
Switzerland
UAE
USA
Australia
Canada
Singapore
Singapore
Switzerland
Switzerland
UK
UK
UK
78.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.9
48.7
100.0
100.0
100.0
100.0
75.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.3
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
78.0
100.0
100.0
100.0
100.0
100.0
90.0
100.0
49.9
48.7
100.0
100.0
100.0
100.0
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
78.0
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
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Oil production
Oil production
Oil exploration/production
Oil refining / distribution
Oil distribution
Holding
Holding
Holding
Holding
Holding
Finance
Finance
Oil distribution
Ship owner
Finance
Oil storage and bunkering
Finance
Finance
Finance
Finance
Finance
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
Operating
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 operations 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.
Glencore Preliminary Results 2019
224
Glencore Preliminary Results 2019
Glencore Annual Report 2019
225
225
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
continued
34. Principal operating, finance and industrial subsidiaries and investments continued
Country of
incorporation
% interest
2019
% interest
2018
Principal joint ventures7
Glencore Agriculture Limited
Clermont Coal Joint Venture8
BaseCore Metals LP
Compania Minera Dona Ines de Collahuasi
El Aouj Joint Venture
Principal joint operations and other unincorporated
arrangement9
Wandoan Joint Venture
Bulga Joint Venture
Cumnock Joint Venture
Hail Creek Joint Venture
Hunter Valley Operations Joint Venture
Liddell Joint Venture
Oaky Creek Coal Joint Venture
Rolleston Joint Venture
United Wambo Joint Venture
ARM Coal (Pty) Ltd.
Goedgevonden Joint Venture
Ernest Henry Mining Pty Ltd
Merafe Pooling and Sharing Joint Venture
Kabanga Joint Venture
Rhovan Pooling and Sharing Joint Venture
Principal associates
Carbones del Cerrejon LLC
Port Kembla Coal Terminal Limited
Newcastle Coal Shippers Pty Ltd
Wiggins Island Coal Export Terminal
Richards Bay Coal Terminal Company Limited
Century Aluminum Company10
PT CITA Mineral Investindo Tbk11
HG Storage International Limited
Noranda Income Fund
Trevali Mining Company
Compania Minera Antamina S.A.
Recylex S.A.
Other investments
United Company Rusal plc12
EN+ GROUP PLC12
OAO NK Russneft13
Jersey
Australia
Canada
Chile
Mauritania
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
South Africa
South Africa
Australia
South Africa
Tanzania
South Africa
Colombia
Australia
Australia
Australia
South Africa
USA
Indonesia
Jersey
Canada
Canada
Peru
France
Jersey
Russia
Russia
49.9
37.1
50.0
44.0
50.0
75.0
68.3
90.0
84.7
49.0
67.5
55.0
75.0
47.5
49.0
74.0
70.0
79.5
50.0
74.0
33.3
13.0
34.7
25.0
19.3
47.0
18.0
49.0
25.0
25.5
33.8
29.8
–
10.6
25.0
49.9
25.1
50.0
44.0
50.0
75.0
68.3
90.0
82.0
49.0
67.5
55.0
75.0
–
49.0
74.0
70.0
79.5
50.0
74.0
33.3
13.0
33.1
20.0
20.2
47.2
–
49.0
25.0
25.6
33.8
29.9
8.8
–
25.0
Main activity
Agriculture business
Coal production
Copper production
Copper production
Iron Ore production
Coal exploration
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Coal production
Copper production
Ferroalloys production
Nickel production
Vanadium production
Coal production
Coal terminal
Coal terminal
Coal terminal
Coal terminal
Aluminium production
Aluminium production
Oil storage
Zinc production
Zinc production
Zinc/Copper production
Zinc/Lead production
Aluminium production
Aluminium production
Oil 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 37.1% 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 convey a direct right to a share of the underlying operations’ assets, liabilities, revenues and expenses. The Hail
Creek interest is an ‘other unincorporated arrangement’ accounted for similar to a joint operation.
10 Represents the Group’s economic interest in Century, comprising 42.9% (2018: 42.9%) voting interest and 4% non-voting interest (2018:4.3%). Century is publicly traded on NASDAQ
under the symbol CENX.
11 The investment has been classified as an associate with the Group intending to close on an additional 12% equity interest in 2020, which will bring the total equity interest to 30%.
12
13 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.
In January 2019, Glencore agreed to exchange its interest in United Company Rusal plc into a 10.6% interest in EN+ GROUP PLC.
Glencore Preliminary Results 2019
226
Glencore Annual Report 2019
226
Simplicity
A culture of
continuous
improvement
Catherine Amyot
Metallurgist – CEZinc, Canada
Catherine’s fascination with engineering
led her to CEZinc as an intern, later
returning as a qualified metallurgist.
She finds the culture of continuous
improvement complements her
ambitious nature.
See more stories like this
Visit Glencore.com and
follow us on social media
Additional
information
Alternative performance
measures
Other reconciliations
Production by quarter –
Q4 2018 to Q4 2019
Resources and reserves
Shareholder information
228
234
236
242
250
Glencore Annual Report 2019
227
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements 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 aid 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) and Collahuasi copper mine (44% owned) under the proportionate consolidation method reflecting
Glencore’s proportionate share of the revenues, expenses, assets and liabilities of these investments.
In November 2017, Glencore completed the acquisition of additional shares in Volcan, thereby increasing its total economic interest
from 7.7% to 23.3% (compared to its 63% voting interest). For internal reporting and analysis, management evaluates the
performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic ownership in this fully ring-
fenced listed entity, with its stand-alone, independent and separate capital structure. The impact is that we reflect 23.3% of Volcan’s
net income in the Group’s Adjusted EBIT/EBITDA and its results are excluded from all other APM’s including production data.
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
associates and joint ventures” below.
Glencore Preliminary Results 2019
228
Glencore Annual Report 2019
228
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 aid 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) and Collahuasi copper mine (44% owned) under the proportionate consolidation method reflecting
Glencore’s proportionate share of the revenues, expenses, assets and liabilities of these investments.
In November 2017, Glencore completed the acquisition of additional shares in Volcan, thereby increasing its total economic interest
from 7.7% to 23.3% (compared to its 63% voting interest). For internal reporting and analysis, management evaluates the
performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic ownership in this fully ring-
fenced listed entity, with its stand-alone, independent and separate capital structure. The impact is that we reflect 23.3% of Volcan’s
net income in the Group’s Adjusted EBIT/EBITDA and its results are excluded from all other APM’s including production data.
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
associates and joint ventures” below.
Alternative performance measures
Alternative performance measures
continued
Alternative performance measures are denoted by the symbol ◊
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
Intersegment eliminations
Revenue – segmental
Proportionate adjustment material associates and joint ventures – revenue
Proportionate adjustment Volcan – revenue
Revenue – reported measure
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
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 relevant material associates and joint ventures
Share of income from other associates
Share of income from associates and joint ventures2
2019
194,188
42,743
(19,672)
217,259
(2,904)
756
215,111
2019
1,754
(745)
1,009
(435)
5
(342)
(772)
237
(123)
114
2018
Restated1
202,674
44,069
(23,576)
223,167
(3,443)
800
220,524
2018
2,212
(726)
1,486
–
7
(536)
(529)
957
86
1,043
1
Industrial activities segment comprises an impairment of $435 million, net of taxes of $213 million relating to Cerrejón, resulting from lower API2 coal price assumptions and reduced
production estimates, including in relation to updated mine-life approval expectations.
2 Comprises share in losses of $58 million (2018: gain of $14 million) from Marketing activities and share in earnings of $172 million (2018: $1,029 million) from Industrial activities.
Adjusted EBIT/EBITDA
Adjusted EBIT/EBITDA provide insight into our overall business performance (a combination of cost management, seizing market
opportunities and growth), and are the corresponding flow drivers towards our objective of achieving industry-leading returns.
Adjusted EBIT is the net result of revenue less cost of goods sold and selling and administrative expenses, plus share of income
from associates and joint ventures, dividend income and the attributable share of Adjusted EBIT of relevant material associates
and joint ventures, which are accounted for internally by means of proportionate consolidation, excluding Significant items, see
definition below.
Adjusted EBITDA consists of Adjusted EBIT plus depreciation and amortisation, including the related Proportionate adjustments.
See reconciliation table below.
US$ 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
Share of associates’ significant items – Volcan
Movement in unrealised inter-segment profit elimination
Proportionate adjustment material associates and joint ventures – net
finance, impairment and income tax expense
Proportionate adjustment Volcan – net finance, income tax expense
and non-controlling interests
Adjusted EBIT
Depreciation and amortisation
Proportionate adjustment material associates and joint ventures –
depreciation
Proportionate adjustment Volcan – depreciation
Adjusted EBITDA
1 Adjusted to present mark-to-market movements on physical forward sales contracts within revenue (see note 1).
2019
2018
Restated1
215,111
(210,434)
(1,391)
114
49
3,449
219
73
(468)
772
106
4,151
7,161
745
(456)
11,601
220,524
(211,468)
(1,381)
1,043
21
8,739
40
–
(237)
529
72
9,143
6,325
726
(427)
15,767
Glencore Preliminary Results 2019
228
Glencore Preliminary Results 2019
Glencore Annual Report 2019
229
229
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Alternative performance measures
continued
Significant items
Significant items of income and expense which, due to their nature and 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 aid in an understanding and
comparative basis of the underlying financial performance. Refer to reconciliation below.
Reconciliation of net significant items 2019
US$ million
Share of Associates’ significant items1
Share of Associates’ significant items – Volcan
Movement in unrealised inter-segment profit elimination1
Net loss on disposals of non-current assets2
Other expense – net3
Impairments4
Impairments – net, related to material associates and joint ventures5
Tax significant items in their own right6
Total significant items
Gross
significant
charges
(219)
(73)
468
(43)
(173)
(2,408)
(435)
–
Non-controlling
interests’ share
–
–
–
–
–
286
–
–
(2,883)
286
Significant
items tax
–
–
(46)
–
–
232
–
(435)
(249)
Equity
holders’ share
(219)
(73)
422
(43)
(173)
(1,890)
(435)
(435)
(2,846)
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 See note 6 of the financial statements.
5 See Proportionate adjustment reconciliation above.
6 Tax expenses related to foreign exchange fluctuations ($12 million) and tax losses not recognised ($543 million), net of tax credits related to the recognition of temporary differences
arising from retrospective changes in tax restructuring regulations ($120 million), see note 7 of the financial statements.
Reconciliation of net significant items 2018
US$ million
Share of Associates’ significant items1
Movement in unrealised inter-segment profit elimination1
Net loss on disposals of non-current assets2
Other expense – net3
Impairments4
Tax significant items in their own right5
Total significant items
Gross
significant
charges
(40)
237
(139)
(764)
(1,643)
–
Non-controlling
interests’ share
–
–
–
58
236
–
Significant
items tax
–
(23)
–
–
191
(470)
Equity
holders’ share
(40)
214
(139)
(706)
(1,216)
(470)
(2,349)
294
(302)
(2,357)
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 See note 6 of the financial statements.
5 Tax expenses related to foreign exchange fluctuations ($130 million) and tax losses not recognised ($340 million), see note 7 of the financial statements.
Net income attributable to equity shareholder pre-significant items
Net income attributable to equity shareholders pre-significant items is a measure of our ability to generate shareholder returns.
The calculation of tax items to be excluded from Net income, includes the tax effect of significant items and significant tax items
themselves. Refer to reconciliation below.
US$ million
(Loss)/income attributable to equity holders of the Parent
Significant items
Income attributable to equity holders of the Parent pre-significant items
2019
(404)
2,846
2,442
2018
3,408
2,357
5,765
Glencore Preliminary Results 2019
230
Glencore Annual Report 2019
230
Significant items of income and expense which, due to their nature and 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 aid in an understanding and
comparative basis of the underlying financial performance. Refer to reconciliation below.
significant
Non-controlling
Significant
Equity
charges
interests’ share
items tax
holders’ share
continued
Significant items
Reconciliation of net significant items 2019
US$ million
Share of Associates’ significant items1
Share of Associates’ significant items – Volcan
Movement in unrealised inter-segment profit elimination1
Net loss on disposals of non-current assets2
Other expense – net3
Impairments4
Impairments – net, related to material associates and joint ventures5
Tax significant items in their own right6
Total significant items
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 See note 6 of the financial statements.
5 See Proportionate adjustment reconciliation above.
Reconciliation of net significant items 2018
US$ million
Share of Associates’ significant items1
Movement in unrealised inter-segment profit elimination1
Net loss on disposals of non-current assets2
Other expense – net3
Impairments4
Tax significant items in their own right5
Total significant items
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 See note 6 of the financial statements.
significant
Non-controlling
Significant
Equity
charges
interests’ share
items tax
holders’ share
Gross
(219)
(73)
468
(43)
(173)
(2,408)
(435)
–
(2,883)
Gross
(40)
237
(139)
(764)
(1,643)
–
(2,349)
–
–
–
–
–
–
–
286
286
–
–
–
58
236
–
294
(46)
–
–
–
–
–
232
(435)
(249)
(219)
(73)
422
(43)
(173)
(1,890)
(435)
(435)
(2,846)
–
(23)
–
–
191
(470)
(302)
(40)
214
(139)
(706)
(1,216)
(470)
(2,357)
2019
(404)
2,846
2,442
2018
3,408
2,357
5,765
5 Tax expenses related to foreign exchange fluctuations ($130 million) and tax losses not recognised ($340 million), see note 7 of the financial statements.
Net income attributable to equity shareholder pre-significant items
Net income attributable to equity shareholders pre-significant items is a measure of our ability to generate shareholder returns.
The calculation of tax items to be excluded from Net income, includes the tax effect of significant items and significant tax items
themselves. Refer to reconciliation below.
US$ million
Significant items
(Loss)/income attributable to equity holders of the Parent
Income attributable to equity holders of the Parent pre-significant items
Alternative performance measures
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 investment
grade credit 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. Consistent with the general
approach in relation to our internal reporting and evaluation of Volcan, its consolidated net debt has also been adjusted 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. Furthermore, 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 2019,
$16,810 million (2018: $17,428 million) of inventories were considered readily marketable. This comprises $10,516 million (2018:
$11,449 million) carried at fair value less costs of disposal and $6,294 million (2018: $5,979 million) carried at the lower of cost or
net realisable value. Total readily marketable inventories includes $148 million (2018: $171 million) related to the relevant material
associates and joint ventures (see note 2) presented under the proportionate consolidation method, comprising inventory 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.
6 Tax expenses related to foreign exchange fluctuations ($12 million) and tax losses not recognised ($543 million), net of tax credits related to the recognition of temporary differences
arising from retrospective changes in tax restructuring regulations ($120 million), see note 7 of the financial statements.
Net funding/net debt at 31 December 2019
US$ 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 2018
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
Proportionate
adjustment
material
associates and
joint ventures
95
31
Proportionate
adjustment
Volcan
(576)
(221)
126
(143)
(17)
(148)
(165)
(797)
36
(761)
–
(761)
Reported
measure
29,067
7,976
37,043
(1,899)
35,144
(16,662)
18,482
Proportionate
adjustment
material
associates and
joint ventures
91
16
Proportionate
adjustment
Volcan
(588)
(193)
107
(199)
(92)
(171)
(263)
(781)
63
(718)
–
(718)
Reported
measure
26,424
8,570
34,994
(2,046)
32,948
(17,257)
15,691
Adjusted
measure
28,586
7,786
36,372
(2,006)
34,366
(16,810)
17,556
11,601
1.51
Adjusted
measure
25,927
8,393
34,320
(2,182)
32,138
(17,428)
14,710
15,767
0.93
Glencore Preliminary Results 2019
230
Glencore Preliminary Results 2019
Glencore Annual Report 2019
US$ million
Capital expenditure – Marketing activities
Capital expenditure – Industrial activities
Capital expenditure – segmental
Proportionate adjustment material associates and joint ventures – capital expenditure
Proportionate adjustment Volcan – capital expenditure
Capital expenditure – reported measure
2019
438
5,349
5,787
(609)
190
5,368
2018
89
5,077
5,166
(577)
188
4,777
231
231
Capital expenditure (“Capex”)
Capital expenditure is expenditure capitalised as property, plant and equipment. For internal reporting and analysis, Capex includes
related Proportionate adjustments. See reconciliation table below.
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Alternative performance measures
continued
APMs derived from the statement of cash flows
Net purchase and sale of property, plant and equipment
Net purchase and sale of property, plant and equipment is cash purchase of property, plant and equipment, net of proceeds from
sale of property, plant and equipment. For internal reporting and analysis, Net purchase and sale of property, plant and equipment
includes proportionate adjustments. See reconciliation table below.
2019 US$ million
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net purchase and sale of property, plant and equipment
2018 US$ million
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net purchase and sale of property, plant and equipment
Proportionate
adjustment
material
associates and
joint ventures
(603)
–
(603)
Proportionate
adjustment
material
associates and
joint ventures
(539)
3
(536)
Reported
measure
(4,712)
178
(4,534)
Reported
measure
(4,687)
136
(4,551)
Proportionate
adjustment
Volcan
180
(9)
171
Proportionate
adjustment
Volcan
188
–
188
Adjusted
measure
(5,135)
169
(4,966)
Adjusted
measure
(5,038)
139
(4,899)
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 and related Proportionate adjustments. Furthermore, the relationship of FFO to net debt is an indication of our financial
flexibility and strength. See reconciliation table below.
2019 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Non-cash adjustments included within EBITDA
Adjusted cash generated by operating activities before working
capital changes
Income taxes paid
Interest received
Interest paid
Dividends received from associates and joint ventures
Funds from operations (FFO)
Net debt
FFO to net debt
2018 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Non-cash adjustments included within EBITDA
Adjusted cash generated by operating activities before working
capital changes
Income taxes paid
Interest received
Interest paid
Dividends received from associates and joint ventures
Funds from operations (FFO)
Net debt
FFO to net debt
Glencore Preliminary Results 2019
232
Glencore Annual Report 2019
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Reported
measure
10,346
–
–
10,346
(2,301)
200
(1,604)
942
7,583
–
1,754
7
1,761
(544)
2
(8)
(776)
435
–
(232)
6
(226)
31
(1)
43
–
(153)
Adjusted
measure
10,346
1,522
13
11,881
(2,814)
201
(1,569)
166
7,865
17,556
44.8%
Proportionate
adjustment
material
associates and
joint ventures
Reported
measure
Proportionate
adjustment
Volcan
Adjusted
measure
13,210
–
–
13,210
(1,740)
183
(1,419)
1,139
11,373
–
2,212
(6)
2,206
(725)
4
(6)
(1,039)
440
–
(319)
–
(319)
59
–
38
4
(218)
13,210
1,893
(6)
15,097
(2,406)
187
(1,387)
104
11,595
14,710
78.8%
232
Alternative performance measures
continued
APMs derived from the statement of cash flows
Net purchase and sale of property, plant and equipment
Net purchase and sale of property, plant and equipment is cash purchase of property, plant and equipment, net of proceeds from
sale of property, plant and equipment. For internal reporting and analysis, Net purchase and sale of property, plant and equipment
includes proportionate adjustments. See reconciliation table below.
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 and related Proportionate adjustments. Furthermore, the relationship of FFO to net debt is an indication of our financial
flexibility and strength. See reconciliation table below.
2019 US$ million
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net purchase and sale of property, plant and equipment
2018 US$ million
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Net purchase and sale of property, plant and equipment
Funds from operations (FFO) and FFO to Net debt
2019 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Non-cash adjustments included within EBITDA
Adjusted cash generated by operating activities before working
Dividends received from associates and joint ventures
Funds from operations (FFO)
2018 US$ million
Cash generated by operating activities before working capital changes
Addback EBITDA of relevant material associates and joint ventures
Non-cash adjustments included within EBITDA
Adjusted cash generated by operating activities before working
Dividends received from associates and joint ventures
Funds from operations (FFO)
capital changes
Income taxes paid
Interest received
Interest paid
Net debt
FFO to net debt
capital changes
Income taxes paid
Interest received
Interest paid
Net debt
FFO to net debt
Proportionate
adjustment
material
Proportionate
Reported
associates and
adjustment
measure
joint ventures
Volcan
Adjusted
measure
(4,712)
178
(4,534)
(603)
–
(603)
180
(9)
171
(5,135)
169
(4,966)
Proportionate
adjustment
material
Proportionate
Reported
associates and
adjustment
measure
joint ventures
Volcan
Adjusted
measure
(4,687)
136
(4,551)
(539)
3
(536)
188
–
188
(5,038)
139
(4,899)
Proportionate
adjustment
material
Proportionate
Reported
associates and
adjustment
measure
joint ventures
Volcan
Adjusted
measure
10,346
–
–
10,346
(2,301)
200
(1,604)
942
7,583
13,210
–
–
13,210
(1,740)
183
(1,419)
1,139
11,373
1,754
–
7
1,761
(544)
2
(8)
(776)
435
–
2,212
(6)
2,206
(725)
4
(6)
(1,039)
440
–
(232)
6
(226)
31
(1)
43
–
(153)
–
(319)
–
(319)
59
–
38
4
(218)
10,346
1,522
13
11,881
(2,814)
201
(1,569)
166
7,865
17,556
44.8%
13,210
1,893
(6)
15,097
(2,406)
187
(1,387)
104
11,595
14,710
78.8%
Proportionate
adjustment
material
Proportionate
Reported
associates and
adjustment
measure
joint ventures
Volcan
Adjusted
measure
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 2019
US$ million
Funds from operations (FFO)
Working capital changes
Net cash used in acquisitions 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 receipt in respect of financing related hedging activities
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Purchase of own shares
Disposal of own shares
Distributions paid to equity holders of the Parent
Cash movement in net funding
Cash flow related adjustments 2018
US$ million
Funds from operations (FFO)
Working capital changes
Net cash used in acquisitions of subsidiaries
Net cash received from disposal of subsidiaries
Exchangeable loan provided for the acquisition of Astron Energy
Purchase of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Margin payments in respect of financing related hedging activities
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Purchase of own shares
Disposal of own shares
Distributions paid to equity holders of the Parent
Cash movement in net funding
2019
1,899
107
14,425
(5,615)
(675)
10,141
2018
2,046
136
14,200
(5,623)
(596)
10,163
Proportionate
adjustment
material
associates and
joint ventures
435
122
–
–
–
–
(603)
–
–
–
–
–
–
–
(46)
Proportionate
adjustment
material
associates and
joint ventures
444
164
–
–
–
–
–
(539)
3
–
–
13
–
–
–
85
Reported
measure
7,583
2,088
(123)
5
(125)
119
(4,712)
178
529
(24)
(305)
(2,318)
6
(2,710)
191
Reported
measure
11,373
1,325
(2,922)
88
(1,044)
(19)
16
(4,687)
136
(507)
(58)
(343)
(2,005)
27
(2,836)
(1,456)
Proportionate
adjustment
Volcan
(153)
(35)
–
1
–
–
180
(9)
–
–
–
–
–
–
(16)
Proportionate
adjustment
Volcan
(222)
37
–
–
–
–
–
188
–
–
–
–
–
–
–
3
Adjusted
measure
7,865
2,175
(123)
6
(125)
119
(5,135)
169
529
(24)
(305)
(2,318)
6
(2,710)
129
Adjusted
measure
11,595
1,526
(2,922)
88
(1,044)
(19)
16
(5,038)
139
(507)
(58)
(330)
(2,005)
27
(2,836)
(1,368)
Glencore Preliminary Results 2019
232
Glencore Preliminary Results 2019
Glencore Annual Report 2019
233
233
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Other reconciliations
continued
Reconciliation of tax expense 2019
US$ million
Adjusted EBIT, pre-significant items
Net finance costs
Adjustments for:
Net finance income from material associates and joint ventures
Proportional adjustment and net finance costs – Volcan
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 credit from Volcan
Tax expense on a proportionate consolidation basis
Applicable tax rate
US$ million
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures – tax
Adjustment in respect of Volcan – tax
Tax expense on the basis of the income statement
1 See table above.
Reconciliation of tax expense 2018
US$ million
Adjusted EBIT, pre-significant items
Net finance costs
Adjustments for:
Net finance cost from material associates and joint ventures
Proportional adjustment and net finance costs – Volcan
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 credit from Volcan
Tax expense on a proportionate consolidation basis
Applicable tax rate
US$ million
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures – tax
Adjustment in respect of Volcan – tax
Tax expense on the basis of the income statement
1 See table above.
Total
4,151
(1,713)
5
82
(96)
2,429
(369)
(342)
(29)
(740)
30.5%
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
740
(342)
(29)
369
142
213
(106)
249
882
(129)
(135)
618
Total
9,143
(1,514)
7
83
(126)
7,593
(1,761)
(536)
(5)
(2,302)
30.3%
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
2,302
(536)
(5)
1,761
302
–
–
302
2,604
(536)
(5)
2,063
Glencore Preliminary Results 2019
234
Glencore Annual Report 2019
234
US$ million
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures – tax
Adjustment in respect of Volcan – tax
Tax expense on the basis of the income statement
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
740
(342)
(29)
369
142
213
(106)
249
Other reconciliations
continued
Reconciliation of tax expense 2019
Adjusted EBIT, pre-significant items
US$ million
Net finance costs
Adjustments for:
Net finance income from material associates and joint ventures
Proportional adjustment and net finance costs – Volcan
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 credit from Volcan
Tax expense on a proportionate consolidation basis
Applicable tax rate
1 See table above.
Reconciliation of tax expense 2018
Adjusted EBIT, pre-significant items
US$ million
Net finance costs
Adjustments for:
Net finance cost from material associates and joint ventures
Proportional adjustment and net finance costs – Volcan
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 credit from Volcan
Tax expense on a proportionate consolidation basis
Applicable tax rate
US$ million
Tax expense on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures – tax
Adjustment in respect of Volcan – tax
Tax expense on the basis of the income statement
1 See table above.
Total
4,151
(1,713)
5
82
(96)
2,429
(369)
(342)
(29)
(740)
30.5%
882
(129)
(135)
618
Total
9,143
(1,514)
7
83
(126)
7,593
(1,761)
(536)
(5)
(2,302)
30.3%
2,604
(536)
(5)
2,063
Production by quarter – Q4 2018 to Q4 2019
Metals and minerals
Production from own sources – Total1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Copper
Cobalt
Zinc
Lead
Nickel
Gold
Silver
Ferrochrome
Coal
Oil (entitlement interest basis)
kt 390.6
13.7
kt
kt 282.1
kt 76.8
32.9
kt
koz
229
koz 8,541
435
32.7
1,270
kt
mt
kbbl
320.7
10.9
262.3
73.9
27.1
202
7,620
402
33.2
1,145
342.3
10.4
273.6
73.6
28.3
221
7,870
397
35.0
1,095
352.8
13.1
273.3
72.3
34.0
199
8,243
231
35.8
1,398
Production from own sources – Copper assets1
355.4
11.9
268.3
60.2
31.2
226
1,453.7
1,371.2
42.2
46.3
1,068.1
1,077.5
273.3
280.0
123.8
120.6
848
1,003
8,285 32,018 34,880
1,580
1,438
139.5
129.4
5,518 4,626
408
35.5
1,880
Collahuasi2
Copper in concentrates
Silver in concentrates
kt
koz
69.2
893
57.3
699
54.7
538
64.5
731
72.3 248.8 246.0
2,878 3,244
910
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
(6)
10
1
2
(3)
(15)
(8)
(9)
8
19
(9)
(13)
(5)
(22)
(5)
(1)
(3)
(6)
9
48
Change
2019 vs
2018
%
1
(11)
Change
Q4 19 vs
Q4 18
%
4
2
Antamina3
Copper in concentrates
Zinc in concentrates
Silver in concentrates
kt
kt
koz
39.9
28.8
1,309
35.9
24.7
1,180
38.8
26.7
1,343
39.1
24.3
1,224
37.6
26.7
1,304
151.4
102.4
5,051
150.6
138.1
5,550
1
(26)
(9)
Other South America (Antapaccay, Lomas Bayas)
Antapaccay
Copper in concentrates
Gold in concentrates
Silver in concentrates
Lomas Bayas Copper metal
Alumbrera
kt
koz
koz
kt
kt
52.3
27
406
19.8
–
47.0
18
381
19.9
–
53.5
26
455
20.1
–
49.6
18
402
19.7
–
47.5
23
338
19.2
–
197.6
85
1,576
78.9
–
205.4
132
1,523
72.8
17.4
(4)
(36)
3
8
(100)
(6)
(7)
–
(9)
(15)
(17)
(3)
–
Copper in concentrates
Gold in concentrates and
in doré
Silver in concentrates and
in doré
Copper in concentrates
Gold in concentrates
Silver in concentrates
koz
–
koz
kt
koz
koz
–
0.3
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120
(100)
–
156
3.1
4
43
(100)
(100)
(100)
(100)
–
(100)
–
(100)
Total Copper metal
Total Copper in concentrates
Total Gold in concentrates
and in doré
Total Silver in concentrates
and in doré
kt
kt
19.8
52.6
19.9
47.0
20.1
53.5
19.7
49.6
19.2
47.5
78.9
197.6
72.8
225.9
8
(13)
(3)
(10)
koz
27
18
26
18
23
85
256
(67)
(15)
koz
410
381
455
402
338
1,576
1,722
(8)
(18)
Pre-significant
tax expense
Significant
items tax1
Total
tax expense
2,302
(536)
(5)
1,761
302
–
–
302
Punitaqui
Glencore Preliminary Results 2019
234
Glencore Preliminary Results 2019
Glencore Annual Report 2019
235
235
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Production by quarter – Q4 2018 to Q4 2019
continued
Metals and minerals
Production from own sources – Copper assets1 continued
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Mount Isa, Ernest Henry, Townsville, Cobar
Copper metal
Copper in concentrates
Gold
Silver
Silver in concentrates
kt
kt
koz
koz
koz
44.0
4.3
22
237
21
23.8
–
27
284
–
40.2
–
27
321
–
Mount Isa, Ernest Henry, Townsville – total production including third party feed
Copper metal
Copper in concentrates
Gold
Silver
Silver in concentrates
Cobar
Copper in concentrates
Silver in concentrates
Total Copper metal
Total Copper in concentrates
Total Gold
Total Silver
Total Copper department – excl. African Copper
kt
kt
koz
koz
koz
kt
koz
kt
kt
koz
koz
57.5
4.3
43
329
21
12.2
123
44.0
16.5
22
381
38.1
–
34
296
–
10.4
106
23.8
10.4
27
390
60.3
–
34
335
–
11.6
120
40.2
11.6
27
441
41.3
–
28
304
–
60.9
–
36
363
–
10.4
116
41.3
10.4
28
420
45.8
–
18
245
–
151.1
–
100
1,154
–
151.5
10.9
74
854
50
61.2
–
36
395
–
220.5
–
140
1,389
–
206.6
10.9
135
1,140
50
11.1
119
43.5
461
48.0
495
45.8
11.1
18
364
151.1
43.5
100
1,615
151.5
58.9
74
1,399
Copper
Zinc
Gold
Silver
kt
kt
koz
koz
242.0
28.8
49
2,993
194.3
24.7
45
2,650
218.9
26.7
53
2,777
224.6
24.3
46
2,777
233.5
26.7
41
2,916
871.3 905.7
138.1
102.4
185
330
11,915
11,120
Mutanda
African Copper (Katanga, Mutanda, Mopani)
Copper metal
Katanga
Cobalt4
Copper metal
Cobalt4
Copper metal
Copper in concentrates
Mopani
kt
kt
kt
kt
kt
kt
49.8
4.6
46.9
8.1
16.1
–
57.2
3.5
28.0
6.4
10.1
–
52.5
2.6
25.7
7.0
10.3
4.0
African Copper – total production including third party feed
Mopani
Copper metal
Copper in concentrates
kt
kt
31.1
–
21.3
–
27.5
4.0
Total Copper metal
Total Copper in concentrates
Total Cobalt4
kt
kt
kt
112.8
–
12.7
95.3
–
9.9
88.5
4.0
9.6
59.4
4.8
31.5
7.2
1.2
3.3
2.5
3.3
92.1
3.3
12.0
65.4
6.2
18.0
4.5
–
3.3
234.5
17.1
103.2
25.1
21.6
10.6
152.4
11.1
199.0
27.3
59.3
–
–
3.3
51.3
10.6
119.5
–
(57)
n.m.
(100)
–
83.4
3.3
10.7
359.3 410.7
–
38.4
10.6
42.2
(13)
n.m.
10
Total Copper department
Copper
Cobalt
Zinc
Gold
Silver
kt
kt
kt
koz
koz
354.8
12.7
28.8
49
2,993
289.6
9.9
24.7
45
2,650
311.4
9.6
26.7
53
2,777
320.0
12.0
24.3
46
2,777
320.2
10.7
26.7
41
2,916
1241.2
42.2
102.4
185
11,120
1,316.4
38.4
138.1
330
11,915
(6)
10
(26)
(44)
(7)
Glencore Preliminary Results 2019
236
Glencore Annual Report 2019
–
(100)
35
35
(100)
7
(100)
4
22
(100)
(9)
(7)
–
(26)
35
15
(4)
(26)
(44)
(7)
54
54
(48)
(8)
(64)
n.m.
4
(100)
(18)
3
(100)
6
(100)
(16)
20
(100)
(9)
(3)
4
(33)
(18)
(4)
(4)
(7)
(16)
(3)
31
35
(62)
(44)
(100)
–
(26)
–
(16)
(10)
(16)
(7)
(16)
(3)
236
Production by quarter – Q4 2018 to Q4 2019
Production by quarter – Q4 2018 to Q4 2019
continued
Metals and minerals
Production from own sources – Zinc assets1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
Mount Isa, Ernest Henry, Townsville – total production including third party feed
38.1
60.3
60.9
61.2
220.5
206.6
7
6
Kazzinc – total production including third party feed
Kazzinc
Zinc metal
Lead metal
Lead in concentrates
Copper metal5
Gold
Silver
Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
41.9
9.6
2.8
14.1
173
1,357
98
40.3
7.9
2.8
11.1
150
959
88
continued
Metals and minerals
Production from own sources – Copper assets1 continued
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Mount Isa, Ernest Henry, Townsville, Cobar
Copper metal
Copper in concentrates
Silver in concentrates
Copper metal
Copper in concentrates
Gold
Silver
Gold
Silver
Silver in concentrates
Cobar
Copper in concentrates
Silver in concentrates
Total Copper metal
Total Copper in concentrates
Total Gold
Total Silver
Total Copper department – excl. African Copper
Copper
Zinc
Gold
Silver
Cobalt4
Cobalt4
African Copper (Katanga, Mutanda, Mopani)
Katanga
Copper metal
Mutanda
Copper metal
Mopani
Copper metal
Copper in concentrates
kt
kt
koz
koz
koz
kt
kt
koz
koz
koz
kt
koz
kt
kt
koz
koz
kt
kt
koz
koz
kt
kt
kt
kt
kt
kt
kt
kt
kt
kt
kt
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
Change
2019 vs
Q4 19 vs
2018
%
Q4 18
%
44.0
23.8
40.2
41.3
45.8
151.1
–
27
284
–
–
27
321
–
–
28
304
–
–
18
245
–
–
100
1,154
–
151.5
10.9
74
854
50
–
(100)
35
35
4
(100)
(18)
3
(100)
(100)
4.3
22
237
21
57.5
4.3
43
329
21
12.2
123
44.0
16.5
22
381
–
34
296
–
10.4
106
23.8
10.4
27
390
–
34
335
–
11.6
120
40.2
11.6
27
441
–
36
–
140
10.9
135
395
1,389
1,140
(100)
(100)
4
22
(16)
20
–
–
50
(100)
(100)
11.1
119
43.5
461
48.0
495
45.8
11.1
18
151.1
43.5
100
151.5
58.9
74
364
1,615
1,399
242.0
194.3
218.9
224.6
233.5
871.3 905.7
28.8
24.7
26.7
49
45
53
24.3
46
26.7
102.4
41
185
138.1
330
2,993
2,650
2,777
2,777
2,916
11,120
11,915
49.8
4.6
46.9
8.1
16.1
–
57.2
3.5
28.0
6.4
10.1
–
52.5
2.6
25.7
7.0
10.3
4.0
65.4
234.5
152.4
6.2
18.0
4.5
–
3.3
17.1
11.1
103.2
199.0
25.1
21.6
10.6
27.3
59.3
–
n.m.
–
36
363
–
10.4
116
41.3
10.4
28
420
59.4
4.8
31.5
7.2
1.2
3.3
2.5
3.3
92.1
3.3
12.0
(9)
(7)
–
(26)
35
15
(4)
(26)
(44)
(7)
54
54
(48)
(8)
(64)
(9)
(3)
4
(33)
(18)
(4)
(4)
(7)
(16)
(3)
31
35
(62)
(44)
(100)
–
(26)
–
(16)
(10)
(16)
(7)
(16)
(3)
Total Copper metal
Total Copper in concentrates
Total Cobalt4
112.8
95.3
88.5
–
12.7
–
9.9
4.0
9.6
83.4
359.3 410.7
(13)
3.3
10.7
10.6
42.2
–
n.m.
38.4
10
Total Copper department
Copper
Cobalt
Zinc
Gold
Silver
kt
kt
kt
koz
koz
354.8
289.6
311.4
320.0
320.2
1241.2
1,316.4
12.7
28.8
49
9.9
24.7
45
9.6
26.7
53
12.0
24.3
46
10.7
26.7
41
42.2
102.4
185
38.4
138.1
330
2,993
2,650
2,777
2,777
2,916
11,120
11,915
(6)
10
(26)
(44)
(7)
Zinc metal
Lead metal
Lead in concentrates
Copper metal
Gold
Silver
Silver in concentrates
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
Total Zinc in concentrates
Total Lead in concentrates
Total Silver in concentrates
North America (Matagami, Kidd)
Matagami
Zinc in concentrates
Copper in concentrates
Zinc in concentrates
Copper in concentrates
Silver in concentrates
Kidd
African Copper – total production including third party feed
Mopani
Copper metal
Copper in concentrates
31.1
–
21.3
–
27.5
4.0
–
3.3
51.3
10.6
119.5
–
(57)
n.m.
(100)
–
Total Zinc in concentrates
Total Copper in concentrates
Total Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
kt
kt
koz
kt
kt
koz
kt
kt
koz
kt
kt
kt
kt
koz
kt
kt
koz
74.5
76.9
32.4
35.8
2.8
2.8
16.5
19.3
254
206
5,195 4,946
88
98
89.5
39.2
1,369
78.6
16.5
588
81.8
41.0
1,525
69.1
14.1
424
48.7
11.3
–
8.1
161
1,019
4
76.3
35.5
–
11.6
233
5,533
4
80.7
40.6
1,422
70.0
13.3
403
45.0
8.2
–
12.1
146
1,354
–
66.2
31.3
–
17.1
260
6,594
–
88.6
42.6
1,463
61.7
11.9
323
38.5
4.2
–
12.7
177
172.5
31.6
2.8
44.0
634
1,214 4,546
92
–
201.2
46.9
8.7
52.4
643
6,210
303
76.3
29.8
–
19.9
263
6,056
–
293.3
129.0
2.8
65.1
962
309.7
149.5
8.7
70.0
934
23,129 20,571
303
92
75.3
33.8
1,108
70.4
16.0
525
278.2
326.4
125.9
158.0
5,518 4,643
254.3
271.2
49.9
55.3
1,719
1,675
168.1
55.7
1,957
150.9
55.1
1,949
150.7
53.9
1,825
150.3
54.5
1,786
145.7
49.8
1,633
532.5
597.6
213.3
175.8
7,193 6,362
8.7
1.4
12.6
8.1
357
21.3
9.5
357
11.2
1.3
13.6
8.0
258
24.8
9.3
258
10.1
1.6
17.6
8.0
435
27.7
9.6
435
11.9
1.4
20.6
7.9
400
32.5
9.3
400
10.6
1.3
15.8
9.6
561
43.8
5.6
67.6
33.5
1,654
35.2
5.4
65.9
33.6
1,893
26.4
10.9
561
111.4
39.1
1,654
101.1
39.0
1,893
(14)
(33)
(68)
(16)
(1)
(27)
(70)
(5)
(14)
(68)
(7)
3
12
(70)
17
25
19
7
11
(3)
12
21
13
24
4
3
–
(13)
10
–
(13)
(8)
(56)
(100)
(10)
2
(11)
(100)
(1)
(17)
(100)
3
4
17
(100)
(16)
(14)
(19)
(10)
(3)
(11)
(13)
(11)
(17)
22
(7)
25
19
57
24
15
57
Glencore Preliminary Results 2019
236
Glencore Preliminary Results 2019
Glencore Annual Report 2019
237
237
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Production by quarter – Q4 2018 to Q4 2019
continued
Metals and minerals
Production from own sources – Zinc assets1 continued
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Other Zinc: South America (Argentina, Bolivia, Peru)6
Zinc in concentrates
kt
Lead metal
kt
Lead in concentrates
kt
Copper in concentrates
kt
Silver metal
koz
Silver in concentrates
koz
22.0
3.5
5.2
1.0
190
1,473
21.6
–
8.1
1.0
–
1,592
19.8
–
8.4
0.8
–
1,655
21.2
–
9.6
0.5
–
1,808
31.0
–
6.2
0.4
–
95.2
13.9
28.0
4.5
744
1,851 6,906 6,989
93.6
–
32.3
2.7
–
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
kt
kt
kt
koz
koz
253.3
76.8
24.6
173
237.6 246.9 249.0
72.3
73.6
21.9
18.5
146
161
5,348
5,432 4,846 4,938
73.9
21.4
150
975.1 930.0
241.6
273.3
60.2 280.0
95.9
85.8
24.0
643
634
177
5,259 20,391 22,501
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
(2)
(100)
15
(40)
(100)
(1)
5
2
(11)
(1)
(9)
41
(100)
19
(60)
(100)
26
(5)
(22)
(2)
2
(3)
Glencore Preliminary Results 2019
238
Glencore Annual Report 2019
238
continued
Metals and minerals
Production from own sources – Zinc assets1 continued
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Zinc in concentrates
Lead metal
Lead in concentrates
Copper in concentrates
Silver metal
Silver in concentrates
22.0
21.6
3.5
5.2
1.0
190
–
8.1
1.0
–
19.8
8.4
0.8
–
–
21.2
–
9.6
0.5
–
31.0
6.2
0.4
–
–
93.6
32.3
2.7
–
–
95.2
13.9
28.0
4.5
744
1,473
1,592
1,655
1,808
1,851
6,906
6,989
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
253.3
237.6
246.9
249.0
241.6
76.8
24.6
173
73.9
21.4
150
73.6
18.5
161
72.3
21.9
146
60.2
24.0
177
975.1
280.0
85.8
634
930.0
273.3
95.9
643
5,432
4,846
4,938
5,348
5,259
20,391
22,501
kt
kt
kt
kt
koz
koz
kt
kt
kt
koz
koz
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
41
19
(100)
(60)
(100)
26
(5)
(22)
(2)
2
(3)
(2)
(100)
15
(40)
(100)
(1)
5
2
(11)
(1)
(9)
Production by quarter – Q4 2018 to Q4 2019
Production by quarter – Q4 2018 to Q4 2019
continued
Metals and minerals
Production from own sources – Nickel assets1
Other Zinc: South America (Argentina, Bolivia, Peru)6
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
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
16.2
0.1
3.8
7.4
0.2
7
116
14
29
1
13.3
0.1
3.9
5.8
0.2
7
124
17
26
1
Integrated Nickel Operations – total production including third party feed
22.6
0.1
5.4
6.7
1.0
10
187
21
49
1
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
Gold
Silver
Platinum
Palladium
Rhodium
23.2
0.2
5.5
9.2
1.3
11
176
21
59
1
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
15.5
0.2
3.1
9.3
0.2
7
155
16
32
1
23.0
0.2
4.5
9.8
1.0
12
211
23
65
1
16.1
0.1
4.1
6.8
0.2
7
118
15
29
1
23.1
0.1
5.8
8.6
1.2
10
189
21
61
2
14.9
0.1
4.7
6.5
0.1
8
110
3
25
1
23.4
0.2
6.3
7.7
1.2
11
162
19
53
1
59.8
0.5
15.8
28.4
0.7
29
507
51
112
4
92.1
0.6
22.0
32.8
4.4
43
749
84
228
5
59.5
0.5
14.4
27.0
0.9
29
464
58
119
4
90.8
0.6
20.6
31.7
4.2
42
696
82
220
5
Murrin Murrin
Total Nickel metal
Total Cobalt metal
kt
kt
9.8
0.8
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
8.7
0.8
9.8
0.8
7.4
0.6
10.8
0.9
9.7
1.1
36.6
3.4
35.5
2.9
8.6
0.9
11.7
0.9
10.6
1.1
40.7
3.7
39.7
3.2
10.9
0.8
6.8
5.0
5.2
7.0
6.5
23.7
28.3
(16)
(4)
32.9
11.2
1.0
7
116
14
29
1
27.1
9.7
1.0
7
124
17
26
1
28.3
12.4
0.8
7
155
16
32
1
34.0
10.9
1.1
7
118
15
29
1
31.2
11.2
1.2
8
110
3
25
1
120.6
44.2
4.1
29
507
51
112
4
123.8
41.4
3.8
29
464
58
119
4
(3)
7
8
–
9
(12)
(6)
–
(5)
–
20
14
(5)
(79)
(14)
–
1
–
10
5
(22)
–
9
(12)
(6)
–
1
–
7
3
5
2
8
2
4
–
3
17
3
16
(8)
–
24
(12)
(50)
14
(5)
(79)
(14)
–
1
–
15
(16)
(8)
–
(8)
(10)
(10)
–
(1)
38
(3)
38
Glencore Preliminary Results 2019
238
Glencore Preliminary Results 2019
Glencore Annual Report 2019
239
239
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements Production by quarter – Q4 2018 to Q4 2019
continued
Metals and minerals
Production from own sources – Ferroalloys assets1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Ferrochrome7
Vanadium pentoxide
kt
mlb
435
5.5
402
5.1
397
5.1
231
5.6
408
4.4
1,438
20.2
1,580
20.2
Total production – Custom metallurgical assets1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Copper (Altonorte, Pasar, Horne, CCR)
Copper metal
Copper anode
kt
kt
103.2
103.7
113.3
123.4
109.8
137.3
100.8
117.7
109.0
132.3
432.9 438.8
479.3
510.7
Zinc (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
205.5
51.5
Zinc metal
Lead metal
kt
kt
203.3
45.7
200.5
50.3
197.3
43.9
204.6
50.6
805.7
190.5
799.6
186.3
Change
2019 vs
2018
%
(9)
–
Change
Q4 19 vs
Q4 18
%
(6)
(20)
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
(1)
7
1
2
6
28
–
(2)
Glencore Preliminary Results 2019
240
Glencore Annual Report 2019
240
Production by quarter – Q4 2018 to Q4 2019
Production by quarter – Q4 2018 to Q4 2019
continued
continued
Metals and minerals
Production from own sources – Ferroalloys assets1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
Change
Change
2019 vs
Q4 19 vs
2019
2018
2018
Q4 18
Ferrochrome7
Vanadium pentoxide
kt
mlb
435
5.5
402
5.1
397
5.1
231
5.6
408
4.4
1,438
20.2
1,580
20.2
Total production – Custom metallurgical assets1
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Copper (Altonorte, Pasar, Horne, CCR)
Zinc (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
Copper metal
Copper anode
Zinc metal
Lead metal
kt
kt
103.2
103.7
113.3
123.4
109.8
137.3
100.8
109.0
432.9 438.8
117.7
132.3
510.7
479.3
kt
kt
205.5
203.3
200.5
197.3
204.6
805.7
799.6
51.5
45.7
50.3
43.9
50.6
190.5
186.3
%
(9)
–
%
(6)
(20)
Change
Change
2019 vs
Q4 19 vs
2018
%
Q4 18
%
(1)
7
1
2
6
28
–
(2)
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
Cerrejón8
Total Coal department
Oil assets
Glencore entitlement interest basis
Equatorial Guinea
Chad
Cameroon
Total Oil department
Gross basis
Equatorial Guinea
Chad
Cameroon
Total Oil department
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
mt
mt
mt
mt
mt
mt
mt
mt
mt
2.1
1.4
14.4
2.4
4.1
3.0
3.0
2.3
32.7
2.6
1.0
14.9
1.8
3.8
3.3
3.6
2.2
33.2
1.7
2.3
16.1
2.2
2.9
4.1
3.7
2.0
35.0
1.8
1.8
16.8
2.2
3.4
3.7
4.0
2.1
35.8
3.1
1.3
16.4
2.4
2.9
2.8
4.3
2.3
35.5
9.2
6.4
64.2
8.6
13.0
13.9
15.6
8.6
139.5
7.5
3.9
59.4
9.4
17.3
10.0
11.7
10.2
129.4
23
64
8
(9)
(25)
39
33
(16)
8
48
(7)
14
–
(29)
(7)
43
–
9
Q4
2018
Q1
2019
Q2
2019
Q3
2019
Q4
2019
2019
2018
451
819
–
436
709
–
423
672
–
439
884
75
597
1,106
177
1,895
3,371
252
1,827
2,799
–
1,270
1,145
1,095
1,398
1,880
5,518 4,626
2,168
1,119
–
2,051
969
–
2,113
919
–
2,166
1,209
216
2,906
9,236
1,511 4,608
730
514
8,818
3,827
–
3,287
3,020
3,032
3,591
4,931 14,574
12,645
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
Change
2019 vs
2018
%
Change
Q4 19 vs
Q4 18
%
4
20
n.m.
19
5
20
n.m.
15
32
35
n.m.
48
34
35
n.m.
50
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 Collahuasi production (44%).
3 The Group’s pro-rata share of Antamina production (33.75%).
4 Cobalt contained in concentrates and hydroxides.
5 Copper metal includes copper contained in copper concentrates and blister.
6 South American production excludes Volcan Compania Minera.
7 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
8 The Group’s pro-rata share of Cerrejón production (33.3%).
Glencore Preliminary Results 2019
240
Glencore Preliminary Results 2019
Glencore Annual Report 2019
241
241
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
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 2019, as published on the Glencore website on 4 February 2020. 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 2019, unless otherwise noted. For comparison purposes, data for 2018 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
Commodity
2019
2018
2019
2018
2019
2018
2019
2018
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
African copper
Katanga
Mutanda
Mopani
Collahuasi
Antamina
Other South America
Australia
Other projects1
(El Pachon, West Wall,
Polyment)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Molybdenum (%)
(Mt)
Copper (%)
Zinc (%)
Silver (g/t)
Molybdenum (%)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
16
3.58
0.57
368
1.39
0.55
207
2.08
0.08
857
0.80
0.02
344
0.84
0.67
9
0.02
659
0.44
0.11
0.7
108
1.79
0.06
0.7
16
3.58
0.57
404
1.36
0.47
208
2.08
0.08
870
0.84
0.02
347
0.87
0.65
10
0.02
677
0.44
0.11
0.7
116
1.77
0.09
0.6
249
3.69
0.54
96
0.97
0.44
76
1.99
0.08
4,534
0.81
0.02
650
0.86
0.75
11
0.02
1,971
0.43
0.04
0.8
167
1.39
0.23
0.4
259
3.60
0.54
263
0.79
0.25
76
1.99
0.08
4,458
0.81
0.03
707
0.86
0.77
11
0.02
2,063
0.42
0.04
0.8
168
1.37
0.23
0.4
265
3.68
0.54
464
1.31
0.53
283
2.06
0.08
5,391
0.81
0.02
994
0.86
0.72
10
0.02
2,629
0.43
0.06
0.8
275
1.5
0.16
0.5
276
3.60
0.54
667
1.14
0.38
285
2.06
0.08
5,328
0.82
0.02
1,054
0.87
0.73
11
0.02
2,741
0.42
0.05
0.7
284
1.53
0.17
0.5
163
3.8
0.45
17
0.72
0.53
76
2.06
0.08
4,806
0.73
0.02
1,295
1.02
0.60
11
0.02
703
0.31
0.02
0.2
160
1.09
0.06
0.6
165
3.78
0.44
119
0.65
0.15
76
2.06
0.08
5,052
0.74
0.02
1,236
0.99
0.60
12
0.02
797
0.30
0.03
0.2
161
1.1
0.06
0.7
(Mt)
853
534
2,318
1,915
3,171
2,449
3,023
2,596
Copper (%)
0.50
0.67
0.45
0.50
0.47
0.54
0.39
0.41
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 4 February 2020.
Glencore Preliminary Results 2019
242
Glencore Annual Report 2019
242
Resources and reserves
Resources and reserves
continued
The resource and reserve data in the following tables comprise summary extracts of the Glencore Resources and Reserves report as
Copper ore reserves
at 31 December 2019, as published on the Glencore website on 4 February 2020. 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 2019, unless otherwise noted. For comparison purposes, data for 2018 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
Measured Mineral
Indicated Mineral
Measured and
Inferred
Resources
Resources
Indicated Resources
Mineral Resources
Commodity
2019
2018
2019
2018
2019
2018
2019
2018
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Molybdenum (%)
(Mt)
Copper (%)
Zinc (%)
Silver (g/t)
Molybdenum (%)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
16
3.58
0.57
368
1.39
0.55
207
2.08
0.08
857
0.80
0.02
344
0.84
0.67
9
0.02
659
0.44
0.11
0.7
108
1.79
0.06
0.7
16
3.58
0.57
404
1.36
0.47
208
2.08
0.08
870
0.84
0.02
347
0.87
0.65
10
0.02
677
0.44
0.11
0.7
116
1.77
0.09
0.6
249
3.69
0.54
96
0.97
0.44
76
1.99
0.08
4,534
0.81
0.02
650
0.86
0.75
11
0.02
1,971
0.43
0.04
0.8
167
1.39
0.23
0.4
259
3.60
0.54
263
0.79
0.25
76
1.99
0.08
4,458
0.81
0.03
707
0.86
0.77
11
0.02
2,063
0.42
0.04
0.8
168
1.37
0.23
0.4
265
3.68
0.54
464
1.31
0.53
283
2.06
0.08
5,391
0.81
0.02
994
0.86
0.72
10
0.02
2,629
0.43
0.06
0.8
275
1.5
0.16
0.5
276
3.60
0.54
667
1.14
0.38
285
2.06
0.08
5,328
0.82
0.02
1,054
0.87
0.73
11
0.02
2,741
0.42
0.05
0.7
284
1.53
0.17
0.5
163
3.8
0.45
17
0.72
0.53
76
2.06
0.08
4,806
0.73
0.02
1,295
1.02
0.60
11
0.02
703
0.31
0.02
0.2
160
1.09
0.06
0.6
165
3.78
0.44
119
0.65
0.15
76
2.06
0.08
5,052
0.74
0.02
1,236
0.99
0.60
12
0.02
797
0.30
0.03
0.2
161
1.1
0.06
0.7
Name of operation
African copper
Katanga
Mutanda
Mopani
Collahuasi
Antamina
Other South America
Australia
Other projects1
(El Pachon, West Wall,
Polyment)
(Mt)
853
534
2,318
1,915
3,171
2,449
3,023
2,596
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 4 February 2020.
Copper (%)
0.50
0.67
0.45
0.50
0.47
0.54
0.39
0.41
Name of operation
African copper
Katanga
Mutanda
Mopani
Collahuasi
Antamina
Other South America
Australia
Other projects1
(Polymet)
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2019
2018
2019
2018
2019
2018
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
Cobalt (%)
(Mt)
Copper (%)
(Mt)
Copper (%)
Molybdenum (%)
(Mt)
Copper (%)
Zinc (%)
Silver (g/t)
Molybdenum (%)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
Gold (g/t)
Silver (g/t)
(Mt)
Copper (%)
9
3.56
0.56
48
1.36
0.62
110
1.90
486
1.03
0.021
224
0.92
0.80
9
0.027
484
0.44
0.10
0.8
22
2.34
0.22
2.8
157
0.29
9
3.56
0.55
80
1.69
0.70
111
1.90
448
1.10
0.023
235
0.96
0.78
10
0.027
504
0.45
0.10
0.8
32
2.11
0.26
2.0
–
–
115
3.18
0.53
82
1.59
0.75
31
1.85
2,569
0.90
0.026
205
0.91
1.12
11
0.021
707
0.49
0.05
1.2
58
1.36
0.31
0.6
106
0.29
124
3.15
0.51
52
1.79
0.59
33
1.90
2,683
0.90
0.026
254
0.87
1.09
11
0.021
739
0.47
0.05
1.3
53
1.43
0.28
0.7
–
–
124
3.20
0.53
130
1.51
0.70
1.41
1.89
3,055
0.92
0.025
430
0.91
0.95
10
0.024
1,192
0.46
0.07
1.0
81
1.63
0.29
1.2
264
0.29
133
3.18
0.52
132
1.73
0.66
144
1.90
3,131
0.93
0.026
489
0.91
0.94
11
0.024
1,243
0.46
0.07
1.1
85
1.68
0.27
1.2
–
–
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 4 February 2020.
Glencore Preliminary Results 2019
242
Glencore Preliminary Results 2019
Glencore Annual Report 2019
243
243
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Resources and reserves
continued
Metals and minerals: Zinc
Zinc mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
2019
2018
2019
2018
2019
2018
2019
2018
Name of operation
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovsky)
Australia
Mount Isa
McArthur River
North America
Zinc North America
Copper North America
Volcan
Lead/zinc/silver deposits
Copper deposits
Other Zinc
(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 (%)
Lead (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Copper (%)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
(Mt)
Gold (g/t)
Copper (%)
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
130
2.6
0.8
0.4
14
1.1
70
2.1
131
7.6
4.3
82
107
9.6
4.1
41
21.8
4.4
0.5
1.4
45
0.5
75
0.4
0.2
33
6.3
1.5
107
18.4
–
0.5
14.6
5.8
1.5
0.4
138
92
4.0
1.4
0.3
20
0.5
78
2.1
110
7.4
4.4
85
108
9.7
4.2
42
21.7
4.2
0.5
1.5
46
0.4
75
0.4
0.2
37
6.3
1.2
109
18.4
–
0.5
15.9
6.0
1.7
0.3
134
93
1.3
0.4
0.2
12
0.9
44
1.7
284
6.9
3.4
61
56
10.3
4.9
52
32
4.5
0.6
0.6
116
0.3
255
0.4
0.2
66
5.2
1.5
87
34.3
–
0.5
24
4.2
1.3
0.3
130
92
1.5
0.4
0.2
15
0.8
46
1.7
308
7.0
3.4
62
64
10.1
5.1
55
34
4.8
0.5
0.7
112
0.4
255
0.4
0.2
55
5.2
1.2
79
34.3
–
0.5
22
4.8
1.4
0.4
138
223
2.1
0.6
0.3
13
1.0
113
1.9
414
7.1
3.6
68
163
9.8
4.4
45
54
4.5
0.6
0.9
87
0.4
330
0.4
0.2
99
5.6
1.5
93
53
–
0.5
38
4.8
1.4
0.3
133
185
2.7
0.9
0.3
17
0.7
124
1.9
419
7.0
3.7
67
172
9.8
4.6
47
55
4.5
0.7
1.0
87
0.4
330
0.4
0.2
92
5.6
1.2
93
53
–
0.5
38
5.3
1.5
0.4
137
149
2
1
0.1
23
1
0.1
1.0
226
6
3
61
–
–
–
–
70
4
1
1
134
0.2
120
0.4
0.1
228
2.9
1.1
78
148
0.2
0.4
76
6
1
0.2
83
157
2
1
0.1
22
1
–
–
220
6
3
65
–
–
–
–
70
4
1
1
133
0.2
120
0.4
0.1
212
2.7
0.9
76
148
0.2
0.4
73
7
1
0.1
89
244
Glencore Preliminary Results 2019
244
Glencore Annual Report 2019
Resources and reserves
continued
Resources and reserves
continued
Name of operation
Commodity
2019
2018
2019
2018
2019
2018
2019
2018
Measured Mineral
Indicated Mineral
Measured and
Inferred
Resources
Resources
Indicated Resources
Mineral Resources
Metals and minerals: Zinc
Zinc mineral resources
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovsky)
Australia
Mount Isa
McArthur River
North America
Zinc North America
Copper North America
Volcan
Lead/zinc/silver deposits
Copper deposits
Other Zinc
(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 (%)
Lead (%)
Copper (%)
Silver (g/t)
Gold (g/t)
(Mt)
Copper (%)
Gold (g/t)
(Mt)
Zinc (%)
Lead (%)
Silver (g/t)
(Mt)
Gold (g/t)
Copper (%)
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
130
2.6
0.8
0.4
14
1.1
70
2.1
131
7.6
4.3
82
107
9.6
4.1
41
21.8
4.4
0.5
1.4
45
0.5
75
0.4
0.2
33
6.3
1.5
107
18.4
–
0.5
14.6
5.8
1.5
0.4
138
92
4.0
1.4
0.3
20
0.5
78
2.1
110
7.4
4.4
85
108
9.7
4.2
42
21.7
4.2
0.5
1.5
46
0.4
75
0.4
0.2
37
6.3
1.2
109
18.4
–
0.5
15.9
6.0
1.7
0.3
134
93
1.3
0.4
0.2
12
0.9
44
1.7
284
6.9
3.4
61
56
10.3
4.9
52
32
4.5
0.6
0.6
116
0.3
255
0.4
0.2
66
5.2
1.5
87
34.3
–
0.5
24
4.2
1.3
0.3
130
92
1.5
0.4
0.2
15
0.8
46
1.7
308
7.0
3.4
62
64
10.1
5.1
55
34
4.8
0.5
0.7
112
0.4
255
0.4
0.2
55
5.2
1.2
79
34.3
–
0.5
22
4.8
1.4
0.4
138
223
2.1
0.6
0.3
13
1.0
113
1.9
414
7.1
3.6
68
163
9.8
4.4
45
54
4.5
0.6
0.9
87
0.4
330
0.4
0.2
99
5.6
1.5
93
53
–
0.5
38
4.8
1.4
0.3
133
185
2.7
0.9
0.3
17
0.7
124
1.9
419
7.0
3.7
67
172
9.8
4.6
47
55
4.5
0.7
1.0
87
0.4
330
0.4
0.2
92
5.6
1.2
93
53
–
0.5
38
5.3
1.5
0.4
137
149
2
1
0.1
23
1
0.1
1.0
226
6
3
61
–
–
–
–
70
4
1
1
134
0.2
120
0.4
0.1
228
2.9
1.1
78
148
0.2
0.4
76
6
1
0.2
83
157
2
1
0.1
22
1
–
–
220
6
3
65
–
–
–
–
70
4
1
1
133
0.2
120
0.4
0.1
212
2.7
0.9
76
148
0.2
0.4
73
7
1
0.1
89
Zinc ore reserves
Name of operation
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovsky)
Australia
Mount Isa
McArthur River
North America
Volcan
Other Zinc
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2019
2018
2019
2018
2019
2018
(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 (%)
Silver (g/t)
(Mt)
Zinc (%)
Lead (%)
Copper (%)
Silver (g/t)
78
3.4
1.0
0.2
14
0.6
42
2.2
29
7.5
3.9
74
71
9.5
4.3
42
5.7
4.42
1.59
43
0.22
10.1
5.3
0.9
99
5.2
6.0
1.4
0.2
145
76
3.9
1.4
0.1
18
0.3
51
2.1
22
8.1
4.1
75
73
9.4
4.3
43
5.8
3.93
1.79
42
0.09
15.8
4.1
0.8
74
5.6
5.2
1.7
0.2
124
13.4
4.5
0.5
0.5
19
0.9
44
1.8
50
7.3
3.4
62
27
8.0
4.0
42
1.0
5.1
1.9
43
–
22.6
4.5
1.1
92
11.3
3.5
1.1
0.2
118
16.8
4.4
0.7
0.6
27
0.7
47
1.8
75
7.0
3.3
60
35
8.1
4.3
46
3.0
6.1
1.3
32
0.4
18.5
4.0
1.0
76
11.2
3.9
1.0
0.3
103
91
3.6
0.9
0.2
15
0.7
86
2.0
79
7.4
3.6
66
98
9.1
4.2
42
7
4.5
1.6
43
0.2
32.7
4.8
1.1
94
16.6
4.3
1.2
0.2
126
93
4.0
1.3
0.2
19
0.4
98
1.8
97
7.2
3.5
62
108
9.0
4.3
44
9
4.7
1.6
39
0.2
34.3
4.0
0.9
73
16.8
4.4
1.2
0.2
110
Glencore Preliminary Results 2019
244
Glencore Preliminary Results 2019
Glencore Annual Report 2019
245
245
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Resources and reserves
continued
Metals and minerals: Nickel
Nickel mineral resources
Name of operation
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
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)
2019
10.8
2.77
1.06
0.06
0.79
1.53
144.5
1.01
0.073
11.7
2.48
13.8
2.49
0.34
0.21
0.16
0.19
2018
12.2
2.74
1.19
0.06
0.94
1.67
2019
37.6
2.48
1.90
0.06
0.96
1.59
2018
37.5
2.50
1.92
0.06
0.92
1.56
138.4
1.01
0.075
75.5
0.99
0.084
75.5
0.99
0.084
12.8
2.48
13.8
2.49
0.34
0.21
0.16
0.19
41.7
2.41
23.4
2.72
0.36
0.19
0.42
0.28
43.6
2.40
23.4
2.72
0.36
0.19
0.42
0.28
2019
48.4
2.54
1.72
0.06
0.92
1.58
220.0
1.00
0.077
53.5
2.42
37.2
2.63
0.35
0.20
0.32
0.25
2018
49.6
2.56
1.74
0.06
0.93
1.58
214.0
1.01
0.078
56.4
2.42
37.2
2.63
0.35
0.20
0.32
0.25
2019
42
1.7
1.9
0.04
1.0
1.6
17
0.9
0.07
82
2.5
21
2.6
0.3
0.2
0.3
0.3
2018
39
1.7
2.0
0.04
1.0
1.6
17
0.9
0.07
83
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 (%)
2019
8.4
1.92
0.81
0.04
0.60
1.01
103.6
1.033
0.080
11.5
2.24
2018
10.3
1.96
0.96
0.04
0.70
1.16
83.1
1.05
0.082
11.7
2.27
2019
21.6
2.30
0.92
0.05
0.52
0.97
37.8
1.04
0.103
30.3
2.18
2018
21.7
2.28
0.92
0.05
0.52
0.95
18.5
1.05
0.078
30.1
2.20
2019
29.9
2.20
0.89
0.05
0.55
0.98
141.4
1.03
0.086
41.8
2.19
2018
32.0
2.17
0.94
0.05
0.58
1.02
101.7
1.05
0.081
41.8
2.22
Glencore Preliminary Results 2019
246
Glencore Annual Report 2019
246
Name of operation
Western Chrome Mines
Western Chrome Mines
101.8
42
2.8
17
107.6
42
2.6
17
(Mt)
Cr2O3 (%)
55.121
42.09
51.951
42.10
61.11
41.5
57.00
41.4
116.23
41.8
108.95
41.7
Tailings
(Mt)
Cr2O3 (%)
–
–
–
–
–
–
–
–
–
–
–
–
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
2019
2018
2019
2018
2019
2018
2019
2018
Resources and reserves
continued
Metals and minerals: Ferroalloys
Ferroalloys mineral resources
Resources and reserves
continued
Metals and minerals: Nickel
Nickel mineral resources
Name of operation
Commodity
INO
(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)
Measured Mineral
Indicated Mineral
Measured and
Inferred
Resources
Resources
Indicated Resources
Mineral Resources
2019
2018
0.084
0.084
2019
10.8
2.77
1.06
0.06
0.79
1.53
144.5
1.01
0.073
11.7
2.48
13.8
2.49
0.34
0.21
0.16
0.19
2018
12.2
2.74
1.19
0.06
0.94
1.67
138.4
1.01
0.075
12.8
2.48
13.8
2.49
0.34
0.21
0.16
0.19
Commodity
(Mt)
Nickel (%)
Copper (%)
Cobalt (%)
Platinum (g/t)
Palladium (g/t)
2019
37.6
2.48
1.90
0.06
0.96
1.59
75.5
0.99
41.7
2.41
23.4
2.72
0.36
0.19
0.42
0.28
2019
8.4
1.92
0.81
0.04
0.60
1.01
(Mt)
Nickel (%)
Cobalt (%)
(Mt)
Nickel (%)
103.6
1.033
0.080
11.5
2.24
2018
37.5
2.50
1.92
0.06
0.92
1.56
75.5
0.99
43.6
2.40
23.4
2.72
0.36
0.19
0.42
0.28
2018
10.3
1.96
0.96
0.04
0.70
1.16
83.1
1.05
0.082
11.7
2.27
2019
48.4
2.54
1.72
0.06
0.92
1.58
220.0
1.00
0.077
53.5
2.42
37.2
2.63
0.35
0.20
0.32
0.25
2019
21.6
2.30
0.92
0.05
0.52
0.97
37.8
1.04
0.103
30.3
2.18
2018
49.6
2.56
1.74
0.06
0.93
1.58
214.0
1.01
0.078
56.4
2.42
37.2
2.63
0.35
0.20
0.32
0.25
2018
21.7
2.28
0.92
0.05
0.52
0.95
18.5
1.05
0.078
30.1
2.20
42
1.7
1.9
1.0
1.6
0.04
17
0.9
0.07
82
2.5
21
2.6
0.3
0.2
0.3
0.3
2019
29.9
2.20
0.89
0.05
0.55
0.98
141.4
1.03
0.086
41.8
2.19
39
1.7
2.0
0.04
1.0
1.6
17
0.9
0.07
83
2.5
21
2.6
0.3
0.2
0.3
0.3
2018
32.0
2.17
0.94
0.05
0.58
1.02
101.7
1.05
0.081
41.8
2.22
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Murrin Murrin
Koniambo
Other Nickel
(Kabanga)
Nickel ore reserves
Name of operation
INO
Murrin Murrin
Koniambo
Eastern Chrome Mines
Eastern Chrome Mines
Tailings
Vanadium
Ferroalloys ore reserves
Name of operation
Western Chrome Mines
Eastern Chrome Mines
Vanadium
(Mt)
Cr2O3 (%)
66.172
40.04
61.743
40.18
49.23
40.4
45.67
40.2
115.40
40.2
107.41
40.2
186.4
39
156.5
38
(Mt)
Cr2O3 (%)
–
–
–
–
–
–
–
–
–
–
–
–
(Mt)
V2O5 (%)
51.6
0.48
48.36
0.48
34.90
0.5
37.67
0.5
86.06
0.5
86.04
0.5
4.6
20
91
0.5
4.2
19
93
0.5
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Cr2O3 (%)
2019
17.791
30.79
2018
17.418
30.84
(Mt)
Cr2O3 (%)
24.554
33.23
22.961
33.20
(Mt)
V2O5 (%)
23.10
0.47
23.94
0.47
2019
6.65
28.0
8.68
33.6
9.5
0.4
2018
7.94
28.2
10.03
34.2
11.5
0.5
2019
24.44
30.0
33.23
33.3
32.6
0.5
2018
25.36
30.0
32.99
33.5
35.4
0.5
Metals and minerals: Aluminium/Alumina
Alumina mineral resources
Name of operation
Aurukun
Commodity
(Mt)
Al2O3 (%)
2019
95
53.4
2018
94
53.4
2019
334
49.9
2018
322
50.0
2019
429
50.6
2018
416
50.7
2019
3
49.3
2018
3
49.5
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Glencore Preliminary Results 2019
246
Glencore Preliminary Results 2019
Glencore Annual Report 2019
247
247
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Resources and reserves
continued
Metals and minerals: Iron Ore
Iron ore mineral resources
Name of operation
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 Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
(Mt)
Iron (%)
(Mt)
Iron (%)
(Mt)
Iron (%)
2019
470
36
215
36
–
–
2018
470
36
215
36
–
–
(Mt)
Iron (%)
2,300
34
2,300
34
2019
1,435
36
190
35
2,180
32
2,500
30
2018
1,435
36
190
35
2,180
32
2019
1,905
36
405
36
2,180
32
2018
1,905
36
405
36
2,180
32
2019
2,520
35
251
35
560
32
2018
2,520
35
251
35
560
32
2,500
30
4,800
32
4,800
32
2,100
31
2,100
31
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Iron (%)
(Mt)
Iron (%)
2019
380
35
770
37
2018
380
35
770
37
2019
551
35
1,290
32
2018
551
35
2019
931
35
2018
931
35
1,290
32
2,070
34
2,070
34
Measured
Coal Resources
Indicated
Coal Resources
Inferred
Coal Resources
Commodity
2019
2018
2019
2018
2019
2018
Coking/Thermal Coal (Mt)
Coking/Thermal Coal (Mt)
3,745
3,849
3,608
3,157
3,669
5,279
3,974
5,401
7,591
8,925
7,615
8,545
South Africa
Thermal Coal (Mt)
2,346
2,409
839
844
344
350
Prodeco
Cerrejón
Canada projects
(Suska, Sukunka)
Thermal Coal (Mt)
190
205
147
148
60
70
Thermal Coal (Mt)
3,250
3,100
1,250
1,200
600
700
Coking/Thermal Coal (Mt)
45
45
113
113
130
130
Glencore Preliminary Results 2019
248
Glencore Annual Report 2019
248
Resources and reserves
continued
Metals and minerals: Iron Ore
Iron ore mineral resources
Name of operation
Commodity
El Aouj Mining Company S.A.
Measured Mineral
Indicated Mineral
Measured and
Inferred
Resources
Resources
Indicated Resources
Mineral Resources
(Mt)
Iron (%)
(Mt)
Iron (%)
(Mt)
Iron (%)
2019
470
36
215
36
–
–
2018
470
36
215
36
–
–
2019
1,435
36
190
35
2,180
32
2,500
30
2019
380
35
770
37
2018
1,435
36
190
35
2,180
32
2018
380
35
770
37
2019
1,905
36
405
36
2,180
32
2019
551
35
1,290
32
2018
1,905
36
405
36
2,180
32
2019
2,520
35
251
35
560
32
2018
2,520
35
251
35
560
32
2018
551
35
2019
931
35
2018
931
35
1,290
32
2,070
34
2,070
34
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Iron (%)
(Mt)
Iron (%)
(Mt)
2,300
2,300
Iron (%)
34
34
2,500
4,800
4,800
30
32
32
2,100
31
2,100
31
South Africa
Thermal Coal (Mt)
2,346
2,409
839
844
344
350
Measured
Coal Resources
Indicated
Coal Resources
Inferred
Coal Resources
Commodity
2019
2018
2019
2018
2019
2018
Coking/Thermal Coal (Mt)
Coking/Thermal Coal (Mt)
3,745
3,849
3,608
3,157
3,669
5,279
3,974
5,401
7,591
8,925
7,615
8,545
Thermal Coal (Mt)
190
205
147
148
60
70
Thermal Coal (Mt)
3,250
3,100
1,250
1,200
600
700
Coking/Thermal Coal (Mt)
45
45
113
113
130
130
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
Prodeco
Cerrejón
Canada projects
(Suska, Sukunka)
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
2019
2019
2019
2019
2019
2018
Thermal Coal (Mt)
Coking Coal (Mt)
Thermal Coal (Mt)
Coking Coal (Mt)
1,142
2
822
178
652
95
681
8
394
92
830
2
763
125
481
5
348
48
1.318
7
1,073
168
240
406
137
543
Thermal Coal (Mt)
40
Thermal Coal (Mt)
200
140
95
190
40
135
130
330
South Africa
Thermal Coal (Mt)
Prodeco
Cerrejón
Energy products: Oil
Net reserves (Proven and Probable)1
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
31 December 2018
Revisions
Production
31 December 2019
Oil mmbbl
15
–
(2)
13
Gas bcf Oil mmbbl
102
2
(4)
100
154
(3)
–
151
Gas bcf Oil mmbbl
3
–
(0.3)
3
–
–
–
–
Gas bcf Oil mmbbl
120
2
(6)
114
–
–
–
–
Gas bcf
154
(3)
–
151
Net contingent resources (2C)1
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
31 December 2018
31 December 2019
Oil mmbbl
23
23
Gas bcf Oil mmbbl
61
61
454
454
Gas bcf Oil mmbbl
4
4
–
–
Gas bcf Oil mmbbl
88
88
–
–
Gas bcf
454
454
1
“Net” reserves or resources are equivalent to Glencore’s working interest in the asset/property.
1,260
8
1,149
150
577
150
375
Combined
mmboe
147
(1)
(6)
142
Combined
mmboe
166
166
Glencore Preliminary Results 2019
248
Glencore Preliminary Results 2019
Glencore Annual Report 2019
249
249
Strategic reportFinancial statementsGovernanceAdditional informationFinancial statements
Enquiries
Corporate Services
Glencore plc
Baarermattstrasse 3
P.O. Box 1363
CH-6341 Baar
Switzerland
Tel: +41 41 709 2000
Fax: +41 41 709 3000
Email: info@glencore.com
Shareholder information
Glencore plc is registered in Jersey, is headquartered
in Switzerland and has operations around the world.
Headquarters
Baarermattstrasse 3
P.O. Box 1363
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).
Our website contains further information on our business and
for shareholders including as to share transfer and distributions:
glencore.com/investors/shareholder-centre
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
250
Glencore Annual Report 2019
Important notice concerning this report
including forward looking statements
Except as required by applicable regulations or by law, 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 past performance cannot be relied
on as a guide to future performance. 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 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.
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.
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
disclosed Principal Risk and Uncertainties section on page 74.
For example, our future revenues from our assets, projects or
mines will be based, in part, on the market price of the
commodity products produced, which may vary significantly
from current levels. These may materially affect the timing and
feasibility of particular developments. Other factors include
(without limitation) the ability to produce and transport
products profitably, demand for our products, changes to the
assumptions regarding the recoverable value of our tangible
and intangible assets, the effect of foreign currency exchange
rates on market prices and operating costs, and actions by
governmental authorities, such as changes in taxation or
regulation, and political uncertainty.
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.
This report is printed on UPM Fine SC and UPM Fine Offset.
Both papers are made of FSC® certified and other
controlled material.
They also EMAS and the European EcoLabel accredited.
Printed sustainably in the UK by Pureprint, a Carbon Neutral®
company with FSC® Chain of custody and an ISO 14001-certified
environmental management system recycling over 99% of all
dry waste.
If you have finished with this document and no longer wish
to retain it, please pass it on to other interested readers or
dispose of it in your recycled waste. Thank you.
Designed and produced by
G
l
e
n
c
o
r
e
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
9
Glencore plc
Baarermattstrasse 3
CH-6340 Baar
Switzerland
Tel: +41 41 709 2000
Fax: +41 41 709 3000
E-mail: info@glencore.com
glencore.com