RESPONSIBLY
SOURCING THE
COMMODITIES
THAT ADVANCE
EVERYDAY LIFE
Annual Report 2020
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.
glencore.com
Read more
Page 10
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
SIMPLICITY
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 work efficiently and focus
on what’s important. We avoid
unnecessary complexity and look
for simple, pragmatic solutions
RESPONSIBILITY
OPENNESS
ENTREPRENEURIALISM
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
We’re honest and straightforward when
we communicate. We push ourselves
to improve by sharing information and
encouraging dialogue and feedback
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
STORIES FROM OUR YEAR
Read about the stories that show who we are
Read how we’re
working to transform
artisanal mining in the
DRC on page 14
Read about our
recycling business
on page 50
Read about our journey
to net zero emissions
on page 16
OUR BUSINESS
AT A GLANCE
Business model
Page 8
Sustainability
Page 32
One of the world’s largest natural resource companies
6
continents
35
countries
c.145,000
employees and contractors
>40
offices
Map key
Head office
Industrial assets
Marketing office/other
Integrating sustainability throughout our business
CO2e Scope 1
million tonnes
CO2 Scope 2
million tonnes
CO2e Scope 3
million tonnes
Targeted reduction in
total emissions
15.0
2019: 18.3
9.3
2019: 11.0
271
2019: 343
40%
on 2019 levels by 2035
Our Financial Highlights
Adjusted EBITDA◊
US$ million
$11.6bn
Net (loss)/income
attributable to
equity holders
US$ million
($1.9)bn
15,767
3,408
13,210
11,601
11,560
10,346
8,568
(404)
(1,903)
Cash generated by
operating activities before
working capital changes
US$ million
Net purchase and sale
of property, plant and
equipment◊
US$ million
$8.6bn
$3.9bn
4,899
4,966
3,921
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Two business segments
Industrial
Marketing
Adjusted EBITDA◊
Industrial 2020
Adjusted EBITDA◊
Marketing 2020
● Metal
● Energy
$7.8bn
2019: $9.0bn
● Metal
● Energy
$3.7bn
2019: $2.6bn
Total Adjusted EBITDA 2020◊
$11.6bn
2019: $11.6bn
Lost time injury
frequency rate
per million hours worked
Total recordable injury
frequency rate
per million hours worked
0.94
2019: 0.99
2.65
2019: 2.86
Total borrowings
US$ million
Net debt◊
US$ million
$37.5bn
34,994
37,043
37,479
$15.8bn
2018
2019
2020
CONTENTS
Strategic Report
Chairman’s introduction
Chief Executive officer’s review
Investment case
Our market 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
Financial review
Non-Financial Information Statement
Our Marketing business
Our Industrial business
Risk management
Corporate Governance
Chairman’s governance statement
Directors and officers
Corporate governance report
ECC report
HSEC report
Audit committee report
Nomination committee 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 2019 to Q4 2020
Resources and reserves
Shareholder information
1
2
5
6
8
10
16
22
24
27
32
38
44
49
52
60
70
86
88
90
95
96
97
99
100
112
118
131
132
133
134
136
137
219
226
228
235
243
◊ 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 219 for definitions, explanation of use and
reconciliations and note 2 of the financial statements
for reconciliation of Adjusted EBIT/EBITDA.
Read more
Page 219
2020201920180.00x0.50x1.00x1.50x20202019201817,55615,84414,710Net debtNet debt to AdjustedEBITDA ratio
CHAIRMAN’S
INTRODUCTION
Additional information
Anthony Hayward
Chairman
DEAR SHAREHOLDERS
I introduced last year’s annual report with a discussion on
the need for a strong and clear purpose, values and strategy
underpinned by a robust and aligned culture. These are the
essential requirements for a sustainable business. 2020 has
provided a perfect example of this.
From a positive outlook at the beginning of the year, Covid-19
emerged as an unprecedented challenge for the world. At
Glencore, we moved quickly to adapt our business and protect
and support our people and communities. This involved a range
of measures across our businesses depending on the incidence
of Covid-19 and the regulations and expectations of governments,
employees and communities that host our operations.
Demand for our commodities and prices fell rapidly early in
the year. This required difficult decisions around continuing
production at uneconomic operations and the collateral impact
on employees and nearby communities. At a group level the
rapid shift in markets led us to suspend our proposed distribution
to shareholders to protect our capital structure and accelerate
a reduction of Net debt back to within our $10-$16bn target range
which was successfully achieved ($15.8bn) by year end. Managing
the impacts of Covid-19 on the effective operation of our
governance and control mechanisms was also critical. We had to
ensure that our reporting and assurance procedures – whether
across human resources, accounting, compliance or elsewhere –
would continue to operate robustly through these times of
exceptional stress and often remote working requirements.
The combination of empowered business leaders and central
governance and support meant that our businesses were able
to react in the most appropriate way for their situation while
adhering to our required Group standards.
In spite of this challenging backdrop, we were able to ensure
that our strategic priorities were progressed, including:
Succession: Ivan Glasenberg’s retirement during the first half
of this year will complete the succession plan for the senior
business leadership team. To have your CEO and principal
senior business leaders retire within a period of two and a half
years would normally be considered a material risk for business
continuity. However, it is a testament to Ivan and his former
partners that they have managed a seamless succession to
the next generation of leaders, whom I am confident have the
abilities to lead the Company into the world of tomorrow.
After nine years’ service as a Director we were very sorry to
see Lenny Fischer retire at year end, but we were delighted
to welcome Cynthia Carroll as a new Director (see page 86).
Culture: the Board is determined to ensure that Glencore is, and
is seen to be, a responsible and ethical company with a positive
culture. As well as overseeing and supporting the considerable
ongoing work on ethics and compliance, including the rollout
of the Purpose and Values campaign, the Board has sought
to increase direct engagement with our workforce through
virtual meetings and workforce surveys. Our work last year is
summarised on pages 24 to 26 and 29. Stakeholders can expect
to see more from us on this in the future.
Investigations: the Board, through its Investigations Committee,
is continuing to manage the Company’s response to the
government investigations (see page 212) and the Company
continues to fully cooperate with the various authorities. The timing
and outcome of the various investigations remain uncertain.
Climate Change: we also announced our ambition to be a leader
in enabling the decarbonisation of energy usage. In doing so,
we recognise our responsibility to contribute to the global effort
to achieve the goals of the Paris Agreement by decarbonising
our own operational footprint. Unique amongst our peers, we
have announced our commitment to reduce our total emissions
footprint – Scope 1, 2 and 3 – by 40% by 2035 on 2019 levels and
our ambition of achieving a net zero total emissions footprint
by 2050, thereby putting us on a trajectory aligned with the
Paris Agreement.
With the transition of leadership from Ivan to Gary, we will
complete the final part of the generational shift to a new
executive team. The Board believes that we have exceptional new
management in place to continue to drive our business forward.
Global society is facing the challenge of meeting the increasing
energy needs of a growing population, while radically reducing
its carbon footprint. We believe that we have an important role
to play in this endeavour and that by implementing our strategy
we will responsibly source the commodities that advance
everyday life for the benefit of the world as a whole.
Our CEO designate, Gary Nagle, has been with Glencore for more
than 20 years. He understands the unique aspects of this business
and culture and I have every confidence he will build on the
strong foundation that he inherits.
Anthony Hayward
Chairman
10 March 2021
Glencore Annual Report 2020
1
Financial statementsGovernanceStrategic report
CHIEF EXECUTIVE
OFFICER’S REVIEW
Resilient performance amid unprecedented
challenges for the global economy
Ivan Glasenberg
Chief Executive Officer
A CHALLENGING TIME FOR THE WORLD
The Covid-19 pandemic is an extraordinary challenge, impacting
colleagues, our families, local communities and society at large. As
a responsible operator, our top priority is to protect the safety and
health of our people and the communities that host our businesses.
Although some of our industrial assets were required to
temporarily suspend operations during the year in line with
national and regional guidance, or where our risk assessment
determined it was appropriate to do so, the majority of our assets
continued to operate relatively normally after implementation of
appropriate precautionary measures. Across our industry, the
impacts were most notable in Peru, South Africa and Colombia,
while Australia and Canada were relatively unaffected. The
cumulative impacts of mine supply disruption helped to offset
the initial demand shock from rapid lockdowns and the
corresponding slowdown in global economic activity.
While demand remained challenging in many key global
economies, China’s rapid recovery, combined with material global
central bank and governmental fiscal support, improved supply/
demand fundamentals and started to generate favourable sector
sentiment and price momentum.
Average price performances for our key metals commodities’
benchmarks was largely flat to slightly lower year-on-year,
although this outcome reflects two very different halves, from
recessionary pricing conditions in March/April to multi-year
highs towards the end of the year. Coal pricing benchmarks
underperformed, finishing 2020 c.10-30% below 2019 averages,
under pressure from reduced economic activity and trade
tensions, although prices also materially improved into year-end.
PATHWAY TO NET ZERO
A clear emerging force, particularly over the last twelve to
eighteen months, is the growing global momentum and
increasing consensus around achieving the goals of the Paris
agreement and targeting net zero global carbon emissions.
Europe and more than 110 countries have announced ambitions
to achieve carbon neutrality by 2050, supported more recently
by China’s plans to target net zero emissions by 2060.
We recognise our responsibility in contributing to the global
effort to achieve the goals of the Paris Agreement through
decarbonisation of our own operational emissions footprint.
However, we believe our contribution should take a holistic
approach and consider our commitments and ambition through
the lens of our total emissions footprint.
2 Glencore Annual Report 2020
In line with the 1.5-degree Celsius (ºC) more ambitious scenarios
set out by the IPCC, we target a 40% reduction of our total
(Scope 1, 2 and 3) emissions by 2035 on 2019 levels. Post 2035,
our ambition is to achieve, with a supportive policy environment,
net zero total emissions by 2050.
Meeting everyday needs for affordable and reliable energy while
decarbonising the economy is a key global challenge. Our
industry will need to significantly increase the supply of various
raw materials required to meet the projected acceleration in
demand for such transition commodities in order to electrify
and / or decarbonise existing fossil-fuel based energy demand.
Our modelling indicates that annual average mine supply growth
in several key metals will need to double (in units of supply growth)
over the coming decades under a Rapid Transition pathway scenario.
The majority of our earnings comes from the metals and minerals
that enable the transition to a low-carbon economy. We are one of
the largest global producers of copper, nickel, zinc, vanadium and
cobalt and will continue to prioritise investment into these
commodities. In addition, our recycling centres and metallurgical
assets play a fundamental role in the circular economy by
reducing new metal consumption and waste generation.
MEETING SOCIETY’S ENERGY NEEDS AS IT
PROGRESSES THROUGH THE TRANSITION
The world currently depends on fossil fuels (coal, natural gas and
oil) for around 80% of its primary energy demand. Coal currently
accounts for about 25% of global energy use, and while this will
decline over time, it continues to make some contribution in all
plausible climate change scenarios to 2050.
For many countries, an affordable, secure energy source is key to
their socio-economic and industrial development, being the
primary pathway for populations to develop key infrastructure
and achieve economic growth and higher standards of living.
Our thermal coal business represents less than 5% of our revenues
and is envisaged to be in the region of 10-15% of our EBITDA in the
medium term (was 8% in 2020) and decline towards zero over the
longer term. Future demand for coal through the transition
underway will be a key determinant in the continued operation
of our mines.
Selling our coal mines does not remove their associated
emissions. While there is demand for coal, and it is economic to
do so, we will continue to operate our mines until they reach the
end of their lives. Through responsible stewardship of these assets
and a commitment to a managed decline of our coal portfolio,
including maintaining a focus on our high-quality coal assets in
Australia, we will deliver on our ambition to reduce our total
We are one of
the largest global
producers of
copper, nickel,
zinc, vanadium
and cobalt and will
continue to prioritise
investment into
these commodities.
emissions in line with the goals of the Paris Agreement. An
example of our actions is the recent announcement to commence
the process to relinquish Prodeco’s mining licenses in Colombia.
Glencore’s CO2e emissions reduction commitments make us
unique amongst our peers with a medium-term Paris aligned
total CO2e emissions reduction target of 40% and a 2050 net zero
ambition for Scope 1+2+3. All decarbonisation scenarios that we
have modelled are net positive for Glencore and our climate
commitments confirm our intention to be part of the solution.
2020 FINANCIAL SCORECARD
Our adaptable and resilient business model, containing many
countercyclical elements, allowed the Group to quickly adjust to the
challenges of Covid-19. Measures to protect cash flows, from capex
cuts to cost efficiencies, helped offset a material portion of the
impact of lower prices in the first half and positioned the business
well for the second half commodity price recovery, such that
Adjusted EBITDA of $11.6 billion was flat year-on-year. Net income,
before significant items, increased 2% to $2.5 billion, while
significant items resulted in a Net loss attributable to equity holders
of $1.9 billion, mainly due to impairment charges related to Mopani
copper in Zambia and our Colombian coal and African oil portfolio.
In our Marketing business, supportive market conditions
produced an outstanding Adjusted EBIT result of $3.3 billion,
reflecting particularly strong results from oil, in conjunction with
a vastly improved metals and see-through Viterra agriculture
performance. We maintain our long-term Marketing Adjusted
EBIT guidance range of $2.2 to $3.2 billion.
Industrial Adjusted EBITDA of $7.8 billion was 13% lower compared to
2019, primarily reflecting weaker coal and oil prices and to a lesser
extent, lower year-on-year production volumes, mainly Covid driven,
relating to periods of stopped or reduced work in many countries
and various market-related coal supply reductions. A notable
improvement in 2020 was seen at our Katanga copper/cobalt asset
in the DRC, where operational improvements and higher volumes
generated a material turnaround in earnings, with African Copper
Adjusted EBITDA of $712 million compared to a loss of $349 million
in 2019. We expect further throughput and optimisation of mining
and processing to provide even higher margins in 2021. We also
finalised an agreement in January this year to sell our controlling
interest in Mopani to Zambia’s ZCCM, with completion expected
in the second quarter of 2021, subject to various approvals
Aided by the strong second half performance, Net debt reduced
during the year by $1.7 billion to $15.8 billion. Excluding IFRS 16
related marketing leases, Net debt finished the year at $15.2 billion,
back inside our $10 to $16 billion target range. Net funding,
however, increased modestly by 3% to $35.4 billion due to higher
carried inventories, on account of the generally materially higher
base metal prices at 31 December 2020 compared to the start
of the year. We enter 2021 with strong earnings momentum,
noting c. $7.2 billion of illustrative annualised free cash flow
generation at end of January 2021 spot prices, from c.$16.0 billion
of Adjusted EBITDA.
We continue to target a strong BBB/Baa credit rating and plan to
reduce Net debt below the middle of our target range this year,
with a medium-term target to the lower end of the range, along
with Net debt/Adjusted EBITDA closer to c.1x.
CORPORATE GOVERNANCE AND SUSTAINABILITY
At Glencore, we are committed to operating in a responsible
manner across all aspects of our business. Last year we concluded
an extensive process to revisit and refine the values that define us.
The values of Safety, Integrity, Openness, Responsibility, Simplicity
and Entrepreneurialism 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 and they are at
the heart of our culture and the way we do business.
We also uphold 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.
We are committed to working in line with the United Nations
Universal Declaration on Human Rights and the UN Guiding
Principles on Business and Human Rights. In 2020, we joined the
Fair Cobalt Alliance, to help positively transform artisanal mining
in the DRC and work towards eliminating child and forced labour,
as well as other dangerous practices.
The safety and security of our workforce and the communities
living around our assets are a priority recognised across our
operational activities. While we have taken far-reaching actions
to address the underlying issues that led to the tragic loss of eight
lives at Glencore’s managed operations in 2020, this performance
remains unacceptable and we are implementing an enhanced
fatality reduction programme with the relaunch of “SafeWork”
in 2021 to help drive the necessary step-change in performance.
We remain determined to be a fatality-free business.
We are very pleased to have appointed Cynthia Carroll to the
Board as an independent Non-Executive Director on 2 February
2021. Cynthia has over 30 years of experience in the resource sector
and her experience and insights will be of great benefit to us.
Cynthia has been appointed to the HSEC board committee.
Glencore Annual Report 2020 3
Financial statementsGovernanceAdditional informationStrategic report
CHIEF EXECUTIVE OFFICER’S REVIEW
continued
SHAREHOLDER RETURNS
LOOKING AHEAD
Owing to the uncertainty resulting from the Covid pandemic and
to support the Group’s overall financial position during 2020, the
Board elected not to pay any distributions in 2020.
Having now reduced Net debt to $15.2 billion, excluding Marketing
leases at period end (within our $10 to $16 billion target range),
the Board is pleased to propose to shareholders a 2021 base
distribution of $0.12 per share (c.$1.6 billion), comprising the
$1 billion base attributable to Marketing plus 25% of 2020 Industrial
asset attributable free cash flow, payable in two equal instalments
in 2021.
As noted above, we have a 2021 priority to ensure additional
deleveraging below the middle of the c.$10–16 billion guidance
range (excluding Marketing lease liabilities) and targeting the
lower end of the range in the medium term, including seeing
the Net debt/Adjusted EBITDA ratio moving closer to 1x. Given
Glencore’s current strong levels of operating cash flow (evidenced
by the c. $7.2 billion of illustrative annualised free cash flow
generation at end of January 2021 spot prices), these targets are
well on track to be met. Reflecting these objectives, the next six
months’ performance and prevailing market conditions and
outlook at the time, the Board would consider special 2021 “top-up”
shareholder distributions, alongside its interim results in August.
Subject to an internal assessment of appropriate equity trading
ranges for Glencore, cash distributions will generally be preferred
over buybacks given the inherent cyclical nature and volatility of
commodity prices.
After almost 40 years in the business and 20 years as CEO, the
time has come for me to retire and hand over to my successor,
Gary Nagle. This transition will occur through the first half of 2021.
I have worked closely with Gary over the last 20 years and the
Board and I have every confidence that he will continue to drive
our business forward with the enduring principles of dedication
and commitment that have contributed to its success to date.
Gary’s appointment largely concludes completion of a seamless
senior management transition to Glencore’s next generation of
leadership. All senior management positions have been promoted
from within the business, demonstrating the strength in depth
across the Group.
Glencore has been a feature of the global commodities industry
for nearly half a century, growing from a physical trader of
metals, minerals and oil, into one of the world’s largest and most
integrated natural resource companies. Today, the business, with
its portfolio of commodities and activities, is uniquely positioned
for the expected resource needs of the future. In remaining
focussed on creating sustainable long-term value for all
stakeholders while operating in a responsible manner, we are
ready to support the transition to a low-carbon economy and
realise our ambition of achieving net-zero by 2050.
Ivan Glasenberg
Chief Executive Officer
10 March 2021
4 Glencore Annual Report 2020
INVESTMENT CASE
Our unique portfolio enables the transition to a low
carbon economy. As a CO2e total emissions reduction
leader, our strategy is Paris aligned across key milestone
dates, with the ambition of achieving net zero by 2050
Strong
diversification
by commodity,
geography
and activity
A major supplier
of energy and
mobility transition
materials
Well-capitalised,
low-cost, high return
assets to facilitate the
transition to a low
carbon economy
• Fully integrated from
extraction to customer
• Presence in over 35 countries
• Responsibly producing
and marketing more than
60 commodities
• Diversified across multiple
suppliers and customers
• Future demand patterns are likely to
favour the commodities that facilitate
the decarbonisation of energy usage
• We are a major producer of the
commodities (copper, cobalt,
nickel and vanadium) that currently
underpin the infrastructure and
battery chemistry likely to power
electric vehicles and energy
storage systems
• Our overall metals’ asset
portfolio is low-cost and long-life,
supporting the transition to a low
carbon economy
• Our high-quality coal portfolio
is expected to generate healthy
levels of cashflow as production
reduces over time, in line with our
decarbonisation commitments
A unique
marketing business
that extracts value
across the entire
supply chain
Be a
decarbonisation
leader while
meeting everyday
metals demand
and today’s
energy needs
Significant cash
flow generation
and shareholder
distribution
potential
• As a marketer of commodities, we
• Leading climate strategy: targeting
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
a 40% reduction in total CO2e
emissions by 2035, and 2050 net zero
ambition for Scope 1+2+3 emissions
• Responsible stewardship of
declining coal business over time
as industry decarbonises
• Decarbonisation pathways require
our transition enabling commodities
• Adjusted EBITDA◊ $11.6 billion in
2020, flat year-on-year
• Net debt/adjusted EBITDA◊ of 1.37x
• Base distribution policy represents
a fixed payout of prior year cash flow,
comprising $1 billion from Marketing
and 25% of Industrial asset
attributable free cash flows
• “Top-up” capital returns, as
appropriate, from accumulation
of balance sheet surplus capital
Glencore Annual Report 2020 5
Financial statementsGovernanceAdditional informationStrategic report
OUR MARKET DRIVERS
We are dependent upon the supply, demand and pricing for our commodities
Key Market drivers
Impact on our industry
How we are responding
Net zero
emissions by
2050
Future
commodity
supply
Efforts to contain
a global
temperature
rise will impact
fossil fuel
demand
• Momentum to decarbonise the global economy is gathering
pace as nations increasingly coordinate efforts aimed at
minimising greenhouse gas emissions, including the targeting
of net zero emissions by 2050
The Paris Agreement aims to keep the global temperature rise
this century to well below
2ºC
as well as pursue further efforts to limit the temperature increase
to 1.5ºC
Timing within
the economic
cycle is very
important when
bringing new
mine supply
online
• 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
$30bn
estimated 2020 diversified miners’ total capital expenditure
compared to a 10 year average of c.$36bn (estimated)
• This transition is likely to increase the cost for fossil fuels, impose
• We recognise our responsibility to contribute to the global effort
levies for emissions, increase costs for monitoring and reporting
to achieve the goals of the Paris Agreement by decarbonising
and reduce demand
our own operational footprint
• Third parties, including potential or actual investors,
• We believe that our contribution should take a holistic
may introduce policies materially adverse to Glencore due to
approach and have considered our commitment through
our interest in fossil fuels, particularly coal
the lens of our total emissions footprint
• Technological advances are making renewable energy sources
• In line with the ambitions of the more demanding 1.5-degree
more competitive with fossil fuels, which is likely to increase
Celsius scenarios set out by the Intergovernmental Panel on
renewable energy’s market share over the longer run. Many
Climate Change, we target a 40% reduction of our total (Scope 1,
analysts believe that demand projections for coal are now lower
2 and 3) emissions by 2035 on 2019 levels. Post 2035, our
than previously expected
ambition is to achieve, with a supportive policy environment,
net zero total emissions by 2050
• Over-investment creates oversupply and, with it, a potentially
• Our disciplined approach to capital allocation seeks to reflect
prolonged period of low commodity prices
market supply and demand dynamics
• Although commodity prices have increased from the lows seen
• Given the unpredictability of costs, risks and timing of large-
in early 2016, the experience of the last economic cycle has
scale greenfield projects, we prefer to add supply via targeted
increased investor pressure on companies to be more cautious
capital efficient/lower risk brownfield expansions when required
about investing in new supply
• With the expectation that growth drivers in the global economy
• Balancing a finite, declining resource base with the need to
will become weighted towards decarbonisation spending, in
grow to meet expected future demand is an inherent challenge
addition to the metals needed for everyday life, the extensive
for companies in the resource sector
part of our commodity portfolio which supplies this demand,
is well placed to benefit from this transition
Demand
for the
commodities
we produce
Changes in
population and
growth of
developing
economies is
generally
impactful on
commodity
demand
• The industrialisation and urbanisation of developing economies
• Current levels of industrialisation and urbanisation suggest, in
• Energy transition commodities such as copper, nickel, cobalt
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
• Looking forward, the world is forecast to add 1.9 billion people by
2050, with much of this growth in highly populous
industrialising economies
• All potential decarbonisation pathways require significantly
more non-fossil fuel commodities
1 Mtpa
forecast annual average growth in copper demand 2020 to 2050
under a Rapid Transition pathway scenario (IEA SDS).
isolation, that demand growth rates for commodities could be
and vanadium could become substantially more important
lower in the future. Lower or negative demand growth could
given their role in the technologies that underpin low or no
generate excess supply along with lower commodity prices.
carbon energy sources
However, post Covid-19, large-scale government expected
stimulus, particularly if directed towards infrastructure, could be
supportive for commodity demand
• Continued population growth, particularly in Africa and South
East Asia could generate additional demand for commodities
• We are a leading producer of metals that enable low-carbon
and carbon-neutral technologies
• We are prioritising capex towards transition commodities,
including our Collahuasi copper JV and our Canadian INO
nickel life extension projects
• The transition to a low-carbon future is overall positive for
Glencore. All energy demand decarbonisation pathways require
our metals enabling commodities
An extra 1.8 billion people forecast
to increase global energy demand
19%
by 2040 under IEA Stated Policies Scenario
Emerging drivers
Impact on our industry
How we are responding
Higher
commodity
prices and
resource scarcity
increases the risk
of material
substitution
• Widespread adoption of renewable energy sources as a means
• The revenue and earnings of substantial parts of our industrial
• Diversification of our portfolio of commodities, currencies,
of decarbonising energy supply will create significant new
demand for the current enabling commodities, including
copper, nickel, cobalt and lithium
• The quantum of potential new demand is generally of a size
that is large relative to current annual production and known
defined global resources of that commodity
asset activities, and to a lesser extent, our marketing activities,
assets and liabilities is likely to mitigate the financial impact
are dependent on prevailing commodity prices
of a negative demand shift in the event of a particular
• Under a rapid decarbonisation scenario, a significant increase in
commodity substitution
demand for the commodities that currently underpin
• Our market research teams continue to assess the underlying
renewable technologies is likely to generate significantly higher
demand for our commodities as well as the new materials that
prices for those commodities
could impact current renewable technology solutions
Substitution
• Higher sustained commodity prices will increase the risk that
consumers of these commodities will accelerate efforts to either
reduce the quantity of material needed for a certain application
or substitute an alternative 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
6 Glencore Annual Report 2020
Net zero
emissions by
2050
Future
commodity
supply
Demand
for the
commodities
we produce
Efforts to contain
• Momentum to decarbonise the global economy is gathering
pace as nations increasingly coordinate efforts aimed at
minimising greenhouse gas emissions, including the targeting
of net zero emissions by 2050
a global
temperature
rise will impact
fossil fuel
demand
The Paris Agreement aims to keep the global temperature rise
this century to well below
2ºC
to 1.5ºC
as well as pursue further efforts to limit the temperature increase
Timing within
the economic
cycle is very
important when
bringing new
mine supply
online
• 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
$30bn
estimated 2020 diversified miners’ total capital expenditure
compared to a 10 year average of c.$36bn (estimated)
Changes in
population and
growth of
developing
economies is
generally
impactful on
commodity
demand
• 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
• Looking forward, the world is forecast to add 1.9 billion people by
2050, with much of this growth in highly populous
industrialising economies
• All potential decarbonisation pathways require significantly
more non-fossil fuel commodities
Higher
commodity
prices and
resource scarcity
increases the risk
of material
substitution
• Widespread adoption of renewable energy sources as a means
of decarbonising energy supply will create significant new
demand for the current enabling commodities, including
copper, nickel, cobalt and lithium
• The quantum of potential new demand is generally of a size
that is large relative to current annual production and known
defined global resources of that commodity
Substitution
Key Market drivers
Impact on our industry
How we are responding
• This transition is likely to increase the cost for fossil fuels, impose
levies for emissions, increase costs for monitoring and reporting
and reduce demand
• We recognise our responsibility to contribute to the global effort
to achieve the goals of the Paris Agreement by decarbonising
our own operational footprint
• Third parties, including potential or actual investors,
• We believe that our contribution should take a holistic
may introduce policies materially adverse to Glencore due to
our interest in fossil fuels, particularly coal
approach and have considered our commitment through
the lens of our total emissions footprint
• 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 now lower
than previously expected
• In line with the ambitions of the more demanding 1.5-degree
Celsius scenarios set out by the Intergovernmental Panel on
Climate Change, we target a 40% reduction of our total (Scope 1,
2 and 3) emissions by 2035 on 2019 levels. Post 2035, our
ambition is to achieve, with a supportive policy environment,
net zero total emissions by 2050
• Over-investment creates oversupply and, with it, a potentially
• Our disciplined approach to capital allocation seeks to reflect
prolonged period of low commodity prices
market supply and demand dynamics
• Although commodity prices have increased from the lows seen
• Given the unpredictability of costs, risks and timing of large-
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
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 become weighted towards decarbonisation spending, in
addition to the metals needed for everyday life, the extensive
part of our commodity portfolio which supplies this demand,
is well placed to benefit from this transition
• Current levels of industrialisation and urbanisation suggest, in
isolation, that demand growth rates for commodities could be
lower in the future. Lower or negative demand growth could
generate excess supply along with lower commodity prices.
However, post Covid-19, large-scale government expected
stimulus, particularly if directed towards infrastructure, could be
supportive for commodity demand
• Continued population growth, particularly in Africa and South
East Asia could generate additional demand for commodities
1 Mtpa
forecast annual average growth in copper demand 2020 to 2050
under a Rapid Transition pathway scenario (IEA SDS).
An extra 1.8 billion people forecast
to increase global energy demand
19%
by 2040 under IEA Stated Policies Scenario
• Energy transition commodities such as copper, nickel, cobalt
and vanadium could become substantially more important
given their role in the technologies that underpin low or no
carbon energy sources
• We are a leading producer of metals that enable low-carbon
and carbon-neutral technologies
• We are prioritising capex towards transition commodities,
including our Collahuasi copper JV and our Canadian INO
nickel life extension projects
• The transition to a low-carbon future is overall positive for
Glencore. All energy demand decarbonisation pathways require
our metals enabling commodities
Emerging drivers
Impact on our industry
How we are responding
• 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
• Diversification of our portfolio of commodities, currencies,
assets and liabilities is likely to mitigate the financial impact
of a negative demand shift in the event of a particular
commodity substitution
demand for the commodities that currently underpin
renewable technologies is likely to generate significantly higher
prices for those commodities
• 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
• Higher sustained commodity prices will increase the risk that
consumers of these commodities will accelerate efforts to either
reduce the quantity of material needed for a certain application
or substitute an alternative 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
Glencore Annual Report 2020 7
Financial statementsGovernanceAdditional informationStrategic report
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 most of our competitors in creating an enhanced
entrepreneurial focus on value generation
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.145,000 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 a significantly 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 multiple
commodities
from over 65 assets
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 recycling
business
We recycle key
commodities fuelling
the circular economy
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.
8 Glencore Annual Report 2020
SAFETY
OPENNESS
INTEGRITY
SIMPLICITY
RESPONSIBILITY
ENTREPRENEURIALISM
Outputs and impact
on key stakeholders
INVESTORS
$11.6bn
2020 Adjusted EBITDA◊
$4.4bn
Free cash flow (FFO less net purchases
of property, plant and equipment)
OUR PEOPLE
7%
Decrease in total recordable injury rate
COMMUNITIES AND SOCIETY
$95m
Community and Covid-19 support
PAYMENTS TO GOVERNMENTS
$5.8bn
Our marketing business
We move commodities
from where they are plentiful
to where they are needed
Logistics and delivery
Our logistics assets and capabilities 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 an
ability to meet our customer specific requirements
and provide a high-quality service.
Our commodities
in everyday
products
The products we
produce and market
play an essential role
in modern life
Our marketing
business
Page 52
Our industrial
business
Page 60
Sustainability
framework
Page 33
Our strategy for a
sustainable future
Page 10
Glencore Annual Report 2020 9
Financial statementsGovernanceAdditional informationStrategic report
OUR STRATEGY FOR A
SUSTAINABLE FUTURE
Aligned with our purpose, our portfolio enables
the transition to a low-carbon economy, while
meeting society’s energy needs as it progresses
through the transition
OUR PURPOSE
STRATEGIC OBJECTIVE
Responsibly
sourcing the
commodities
that advance
everyday life
To be a leader in
enabling
decarbonisation of energy
usage and help meet
continued demand for the
metals needed in everyday
life while responsibly
meeting the energy
needs of today
10 Glencore Annual Report 2020
STRATEGIC PRIORITIES
Responsible
production
and
supply
Responsible
portfolio
management
Responsible
product use
Integrity, responsibility and
safety are our core values
that are embedded in
everything we do. We are
committed to operating
ethically, responsibly,
and to contributing
to socioeconomic
development in the
countries where we
operate. We will continue
to focus on reducing
the carbon footprint of
our operations and will
allocate financial returns
towards fullfilment of
our business strategy.
Our commitment is
delivered through our
operational excellence,
health and safety
and ethics and compliance
programmes, advancing
our environmental
performance, respecting
human rights and
by developing, maintaining
and strengthening our
relationships with all of
our stakeholders.
We will prioritise investment
in metals that support the
decarbonisation of energy
usage as well as help meet
demand for metals needed
in everyday life. We will
also reduce our coal
production in line with
our various climate action
commitments and
the electrification and
decarbonisation of
energy systems.
Our capital allocation
supports this strategy
through the optimal
balance of debt and
equity, distributions to
shareholders and business
reinvestment in transition
commodities and value
accretive Scope 1+2
abatement opportunities
that help achieve medium-
term Paris alignment and
our 2050 net-zero ambition.
We will participate in
global efforts to improve
abatement technologies
and availability, as well as
resource use efficiency
by contributing to the
circular economy.
A low-carbon future
requires responsibly
produced low-carbon
metals. We will seek
opportunities to increase
the proportion of green
metals we can supply
to customers from our
own operations and
through our extensive
marketing activities.
Glencore Annual Report 2020
11
Strategic reportAdditional informationFinancial statementsGovernance
OUR STRATEGY FOR A SUSTAINABLE FUTURE
continued
Strategic
priorities
Performance in 2020
Operational performance
Climate change
Water management
Operational excellence
RESPONSIBLE
PRODUCTION
AND SUPPLY
After allowing for managed production
adjustments, targeting margin over volume, the
majority of our key assets performed in line with
expectations. Our copper, zinc, and coal portfolios
maintained their first quartile cost/margin
positions, while the nickel portfolio (ex-Koniambo)
again recorded a second quartile cost position.
Calculated copper, zinc and nickel EBITDA
margins increased year-on-year while coal’s
margin decreased in line with lower coal prices.
Safety
Regrettably, there were eight fatalities during
the year. We implemented our enhanced fatality
reduction programme, and have overhauled our
“SafeWork” programme for relaunch in 2021.
We continue to work towards the elimination
of fatalities from our business.
Our TRIFR and LTIFR decreased by 7% and 5%
respectively compared to 2019.
We recognise our responsibility
to contribute to the global effort
to achieve the goals of the Paris
Agreement by decarbonising
our own operational emissions
footprint. In line with the
ambitions of the 1.5-degree
Celsius (ºC) scenarios set out by
the IPCC, we have set ourselves
the target of reducing our total
(Scope 1, 2 and 3) emissions by
40% by 2035 on 2019 levels. Post
2035, our ambition is to achieve,
with a supportive policy
environment, net zero total
emissions by 2050.
Conservatively positioned
Bonds
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.
Year-end Net debt and Net debt to Adjusted
EBITDA were $15.8 billion and 1.37x respectively.
Net loss attributable to equity holders for 2020
was $1.9 billion.
RESPONSIBLE
PORTFOLIO
MANAGEMENT
Marketing green metals
We are one of the largest suppliers of aluminium
to global markets. Significant offtake agreements
with low-carbon producers results in more than
60% of our ex-China marketing book currently
being low-carbon. We will continue to focus on
expanding this footprint.
RESPONSIBLE
PRODUCT USE
12 Glencore Annual Report 2020
We issued $2.0 billion, EUR 950
million and CHF 225 million
of bonds across a range of
maturities from 5 to 10 years.
Post-2020 maturities are
capped at c.$3 billion in
any one year.
Reinvestment
Our net 2020 cash capital
expenditure of $3.9 billion was
weighted towards transition
commodities with c.82% of our
expansionary capital invested in
our metals business, including
the Katanga copper/cobalt
operation, INO life extension
projects (nickel) and the
Zhairem zinc project.
Responsible sourcing
Glencore became a member
of the Fair Cobalt Alliance (FCA)
in 2020. Through the FCA, we
will support legitimate artisinal
and small-scale mining
(ASM) cooperatives in their
endeavours to transform
their practices and align with
international human rights
practices, especially in the
prevention of child labour.
Operations continue
to implement our Water
Management Guideline,
focused on responsible water
management, in alignment
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 2020, we spent
$95 million on these and
Covid-19 support programmes
(2019: $90 million).
Credit rating
The Group’s credit
ratings are currently Baa1
(negative outlook) from
Moody’s and BBB+ (stable)
from Standard & Poor’s.
Credit facility
The Revolving credit facilities
were refinanced and slightly
increased in 2020 to $14.625
billion. Committed available
liquidity of $10.3 billion at
year-end covers more than
three years of upcoming
bond maturities.
In addition to our new
partnership with the FCA, as
a member of the Responsible
Minerals Initiative, we also
participate in programmes
to develop frameworks and
standards that support
responsible ASM.
Principal
risks
• Health,
safety and
environment
• Climate change
• Community
relations and
human rights
Priorities going forward
KPIs
Under all credible scenarios,
• Value for our
fossil fuels (coal, gas and oil) will
shareholders – Adjusted
Continued focus on operational efficiencies
and improvements to minimise operating
costs and maximise margins.
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,
continue to be a part of the
global energy mix for many
years to come.
We will responsibly steward the
decline of our coal business as it
meets society’s energy needs
through the energy transition.
Transparency
safety, environmental and community
and human rights performance.
We are committed to operating
transparently, responsibly and
meeting or exceeding
applicable laws.
Managing emissions
We are working with global specialists
and draw on local expertise within our
operational teams to identify value
accretive abatement opportunities to
further reduce our carbon footprint.
EBIT/EBITDA, Net
income attributable
to equity holders
• Safe and healthy
workplace – fatalities,
TRIFR, LTIFR and
occupational
disease cases
• Environmental
performance –
water withdrawn,
Scope 1 and 2
emissions, meeting
our commitments
on climate change
• Long-term value
for communities –
community
investment spend
Balance sheet
In the medium term, we target
• Returns to shareholders
• Supply, demand
leverage at the low end of our
– Funds from
We are committed to strengthening our
balance sheet to ensure it is capable of
supporting our purpose and strategy
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.
$10-$16 billion Net debt
guidance range (below the
midpoint by end of 2021),
including a Net debt/Adjusted
EBITDA ratio closer to c.1x.
Reinvestment
Prioritise investment in
transition commodities and
value accretive Scope 1+2
abatement opportunities that
help achieve our medium-term
Paris alignment and 2050
net-zero ambition.
operations, Net funding
and Net debt and
annual capital return /
distributions
• Value for our
shareholders – Adjusted
EBIT/EBITDA, Net
income attributable
to equity holders
and prices
for the
commodities
we produce
• Currency
exchange rates
• Liquidity
• Counterparty
credit and
performance
Partnerships
Circular economy
• Returns to shareholders
• Geopolitical,
Working with our customers and
Leverage our value chain to
supply-chain to enable greater use of
expand the volume of
low-carbon metals and support progress
recyclable commodities for
towards technological solutions
Abatement
processing through our global
network of metallurgical assets.
Supporting uptake and integration
Responsible sourcing
of abatement – an essential contributor
Pursue strategic long-term
to achieving low or net zero carbon
objectives
agreements to provide a reliable
supply of responsibly-produced
commodities essential to the
low-carbon economy
– Funds from
operations, Net funding
and Net debt and
annual capital return /
distributions
• Value for our
shareholders – Adjusted
EBIT/EBITDA, Net
income attributable
to equity holders
permits and
licence to
operate
• Laws and
enforcement
• Operating risk
Key performance
indicators
Page 22
Risk Management
Page 70
Principal
risks
• Health,
safety and
environment
• Climate change
• Community
relations and
human rights
• Value for our
shareholders – Adjusted
EBIT/EBITDA, Net
income attributable
to equity holders
• Safe and healthy
workplace – fatalities,
TRIFR, LTIFR and
occupational
disease cases
• Environmental
performance –
water withdrawn,
Scope 1 and 2
emissions, meeting
our commitments
on climate change
• Long-term value
for communities –
community
investment spend
• Returns to shareholders
• Supply, demand
– Funds from
operations, Net funding
and Net debt and
annual capital return /
distributions
• Value for our
shareholders – Adjusted
EBIT/EBITDA, Net
income attributable
to equity holders
and prices
for the
commodities
we produce
• Currency
exchange rates
• Liquidity
• Counterparty
credit and
performance
Strategic
Performance in 2020
priorities
Priorities going forward
KPIs
Operational performance
Climate change
Water management
Operational excellence
Continued focus on operational efficiencies
and improvements to minimise operating
costs and maximise margins.
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.
Managing emissions
We are working with global specialists
and draw on local expertise within our
operational teams to identify value
accretive abatement opportunities to
further reduce our carbon footprint.
Conservatively positioned
Bonds
Credit rating
Balance sheet
We are committed to strengthening our
balance sheet to ensure it is capable of
supporting our purpose and strategy
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.
Under all credible scenarios,
fossil fuels (coal, gas and oil) will
continue to be a part of the
global energy mix for many
years to come.
We will responsibly steward the
decline of our coal business as it
meets society’s energy needs
through the energy transition.
Transparency
We are committed to operating
transparently, responsibly and
meeting or exceeding
applicable laws.
In the medium term, we target
leverage at the low end of our
$10-$16 billion Net debt
guidance range (below the
midpoint by end of 2021),
including a Net debt/Adjusted
EBITDA ratio closer to c.1x.
Reinvestment
Prioritise investment in
transition commodities and
value accretive Scope 1+2
abatement opportunities that
help achieve our medium-term
Paris alignment and 2050
net-zero ambition.
RESPONSIBLE
PRODUCTION
AND SUPPLY
After allowing for managed production
We recognise our responsibility
Operations continue
adjustments, targeting margin over volume, the
to contribute to the global effort
to implement our Water
majority of our key assets performed in line with
to achieve the goals of the Paris
Management Guideline,
expectations. Our copper, zinc, and coal portfolios
Agreement by decarbonising
focused on responsible water
maintained their first quartile cost/margin
our own operational emissions
management, in alignment
positions, while the nickel portfolio (ex-Koniambo)
footprint. In line with the
with the International
again recorded a second quartile cost position.
ambitions of the 1.5-degree
Council for Mining & Metals’
Calculated copper, zinc and nickel EBITDA
Celsius (ºC) scenarios set out by
(ICMM) position statement
margins increased year-on-year while coal’s
the IPCC, we have set ourselves
on water and its water
margin decreased in line with lower coal prices.
the target of reducing our total
management framework.
Safety
(Scope 1, 2 and 3) emissions by
40% by 2035 on 2019 levels. Post
Community engagement
Regrettably, there were eight fatalities during
2035, our ambition is to achieve,
Our community development
the year. We implemented our enhanced fatality
with a supportive policy
programmes are an integral
reduction programme, and have overhauled our
environment, net zero total
part of our community and
“SafeWork” programme for relaunch in 2021.
emissions by 2050.
We continue to work towards the elimination
of fatalities from our business.
Our TRIFR and LTIFR decreased by 7% and 5%
respectively compared to 2019.
stakeholder engagement
strategies. In 2020, we spent
$95 million on these and
Covid-19 support programmes
(2019: $90 million).
Capital structure and credit profile managed
We issued $2.0 billion, EUR 950
The Group’s credit
through targeting a maximum 2x Net debt/
million and CHF 225 million
ratings are currently Baa1
RESPONSIBLE
PORTFOLIO
MANAGEMENT
Adjusted EBITDA throughout the cycle,
augmented by an upper Net debt cap
of c.$16 billion excluding Marketing-related
lease liabilities.
Year-end Net debt and Net debt to Adjusted
EBITDA were $15.8 billion and 1.37x respectively.
Net loss attributable to equity holders for 2020
was $1.9 billion.
of bonds across a range of
(negative outlook) from
maturities from 5 to 10 years.
Moody’s and BBB+ (stable)
Post-2020 maturities are
capped at c.$3 billion in
any one year.
Reinvestment
from Standard & Poor’s.
Credit facility
The Revolving credit facilities
were refinanced and slightly
Our net 2020 cash capital
increased in 2020 to $14.625
expenditure of $3.9 billion was
billion. Committed available
weighted towards transition
liquidity of $10.3 billion at
commodities with c.82% of our
year-end covers more than
expansionary capital invested in
three years of upcoming
our metals business, including
bond maturities.
the Katanga copper/cobalt
operation, INO life extension
projects (nickel) and the
Zhairem zinc project.
Marketing green metals
Responsible sourcing
We are one of the largest suppliers of aluminium
Glencore became a member
In addition to our new
to global markets. Significant offtake agreements
of the Fair Cobalt Alliance (FCA)
partnership with the FCA, as
with low-carbon producers results in more than
in 2020. Through the FCA, we
a member of the Responsible
60% of our ex-China marketing book currently
will support legitimate artisinal
Minerals Initiative, we also
being low-carbon. We will continue to focus on
and small-scale mining
participate in programmes
expanding this footprint.
RESPONSIBLE
PRODUCT USE
(ASM) cooperatives in their
to develop frameworks and
endeavours to transform
standards that support
their practices and align with
responsible ASM.
international human rights
practices, especially in the
prevention of child labour.
Partnerships
Working with our customers and
supply-chain to enable greater use of
low-carbon metals and support progress
towards technological solutions
Abatement
Supporting uptake and integration
of abatement – an essential contributor
to achieving low or net zero carbon
objectives
Circular economy
Leverage our value chain to
expand the volume of
recyclable commodities for
processing through our global
network of metallurgical assets.
Responsible sourcing
Pursue strategic long-term
agreements to provide a reliable
supply of responsibly-produced
commodities essential to the
low-carbon economy
• Returns to shareholders
– Funds from
operations, Net funding
and Net debt and
annual capital return /
distributions
• Value for our
shareholders – Adjusted
EBIT/EBITDA, Net
income attributable
to equity holders
• Geopolitical,
permits and
licence to
operate
• Laws and
enforcement
• Operating risk
Glencore Annual Report 2020 13
Strategic reportAdditional informationFinancial statementsGovernance
EVOLVING OUR APPROACH TO ARTISANAL
AND SMALL-SCALE MINING (ASM)
As a major copper and cobalt miner in the Democratic Republic
of the Congo (DRC), we have long engaged on the issue of ASM
with communities around our businesses, the DRC Government,
civil society and other key stakeholders, including our customers.
Following this engagement, last year we revised our approach,
further exploring how ASM and large-scale mining (LSM) can
sustainably co-exist as distinct yet complimentary sectors of a
successful mining industry. Although we do not mine or trade any
cobalt from artisanal sources, we believe that legal ASM can play
an important and sustainable role in the DRC economy. However,
it must be carried out safely, transparently and without the use of
child or forced labour.
We have also joined the Fair Cobalt Alliance (the Alliance). The
Alliance’s mission is to positively transform ASM in the DRC and
work towards eliminating child and forced labour, as well as other
dangerous practices. Through its partners in the DRC, the Alliance
aims to tackle long-standing challenges within the ASM sector. Its
objectives include achieving a child-labour free Kolwezi, supporting
the professionalisation of ASM through the adoption of responsible
mining practices, and identifying and supporting alternative
livelihoods to help increase incomes and reduce poverty.
We are already committed to working with our local communities
and other stakeholders in the DRC to address the endemic
poverty in this region that is the underlying cause of ASM.
Glencore, through our support of the Alliance, supports legitimate
ASM cooperatives in their endeavours to transform their practices
and align with international human rights practices, especially in
the prevention of child labour.
STORIES FROM THE YEAR
Cobalt Alliance: A case study
ENABLING
POSITIVE
CHANGE
In light of our recent membership
of the Fair Cobalt Alliance, we
explore the issue of responsible
sourcing, what we’re doing
about ASM, and what we
hope the Fair Cobalt
Alliance can achieve.
Glencore believes that legal
ASM can play an important
and sustainable role in the
DRC economy when carried
out responsibly and
transparently; we also
believe that alternative
livelihood activities to ASM
is key for a diversified and
sustainable economy for the
communities living around
our operations.
We are already committed to working
with our local communities and other
stakeholders in the DRC to address
the endemic poverty in this region
that is the underlying cause of ASM.
For example, former ASM women
have created sewing cooperatives
as an alternative livelihood activity.
14 Glencore Annual Report 2020
COBALT: A CASE FOR LEADERSHIP IN
RESPONSIBLE SOURCING
As an industrial mining operation, we do not process, buy or trade
ASM material.
Historically, ASM has been associated with significant challenges.
High unemployment and subsistence living can push miners into
taking great risks resulting in child labour and illegal intrusions
onto active industrial sites – including our own – continuing to
present risks to both our people and communities. As a responsible
miner, we do not tolerate any form of child or forced labour. Also
we do not tolerate illegal intrusions onto mining concessions.
While these challenges exist, ASM is a significant source of
employment within the DRC for as many as 2 million people
across the country. The DRC’s geological cobalt endowment is
unrivalled – the country has around 60% of the world’s known
cobalt reserves. This means that while the DRC hosts the largest
industrial cobalt mines in the world, smaller operations including
ASM can also be economically viable and will continue to exist.
Although we do not trade ASM sourced cobalt today, we
recognise the legitimacy of cobalt from responsible ASM
operations in the global supply chain and welcome the efforts by
responsible sourcing initiatives and international organisations to
improve practices and address risks of human rights violations. In
addition to our new partnership with the Alliance, as a member of
the Responsible Minerals Initiative and the Global Battery Alliance,
we participate in programmes to develop frameworks and
standards that support responsible ASM.
“WE CANNOT IGNORE ARTISANAL MINING”
On the ground, we are committed to operating ethically,
responsibly and respecting human rights everywhere we
operate. This includes zero tolerance for child labour.
We believe we have a responsibility to collaborate with local
stakeholders to help address social challenges in the regions that
host our operations.
Our Kamoto Copper Company business (KCC) supports social
development through its many local programmes, in particular
a series of initiatives designed to fight child labour and develop
alternative sources of livelihoods for the community. These include
supporting over 162 agricultural co-operatives providing food
self-sufficiency and income generation to over 3,500 members
and their dependents, and upskilling over 2,000 small business
association members who support 12,000 dependants. KCC and
Glencore have also improved learning conditions for over 54,000
primary and secondary age school children, and in 2019 ran school
holiday camps for 10,000 children.
As the world calls for more cobalt and copper to power the energy
and transport revolutions, the demand for these vital everyday
commodities will reinforce the global importance of the DRC. It is
crucial that all supply chains, including both cobalt and copper,
are sustainable, ethical, and responsible.
As part of Capacity Building for Associations,
Glencore, through our support to the Fair
Cobalt Alliance, will support legitimate ASM
cooperatives in their efforts to transform
their practices and align with international
human rights practices, in particular in the
prevention of child labour.
Glencore Annual Report 2020 15
Financial statementsGovernanceAdditional informationStrategic report
CLIMATE CHANGE
Our portfolio enables the transition to a low-carbon
economy, while meeting society’s energy needs as
it progresses through the transition
CLIMATE REPORT 2020: PATHWAY TO NET ZERO
In late 2020, we published our third report on climate change,
Climate Report 2020: Pathway to net zero. This report focuses on
how we will deliver our targeted 40% reduction in total emissions
by 2035 on 2019 levels and our ambition, with a supportive policy
environment1, to be a net-zero total emissions company by 2050.
These reductions will be underpinned by the managed reduction
of our coal portfolio.
Led by the Climate Change working group – see page 92 – we
formulated our climate change strategy in partnership with key
stakeholders. Our ongoing engagement activities are core to our
commitment to inform stakeholders on our progress, and
demonstrating our portfolio resilience under a range of scenarios.
Our Climate Report is available on our website at:
glencore.com/sustainability/reports-and-presentations
OUR APPROACH
We understand the role the commodities we produce and
market have in meeting the needs of daily lives. The diversity of
our portfolio underpins our strategic ambition to play a leading
role in enabling the decarbonisation of global energy usage
through providing metals such as copper, cobalt, zinc and nickel
that are essential to the transition to a low-carbon economy, and
managing down our coal business by 40% or more from current
levels by 2035.
We recognise the need for action. We have set ourselves a
1.5-degree Celsius (°C) pathway aligned target of an absolute 40%
reduction of our total emissions (Scope 1, 2 and 3) by 2035 on 2019
levels, consistent with the midpoint of Intergovernmental Panel
on Climate Change’s (IPCC) 1.5°C scenarios and the 1.5°C pathways
set out by the International Energy Agency (IEA). Post 2035, we set
ourselves the ambition to achieve, with a supportive policy
environment, net zero total emissions by 2050.
OUR POSITION ON CLIMATE CHANGE
We support the global climate change goals outlined in the
United Nations Framework Convention on Climate Change
(UNFCCC) and the Paris Agreement. We believe that only through
collective global action can the world achieve the goals of the
Paris Agreement and limit the impact of climate change. Demand
for renewables technologies, and the metals and minerals required
to build them, is expected to grow exponentially in response to the
decarbonisation of global energy supply and electrification of key
sectors, including mobility and its associated infrastructure.
We recognise global climate change science as laid out by the
IPCC and the need to meet the goals of the Paris Agreement.
The world requires a global transformation of energy, industrial
and land-use systems to achieve these goals. As one of the largest
diversified natural resource companies in the world, we can
support the achievement of the goals by producing, trading
and supplying the metals and minerals that are essential to the
transition to a low-carbon economy and to meeting the needs
of everyday life.
We have a responsibility to contribute to the global effort to
achieve the goals of the Paris Agreement by decarbonising
our own operational emissions footprint. We believe that our
contribution should take a holistic approach and have considered
our commitments through the lens of our total emissions
footprint. Our commitment to reduce our Scope 1, 2 and 3
emissions and our coal production is consistent with the IPCC
and IEA 1.5°C scenarios.
Under all credible scenarios, fossil fuels (coal, gas and oil) will
continue to be a part of the global energy mix for many years
to come. Facilitating investment into deploying low emission
technologies, carbon capture and adaptation efforts should be
a priority.
We cannot achieve net zero alone. Continued reductions in
emissions will depend on coordinated government policies,
including incentives to drive accelerated uptake of lower carbon
and decarbonisation technologies, and market-based regulations
governing industrial practices that drive a competitive, least-cost
emissions reduction approach.
As a member of the International Council on Mining and Metals,
our assets consider their Integrated Mine Closure: Good practice
guide, which includes a focus on social provision in closure
planning, in their management systems. We recognise the need
to collaborate with national and regional governments, as well as
our communities, to ensure a just transition through the transition
to a low carbon economy.
REDUCING SCOPE 3 EMISSIONS
Scope 3 emissions form a material part of the mining sector’s
carbon footprint and, as such, we have taken a holistic approach
to our commitments, and included Scope 3 emissions in our
target and ambition.
The most significant contributor to our Scope 3 emissions is our
customers’ usage of the fossil fuels we produce (predominantly
coal). Recent years have seen significant declines in use of coal for
power generation in Europe, largely displaced by natural gas and
LNG. In the Asia-Pacific region, the key destination for our
Australian and South African coal production, coal is the
predominant source of fuel for power generation and, we believe,
will remain a vital transition fuel until such time as alternative
infrastructure can be approved, financed and constructed.
Our total Scope 3 emissions in 2020 were 271 million tonnes CO2e,
a decrease on the 343 million tonnes CO2e in 2019, reflecting lower
energy use by industry in this most challenging year. Our
customers’ usage of the fossil fuels we produced totalled 253
million tonnes CO2e (2019: 326 million tonnes CO2e), being around
93% of our total Scope 3 emissions. Emissions resulting from
customers’ use of the oil products refined at the Astron refinery
are excluded from our Scope 3 emissions total as we neither
originate nor consume the products.
We expect our coal portfolio to produce no more than 85mt by
2035, down 40% from 2019 levels. By 2050, our only remaining coal
mines, if any, will likely be in Australia, with any post-2050
production, including for metallurgical purposes, assumed to be
neutralised directly through carbon capture, utilisation and
storage, or indirectly through offsets.
1 Coordinated government policies, including incentives to drive accelerated uptake of lower carbon and decarbonisation technologies, and market based regulations governing
industrial practices that drive a competitive, least cost emissions reduction approach, are critical to our ability to achieve our ambition of net zero total emissions by 2050.
16 Glencore Annual Report 2020
Our 2020 Sustainability Report will provide a full disclosure on
all of the Scope 3 categories that are relevant and material to
our activities.
REDUCING OUR OPERATIONAL FOOTPRINT
We have set ourselves a 1.5°C pathway aligned target of an
absolute 40% reduction of our total emissions (Scope 1, 2 and 3) by
2035. Given the impact of the coronavirus pandemic on both
mine supply and industrial demand, particularly for thermal coal,
we have taken 2019 rather than 2020 as the baseline year.
We work with global specialists and draw on the local expertise
within our operational teams to identify ways to further reduce
our Scope 1 and 2 emissions. Our approach has led to the
implementation of initiatives that reduce these emissions, while
continuing to meet our obligations to our customers.
Our group-wide marginal abatement cost curve (MACC) identifies
and quantifies opportunities to reduce our carbon footprint and
supporting our assessment of cost-ranked emission reduction
initiatives. These include utilising more power from low-carbon
sources and delivering operational improvements and technologies
that enhance efficiencies, resulting in emissions reductions.
We are continuing to manage our assets responsibly and to
collaborate with governments and local communities to deliver
sustainable economic benefits.
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.
Scope 1 (measured in CO2e) includes emissions from combustion
in owned or controlled boilers, furnaces and vehicles/vessels, from
the use of reductants and fugitive emissions from the production
of coal and oil (direct emissions).
Scope 2-location-based emissions (measured in CO2) 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. For the calculation of the
Scope 2-location-based emissions the relevant grid emission
factors to all our purchased electricity, regardless of specific
renewable electricity contracts (indirect emissions), are applied.
Scope 3 emissions (measured in CO2e) relate to the indirect
greenhouse gas emissions further up and down our value chain.
These include upstream emissions associated with the products
and services we purchase from suppliers and downstream
emissions that include emissions resulting from our customers’
use of the fossil fuels that we produce, their processing of our
metals and concentrates, the emissions resulting from time-
chartered vessels and emissions resulting from joint ventures.
We have exceeded our 2020 target of reducing Scope 1 and 2
emissions intensity by 5% compared to the 2016 baseline, with
Illustrative Adjusted EBITDA mix (%)
Portfolio transition – declining coal Adjusted EBITDA contribution
100
80
60
40
20
0
2018
Metals/other
Coal industrial
2050
a 13.2% reduction achieved. We achieved the reduction of our
carbon intensity through a range of measures, including
operational abatement and production changes, as well as lower
coal seam emissions due to the closure of a coal underground
operation in Australia.
Going forward, we will report annually on progress against
our new target of a 40% reduction in Scope 1, 2 and 3 emissions
by 2035.
INVESTING IN TRANSITION METALS
A key input into reducing our overall footprint will be our allocation
of capital in a way that prioritises investment and sustaining
expenditure in our portfolio’s transition metals.
We disclose how we ensure our material capital expenditure
and investments align with the goals of the Paris Agreement,
including our costs relating to the exploration, acquisition or
development of fossil fuel production, resources and reserves,
as well as for the metals essential to the transition to a low-
carbon economy.
We have adopted the IEA’s global energy and emission scenarios
and extended the scenario analysis to include the evolution of
metals demand as the world transitions to greater electrification
and adoption of metal-intensive wind, solar and battery
technologies. However, as no single pathway can define how
individual economies and the world will transition, the IEA’s
scenarios describe a range of potential outcomes dependent
on the rate at which transition policies are implemented. We
use each of these scenarios to test the resilience of our portfolio,
assess the market fundamentals for our products and to inform
our decisions on capital allocation.
The chart below illustrates our pathway to achieve our medium-term target and long-term ambition.
Illustrative emissions pathway to net zero
(million tonnes CO2)
40%
Reduction
Scope 1+2+3
2019
Scope 1+2+3
Asset Depletion
Scope 1+2
Net Assets Depletion
Scope 3
Decarbonise
Scope 1+2
2035
Scope 1+2+3
Energy Efficiency
+ Fuel Switch
Asset Investments
Scope 1+2+3
Offsets and
efficiencies
Coal Depletion
Scope 1+2+3
2050
Net Zero
Net Zero
Scope 1+2+3
Glencore Annual Report 2020 17
Financial statementsGovernanceAdditional informationStrategic report
CLIMATE CHANGE
continued
Results of scenario testing
Commodity
businesses*
and outlook
Copper
(39%)
Scenarios as set out in
Climate Report 2020:
Pathway to Net Zero
Current Pathway
Scenario impacts
Growth in renewables power generation capacity, electric vehicle sales and
associated infrastructure to underpin our forecasted 15% increase in copper
demand by 2025 on 2019 levels. The Current Pathway is projected to increase
demand by 45% by 2035 and 95% by 2050.
Rapid Transition and
Radical Transformation
The required greater acceleration in investments to decarbonise economies
under the Rapid Transition and Radical Transformation could further drive
copper demand and support rises of 50% and 100% on 2019 levels in 2035 and
2050 respectively.
Ferroalloys
(not
financially
material)
Current Pathway
In South Africa, rising electricity prices and carbon taxes will exacerbate
the pressure currently felt in ferrochrome smelting. Continuing demand
for chrome will support the ongoing operation of ferrochrome mines in
South Africa.
Rapid Transition and
Radical Transformation
The accelerated adoption of renewable technologies such as solar and wind
power generation, which depend on chrome and vanadium, amongst other
metals, for the generation, transmission and storage of low-carbon energy
underpins demand growth for our ferroalloys business, balanced by pressures
on ferrochrome smelting in South Africa.
Nickel
(5%)
Current Pathway
Nickel’s use in batteries, EVs and energy storage systems will result in its
demand rising in the Current Pathway to 130% of 2019 levels by 2025. By 2035,
the scenario requires 135% more nickel and by 2050, cobalt displacement
leads to increases in nickel demand of 250% above 2019 levels.
Zinc
(18%)
Coal
(10%)
Rapid Transition and
Radical Transformation
The adoption of policies needed for the Rapid Transition and Radical
Transformation could drive a 200% increase in demand growth by 2035
on 2019 levels and a continued growth to 270% by 2050.
Current Pathway
The electrification, industrialisation and urbanisation of developing
economies supports demand growth for zinc, due to its anti-corrosive
properties and use as an alloy in materials used in automobiles, electrical
components, and household fixtures. This leads to zinc demand rising to 106%
of 2019 levels by 2025. By 2035, the Current Pathway requires 20% more zinc,
and by 2050 demand reaches 145% of 2019 levels.
Rapid Transition and
Radical Transformation
The major transformation of the global energy system necessary to achieve
the goals of the Paris Agreement is zinc’s use in offshore wind-energy
generating facilities. These scenarios show zinc demand growing to 150%
of 2019 levels by 2035 and to 200% by 2050 on 2019 levels.
Current Pathway
Up to 2030, the Current Pathway sees coal demand growth in Asia offsetting
further declines in the Atlantic markets and demand exceeding supply
capacity in the absence of substantial investment to mine extensions.
Rapid Transition and
Radical Transformation
Marketing
(32%)
Current Pathway
Rapid Transition and
Radical Transformation
* 2020 Adjusted EBITDA contribution
18 Glencore Annual Report 2020
Policies supporting the Rapid Transition and Radical Transformation will lead
to significant coal demand decline over the longer term. The ongoing use of
existing coal power generation facilities will require negative carbon
technologies, including CCUS and DAC, to achieve net zero emissions and
limit global temperature increases. Sensitivity analysis of the carrying
values of our coal assets to such scenarios is presented in Note 1 to the
financial statements.
Marketing remains core to our business model, differentiating Glencore from
its mining peers. Marketing and trading margins are expected to adapt with
climate initiatives. The agility of our marketing business enables it to adapt to
changing circumstances and benefit from various trading and arbitrage
opportunities that will inevitably arise as economies transition at different
rates. Our marketing business will continue to expand into new areas, as
already evidenced with the addition of LNG into our portfolio. Under any
scenario, our marketing business is well-positioned to support the responsible
sourcing and delivery of products needed for the low-carbon economy.
Our performance
Scope 1
(direct emissions)1
(CO2e million tonnes)
Scope 2
location-based2
(CO2 million tonnes)
Carbon Scope 1 and 2
emissions intensity3
(tGHG/tCu)
Total global energy use
at our operated assets4
(petajoules)
Scope 3
(CO2e million tonnes)
18.8
18.3
15.0
11.7
11.0
9.3
4.35
4.40
4.13 3.93 3.78
209
210
180
343
313
271
2018
2019
2020
2018
2019
2020
2016
2017
2018
2019
2020
2018
2019
2020
2018
2019
2020
Baseline
1 This includes emissions from reductants used in our metallurgical smelters. It also includes CO2e of methane emissions from our operations, which is around 24%
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 13.3% of our total energy needs (2019: 12.5%). In Australia, we use coal seam gas from our mines to supplement power generation at a
number of our assets and have flares installed at those underground coal mines with the necessary supply and concentration of methane.
We also take into consideration the various potential impacts
on our operating costs arising from existing and planned carbon
pricing regulation. It is unclear what future mechanisms for
carbon pricing will be as there is limited to no uniformity between
existing structures. The manner in which carbon pricing is
implemented will determine the competitiveness of different
energy sources and the role of fossil fuels, as well as having
impacts across our full value chain and in turn drive demand
for our products.
2020 CAPITAL ALLOCATION, INCLUDING CAPEX
ALLOCATED TO COAL AND OIL
Our disciplined approach to capital allocation seeks to reflect
market supply and demand dynamics. As 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 our capital
expenditure (currently and into the future) is heavily weighted
towards energy transition metals, including various South
American copper projects, African copper and cobalt, Kazakhstan
polymetallic investments and nickel projects in Canada.
In 2020, industrial capital expenditure was $4.1 billion (2019: $5.3
billion), of which $787 million or 18% related to coal (2019: $990
million). With expansionary expenditure at the United Wambo
joint venture largely complete, we do not expect an increase in
coal capital expenditure in 2021.
Following the commissioning of United Wambo in December
2020, the currently approved capital programme for the coal
business is limited to stay-in-business capital expenditure and
extensions at existing mines. The remaining 82% of our 2020
industrial capital expenditure was weighted towards copper and
cobalt (together 40%), zinc (19%) and nickel (13%). Key projects are
the finalisation of Katanga’s processing infrastructure; progression
of the Zhairem zinc mine in Kazakhstan; and development of new
nickel mines in Canada.
The medium-term capital programme for our metals businesses
will see a material investment cycle alongside our joint venture
partners in Collahuasi and Antamina. Notably, Collahuasi is
working on a desalination plant that will substantially eliminate
its use of local freshwater sources in favour of water pumped
from the sea. The Canadian nickel projects will continue to be
developed over the next few years, with mine commissioning
expected in 2024-25.
MANAGING RISK AND OPPORTUNITY
Assessing climate change-related risks is part of our Group risk
management and strategy development processes. Effective
and strategic management of climate change-related risks and
opportunities across all aspects of our business is vital to our
continued ability to operate.
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.
In 2020, we conducted assessments of physical and regulatory
risks to our operations against the Current Pathway and Rapid
Transition scenarios. Our Climate Report 2020: Pathway to net
zero details the risks and opportunities identified across the
business, as well as the mitigating actions.
Our work programme for 2021 includes:
• Validating the 2019 baseline for Scope 3 emissions
• Progressing commodity departments’ marginal abatement
cost curves to support our assessment and implementation
for CO2 emission reduction projects
Glencore Annual Report 2020 19
Financial statementsGovernanceAdditional informationStrategic report
CLIMATE CHANGE
continued
DELIVERING ON OUR AMBITIONS
We plan to deliver our ambition of net zero total emissions by 2050 through seven core actions:
Managing our footprint
Footprint
MANAGING OUR
OPERATIONAL FOOTPRINT
Reducing our Scope 1 and 2 emissions
Reduction
REDUCING SCOPE 3 EMISSIONS
Our diverse portfolio uniquely allows
us to address this portion of our footprint
through investing in our metals
portfolio, reducing our coal production
and supporting deployment of low
emission technologies
Capital
ALLOCATING CAPITAL
TO PRIORITISE
TRANSITION METALS
Providing the metals
that the world needs
Contributing to global decarbonisation
Partnership
COLLABORATING WITH
OUR VALUE CHAINS
Working in partnership with
our customers and supply
chain to enable greater use
of low-carbon metals and
support progress towards
technological solutions
Abatement
SUPPORTING UPTAKE
AND INTEGRATION
OF ABATEMENT
An essential contributor to
achieving low – or net zero
carbon objectives
Technology
UTILISING TECHNOLOGY
TO IMPROVE RESOURCE
USE EFFICIENCY
Contributing to the
circular economy
Transparency
TRANSPARENT
APPROACH
Reporting on our progress
and performance
ENGAGEMENT AND DISCLOSURE
We are committed to reporting transparently on our progress
in meeting our climate change objectives and data on our
total emissions.
Industry association review
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.
During 2020, we published our second Review of our Industry
Organisation’s Positions on Climate Change. The Review
considered these industry organisations’ advocacy activities and
public statements and whether they aligned with our support for
the goals of the Paris Agreement.
Our assessment of these activities identified three regions/
countries with significant movement on climate policies over the
last few years: Australasia, Europe and South Africa. As such, we
focused our 2020 review on our direct and indirect advocacy
activities in these jurisdictions, recognising the importance of
concerted and pragmatic policy action to help achieve the goals
of the Paris Agreement.
The Review of our Industry Organisation’s Positions on Climate
Change is available on our website at:
glencore.com/sustainability/reports-and-presentations
20 Glencore Annual Report 2020
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
Corporate Governance Report: page 90
opportunities.
Board activities during 2020: page 93
Risk – Board leadership: page 70
Climate Report 2020: Pathway to net zero: page 10
(b) Describe management’s role in assessing and managing
Board activities during 2020: page 93
climate-related risks and opportunities
HSEC Committee report: page 96
Climate Report 2020: Pathway to net zero: page 32
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.
Risk management – climate change: pages 82 – 83
Climate Report 2020: Pathway to net zero: pages 32 – 33
(b) Describe the impact of climate-related risks and opportunities
Risk management – climate change: pages 82 – 83
on the organisation’s businesses, strategy,
and financial planning.
Climate Report 2020: Pathway to net zero: pages 10, 18, 19 – 21, 32 – 33
(c) Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a
2°C or lower scenario.
Longer-term viability: pages 72 – 73
Climate Report 2020: Pathway to net zero: pages 19 – 21
RISK MANAGEMENT
Disclose how the organisation identifies, assesses, and manages climate-related risks
(a) Describe the organisation’s processes for identifying and
Approach to risk management: page 70
assessing climate-related risks.
Climate Report 2020: Pathway to net zero: pages 32 – 33
(b) Describe the organisation’s processes for managing climate-
Climate Report 2020: Pathway to net zero: pages 32 – 33
related risks.
(c) Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets.
Risk management section: page 70
Climate Report 2020: Pathway to net zero: pages 32 – 33
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.
Our performance: page 19
Climate Report 2020: Pathway to net zero: pages 9, 35 – 38
(b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks.
Our performance: page 19
Key performance indicators: pages 22 – 23
Climate Report 2020: Pathway to net zero: pages 35 – 38
(c) Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets.
Our performance: page 19
Climate Report 2020: Pathway to net zero: pages 9, 32 – 33
Glencore Annual Report 2020 21
Financial statementsGovernanceAdditional informationStrategic report
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
Net funding/Net debt◊
Adjusted EBIT/EBITDA◊
(US$ million)
(US$ million)
Funds from operations (FFO)◊
(US$ million)
11,560
15,844
8,325
Net (loss)/income attributable
to equity holders
(US$ million)
(1,903)
15,767
9,143
11,601
11,560
4,151
4,416
32,138
34,366
35,428
11,595
1.60x
1.20x
17,556
14,710
15,844
0.80x
7,865
8,325
3,408
(404)
(1,903)
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
0.40x
0.00x
EBITDA
EBIT
Net debt
Net funding
Net debt to Adjusted
EBITDA ratio
Links to strategy
Links to strategy
Links to strategy
Links to strategy
DEFINITION
Funds from operations (FFO) is a
measure that reflects our ability
to generate cash for investment,
debt servicing and distributions
to shareholders.
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.
2020 PERFORMANCE
FFO were up $460 million (6%) on
2019.
Based on our prescribed
distribution formula, segment cash
flows in 2020 support a proposed
distribution of $0.12 per share,
payable in two equal tranches in
May and September 2021.
DEFINITION
Net income attributable to
equity shareholders is a measure
of our ability to generate
shareholder returns.
2020 PERFORMANCE
Net loss attributable to equity
holders was $1.9 billion in 2020
compared to $404 million in 2019.
This was driven by non-cash
impairment charges largely taken in
the first half. These broadly reflected
two factors: uncertain market
conditions giving rise to lower
confidence in development of
projects to which value had
previously been allocated (Volcan,
Mopani and Chad E&P), and the
sustained reduction in Atlantic
steam coal prices significantly
impairing the economics of coal
mining in Colombia.
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.
2020 PERFORMANCE
Adjusted EBITDA was $11.6 billion,
in line with 2019, and Adjusted EBIT
was $4.4 billion, an increase of 6%.
Commodity prices were highly
volatile in the year, with the initial
impact of the pandemic leading to
multi-year lows. These reversed in
the second half, with base metals
prices increasing well above their
pre-Covid levels.
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 funding is defined as total
current and non-current
borrowings less cash and
cash equivalents and related
Proportionate adjustments. Net
debt is defined as Net funding less
readily marketable inventories and
related Proportionate adjustments.
The relationship of Net debt to
Adjusted EBITDA is an indication of
our financial flexibility and strength.
2020 PERFORMANCE
Net funding as at 31 December
2020 increased by $1.1 billion to
$35.4 billion, while Net debt (net
funding less readily marketable
inventories) decreased by $1.7 billion
to $15.8 billion.
Our target net debt range is $10-16
billion, and our target leverage ratio
is under two times, through the
cycle. By year end, we were within
these target ranges. Business
conditions in early 2021 and our
focus on cash generation, are
supportive of continued
deleveraging towards the lower end
of the range in the medium term
and a leverage ratio closer to 1x.
22 Glencore Annual Report 2020
Strategic priorities
Responsible production
and supply
Responsible portfolio
management
Responsible
product use
Non-financial key performance indicators
Safety: Total recordable injury
frequency rate (TRIFR)
(per million hours worked)
Water withdrawn
(million m3)
2.65
3.18
2.86
2.65
1,027
1,020
1,017
1,027
Carbon emissions
(Scope 1 and 2)
(million tonnes CO2)
24.3
30.5
29.2
11.7
11.0
24.3
9.3
18.8
18.3
15.0
Our strategy for a
sustainable future
Page 10
Financial review
Page 44
Community investment
(US$ million)
95
95
90
95
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Scope 1
Scope 2
Links to strategy
Links to strategy
Links to strategy
Links 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.
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.
2020 PERFORMANCE
During the year, total recordable
injury frequency rate (TRIFR) was
lower than the previous year at 2.6
(2019: 2.9).
While our year-on-year TRIFR
decreased, we did not make our
ambitious five-year target of a 50%
reduction of Group TRIFR by the
end of 2020 against a 2014 baseline
of 5.02 – the baseline includes Viterra
(previously known as Glencore
Agriculture). We have fed the
learnings from how we improved
our performance into the work we
have undertaken on reviewing and
revising our SafeWork initiative.
2020 PERFORMANCE
In 2020, we withdrew slightly more
water than the year before, 1,027
million m3, compared to 1,017 million
m3 in 2019.
We are working 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.
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.
2020 PERFORMANCE
In 2020, we spent $95 million
on community development
programmes, of which $19 million
was spent on Covid-19 related
initiatives (2019: $90 million).
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.
2020 PERFORMANCE
We have exceeded our 2020 target
of reducing Scope 1 and 2 emissions
intensity by 5% compared to the
2016 baseline, with a 13.2% reduction
achieved.
We achieved the reduction of our
carbon intensity through a range
of measures, including operational
abatement and production
changes, as well as lower coal
seam emissions due to the closure
of a coal underground operation
in Australia.
Going forward, we will report
annually on progress against our
new target of a 40% reduction on
Scope 1, 2 and 3 emissions by 2035.
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 2020 23
Financial statementsGovernanceAdditional informationStrategic report
SECTION 172 STATEMENT AND
STAKEHOLDER ENGAGEMENT
The Board upholds the need for transparent and constructive
stakeholder engagement and consultation.
We operate assets in 35 countries and have around 145,000
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 (see page 93 regarding Board activities)
To enable this and ensure stakeholder considerations are reflected
in our decision-making, we have standing agenda items for Board
and Committee meetings that reflect our different stakeholder
groups’ interests.
Unfortunately, as a result of the global pandemic, some planned
interactions between the designated Non-Executive Directors
and our workforce had to be curtailed. However, virtual town hall
meetings were organised, giving our workforce the opportunity
to engage directly with them (see page 29 for more details)
As a global resources
business, we recognise
that robust, respectful
and two-way relationships
with stakeholders are
essential for our social
licence to operate
Statement regarding Section 172 of
the UK Companies Act 2006 and
our commitment to transparent and
constructive dialogue with all of
our 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 decisions 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 5, Business Model on page
8, and Risk Management from page 70
• the interests of the Group’s employees: see Our People
section from page 27 and Ethics and Compliance section
from page 38
• 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 32 and our Sustainability Report to be
released in April this year, Climate section from page 16
and Risk Management section from page 70
• the desirability of the Company maintaining a
reputation for high standards of business conduct:
see our Ethics and Compliance section from page 38
and Risk Management section from page 70
• the need to act fairly between members of the
Company: the Corporate Governance section from
page 90 which outlines the material ways in which
the Board and management interact with and
communicate to shareholders
When discharging their duty under Section 172, the
Directors have focussed on mapping out the Company’s
key stakeholder groups and reviewing our level of
engagement with them.
The following pages outline our key stakeholder groups,
how we interact with them and how the Board considers
their interests and opinions during its discussions and
decision-making processes.
The Board remains focused on its stakeholder awareness
and strengthening its understanding of the broad range
of views expressed by Glencore’s stakeholders.
24 Glencore Annual Report 2020
HOW THE
GROUP ENGAGES
WHAT THE
BOARD CONSIDERS
Stakeholder Engagement
STAKEHOLDER
THEIR INTERESTS
Our people
• Training, compensation and
career opportunities
• Health, safety and wellbeing
• Company culture and reputation
• Industrial relations
• Asset viability
Communities
• Local employment and
procurement opportunities
• Socio-economic development
projects
• Environmental management
• Operational impacts
• Potential site closure
• Tailings storage facilities
• Security and its engagement
with civil society
• Artisanal and small-scale mining
(ASM)
• Covid-19 engagement
• Intranet, emails, newsletter
updates
• Posters and leaflets
• Virtual town hall meetings
and forums
• Pre-shift ‘toolbox’ talks
• Culture surveys
• Webinars
• Raising Concerns platform
• Community liaison teams
• Various meeting formats to
reflect local expectations
• Radio and television broadcasts
• Social media channels and
asset’s websites
• Asset-specific publications
Investors,
financial
analysts
and media
• Financial and operational
• Regular calls, one-on-one
performance
• Climate change
• Compliance with laws
• Presence in developing countries
• Tailings storage management
• Transparent payments to
government
• Human rights
• Industrial relations
meetings and group events/
presentations
• Corporate Affairs teams regularly
speak to media at global,
national and local levels
• Site visits (Covid permitting)
• Webinars and online Q&A
sessions
• Annual report, sustainability
report, modern slavery
statement, payments to
governments report and other
reports and presentations
• AGM
• Website, social media channels,
media releases, listing regulatory
announcements
• Workforce engagement by
designated Non-Executive
Directors
• Periodic updates from the Group
Head of Human Resources
• Results of culture surveys
• Group HSEC-HR provides the
Board HSEC Committee with
regular updates on Glencore’s
impact on the communities living
around its operations
• Asset management provide
details of community
considerations as input into
Directors’ discussions on
operational matters
• Review and approval of revised
approach on ASM
• Results meetings
• AGM
• Meetings with shareholders,
analysts and key media
• Group Investor Relations
provide analysts’ reports
and investor feedback
• Following any major
announcements, Group
Corporate Communications
provides feedback to the Board
• Board resolution on Climate
Change – see page 92
Glencore Annual Report 2020 25
Financial statementsGovernanceAdditional informationStrategic report
SECTION 172 STATEMENT AND STAKEHOLDER ENGAGEMENT
continued
Stakeholder Engagement continued
STAKEHOLDER
THEIR INTERESTS
Governments
and regulators
• Tax and royalty payments
• Compliance with laws
HOW THE
GROUP ENGAGES
WHAT THE
BOARD CONSIDERS
• Provide information and updates
on key topics, either directly or as
part of industry associations
• Participation in multi-
• Reports on material of regulatory
issues and emerging legislation
• Reports on engagement with
governments and regulators
stakeholder organisations,
initiatives and roundtables, such
as the Voluntary Principles on
Security and Human Rights, the
OECD and the EITI
• Direct engagement with
national, regional and local
government on key topics
• Site visits
• Public reporting
• Regular meetings and updates
• Customer site visits
(Covid permitting)
• Participation in commodity-
specific responsible sourcing
initiatives
• Local procurement initiatives
• Oversight of the implementation
of the Group Supplier Standards
• Discussions as to relationships
with and comments from
suppliers and customer
• Regular meetings with asset
management
• Union participation in asset
safety committees
• Periodic updates from the Group
Head of Human Resources on
material workforce issues
and regulations
• Local employment and
procurement
• Operational environmental
management, including
tailings storage
• Climate change
• Socio-economic
development projects
• Transparency and human rights
• Public health
• Security
• Responsible sourcing and supply
• Transparency in the supply chain
• Procurement spend
• Human rights
• Compliance with laws
and regulations
• Competitive pricing
• Performance
• Health, safety and wellbeing
• Negotiation of workplace
agreements
• Industrial relations
• Asset viability
• Human rights
• Tailings storage facilities
• Social incidents
• Public health
• Operational and environmental
management
• Socio-economic development
projects
• Transparency in payments
to governments
• Security and its engagement
with civil society
• Compliance with laws
and regulations
• Direct engagement with
global and local NGOs and
civils society groups
• Sustainability Reporting,
including Sustainability Report,
Modern Slavery Statement,
Payments to Government
Report, Human Rights Report
• Social media channels
and corporate website
• External forums and
organisations, such as the
Voluntary Principles on Security
and Human Rights, the OECD
and the EITI
• Group Sustainable Development
provides regular updates to the
Directors on the opinions and
activities of NGOs and civil
society groups
• Regular discussions on major
issues of concern to NGOs
and civil society groups and
engagement with them.
Suppliers and
customers
Unions
NGOs and civil
society groups
26 Glencore Annual Report 2020
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
PURPOSE AND VALUES IN ACTION
We are proud of the contribution our 145,000 employees and
contractors make to our business and to their communities. Our
unique business model empowers our people to take commercial
decisions aligned to the broader goals of our company and
we strive to encourage a high-performance culture where
accountability and performance are recognised and rewarded.
In an increasingly complex world, we recognise the hugely
important role our Purpose and Values can play in helping
to guide and manage our business and our people. This year,
perhaps, more than any other has taught us that having an
aligned Purpose and set of Values is invaluable in ensuring
our organisation and our teams react in an appropriate fashion
when faced with uncertainty and complexity.
During the year, we have placed considerable emphasis on
reinforcing both our Purpose and our Values throughout the
organisation. To engage approximately 145,000 employees and
contractors across the business around these principles, we
launched a Group-wide internal communications and employee
engagement campaign in November 2020 – the biggest of its
kind undertaken by the Company to date. The campaign aims
to foster discussion about the Group’s culture, further embed
expectations and develop behaviours on how we do business
in alignment with our Values.
The first phase focused on the ways our Purpose and Values
shape our culture and explored what they mean to our people.
The next phases will unpack the commitments and expectations
of how we do business as laid out in our refreshed Code of Conduct.
To ensure that our people understand what is expected of them
wherever they are based and whatever they do, the Purpose and
Values phase of the campaign has been consistent in its high-
level messaging but adapted where necessary to serve local
needs and objectives, allowing for regional and cultural differences
across our diverse operations.
The communication materials to support the campaign were
produced in a number of languages from English and German, to
Chinese, Sepedi and Tswana, and feature a broad cross-section of
our workforce from different geographies, with a mix of those
from office-based and operational roles from our industrial and
marketing businesses.
To reach employees at the assets, many of whom are not
connected to the online Group network, these materials were
complemented at our assets with posters, banners and
newsletters, both printed and digital, which promoted the
campaign along with a new intranet hub and a new Purpose and
Values section on our external website. The films were shown, and
posters displayed, in muster rooms and office communal areas
while the book has been widely printed and distributed and
posted to some employees’ homes. The campaign’s key messages
have also been incorporated into a number of teams’ regular
‘toolbox talks’. Many teams have also adapted the messaging and
created local materials such as notebooks, calendars, and playing
cards for use by employees during their breaks.
POLICIES
We have further strengthened the connection between our
Purpose, Values and governance framework. We have reviewed
and amended our Group Human Resources policies to ensure
alignment to strategy and to strengthen consistency of
application across the world. The Company is preparing two
new Group policies governing Human Resources issues with
a condensed and clearer set of commitments, namely:
• the Equality of Opportunity Policy, and
• the Diversity and Inclusion Policy.
The Equality of Opportunity Policy will set out Glencore’s belief
in, and commitment to, fairness and equality. The policy will
make our expectations of high performance and individual
contribution explicit, but will also provide details on how we
ensure our processes are fair, transparent and free from unlawful
discrimination. The policy will also provide a global commitment
to mechanisms such as grievance processes to assist in resolving
complex employee relations issues.
The Diversity and Inclusion Policy will set out our commitment
to diversity of thought, our belief in constructive challenge and
our desire to create an inclusive culture. It will provide a
commitment to monitoring our demographic make-up,
educating ourselves on issues of bias and equal pay for equal
work in each of our companies.
These policies will be published on our website to ensure
transparency and accountability.
Over the course of the next year, these global policies will be
underpinned by a set of global people standards which will
increase the consistency of practices and employee experiences
across the world.
CEZinc donated 2,000
masks for the nursing
staff at the local Suroît
Regional Hospital
Glencore Annual Report 2020 27
Financial statementsGovernanceAdditional informationStrategic report
OUR PEOPLE
continued
We surveyed the day-to-day
experience of 20,000
employees, their satisfaction
with their roles and career
development, including
safety and ethical behaviour
MONITORING OUR CULTURE AND LISTENING TO
EMPLOYEES
We continue to develop and evolve our mechanisms to evaluate
our culture and understand employee experience across our
operations. Following 2019’s successful survey of our marketing
employees and our Australian businesses, this year our Employee
Survey was distributed globally to our networked employees for
the first time. 30,000 employees from 35 countries were invited
to participate.
Our survey measured the day-to-day experiences of our
employees; their satisfaction with their roles and career
development as well as vitally important concepts such as
safety and ethical behaviour – key elements which underpin
our strategy and our reputation as a responsible and ethical
operator. We measure employee engagement through an
engagement score and benchmark this score across our
businesses, against an external high-performance benchmark
and against large scale industrial businesses. Our scores were
very positive with employee engagement scoring 85% against
our external benchmarks of 81%.
We have invested considerable time and resources in our Ethics
and Compliance programme over the last number of years.
The survey provides an opportunity to test the impact of this
programme on the ground and our scores benchmark well and
are in many areas above the benchmarks of externally recognised
surveys like the Institute of Business Ethics’ European Survey of
Ethics at Work.
Our Values and Culture survey
82%
87%
Our Values and Culture score
of 82% tells us that the vast
majority of our employees
feel their experience matches
our values
of surveyed employees told
us that they intend to stay
at least 12 months with
the company
92%
86%
of surveyed employees
stating that they work
in a safe environment
of surveyed employees
stating that they are proud
to work at Glencore
94%
88%
of surveyed employees
feeling comfortable reporting
a safety concern, a key
enabler of improvement in
our performance
of surveyed employees
stating that their direct
manager acts ethically and
in compliance with policies
28 Glencore Annual Report 2020
Additionally, we have created a Values and Culture Index to
measure the extent to which our employees’ experiences
match our values. Our Values and Culture index is made up
of 14 questions and covers topics designed to understand
whether our values are brought to life each day and the
extent to which our culture addresses critical issues such as
safety, business integrity and compliance. The index also
analyses whether our people feel that they are treated fairly
and with respect and whether they feel their business
communicates well and is being run efficiently.
EMPLOYEE ENGAGEMENT BY BOARD AND SENIOR
MANAGEMENT
As well as raising awareness of our Purpose and Values, the
campaign focused on facilitating engagement between
members of our management, Board and front-line workers.
To achieve this during a time of pandemic and restrictions
on travel, a number of our non-executive directors engaged
our workforce at our operations and offices via virtual town
hall meetings.
During these sessions, they took questions, listened and
responded to the viewpoints and issues raised.
With support from Tony Hayward, Peter Coates, Patrice Merrin, Gill
Marcus and Kalidas Madhavpeddi, sessions were held in Australia,
Canada, Peru and South Africa in collaboration with local
management. Further town hall meetings are scheduled for 2021
to facilitate further direct engagement with employees.
Glencore’s CEO Ivan Glasenberg held a live-stream in December
during which he also answered questions from employees, and
talked about the Group’s culture, articulating how it plays a central
role in the company’s continued success.
The opportunity to connect with the Board and senior
management has been received positively across the Group.
These sessions have also been supplemented by locally led
sessions enabling local management to continue the
momentum and highlight areas which will resonate with their
local teams.
A REFRESHED CODE OF CONDUCT IN 2021
The Purpose, Values and Code of Conduct engagement
campaign has continued into 2021 and will culminate with
the launch of our refreshed Code of Conduct later in the year.
The Code has been revised to reflect updated expectations for our
people, the importance of ethical decision making and provide a
clear reference point for our supporting policies.
The Code is designed to be accessible and reflect the evolving
expectations for businesses.
As part of the campaign, we will be running a series of virtual
events during 2021, featuring the insights and expertise of
internal and external speakers, which are intended to encourage
a conversation across the Group as we further explore what it
means to work at Glencore.
TALENT AND DEVELOPMENT
We believe that commodity and technical specialisation are key
drivers of value and performance and therefore training and
development is aligned to this need for specialisation. This year,
in addition to the regular training curriculum across our assets
we have commenced a relationship with the International
institute for Management Development (IMD) to develop a
comprehensive Leadership Development offering for our General
Managers in the Zinc division. The modular programme will
enable clear communication of the Zinc Industrial strategy,
provide an opportunity to share best practice across the group
and enable us to leverage IMD’s expertise in technical and
financial matters but also equip our leadership with the skills
and competencies to manage the operational complexity and
increasing ESG requirements applicable to their businesses.
We believe in empowering
our leaders and our people
to drive the performance of
our business
Glencore Annual Report 2020 29
Financial statementsGovernanceAdditional informationStrategic report
OUR PEOPLE
continued
SOUTH AFRICAN COMMUNITY TRAINING PROGRAMME
Diversity
87,822
employees at 31 December 2020
2019: 89,092
2018: 86,621
56,300
contractors at 31 December 2020
2019: 70,253
2018: 71,887
Employee diversity in 2020
● Male
84%
● Female 16%
2019: 16% female – 84% male
2018: 15% female – 85% male
Senior manager* diversity in 2020
● Male
87%
● Female 13%
2019: 13% female – 87% male
2018: 16% female – 84% 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 SA offers a number of training and development opportunities to members
of communities surrounding its operations in the Emalahleni and Steve Tshwete Local
Municipalities of the Mpumalanga Province in South Africa. The programs are aimed at
empowering members of the local communities with skills and qualifications to enable
them to be employable both within Glencore and within the mining industry in general
as well as skills to operate outside the mining industry or independently operating their
own businesses. Programs aimed at equipping members of the community with the
skills and qualifications to be employable within the Company and the industry include
the Blasting Assistant Program, the Operator Training Program and the Engineering
Learnership Program.
The Engineering Learnership Program is undertaken over a period of up to three years
and on completion, the participants end up with a trade qualification as either an
Electrician, Auto Electrician, Boilermaker, Diesel Mechanic or Fitter. Upon completion,
the candidates are considered for permanent placement into available positions within
the business. Where such opportunities are not available, their information is provided
to other potential employers in the area. They are also put on the waiting list for
absorption as and when opportunities arise within the business.
During 2020, a total of eighty seven (87) candidates from the community participated in
the Engineering Leadership Program. In an effort to enhance the representation of
women in technical disciplines including engineering, a focus has been placed on
increasing the intake of women into the program and the 2020 intake had a female
representation rate of 75%.
GRADUATES AND APPRENTICESHIPS
Maintaining a supply of engineering and geological talent is a priority for our Human
Resources teams around the world. The numbers of students choosing these careers has
declined in recent years in some geographies and therefore our talent sourcing strategy
has greater emphasis and focus on school leaver and apprentice programmes alongside
traditional graduate recruitment in many jurisdictions. It also includes direct engagement
with educational institutions and active participation in collective industry efforts.
In Australia we are active in initiatives facilitated by the NSW Minerals Council including
the Pathways to Resource Industry and Mining Employment (Prime) ‐ a two‐year
partnership between the Council and Regional Development Australia to implement
industry‐skilling and workforce development initiatives to enhance awareness of the
mining industry and its career opportunities.
The Queensland Minerals and Energy Academy is a partnership between the
Queensland Government and the Queensland Resources Council which provides a
pipeline of employees into the resources sector. During 2019, Glencore was engaged in 16
events, involving 25 Glencore representatives, 302 student engagements (41 percent girls)
and 17 teachers. Glencore Australia is also active as a lead sponsor of the QMEA Girls
Mentoring Program.
PEOPLE ENABLING TECHNOLOGY AT KIDD OPERATIONS
With the inrush of technology applications in mining, bridging the gap between R&D
and real-world benefits has become quite a familiar topic to Kidd Operations. By
matching existing mining expertise to new generations of tech-savvy personnel entering
mining, we unlock the potential to create value in new ways.
While the site drove R&D efforts to develop the first autonomous LiDAR drone
underground, real success required our forward-thinking engineers-in-training to
tackle the complete workflow, guide the parallel development of new data tools, with
developers entirely new to the mining industry. All areas of the mine, including those
only accessible via autonomous flight, can now be rapidly scanned in ultra-high
resolution, and the results stitched into a combined 3D view of the mine, with minimal
user intervention. This paves the way for advanced planning and geotechnical analysis,
including rendering a precise 3D model of the mine in Holographic Mixed Reality
(currently in MVP phase), allowing all levels of users to interact, understand, and make
quality decisions that drive value.
Whilst safety and productivity solutions above-ground have been using GPS technology
for nearly two decades, underground systems have lagged with limited real time visibility
30 Glencore Annual Report 2020
on production performance data, vehicle interaction, or geofencing. In response,
Kidd launched a project exploring Ultra-Wide-Band (UWB), an emerging localisation
technology, again in the first application in underground mining. Using graduate
engineering talent to tackle not only the hardware adaptation but the inception of the
use-case and the development of the intermediate systems enabled the operation to
turn position data into useable information, far beyond the developer’s intent. With UWB
tags being introduced in mobile phones, this technology is primed for future success.
COVID-19
In response to the increasing spread of the SARS-CoV-2 virus, Glencore established an
Incident Management Team (IMT), in late January 2020. We developed a Group wide
Global Infectious Disease Response Plan which provided the business guidance on key
controls to implement and monitor.
A global Health Advisory service was set up with input and expertise from medical
experts at International SOS. The service provided up-to-date guidance on health
protection measures and also acted as a co-ordination point for collating statistics on
infections at our operations worldwide. Video webinars with medical experts were held
and recordings distributed through the Group intranet in an effort to provide support
and counter mis-information regarding the pandemic and health protection measures.
At our assets and offices around the world, comprehensive changes were made to how
we work to reduce the number of people working on site and other measures to facilitate
social distancing and the monitoring and recording of employees’ health were introduced.
Many of the communities where we operated faced an extraordinary socio-economic
hardship as a result of Covid-19. In April we launched the $25 million Glencore Community
Support Fund as part of our commitment to protect the safety and health of the people
in our host communities.
Further details on our responses to the pandemic is available at:
glencore.com/media-and-insights/Updates-regarding-COVID-19
Emerging talents across the world
North
America
South
America
Australasia
Africa
Europe & UK
Total
Graduate intake
Vacation programmes
Scholarships and Bursaries
Apprenticeships and artisans
9
82
59
51
17
72
62
63
117
151
41
122
85
67
312
281
13
99
5
49
241
471
479
566
Glencore Annual Report 2020 31
Financial statementsGovernanceAdditional informationStrategic report
SUSTAINABILITY
Responsibility is one of our Values. For Glencore, being a
responsible operator means delivering strong financial,
social and environmental performance through robust
governance, ethical and transparent business practices,
and respect for the rights of all.
OUR APPROACH
Our approach to sustainability reflects our Purpose to responsibly
source the commodities that advance everyday life. We establish
and implement ethical and consistent business practices and
standards through our health, safety, environment, and
community and human rights (HSEC-HR) strategy, policies and
standards. We are a responsible operator and aspire to have a
reputation for doing things the right way.
Our approach 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. We review our approach annually to
confirm that it continues to fulfil the needs of our business.
Governance of our Group sustainability strategy and framework
rests with the HSEC Committee of the Board. Our senior
management team, including the CEO and commodity
department business heads, are accountable for overseeing
the implementation of our HSEC-HR strategy.
Further details on our HSEC-HR 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 publications:
• Sustainability highlights
• Payments to governments report
• Modern slavery statement
• ESG A-Z section on our website (www.glencore.com)
• Water microsite
ENGAGING WITH OUR STAKEHOLDERS
We engage with relevant stakeholder groups to build meaningful
relationships and understand their expectations and aspirations.
Further information on our stakeholder engagement activities is
available on page 24.
EXTERNAL COMMITMENTS
We participate in a wide range of external initiatives, supporting
our commitment to continuously improve our approach and
performance across sustainability topics. Our engagement
varies from reporting on our progress to taking a role in driving
strategic change.
We are signatories to the United Nations (UN) Global Compact
(GC), aligning our strategies and operations with its principles,
which cover human rights, labour, environment and anti-
corruption. We recognise the UNGC’s Sustainable Development
Goals (SDGs) and their systematic global approach to society’s
overall development. We believe that we can play a role in
supporting our host governments to meet the SDGs.
All of our sustainability communications are available
on our website: glencore.com/sustainability
32 Glencore Annual Report 2020
Lost time injury
frequency rate
(per million hours
worked)
0.94
Total recordable
injury frequency
rate
(per million hours
worked)
Water withdrawn
(million m3)
1,027
2.65
3.18
1,020
1,017
1,027
2.86
2.65
1.06
0.99
0.94
2018
2019
2020
2018
2019
2020
2018
2019
2020
CO2e Scope 1
(million tonnes)
15.0
18.8
18.3
15.0
CO2 Scope 2 –
location based
(million tonnes)
Community
investment
(US$ million)
9.3
95
95
90
95
11.7
11.0
9.3
2018
2019
2020
2018
2019
2020
2018
2019
2020
In 2020, we announced a
1.5ºC-aligned target of an
absolute 40% reduction of
total emissions by 2035 on
2019 levels and ambition of
achieving a net zero total
emissions footprint by 2050
Sustainability framework
Corporate strategy
Responsible production
and supply
Responsible portfolio
management
Responsible
product use
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
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
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
(the Committee) has
oversight and ultimate
responsibility
The Committee receives
regular updates and has
oversight of how our
business is performing
across all our internally
defined, sustainability
related material risk areas
Sustainability principles,
guidance and policies
Integrated throughout
the business and give
guidance on the
standards we expect
We uphold the International Labour Organization (ILO)
Declaration on Fundamental Principles and Rights at Work, the
UN Universal Declaration of Human Rights, 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.
We have been a member of the International Council on Mining &
Metals since 2014. We endorse its Mining Principles and are active
in its working groups.
include the consortia for zinc, cobalt, cadmium, sulphuric acid,
lead and precious metals.
Our responsible sourcing strategy considers production, sourcing
of metals and minerals and procuring goods and services. Our
Supplier Standards form the basis of our risk-based supply chain
due diligence programme and references the Organization of
Economic Cooperation and Development’s Due Diligence
Guidance for Responsible Supply Chains of Minerals from Conflict-
Affected and High-Risk Areas.
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 annual reports detailing material payments
made to governments, broken down by country and project.
As part of our commitment to responsible product stewardship,
we follow the UN globally harmonised system for classification
and labelling of chemicals (GHS), the EU REACH regulations on
the registration, evaluation, authorisation and restriction of
chemicals, and the London Bullion Market Association
Responsible Gold guidance. Where appropriate, we participate in
the REACH consortia related to the materials we produce; these
RISK MANAGEMENT AND ASSURANCE
Our management of HSEC-HR-related risks aligns with Glencore’s
approach to the identification, assessment and mitigation of risk.
Our assets use the risk 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-HR assurance programme primarily focuses
on our systematic management of the catastrophic hazards and
their controls. Internal and external senior subject matter experts
participate in this programme.
Glencore Annual Report 2020 33
Financial statementsGovernanceAdditional informationStrategic report
SUSTAINABILITY
continued
Performance overview
Achieved
On track
Not achieved
Not applicable
Material topic
2015–2020 strategic priority
Performance indicator
2020
2019 Status
Catastrophic hazard
management
• No major or catastrophic incidents
Number of incidents
(major and catastrophic)
Workplace health
and safety
• No fatalities
• 50% reduction of Group LTIFR by the end of
Fatalities at managed operations
0
8
0
17
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
Lost time injury frequency rate
0.94
0.99
Total recordable injury frequency rate
2.65
2.86
Climate change
• 5% (minimum) carbon emission intensity
CO2e Scope 1 (million tonnes)
New occupational disease cases
Number of HPRIs reported
111
106
399
574
15.0
18.3
reduction on 2016 baseline2 of 4.35
tGHG/tCu by 2020
CO2 Scope 2 – Location based (million tonnes)
9.3
11.0
Total energy use (petajoules)
180
210
Carbon emissions intensity (tGHG/tCu)
3.78
3.93
Human rights and
grievance
mechanisms
Community
engagement and
social commitment
compliance
• No serious human rights incidents
Serious human rights incidents
0
0
• Implement our social value creation strategy
• Distribute the community leadership
Programme Toolkit
Community investment spend ($ million)
95
90
Product stewardship
• 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
1 Baseline figures include Viterra (formerly Glencore Agriculture)
2 The baseline is for operated industrial assets and amended to reflect acquisitions and divestments
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, open pit mines and
metal processing plants.
The HSEC Committee reviews the results of all the audits, together
with their key findings, observations and good practice.
MATERIALITY ASSESSMENT
We regularly undertake a sustainability-related materiality
assessment that considers input from within our business and
from other stakeholders. We use this assessment to inform the
HSEC-HR strategy and our reporting. The assessment identifies
topics that are material to our development, performance and
current position as well as for our future prospects. It also
establishes the material topics for our sustainability strategic
review and publications.
We identified the following material topics for the 2019–20 period:
catastrophic hazards, safety and health, climate change and
energy (see page 16), water, land stewardship, responsible
sourcing and supply, human rights, social performance and our
people (see page 27).
OUR MATERIAL TOPICS
CATASTROPHIC HAZARD MANAGEMENT
We define catastrophic events as those with a low probability but
severe consequences that could cause widespread loss of life or
significant environmental harm, or result in major reputational or
financial damage. We are committed to eliminating catastrophic
incidents at our assets.
We recognise the exceptional nature of such events and we have
developed specific programmes to actively identify, monitor and
mitigate catastrophic hazards within our business. Our Group
Catastrophic Hazard and Fatal Hazard Management Policy
specifies our approach to their management.
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.
Our HSEC audit programme focuses on catastrophic hazards and
critical control management, using both internal and external
expert assessors. It gives particular attention to identifying
catastrophic hazards, their critical controls and management
plans, as well as the effectiveness of verification and reporting
processes.
Managing our tailing storage facilities
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 monitor our TSFs for integrity and structural stability. Our
assets evaluate natural phenomena and incorporate these
34 Glencore Annual Report 2020
considerations into their tailings facility designs where relevant.
Flooding and seismic activity are the main natural phenomena
that may affect TSFs. In addition, our TSFs undergo regular
external inspections.
During the year, both our lost time injury frequency rate1,2
(LTIFR) and total recordable injury frequency rate3 (TRIFR)
were slightly lower than the previous year at 0.94 (2019: 0.99) and
2.6 (2019: 2.9) respectively.
We continue to manage closed TSFs responsibly post-closure.
We regularly inspect our facilities and external experts conduct
independent inspections and reviews.
Performance during 2020
We target zero major or catastrophic incidents, which we
achieved during 2020.
In 2020, we entered into an agreement with a leading global
provider to extend satellite monitoring to over half of our facilities,
prioritising on a basis of consequence classification. This is the
largest industry agreement to date for specific satellite monitoring
of TSFs.
In 2020, the Global Tailings Review, made up of the ICMM, UN
Environmental Programme and Principles for Responsible
Investment, published a new Global Industry Standard on Tailings
Management (the Standard).
In August 2020, all ICMM members, including Glencore,
committed to implement the Standard. All of our TSFs with
“Extreme” or “Very high” potential consequences will be in
conformance with the Standard by 5 August 2023. All of our
other TSFs not in a state of safe closure will be in conformance
with the Standard by 5 August 2025.
Further information is available on our website (glencore.com/
sustainability/Tailings). It includes an overview of our approach
towards managing TSFs and provides details on a total number
of 215 individual tailings dam walls representing approximately
122 TSFs.
SAFETY AND HEALTH
In line with our company values, our first priority in the workplace
is to protect the health and wellbeing of all of our people. Our goal
is continuous improvement in the prevention of occupational
disease and injuries.
We take a proactive, preventative approach towards health and
safety. We believe that all fatalities, injuries and occupational
diseases are preventable. Through strong safety leadership, we
can create and maintain safe workplaces for all our people. A large
number of our assets have been fatality free for multiple years.
We require an effective safety management system at each asset
to assure the integrity of plants, equipment, structures, processes
and protective systems, as well as the monitoring and review of
critical controls.
Our SafeWork initiative supports changing attitudes towards
safety and bringing about long-term sustainable change that
supports the elimination of fatalities and serious injuries. The
initiative’s aim is to provide everyone within our business with the
knowledge and tools to perform every task safely. In 2021, we will
relaunch SafeWork as part of our fatality reduction programme.
Our occupational health management strategy addresses the
health risks facing our workforce, their families and the
communities inside and outside our gates. We use a variety
of onsite programmes to manage occupational diseases and
exposure to health hazards; we extend many of these health
programmes to our host communities, to combat regional
health problems and promote healthy lifestyles.
Performance during 2020
We are saddened to report the loss of eight lives at our operations
during 2020, compared to seventeen during 2019. All loss of life is
unacceptable and we are determined to eliminate fatalities across
our business.
While our year-on-year LTIFR and TRIFR decreased, we did not
make our ambitious five-year targets of 50% reduction of Group
LTIFR by the end of 2020 against a 2015 baseline4 of 1.34 and 50%
reduction of Group TRIFR by the end of 2020 against a 2014
baseline4 of 5.02. We are using the learnings gained from
improving our performance into the work we are undertaking
on reviewing and revising our SafeWork initiative.
In 2020, our high potential risk incidents (HPRIs) fell to 399
(2019: 574). The reporting of HPRIs represents a supportive part
of our strategy to reduce fatalities and, as such, we do not target
a reduction in this metric. They allow the identification of activities
that we need to prioritise in order to advance further our learning
and safety performance. The majority of HPRIs related to mobile
equipment and working at height and nearly 80% resulted in
no injuries.
We recorded a slight increase in the number of new cases of
occupational disease, 111 cases (2019: 106).
WATER
Water is an essential resource for many of our industrial activities.
Some of our assets are located in areas with high to extremely
high water baseline stress and share access to water with other
local water users. Other assets manage surplus water that may
involve dewatering activities and flood protection measures.
Regardless of their location, our assets undertake detailed
assessments of their local environmental conditions during the
operational changes in lifecycle, to develop water management
strategies that maximise the efficient and sustainable use of this
important natural resource.
We recognise access to safe and clean water and sanitation as a
salient human right. We seek to fully understand and minimise
our operational water footprint and manage our activities in
a way that protects our shared water resources. We are
committed to ensuring good water management is in place
at all of our assets and undertake detailed assessments, target
setting, monitoring and implementation of corrective actions.
Our assets consult their host communities and other relevant
local water users to understand local priorities and to collaborate
on sustainable solutions.
Performance during 2020
In 2020, we withdrew 1,027 million m3 of water (2019: 1,017 million
m3). The small increase in withdrawn water is primarily due to
improving the calculation methodology at a smelter that utilises
seawater for cooling purposes.
During 2020, we furthermore established a global working group
of internal subject matter experts to develop internal and external
targets for water management and continued our participation in
the ICMM water working group.
LAND STEWARDSHIP
We are committed to managing our land in a productive and
sustainable manner ensuring proactive stewardship of our
landholdings, including those that have not undergone
industrial activity. We align our approach to cultural heritage
and archaeologically sensitive locations on our landholdings
with local regulatory requirements and best practice. We respect
legally designated areas and commit to neither mine nor explore
in World Heritage Sites.
We require our industrial assets to implement land stewardship
management systems, including progressive land rehabilitation
target setting tied to life of asset planning, that includes standard
1 Lost time injuries (LTIs) are recorded when an employee or contractor is unable to work following an incident. We record lost days as beginning on the first rostered day that the
worker is absent after the day of the injury. The day of the injury is not included. LTIs do not include restricted work injuries (RWIs) and fatalities.
2 The lost time injury frequency rate (LTIFR) is the total number of LTIs recorded per million hours worked.
3 The total recordable injury frequency rate (TRIFR) is the sum of fatalities, lost time injuries (LTIs), restricted work injuries (RWIs) and medical treatment injuries (MTIs) per million
hours worked. The metric represents all injuries that require medical treatment beyond first aid.
4 Baseline figures include Viterra (previously known as Glencore Agriculture).
Glencore Annual Report 2020 35
Financial statementsGovernanceAdditional informationStrategic report
SUSTAINABILITY
continued
elements such as an environmental policy, data collection and
monitoring, adaptive management, and continuous improvement.
working group that developed the new lCMM Closure Maturity
Framework tool, which we piloted at six of our global assets.
We are committed to identifying and addressing the potential
impacts of our business on ecosystems services and achieving
no net loss of biodiversity through the application of mitigation
hierarchy. We require all operations to develop risk-based
biodiversity action plans and site-level biodiversity targets,
to drive progress in this critical area.
Biodiversity
Mining activities directly impact the surrounding land, flora and
fauna throughout their lifecycle; our goal is to minimise and
manage those impacts. Our assets’ land stewardship and
biodiversity management plans can include measures for
preliminary clearing works, habitat relocation, flora and fauna
conservation, weed and pest control and fire and grazing
management. Where possible, these plans support the
continuation of existing land practices, including grazing and
other agricultural activities.
As an ICMM member, we commit to not conduct any exploration,
drilling or mining in World Heritage areas and IUCN category I-IV
protected areas (‘no-go’ areas), and not to put the integrity of such
properties at risk. Our assets work to avoid the loss of any
International Union for Conservation of Nature (IUCN) Red List
threatened species.
Rehabilitation
A core component of our operations’ lifecycle is progressive
rehabilitation. Where active operations have ceased, we review
opportunities for restoration in the previously operated areas.
Progressive rehabilitation has many benefits, including reducing
an operation’s footprint, improving the visual appeal of the
landscape and reducing dust, erosion and sedimentation, as
well as improving conditions for local communities and future
land users.
To support progressive rehabilitation, our assets may excavate and
reserve topsoil and overburden from areas prior to development.
Closure management
Unlike many other industrial uses of the land, mining has a finite
life and transitions to post-mining land use at the end of its
operational lifecycle. We require each asset to have a closure plan,
including progressive rehabilitation and financial provision, to
support a responsible exit. Assets regularly review their closure
plan to ensure it remains fit-for-purpose, and aligns with the
asset’s lifecycle. Assets develop and maintain their closure plan
to align with good practice, such as the ICMM’s Integrated
Mine Closure Good Practice Guide. Assets are required to
consult with local communities on the development of their
closure plans and monitor the societal risks and opportunities
associated with closure.
Glencore has acquired, through mergers and acquisitions, a
number of older mines and legacy operations. We have a
specialised management process for these legacy operations,
which supports the identification and implementation of
appropriate monitoring and responsible restoration.
Performance during 2020
During 2020, we established a global working group of internal
subject matter experts to develop internal targets for biodiversity
and land rehabilitation, as well as enhanced corporate governance
for land stewardship and biodiversity. The targets reflect the
diversity of our assets’ locations and activities, and progress
against them will be monitored.
We mapped our approach to closure against the ICMM’s
Integrated Mine Closure: Good Practice Guide and have
addressed any identified gaps. We participated in ICMM’s closure
36 Glencore Annual Report 2020
RESPONSIBLE SOURCING AND SUPPLY
An integral part of our responsible sourcing approach is supply
chain due diligence (SCDD) for our metals and minerals supply
chain. During 2020, we strengthened our internal due diligence
management system.
Our guideline sets out our five-step approach to due diligence
that aligns with the OECD’s Due Diligence Guidance for
Responsible Supply Chains of Minerals from Conflict-Affected
and High-Risk Areas (CAHRA). Our risk assessment and
management strategy identifies and assesses risks,
including those relating to CAHRA. We take a collaborative
risk management and mitigation approach to the identified
human rights risks within our supply chain.
As part of our system of controls and transparency, we have an
online platform that manages due diligence-related information
collection and supplier assessment.
We have a system of accountability with identified internal roles
and responsibilities, as well as a dedicated SCDD manager who
oversees and implements the process. Our responsible sourcing
team engages with internal stakeholders to increase awareness
on the responsible sourcing of minerals. During the year, we
undertook capacity building activities and training sessions with
our marketing teams.
Performance during 2020
During the year, we rolled out our risk-based supply chain due
diligence programme to our cobalt and nickel marketing teams.
The assessment did not find any concerns relating to adverse
human rights impacts in these two commodities’ supply chains.
We provided input into the drafting of the Joint Base Metals Due
Diligence Standard developed by the Copper Mark. The standard
enables companies to comply with the London Metal Exchange
Responsible Sourcing requirements. Our participation enabled us
to better understand the responsible sourcing requirements of
the LME and should support the leading position of our listed
brands in the metals markets.
In 2020, 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).
HUMAN RIGHTS
We have the potential to adversely or positively impact on human
rights directly through our operations, or through our
relationships with joint ventures, contractors and suppliers. We are
committed to respecting human rights and actively support our
employees, business partners and others to understand and meet
this commitment.
We aim to avoid causing or contributing to adverse human rights
impacts; to prevent or mitigate adverse human rights impacts
linked to our operations, products or services through our
business relationships; and to make a positive contribution to the
advancement of human rights of all people, including vulnerable
groups. In the event that we cause or contribute to an adverse
impact on human rights, we provide for, or cooperate in, processes
to enable appropriate remedy.
We align with relevant international standards to understand,
control and mitigate our impacts. Our polices and practice align
with the Universal Declaration of Human Rights, the United
Nations (UN) Guiding Principles, the UN Global Compact and
International Labour Organization’s core conventions and we
articulate these in our Code of Conduct and Group Human Rights
Policy. In addition, we operate in accordance with the Voluntary
Principles on Security and Human Rights, International Finance
Corporation’s Standard 5 on Involuntary Resettlement.
We respect the rights, interests and aspirations of Indigenous
Peoples and acknowledge their right to maintain their culture,
identity, traditions and customs, and operate in accordance with
the ICMM Position Statement on Indigenous Peoples and Mining.
Our assets are required to conduct regular human rights training
for their workforces, with a focus on those employees in positions
exposed to human rights concerns, such as security. This covers
general human rights awareness during day-to-day activities for
our wider workforce, as well as focused training on the Voluntary
Principles on Security and Human Rights for our security
employees and contractors.
Enabling complaints and grievance processes
We operate local level complaints and grievance processes
designed to be legitimate, accessible, predictable, equitable,
transparent, rights compatible, a source of continuous learning,
and based on engagement and dialogue. Where people have
complaints or grievances, we aim to investigate and resolve
them at the local level. Assets are required to investigate and
record all complaints.
We do not allow any form of punishment, discipline or retaliatory
action to be taken against people for speaking up or cooperating
with an investigation.
Indigenous Peoples
Some of our assets are located on or near the traditional territories
of Indigenous Peoples. Our approach aligns with the ICMM
Position Statement on Indigenous People and Mining, which
requires mining projects located on lands traditionally owned by
or under customary use of Indigenous Peoples to respect
Indigenous Peoples’ rights, interests, special connections to lands
and waters, and perspectives.
ICMM Members must adopt and apply engagement and
consultation processes that ensure the meaningful participation
of Indigenous communities in decision making, through a
process consistent with their traditional decision-making
processes. We seek, through good faith negotiation, to reach
agreements with Indigenous Peoples who maintain an interest
in, or connection to the land on which we operate, formalising
engagement processes and sustainable benefits.
Performance during 2020
During 2020, we commenced an internal campaign to
strengthen our management of local-level complaints and
grievances. We conducted a Group-wide desktop review of local
processes against the United Nations effectiveness criteria. Areas
for improvement were identified and assets have a target to close
these gaps by the end of 2021.
To support improved understanding of challenges and good
practices in the implementation of grievance processes, we
conducted an interactive webinar series in early 2021. Over 150
operational managers and social, environment and legal
professionals attended the sessions that spanned seven
geographical regions and four languages.
Following events in Western Australia in 2020, where mining
activities impacted on significant cultural heritage, we undertook
an internal review of our own heritage risks, with the intent of
addressing any deficient areas during 2021. The review was
supported by independent cultural heritage experts.
In Australia, our Indigenous Relations and Cultural Heritage
Working Group is also working on strengthening our
engagement with Indigenous Peoples.
In addition we commissioned a report benchmarking cultural
heritage legal and regulatory frameworks in countries where we
operate against international standards. Earlier this year, we
reviewed and updated the Group Human Rights Policy. We have
developed a human rights risk rating tool to strengthen a
consistent approach to human rights impact assessments. The
Tool aligns with our identified salient issues for human rights and
will be rolled out in 2021.
The new policy reflects our commitments to a range of
international human rights instruments. In addition, we have
developed an innovative human rights rating tool to assist us in
assessing each asset’s overall human rights risk level. This rating
will inform the minimum management controls to be
implemented, commensurate with the level of human rights
risk. The tool will be rolled out and tested during 2021.
SOCIAL PERFORMANCE
Our activities can make a significant contribution to the national,
regional and local economies through the production and
marketing of commodities that provide the basic building blocks
for development. We provide employment and training, business
partner opportunities, tax and royalty payments to governments
that help provide essential services, socio-economic development
and environmental stewardship.
We aim to avoid harm to people and the environment from our
activities, respect human rights, contribute to social and economic
development of affected people and society more widely, and to
establish and maintain trusting relationships with stakeholders,
through ethical and responsible business practices.
Stakeholder engagement
Our business is geographically diverse, with operations on six
continents, and we adopt an inclusive community approach
informed by the local context. Some of our businesses operate
in challenging socio-political contexts but we are committed to
working with others to help find and implement solutions to
social issues and to build resilient and peaceful communities.
We work hard to get to know our local communities and identify
the individuals, groups or organisations with an interest in our
business or who are affected by it. We implement a range of
engagement activities designed to be relevant and appropriate
for different stakeholders, including vulnerable groups, including
access to local level complaints and grievance processes (see
Human Rights).
Through meaningful stakeholder engagement and integration of
social performance into our core business, we seek to advance the
interests and aspirations of both our host communities, broader
society and our assets.
Social investment
In addition to our employment, local procurement, taxes
and royalties, we seek to make a positive contribution to
social and economic development of our host communities
and society more broadly through our voluntary social
investment programmes.
Our strategic objective is to do this in a way that builds resilient
communities and regions by reducing dependency on our
operations. This is challenging when the immediate, short-term
needs in many of our communities are high. This was the case
during 2020 when we responded to requests for health and
medical equipment in many of our host communities during
the initial stages of the Covid-19 pandemic. However, our aim is
to focus our efforts on developing programmes that contribute
to longer-term social objectives through activities such as
enterprise and job creation, education, health and wellbeing
and capacity building.
Our socio-economic development activities are founded on
the resources, needs and plans identified at a local or regional
level, and are informed by relevant data gathering and
community engagement.
Performance during 2020
In 2020, we spent $95 million on community development
programmes, of which $19 million was spent on Covid-19 related
initiatives (2019: $90 million).
During the year, we reviewed and updated our Social
Performance Policy.
All of our sustainability communications are available on our
website: glencore.com/sustainability
Glencore Annual Report 2020 37
Financial statementsGovernanceAdditional informationStrategic report
ETHICS AND
COMPLIANCE
We fulfil our purpose 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 and
compliance throughout the Group, rather than simply performing
the minimum required by law. 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, our Group Ethics and Compliance programme
includes risk assessments, policies, standards, procedures and
guidelines, training and awareness, advice, monitoring,
speaking openly and investigations. We consider guidance
from relevant authorities and international organisations and
work with leading advisers to ensure that we are aligned with
international best practices.
Our employees, directors and officers, as well as contractors under
Glencore’s direct supervision, working for a Glencore office or
industrial asset directly or indirectly controlled or operated by
Glencore plc worldwide, must comply with our Code and policies,
as well as applicable laws and regulations, regardless of location.
Our Supplier Standards set out the expectations we have for all
suppliers, including expectations regarding ethical business
practices. We assert our influence over joint ventures we don’t
control to encourage them to act in a manner consistent with
our Values and Code.
BOARD AND MANAGEMENT OVERSIGHT
AND SUPPORT
Our Board of Directors plays a critical role in overseeing and
assessing our culture of ethics and compliance, and ensuring
policies, practices and behaviour are consistent with our
Values. Our Board has established a separate Ethics, Compliance
and Culture (ECC) committee, dedicated to overseeing and
approving key ethics, compliance and culture-related matters
within the Group.
We provide training to the Board, emphasising to Directors
their role in ethics and compliance oversight and programme
implementation. Furthermore, the ECC committee receives
regular updates covering topics such as the Compliance team
structure, status of risk assessments, policies, standards,
procedures or guidelines under development or review,
Glencore Ethics and Compliance programme
B o a r d o v e rsight and governance
Discipline and
incentives
Risk
assessments
Investigations
Speaking
openly and
raising
concerns
VALUES
Safety
Integrity
Responsibility
Openness
Simplicity
Entrepreneurialism
Policies,
standards,
procedures
and guidelines
Training
and
awareness
Monitoring
Advice
Identifying, assessing
and evaluating
compliance risks
and controls
Establishing
approaches and
requirements to
mitigate compliance
risks and reflect
ethical and legal
expectations and
requirements
Training and raising
awareness on ethics /
compliance risks
Together with other
functions, ensuring an
appropriate system for
discipline and incentives
Coordinating objective
and consistent
internal investigations,
whilst maintaining
confidentiality and
protecting against
retaliation
Providing safe channels
to raise concerns
regarding potential
misconduct including
our Group Raising
Concerns Programme
Assessing the effectiveness of programme
implementation and identifying
opportunities for improvement
38 Glencore Annual Report 2020
Providing advice and guidance
to employees on ethics and
compliance matters
updates on training and awareness activities, overviews of
monitoring visits and key findings. Board members also receive
updates on material reports that have come in via our Raising
Concerns platform and the progress of investigations.
The following management committees also support the
implementation of our Ethics and Compliance programme
and report to the Board:
In addition, these risks are assessed, at appropriate intervals, across
each office and industrial asset across the Group. Local risk
assessments help us understand and document the specific
compliance risks faced by each of our businesses, as well as
identify and assess the controls in place to mitigate those risks.
These risk assessments also form the basis for drafting and
updating Group policies, standards, procedures and guidelines.
• The Environment, Social and Governance (ESG) committee,
comprises Glencore’s CEO, CFO, Head of Industrial Assets,
General Counsel, Head of Compliance, Head of Human
Resources, Head of HSEC and Human Rights, and Head of
Sustainability. It also includes senior members of executive
management representing marketing and industrial assets
across different commodities. The ESG committee considers
issues relevant to the Group’s corporate functions regarding
the various ESG programmes and projects implemented
across the Group. It also reviews and approves policies,
standards, procedures, systems and controls relevant to the
corporate functions.
• The Business Approval Committee (BAC), a sub-committee
of the ESG, comprises Glencore’s CEO, CFO, General Counsel,
Head of Sustainable Development and other relevant corporate
or business heads as required. It determines, sets guidance and
criteria, and reviews business relationships, transactions or
counterparties that give rise to ethical or reputational concerns.
• The Raising Concerns Investigations Committee (RCIC),
comprises Glencore’s CEO, CFO, General Counsel, Head of
Industrial Assets and Head of Human Resources. The RCIC
oversees the operation of our Raising Concerns Programme
and the conduct of investigations, ensuring recommendations
and sanctions are applied consistently across the Group.
GROUP COMPLIANCE FUNCTION STRUCTURE
Our Group Compliance team supports the implementation
of our Ethics and Compliance programme and is comprised
of our full-time Corporate and Regional teams, as well as local
Compliance Officers in our offices and industrial assets.
The Corporate Compliance team is responsible for designing,
monitoring and continuously improving the Ethics and
Compliance programme. The Corporate team includes subject
matter experts for each element of our programme and the
various compliance risks that it covers. The Regional Compliance
teams are responsible for implementation of the programme in
specific geographical regions. They provide guidance to the
business and support the local Compliance Officers and a
network of part-time Compliance Coordinators based in our
offices and industrial assets. The Compliance Coordinators have a
compliance role in addition to their primary business or corporate
role. We hire qualified local Compliance Officers. and have a
formal process for nominating and appointing qualified
individuals for the Compliance Coordinator role, depending on
the nature and risks identified at our offices and industrial assets.
Both roles support our employees in day-to-day business
considerations, particularly those seeking advice on ethical, lawful
behaviour or policy implementation. Employees can access the
contact details of our Compliance Officers and Compliance
Coordinators via both Group and local intranets.
GROUP ETHICS AND COMPLIANCE PROGRAMME
Risk assessments
In order to ensure the Ethics and Compliance programme
is appropriately designed, tailored to our business and that
resources are adequately allocated, we identify, assess and
evaluate compliance risks faced by our business.
We achieve this by performing an annual Group Compliance risk
assessment to identify, record and assess risks relevant to the
entire Group. We document these risks consistently in the Group
Compliance Risk Register which covers several risk areas, but
focuses in particular on anti-corruption given the nature of our
business and the geographies in which we operate.
Group policy framework
Our Group policy framework encompasses our Values, Code
of Conduct and a suite of policies, standards, procedures and
guidelines on various compliance matters and risks. These include
bribery and corruption, conflicts of interest, sanctions, anti-money
laundering, market conduct, the prevention of the facilitation of
tax evasion, competition law, fraud and information governance.
This framework reflects our commitment to uphold ethical
business practices and to meet, or exceed, applicable laws and
external requirements.
During 2020, as part of a broader review Group policy architecture
and framework, we initiated a review of all Group compliance
policies to ensure that they are clear, comprehensive and accessible.
Employees can access our compliance policies, standards,
procedures, and guidelines through various channels, including
the Group and local intranets. Our managers and supervisors are
responsible for ensuring employees understand and comply with
the policies, standards and procedures. 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. Our offices
and industrial assets are responsible for implementing Group
procedures in their offices and industrial assets and developing
and implementing local procedures, consistent with Group policies
and standards, but adapted for local risks and requirements.
Our policy framework is comprehensive and addresses all
relevant compliance risks, with a strong emphasis on key risks
such as anti-corruption, sanctions and money laundering.
Anti-Corruption
Our Anti-Corruption Policy is clear: the offering, providing,
authorising, requesting or receiving of bribes is unacceptable, and
we do not engage in corruption or bribery, including facilitation
payments. We assess corruption risk within our businesses and
work to address these risks through policies, standards,
procedures, and guidelines on various topics. These cover:
Political contributions
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.
Political engagement
Although we do not directly participate in party politics, we do
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 persons who
lobby on our behalf must comply with all applicable laws and
regulations (including, but not limited to, the laws and regulations
relating to registration and reporting).
Sponsorships, charitable contributions and
community investments
We never make a sponsorship, charitable contribution or
community investment in order to disguise a bribe, or to gain an
improper business advantage.
We ensure that when we make sponsorships, charitable
contributions or community investments we conduct risk-based
due diligence and when required, we monitor the appropriate use
of our funds or resources.
Glencore Annual Report 2020 39
Financial statementsGovernanceAdditional informationStrategic report
ETHICS AND COMPLIANCE
continued
Gifts and entertainment
We only give and accept reasonable, appropriate and lawful gifts
and entertainment that satisfy the general principles of 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. We have requirements for pre-approval of gifts
and entertainment based on localised thresholds, and additional
requirements regarding public officials.
Participation in external anti-corruption organisations
We are a member of the Partnering Against Corruption Initiative
(PACI) whose members collaborate on collective action and share
leading practice in organisational compliance. The initiative has
a commitment of zero tolerance to bribery and requires its
members 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
and have incorporated guidelines from both organisations
into our programme.
We are an active supporter of the Extractive Industries
Transparency Initiative, which is a multi-stakeholder initiative
between governments, companies and civil society, which
promotes the open and accountable management of
extractive resources.
Interactions with public officials
Dealings with public officials bring a higher risk of perceived
bribery, so we are especially careful in our interactions with them
and have various requirements that guide how we interact with
public officials in order to mitigate corruption risks.
Transparency
Each year we report our total payments to governments and
provide country-by-country and project-by-project information.
Additionally, and where applicable, we have aligned our reporting
on such payments with the requirements of Chapter 10 of the
European Union accounting directive.
Sanctions and trade controls
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.
To manage our sanctions risk exposure and ensure compliance,
we implement a range of controls and processes. These include
screening and conducting due diligence on our counterparties
and vessels using a risk-based approach to determine whether
they are a sanctions target, subject to sectoral sanctions or
otherwise attract sanctions risk.
Anti-Money laundering
Our Anti-Money Laundering Policy sets out our approach to
ensuring that we comply with all applicable laws and regulations
to prevent tax evasion and money laundering, and appropriately
manage the related risks. We do not tolerate tax evasion of any
kind and we do not knowingly or willfully facilitate tax evasion. To
manage our money laundering and tax evasion risk exposure and
ensure compliance, we implement a number of controls and
processes including in respect of payments to third parties.
Business partners
We work with a range of business partners and expect them to
share our commitment to ethical business practices. Business
partners include our suppliers, customers, joint ventures (JVs), JV
partners, service providers and other counterparties. We have a
comprehensive framework for managing the key risks associated
with our business partners, from onboarding through to
40 Glencore Annual Report 2020
offboarding, and including continuous monitoring. Through this
framework, we seek to comply with applicable laws (including
bribery and corruption, sanctions and money laundering) and to
manage the reputational risks that can arise from engaging with
certain categories of counterparties.
Our framework seeks to ensure that all counterparties are
assessed based on their risk and then directed to the most
appropriate due diligence and management process for their
risk level – either Know Your Counterparty (KYC) or Third Party
Due Diligence and Management. All our procedures require
beneficial ownership identification.
Our KYC programme differs for our offices and industrial assets
due to the different risk profile of the business, but each applies
a risk-based approach to due diligence for suppliers, customers
and service providers. Our Third Party Due Diligence and
Management Procedure is a standardised procedure across
offices and industrial assets. It sets out a detailed, risk-based
assessment process whereby we identify, assess and mitigate
the corruption risk exposure of third party relationships that
present the highest risk to Glencore. This applies particularly
to intermediaries, charitable contributions, sponsorships and
community investments. The procedure also requires ongoing
training, monitoring and review of the relationships.
Through our Joint Ventures and Mergers and Acquisitions
Procedure, we ensure that our Ethics and Compliance
programme is implemented at all JVs that we control or operate.
For JVs which we do not control or operate, we seek to influence
our JV partners to adopt our commitment to responsible business
practices and implement appropriate compliance programmes.
In respect of mergers and acquisitions, we conduct thorough
pre-transaction due diligence and incorporate acquired or
merged entities which we control or operate, into our Ethics
and Compliance programme.
Training and awareness
Training
Training on and awareness of our policies, standards, procedures,
and guidelines are critical components of our Ethics and
Compliance programme. They ensure our employees and
relevant contractors 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.
The outbreak of Covid-19 has presented some challenges to the
implementation of our training and awareness programme. Our
aim has been to reduce the impact Covid-19 has had on in-person
training through remote learning strategies. In order to make our
online training sessions more engaging and effective, we have
used live voting tools which give the audience an opportunity
to actively participate. We have also redesigned some of our
awareness materials so that they can be viewed and accessed in
an electronic-friendly format. Employees can also easily refer to
these materials via the Glencore Ethics and Compliance app on
their mobile devices.
Our training programmes mix e-learning with face-to-face
training. 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.
New joiners receive face-to-face compliance training sessions on
our Values, Code of Conduct, and key compliance risks including
how to raise concerns.
E-learning sessions are designed for employees and contractors
with regular access to a work computer. Where regular access to a
work computer is not available, employees and contractors receive
training in other ways, including induction sessions, pre-shift
training and toolbox talks.
Business Partner Management Framework
Code of Conduct
Key subject matter risk areas
Bribery and corruption
Sanctions
Money laundering
Corporate policies, procedures, and standards
KYC standard – Industrial
Assets
Suppliers/service providers engaged
in industrial assets
KYC Procedure – Marketing
Suppliers/service providers engaged
in marketing and customers engaged
in marketing and industrial assets
Third Party Due Diligence
and Management Procedure
(applicable to marketing and
industrial assets)
Business generating and government
facing intermediaries, third parties
managing a community investment
and recipients of charitable
contributions and sponsorships
Joint Venture and
Mergers and Acquisitions
Procedure
Due diligence
Ongoing
monitoring
(screening)
Renewal
i
g
n
d
r
a
o
b
n
O
m
r
o
f
Enhanced due
diligence and
business
justification
review
Training
Ongoing
monitoring
(screening,
periodic audits
and visits)
Termination
/offboarding
Pre
Transaction
approval
Due diligence
of JV partners
and JV
operations
Assessment
of JV
controls and
compliance
strategies
Implementation
of compliance
strategies
Ongoing
monitoring
Number of employees completing
compliance e-Learnings in 2020*
Number of employees attending in-person
training on key compliance risks in 2020
Code of conduct
Conflict of interest
Anti-bribery and corruption
39,891
(38,523 in 2019)
Covers: Glencore’s expectations on
how to do business safely,
responsibly, ethically and legally
24,875
(new training in 2020)
Covers: the different types of conflicts
of interest, how to recognise
conflicts, and what to do if they arise
Anti-bribery and corruption
Sanctions
24,961
(29,481 in 2019)
Covers: facilitation payments, gifts
and entertainment, and dealings
with public officials
19,708
(28,574 in 2019)
Covers: our approach to sanctions,
due diligence of counterparties, and
screening of vessels
Audience: employees and contractors with regular access to a work
computer, and in the case of the specific risk e-Learnings, those employees
and contractors who are due to the nature of their roles more exposed to
conflict of interests , bribery and corruption or sanctions risks.
5,351
in 277 sessions
Audience: employees and
contractors especially exposed
to bribery and corruption risks
and whose role may require them
to interact with third parties.
Sessions tailored to employees
in various functions using
scenarios relevant to their roles
Anti-bribery and corruption /
Sanctions / Money
laundering red flags
245
in 19 sessions
Audience: senior marketing office
employees especially exposed to
bribery and corruption, sanctions
and money laundering risks.
Highly interactive sessions on how
to identify red flags. Case studies
focused on how these key risks might
present themselves in real situations
and how to mitigate exposure
* The 2020 e-Learning completion numbers have reduced due to the carve-out of the agriculture business Viterra (formerly Glencore Agriculture), which is now managing its own
independent compliance programme with oversight from its shareholders including Glencore.
Glencore Annual Report 2020 41
Financial statementsGovernanceAdditional informationStrategic report
ETHICS AND COMPLIANCE
continued
We also train and develop our own compliance personnel to
increase their understanding of key compliance risks and
important developments. We encourage them to participate in
relevant conferences, lectures, webinars and podcasts, where
possible, to continuously enhance their knowledge and skills.
Awareness
Awareness-raising activities and initiatives, in addition to online
and face-to-face training, are key to reminding employees of the
importance of ethics and compliance. While in-person activities
and initiatives have been heavily impacted by Covid-19, we have
continued to develop awareness materials in the form of
electronic guides, checklists, newsletters, videos and intranet
communications.
We also continue to develop content for the Glencore Ethics and
Compliance app 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, and allows for easy access to our Raising Concerns
platform, Conflicts of Interest declaration platform, and Gifts and
Entertainment register.
Ethics and Compliance event in the DRC
To mark the United Nations Anti-Corruption Day, on 10
December 2020, in collaboration with the newly created
Congolese Anti-Corruption Agency (l’Agence de Prévention
et de Lutte contre la Corruption – APLC), the Mining
Chapter of Congolese Federation of Companies (FEC) and
La Société Générale des Carrières et des Mines (Gécamines),
we sponsored a well-attended ethics and compliance event
in Kinshasa, Democratic Republic of the Congo (DRC).
The objective of the event was to bring together key
stakeholders from business, government and non-
governmental organisations to discuss their experiences
and approach to anti-bribery and corruption in the DRC.
We introduced the audience to our Ethics and Compliance
programme, our Values, and Code of Conduct, including
our approach to anti-bribery and corruption and conflicts of
interest. A panel which alongside Glencore, included
representatives from Gécamines and the FEC, engaged in
an open discussion on these topics before the event
concluded with remarks from the newly appointed Head of
the APLC.
Monitoring
We regularly monitor and test the implementation of our
Ethics and Compliance programme in order to determine its
effectiveness, and that it is operationalised and embedded into
business operations. The monitoring activities also enable us
to identify opportunities for improvement that help develop
and evolve the programme and respond to changes in our
business, the environments we operate in and applicable
laws and regulations.
Our Annual Monitoring Plan comprises on-site and desktop
reviews. On-site reviews are visits to our offices and/or industrial
assets to assess the implementation of our Ethics and Compliance
programme. In light of the Covid-19 outbreak, these reviews have
been performed remotely. Desktop reviews focus on the analysis
and transaction testing of either compliance processes and
controls or other processes, systems and controls that the
Monitoring team can access centrally.
42 Glencore Annual Report 2020
We have implemented a number of systems across the Group to
ensure that we consistently manage and track our compliance
data across all of our different modules. This includes risk
assessment, training and policies, and gives us an overall picture
of the risks in each of our offices and industrial assets and the
status of implementation of our programme.
Speaking openly and raising concerns
We are committed to creating a culture where everyone feels free
to speak about concerns in a secure and confidential way. We do
not tolerate retaliation against anyone who speaks openly about
conduct they believe is unethical, illegal or not in line with our
Code and policies, even if the concern is not substantiated. To
assist in achieving these objectives we implemented our
Whistleblowing Policy during 2020.
We encourage whistleblowers to first raise concerns with relevant
managers or supervisors as they are usually best equipped to
resolve concerns quickly and effectively. Reporters also have the
option of reaching out to nominated whistleblowing contacts,
who are members of senior management at the office or
industrial asset.
If a concern remains unresolved or a whistleblower is
uncomfortable using local channels, concerns can also be
reported via our Raising Concerns Programme, our corporate
whistleblowing programme, managed in Switzerland.
Raising Concerns allows whistleblowers to raise concerns
anonymously in any of 21 languages, by internet or phone.
Hotlines are available in most of the countries where we operate,
and details are published on the platform’s website and on
posters at offices and industrial assets.
All concerns are taken seriously and handled promptly, using an
objective, fact-based rationale. Concerns are investigated either
by our corporate office in Switzerland, or locally, depending on
factors such as the nature and severity of the concern.
In 2020, the programme received 413 reports of concerns
(2019: 500), with the following breakdown:
Type of concerns
Raised via
Business Integrity – 143 (35%);
HR – 190 (46%);
HSEC-Human Rights – 57 (14%);
Others – 23 (5%).
Web – 267;
Phone – 115; and
Email/Other (such as direct contact with
compliance/asset management) – 31.
Closed concerns
substantiated /
partially substantiated
22%* (2019 – 28%)
* As percentages of closed concerns as at 31 January 2021.
Discipline
Glencore expects all employees to act in accordance with our
Values, Code of Conduct and policies, regardless of role or location.
Glencore takes breaches of our Code of Conduct and policies
seriously. Anybody working for Glencore who breaches the Code
of Conduct, policies, procedures or the law may face disciplinary
action, including dismissal.
Interview with our local Compliance team in the DRC
Samy Senot Doss, Regional
Compliance Officer (RCO)
Samy is responsible for the
implementation of our Ethics
and Compliance programme
in Central Africa. He is based
in the Democratic Republic
of Congo.
Why did you choose
to work for Glencore?
Through its unique scale,
Glencore can have a considerable influence on – and be a role
model for – other companies in Africa through the way we
integrate ethics and compliance into how we do business.
What do you enjoy about working at Glencore?
Glencore doesn’t hesitate to support and encourage new ideas
and initiatives if they improve the way of working. The effective
implementation of an ethics and compliance programme
requires a commitment to continuous improvement. In
particular, in my current environment, one has to be willing to
continually seek out new ways to get people to understand the
importance of doing business the right way. Being at the
forefront of Glencore’s ethics and compliance strategy in the
DRC has been enriching and rewarding. Since I started here,
I’ve also enjoyed being part of the Group’s support for the
transition to a low-carbon economy. Our membership of the
Fair Cobalt Alliance, which aims to improve working conditions
and eliminate child labour, supports our Value of Integrity and
our vision and long-term strategy for being an internationally
respected mining business that responsibly produces and
trades commodities.
What do you think makes a good Regional
Compliance Officer?
A good RCO should be an unbiased technician, seeking to
reach consistent decisions and able to clearly demonstrate
the rationale for those decisions. The aim is to create and
strengthen trust in the RCO amongst all stakeholders and be
a trusted advisor.
Hyacinthe Twite
Wa Kisanga, Local
Compliance Officer
Hyacinthe works closely with
Samy as a full-time member
of the Compliance team and
is responsible for
implementing our Ethics
and Compliance programme
at the Kamoto Copper
Company in the Democratic
Republic of Congo.
What led you to Compliance and what do you
enjoy most about it?
It was the opportunity to add value to support the business in
achieving its objectives in the right way. Compliance offers a
dynamic career because it’s always evolving and therefore one
is always learning.
I enjoy learning through doing in Compliance. It’s the real-life,
day-to-day situations that have enriched my knowledge and
developed my skills. Each day, I must listen to and engage with
different stakeholders, understand and analyse complex issues
Being a good RCO requires the ability to adapt and be flexible,
especially in Africa, where implementing an ethics and
compliance programme in this jurisdiction and industry can
be complicated. There are many challenges that require you to
be active and deeply involved in the business to understand
the dynamics and issues.
Lastly, you need to be able to quickly identify where the ethics
and compliance risks lie and foresee when projects – although
well intentioned – could lead to non-compliant practices. One
example of this is the Covid-19 pandemic response, where
donations could be well intentioned, but still need to be looked
at carefully as they can raise compliance issues.
What do you like most about your job as
Regional Compliance Officer in the Central
and North Africa region?
Over the course of my career in Compliance, the statement I
hear that bothers me most is: “This is the way we do things
around here”.
Every day that statement motivates me to do my best to show
stakeholders why doing business the right way is essential to our
success. My role is to raise the standards and challenge some of
the practices in this region, and I find that really exciting.
A rigorous and standardised approach draws a clear line
between what can be allowed and what is clearly prohibited,
regardless of the place of operation.
What’s the biggest challenge you face as Regional
Compliance Officer?
In general, I’m pleasantly surprised by the commitment and
engagement of the different stakeholders to make a difference
in how business is conducted in this part of the world. Everyone
knows the stakes are high and wants to contribute at his or her
own level to support compliance. There’s an earnest, shared
desire to improve the business climate, but sometimes the lack
of coordination and alignment amongst the various stakeholders
can limit the impact of individual company initiatives.
and suggest concrete solutions. At the same time, I have
to demonstrate firmness, common sense, courage and
diplomacy in decision-making.
What does your typical work day look like?
No one day is quite like any other. My time and energy
are mostly focused on the implementation of compliance
policies and procedures, performance of third party due
diligence for intermediaries, review of donations and social
community projects, and training according to our training
plan. The training varies. It might be a training session for
senior management on red flags or it may be training new
employees to give them an introduction to our Values, the
Code of Conduct, and key company policies. We also train
them on the importance of speaking up and raising concerns
if they witness a breach of our Code, our Values or the law.
In the DRC we have a significant community investment
programme, so I spend a lot of my time doing due diligence
and analysis on the programme’s beneficiaries that fall under
the scope of our Third Party Due Diligence and Management
Procedure. An example might be a community investment
project for the supply of water to a community surrounding
the site.
Glencore Annual Report 2020 43
Financial statementsGovernanceAdditional informationStrategic report
FINANCIAL REVIEW
Robust adjusted earnings and cash flows in H2
2020 drove net debt down to our target range.
Losses per share were mainly due to non-cash
impairment charges. Cash flows from 2020
support a recommended 12¢/share distribution
to shareholders in 2021
Steven Kalmin
Chief Financial Officer
economies began to recover from the earlier severe Covid
related lockdowns and uncertainty and commodity prices
rebounded. The average LME copper price in H2 was 24%
higher than in H1, while own sourced H2 copper production
was up 15% over H1 levels.
Notwithstanding 2020 seeing two very different halves as noted
above, average prices for many of our key commodities were
broadly comparable to 2019, the main exceptions being gold, up
27% over 2019 and coal prices, which were materially down (GC
Newc 22%, API2 19% and API4 12%) compared to 2019. During a
year of uncertainty and volatility, the strength and flexibility of our
business model (combining large-scale marketing and industrial
activities), with broad geographic, commodity and activity
diversification, enabled us to weather and mitigate the worst
impacts of the pandemic.
Adjusted EBITDA was $11,560 million and Adjusted EBIT was
$4,416 million in 2020, compared to $11,601 million and $4,151
million in 2019. This broadly consistent headline result masks
differing performances and timing across the Marketing and
Industrial segments. The Marketing activities segment increased
its contribution to Group Adjusted EBITDA to 32 % (2019: 23 %)
with an Adjusted EBITDA of $3,732 million, an increase of 42 %
over 2019, continuing to build on its record first half contribution,
benefitting from market volatility, dislocation and supportive
pricing curve structures. Adjusted EBITDA from our Industrial
activities segment was $7,828 million, 13 % lower than 2019,
however, H2 2020 was up 17% over the comparable period and
was double the H1 2020 contribution as its weighting to industrial
metals was rewarded in H2 against a backdrop of recovering
economies and higher prices, clearly aided by necessary
accommodative monetary conditions and governmental
fiscal support.
Reflecting such business mix, Adjusted EBITDA mining margins
improved to 36% (2019: 28%) in our metal operations, but reduced
to 17% (2019: 37%) in our energy operations. See page 64.
FINANCIAL RESULTS
Loss attributable to equity holders moved from a loss of $404
million in 2019 to a loss of $1,903 million in 2020 and EPS reduced
from negative $0.03 per share to negative $0.14 per share. In a year
of rapidly changing global economic conditions, our healthy
overall underlying results reflects a year of two halves. The H1 2020
reported results were heavily impacted by the low commodity
prices and challenging early pandemic environment, against
which backdrop, various impairment charges were booked across
our portfolio. H2 2020 delivered a net profit of $697 million as
Group Adjusted EBITDA◊
Cash generated by operating
activities before working
capital changes
$11.6bn
2019: $11.6bn
15,767
14,545
10,268
11,601 11,560
$8.6bn
2019: $10.3bn
13,210
11,866
7,868
10,346
8,568
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Net debt/Adjusted EBITDA◊
Shareholder returns
1.37x
15,526
14,710
17,556
15,844
10,216
2016
2017
2018
2019
2020
Net debt
Net debt to Adjusted
EBITDA ratio
12¢/share
proposed for 2021
1.50x
1.00x
0.50x
0.00x
2,005 2,318
998 2,836 2,710
1,587
2016
2017
2018
2019
2020
2021
Distributions
Buybacks
Proposed distribution
44 Glencore Annual Report 2020
Highlights
US$ million
Key statement of income and cash flows highlights1:
Revenue
Adjusted EBITDA◊
Adjusted EBIT◊
Net loss attributable to equity holders
Loss 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◊
Adjusted EBITDA/EBIT◊
2020
2019 Change %
142,338
11,560
4,416
(1,903)
(0.14)
8,325
8,568
3,921
215,111
11,601
4,151
(404)
(0.03)
7,865
10,346
4,966
(34)
–
6
(371)
(380)
6
(17)
(21)
31.12.2020
31.12.2019 Change %
118,000
124,076
35,428
15,844
52.5%
1.37x
34,366
17,556
44.8%
1.51x
(5)
3
(10)
17
(9)
Adjusted EBITDA by business segment is as follows:
US$ million
Metals and minerals
Energy products
Corporate and other4
Total
Segment change (%)
2020
2019
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Change
%
1,768
2,053
(89)
3,732
42
7,285
1,039
(496)
9,053
3,092
(585)
7,828
11,560
(13)
1,169
1,515
(47)
2,637
5,555
3,854
(445)
8,964
6,724
5,369
(492)
11,601
35
(42)
19
–
Adjusted EBIT by business segment is as follows:
US$ million
Metals and minerals
Energy products
Corporate and other4
Total
Segment change (%)
2020
2019
Marketing
activities
Industrial
activities
Adjusted
EBIT
Marketing
activities
Industrial
activities
Adjusted
EBIT
Change
%
1,667
1,761
(89)
3,339
41
3,054
(1,365)
(612)
1,077
(40)
4,721
396
(701)
4,416
1,089
1,324
(47)
2,366
1,016
1,274
(505)
1,785
2,105
2,598
(552)
4,151
124
(85)
(27)
6
1 Refer to basis of presentation below.
2 Refer to page 48, also noting that 2019 FFO materially impacted by the lag of income taxes paid in 2019, in respect of 2018 profitability.
3
4 Corporate and other Marketing activities includes $211 million pre-significant items (2019: $58 million) of Glencore’s equity accounted share of Viterra.
◊ Adjusted measures referred to as Alternative performance measures (APMs) which are not defined or specified under the requirements of International Financial Reporting
Includes $652 million (2019: $607 million) of Marketing related lease liabilities.
Standards; refer to APMs section on page 219 for definitions and reconciliations and note 2 of the financial statements for reconciliation of Adjusted EBIT/EBITDA.
Marketing activities
Marketing Adjusted EBITDA and EBIT increased by 42% to $3,732
million and by 41% to $3,339 million, respectively. As noted above,
the scale and number of macro forces in H1 2020 (primarily Covid
linked, but also OPEC+’s supply response deliberations), and in H2
a rebound in demand for commodities coupled with supply
constraints, led to extreme levels of market volatility, amid rapidly
and materially changing underlying supply and demand
scenarios. This backdrop provided overall supportive physical
commodity marketing conditions. Metals and minerals Adjusted
EBIT was up 53%, or a more comparable 16%, adjusting for the
$350 million of largely non-cash cobalt accounting losses
recognised in the base period. Energy products Adjusted EBIT
was up 33% over 2019, as exceptional price movements and
dislocations across crude oil and refined products, combined with
soaring demand for and prices of storage and logistics, enabled
our oil department to deliver a record yearly performance. Our
50% share of earnings from the Viterra (formerly Glencore Agri)
agricultural business (captured within Corporate and Other) was
$211 million (post-interest and tax) compared to $58 million in 2019,
also reflecting good business opportunities captured during the
year and strong procurement margins on the back of generally
healthy crop sizes.
Industrial activities
Industrial Adjusted EBITDA decreased by 13% to $7,828 million
(Adjusted EBIT was $1,077 million, compared to $1,785 million in
2019). The decrease was primarily driven by overall weaker average
year-over-year commodity prices (coal being the main driver) and
the impacts of the pandemic on our coal and oil operations, in the
form of periods of stopped or reduced work, notably in Colombia,
South Africa and Chad, followed by market-related supply
reductions in Australia through H2.
Glencore Annual Report 2020 45
Financial statementsGovernanceAdditional informationStrategic report
FINANCIAL REVIEW
continued
EARNINGS
A summary of the differences between reported Adjusted EBIT and income attributable to equity holders, including significant items, is
set out in the following table:
US$ 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$)3◊
Significant items◊
Share of Associates’ significant items4
Movement in unrealised inter-segment profit elimination5
Net loss on disposals of non-current assets6
Other expense – net7
Impairments8
Income tax credit/(expense)2
Non-controlling interests’ share of significant items9
Total significant items
(Loss)/income attributable to equity holders of the Parent
(Loss)/earnings per share (Basic) (US$)
2020
4,416
(580)
(46)
(1,453)
(306)
454
2,485
0.19
(92)
(760)
(36)
(173)
2019
4,151
(337)
(106)
(1,713)
(369)
816
2,442
0.18
(292)
468
(43)
(173)
(6,392)
(2,843)
1,476
1,589
(4,388)
(1,903)
(0.14)
(249)
286
(2,846)
(404)
(0.03)
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 Based on weighted average number of shares, refer to note 17 of the financial statements.
4 Recognised within share of income from associates and joint ventures, see note 2 of the financial statements.
5 Recognised within cost of goods sold, see note 2 of the financial statements.
6 Refer to note 4 of the financial statements and to APMs section for reconciliations.
7 Recognised within other expense – net, see note 5 of the financial statements and to APMs section for reconciliations.
8 Refer to note 6 and 10 of the financial statements and to APMs section for reconciliations.
9 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 aid in
providing an understanding and comparative basis of the
underlying financial performance.
In 2020, Glencore recognised a net expense of $4,388 million
(2019: $2,846 million) in significant items comprised primarily of:
• Expenses of $92 million (2019: $292 million) relating to Glencore’s
share of significant expenses recognised directly by our
associates. 2020 had no individually material items. In 2019, the
expense primarily related to impairments and other items in
Viterra (net $73 million), Trevali ($65 million) and Oil vessels’
entities ($62 million).
• Net loss on disposals of non-current assets of $36 million
(2019: $43 million) see note 4.
• Income tax credit of $1,476 million (2019: expense of
$249 million) – see income taxes below.
• Other income/(expense) – net expenses of $173 million
(2019: $173 million) see note 5. Balance primarily comprises:
‒ $438 million (2019: $47 million) of mark-to-market gains on
equity investments / derivative positions accounted for as
held for trading, including the commodity price linked
deferred consideration related to the sale of Mototolo in 2018.
‒ $192 million net loss (2019: $70 million) on foreign
exchange movements.
‒ $113 million (2019: $159 million) relating to certain legal
matters and the ongoing investigations (legal, expert
and compliance) related costs (see note 31).
‒ $214 million (2019: $173 million) of closure and severance costs,
primarily relating to suspension of operations at Prodeco
coal in Colombia and the closure of the Aguilar zinc mine
in Argentina. 2019 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.
‒ $Nil (2019: gain of $325 million). The 2019 gain related to the
settlement of an outstanding claim (reversing a prior period
provision of the same amount), 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
• Impairments of $6,392 million (2019: $2,843 million), see notes 6
and 10. The 2020 charge primarily relates to the:
‒ Chad oil operations ($673 million), due to lower oil price
assumptions and operational impacts from Covid-19
restrictions to international mobility.
‒ Astron oil refinery ($480 million), primarily due to lower
projected oil refining margins, following the global macro-
economic impact of Covid-19 on refined petroleum product
demand and resulting global refinery overcapacity.
‒ Prodeco coal operations ($835 million) owing to continued
pressure on the API 2 European coal market and seeking to
place the operations on extended care and maintenance,
which application was rejected by the government.
‒ In addition, a $445 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 11).
46 Glencore Annual Report 2020
‒ Mopani copper operations ($1,041 million), owing to persistent
operational challenges, results from further technical analysis,
delays in key development projects and cost increases,
resulting in the decision to transition mining operations to
care and maintenance, and ultimately culminating in an
agreed sale to ZCCM expected to close in H1 2021.
‒ Volcan zinc operations ($2,347 million), resulting in a Glencore
attributable amount of $380 million (after tax and non-
controlling interest), reflecting revised confidence levels in
deploying capital to longer-term greenfield projects /
resources.
‒ Lydenburg ferrochrome smelter ($116 million), owing to the
challenging operating, cost and market environment across
the South African ferrochrome industry, necessitating
Glencore to make production and cost reductions.
The 2019 impairments related primarily to the Prodeco coal
operations ($514 million), the Chad oil operations ($538 million),
the Mutanda copper operations in the DRC ($300 million), Oxidos
and Cerro de Pasco operations ($378 million) and VAT
impairments in respect of long overdue claims, predominantly in
Zambia ($162 million).
Net finance costs
Net finance costs were $1,453 million during 2020, a 15% decrease
compared to $1,713 million in the comparable reporting period,
primarily due to lower average base rates (mainly US$ Libor).
Interest expense for 2020 was $1,573 million, down 19% over 2019
and interest income was $120 million compared to $227 million in
the prior year.
Income taxes
An income tax credit of $1,170 million was recognised during 2020,
compared to an expense of $618 million in 2019. Adjusting for
$1,476 million (2019: net expense of $249 million) of net income tax
credit related to significant items (primarily impairments and tax
losses recognised/not recognised), the 2020 pre-significant items
income tax expense was $306 million (2019: $369 million). The
2020 effective tax rate, pre-significant items, was 29.7%, consistent
with the 30.5% in 2019.
STATEMENT OF FINANCIAL POSITION
Current and non-current assets
Total assets were $118,000 million as at 31 December 2020,
compared to $124,076 million as at 31 December 2019. Current
assets increased from $41,410 million to $43,212 million, primarily
due to an increase in marketing inventories on account of higher
metals commodity prices (copper, zinc and aluminium up 26%,
20% and 11% respectively) and higher carried oil volumes at
year-end relative to 2019. Non-current assets decreased from
$82,666 million to $74,788 million, primarily due to impairments to
property, plant and equipment of $5,250 million, transfer of
Mopani to ‘assets held for sale’, lower capital expenditure over the
period (below depreciation and amortisation expense) and
mark-to-market adjustments (loss of $630 million) with respect to
our investments carried at fair value through other
comprehensive income (see note 10).
Current and non-current liabilities
Total liabilities were $83,598 million as at 31 December 2020,
compared to $84,840 million as at 31 December 2019. Current
liabilities were broadly consistent with the prior year at $39,441
million. Non-current liabilities decreased from $45,832 million to
$44,157 million, primarily due to a decrease in deferred tax
liabilities of $1,373 million resulting from 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 $34,402 million as at 31 December 2020,
compared to $39,236 million as at 31 December 2019, the
movement primarily reflecting the loss for the year of $3,946
million, including non-controlling interests, and the movements
in other comprehensive income/(loss) noted below.
Other comprehensive income/(loss)
A loss of $885 million was recognised during 2020, compared to
a gain of $285 million in 2019 primarily relating to mark-to-market
losses of $630 million, mainly with respect to our investment in
Russneft (see note 10) and exchange losses on translation of
foreign operations of $189 million, primarily relating to our South
African ZAR-denominated subsidiaries.
CASH FLOW AND NET FUNDING/DEBT
The reconciliation in the table overleaf 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 in net funding items.
Net funding as at 31 December 2020 increased by $1,062 million
to $35,428 million and net debt (net funding less readily
marketable inventories) decreased by $1,712 million over the
period to $15,844 million.
Funds from operations were up 6% compared to 2019, more
than covering the full increase in working capital of $4,318 million
(including inventories) and the $3,921 million of net capital
expenditure.
Business and investment acquisitions and disposals
Net outflows from acquisitions and investments were $265 million
(2019: $147 million) over the year, comprising primarily cash
derecognised upon disposal of Minera Alumbrera Limited, the
finalisation of acquiring a 30% interest in PT CITA Mineral
Investindo Tbk and the acquisition of the remaining 0.5% minority
interest held in Katanga Mining Limited. The net outflow in 2019
was primarily the minority buy-outs within existing operations
(additional 10% in Ulan and 2.7% in Hail Creek).
Liquidity and funding activities
In 2020, the following significant financing activities took place:
• In March 2020 (effective May 2020), Glencore refinanced and
extended its committed revolving credit facilities on the same
commercial terms as 2019. As at 31 December 2020, the
facilities comprise:
‒ a $9,975 million 12-month revolving credit facility with a
12-month term-out option at Glencore’s discretion, and a
12-month extension option; and
‒ a $4,650 million 5-year revolving credit facility, with a
12-month extension option.
• In September 2020, issued:
‒ 7.5 year EUR 850 million, 1.125% coupon bonds
‒ 5.5 year CHF 225 million, 1.000% coupon bonds
‒ 5 year $1,000 million, 1.625% coupon bonds
‒ 10 year $1,000 million, 2.500% coupon bonds
• In December 2020, issued 7.5 year EUR 100 million, 1.125%
coupon bonds
As at 31 December 2020, Glencore had available committed
liquidity amounting to $10.3 billion.
Glencore Annual Report 2020 47
Financial statementsGovernanceAdditional informationStrategic report
FINANCIAL REVIEW
continued
CASH FLOW AND NET FUNDING/DEBT
Net funding
US$ 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
Purchase and sale of investments – net2
Purchase and sale of property, plant and equipment – net2
Net margin receipts 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
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.
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 (negative 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 lease liabilities
($0.7 billion as at 31 December 2020, representing primarily
chartered vessels and various storage facilities, where the majority
of such commitments expire within 2 years).
RECOMMENDED DISTRIBUTION
The Directors have recommended a 2020 financial year cash
distribution of $0.12 per share amounting to $1.6 billion,
accounting for own shares held as at 31 December 2020. Payment
will be effected as a $0.06 per share distribution in May 2021 and a
$0.06 per share distribution in September 2021 (in accordance
with the Company’s announcement of the 2021 Distribution
timetable made on 16 February 2021).
48 Glencore Annual Report 2020
31.12.2020
31.12.2019
37,479
(553)
(1,498)
37,043
(778)
(1,899)
35,428
34,366
31.12.2020
31.12.2019
8,568
1,930
15
(1,042)
(1,189)
43
8,325
(4,318)
(222)
13
(3,921)
1,040
(56)
(127)
734
–
–
(457)
(1,339)
(1,062)
(34,366)
10,346
1,522
13
(1,368)
(2,814)
166
7,865
2,175
(117)
(6)
(4,966)
529
(24)
(5,327)
129
(225)
(865)
(582)
(685)
(2,228)
(32,138)
(35,428)
(34,366)
19,584
16,810
(15,844)
(17,556)
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
2020, Glencore plc had CHF 27 billion of such capital contribution
reserves in its statutory accounts. The distribution is subject to
shareholders’ approval at Glencore’s AGM on 29 April 2021.
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.
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.
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 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). Significant items (see reconciliation below)
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 aid in providing
an understanding and comparative basis of the underlying
financial performance.
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 219.
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 requirements
Policies
Reference in 2020 annual report
1. Environmental Matters
• Sustainability Policy
• Code of Conduct
• Climate change, page 16
• Climate change risk, pages 82 – 83
• Health, safety, environment risk, pages 80 – 81
• Sustainability, page 32
• Operating risk, page 79
• Our people, page 27
• Ethics and Compliance, page 38
2. Employees
3. Human Rights
• Code of Conduct
• SafeWork programme
• Conflict of Interest Policy
• 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
• Community and human rights risk
pages 83 – 84
• Sustainability, page 32
4. Social Matters
• Code of Conduct
• Sustainability Policy
• Community and human rights risk,
pages 83 – 84
• Sustainability, page 32
• Our people, page 27
5. Anti-corruption and anti-bribery
• Code of Conduct
• Global Anti-Corruption Policy
• Laws and enforcement risk, pages 76 – 77
• Ethics and Compliance, page 38
6. Business model
7. Principal Risk and Uncertainties
8. Non-financial key performance indicators
• Business model, page 8
• Risk management, page 70
• Non-financial key performance indicators,
page 23
Glencore Annual Report 2020 49
Financial statementsGovernanceAdditional informationStrategic report
Recycling is becoming an increasingly important part of
Glencore’s business and reflects our purpose of responsibly
sourcing the commodities needed to advance everyday life.
As the world’s population increases and countries continue to
develop and industrialise, society will need more metals and
minerals. Although we will still need mining to meet global
demand, recycling is playing an essential role.
Our recycling activities are carried out both by our dedicated
business, Glencore Recycling, and by our commodity businesses,
in particular Nickel and Zinc. Through these activities, we give
recyclable materials a second life and divert them from landfill,
helping minimising the environmental impacts.
GLENCORE RECYCLING
Glencore Recycling is a market leader in the recycling of copper
and precious metals, with decades of experience in the industry,
recycling more than one million tonnes of scrap electronics since
the 1990s. In 2020, we recovered approximately 27kt copper,
132koz gold, 1.3moz silver, 16koz palladium, and 5koz platinum
from recyclable input feeds.
This fully integrated business, with facilities in the United States
and Canada, sources recyclable materials from original
equipment manufacturers (OEMs), other end-of-life sources
and processors before sampling and determining value. It
then smelts and refines the materials, before marketing them
directly to our customers.
Its approach is underpinned by three core areas: leading
technological expertise, a commitment to customer excellence
and embedding sustainability across the business.
Our plants, laboratories and technical capabilities enable us to
accurately sample and treat a wide range of complex materials,
while through our smelting and refining capabilities we produce
London Metal Exchange (LME) grade copper and precious metals.
We work closely and flexibly with customers to understand their
requirements, ensuring prompt turnaround times and logistics
solutions, and helping them maximise returns.
By working to the electronics industry’s leading responsible
recycling standards, and undergoing third party health, safety and
environmental management assurance at our facilities, we close
the loop between processors, manufacturers and consumers.
RECYCLING WITHIN OUR NICKEL AND
ZINC BUSINESSES
In Canada, our Sudbury Integrated Nickel Operations (INO) is one
of the world’s largest processors of secondary nickel and cobalt
bearing materials, including alloy scrap, battery materials, plating
residues and spent catalysts. Sudbury INO has built a solid
reputation for recycling, established over 30 years in the areas of
receiving, sampling and the effective recovery of metals contained
in end-of-life materials. In 2020, we recovered approximately 4.6kt
of nickel and 2kt cobalt. The secondary materials processed are
then further refined at our Nikkelverk refinery in Norway into
finished products with purities amongst the highest in the world.
Our Portovesme lead and zinc smelter in Sardinia, Italy, processes
electric arc furnace (EAF) steel dust. EAF dust is a zinc-containing
by-product of the steel production process, and our recycling and
processing of this material avoids it being sent to landfill. In 2020,
we recovered approximately 57kt zinc directly from EAF dust.
Glencore smelters recovered a further 103kt zinc from treatment
of waelz oxides, which are also derived from steel industry EAF
dust residues.
Any lead recovered from this process is also treated on site,
together with spent car battery paste, mined lead concentrates
and zinc smelter residues to produce refined lead.
To learn more about our recycling activities, visit glencore.com/
what-we-do/recycling
STORIES FROM THE YEAR
Recycling: A case study
DECADES OF
RECYCLING
EXPERTISE
Giving metals and minerals
a second life: a profile of
our recycling activities
50 Glencore Annual Report 2020
Although we still need
mining to meet global
demand, recycling is playing
an essential role
Kunal explains how a mobile phone or
laptop is recycled: “Through collection
and sorting stages, devices end up with
an electronics pre-processor or recycler
who dismantles them. Then, via
automated or manual sorting, parts of the
device will end up in three categories –
plastics, steel or aluminium, and non-
ferrous. This last category, which still has
a significant amount of plastic, is sent
to Glencore for recycling. At one of our
recycling sites, such a feed will go through
further processing to homogenise it.
The processed electronics feed will be
sent to one of our copper smelters, and
blended along with copper concentrates
to produce copper anodes. The precious
metals in the electronics feed will end up
in the slimes. Both the anodes and the
slimes then go to our copper refinery, and
the output of that process is market
grade copper cathodes, as well as gold
and silver bars.”
Breaking it down
Last year, we
recovered
approximately
27kt
copper
132koz
gold
1.25moz
silver
16koz
palladium
5koz
platinum
4.6kt
nickel
2kt
cobalt
160kt
zinc
Glencore Annual Report 2020 51
Financial statementsGovernanceAdditional informationStrategic report
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
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 RETURNS
We generate returns as a fee-like income from
distribution of physical commodities and arbitrage,
including blending and other optimisation
opportunities. Our use of hedging instruments results
in profitability being largely determined by these
activities rather than by absolute price movements.
Marketed volumes (tonnes/bbl)
Copper
3.4m
Nickel
149k
Lead
1.0m
Alumina/
aluminium
7.2m
Zinc
2.8m
Ferroalloys
8.5m
Coal
68.4m
Crude oil
791m
52 Glencore Annual Report 2020
GETTING
COMMODITIES
TO WHERE
THEY NEED
TO BE
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
TIME
ARBITRAGE
Disparity
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.
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.
Glencore Annual Report 2020 53
Strategic reportAdditional informationFinancial statementsGovernance
MARKET REVIEW AND OUTLOOK
Pandemic-related uncertainty drove industrial metal prices down in the
first half, before a rapid recovery on robust Asian demand, and markets
pricing in Covid’s impact on commodity supply. Energy markets had
a tough year, which also presented trading opportunities
Financial overview
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA margin
Metals and
minerals
Energy
products
Corporate
and other1
54,847
69,290
1,768
1,667
3.2%
2,053
1,761
3.0%
–
(89)
(89)
n.m.
2020
124,137
3,732
3,339
3.0%
Metals and
minerals
73,561
1,169
1,089
1.6%
Energy
products
120,627
1,515
1,324
1.3%
Corporate
and other1
–
(47)
(47)
n.m.
2019
194,188
2,637
2,366
1.4%
1 Corporate and other Marketing activities includes $211 million (2019: $58 million) of Glencore’s equity accounted share of Glencore Agri.
HIGHLIGHTS
Marketing delivered an outstanding performance. Adjusted EBIT
of $3,339 million was up 41% up on 2019, building on the record
first half contribution, which particularly benefitted from
heightened market volatility, dislocation and supportive pricing
curve structures. Financial and commodity markets were
extremely volatile in the face of Covid uncertainty, where risk
assets were initially heavily sold in March/April, later being met by
enormous liquidty injections and economic stimulus worldwide
and selective industrial demand recovery, particularly in China.
Our diverse suite of commodities responded at different times
through this period:
• base metals initially plunged to multi-year lows on demand-
side fears, but many have since reached multi-year highs. The
market’s confidence in demand has returned, also recognising
that supply growth has been weak, having itself been disrupted
by the pandemic;
• energy prices were depressed through most of 2020, but
ended the year on an upward trajectory as economic activity,
particularly in China, picked up and supply reductions began
to take hold;
Selected marketing volumes sold
• average prices for precious metals were markedly higher due to
their often countercyclical characteristics
Our major commodity trading units performed well during this
difficult year. Year-over-year EBIT increased by approximately $1
billion, of which $578 million was attributable to the Metals
business, partly reflecting the reversal of the challenging cobalt
market conditions from 2019 which led to significant marketing
inventory writedowns in the base period. Energy Products EBIT
increased by $437 million as exceptional price movements and
dislocations across crude oil and refined products, combined with
soaring demand for and prices of storage and logistics, enabled
our oil department to deliver a record yearly performance.
Our 50% share of earnings from the Viterra agricultural business
(captured within Corporate and Other) was $211 million (post-
interest and tax) compared to $58 million in 2019.
Units
mt
mt
mt
moz
moz
kt
mt
mt
mt
mt
mt
mbbl
mbbl
2020
2019
Change %
3.4
2.8
1.0
2.0
64.9
149
8.5
7.2
57.6
67.1
1.3
791
738
4.1
3.1
1.1
2.1
68.3
181
9.5
11.0
65.5
86.7
6.5
973
779
(17)
(10)
(9)
(5)
(5)
(18)
(11)
(35)
(12)
(23)
(80)
(19)
(5)
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
Crude oil
Oil products
1 Estimated metal unit contained.
2
Includes agency volumes.
54 Glencore Annual Report 2020
Market highlights
Copper
Zinc
Nickel
Coal
2020E global copper
mine production1
2016-2020E cumulative global
zinc metal deficit5
2016-2020E cumulative nickel
market deficit7
2020E Pacific seaborne
thermal coal demand growth8
-1.4%
Global visible copper
inventory end-2020
c.11 days’
consumption1
Incremental copper demand
from grid distribution and
storage by 20502
8.7Mt
1Mtpa
Forecast annual average
demand growth from 2020 to
2050 under a Rapid Transition
decarbonisation pathway3
c.2Mt
40kt
-7.2%
Global visible zinc exchange
inventory end-2020
Global visible nickel inventory
end-2020
Coal share of 2030 forecast
primary energy demand9
c.6 days’
consumption6
c.35 days’
consumption7
17%
2020E growth in Chinese zinc
metal consumption5
Primary nickel demand in
batteries: 2016-2020E CAGR8
+25%
2020E Pacific share of
global seaborne thermal
coal demand8
89%
c.1Mt
Incremental primary nickel
demand from EV batteries by
20308
2030E coal demand9
4.9bt
vs 2019 coal demand of 7.8bt
+1.0%
2020E global zinc metal
demand growth: -5.5%5
2020E zinc mine supply4
12.5Mt
2020 forecast one year ago:
14Mt
1 Wood Mackenzie Copper long-term outlook Q4 2020. Visible inventories comprise
LME, SHFE, Comex and estimated Chinese bonded warehouse stock
5 Wood Mackenzie Zinc long-term outlook Q4 2020 update
6 Wood Mackenzie Zinc long-term outlook Q4 2020 update, exchange inventories
2 Glencore modelled estimates under a Rapid Transition (IEA SDS) scenario,
comprise LME and SHFE.
compared to 2020
3 Glencore, 2020 Investor Update, 4 December 2020, Slide 6
4 Wood Mackenzie Zinc long-term outlook Q4 2020 update compared with
7 Glencore estimates, visible inventories comprise LME and SHFE
8 Glencore estimates
9 Glencore modelled estimates under a Rapid Transition (IEA SDS) scenario
Q4 2019 update
MARKET VARIABLES
Select 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
EUR : USD
GBP : USD
USD : CHF
USD : KZT
USD : ZAR
Spot
31 Dec 2020
Spot
31 Dec 2019
Average
2020
Average
2019
Change in
average %
382
164
7,749
2,729
1,976
16,554
1,898
26
15
73
154
93
82
52
324
207
6,149
2,280
1,914
13,950
1,517
18
15
70
86
79
68
66
318
138
6,186
2,269
1,826
13,803
1,771
21
15
70
105
64
61
43
326
199
6,005
2,548
1,999
13,944
1,393
16
16
77
90
72
78
64
(2)
(31)
3
(11)
(9)
1
27
31
(6)
(9)
17
(11)
(22)
(33)
Spot
31 Dec 2020
Spot
31 Dec 2019
Average
2020
Average
2019
Change in
average %
0.77
1.27
1.22
1.37
0.89
421
14.69
0.70
1.30
1.12
1.33
0.97
383
14.00
0.69
1.34
1.14
1.28
0.94
414
16.46
0.69
1.33
1.12
1.28
0.99
383
14.45
–
1
2
–
(5)
8
14
Glencore Annual Report 2020 55
Financial statementsGovernanceAdditional informationStrategic report
MARKET REVIEW AND OUTLOOK
continued
COPPER
Having started the year above $6,000/t, the spread of Covid-19 and
the associated deteriorating demand outlook resulted in copper
prices reaching a low of $4,372/t in March. Up to this point, the
impacts to mine and scrap supply were limited. The low price
environment was temporary, as supply disruptions from
containment measures extended globally, particularly mine
supply from South and Central America, while consumption in
China began to improve, supported by significant monetary and
fiscal stimulus. Refined copper inventories subsequently reached
multi-year lows, signaling a tight physical market. Net imports of
refined copper to China increased to record monthly levels from
mid-2020. Cathode premiums consequently improved to their
highest levels in five years and strong competition for
concentrates saw treatment and refining charges moving to
levels last seen in 2012.
The improving global demand conditions during the second half
of the year and continued financial stimulus measures, resulted in
a strong recovery in copper prices, supported by ongoing strong
demand from China, declining visible inventories and more
recently, improved demand growth expectations with regards to
the longer term energy transition. Mine supply and logistics
disruptions persisted into the second half, although to a lesser
extent. Net-speculative positioning continued to move long in the
run-up to year end and the copper price moved above $8,000/t in
December, an increase of more than 80% from the low-point in
March, and reaching the highest level since early 2013.
Looking forward, mine supply is expected to continue to be
impacted by measures taken to contain the spread of Covid-19,
with projects under construction likely to experience further
delays. Supply growth is also constrained by ageing assets,
declining ore grades and a diminished project pipeline. For 2021,
annual treatment and refining charges settled at their lowest
levels in 10 years and benchmark annual cathode premiums
rolled over at 2020 levels, reflecting the positive demand outlook
for copper consumption and anticipated restocking through
supply chains. In the near term, we expect demand to continue to
recover ex-China and to remain strong in China, supported by
economic stimulus measures, Covid vaccine rollouts and a return
to steady growth rates longer term, driven by population growth
and rising living standards in emerging economies. In addition,
climate change policies will be a key driver for copper growth
sectors going forward, from renewable power generation and
distribution, to energy storage and electric vehicles.
COBALT
Late 2019 brought stability in the cobalt price at c.$15/lb, with lower
stock levels across the cobalt supply chain and expectations of
improved demand conditions into 2020. This materialised with an
initial 13% price rally to a 2020 high of $17.00/lb, before the
pandemic-related retracement to reach a 2020 low of $13.75/lb in
July. The average price for the year was $15.40/lb, 4% lower than
2019. Metal demand sectors, notably aerospace, suffered a more
pronounced impact than battery and other sectors.
Cobalt hydroxide payability was relatively resilient over the first half
of the year, maintaining a range of 60-70% with the support of
logistics disruptions, emerging European EV sector demand and
solid consumer goods battery demand. African logistics
disruptions associated with Covid-19 reduced availability of
hydroxide from the DRC, which is responsible for c.70% of global
supply and almost all cobalt in the form of hydroxide. Although
bottlenecks eased during H2, given stronger European EV
demand and Chinese EV demand showing solid signs of recovery,
payability pushed above 80% in the last quarter.
2021 has started strongly from a demand and pricing perspective,
most notably as Chinese and European EV demand builds
momentum. A level of stockpiling of key strategic materials,
particularly in China, has also supported demand. EV model
releases by global automakers, coupled with strong consumer
demand and government support, should underpin EV sales
growth in key markets, pointing to a constructive cobalt
market. Vaccination roll-out is expected to bolster a wider
economic recovery, benefiting non-battery demand segments
including aerospace.
LME copper price (high, low, average)
($/t)
MB cobalt price (high, low, average)
($/lb)
As the pandemic took hold, copper and other industrial metal
prices reached multi-year lows due to demand uncertainty. With
overall demand proving relatively resilient and growing fears on
mine supply, prices increased dramatically.
Cobalt was one of the more stable markets in 2020.
8,000
7,000
6,000
5,000
4,000
30.00
25.00
20.00
15.00
10.00
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
2019 range
2020 range
Average
56 Glencore Annual Report 2020
2019 range
2020 range
Average
ZINC
NICKEL
Covid-related disruptions on the supply side resulted in an
unanticipated zinc concentrates deficit in 2020 and, in turn, lower
metal production than initially expected. However, global metal
demand fell faster than supply, resulting in higher visible metal
stocks, although still only representing seven days relative to
global demand. Average metal prices reduced by 11% to $2,269 in
2020, but by year end, demand had recovered, with prices rising
to $2,631 on average in Q4 2021.
The demand recovery in H2 2020 was stronger in China than in
the rest of the world, as evidenced by SHFE stocks at similar levels
in both December 2019 and 2020, while other exchange stocks
increased. Meanwhile, Chinese mine production slightly
decreased in 2020 per NBS (-1.8% YoY), metal imports were
curtailed by Covid disruption elsewhere and Chinese smelters
continued to process at full capacity, driving concentrates imports
up 20.1%, which absorbed excess concentrates stocks ex-China.
Spot TCs reduced from c.$300/dmt in Q1 2020 to $85/dmt in
December 2020, as smelters competed for concentrates.
Towards the end of the year, market publications revised their zinc
metal surplus estimates for 2020 to below 0.5mt, compared to
earlier forecasts of a 1mt surplus in the midst of the crisis in Q2
2020. The recovery in the zinc price throughout H2 reflects
renewed optimism for metal demand in 2021, while pricing in
potential additional disruptions in mine supply and a weaker
US dollar.
We expect ex-China mine supply to recover in 2021 (although
with risk as Covid measures remain) and be absorbed by post-
Covid increases in ex-China smelter production and some
global smelter restocking. Indications for demand recovery are
encouraging, underpinned by economic stimulus.
In lead markets, Covid disruptions drove TCs down from $180/dmt
in January to $100/dmt by December. Refined metal production
was not severely affected by the mine disruptions (-2.4% YoY) and
metal consumption fell by 4% YoY, in which context, the average
price for the year reduced by 9% to $1,826
In 2020, primary nickel consumption declined year on year, whilst
supply growth was driven by Indonesia. The resulting surplus was
larger in H1 2020 as the outbreak of Covid-19 had a greater impact
on demand than on mine supply, however it then narrowed in H2
2020 on increased nickel consumption from Chinese stainless
steel producers.
Global stainless steel production was down on the prior year due
to the pandemic. Notable exceptions were China and Indonesia,
whose production, particularly for the high-nickel containing
300-series, experienced a strong rebound from Q2 with total 2020
melt exceeding levels seen in 2019.
Outside the stainless steel segment, nickel demand from alloys
and special steels was negatively affected by the pandemic’s
impact on key end-use sectors such as aerospace, oil and gas and
automotive. The consequences of travel restrictions and stay-at-
home orders for the aerospace industry have been dramatic and
the effects on downstream demand are likely to be long lasting.
Automotive production significantly declined in the second
quarter, prompting year on year double-digit sales declines in
almost all markets, except China, where the drop was more
modest. Conversely, after a weak first quarter, the electric and
hybrid vehicle markets exceeded even the most optimistic
forecasts, albeit from a lower base than traditional automotive. In
Europe, the strong policy response prompted by Covid-19 pushed
sales above 1 million units, turning it into the world’s largest EV
market. In China, from August, New Energy Vehicles sales were
back to growth mode. We expect the recent positive trend to
support a strong rebound in 2021 nickel demand, as major
economies and automakers have committed to aggressively
support the transformation to EVs.
Meanwhile on the supply side, pandemic-related production
losses from traditional nickel suppliers were not as large as initially
feared and these were more than offset by continued growth in
production of nickel pig iron (“NPI”) in Indonesia, which for the first
time, surpassed China as the world largest producer of NPI.
Despite the positive demand outlook, we expect the market
to remain in surplus in 2021, driven by increasing nickel supply
from Indonesia.
LME zinc price (high, low, average)
($/t)
LME nickel price (high, low, average)
($/t)
China’s consumption of zinc broadly continued at 2019 levels.
Nickel is closely tied to stainless steel markets, and the
development of NPI production in Indonesia.
3,500
3,000
2,500
2,000
1,500
20,000
18,000
16,000
14,000
12,000
10,000
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
2019 range
2020 range
Average
2019 range
2020 range
Average
Glencore Annual Report 2020 57
Financial statementsGovernanceAdditional informationStrategic report
MARKET REVIEW AND OUTLOOK
continued
FERROALLOYS
OIL
Global ferrochrome production decreased by 11% in 2020, with
South Africa declining 25% year on year due to rising cost
pressures and Covid lockdown restrictions. South African chrome
ore exports reduced by 10% (basis YTD November)
Chrome demand recovered during H2, mainly supported by
growth in stainless steel production in China and Indonesia, with
all other major regions decreasing production in 2020.
Vanadium consumption from carbon steel production decreased
considerably during H1 2020 due to Covid-19 related impacts.
Demand from the aerospace industry was particularly weak. H2
demand improved, largely due to the carbon steel industry in
China.
ALUMINIUM
The aluminium and alumina markets experienced a turbulent
2020 due to the pandemic.
The LME 3M contract reached a 4-year low of $1,462 towards the
end of H1, as Covid-19 impaired ex-China demand, causing a large
supply surplus. In China, a strong demand rebound lead to higher
domestic prices, opening the import arbitrage window which
supported ex-China prices and attracted 10-year record primary
aluminium imports. With this dynamic in place and an improved
global macro sentiment, the LME 3M closing price reached a
yearly high of $2,055 before ending the year at $1,974.
In the U.S., with demand weakening, the delivered Midwest
premium declined in H1 from 14.5c/lb to 9c/lb, before staging a
recovery in H2 to end the year at 14.65c/lb, on the back of demand
recovery and re-introduction of quotas on Canadian imports. The
CIF Main Japanese Port premium finished the year at $127/t, up
from $78/t at the beginning of the year, as customers sought to
draw aluminium shipments away from China.
China alumina imports throughout the year also offered a floor to
ex-China alumina prices. Price levels were beneficial to smelters
during H2 as LME prices outperformed alumina prices.
IRON ORE
Chinese steel production reached record levels in 2020, led by
strong infrastructure spending, which in turn led to the iron ore
market being in deficit for most of year. Iron ore prices rose to
levels not seen over the last five years. In H2 2020, ex-China
demand also returned, with prices responding. Despite iron ore
prices at multi-year highs, steel mill margins have generally been
positive, having been able to pass on the higher raw material costs
to their customers. Prospects for a significant increase in iron ore
supply are limited in the near term, with prices thereby supported,
subject always to the demand side of the equation.
2020 marked one of the most dramatic periods in the history of oil
markets, the implications of which are far-reaching and structural
across many industries. The start of 2020 saw oil prices at their
highs for the year, with Brent over $69 per barrel. By the end of
January, the fear of Covid spreading and its anticipated impact on
oil demand caused market panic, starting a rout in oil prices.
The collapse of the OPEC+ production cut agreement in early
March, temporarily increasing supply, exacerbated the sell-off.
Volatility surged to historical highs, with near dated Brent implied
volatility topping 100%. Due to the global pandemic, most
countries entered some form of lockdown at different stages. With
transportation severely curtailed, in particular air travel, near term
global oil demand destruction was expected to reach
unprecedented levels, even as actual supply was increasing. With
oil prices in free fall, OPEC+ finally came to an agreement for
production cuts on a massive scale of close to 10 million barrels
per day.
As governments extended lockdowns, global oil storage edged
towards capacity. Tanker freight rates surged and the oil price
curve structure moved into deep contango, as the market forced
more oil into storage. Brent dropped below $20 per barrel, its
lowest level in more than 20 years. Oil in some parts of the world,
in particular the US, even priced negative for a short period.
In May, oil prices started to recover as more countries lifted
restrictions. Oil inventories looked to have peaked, demand
showed signs of recovery and OPEC+ extended production cuts.
The optimism was short lived as Covid-19 second waves hit a
number of countries in Q3, resulting in renewed restrictions, which
kept a lid on oil prices and the curve dropped back into a deep
contango. It was only midway through Q4, when reports emerged
of possible high-efficacy vaccines, that the oil price strength
resumed, closing around $52 per barrel by the end of the year. At
the same time, the price curve moved from contango into a
strong backwardation, signaling expectations for a tightening in
future market conditions.
The oil market has been working to find price equilibrium in an
extraordinarily disruptive period, creating material market
imbalances and volatility. Physical oil traders, like ourselves, saw
the usage of storage and logistics soar and unprecedented price
dislocations in markets for crude oil, refined products and freight,
generating material trading opportunities.
Brent crude (high, low, average)
($/bbl)
Demand shock in March/April 2020 met ultimately with supply
reductions. Key tensions are OPEC+ policies and the range of
scenarios for demand growth.
80
60
40
20
0
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
2019 range
2020 range
Average
58 Glencore Annual Report 2020
seaborne coking coal demand caused spot HCC prices to fall from
above $160/t during February to below $110/t at the end of August.
Recovery of global steel production ex-China in H2 2020 provided
brief support for prices during September / October before the
Chinese restrictions on Australian coal imports pushed prices to
$100/t levels by year end, leaving some 40% of seaborne suppliers
facing negative cash margins. Improving demand, and
destocking of coking coal and coke, has since supported a price
recovery in early 2021
COAL
Seaborne coal trade was dramatically impacted during 2020 by
the economic fallout from Covid-19 and the necessary reshuffling
of trade flows as China restricted Australian coal purchases. The
rapid drop in global energy demand created oversupply, which
drove prices to unsustainable lows, comparable with the 2016
downturn. By September, producers had realigned thermal coal
production in line with prevailing demand. Further economic
recovery in Q4 and a cold northern hemisphere winter led prices
higher, particularly domestically in China. At year end, coking coal
markets remained temporarily subdued due to the overhang of
market players needing to resell excess inventory of Australian coal
destined for China.
Global seaborne thermal coal demand in 2020 declined by in
excess of 100Mt or 10%, however important pockets of growth
could be seen in Vietnam, Malaysia, Indonesia, Pakistan and
Bangladesh. In Asia overall, demand fell by some 60Mt, mainly
into China, South Korea (preferential use of LNG) and India, due its
extended Covid-19 shutdown. Atlantic market demand declined
by 40Mt against a backdrop of Covid-19 demand declines, record
low LNG import prices, higher carbon prices and growth in
renewables power.
Overall, seaborne thermal markets ended 2020 in a balanced
position due to lower supply, mainly from the USA, Colombia,
Indonesia and Australia, in each case, as producers responded to
the lower demand and price environment.
Despite markets starting the year in good shape, noting the
above, prices were weak from late February until mid-September,
as markets reached a balance, sparking a price recovery from
unsustainably low levels. For the year to September, the
Newcastle, API4 and API2 indices fell 26%, 42% and 27% from their
opening levels to their lows, at which point nearly 60% of the
global seaborne supply was selling at cash negative margins.
Towards year end, prices improved substantially with Newcastle,
API4 and API2 closing the year 32%, 26% and 34% above their year
opening price levels. Overall for 2020, the average index prices for
Newcastle, API4 and API2 were 22%, 11% and 18% respectively
lower than during 2019.
Global pig iron production was down slightly YoY, however
metallurgical coal import countries ex-China reported a 14%
reduction in production. The resulting reduction in global
Coal prices (major relevant indices in 2020)
($/t)
Changes in thermal coal imports (2019-2020)
(Mt)
100
80
60
40
20
1,100
1,050
1,000
950
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
NEWC GC
API 2
API 4
2019
Rest of
world
EU
Korea
Japan
India
China
Other
Asia
2020
Source: IEA
Glencore Annual Report 2020 59
Financial statementsGovernanceAdditional informationStrategic report
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
Our industrial business proved resilient to the
challenges of operating in the current environment.
Following a challenging first half, Covid-safe working
practices were embedded and production was largely
restored in the second half of the year
Metals and minerals
mining margin
36%
2019: 28%
Katanga ramping up towards
nameplate capacity
Energy products margin
Sustaining capex
17%
2019: 37%
Lower demand for energy
in lockdown conditions
$3.1bn
2019: $4.1bn
Lower spend on C&M assets
such as Mutanda and
Prodeco, and a level of
Covid-related deferrals
Katanga copper production
Equity coal production
Expansion capex
271kt
2019: 235kt
Ramp-up executed to plan
106mt
2019: 140mt
Covid-related shutdowns and
voluntary reductions during
tough market conditions
$1.0bn
Projects in Africa (copper/
cobalt), Kazakhstan (zinc)
and Canada (nickel)
Peter Freyberg
Head of Industrial Assets
Adjusted EBITDA
(US$ million)
13,275
8,964
7,828
2018
2019
2020
Adjusted EBIT
(US$ million)
6,729
1,785
1,077
2018
2019
2020
60 Glencore Annual Report 2020
SUPPORTING THE
ENERGY AND
MOBILITY
TRANSITION
Own mineral resources Reserve Life (portfolio weighted average, approx. years)
Copper
23
Zinc
15
Nickel
26
Coal
15
In-house smelting/refining capability (ktpy)
Copper metal
Zinc metal
1,160
Excludes idled capacity
at Mutanda
1,390
Own sourced production in 2020
Copper (kt)
1,258
Coal (mt)
106
Safe working
Fatalities
8
2019: 17
Zinc (kt)
1,170
Oil (mbbl)
3.9
TRIFR
2.65
2019: 2.86
Lead metal
360
Lead (kt)
259
Cobalt (kt)
27
LTIFR
0.94
2019: 0.99
Ferrochrome
Nickel metal
1,800
Excludes idled capacity
at Lydenburg
139
Ferrochrome (kt)
Nickel (kt)
1,029
110
Socio-economic contribution
Community support initiatives
$95m
Glencore Annual Report 2020 61
Strategic reportAdditional informationFinancial statementsGovernance
OUR INDUSTRIAL BUSINESS
continued
Financial overview
US$ million
Revenue◊
Adjusted EBITDA◊
Adjusted EBIT◊
Adjusted EBITDA mining margin
Metals
and
minerals
30,303
7,285
3,054
36%
Energy
products
Corporate
and other
11,145
1,039
(1,365)
17%
5
(496)
(612)
2020
41,453
7,828
1,077
Metals and
minerals
Energy
products
Corporate
and other
27,672
5,555
1,016
28%
15,067
3,854
1,274
37%
4
(445)
(505)
2019
42,743
8,964
1,785
HIGHLIGHTS
The direct and indirect impacts of Covid-19 played out differently
in various parts of the business. On the Metals side, asset
suspensions were relatively short-term, while the market’s
assessment of supply and demand generated sustained
commodity price increases in H2 2020. Meanwhile energy prices
remained especially low through most of the year.
As a result, while overall Industrial Adjusted EBITDA of $7,828
million was down 13% on 2019, the Metals component was up
31% and Energy down 73%.
There were notable successes, during 2020, a year in which our
sites responded to the challenges of adjusting working practices
to be sustainable and safe in the pandemic era. Katanga delivered
on its ramp-up plans, lifting the African copper portfolio to
Adjusted EBITDA of $712 million, a $1bn improvement on 2019,
which was the key factor in lifting the Metals Adjusted EBITDA
mining margin from 28% to 36%. On the other hand, the
equivalent Energy Adjusted EBITDA margin declined from 37% to
17%, reflecting the significant reductions in international coal and
oil price benchmarks, and to a lesser extent, lower production
volumes on account of various extended suspensions in Colombia
and Chad and market-related coal supply reductions in Australia.
Capex of $4,082 million (2019: $5,349 million) was 23% lower year
over year, reflecting a mix of targeted reductions/deferrals, and
“involuntary” reductions as planned work was delayed by
pandemic-related restrictions.
62 Glencore Annual Report 2020
Financial information
US$ million
Revenue◊
Copper assets
Africa (Katanga, Mutanda, Mopani)
Collahuasi1
Antamina1
Other South America (Lomas Bayas, Antapaccay)
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Custom metallurgical (Altonorte, Pasar, Horne, CCR)
Intergroup revenue elimination
Copper
Zinc assets
Kazzinc
Australia (Mount Isa, McArthur River)
European custom metallurgical (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
North America (Matagami, Kidd, 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 assets2
Energy products revenue◊
Corporate and other revenue
Total Industrial Activities revenue◊
1 Represents the Group’s share of these JVs.
2 Controlling interest acquired in April 2019, see note 25.
5
4
41,453
42,743
2020
2019
Change %
3,105
1,732
1,055
2,025
1,988
7,842
(308)
17,439
3,031
1,219
2,883
1,746
317
9,196
1,461
646
239
2,346
1,.321
1
30,303
971
4,031
969
357
208
6,536
400
111
4,098
11,145
2,829
1,385
1,025
1,709
1,836
7,107
(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
10
25
3
18
8
10
n.m.
11
4
(6)
213
(22)
(21)
19
(6)
(3)
(24)
(7)
(23)
–
10
(37)
(32)
(24)
(55)
(58)
(35)
(48)
(68)
5
(26)
25
(3)
Glencore Annual Report 2020 63
Financial statementsGovernanceAdditional informationStrategic report
OUR INDUSTRIAL BUSINESS
continued
US$ million
Copper assets
Africa
Collahuasi1
Antamina1
Other South America
Australia
Polymet
Custom metallurgical
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
Metals and minerals Adjusted EBITDA/EBIT◊
Adjusted EBITDA mining margin2
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
Corporate and other
Industrial activities Adjusted EBITDA/EBIT◊
Adjusted EBITDA◊
Adjusted EBIT◊
2020
2019 Change %
2020
2019 Change %
(1,279)
n.m.
712
1,301
755
1,042
385
(20)
336
4,511
42%
1,228
384
327
240
(33)
(21)
2,125
35%
670
117
(196)
591
25%
37%
133
(73)
(2)
7,285
36%
244
799
183
(72)
5
1,159
18%
(15)
(105)
1,039
17%
(349)
885
737
859
449
(7)
377
2,951
29%
1,097
406
166
155
(44)
(5)
1,775
33%
657
105
(136)
626
25%
34%
246
(40)
(3)
5,555
28%
793
2,332
324
43
132
3,624
36%
215
15
3,854
37%
(496)
(445)
7,828
8,964
n.m.
47
2
21
(14)
n.m.
(11)
29%
12
(5)
97
55
n.m.
n.m.
20
2
11
n.m.
(6)
(46)
n.m.
n.m.
31
(69)
(66)
(44)
n.m.
(96)
(68)
n.m.
n.m.
(73)
n.m.
(13)
68
2
96
(35)
n.m.
(29)
506
29
n.m.
262
n.m.
n.m.
n.m.
42
–
14
n.m.
(57)
(66)
n.m.
n.m.
201
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
148
1,011
472
518
79
(20)
162
2,370
824
(63)
181
74
(33)
(292)
691
235
92
(298)
29
39
(73)
(2)
603
462
264
121
(7)
227
391
641
6
50
(59)
(44)
(109)
485
235
81
(249)
67
116
(40)
(3)
3,054
1,016
(1)
(528)
(164)
(133)
(105)
(931)
(187)
(247)
546
1,018
23
(180)
(56)
1,351
–
(77)
(1,365)
1,274
(612)
1,077
(505)
1,785
n.m.
(40)
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 ($6,488 million (2019: $4,941 million)) divided by
Revenue excluding non-mining assets and intergroup revenue elimination ($18,139 million (2019: $17,628 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) ($1,144 million (2019: $3,839 million)), divided by the sum of coal revenue
from own production and Oil E&P revenue ($6,647 million (2019: $10,411 million)).
64 Glencore Annual Report 2020
US$ million
Capital expenditure◊
Copper assets
Africa
Collahuasi1
Antamina1
Other South America
Australia
Polymet
Custom metallurgical
Copper
Zinc assets
Kazzinc
Australia
European custom metallurgical
North America
Other Zinc
Zinc
Nickel assets
Integrated Nickel Operations
Australia
Koniambo
Nickel
Ferroalloys
Aluminium/Alumina
Metals and minerals capital expenditure◊
Australia (thermal and coking)
Thermal South Africa
Prodeco
Cerrejòn
Coal
Oil E&P assets
Oil refining assets
Energy products capital expenditure◊
Corporate and other
Industrial activities capital expenditure◊
1 Represents the Group’s share of these JVs.
2020
2019
Sustaining Expansion
Total
Sustaining
Expansion
Total
220
287
180
309
208
8
144
196
44
10
12
–
–
–
416
331
190
321
208
8
144
381
298
228
403
203
–
234
477
25
5
21
–
9
–
858
323
233
424
203
9
234
1,356
262
1,618
1,747
537
2,284
201
173
80
52
47
553
142
33
38
213
87
–
2,209
394
147
44
22
607
119
125
851
193
–
25
–
–
218
306
–
–
306
28
–
814
152
28
–
–
180
–
–
394
173
105
52
47
771
448
33
38
519
115
–
209
293
106
68
104
780
164
16
39
219
141
–
236
–
–
6
–
445
293
106
74
104
242
1,022
289
–
–
289
8
–
453
16
39
508
149
–
3,023
2,887
1,076
3,963
546
175
44
22
787
119
125
358
200
229
53
840
201
121
1,162
121
29
–
–
150
–
–
150
479
229
229
53
990
201
121
1,312
180
1,031
–
3,060
28
1,022
28
4,082
–
4,049
74
1,300
74
5,349
Glencore Annual Report 2020 65
Financial statementsGovernanceAdditional informationStrategic report
OUR INDUSTRIAL BUSINESS
continued
Operating highlights
COPPER ASSETS
Own sourced copper production of 1,258,100 tonnes was 113,100
tonnes (8%) lower than 2019, mainly reflecting Mutanda being
on care and maintenance in 2020 (partly offset by Katanga’s
successful ramp-up), with Covid-19 related suspensions being
a much smaller factor.
Own sourced cobalt production of 27,400 tonnes was 18,900
tonnes (41%) lower than 2019, mainly reflecting Mutanda on care
and maintenance. On a standalone basis, Katanga’s cobalt
production was up 6,800 tonnes (40%).
Africa
Own sourced copper production of 301,000 tonnes was 68,900
tonnes (19%) lower than 2019, and cobalt production of 23,900
tonnes was 18,300 tonnes (43%) lower, in each case reflecting
Mutanda’s care and maintenance status during 2020, partly offset
by Katanga’s ramp-up.
In January 2021, Glencore agreed terms for the sale of its interest
in Mopani to ZCCM, with completion expected in H1 2021.
Collahuasi
Attributable copper production of 276,800 tonnes was 28,000
tonnes (11%) higher than 2019, reflecting higher milled throughput
following an investment programme in the plant over recent
years. The lower production in Q4 of 59,200 tonnes (down 18% on
Q4 2019) related to expected ore head grades during the period,
with a sequential increase expected in Q1 2021.
Antamina
Mining operations were suspended from mid-April to late May as
part of Peru’s overall Covid-19 response.
Accordingly, attributable copper production of 127,700 tonnes was
23,700 tonnes (16%) lower than 2019. Zinc production of 142,400
tonnes was up 40,000 tonnes (39%), as expected higher zinc
grades in the current phase of the mine plan more than offset the
impact of the Covid suspension.
Other South America
Own sourced copper production of 259,700 tonnes was 16,800
tonnes (6%) lower than 2019, mainly reflecting expected lower
grades at Antapaccay.
In December 2020, Glencore contributed its share of the
Alumbrera mine, plant and infrastructure (on care and
maintenance) into a 25% interest in a newly established and
larger resourced MARA joint venture.
Australia
Own sourced copper production of 185,000 tonnes was 9,600
tonnes (5%) lower than 2019, mainly reflecting temporary access
restrictions to parts of the Mount Isa underground mine in Q4
2020, and a higher number of required smelter shutdown days
to maintain air quality and emissions standards.
Custom metallurgical assets
ZINC ASSETS
Own sourced zinc production of 1,170,400 tonnes was 92,900
tonnes (9%) higher than 2019, mainly reflecting: (i) higher zinc
content from Antamina noted above (40,000 tonnes); (ii)
improved output from the Mount Isa operations (27,800 tonnes);
and (iii) the net positive effect of 18,700 tonnes from Other South
America, owing to restarting the short-life Iscaycruz mine in Peru,
offset by Covid-related suspensions and shutdowns.
Kazzinc
Own sourced zinc production of 167,500 tonnes was 5,000 tonnes
(3%) lower than 2019.
Own sourced lead production of 25,600 tonnes was 8,800 tonnes
(26%) lower than 2019, reflecting maintenance on the lead smelter
and mining from the Ushkatyn mine in the base period, which
has now ceased.
Own sourced copper production of 37,000 tonnes was 7,000 tonnes
(16%) lower than 2019 due to expected lower grades at Maleevsky
mine, and maintenance at the Ridder-Sokolny concentrator.
Own sourced gold production of 659,000 ounces was 25,000
ounces (4%) higher than 2019, mainly reflecting higher grades
and recoveries at Vasilkovsky.
Australia
Zinc production of 633,500 tonnes was 35,900 tonnes (6%) higher
than 2019 due to drawing down accumulated ore stock at Mount
Isa, now at normal levels, while lead production of 216,800 tonnes
was in line with last year.
North America
Zinc production of 114,700 tonnes and copper production of
40,700 tonnes were modestly up on 2019 levels.
South America
Zinc production of 112,300 tonnes was 18,700 tonnes (20%) higher
than 2019, mainly reflecting the restart of the short-life Iscaycruz
mine in Peru in Q3 2019, which more than offset the effect of
Covid-related mine suspensions and shutdowns in 2020.
European custom metallurgical assets
Zinc production of 787,200 tonnes was modestly lower than 2019,
while lead production of 198,000 tonnes was in line with 2019.
NICKEL ASSETS
Own sourced nickel production of 110,200 tonnes was 10,400
tonnes (9%) lower than 2019, reflecting Koniambo operating as a
single-line operation for the majority of 2020, with Covid-related
mobility restrictions affecting its maintenance schedule. The
expected decline in grades at the existing Sudbury mines (INO)
also contributed.
Integrated Nickel Operations (INO)
Own sourced nickel production of 56,900 tonnes was 3,400
tonnes (6%) lower than 2019, mainly reflecting the expected
decline in existing Sudbury mines’ head grades. Refinery
production including third party material was in line with 2019.
Copper cathode production of 482,600 tonnes was 49,700 tonnes
(11%) higher than 2019, reflecting increased output from Pasar
and CCR.
Own sourced copper production of 28,600 tonnes was 15,600
tonnes (35%) lower than 2019, mainly reflecting the expected
decline in copper from the existing Sudbury mines.
Copper anode production of 490,100 tonnes was 20,600 tonnes
(4%) lower than 2019, mainly reflecting planned maintenance at
Altonorte and Horne.
66 Glencore Annual Report 2020
Murrin Murrin
Australian thermal and semi-soft
Own sourced nickel production of 36,400 tonnes was in line
with 2019.
Koniambo
Nickel production of 16,900 tonnes was 6,800 tonnes (29%)
lower than 2019, with the operation having effectively been run
on one furnace (rather than two) for the majority of 2020. One of
the furnaces was undergoing scheduled maintenance when
Covid-19 restrictions were introduced in March, delaying its restart
until October.
The second furnace was taken down for its own maintenance
in January 2021, with a restart expected in March.
FERROALLOYS ASSETS
Attributable ferrochrome production of 1,029,000 tonnes was
409,000 tonnes (28%) lower than 2019, reflecting the South African
lockdown and resulting suspension of smelting operations in Q2,
with a phased restart thereafter. Lydenburg smelter has been
placed on extended care and maintenance. The remaining four
smelters were fully operational from Q4, resulting in materially
higher quarter on quarter production.
COAL ASSETS
Coal production of 106.2 million tonnes was 33.3 million tonnes
(24%) lower than in 2019, reflecting the impacts of the pandemic
via stopped or reduced work periods in Colombia and South
Africa, extended care and maintenance at Prodeco, plus market-
related supply reductions in Australia in H2 2020.
Australian coking
Production of 7.6 million tonnes was 1.6 million tonnes (17%) down
on 2019, reflecting downtime at Oaky Creek with an additional
longwall move in the current period, timing of coking coal
processing at Newlands and planned wash plant maintenance
at Hail Creek.
Production of 66.7 million tonnes was 12.5 million tonnes (16%)
down on 2019, mainly reflecting targeted volume reductions in
H2 2020, in response to the weak coal price environment.
South African thermal
Production of 24.0 million tonnes was 2.9 million tonnes (11%)
down on 2019, reflecting various Covid-19 impacts, including
self-isolation requirements for staff and contractors.
Prodeco
Prodeco has been on temporary care and maintenance since
March 2020. An application for longer-term care and
maintenance was refused in December 2020. On 4 February 2021,
Glencore announced that Prodeco would commence the process
of handing its mining contracts back to the Republic of Colombia
through the National Mining Agency and that the mines would
remain on care and maintenance until the formal process of
relinquishing the contracts was complete.
Cerrejòn
Cerrejón production was interrupted initially by a mandated
shutdown from Q2-Q3, and subsequently by strike action in
Q3-Q4. Production restarted in December 2020, later than
initially expected.
OIL ASSETS
Exploration and production
Entitlement interest oil production of 3.9 million barrels was 1.6
million barrels (29%) lower than 2019. Operated fields in Chad were
placed on care and maintenance in March/April 2020 and are yet
to be restarted, given continued pandemic-related challenges in
international mobility (2.3 million barrels decrease). The balance
reflects year over year production increases in Equatorial Guinea
and Cameroon since new wells were drilled.
Quarter on quarter, production in Equatorial Guinea reduced as
a result of a scheduled temporary shut-in to tie in gas pipeline-
related infrastructure. The Alen field is moving into a natural gas
production phase with first gas expected in Q1 2021.
Glencore Annual Report 2020 67
Financial statementsGovernanceAdditional informationStrategic report
OUR INDUSTRIAL BUSINESS
continued
PRODUCTION DATA
Production from own sources – Total1
Production from own sources – Zinc assets1
2020
2019
Change
%
167.5
25.6
–
37.0
659
172.5
31.6
2.8
44.0
634
4,712
4,546
(3)
(10)
(100)
(16)
4
4
–
92
(100)
633.5
216.8
7,404
114.7
40.7
2,125
112.3
17.0
1.6
6,121
597.6
213.3
7,193
111.4
39.1
1,654
93.6
32.3
2.7
6,906
1,028.0
975.1
259.4
280.0
79.3
659
85.8
634
20,362
20,391
6
2
3
3
4
28
20
(47)
(41)
(11)
5
(7)
(8)
4
–
kt
kt
kt
kt
koz
koz
koz
kt
kt
koz
kt
kt
koz
kt
kt
kt
koz
kt
kt
kt
koz
koz
Copper
Cobalt
Zinc
Lead
Nickel
Gold
Silver
Ferrochrome
2020
1,258.1
27.4
2019
1,371.2
46.3
1,170.4
1,077.5
259.4
280.0
110.2
916
120.6
886
32,766
32,018
Change
%
(8)
(41)
9
(7)
(9)
3
2
Kazzinc
Zinc metal
Lead metal
Lead in concentrates
Copper metal6
Gold
Silver
1,029
1,438
(28)
Silver in concentrates
kt
kt
kt
kt
kt
koz
koz
kt
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)7
Zinc in concentrates
Lead in concentrates
Copper in concentrates
Silver in concentrates
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
Production from own sources – Copper assets1
African Copper
(Katanga, Mutanda, Mopani)
Copper metal
Copper in concentrates
Cobalt2
Collahuasi3
Copper in concentrates
Gold in concentrates4
Silver in concentrates
Antamina5
Copper in concentrates
Zinc in concentrates
Silver in concentrates
kt
kt
kt
kt
koz
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
2020
2019
Change
%
301.0
359.3
–
23.9
10.6
42.2
(16)
(100)
(43)
276.8
248.8
53
38
3,961
2,878
127.7
142.4
5,535
74.1
185.6
90
1,298
138.8
46.2
93
1,271
151.4
102.4
5,051
78.9
197.6
85
1,576
151.1
43.5
100
1.615
1,150.2
1,241.2
23.9
142.4
236
42.2
102.4
185
12,065
11,120
11
39
38
(16)
39
10
(6)
(6)
6
(18)
(8)
6
(7)
(21)
(7)
(43)
39
6
8
68 Glencore Annual Report 2020
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
2020
2019
Change
%
56.5
0.4
13.5
15.1
0.6
21
339
40
101
4
36.4
2.9
59.8
0.5
15.8
28.4
0.7
29
507
51
112
4
36.6
3.4
(6)
(20)
(15)
(47)
(14)
(28)
(33)
(22)
(10)
–
(1)
(15)
Australian coking coal
Australian semi-soft coal
Australian thermal coal (export)
mt
mt
mt
Australian thermal coal (domestic) mt
2020
7.6
4.6
55.7
6.4
Change
%
(17)
(28)
(13)
(26)
2019
9.2
6.4
64.2
8.6
South African thermal coal
(export)
South African thermal coal
(domestic)
Prodeco
Cerrejòn9
Total Coal department
Oil assets
Glencore entitlement
interest basis
mt
mt
mt
mt
mt
14.8
13.0
14
9.2
3.8
4.1
13.9
15.6
8.6
106.2
139.5
(34)
(76)
(52)
(24)
2020
2019
Change
%
16.9
23.7
(29)
Equatorial Guinea
Chad
Cameroon
kbbl
kbbl
kbbl
1,960
1,112
872
1,895
3,371
252
110.2
28.6
3.5
21
339
40
101
4
120.6
44.2
4.1
29
507
51
112
4
(9)
(35)
(15)
(28)
(33)
(22)
(10)
–
Total Oil department
kbbl
3,944
5,518
Gross basis
Equatorial Guinea
Chad
Cameroon
kbbl
kbbl
kbbl
10,435
1,521
2,528
9,236
4,608
730
Total Oil department
kbbl
14,484
14,574
3
(67)
246
(29)
13
(67)
246
(1)
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 Reported from Q4 2020 given higher gold price and production, with resulting
increased materiality. Comparatives updated accordingly.
5 The Group’s pro-rata share of Antamina production (33.75%).
6 Copper metal includes copper contained in copper concentrates and blister.
7 South American production excludes Volcan Compania Minera.
8 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
9 The Group’s pro-rata share of Cerrejòn production (33.3%).
Production from own sources – Ferroalloys assets1
Ferrochrome8
Vanadium Pentoxide
2020
1,029
19.5
kt
mlb
Change
%
(28)
(3)
2019
1,438
20.2
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
2020
2019
Change
%
kt
kt
kt
kt
482.6
490.1
432.9
510.7
787.2
198.0
805.7
190.5
11
(4)
(2)
4
Glencore Annual Report 2020 69
Financial statementsGovernanceAdditional informationStrategic report
RISK
MANAGEMENT
Risk management is one of the core responsibilities of the
Group’s leadership and it is central to our decision-making
processes. The Group’s leadership fundamental duties as
to risk 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 and
monitors our risk exposure. 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 below and to whom the Group’s applicable corporate
functions (Risk Management, Compliance, Legal, HSEC,
Sustainable Development, HR and IT) report.
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 returns.
The Board, through the ECC and HSEC Committees, reviews and
determines the appropriate level of risk management oversight
for the Group’s material JVs. We ensure that our material risk
management programmes are implemented at all JVs that we
operate. In other JVs, we seek to influence our JV partners to
adopt our commitment to responsible business practices and
implement appropriate programmes in respect of their main
business risks.
Risk management framework
RISK MANAGEMENT FRAMEWORK
Our Group functions support senior management and those with
responsibilities for risk within the business in the development
and maintenance of an appropriate institutional risk culture
mitigating risk across the Group, as appropriate.
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.
Led by the Head of Industrial Assets and the Industrial Leads
across each commodity department, management teams at
each industrial operation are responsible for implementing
processes that identify, assess and manage risk.
The risks that may impact on business objectives and plans are
maintained in business risk registers. They include strategic,
compliance, operational and reporting risks.
HSEC & SUSTAINABILITY RISK MANAGEMENT
These risk management processes are managed at asset level,
with the support and guidance from the central Sustainability
and HSEC and HR teams, and subject to the leadership and
oversight of the HSEC Committee.
The Group’s internal HSEC Audit programme focuses on
catastrophic risks, assessing and monitoring compliance with
leading practices.
Further information is provided in the report from the HSEC
Committee on page 96 and will be published in the Group’s
sustainability report for 2020.
MARKETING RISK (MR) 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’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
• Risk culture
• Risk strategy and appetite
• Risk governance
• Risk organisation
• External disclosure
• Risk monitoring and reporting
• Board of Directors
Oversight
Tone from
the top
Infrastructure
• Management team
People
Process
Technology
• Risk identification
• Risk assessment
• Risk management
Identify
Measure
Mitigate
Control
Report
Risk process
• Business segments
and functions
HSEC risk and compliance processes
Industrial risk process
Marketing risk process
Industrial
Marketing
70 Glencore Annual Report 2020
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 MR function monitors and analyses the large transactional
flows across many locations using its timely and comprehensive
transaction recording, ongoing reporting of the transactions
and resultant exposures, which provides all encompassing
positional reporting, and continually assessing universal
counterparty credit exposure.
The MR team provides a wide array of daily and weekly reporting.
For example, daily risk reports showing Group Value at Risk (VaR)
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 improve measures to capture risk exposure within the
specific areas of the business, e.g. within metals, concentrate
treatment and refining charges are analysed.
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
For legal and compliance risk, see Ethics and Compliance section
pages 38 – 43, and laws and enforcement risk pages 76 – 77.
INTERNAL AUDIT
Glencore’s Internal Audit function reports directly to the Audit
Committee. Its role is to evaluate and improve the effectiveness
of business risk management, control, and business governance
processes.
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. Internal Audit reviews these
areas of potential risk, and suggests controls to mitigate
exposures identified.
In recognition of the need to conduct assurance on the global
Covid-19 related response across our operations, Corporate HSEC
worked with Internal Audit to develop a remote audit program,
which was implemented in May 2020.
The Audit Committee considers and approves the risk-based
Internal 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 considers 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.
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,
consistent with the previous year. This limit is subject to review
and approval on an annual basis. It was temporarily increased to
$120 million to reflect the exceptional trading conditions in oil
markets during part of Q2 2020. The purpose of this Group limit
is to assist senior management in controlling the Group’s overall
risk profile, within this tolerance threshold. During the year
Glencore’s reported average daily VaR was approximately
$39 million, with an observed high of $102 million and a low
of $14 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 $100 million
for 2021.
VaR development ($m)
120
90
60
30
0
Jan
2020
Mar
2020
May
2020
Jul
2020
Sep
2020
Nov
2020
● Metals and minerals
● Energy products
Glencore Annual Report 2020 71
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
2020 developments and overview of principal risks and uncertainties
M o d e rate impact
M a j o r impact
2
v
S e
1
5
6
e r e imp
a
c
8
t
4
10
7
3
9
11
KEY
External risks
1
2
3
4
5
Supply, demand and prices of commodities
Currency exchange rates
Geopolitical, permits and licences to operate
Laws and enforcement
Liquidity
Counterparty credit and performance
Business risks
6
7
8
Operating
Cyber
Sustainability risks
9
10
11
Health, Safety, Environment
Climate change
Community relations and human rights
Risk impact
Moderate
Major
Severe
Risk probability change in 2020 v 2019
Increase
Stable
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, reputation and licence to operate. Our principal
risks and uncertainties are highly dynamic and our assessment
and our responses to them are critical to our future business
and prospects.
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.
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 mandates its ECC, HSEC and Audit Committees to
identify, assess and monitor the principal and emerging risks
relevant to their respective remits. These Committees usually
meet five times a year and are always followed by a meeting of
the Board to review and discuss their work.
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 our
risks information which is set out on page 73.
EVOLUTION IN PRINCIPAL RISKS
Impact of Covid-19
Globally, Covid-19 has resulted in immense operational disruptions.
Challenges for Glencore have included safeguarding the health
and safety of employees, government enforced shut downs,
strained supply chains, liquidity constraints, counterparty financial
strains and abrupt shifts to remote working. Covid-19’s impact on
us has been uneven. Key mining regions such as Australia and
Canada have been relatively unimpacted, while Peru, Colombia
and South Africa suffered significantly more disruption.
The continued high incidence of Covid-19 at the date of this report
make the outlook over the short-term uncertain and, notably for
various energy based business (coal and oil producing
companies), given the continued acceleration and momentum
surrounding decarbonisation, highly more uncertain over the
medium to longer term.
Consistent with the prior year, there are 11 principal risks for the
Group, of which, the 6 most significant and potentially posing
a material and adverse effect on the Group are:
1. supply, demand and prices of commodities,
2. geopolitical, permits and licences to operate,
3. laws and enforcement,
4. health, safety, environment, including catastrophic hazards,
5. liquidity, and
6. climate change risks.
Further details on each risk is set out on the following pages.
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 2021. 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 Board also assessed the medium- and long-term impact of
climate change on the outlook for our commodity businesses,
under a range of possible scenarios, as set out on page 18. Such
impacts are uncertain, being particularly dependent on long-
term changes in the energy mix related to power generation and
transportation, as well as consumption efficiencies, behavioural
change and co-ordinated implementation of government policy
and regulation frameworks, which will materially fall outside the
72 Glencore Annual Report 2020
four-year period selected for assessment of longer term viability.
This analysis, however, indicates stable or improving opportunities
across the portfolio in the Current Pathway scenario. In the Rapid
Transformation and Radical Transition scenarios, we project
significant coal demand decline over the longer term, more than
compensated however (from a financial perspective) by materially
stronger demand for battery and new energy infrastructure
required metals.
The Board has considered the potential risks arising from
Brexit and determined there to be no material impact on
longer-term viability.
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.
For the 2021-24 plan these scenarios included:
• a prolonged downturn in the price and demand of
commodities most impacting Glencore’s operations. Prices and
FX over Q2 2020 (lowest average quarter in 2020, accounting for
Covid-19) are assumed to prevail for the outlook period to 2024;
• foreign exchange movements to which the Group is exposed as
a result of its global operations;
• adverse consequences resulting from an increased regulatory
environment;
• actions at the Group’s disposal to mitigate the adverse impacts
of the above, principally the ability to defer or cancel capital
expenditure, to manage the working capital cycle and to reduce
or stop distributions to shareholders; and
• consideration of the potential impact of adverse movements in
macroeconomic assumptions and their effect on the above key
financial KPIs and ratios which could increase the Group’s
access to or cost of funding.
The scenarios were assessed taking into account current risk
appetite and any mitigating actions Glencore could take, as
required, in response to the potential realisation of any of the
stressed scenarios.
Based on the results of the related analysis, the Directors have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the four-year
period of this assessment. They also believe that the review period
of four years is appropriate having regard to the Group’s business
model, strategy, principal risks and uncertainties, and viability.
Understanding our risks information
There are many risks and uncertainties which have the
potential to significantly impact our business. 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 244.
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.
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 usually 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 natural hazards, events of nature
or similar phraseology we are referring to matters such
as earthquake, flood, severe weather and other natural
phenomena
• where we refer to “mitigation” we do not intend to suggest
that we eliminate the risk, but rather it refers to 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 2020 financial
statements
• a reference to the sustainability report is our 2020
sustainability report to be published in Q2 of 2021
Glencore Annual Report 2020 73
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
Strategic priorities
Responsible production and supply
Responsible portfolio management
Responsible product use
tolerance limit by $20 million in Q2,
cancelling this shortly afterwards.
Industrial operations sought to reduce
capital expenditure. For certain operations
that were cash negative, difficult decisions
were made to suspend some operations.
Major decisions by governments can also
lead to lower demand for our commodities
in their countries or regions, for example
China’s restrictions on certain Australian
sourced commodities which began
in 2020.
See the Chief Executive Officer’s review on
page 2, our market and emerging drivers
on page 6 and the financial review on
page 44.
MITIGATING FACTORS
We continue to maintain focus on cost
discipline and achieving greater
operational efficiency.
We actively manage marketing risk,
including daily analysis of Group value
at risk (VaR).
We maintain both a diverse portfolio of
commodities, geographies, 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 condition.
External risks
1
Supply, demand and
prices of commodities
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Medium. Being a resources company,
we are subject to the inherent risk to the
business of sustained low prices of our
main commodities. We seek to ensure
this risk is ameliorated through scale of
sufficiently low cost operations and
diversity of product. For marketing
activities, our market risk appetite is
relatively low and our positions are
usually hedged, when possible.
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.
The dependence of the Group (especially
our industrial business) on commodity
prices, supply and demand of
commodities, make this the Group’s
foremost risk.
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, fluctuations
74 Glencore Annual Report 2020
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 more broadly),
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, zinc 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.
This risk is more prevalent in certain
commodities, such as steel, coal and oil.
In particular, it is a widely held view that
demand for coal will reduce due to political
pressures, cost reductions for alternatives
(renewables and LNG) and possible carbon
taxes. Oil production/processing is
significantly less material for the Group.
New or improved energy production
possibilities and/or technologies can
reduce the demand for some
commodities such as coal.
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.
DEVELOPMENTS
The demand shock to the global economy
from Covid-19 initially led to significantly
lower commodity prices, particularly in
energy products. Notwithstanding a
healthy level of recovery in many
commodities in the second half of last year,
markets continue to be uncertain and
potentially volatile.
Due primarily to statistical modelling
outcomes in oil marketing, the Group
temporarily increased its Value at Risk
External risks continued
2
Currency exchange rates
Risk movement in 2020: Stable
Link to strategic priorities
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 typically
naturally hedged through movements in
commodity prices.
DESCRIPTION AND
POTENTIAL IMPACT
FX changes happen all the time 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 sales 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 55.
DEVELOPMENTS
A level of producer country FX depreciation
occurred during 2020, providing some
local currency cost relief relative to the
US dollar.
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, including the U.S./China trade
developments, political/economic
stability in the Middle East and the
ongoing disruption caused by the
coronavirus pandemic.
MITIGATING FACTORS
The inverse FX correlation (against USD
commodity prices) 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.
We monitor internally financial impacts
resulting from foreign currency movements.
3
Geopolitical, permits
and licences to operate
Risk movement in 2020: Stable
Link to strategic priorities
RISK APPETITE
High. We operate in various countries with
less developed political and regulatory
regimes. To be considered a truly diversified
commodities group, operations in these
jurisdictions are required.
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 fabrics. 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 sometimes in breach of
existing stability undertakings.
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 or
drilling 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.
Glencore Annual Report 2020 75
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
External risks continued
DEVELOPMENTS
Covid-19 has given rise to new or increased
concerns with various stakeholders,
including our workers, host communities
and governments, in relation to public
health and the broad economic impacts
of reduced demand and potentially lower
production levels.
Resource nationalism continues to be
a challenging issue in many countries.
We published our latest annual Payments
to Governments report for 2019 which
provided details on the total government
contributions of over $7.7 billion. It also set
out details of payments on a project by
project basis. We expect to publish our
report on 2020 in the middle of this year.
A new law on procurement in the DRC is
now being enforced providing among other
matters for obligatory contracting with
DRC majority-owned firms and payment
of a 1.2% levy on the value of contracts.
Also see Community and Human Rights
risk on pages 83 – 84.
MITIGATING FACTORS
The Group’s industrial assets are diversified
across various countries. The Group
also continues to actively engage with
governmental authorities, particularly
against any backdrop of material
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 important in assisting
in the management of 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.
The Group has increased its engagement
due to Covid-19 with employees, relevant
governmental authorities, regulators and
other stakeholders.
4
Laws and enforcement
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Medium. The Group maintains
programmes which seek to ensure that we
comply with the laws and external
requirements applicable to our business
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.
76 Glencore Annual Report 2020
DESCRIPTION AND
POTENTIAL IMPACT
We are exposed to extensive laws,
including those relating to bribery and
corruption, sanctions, taxation, anti-trust,
market conduct rules and 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,
market abuse, 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 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 on page 212)
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 the existing investigations and/or
defending proceedings is 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.
External risks continued
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.
DEVELOPMENTS
On 19 June 2020, the Company was
notified by the Office of the Attorney
General of Switzerland (OAG) that it had
opened a criminal investigation into
Glencore International AG for failure to
have the organisational measures in place
to prevent alleged corruption in the DRC.
The current main investigations are
summarised in note 31. The Group is
continuing to cooperate fully with each of
the relevant authorities concerning these
investigations. The Investigations
Committee of the Board manages the
Group’s responses to these investigations.
5
Liquidity
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Low. It is the Group’s policy to operate
a strong BBB rated balance sheet and
to ensure that a minimum level of cash
and/or committed funding is available
at any given time.
DESCRIPTION AND
POTENTIAL IMPACT
It is also possible that the various
investigations may expand and/or other
authorities may open investigations into
the Group.
The final scope and outcome of the
investigations listed above is not possible
to predict or estimate.
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.
We have implemented a Group Ethics and
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 Ethics and Compliance
programme, including through increasing
circumstances we are unable to control,
such as general market disruptions, sharp
movements in commodity prices or an
operational problem that affects our banks,
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.
Debt costs may rise owing to ratings
agency downgrades and the possibility
of more restricted access to funding.
DEVELOPMENTS
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
Note 27 details the fair value of our
financial assets and liabilities. Note 26
details our financial and capital risk
management including liquidity risk.
The Group’s Net debt has reduced from
$19.7 billion at 30 June 2020 to $15.8 billion
at year end. The elevated debt position
earlier in 2020, coupled with the prevailing
market uncertainty and the adoption of a
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 – see pages 42.
However, there can be no assurance that
such policies, standards, procedures and
controls will adequately protect the
Group against fraud, corruption, market
abuse, sanctions breaches or other
unlawful activities.
cautious approach from a broader
stakeholder and rating agencies
perspective, led to the Board’s decision not
to proceed with a 2020 cash distribution.
Our net funding at 30 December 2020 was
$35.4 billion (31 December 2019: $34.4 billion).
The Group’s business model relies on ready
access to substantial borrowings at
reasonable cost, which has continued to be
forthcoming, noting the Group’s successful
issuance of circa $3.5 billion long-term
bonds in Q3 2020 at attractive interest rates.
Covid-19 initially resulted in lower
commodity prices for many of our key
commodities, though this reversed
during H2 as noted in the section on
our Marketing business. During the very
volatile end of Q1 period, Glencore
refinanced and extended its core revolving
credit facilities, thereby maintaining and
lengthening our committed available
liquidity levels at around $10 billion.
Glencore Annual Report 2020 77
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
Business risks
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 (negative 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 lease liabilities (c.$650 million as
at 31 December 2020). This financial policy
facilitates access to funds, even in periods
of market volatility. It is a priority to reduce
the Net debt balance over the medium
term to the lower end of the $10-16bn
range (below $13bn by the end of 2021),
which is being aided by the current
healthy free cash flow generation.
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 considerably higher.
6
Counterparty credit
and performance
Risk movement in 2020: Increase
Link to strategic priorities
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 respect of various key
strategic relationships.
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.
Our teams monitor and report regularly
to the management on financial and
operating results.
RISK APPETITE
DEVELOPMENTS
Many of our customers and suppliers are
experiencing uncertainty and in some
cases, financial hardship. We have regular
contact with our key counterparties and, in
the vast majority of cases, deliveries and
payments have continued in the normal
course of business.
Additionally, due to Covid-19 related
uncertainties, certain accounts receivable
insurance limits have been significantly
reduced.
Exposures relating to material oil pre-
payments are a particular area of focus.
Our trade receivables were approximately
$2 billion lower year on year, in a generally
higher commodity price environment,
reflecting steady collections.
The Group’s accounts receivable balance,
including assessment of doubtful
accounts, is set out in note 13.
MITIGATING FACTORS
We seek to diversify our counterparties.
We place limits on open accounts, and we
monitor these.
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.
Medium. Where possible, credit exposures
are to be covered through credit mitigation
products.
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
78 Glencore Annual Report 2020
Business risks continued
7
Operating
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Low. It is the Company’s strategic objective
to focus on its people and to conduct safe,
reliable and efficient operations.
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
risks and hazards 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.
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
agreements in place which seek to protect
its position where it does not exercise
control, the management of such
operations and 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
Business continuity planning has been
challenging in many countries. The
response to the pandemic has varied by
jurisdiction, with authorities imposing
different requirements, often changing as
the crisis evolved. Almost all operations
were impacted by changed protocols /
working practises, while many were
required to fully suspend production for
a period of time.
The Group engaged with relevant
government authorities and advisors to
seek to ensure that its responses and
measures focused on the health of its
workforce and communities, while
allowing its operations to continue, where
reasonably practicable. Management
ensured that Business Continuity Plans
(BCP) were in place across its business.
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,
although we are not complacent and
continue to monitor the situation. In South
Africa, the operations at our Ferroalloys
smelters were impacted by power
disruptions and an explosion occurred at
Astron Energy refinery resulting in the loss
of two lives and a lengthy shutdown.
Despite the challenges created by the
global pandemic, we have maintained
engagement campaigns with employees
to receive direct feedback on the Group’s
culture and practices.
MITIGATING FACTORS
Development and operating risks and
hazards are managed through our
ongoing 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.
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
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 27.
Glencore Annual Report 2020 79
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
Business risks continued
8
Cyber
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Low. Where possible, cyber exposure risks
are mitigated through layered cyber
security, proactive monitoring and cyber
security penetration testing to confirm the
security of systems.
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.
Sustainability risks
9
Health, safety,
environment
Risk movement in 2020: Stable
The security of long interconnected
commodity supply chains is an area of
increasing concern that we monitor
closely. 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 2020, none
of these events resulted in a material
breach of our IT environment nor resulted
in a material business impact.
In March 2020, we initiated our BCP to
facilitate a significant degree of remote
working at our operations globally in
response to the Covid-19 pandemic. With
more of our people working from home,
we are more reliant, not only on our own
corporate network, but also Internet
service providers to the home. Our IT
security monitoring platforms also
detected a material increase in phishing
fraud attempts linked to Covid-19.
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
makes it easier to manipulate audio
content that could be used in phishing
or fraud attacks by impersonating senior
executives. We continue to monitor
developments in this space.
We also expect an increase in “supply chain
attacks” through which legitimate third
party software is manipulated in an
attempt to spread malware or gain access
to systems.
RISK APPETITE
Medium. We impose HSEC policies and
standards designed to protect our people
and ensure we comply with laws and
external regulations.
Link to strategic priorities
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
80 Glencore Annual Report 2020
MITIGATING FACTORS
We publish IT security standards and
proactively educate our employees
in order to raise awareness of cyber
security threats.
Where possible, cyber exposure risks are
mitigated through layered cyber security,
proactive monitoring and cyber security
penetration testing to confirm the security
of systems.
We seek to keep our system software
patches up to date and have global
platforms to manage patch compliance.
We have adopted strict privileged access
management to ensure administrator
rights on critical systems are protected.
We have multiple layers of email security
and harden our computers and servers
to protect against malware. Corporate
applications and communications are
secured with multiple layers of security
including two-factor authentication and
VPN technology for remote access.
We use global IT security platforms in order
to proactively monitor and manage our
cyber risks. We routinely conduct third
party penetration tests to independently
assess the security of our IT systems. We
have a dedicated programme to enhance
the monitoring and security of our OT
platforms.
Our IT Security Council sets the global
cybersecurity strategy, conducts regular
risk assessments and designs cyber
security solutions that seek to defend
against emerging malware, viruses,
vulnerabilities and other cyber threats.
Our Cyber Defence Centre is responsible
for day-to-day monitoring of cyber
vulnerabilities across the Group 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.
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
little or no access to health facilities and,
due to cultural and/or historical reasons,
Sustainability risks continued
have poor working conditions,
organisational cultures and approaches
towards personal safety. Our presence in
these regions can address these
challenges through implementing
strong occupational health and safety
management systems. Our operations can
have direct and indirect impacts on the
environment. Our ability to manage and
mitigate these may impact our operating
licences as well as affect 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.
We work with national and regional
authorities to identify how Glencore’s
presence can support domestic
healthcare programmes.
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.
We operate in some countries characterised
with complex and challenging political
and/or social climates. This results in a
residual risk for compliance with our HSEC
policies and standards, as well as with
external laws and regulations.
DEVELOPMENTS
In response to Covid-19, Glencore focused
on efforts to ensure the resilience of the
business, including daily monitoring of
global conditions, anticipation of potential
impacts, and development of action plans
and controls to mitigate risks. At the start
of the crisis, the corporate Covid-19 Global
Response Steering Committee and
Incident Management Team were
established to maintain continuous
communication and response support for
our global industrial and marketing teams,
resolving potential threats to business
continuity, and focusing on the health and
well-being of our workforce.
During 2020, we have also remained
focused on other significant risks facing
our industry, arising from operational
catastrophes such as the mining dam
collapses in Brazil in the last five years.
During 2020, the HSEC Committee
continued to sponsor and monitor the
Group’s sustainability risks assurance
process. Its focus continues to be on the
Group’s HSEC catastrophic hazards. As
well, we continued implementation of our
Group-wide Tailings Storage Facility and
Dam Management Standard, throughout
the business and participated in the
development of the new Global Industry
Standard on Tailings Management
(GISTM), in association with International
Council on Mining & Metals (ICMM)
member companies.
We continue to take a flexible local
approach to transforming our workforces’
safety and health attitudes and culture.
We review and strengthen our policies as
technology and methodologies change
and regularly assess their implementation.
We continue to strive to achieve our
ambitions of zero workplace fatalities or
catastrophic environmental incidents.
We regret that we have recorded 8
fatalities at our operations (2019: 17). Our
Board and senior management are
committed to ongoing efforts to improve
practices in order to provide a safe working
environment. To underscore these efforts
and commitment, we initiated a
comprehensive review of our safety
performance expectations and aim to
relaunch our SafeWork programme in
early 2021 – see page 35. No major or
catastrophic environmental (category 4-5
and above) incidents have occurred during
the year.
MITIGATING FACTORS
Our approach to the management of
health, safety and environment, and our
expectations of our workers and our
business partners are outlined in our
policies and standards. These underpin our
approach towards social, environmental,
safety and compliance indicators,
providing clear guidance on the standards
we expect all our operations to achieve.
In 2020 a new corporate Health, Safety,
Environment, and Community and
Human Rights team was established
under the Head of Industrial Assets and
Head of HSEC-HR. The objective of this
team is to enhance group-level HSEC-HR
governance and technical standards to
ensure an efficient and consistent
approach to managing HSEC-HR related
issues across the business. We conducted
a review of our SafeWork program, which
is Glencore’s approach to eliminating
fatalities. The programme focuses on
identifying and managing the hazards
in every workplace and is built on a set of
minimum expectations and mandatory
protocols, standards, behaviours and safety
tools. Well-led, consistent application of
SafeWork will drive operating discipline
and prevent fatal accidents at our assets.
This will be launched in Q1 2021.
Our commitment to complying with
or exceeding the health, safety and
environmental laws, regulations and
best practice guidelines applicable to
our operations and products is driven
through our sustainability framework.
We remain focused on the significant risks
facing our industry arising from
operational catastrophic events. For
example, the considerable verification
work 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 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 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 Covid-19,
HIV/AIDS, malaria and tuberculosis.
See also the Sustainability review on
page 35 and the HSEC Committee
report on page 96. Further details will
also be published in our 2020
Sustainability Report.
There can be no assurances that our
policies and procedures will protect
the Group against health, safety and
environmental risks.
Glencore Annual Report 2020 81
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
Sustainability risks continued
10
Climate change
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
High. Climate change is a material issue
that can affect our business through
regulations to reduce emissions, carbon
pricing mechanisms, extreme climatic
events, access to capital, permitting risks
and energy costs, as well as changing
demand for the commodities we produce
and market. We consider our risk appetite
as high due to our significant exposure to
coal producing assets.
DESCRIPTION AND
POTENTIAL IMPACT
A number of governments have already
introduced, or are contemplating the
introduction of regulatory responses 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, South Korea, Japan 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
• impacts on the development or
maintenance of our assets due to
restrictions in operating permits,
licences or similar authorisations
Variations in commodity use from
emerging technologies, moves towards
renewable energy generation and policy
changes may affect demand for our
products, both positively and negatively.
82 Glencore Annual Report 2020
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.
There has been a significant increase
in litigation (including class actions), 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 companies with fossil fuel
operations in various jurisdictions seeking
damages related to climate change.
DEVELOPMENTS
Due to falling demand for coal in Europe,
and fall in oil price respectively, during
2020, the Group wrote down the value of
its Colombian coal and Chad oil assets by
c.$2.2 billion.
During the year, the Covid-19 global
pandemic led to a projected 8% decrease
in global energy demand for 2020-2021,
which affected all energy providers and
resulted in a lower demand for coal,
including in Asia, as well as for seaborne
coal. As global economies recover from the
pandemic’s impacts, demand for coal is
expected to improve. However, the likely
focus of government stimulus packages
on low carbon technologies and ongoing
reductions in the cost of renewables has
the potential to accelerate the reduction
in demand for fossil fuels over the medium
to long term.
The commitments made by a number
of countries, including China, to achieve
carbon neutrality by 2050 or 2060 are a
strong indicator of the pace of change and
the longer-term global trajectory. New
European regulation, particularly the ‘EU
Taxonomy’ and the “EU Green Deal’ is likely
to accelerate the flow of capital to products
and technologies needed in the low-
carbon economy, and place greater
scrutiny on the carbon footprint of
European industrial companies, as well
as on those importing products into the
Eurozone. This is relevant for Glencore
as a large producer of seaborne thermal
coal and a marketer of fossil fuels
more generally.
As a result of these factors, some market
participants and analysts take a bearish
view (some strongly so) on the market
fundamentals for coal and oil. Some may
choose not to invest in or transact with us,
due to our fossil fuels operations.
MITIGATING FACTORS
We integrate climate considerations, such
as energy and climate policies in countries
where we operate and sell our products,
expectations of our value chains, and the
various commitments to achieve the goals
of the Paris Agreement, into our strategic
decisions and day-to-day operational
management.
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.
We have set ourselves a 1.5°C pathway
aligned target of an absolute 40%
reduction of our total emissions (Scope 1, 2
and 3) by 2035 on 2019 levels, consistent
with the midpoint of Intergovernmental
Panel on Climate Change’s 1.5°C scenarios.
Post 2035, we have set ourselves the
ambition to achieve, with a supportive
policy environment, net zero total
emissions by 2050.
This commitment is supported by our
diverse portfolio, which uniquely allows
us to reduce our Scope 3 emissions
through investing in our metals portfolio,
reducing our coal production over time
and supporting deployment of low
emission technologies.
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 continuously monitor and report our
Scope 1, 2 and 3 emissions, and use this
data in managing our operational carbon
footprint, as well as the development and
tracking of our targets.
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, both directly and through our
industry organisations. We seek to
ensure that there is a balanced
debate with regard to the ongoing
use of fossil fuels
Sustainability risks continued
• Lobbying activities: we acknowledge
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 Agreement and
its Goals
• Carbon pricing: we operate successfully
in multiple jurisdictions that have direct
and indirect carbon pricing or
regulation. We have identified some
parts of our business that would likely
experience financial stress in a high
carbon price environment. However, our
conclusion is that our business overall
remains resilient. We consider local
regulation and carbon price sensitivities
as part of our ongoing business
planning for existing industrial assets,
new investments and as part of our
marketing activities. We are working
with relevant industry organisations on
developing lifecycle analysis to calculate
our commodities’ carbon footprint
• Energy costs: we consider energy costs
and our carbon footprint in our annual
business planning process. Commodity
departments are required to provide
energy and GHG emissions forecasts for
each asset over the forward planning
period and provide details of mitigation
projects that may reduce such
emissions, including identifying
and developing renewable energy
generation opportunities.
• Physical impacts: we track changing
weather conditions and amend
operating processes as appropriate,
as well as incorporate climate risk into
our design and planning. We regularly
review the integrity of our assets,
including tailings storage facilities,
against the potential impact of extreme
weather events.
• Access to capital: we regularly review our
banks’ climate change-related policies
and evolving applicable restrictions, if
any. Through maintaining a strong
relationship with our lenders, we
continue to have a broad range of
sources from which to access funds.
• Permitting risk: we engage with a broad
range of stakeholders on diverse topics
including climate change and related
areas of concern. Our engagement with
our local communities and those directly
affected by our operations is transparent
and honest. Where we identify differing
opinions, we look for opportunities to
find constructive solutions.
• Product demand: we track and respond
to regulatory and technology
developments. There are near-term
opportunities in positively repositioning
many of our products that enable the
decarbonisation transition.
• Litigation: our climate change
programme strives to ensure that we
identify, understand and monitor our
emissions and climate change issues in
order to meet international best practice
standards, ensure regulatory compliance
and meet our commitments that
support the goals of the Paris Agreement.
Further information is available at:
glencore.com/sustainability/
climate-change
11
Community and
human rights
Risk movement in 2020: Increase
Link to strategic priorities
RISK APPETITE
Low. Our approach is to minimise
the impacts of our business, engage
openly and honestly to build lasting
relationships and foster socio-economic
resilient communities
DESCRIPTION AND
POTENTIAL IMPACT
Respecting human rights and building
strong relationships are fundamental
to the current and future viability of
our business.
Due to the scale and nature of our
business, we have the potential to make a
significant positive contribution to local
communities, countries and broader
society. Positive impacts range from the
production of the raw materials for social
progress, payment of taxes and royalties
to governments and provision of
employment and business opportunities.
Conversely, we must also identify, mitigate
and manage any potential negative risks
inherent in our operations. Areas that we
carefully monitor and manage to avoid
negative impacts include health and
safety of our workforce and surrounding
communities, environmental
management of air, land and water and
interactions with individuals and groups
who live and work in or near our local
communities. Poor performance could
contribute to social instability and the
perceived and real value depreciation of
our assets.
We have a geographically diverse business,
operating in both developed and
developing countries in an array of
different contexts. In a number of regions
where we operate, the socio-political
environment is complex which presents
additional business, social and security
risks if not well understood and managed.
While our Group policies and standards
apply to all our businesses, we tailor our
community approach to be relevant and
appropriate to the local context
A perception that we are not respecting
human rights or generating local
sustainable benefits could have a negative
impact on our ability to operate effectively,
our ability to secure access to new
resources, our capacity to attract and retain
the best talent and ultimately, our financial
performance. The consequences of
adverse community reactions 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. In addition, global connectivity
means that local issues can quickly
escalate to a regional, national and global
level potentially resulting in reputational
damage and social instability.
Some of our mining operations are in
remote areas where they are a major
employer in the region. This presents
particular social challenges when the
mine’s resources are depleted to an extent
that it is no longer economic to operate
and must be closed. Robust planning
and stakeholder engagement are key
to mitigate environmental and social
closure risks.
Glencore Annual Report 2020 83
Financial statementsGovernanceAdditional informationStrategic report
RISK MANAGEMENT
continued
Sustainability risks continued
DEVELOPMENTS
MITIGATING FACTORS
During 2020, Covid-19 impacted people’s
quality-of-life and increased uncertainty
around the world.
The ensuing economic impacts of Covid-19
have amplified existing inequalities around
the world, resulting in an escalation of civil
unrest in many countries. In the Espinar
region of Peru, social protests impacted
our Antapaccay operation. The
government deployed public security to
return law and order in the region around
the operation without harm to community
members, security forces or our workforce.
We expect the economic impacts of the
pandemic to continue for some time and
our operations will continue to respond by
providing social support, in partnership
with governments and development
organisations.
Artisanal and small-scale mining (ASM)
continues to be a challenge at certain
operations, most notably in the DRC.
The destruction of Indigenous cultural
heritage during mining activities in
Australia has highlighted the need for
effective management processes and
engagement, to protect areas and items
of cultural significance, and to avoid
business and reputation risks.
We strive to uphold and respect the
human rights of our workforce, local
communities and others who may be
affected by our activities, in line with the
United Nations Guiding Principles on
Business and human rights (UN GPs). We
have processes to identify, prevent and
mitigate human rights risks and impacts
across our business. In the event that we
cause or contribute to a negative impact
on human rights, we strive to provide
appropriate remedy to those affected in
line with the UN GPs.
We seek to apply the UN Voluntary
Principles on Security and human rights
in regions where there is a high risk to
human rights from the deployment of
public and private security forces.
We respect communities’ perspectives
and actively seek them to inform our
decision-making. Our ambition is to be
a responsible, engaged and valued
company wherever we operate and
contribute to healthy, resilient
communities. We support the
advancement of the interests of both
our host communities and our assets.
We seek to build enduring and trusting
relationships by engaging openly and
honestly and participating as an active
member of society. We focus our social
investments on initiatives and programs
to deliver long-term benefits fostering
socio-economic resilience.
We implement locally appropriate
complaints and grievance processes and
welcome feedback and comments on our
performance. We review all complaints
received and take actions when necessary
to address the issues raised.
Our first and foremost priority during the
Covid-19 pandemic has been the health
and wellbeing of our employees and
communities, especially vulnerable groups.
At the beginning of the pandemic, we
responded to the immediate medical crisis
in our communities by augmenting
communication programs to promote
prevention measures, providing basic
sanitation and medical materials and
supporting local health systems and
services. As time progresses, we will adapt
our programs to support economic
recovery of our communities and regions.
During 2020, we revised our approach to
ASM to explore how ASM and large-scale
mining can sustainably co-exist as distinct
yet complementary sectors of a successful
mining industry. We believe that legal ASM
can play an important and sustainable role
in many economies when carried out
responsibly and transparently, including
the DRC. One manifestation of our new
approach is our partnership with the Fair
Cobalt Coalition, an NGO aiming to
positively transform ASM in the DRC. It is
working towards eliminating child and
forced labour, improving work practices in
ASM operations and supporting alternative
livelihoods to help increase incomes and
reduce poverty.
Further information is available on our
website at: glencore.com/sustainability/
community-and-human-rights
84 Glencore Annual Report 2020
SAFETY
Christine has worked with the Human Resources team at
Sudbury since 2005. Her role encompasses Occupational Health
initiatives, because keeping people safe isn’t only about their
physical safety at work.
Christine McGarry
Labour Relations & Disability
Management Specialist
– Sudbury INO, Canada
“We ask if they are fit for duty, and it’s not just
‘do they have something physical that you
can see?’ We also ask about their mental
wellbeing. Individuals have told us that we
have saved their lives, saved their families
and saved their ability to keep working.”
Learn more about our culture and how
we work safely on www.glencore.com
INTEGRITY
Emile has worked as a Legal Counsel for Glencore in the
Democratic Republic of the Congo for four years.
“Integrity is doing the right thing at the right
moment, even when no one is watching. It’s
not always easy to live with integrity. But
whatever your background, we all have a
common ground, and that means we need
to live with a sense of wrong and right.”
Emile Luketa
Legal Counsel – Democratic
Republic of the Congo
Learn more about our culture and how we
work with integrity on www.glencore.com
CORPORATE
GOVERNANCE
Chairman’s governance statement
Directors and officers
Corporate governance report
ECC report
HSEC report
Audit committee report
Nomination committee report
Directors’ remuneration report
Directors’ report
86
88
90
95
96
97
99
100
112
Glencore Annual Report 2020 85
Strategic reportFinancial statementsAdditional informationGovernance
CHAIRMAN’S
GOVERNANCE
STATEMENT
Anthony Hayward
Chairman
DEAR SHAREHOLDERS
2020 has seen a marked acceleration in the focus on
Environmental, Social and Governance issues, and increasing
expectations for transparent and consistent reporting on these
topics. The actions of the extractives sector necessarily draw
intense scrutiny from stakeholders and third parties. Companies
such as ours must work hard to meet society’s reasonable
expectations as to our activities and impacts.
A major challenge for the investment community is the
current alphabet soup of differing reporting requirements
and the varying expectations of stakeholders on ESG matters.
We are actively contributing to this debate and look forward
to progress on a consensus for the requirements for a single
reporting framework.
As the CEO and I have emphasised at the beginning of this
report, Glencore has an important and critical role in helping the
world achieve the goals of the Paris Agreement. Decarbonising
the global energy system requires a significant increase in the
supply of the metals needed to electrify energy usage.
The challenges in the resources sector require strong leadership
and the Board has worked with Ivan over the past two and a half
years to oversee a seamless transition to the next generation of
leaders across Glencore’s business. We are confident that Gary
Nagle, as our next CEO, has the right skill set and qualities to
lead the Glencore of the future. We have now announced the
completion of our management succession plan which by
June this year will have seen all of the senior departmental
management team in place at the time of the Company’s IPO
replaced by internal successors.
A significant succession process is also being undertaken within
the Board. At the end of last year Leonard Fischer retired, whom
I thank again for his significant contribution to the Board across
nine years, in particular as chair of the Audit Committee and
through his insights on financial risk management. In the last
12 months we have been joined by Kalidas Madhavpeddi and
Cynthia Carroll. We are extremely pleased to have secured such
strong industry experts. We recognise the importance of avoiding
groupthink and maintaining strong independence and variety of
thought in the boardroom, but this must not be at the expense
of considerable industry knowledge and our Board continues to
reflect this. As we evolve the membership of our Board, we will
continue to look to ensure that we have an appropriate mix of
skills, experience and background.
As noted last year, the 2018 UK Corporate Governance Code (the
Code) provides that the chairman should be subject to a nine year
term limit from first appointment as a director. However, the
Board recommended to shareholders that I remain as Chairman
while the senior management succession is concluded and for
the ongoing investigations. We have consulted with a number
of our leading shareholders regarding this issue and they support
a second and final extension to my term as a Chairman which
the Board will recommend to shareholders. I will step down at the
latest by next year’s AGM. A search for my successor is underway.
The Board continued to focus during 2020 on a range of ESG
issues including:
Firstly, as I commented on page 1, the various investigations
continue and we remain focussed on having the appropriate
governance and oversight over our response through our
Investigations Committee.
Secondly, since his appointment as General Counsel five years ago,
Shaun Teichner has worked tirelessly to improve our compliance
function across the Group so that it can be considered world class
and support a strong ethical culture across the Group. Having
made great strides in this area, last year we reached the point
where it was important to have a leader of this function whose
sole responsibilities are for compliance. The Company therefore
last year appointed a separate Head of Compliance, Daniel Silver.
At every set of Board and Committee meetings, we carefully
review the progress of our ethics and compliance programme
and in another session, oversee our Raising Concerns programme
and its related investigations. The Board also separately receives
training on material compliance issues. We have also expanded
our reporting on compliance and I would encourage stakeholders
to consider this carefully – see pages 38 to 43.
Thirdly, Peter Freyberg, as Head of Industrial Assets, continues
to provide energetic leadership on HSEC matters, strongly
supported by our HSEC-Human Rights team. I also encourage
careful reading of our work in this area, including the summaries
in our Sustainability section – page 32 – and HSEC Committee
report – page 96. With regard to health and safety, while certain of
our operations have particular HSEC challenges, we believe these
are surmountable and are targeting continued improvement, not
only to the crucial and humbling fatality number, but also across
all sustainability measures for those businesses. Management’s
work on simplifying our business through the planned disposal
of certain of our ‘tail’ assets will also assist with this.
86 Glencore Annual Report 2020
2020 has seen a marked
acceleration in the focus on
Environmental, Social and
Governance issues, and
increasing expectations for
transparent and consistent
reporting on these topics.
Fourthly, our new strategy which we announced in December
is set out in our Climate report 2020: pathway to net zero.
This is the culmination of a lengthy process of detailed analysis
and collaboration by our climate working group which
comprises a number of senior people across our businesses
and corporate functions.
Lastly, management broadened the scope of its former Business
Ethics Committee, which is now the Environmental, Social and
Governance committee, allowing it to focus on key ESG matters
for the Group. This management committee reports directly to
the Board and its Committees, as appropriate. We also initiated
a review of our entire policy architecture and framework and will
be releasing later this year a complete suite of revised policies,
which have been reviewed and approved by the Board, reflecting
our commitments to operate responsibly and ethically.
We trust that this annual report provides a considered yet
concise overview of our business and its governance.
Tony Hayward
Chairman
10 March 2021
As the CEO and I have
emphasised at the beginning
of this report, Glencore has an
important and critical role in
helping the world achieve the
goals of the Paris Agreement.
Glencore Annual Report 2020 87
Strategic reportFinancial statementsAdditional informationGovernance
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 founder and
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 chairman of Revolut
Limited and deputy chairman of River
and Mercantile Group PLC (LON:RIV).
Mr Gilbert co-founded Aberdeen Asset
Management in 1983, leading the
company for 34 years and overseeing
its 2017 merger with Standard Life. He
is also chair of Toscafund and a
non-executive director of ASSETCO
and Saranac Partners. He was deputy
chair of the board of Sky PLC until 2018.
He 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 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
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. 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 and
non executive director of Stillwater
Mining Company (NYSE:SWC) from
2013 to 2017. Ms Merrin chaired CML
Healthcare and was also a director of
Arconic Inc., NB Power, and the Alberta
Climate Change and Emissions
Management Corporation. Ms Merrin
is a graduate of Queen’s University,
Ontario and completed the Advanced
Management Programme at INSEAD.
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 as an Officer 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
(64)
H
Joined Glencore in April 1984;
Chief Executive Officer since
January 2002.
Peter Coates AO
Non-Executive Director
(75)
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
(76)
R
N
Appointed in June 2013.
Anthony Hayward
Chairman (63)
E
H
I
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 (65)
A
I
R
Senior Independent Director
since May 2018; appointed in
May 2017.
Patrice Merrin
Non-Executive Director
(72)
E
H
I
N
Appointed in June 2014.
Chair of Nomination Committee
from 2020.
88 Glencore Annual Report 2020
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. From 2018 to
2019, 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
Ms Carroll has over 30 years’ experience
in the resources sector. She began her
career as an exploration geologist at
Amoco before joining Alcan. She held
various executive roles there
culminating in being CEO of the
Primary Metal Group, Alcan’s core
business. From 2007 to 2013 she served
as CEO of Anglo American plc.
Ms Carroll is currently a non-executive
director of Hitachi, Ltd (TYO: 6501),
Baker Hughes Company (NYSE: BKR)
and Pembina Pipeline Corporation
(TSE: PPL).
She is a fellow of the Royal Academy of
Engineers and a Fellow of the Institute
of Materials, Minerals and Mining.
Ms Carroll holds a Bachelor’s degree in
Geology from Skidmore College (NY),
a Master’s degree in Geology from the
University of Kansas and a Master’s in
Business Administration from Harvard
University.
EXPERIENCE
Mr Kalmin joined Glencore in
September 1999 as general manager
of finance and treasury functions at
Glencore’s coal industrial unit in
Sydney. He moved to Glencore’s head
office in 2003 to oversee Glencore’s
accounting functions, becoming CFO
in June 2005. From November 2017 to
June 2020 he was 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
(71)
A
E
Appointed in January 2018.
Member of Nomination
Committee during 2019.
Cynthia Carroll
Non-Executive Director
(64)
H
Appointed in February 2021.
Officers
Steven Kalmin
Chief Financial Officer
(50)
Appointed as Chief Financial
Officer in June 2005.
EXPERIENCE
Mr Madhavpeddi has over 40 years of
experience in the international
mining industry, including being
CEO of China Molybdenum
International from 2008 to 2018. His
career started at Phelps Dodge,
where he worked from 1980 to 2006,
ultimately becoming senior VP
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),
Trilogy Metals (TSX:TMQ), and
Dundee Precious Metals Inc (TSX:
DPM). 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.
Kalidas Madhavpeddi
Non-Executive Director
(65)
A
N
R
Appointed in February 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:
A
E
H
I
N
R
Audit
Ethics, Compliance and Culture (ECC)
Health, Safety, Environment and Communities (HSEC)
Investigations
Nomination
Remuneration
denotes Committee chair
Board diversity
page 91
John Burton
Company Secretary
(56)
Appointed Company Secretary
in September 2011.
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 law 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.
Glencore Annual Report 2020 89
Strategic reportFinancial statementsAdditional informationGovernance
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 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.
In accordance with provisions 10 and 19 of the Code, the following
serves as explanation for the extended tenure of Mr Leonhard
Fischer and Dr Anthony Hayward:
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
• For the period from May until August, Mr Fischer remained as
implementation
the Audit Committee chair despite having served for nine years
on the Board. As recorded in last year’s annual report, major
shareholders had been consulted on this temporary extension.
Mr Fischer retired from the Board in December 2020. He was
considered to remain independent throughout this time.
• Last year we consulted with our largest institutional
shareholders regarding Dr Hayward’s tenure on the Board as
he exceeded nine years in 2020. This had clear support and the
shareholder vote at the 2020 AGM in favour of Dr Hayward’s
reappointment was 96% of those cast. The Board reconsidered
this position this year and continues to believe that, due to the
management succession taking place and the ongoing
investigations, it is in the shareholders’ interest that he remains
as Chairman for a second and final additional year. The Board
has also obtained shareholder support for this position in a
similar consultation carried out in recent months.
During 2020 the Board comprised either seven or eight Non-
Executive Directors (including the Chairman) and one Executive
Director. A list of the current Directors, with their brief biographical
details and other significant commitments, is provided in the
previous pages. Mr Madhavpeddi joined the Board in February
2020. In August 2020, he replaced Mr Fischer as chair of the Audit
Committee. On 2 February 2021, Ms Cynthia Carroll was appointed
as Non-Executive Director.
The Chief Financial Officer attends all meetings of the Board and
Audit Committee. The Company Secretary attends all meetings
of the Board and its Committees.
Division of responsibilities
As a Jersey incorporated company, Glencore has a unitary Board,
meaning all Directors share equal responsibility for decisions
taken. Glencore has established a clear division between the
respective responsibilities of the Non-Executive Chairman and
the Chief Executive Officer, which are set out in a schedule of
responsibilities 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 Company Secretary is responsible for ensuring that there is
clear and effective information flow to the Non-Executive Directors.
The CEO, CFO and General Counsel have line of sight across the
Group. Together with the Head of Industrial Assets, they lead our
management team supported by the heads of each marketing
and industrial division and the heads of corporate functions.
90 Glencore Annual Report 2020
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 attendance throughout the year
Attendance during the year for all scheduled full agenda Board
and all permanent Board Committee meetings is set out in the
table below:
Board
of 6
HSEC
of 5
ECC
of 5
Audit
of 5
Rem
of 2
Nom
of 5
Anthony Hayward
Peter Coates
Leonhard Fischer¹
Martin Gilbert
Ivan Glasenberg
John Mack
Kalidas
Madhavpeddi²
Gill Marcus³
Patrice Merrin⁴
6
6
6
6
6
6
6
6
6
5
5
5
5
5
5
5
5
1
2
2
1
3
5
2
5
1
1
5
4
1
4
1 Mr Fischer attended all meetings while he was a member of the committees
2 Mr Madhavpeddi attended all meetings after his appointment to the Committees
(including as chair of the Audit Committee)
3 Ms Marcus stepped down from the Nomination Committee after its first meeting of
the year
4 Ms Merrin attended all meetings of the Nomination Committee after her
appointment as chair.
In addition, there were another 6 limited agenda meetings of the Board. Most
Directors also attend by invitation the meetings of the Committees of which they
are not members.
Board diversity and experience
Tony
Hayward
British
Ivan
Glasenberg
S. African
Martin
Gilbert
British
Cynthia
Carroll
American
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
*The majority of these skills have been acquired through exposure and experience at leadership level, not usually as part of a formal education.
Board tenure
Board gender
0–2 yrs
3–6 yrs
7–9 yrs
9+ yrs
0–2 yrs
3–6 yrs
7–9 yrs
9+ yrs
Male
Female
Senior Independent Director
Male
Female
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. Further details
of these responsibilities are set out on page 90.
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 (and Mr Fischer from
May to December 2020), who was first appointed to the board
in May 2011 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.
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 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 the year, 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. If 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 Company 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.
During the year the Board reviewed the proposed sale of our
73% interest in Mopani to ZCCM, a 10% shareholder in Mopani.
Transactions between the Group and its significant joint
ventures and associates are summarised in note 32 to the
Financial Statements.
Glencore Annual Report 2020 91
Strategic reportFinancial statementsAdditional informationGovernance
CORPORATE GOVERNANCE REPORT
• In recognition of the desire of shareholders to have the
continued
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
adviser to review the proposed transaction and provide an
independent opinion for the Board to assist in its decision making.
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 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 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.
Investigations
In July 2018, following receipt of a subpoena from the US
Department of Justice (DOJ), the Board reconstituted the then
existing Investigations Committee to direct the Company’s
response. The Investigations Committee’s mandate has continued
and includes oversight of the Company’s response to all the
investigations listed in note 31. The committee has operated
entirely separately from the Group’s executives, who have no
decision-making power concerning the investigations. It also
monitors the Group’s exposure arising from the investigations and
concludes on the appropriate disclosure in the financial
statements: see note 31 for further details.
Oversight of management of climate-related risks and
opportunities
Climate change is a Board-level standing agenda item. In 2020,
our climate change programme and performance were overseen
by the Health, Safety, Environment & Communities Committee,
which reviewed progress at all of its five meetings. The
development and implementation of the programme are the
responsibility of the Climate Change Working Group, which was
first established in 2017, and which is chaired by the Chairman and
includes the CEO and other members of the senior management
team. In 2020, this Working Group oversaw the development and
publication of our climate commitments, as well as the
publication of our 2020 Climate Report.
opportunity directly to advise the Company of their opinion on
its plans and their implementation, the Board has resolved to
follow the same shareholder engagement model which it uses
for remuneration by which a policy is issued at least every three
years and a report is published annually on the implementation
of that policy, each of which is to be put to an advisory vote.
Board meetings
The Board has approved a schedule that sets out the matters
reserved for its approval, including Group strategy, financial
statements and annual budget, and material acquisitions and
disposals. Meetings are usually held at the Company’s
headquarters in Baar, Switzerland. However, during 2020, due to
travel restrictions, most Directors were unable to attend most of
the meetings in person.
Details of the main matters considered by Board and Committee
meetings held during the year are detailed on page 93.
The Board and its Committees have standing agenda items to
cover their proposed business at their scheduled meetings. The
Chairman seeks to ensure that the very significant work of the
Committees feeds into, and benefits as to feedback from, the full
Board. The Board and Committee meetings 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 last year is set out
on the next page.
Corporate Governance
Shareholders
Ongoing
engagement
Elect
Directors
Board of
Directors
Chief Executive
Officer
and
Chief Financial
Officer
Audit
committee
Remuneration
committee
Nomination
committee
Going forward, and in recognition of the significance of climate
change for Glencore and its stakeholders, the Board has
mandated the following measures:
Investigations
committee
• The Climate Change Working Group will continue to oversee
the climate programme. The CEO will assume the role of the
chairman of the Working Group, and will report directly to the
Board on progress at its meetings.
ECC
committee
HSEC
committee
92 Glencore Annual Report 2020
Board and Committees’ activities during 2020
Below are details of the main topics which were reviewed, discussed, and when required, approved by the Board during 2020::
Regular updates
Financial & Risk
Governance & Stakeholders
• Chairman’s report
• Reports from Committee Chairs
• Reports from CEO, CFO,
Company Secretary, General
Counsel and senior
management
• Group performance report
• Customer performance
dashboard
• Finance reports, forecasts
and capital position updates
• Plan to manage remote
working risks
• 2021 budget/2022–24 business plan
• Capital management programmes
• Financial statements
• Group risk appetite
• Group risk management
framework
• Annual report
• AGM and voting results
• Investor relations reports
• Analysts updates
• Corporate governance
framework
• Stakeholder engagement
Legal, Regulatory
& Compliance
• Group policies
• Legal matters updates and
investigations
Health, Safety & Environment
Other activities
• Fatalities, major incidents and
• Covid-19 related activities
other safety issues
• Environmental incidents reports
• Climate target and ambition
• Regulatory & Compliance
development
updates
• Group Ethics and Compliance
Programme
• Raising Concerns reports
• Human Rights and
Communities reports
• Progress in meeting our carbon
targets and performance
• Tailings Storage Facilities reviews
• Supply chain traceability
including analysis of risk and
checking procedures across all
aspects of the business including
financial and risk, compliance
and HSEC
• Board and Directors’ evaluation
• Chairman’s performance
• Succession planning for Board
and senior management
• Senior management
remuneration
Appointment of Non-Executive Directors
All 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 essential 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 2020, most planned site visits were cancelled due to the
global pandemic. However, various virtual site engagements took
place – see page 29.
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 Cynthia Carroll has commenced and
will continue throughout the year, including a comprehensive
introduction to the main aspects 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 topics 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 2020, 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
previous evaluation (summarised in the 2019 Annual Report).
Results were provided to the Chairman and the Senior
Independent Director by the Company Secretary.
Final results were presented to the Board collectively
for discussion.
Issues of focus raised for the Board included:
• health and safety, especially fatalities reduction
• progressing the investigations
• refreshment of the Board including diversity and strong
resource industry experience
• senior management transition
• more active remuneration committee
• more work on succession planning
• new carbon strategy
• risk management, compliance, culture and internal
audit/controls
Glencore Annual Report 2020 93
Strategic reportFinancial statementsAdditional informationGovernance
CORPORATE GOVERNANCE REPORT
continued
DIVERSITY
Corporate Reporting Review
The diversity policy which is applied to appointments to our
administrative, management and supervisory bodies with regard
to aspects such as age, gender, or education and professional
backgrounds is the same as for all Group employees.
The UK Financial Reporting Council (FRC) reviewed Glencore’s
annual report for the year ended 31 December 2019 as part of
its regular monitoring of the Directors’ reports and accounts
of public and large private companies.
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. This board
target was achieved on 2 February 2021. 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 many 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 any impact.
Risk management and internal control
The Board has applied provisions 28 to 31 of the Code by
establishing an ongoing 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: see pages 70 to 84 which include detailed
information on the Group’s principal risks.
The principal areas where the FRC raised questions were:
impairment; climate change disclosures in the strategic report;
segments; and alternative performance measures. We provided
the FRC with the information it requested and its enquiries are
now closed having been brought to a satisfactory conclusion.
The FRC requested undertakings and suggested improvements
as to additional disclosures concerning these topics to be made in
future reporting (including in this report).
The review was based solely on the published annual report and
accounts and provides no assurance that the annual report and
accounts are correct in all material respects. The FRC’s role is not
to verify the information provided but to consider compliance
with reporting requirements.
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
across a variety of locations where we have institutional
shareholders. We also regularly meet with existing and
prospective shareholders to update or to introduce them to the
Company and, although it was not possible in 2020 due to the
global pandemic, we usually arrange periodic 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, including other
Non-Executive Directors, the Company Secretary and senior
members of the Sustainability team. The matters covered by
meetings with the Chairman and Company Secretary include
the work of the Board’s committees.
This year, following the introduction of Covid-19 related restrictions,
almost all of these engagements have taken place virtually.
AGM
The Company’s next AGM is due to be held on 29 April 2021.
Full details of the meeting will be set out in the AGM notice of
meeting. All documents relating to the AGM will be available on
the Company’s website at: glencore.com/agm
94 Glencore Annual Report 2020
Additional information
ETHICS, COMPLIANCE
AND CULTURE (ECC)
REPORT
The Committee met five times during the year. Each Committee
member served throughout the year and attended all of the
meetings. 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, standards,
procedures, systems and controls for the prevention of
unethical business practices and misconduct
• Reviewing reports and the activities of the following
management committees: ESG Committee (formerly business
ethics committee) and business approval committee (see page
39 for further information)
Anthony Hayward
Chair
Other members
Patrice Merrin
Gill Marcus
Peter Coates
Workforce Engagement
• Assessing and monitoring culture to ensure alignment with the
• Management of health related concerns, policies and
communications was considered both before and after the
effects of Covid-19.
• Consideration of HR Group policies, standards, legislative
compliance around the globe and greater use of technology.
• Consideration of the employee campaign in respect of the
Group’s purpose and values.
• Reporting on culture surveys: (1) the marketing business and (2)
the Group as a whole. Employee attitudes to the Group’s values,
its commitment to ethical behaviour and scores covering the
compliance programme were considered in particular.
• As part of the Committee’s role in assessing and monitoring
Group culture, it was expected that members of the Committee
would hold a series of meetings that would take place with
members of our workforce in various locations across the Group.
Initially these plans were put on hold due to Covid-19, but once
it became clear in the second half of the year that in-person
meetings would be impractical, a series of virtual engagements
was established.
Engagement by the Board and senior management is included
in Our people section, on page 27.
Tony Hayward
Chair of the ECC Committee
10 March 2021
Company’s purpose and values
• Monitoring the Group’s stakeholder engagement
MAIN ACTIVITIES
During the year, the Committee’s activities included the following:
Ethics and Compliance
• Provided oversight of the key elements of the Ethics and
Compliance programme, including risk assessments, internal
monitoring, training and awareness, and reviews conducted
by third party specialists
• Reviewed the implementation and effectiveness of the Ethics
and Compliance Programme
• 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.
• Reviewed the Whistleblowing, Raising Concerns and
Investigations framework and reviewed and recommended to
the Board revised policies for Anti-Corruption, Whistleblowing
and Competition Law
• Considered the effect of Covid-19 on the efficacy of the Group
Ethics and Compliance programme
Stakeholder engagement
• Reviewed our ESG engagement, including with NGOs and
multi-stakeholder organisations that invest or engage on
ESG issues, and track the development of reporting on ESG
related topics.
• Considered the conduct and positions of our member
organisations during 2020 on material issues in accordance
with our Political Engagement Policy. This included a detailed
analysis of activities across the main countries in which the
Group operates and the organisations either of the globally
ambit or in those countries to which Group companies are
current members.
Glencore Annual Report 2020 95
Strategic reportFinancial statementsGovernance
HEALTH, SAFETY,
ENVIRONMENT
& COMMUNITIES
(HSEC) REPORT
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
• Evaluating and overseeing the quality and integrity of any
reporting to external stakeholders concerning HSEC matters
• Reporting to the Board
MAIN ACTIVITIES
During the year, the Committee engaged in:
• HSEC Strategy: reviewing the Group’s annual HSEC strategy
and its implementation
• Governance: approved new and revised key HSEC and human
rights policies
• Health and Safety: overseeing the Group’s fatality reduction
programme including:
‒ eight deep dive SafeWork (including fatal hazard)
assessments;
‒ commencement of the project SafeWork 2.0;
‒ implementation of the zinc and copper departments’ safety
cases (including presentations at every meeting through
the year); and
‒ progress against the corporate led-Kazzinc safety intervention
‒ strengthening of investigation process, including
targeted training
96 Glencore Annual Report 2020
Peter Coates
Chair
Other members
Ivan Glasenberg
Anthony Hayward
Patrice Merrin
• Health and Safety: review of each fatality occurring with
emphasis on lessons to be learned across the Group; oversight
of a revamping of leadership of fatality investigations including
a training programme; reviews of critical incidents and trends in
TRIFR, LTIFR, HPRIs and other relevant statistics
• Environment: assessing the Group’s strategy concerning GHG
emissions, energy, water and stewardship and other impacts
• Communities: reviewing material issues, investigations
and complaints
• Social and human rights: monitoring the Group’s strategy
and reviewing serious incidents
• Assurance: reviewing work of the HSEC Audit function
including its training activities
• Enterprise Risk Management: overseeing the development
of a new ERM standard for the industrial business
• Tailings storage facilities: overseeing the work on the Global
Tailings Review Standard and the internal work on the Group’s
facilities, particularly those designated as high risk
• External affairs: monitoring the Group’s external HSEC
reporting, continuing engagement on material issues and
stakeholder and investor engagement
• Other matters: Considering a variety of other material
HSEC issues
Peter Coates
Chair of the HSEC Committee
10 March 2021
AUDIT COMMITTEE
REPORT
Additional information
The Committee met five times during the year. Leonhard Fischer
stepped down as chair of the Committee in August 2020 and
was replaced by Kalidas Madhavpeddi. The other Committee
members served throughout the year and attended all of the
meetings. All current 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.
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, Chief Risk Officer 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.
Additionally, the Committee 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 certain non-audit services to be
contracted with the external auditors.
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 and half-year 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 auditor, especially matters
that influence or could affect the presentation of accounts and
key figures
Kalidas Madhavpeddi
Chair
Other members
Martin Gilbert
Gill Marcus
• 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 certain control
weaknesses noted by our auditor in their report on
page 118. Management is currently working on
remediating these matters.
• 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 the
operation of the Company’s policy for the provision of non-audit
services by it
• Reviewing the Internal Audit department’s annual audit plan
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 which are 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, 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 reports.
Glencore Annual Report 2020 97
Strategic reportFinancial statementsGovernance
6. 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.
Exposures arising from oil marketing posing particular risk due to
the effects of the steep fall in the price of oil earlier in the year were
considered in particular.
7. Other material issues
These included going concern and long-term viability
assessments. The Committee was satisfied with the going
concern and longer-term viability conclusions reached as set out
on page 72.
INTERNAL AND EXTERNAL AUDIT
The Committee monitored the internal audit function as
described under Internal Audit on page 71.
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 application of the FRC’s Revised Ethical Standard 2019, from
1 January 2021, has introduced significantly extended restrictions
regarding the use of the Company’s external auditor for non-audit
services, to preserve the auditor’s independence. This has largely
overtaken the Group’s non-audit services policy, although this is
still maintained.
For 2020, fees paid to the external auditor were $28 million,
including total non-audit fees of $4 million; further details are
contained in note 29 to the financial statements.
The Committee has commenced a tender process for the
appointment of the Company’s external auditor. This process will
be completed this year and the appointment will be with effect
from the audit of the financial statements for 2022.
Kalidas Madhavpeddi
Chair of the Audit Committee
10 March 2021
CORPORATE GOVERNANCE REPORT
continued
During the year, the Committee has focused in particular on these
key matters:
1. Audit plan review
In addition to the review of key developments and audit risks
central to planning for the half year review and annual audit, the
Committee also considered particular issues in response to
Covid-19, including fraud risk factors, re-assessment of internal
controls, and reviewing the work of component auditors and
site visits
2. FRC Corporate Reporting Review
The Committee considered a letter from the FRC relating to
the Group’s 2019 annual report and accounts. The Committee
reviewed and agreed the comprehensive response proposed
by management, with input from the external auditor, to the
questions raised by the FRC.
Following further correspondence the questions were answered,
see Corporate Reporting Review on page 94.
3. Covid-19
Impact assessment in accordance with the FRC guidance. The
Committee considered at each of its meetings from May (having
first discussed at Board level in April) the risks to management
accounting and internal controls processes becoming challenged
due to the effects of Covid, including relocation of staff and
inaccessibility of some business locations. The Committee
reviewed the Group’s financial reporting framework and controls
structure and considered the potential impact and mitigating
controls that could be applied in respect of its critical controls.
Certain controls around significant risk areas were considered in
respect of reporting at Group level, controls concerning the
marketing and industrial businesses and our critical IT infrastructure.
4. Impairments
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 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. The Group’s
coal assets in Australia, Colombia and South Africa, copper assets
in central Africa, the Volcan business in Peru, the Koniambo nickel
asset in New Caledonia and the oil assets in Africa have been
subject to particular scrutiny. In relation to coal, there continues to
be particular focus around the price outlook and climate change
related risks.
5. Taxation
Due to its global reach, including operating in many higher-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.
98 Glencore Annual Report 2020
NOMINATION
COMMITTEE REPORT
Additional information
During the year, the Committee’s composition was altered from
initially Anthony Hayward (Chair), John Mack, Leonhard Fischer
and Gill Marcus to its current composition.
The Committee met five times during the year.
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.
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
• 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
Patrice Merrin
Chair
Other members
John Mack
Kalidas Madhavpeddi
MAIN ACTIVITIES
The Committee focused on three main tasks during this year.
The most important has been senior management succession.
The decision making for this progress was completed by year end.
During the first half of 2021, Mr Glasenberg will retire and all of the
heads of the main departments will have been replaced from
those in place at the Company’s IPO in 2011.
Secondly, prior to the notice of 2020 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 2020 AGM.
Thirdly, the Committee considered the composition of the Board.
The Committee continued its work on board refreshment. This
has led to the appointments of Kalidas Madhavpeddi and Cynthia
Carroll, both of whom bring extensive mining experience and
further diversity to the Board table.
The Committee acknowledged 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 Cynthia Carroll, the Board satisfies the diversity
target set by the Hampton-Alexander review. Additionally, the
Board meets the ethnic diversity target of the Parker Review.
Patrice Merrin
Chair of the Nomination Committee
10 March 2021
Glencore Annual Report 2020 99
Strategic reportFinancial statementsGovernance
DIRECTORS’
REMUNERATION
REPORT
For the year ended 31 December 2020
John Mack
Chair
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 2020.
In February 2020, Leonhard Fischer stepped down as a member
of the Committee and was replaced by Kalidas Madhavpeddi.
Martin Gilbert and I served on this Committee throughout
the year.
At the 2020 AGM, our shareholders approved the Directors’
Remuneration Policy and the Directors’ Remuneration Report
with over 96% of votes cast in favour of both resolutions.
In December 2020, it was announced that Ivan Glasenberg will
retire in 2021 and that Gary Nagle will succeed him as CEO. As
part of the transition preparation, the Board and the Committee
have during the last year been considering the most appropriate
approach to CEO pay. The purpose of the proposed new approach
is to ensure that Mr Nagle receives remuneration which is both
competitive and aligned with our shareholders’ interests. As
shareholders will be aware, Mr Glasenberg, given his large
shareholding, waived any salary increase and participation in
any form of variable pay programme and, therefore, his overall
pay was not typical or competitive. New arrangements needed
to be newly created rather than built on prior arrangements.
This report is presented 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, unless stated otherwise. 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.
John Mack
Chair of Remuneration Committee
10 March 2021
PART A-1
CEO SUCCESSION PACKAGE AND RESULTING
PROPOSED POLICY CHANGES
The current remuneration policy provides for a salary cap of $2m
plus RPI and the ability to operate an annual bonus and long-
term incentive plan (LTIP) each subject to a maximum of 200%
of salary. It also provides for the LTIP to operate with pre-vest
performance conditions measured over 3 years and a further
2-year holding period. These current policy positions for variable
pay are not in line with the practices of our peers or the FTSE 30
and require changes to facilitate the transition to new leadership.
Consultation
During 2020 and 2021, the Committee conducted extensive
external benchmarking based on a UK-listed peer group. This
comprised of Anglo American, BHP, BP, Rio Tinto and Shell.
The mining companies were chosen as the best comparators
to our industrial business while the oil companies’ combined
industrial and marketing business model is closely aligned to
the Group’s activities.
Policy proposals and a proposed remuneration package were
developed and consulted upon with a significant number of
shareholders and proxy advisors. There were two main rounds of
consultation over a period of 13 months which enabled valuable
feedback and suggestions to be incorporated into the final
proposed remuneration package and policy. The majority
of respondents were comfortable with the proposed changes.
We received constructive feedback in relation to quantum, the
restricted stock plan (RSP) underpin and the importance of clearly
identifying the proposed changes to the policy and their rationale.
In the spirit of this consultation and ensuring full disclosure,
the detailed remuneration package and the underlying logic,
assumptions and chosen comparators are detailed in the
following sections.
100 Glencore Annual Report 2020
Given the complexity of the Group structure and its clear exposure
to commodity price movements, the underpin deliberately does
not apply a formula driven approach to determining vesting levels.
Instead, broad discretion has been reserved to consider the
position in the round and to reduce vesting levels if the overall
company financial or ESG performance is not at an adequate
level. Instead, the Remuneration Committee will make use of
all relevant data points for its review, including the Company’s
Ethics and Compliance programme and climate action transition
plan to assess the progress across the Group concerning material
ESG matters. In reaching any decision, it will balance both the
design principle that the default for restricted stock is to accept
lower awards levels for greater certainty of vesting and, therefore,
there should be a default to full vesting while ensuring that the
Remuneration Committee considers the overall outcome and
avoids payments for failure.
Annual Bonus
To further build on the principle of share ownership and
shareholder alignment, the Committee is proposing that 50% of
any bonus outcome is deferred into shares. These deferred shares
shall vest on the third anniversary of grant and are generally
subject to continuing employment. To ensure a fair balance
between any bonus pay-outs and alignment to shareholder
interests and considering that the RSP component is not
accessible until two years post-employment, the Committee is
proposing to increase the maximum opportunity to 250% of salary
from the current policy maximum of 200%.
The Remuneration Committee proposes an initial scorecard for
2021 comprising 55% financial measures, 30% HSEC and 15%
individual targets which provides an appropriate mix of financial
and non-financial measures. The scorecard will be kept under
review in subsequent years and, while this basic framework is
likely to continue, the precise metrics may evolve in line with the
Board’s priorities. The policy allows for flexibility to set measures,
weightings and targets each year which recognise market
developments while placing appropriate emphasis on our
long-term commitments.
Total Remuneration
The Committee believes that the initial proposed maximum total
remuneration of $10.4m is not excessive, provides market
competitiveness, alignment to shareholders’ interests and an
appropriate discount to peer LTIP levels. The Committee
highlights that approximately 60% of the total reward opportunity
is delivered in shares and 40% is subject to a holding requirement
until two years post-employment and is, therefore, directly aligned
with the long-term interests of shareholders. For the purposes of
clarity, the maximum total annual remuneration that the CEO will
actually receive during his employment is c. $6.4m compared
to the peer maximum of $11-18m, since 40% is held back until
two years post-employment. This ignores any share price changes,
distributions or share awards.
The holding restriction until two years’ post-employment under
the RSP is separate from the general shareholding guideline in
the amount of 500% of salary for the CEO.
Fixed Remuneration
To set a competitive salary for Mr Nagle, the Committee
has considered both the current salary level for the CEO and
comparison with the peer group and FTSE 30.
Mr Glasenberg has not received an increase since 2011, despite
clear salary growth in the market during this period. Extrapolating
his salary with the ten-year average RPI for the UK of 2.8%, results
in an increased salary of c. $1.9m. The typical base salary for the
CEOs within our peer group ranges between c. $1.6-1.9m,
depending on currency exchange rates.
Glencore’s annual pension provision for the CEO is fully aligned
to the wider Swiss workforce, which at present amounts to a
maximum of c. $65,000. This provision is significantly below the
peer range of $150-450,000. The resulting fixed remuneration
of base salary, benefits and pension provision in the peer group
ranges between c. $1.9-2.3m. The Committee has set the base
salary at $1.8m, well within the current policy cap of $2m.
The resulting total fixed remuneration of c. $1.9m inclusive of
pension and all benefits places the proposal at the lower end
of the peer group.
Long Term Incentive (LTI)
A particular area of concern for the Remuneration Committee
in designing the proposed remuneration policy was the
considerable volatility in variable pay in commodity related
businesses. The Committee focused on constructing a package
which rewarded long-term executive decision making rather
than short-term commodity price movements. It concluded that
a RSP, subject to the appropriate level of discount to a traditional
LTIP, would reward consistent shareholder value creation,
executive planning and action. The Committee also supports
the principle of long-term share ownership which is promoted
by the UK Corporate Governance Code and believes that there
is no better alignment between the interests of executives and
shareholders than through long-term shareholding. Therefore,
to ultimately align the CEO’s interests with those of our
shareholders, no shares under the proposed RSP will be
disposable until at least two years post-employment, except
as necessary to meet tax obligations.
Given that the Company has never previously operated an
executive LTIP, the Remuneration Committee designed the
proposed plan after comparison with the peer group and FTSE30.
These benchmarks suggest an LTIP grant level of 400-500% of
salary suggesting a discounted award of 200-250% following the
best practice conversion for restricted stock awards at 50% of the
LTIP face value.
Considering the total pay position and the holding requirement
of two years post-employment, the Committee feels that a
proposed award level of 225% of salary is an appropriate award
level and proportionate to the role both in terms of quantum
and relative to benchmarks.
The vesting of each annual grant will be subject to a holistic
review of performance following the third anniversary of grant.
In reaching its decision, the Committee will look at both financial
and non-financial performance noting that there may be
short-term trade-offs between different factors. In particular, it will
consider reducing the level of vesting if any of the following occur:
• Failure to pay the minimum distribution required under the
Company’s stated distribution policy;
• The overall performance and outcomes, both on absolute and
relative basis, is considered by the Committee unsatisfactory to
permit full vesting;
• ESG performance (including climate) is considered
unsatisfactory to permit full vesting.
Glencore Annual Report 2020 101
Strategic reportFinancial statementsAdditional informationGovernance DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2020 continued
FY2021 CEO Package
The below table summarises the full year proposed package. For 2021 the bonus and RSP awards for Mr Nagle will be time pro-rated
to reflect his period as CEO following his appointment.
Fixed Remuneration
Annual Bonus
Long Term Incentive
• $1.8m Base Salary
• Nominal Benefits/Pension
• In line with market and competition, ensures
stability and balanced with more
conservative variable potential
• 125% target, 250% maximum bonus
• 55% Financial, initially comprising:
‒ 30% Funds From Operations;
‒ 15% Net debt;
‒ 10% Capex;
• 30% HSEC comprising of:
‒ 15% Safety;
‒ 15% Progress towards 2035 CO2 targets; and
• 15% Individual targets.
• 50% deferred into shares vesting
on the third anniversary, subject
to continuing employment.
• 225% per year
• Comprehensive underpin focused on
a holistic review of the overall business
and ESG performance.
• Test of underpin and cliff vesting on third
anniversary. Requirement to hold all vested
restricted stock until the later of 5-years
from grant and 2 years post-employment.
Summary of proposed policy changes
Conclusion
The following changes to the variable elements of the
remuneration policy are proposed (neither of which
have been utilised by the current CEO):
• Annual bonus maximum increased from 200% to 250%
with 50% of any bonus outcome deferred for three years
into shares. Minor clarifications to the operation of deferral
and distribution accrual.
• Introduction of RSP. Under the new plan, the CEO will receive
an annual grant of shares worth 225% of salary. The vesting is
subject to an underpin, combined with a holding requirement
until two years post-employment.
A comparison of each current policy element and the proposed
changes can be found on the following pages.
While the Company renewed its policy at the 2020 AGM, based on
the findings of the review described above, it is now necessary to
seek approval for a revised policy in light of succession as we move
to a more appropriate and competitive remuneration structure.
We believe that the proposal directly aligns the executive director’s
interests with those of our shareholders through the most
long-term plan operated by a major UK listed company. We are
confident that shareholders will recognise this as a continuation
of our ESG journey.
The Committee continues to seek to ensure that the directors’
remuneration policy and its implementation are attractive to
shareholders in reflecting sensible practice and good governance.
We welcome an open dialogue with shareholders and will
continue to consult with major shareholders before implementing
any future significant changes to the remuneration policy.
We would like to thank all those who took part in the consultation
for their openness and constructive challenge.
102 Glencore Annual Report 2020
Part A-2
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 2021 AGM. The Policy approved by shareholders at the
2020 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 Policy for the Executive Directors currently only applies to Mr
Glasenberg as he is the only Executive Director. Mr Nagle will be
appointed to the Board and replace Mr Glasenberg from a date to
be announced in 2021. Mr Glasenberg, given his status as a major
shareholder, elected not to participate in any form of variable pay
and, as acknowledged in the 2020 policy, this requires the policy to
be updated to reflect the future position applying to his successor.
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)
The philosophy of the Remuneration Committee is to
set the Company’s remuneration policies and practices
to 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 approach
to executive remuneration.
The Committee is satisfied that the revised 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.
UK CORPORATE GOVERNANCE CODE CONSIDERATIONS
As part of its review of the new remuneration policy, the Committee has considered the factors set out in provision 40 of the Corporate
Governance Code. In our view, the proposed policy addresses those factors as set out below:
Clarity: remuneration arrangements
should be transparent and promote
effective engagement with shareholders
and the workforce.
Our remuneration policy and pay arrangements are clearly disclosed each
year in the Annual Report. The Remuneration Committee proactively seeks
engagement with shareholders on remuneration matters.
Simplicity: remuneration structures
should avoid complexity and their rationale
and operation should be easy to
understand.
Our remuneration structure comprises fixed and variable remuneration, with
the performance conditions for variable elements clearly communicated to, and
understood by, participants. The RSP will provide a mechanism for aligning
Executive Director and shareholder interests.
Risk: remuneration arrangements should
ensure reputational and other risks from
excessive rewards, and behavioural risks
that can arise from target-based incentive
plans, are identified and mitigated.
The rules of the annual bonus scheme and RSP provide suitable mechanisms
for the Committee to reduce award levels and are subject to malus and
clawback provisions. The RSP reduces the risk of unintended remuneration
outcomes associated with complex performance conditions associated with
other forms of long-term incentives.
Predictability: the range of possible values
of rewards to individual directors and any
other limits or discretions should be
identified and explained at the time of
approving the policy.
Proportionality: the link between
individual awards, the delivery of strategy
and the long-term performance of the
company should be clear. Outcomes
should not reward poor performance.
Alignment to culture: incentive schemes
should drive behaviours consistent with
company purpose, values and strategy.
The RSP increases the predictability of reward values (removing the risk of
potentially unintended outcomes). Maximum award levels and discretions are
set out in the policy tables and the policy includes scenario charts showing the
potential outcomes on a range of assumptions.
Variable performance-related pay represents a significant proportion of the
total remuneration opportunity. The Committee considers the appropriate
financial and personal performance measures each year to ensure that there is
a clear link to strategy. Discretion is available to the Committee with the ability to
reduce awards if necessary, to ensure that formulaic outcomes do not reward
poor performance.
The Committee seeks to ensure that personal performance measures under
the annual bonus scheme incentivise behaviours consistent with the
Company’s culture, purpose and values. The RSP will clearly align the Executive
Director’s interests with those of shareholders by ensuring a focus on delivering
against strategy to generate long-term value for shareholders.
Glencore Annual Report 2020 103
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2020 continued
1. Components of Executive Director Remuneration
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
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 and performance measures
Base salaries are usually reviewed annually, however, this next
review will take place in December 2022.
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 was first approved.
Key changes to last approved policy
None
Policy and operation
Provides appropriate insurance coverage benefits.
Values are shown in the single figure table on page 111 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 a Swiss based
executive, this would be expected to mean employees generally
in the Baar office.
Maximum opportunity and performance measures
Benefits to comprise only those generally available to staff at
the Company’s head office. These currently comprise salary
loss (long-term sickness) and accident / travel insurance.
A monetary limit of $100,000 p.a. for these benefits applies
($20,000 in the case of Mr Glasenberg).
Key changes to last approved policy
None
Pension
Annual Bonus
Provides basic retirement benefits which reflects local
market practice
Supports delivery of short-term operational, financial and
strategic goals
Policy and operation
Participation in the defined contribution scheme for all Swiss head
office-based employees.
Maximum opportunity and performance measures
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.
Key changes to last approved policy
None
Policy and operation
Annual Bonus plan levels and the appropriateness of measures
are reviewed annually to ensure they continue to support the
Group’s 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 current intent is that
such shares vest on the third anniversary of grant contingent on
continuous employment.
Cash element to be paid in one tranche following the publication
of the year-end results.
Dividends will accrue over the period from grant to the relevant
vesting date and roll up into further shares which will be released
on such date.
Malus and clawback provisions apply to any Annual Bonus
plan outcome.
Maximum opportunity and performance measures
The Committee has set a maximum annual bonus level of 250%
of base salary p.a.
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. The Committee
specifically reserves the ability to reduce payments if not satisfied
that any formulaic outcome is appropriate in the circumstances.
Key changes to last approved policy
Cap increased from 200% to 250% and minor clarifications to the
operation of deferral and distribution accrual.
104 Glencore Annual Report 2020
1. Components of Executive Director Remuneration continued
Long Term Incentives
Personal Shareholdings
Policy and operation
The Committee has set a formal shareholding requirement for
Executive Directors of 500% of salary.
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.
Key changes to last approved policy
None
Incentivises the creation of shareholder value over the
longer term
Policy and operation
Awards will generally be granted on an annual basis contingent
on employment to the third anniversary of grant and satisfaction
of an underpin at that time. As the award is of restricted shares, the
default will be for awards to vest, unless the Committee considers
this inappropriate in the circumstances.
Shares will only be released (other than to meet tax obligations) on
the later of five years from grant and two years post-employment.
Distributions will accrue over the period from grant to the third
anniversary of grant and roll up into further shares, which will be
released on such anniversary. From that date, distributions will be
paid directly on any vested shares.
Malus and clawback 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 and performance measures
Overall annual Executive Directors’ limit of 225% of salary for LTI grants.
The vesting of awards is subject to an underpin permitting the
Committee to reduce or eliminate the level of vesting if it considers
full vesting inappropriate in all the circumstances.
The Committee will holistically review the overall business and ESG
performance (including financial and non-financial elements, such
as distribution payments, delivery against climate change objectives,
governance, culture, as well as health and safety performance).
Key changes to last approved policy
Introduction of Restricted Share Plan.
Service Contracts
Policy and operation
It is the Company’s policy to provide for 12 months’ notice for
termination of employment for Executive Directors, to be given by
either party.
Under normal circumstances, the Company may terminate the
employment of an Executive Director by making a payment in lieu
of notice equivalent to basic salary only for the notice period at the
rate current at the date of termination. In appropriate cases, the
Executive Director can be dismissed without compensation.
Key changes to last approved policy
None
Notes to policy table and other key considerations
1. Differences between the policy on remuneration for Directors from the policy on remuneration of other employees: the only current 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.
2. For 2020, all remuneration and fees were paid in US Dollars except for pension contributions and the provision of benefits which were provided in Swiss Francs.
Glencore Annual Report 2020 105
Strategic reportFinancial statementsAdditional informationGovernance
When Mr Nagle joins the Board, it is envisaged that his potential
remuneration will comprise:
$m
$14
$12
$10
$8
$6
$4
$2
$0
$4.050
$2.250
$1.850
$1.850
$4.050
$2.025
$4.050
$4.500
$4.500
$1.850
$1.850
Minimum
On-target
Maximum
Maximum Plus
Fixed Remuneration
Annual Bonus
LTI
LTI Plus
This has been calculated using the following assumptions, in
accordance with UK reporting regulations:
• Minimum: Mr Nagle’s starting salary of $1.8m and
assumed benefits of $50k (one-time relocation expenses
have been excluded)
• On-target pay: as Minimum plus bonus at 50% of maximum
plus the LTI grant
• Maximum pay: as On-target pay except bonus payable at max
• Maximum plus 50%: as Maximum pay except the share price
on the LTI is assumed to increase by 50%
• Each element ignores the impact of distribution roll-up
MANAGING POTENTIAL CONFLICTS OF INTEREST
In order to avoid any conflicts of interest, remuneration is
managed through well-defined processes ensuring that no
individual is involved in the decision-making process related
to their own remuneration. In particular, the remuneration of
an Executive Director is set and approved by the Committee;
no Executive Director is involved in the determination of his own
remuneration arrangements or attends the meetings where
this is discussed.
The Committee also receives support from external advisers
and evaluates the support provided by those advisers annually to
ensure that advice is independent, appropriate and cost-effective.
Committee members bring their own judgment to consideration
of all matters.
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2020 continued
MALUS & CLAWBACK
Awards subject to the applicable plan rules governing the annual
bonus and RSP are subject to malus and clawback provisions that
allow the Committee to reduce or clawback awards and may be
applied in certain circumstances. These provisions apply
irrespective whether an award is made in cash or equity.
The Committee may, in its discretion, decide to delay vesting and
therefore extend the period during which malus and clawback
may be applied if facts come to light within the period warranting
an investigation.
DISCRETION AND VESTING SUBJECT
TO THE UNDERPIN
In addition to the specific discretions set out in the policy table
above, the Committee may exercise various discretions related
to the operation of the policy. In particular, these include, but are
not limited to, the following:
• the participants of the respective plans;
• the timing of award grants, vesting and/or payment;
• the size of an award and/or payment (subject to the limits
set out in the policy table);
• the determination of vesting;
• dealing with a change of control or corporate restructuring;
• the determination of a good/bad leaver for incentive plan
purposes and the treatment of pro-rating and holding periods;
• adjustments required in certain circumstances (e.g. rights
issues, corporate reorganisation and/or change to capital
structure); and
• determining the appropriate performance conditions,
underpins, weightings and targets for the annual bonus
scheme and LTI.
The holistic, qualitative judgement, which is applied as an
underpin test before final vesting of restricted stock is confirmed,
is an important aspect to ensure that vesting is not simply driven
by a formula or the passage of time that may give unexpected or
unintended remuneration outcomes.
The exercise of any discretion will be fully disclosed in the
applicable statement of implementation of the policy.
POTENTIAL REWARDS UNDER VARIOUS SCENARIOS
Under the current 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 2021, 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.
106 Glencore Annual Report 2020
RECRUITMENT REMUNERATION POLICY
The Company’s Executive Director 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 goals.
• 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
(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. Nonetheless, it envisages
applying the caps in practice. 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 to compensate
for the forfeiture of incentive awards in a previous employer.
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, Restricted 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 below in respect of the main Policy for such Directors.
Glencore Annual Report 2020 107
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2020 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. 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
Annual Bonus
Deferred element
of bonus
LTI
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
Pro-rated bonus, typically with the normal proportion
subject to deferral
No awards made
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 underpin at the normal
measurement date.)
Committee discretion to disapply pro-rating
May be retained or forfeited at Committee discretion
All awards will normally lapse.
In the event of a change of control or similar event, awards may become payable or vest early with treatment broadly in line with that
for good leavers. Rules permit a roll-over of awards in appropriate circumstances.
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 and/ or the provision of outplacement and similar services.
2. Chairman and Non-Executive
Director Remuneration
Fees
Engagement with shareholders
As explained, on page 100 of this report, the Company engaged
extensively with shareholders as part of the development of this
policy. The Committee will continue to monitor the views of
shareholders as published in guidelines and engage directly with
them as appropriate.
Reflects time commitment, experience, global nature and size
of the Company
Engagement with colleagues
As a global resources company with employees around the world,
many of whom do not have access to the internet, it is not feasible
to directly engage with all colleagues on executive remuneration.
The Committee is advised of pay and conditions around the
Group and considers such information when considering
executive pay.
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 2021.
Maximum opportunity and performance measures
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.
Key changes to last approved policy
None
108 Glencore Annual Report 2020
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 Kalidas Madhavpeddi 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 pages 90 and 91.
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:
• Regularly review the appropriateness and relevance of the
Remuneration Policy
• Determine and agree with the Board the framework for the
remuneration of the Company’s Chairman, the Chief Executive
and the Executive Directors
• 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
• Determine the policy for senior management remuneration
• 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
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.
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 2020.
A copy of the service contract of the Executive Director is available
for inspection at Company’s registered office as noted on
page 243 or as otherwise indicated in the Notice of 2021 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
EXTERNAL APPOINTMENTS
None currently. 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 re-election 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.
Copies of the letter of appointment for Non-Executive Directors
are available for inspection at Company’s registered office
address as noted on page 243.
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 2021,
which are unchanged from 2020, 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
Glencore Annual Report 2020 109
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REMUNERATION REPORT
For the year ended 31 December 2020 continued
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.
Advisers to the Remuneration Committee
The Committee appointed and received independent
remuneration advice during the year from its external adviser,
FIT Remuneration Consultants LLP (FIT). FIT is a member of the
Remuneration Consultants Group (the UK professional body for
these consultants) and adheres to its code of conduct. The
Committee was satisfied that the advice provided by FIT was
objective and independent.
FIT’s fees for this advice in respect of 2020 were $59,554
(2019: $58,491).
The Committee also receives advice from the Company Secretary.
Relative importance of remuneration spend
The table below illustrates the change in total remuneration,
distributions paid and net profit from 2019 to 2020.
Distributions and buy-backs attributable
to equity holders
Net income/(loss) attributable
to equity holders
Total remuneration
2020
US$m
–
2019
US$m
5,028
(1,903)
(404)
5,403
5,231
The figures presented have been calculated on the following
bases:
• Distributions and buy-backs – distributions paid and shares
bought back during the year
• Net income/(loss) attributable to equity holders – our
reported net loss in respect of the financial year.
• Total remuneration – represents total personnel costs as
disclosed in note 23 to the financial statements which includes
salaries, wages, social security, other personnel costs and
share-based payments
Performance graph and table
This graph shows the value to 31 December 2020, on a total
shareholder return (TSR) basis, of £100 invested in Glencore plc
on 24 May 2011 (our IPO date) compared with the value of £100
invested in the FTSE 350 Mining Index. The FTSE 350 Mining Index
is considered to be an appropriate comparator for this purpose as
it is an equity index consisting of companies listed in London in
the same sector as Glencore.
The UK reporting regulations also require that a TSR performance
graph is supported by a table summarising aspects of CEO
remuneration, as shown below for the same period as the TSR
performance graph:
Performance
40
20
0
-20
-40
-60
-80
-100
19 May
2011
24.9
(42.3)
30 Dec
2011
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
30 Dec
2016
29 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
Glencore
FTSE 350 Mining
CEO single figure remuneration since 2011
Annual
variable
element
award rates
against
maximum
opportunity2
Long-term
incentive
vesting
rates against
maximum
opportunity2
Single figure
of total
remuneration1
(US$’000)
2020 Ivan Glasenberg
2019
2018
2017
2016
2015
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
2014
Ivan Glasenberg
2013
2012
2011
Ivan Glasenberg
Ivan Glasenberg
Ivan Glasenberg
1,508
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 2020. 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.
110 Glencore Annual Report 2020
CEO pay ratio
The table below shows the ratio of CEO single figure
remuneration for 2020 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 represent 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
2020
2019
Method
(A)
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
A
A
$8,525
177 : 1
$8,558
176 : 1
$21,212
71 : 1
$21,238
71 : 1
$65,025
23 : 1
$64,077
23 : 1
Additional UK remuneration disclosures
Under UK laws and remuneration regulations, UK companies are
also required to disclose various data comparing the percentage
change in directors’ year-on-year remuneration compared with
employees of the listed company itself, i.e. not on a group-wide
basis. As Glencore plc has no direct employees, there would be
no non-director data to disclose. There have been no changes in
the Company’s levels of pay for directors with the only changes
relating to minor benefits and the impact of Non-Executive
Directors changing committee memberships. On this basis,
it was considered unnecessary to include such data.
Most recent shareholder voting outcomes
IMPLEMENTATION REPORT – AUDITED INFORMATION
Non-Executive fees
The emoluments of the Non-Executive Directors for 2020 were
as follows:
Name
Non-Executive Chairman
Anthony Hayward
Non-Executive Directors
Peter Coates
Leonhard Fischer
Martin Gilbert
John Mack
Kalidas Madhavpeddi
Patrice Merrin
Gill Marcus
Single figure table
Ivan Glasenberg
Salary
Benefits
Annual Bonus
Long-term incentives
Pension
Total
Total 2020
US$’000
Total 2019
US$’000
1,150
1,150
310
214
300
200
188
300
222
US$’000
2020
1,447
4
–
–
57
1,508
310
280
300
200
–
265
240
2019
1,447
4
–
–
52
1,503
The notes to the CEO single figure remuneration table from the
previous page 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.
The votes cast to approve the Directors’ remuneration report, for
the year ended 31 December 2019 at the 2020 AGM were:
The aggregate fees for all Non-Executive Directors for 2020 were
$2,884,000 (2019: $2,745,000).
Votes “For”
Directors’ remuneration policy
97.28%
(9,718,437,304)
Directors’ remuneration report
96.59%
(9,655,344,116)
Votes
“Against”
Votes
“Withheld1”
The total emoluments of all Directors for 2020 (including
pension contributions for Mr Glasenberg) were $4,392,000
(2019: $4,248,000).
2.72%
Directors’ interests
(271,822,039)
(100,913,371)
3.41%
(341,081,734)
(94,747,475)
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.
1 A vote withheld is not counted in the calculation of the proportion of votes for and
against the resolution.
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
10 March 2021
Glencore Annual Report 2020 111
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REPORT
For the year ended 31 December 2020
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 2020. The Directors’ report
includes details of the business, the development of the Group
and likely future developments as set out in the Strategic Report,
which together form the management report for the purposes of
the UK Financial Conduct Authority’s Disclosure and Transparency
Rule (DTR) 4.1.8R. The notice concerning forward-looking
statements is set out at the end of the Annual Report.
CORPORATE STRUCTURE
Glencore plc is a public company limited by shares, incorporated
in Jersey and domiciled in Baar, Switzerland. Its shares are listed
on the London and Johannesburg Stock Exchanges.
FINANCIAL RESULTS AND DISTRIBUTIONS
The Group’s financial results are set out in the financial statements
section of this Annual Report.
In light of the continued uncertain pandemic / economic outlook
and in order to support the Group’s overall financial position, no
distribution was made in 2020.
The Board is recommending to shareholders an aggregate capital
distribution of US$0.12 per share in respect of the 2020 financial
year as further detailed on page 48.
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.
112 Glencore Annual Report 2020
John Burton
Company Secretary
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 page 19.
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.
EMPLOYEE POLICIES AND INVOLVEMENT
Glencore has 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 but includes Group-wide surveys –
see Our people section on page 27.
DIRECTORS’ CONFLICTS OF INTEREST
MAJOR INTERESTS IN SHARES
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 2020, together with their biographical details
and other information, are shown on pages 88 – 89.
DIRECTORS’ INTERESTS
Details of interests in the ordinary shares of the Company of those
Directors who held office during 2020 are given below:
Name
Executive Directors
Ivan Glasenberg
Non-Executive Directors
Anthony Hayward
Peter Coates
Leonhard Fischer
Martin Gilbert
John Mack
Kalidas Madhavpeddi
Gill Marcus
Patrice Merrin
Number of
Glencore
Shares
Percentage of
Total Voting
Rights
1,211,957,850
9.09
244,907
1,665,150
–
50,000
750,000
–
–
60,000
0.00
0.01
–
0.00
0.00
–
–
0.00
SHARE CAPITAL AND SHAREHOLDER RIGHTS
As at 26 February 2021, 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 81,000,508 shares are held by Group employee
benefit trusts.
Taking into account the information available to Glencore as
at 26 February 2021, 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
Aristotelis Mistakidis
Daniel Mate
SHARE CAPITAL
Number of
Shares
1,221,497,099
1,211,957,850
886,856,436
516,588,214
463,675,134
454,136,143
Percentage of
Total Voting
Rights
9.17
9.10
6.66
3.88
3.48
3.41
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.
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.
Glencore Annual Report 2020 113
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REPORT
For the year ended 31 December 2020 continued
The Directors may refuse to register a transfer of a certificated
share which is not fully paid, provided that the refusal does not
prevent dealings in shares in the Company from taking place on
an open and proper basis or where the Company has a lien over
that share.
The Directors may also refuse to register a transfer of a certificated
share unless the instrument of transfer is:
(i)
lodged, duly stamped (if necessary), at the registered office
of the Company or any other place as the Board may
decide accompanied by the certificate for the share(s) to
be transferred and/or such other evidence as the Directors
may reasonably require as proof of title; or
(ii) in respect of only one class of shares
Transfers of uncertificated shares must be carried out using
CREST and the Directors can refuse to register a transfer of an
uncertificated share in accordance with the regulations governing
the operation of CREST.
The Directors may decide to suspend the registration of transfers,
for up to 30 days a year, by closing the register of shareholders. The
Directors cannot suspend the registration of transfers of any
uncertificated shares without obtaining consent from CREST.
There are no other restrictions on the transfer of ordinary shares in
the Company except: (1) certain restrictions may from time to time
be imposed by laws and regulations (for example insider trading
laws); (2) pursuant to the Company’s share dealing code whereby
the Directors and certain employees of the Company require
approval to deal in the Company’s shares; and (3) where a
shareholder with at least a 0.25% interest in the Company’s issued
share capital has been served with a disclosure notice and has
failed to provide the Company with information concerning
interests in those shares. There are no agreements between
holders of ordinary shares that are known to the Company,
which may result in restrictions on the transfer of securities or
on voting rights.
The rules for appointment and replacement of the Directors are
set out in the Articles. Directors can be appointed by the Company
by ordinary resolution at a GM or by the Board upon the
recommendation of the Nomination Committee. The Company
can remove a Director from office, including by passing an
ordinary resolution or by notice being given by all the other
Directors. The Company may amend its Articles by special
resolution approved at a GM.
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
There was no purchase of own shares by the Company 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 44.
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 in 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.
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 pages 73 – 74 in the Risk Management 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, sources of
funding and liquidity.
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.
114 Glencore Annual Report 2020
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
However, the Directors are also required to:
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 (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and IFRS as issued by the International
Accounting Standards Board. 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
• 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
10 March 2021
Glencore Annual Report 2020 115
Strategic reportFinancial statementsAdditional informationGovernance
DIRECTORS’ REPORT
For the year ended 31 December 2020 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 (IFRS) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and IFRS 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 2020 were approved on the date below by the
Board of Directors.
Signed on behalf of the Board:
Anthony Hayward
Chairman
10 March 2021
Ivan Glasenberg
Chief Executive Officer
116 Glencore Annual Report 2020
Andrew McNamara
U.S. Head of Marketing
Operations, Oil –
United States
RESPONSIBILITY
In our oil business, Andrew says, people have that sense of
ownership and responsibility because they are overseeing
a vessel from loading to unloading.
“When I think of responsibility, I think of
ownership. When you have something that
you’re responsible for, you need to own it…
you need to understand it… you need to
make sure it gets done the right way.”
“Getting it into a port, loading it successfully,
getting it into the discharge port. You really
take pride”
Learn more about our culture and how
we work safely on www.glencore.com
OPENNESS
She believes that by being open – listening to and appreciating
what’s on people’s minds – you can help them to improve their
work, because people feel better when they know that they are
heard and understood
Jacqueline Ramirez
Materials Dispatcher – Chile
“For me, openness is about communicating,
knowing how to connect with others.”
Learn more about our culture and how we
work with openness on www.glencore.com
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
118
131
132
133
134
136
137
Glencore Annual Report 2020 117
Strategic reportGovernanceAdditional informationFinancial statements
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 the Group’s affairs as at 31 December 2020 and of the Group’s loss for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies to the European Union and as issued by the International Accounting Standards Board
(“IASB”), and
• have been properly prepared in accordance with 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 adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in 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 public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group for
the year are disclosed in note 29 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Group.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
118 Glencore Annual Report 2020
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;
• Potential impact of climate change on non-current assets;
• Marketing revenue recognition and fair value measurements;
• Classification of trading contracts and arrangements which contain a financing element, and
• Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes.
Our assessment of the Group’s key audit matters is consistent with those identified in 2019, except that:
• This year we identified the potential impact of climate change on non-current assets as a separate key audit
matter, due to the increased evidence that policies being adopted to combat climate change could have a
material impact on the financial statements. In the prior year, this issue was included within the “Impairment
of non-current assets” key audit matter.
• We removed “Credit and performance risk” and “Fair value measurements” as individual key audit matters, as
there were fewer significant accounting complexities and judgements in these areas of our audit in the
Marketing segment in the current year, and the amendments in the “Impairment of non-current assets” and
“Marketing revenue recognition and fair value measurements” key audit matters cover the significant
elements of these specific risks.
• The prior year key audit matter “Classification of financial instruments” has been broadened and renamed to
“Classification of trading contracts and arrangements which contain a financing element”, to reflect specific
risk focus and the wider range of arrangements in scope of this key audit matter.
The materiality that we used for the Group financial statements in the current year was $175 million
(2019: $250 million), which was determined on the basis of the average 3-year adjusted pre-tax profit
consistent with prior years.
We focused our Group audit scope primarily on the audit work at 38 components, representing the Group’s
most material marketing operations and industrial assets. These 38 components account for 80% of the Group’s
net assets, 88% of the Group’s revenue and 91% of the Group’s adjusted EBITDA (refer to segment information in
note 2 to the financial statements).
Materiality
Scoping
Significant changes
in our approach
Other than performing the audit work largely remotely due to the Covid-19 pandemic and the changes to key
audit matters discussed above, there were no significant changes to our audit approach when compared to 2019.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:
• We considered the effect of key risks on the Group’s business model as part of our risk assessment and analysed how these risks
might affect the Group’s liquidity position, including access to capital, and thus its ability to continue to operate as a going concern.
The risks we consider to have the greatest impact are supply, demand and prices of commodities over the forecast period.
• We assessed the basis for the assumptions used in the forecast information including operational profitability, the Group’s debt
repayment obligations and capital expenditure requirements as well as undrawn facilities.
• We challenged the downside stress scenarios applied by the directors in their analysis, in particular whether the downside
scenarios represented an appropriately robust sensitivity. We evaluated the effect of these scenarios on key metrics such as
liquidity headroom, net debt and net debt to EBITDA over the going concern period and performed additional sensitivities to
further challenge the Group’s forecast position.
• We challenged whether contingent liabilities could have a material effect on the Group’s ability to continue as a going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Glencore Annual Report 2020 119
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
GOVERNMENT INVESTIGATIONS
Description of key audit matter
How the scope of our audit responded to the key audit matter
The Group is subject to certain investigations by regulatory and
enforcement authorities as disclosed in Note 31 to the financial
statements. The Board discussions on this matter are set out in
the Corporate Governance Report on page 90 and the Group’s
discussion on the Laws and enforcement principal risk in the
Strategic Report set out on pages 76–77.
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 (“the
advisors”) 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 is continuing to cooperate with the various authorities,
including through reporting to those authorities facts relevant to
their investigations. The investigations are complex and dynamic
including in relation to scope. The timing and outcome of the
various investigations remain uncertain.
The judgement of the Investigations Committee (guided by the
General Counsel and the Group’s external legal counsel) is needed
to determine whether a present obligation exists and a provision
should be recorded at 31 December 2020 in accordance with the
accounting criteria set out under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets.
At 31 December 2020, taking all available evidence into account,
the Investigations Committee concluded that it is not probable
that a present obligation existed at the end of the reporting
period for the above regulatory and enforcement proceedings.
The timing and amount, if any, of financial effects (such as fines,
penalties or damages, which could be material) or other
consequences, including external costs, from any of the various
investigations and any change in their scope is not possible
to predict or estimate. 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 2020.
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.
In response to the investigations by regulatory and enforcement
authorities we performed the following:
• We gained an understanding of the Investigations Committee’s
and General Counsel’s process for reviewing the IAS 37
assessment and review of the disclosures in the Annual Report.
• We attended regular briefings from the General Counsel and
the Group’s external legal counsel during the year.
• We assessed the competence, capability and objectivity of the
advisors used by the Group.
• 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 a
present obligation exists and a provision should be recorded at
31 December 2020.
• We included Deloitte forensic specialists, experienced in similar
investigations, in our team to understand and challenge the
adequacy of the scope and outcomes of the work of the
advisors. This work included understanding the investigation
methodology applied by the advisors in identifying the relevant
facts for reporting to the enforcement authorities.
• We reviewed correspondence with the investigating authorities
and the internal meeting minutes of the Investigations
Committee.
• We enquired of the General Counsel and the Group’s external
legal counsel as to the current stage of the various regulatory
and enforcement proceedings and assessed against our
understanding of a typical investigation cycle and our
assessment of the status of where the various regulatory
authorities are in their investigation.
• We enquired of the Investigations Committee, the General
Counsel and the Group’s external legal counsel as to their
awareness of identified known or likely non-compliance from
the investigations to date which could indicate the existence of
a present obligation at 31 December 2020 and whether any
such non-compliance could result in a potential material
outflow (penalty or fine).
• Working with our Deloitte forensic specialists, we considered
whether the Investigations Committee’s conclusions were
reasonable that a present obligation did not exist at the end of
the reporting period and that the timing and amount, if any, of
financial effects from any of the various investigations and any
change in their scope is not possible to predict or estimate.
KEY OBSERVATIONS
Based on the results of our procedures, we concluded that the timing of the completion of the regulatory and enforcement proceedings
and the outcome thereof are uncertain. Consistent with the Investigations Committee and the General Counsel, we concurred that no
present obligation existed to settle any potential fines or penalties associated with these proceedings. We concurred that the disclosure
of a contingent liability as set out under “Legal and regulatory proceedings” in note 31 of the financial statements is appropriate.
120 Glencore Annual Report 2020
IMPAIRMENTS OF NON-CURRENT ASSETS
Description of key audit matter
How the scope of our audit responded to the key audit matter
The carrying value of the Group’s non-current assets within
the scope of IAS 36 Impairment of assets includes intangible
assets, property, plant and equipment (“PPE”), non-current
advances and loans and investments in associates and
joint ventures, which amounted in total to $69,019 million at
31 December 2020.
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 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 (refer to ‘Potential impact
of climate change on non-current assets’ key audit matter
below), and
• Geological and other operational challenges that negatively
affect an asset’s performance over time.
For non-current advances and loans, the Group is exposed to
credit and performance risk arising from risks related to non-
performance by the counterparty, particularly in markets
demonstrating significant price volatility with limited liquidity and
terminal markets. Assessing counterparty risk, solvency and
liquidity can be highly subjective. This risk is heightened in times
of increased price volatility, such as that caused by the Covid-19
pandemic, where suppliers may be incentivised to default on
delivery and customers may be unwilling to take contracted
deliveries or be unable to pay.
When an impairment indicator exists in the Group’s significant
assets and investments, management completes an impairment
review.
As disclosed in note 6, pre-tax impairments totalling $5,508 million
were recorded in PPE and intangible assets and $343 million of
impairments were recognised on various other items. In addition,
as disclosed in note 10, $752 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
if different assumptions were applied and readers are specifically
referred to the sensitivity disclosures made by the Group 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 98.
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 its impairment assessment.
We obtained an understanding of the methodology applied
by management in developing its impairment assessments
with the help of internal experts, which included understanding
the inherent subjectivity and complexity of underlying key
assumptions, as well as relevant controls in management’s
impairment assessment process.
We assessed the competence, capability and objectivity of
management’s experts responsible for preparing the resources
and reserves statements.
We reviewed management’s assessment of impairment risk and
its assessment of the indicators of impairment and challenged
the significant assumptions used and the data sources on
which these assumptions were based. 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.
We performed an independent assessment of impairment
indicators.
We challenged management’s sensitivity analyses by performing
independent sensitivity analyses using management’s models,
including for certain assets which were not identified by
management as having indicators of impairment but which
have a higher risk of impairment due to lower available headroom
in discounted cash flow models.
We updated our assessment of management’s determination of
cash-generating units (“CGUs”) by reference to 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 were identified, we performed
detailed testing on management’s impairment calculations 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 basis for technical mining, operational
and financial inputs (e.g. reserve and resource estimation,
production parameters, grade and recovery rates, resource
conversion rates, and operating and capital costs). Production
and cost assumptions were cross checked against historical
performance as well as approved budgets and life of mine plans,
where applicable, and mineable tonnes assumptions were
assessed against reserves and resources estimates. Where
appropriate, benchmarking across similar assets in the same
commodity and geographic region was performed.
For non-current advances and loans (see note 11), we obtained
an understanding of management’s method of assessing
these assets for impairment, which included obtaining an
understanding of relevant controls in the Group’s centralised
and local credit and performance risk monitoring processes.
We challenged management’s assessment of recoverability
of these advances and loans 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 challenged management’s assessment of the recoverability of
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.
We assessed the adequacy of impairment related disclosures in
the financial statements, including the key assumptions used and
the completeness and accuracy of sensitivities disclosed.
Glencore Annual Report 2020 121
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
IMPAIRMENTS OF NON-CURRENT ASSETS CONTINUED
KEY OBSERVATIONS
Based on the results of our assessment of management’s methodology for impairment testing and modelling, we concluded that
the methodology applied complies with the accounting framework, and that management’s assessment of impairment indicators
was appropriate.
We concluded that key assumptions to which impairment outcomes were sensitive were reasonable overall in comparison to third
party evidence and / or our specialists’ developed acceptable ranges. For certain impairment models, management applied risk
adjustments to cash flows, and thus applied discount rate assumptions that excluded such risks. Our assessment of an independent
discount rate incorporated such risks into the discount rate, and we concluded that management’s approach was reasonable as the
two approaches yielded similar outcomes.
In the course of auditing management’s impairment models, we identified certain modelling errors which were subsequently
corrected by management. These errors were not detected by management’s review processes, and therefore they constituted control
deficiencies. Based on the results of this testing, we concluded that the recoverable amounts for the CGUs tested were within an
acceptable range of outcomes, although subject to high levels of estimation uncertainty. We considered management’s disclosures on
key assumptions and impairment sensitivities and found them to be in compliance with IFRS requirements.
We concluded that the Group’s provisioning in relation to non-current loans and advances was appropriate.
POTENTIAL IMPACT OF CLIMATE CHANGE ON NON-CURRENT ASSETS
Description of key audit matter
How the scope of our audit responded to the key audit matter
As described on pages 16 to 21, climate change, and the world’s
response to climate change, present significant risks and
uncertainties for Glencore’s energy industrial assets as a result of
the sensitivity to demand for future fossil fuels, particularly thermal
coal. Glencore’s thermal coal portfolio at 31 December 2020 has a
carrying value of $11.9 billion.
As described on page 16, in December 2020 the Group published
its Climate Report 2020: Pathway to net zero, which sets out the
Group’s target of a 40% reduction in total emissions by 2035 and
its ambition to achieve net zero total emissions by 2050.
We worked with Deloitte internal environmental specialists 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
publicly available industry projections of demand and long-term
prices into the future, such as the STEPS and SDS scenarios.
We reviewed the time period through which coal CGUs are valued
(life of mine plan) to assess if the assumptions are consistent with
management’s long-term investment plans, public disclosures
and credible external scenarios about energy transition timing
and effects.
We reviewed management’s impairment models and reperformed
the calculation of sensitivities in note 1 applying the IEA’s short- to
long-term price assumptions.
We considered whether management’s sensitivity and estimation
uncertainty disclosures were adequate in the context of climate
change risks and uncertainties.
We read the other information included in the annual report and
considered whether there was any material inconsistency
between the other information and the financial statements, or
whether there was any material inconsistency between the other
information and our understanding of the business based on
audit evidence obtained and conclusions reached in the audit.
To test the resilience of its portfolio to the impacts of climate
change, the Group has developed three scenarios:
• Current Pathway scenario, consistent with the IEA Stated
Policies scenario (STEPS);
• Rapid Transition scenario, consistent with IEA Sustainable
Development scenario (SDS), and
• Radical Transformation scenario, consistent with the IEA Net
Zero Emissions by 2050 scenario (NZE2050).
Glencore’s base case production decline profile used in its internal
modelling and business plans is consistent with the Group’s net
zero ambition. However, as explained in note 1, the base case price
assumptions used in management’s impairment assessment
(see the key audit matter above) are higher than those assumed
in STEPS and SDS.
While under all credible scenarios, fossil fuels (coal, gas and oil) will
continue to be part of the global energy mix into the future,
policies supporting the Rapid Transition and Radical
Transformation scenarios would lead to significant coal demand
decline over the longer term and likely lower prices.
The Group has set out in note 1 to the financial statements
illustrative impairment downside impacts to current carrying
values at possible commodity price curves consistent with STEPS
and SDS. Under STEPS the illustrative impairment is $2.5 billion
while under SDS the illustrative impairment is $7.7 billion.
We identified a key audit matter relating to the accuracy and
presentation of this analysis and the consistency of the Group’s
net zero ambition with its internal modelling and business plans,
including those used in its impairment assessment.
122 Glencore Annual Report 2020
POTENTIAL IMPACT OF CLIMATE CHANGE ON NON-CURRENT ASSETS CONTINUED
KEY OBSERVATIONS
We found no inconsistencies between management’s impairment forecasts and its stated response to climate change, as described in
the Strategic Report. In relation to assumptions about external markets, and in particular future coal prices, we found management’s
impairment assumptions to be reasonable when compared to reputable publicly available industry projections, notwithstanding that
we observed management’s coal price assumptions to be generally higher than thermal coal prices in the subset of scenarios that are
predicated on a starting assumption that the Paris goals will be met, such as the IEA’s SDS scenario. We concluded that reasonable
consideration and weight had been given by management to the likely impacts of climate change in the valuation for impairment
testing purposes of its thermal coal portfolio at 31 December 2020.
We concluded that the potential future financial impact of climate change on thermal coal impairment tests arising from reasonably
possible changes in management’s impairment assumptions in the next financial year (as specifically required by IAS 1), and
additionally over the longer-term is appropriately disclosed in note 1 to the financial statements.
MARKETING REVENUE RECOGNITION AND FAIR VALUE MEASUREMENTS
Description of key audit matter
How the scope of our audit responded to the key audit matter
Glencore generates revenue as a fee-like income from distribution
of physical commodities and arbitrage, including blending and
other optimisation opportunities.
We reviewed Glencore’s accounting policies on revenue
recognition and fair value measurements to assess compliance
with the requirements of IFRS.
Specifically for the Marketing segment:
• We tested relevant controls surrounding the completeness and
accuracy of trade capture and the revenue and trade cycle.
• We tested general IT controls surrounding major technology
applications and critical interfaces involving revenue recognition
and the completeness and accuracy of trade capture.
• We utilised data analytics tools to trace realised revenue to cash
receipts and to enhance audit effectiveness over large
transaction volumes.
• We agreed, on a sample basis, deliveries occurring on or around
31 December 2020 between the trade book system and the
relevant shipping documents to assess whether the IFRS
revenue recognition criteria were met for recorded sales.
• We tested the accuracy and completeness of unrealised trades
as of the reporting date by tracing and agreeing a sample of
trades entered into around the year-end from their source
documents to the trade book system.
• We tested relevant internal controls over management’s fair
value measurement processes and performed detailed
substantive testing of the related fair value measurements on a
sample basis.
• We worked with financial instrument specialists with
experience in commodity trading, to test significant
unobservable inputs utilised in ‘Level 3’ measurements in the
fair value hierarchy as set out in notes 27 and 28 to the financial
statements. This work included assessing management’s
valuation assumptions against independent price quotes,
recent transactions, and other relevant documentation.
Marketing revenue for the year (prior to inter-segment
eliminations) was $124,137 million (2019: $194,188 million). Refer to
note 1 for the revenue recognition accounting policies and note 2
for segment information.
The decrease in revenues year on year is principally due to the
impact of lower commodity prices in the first half arising from a
number of macro forces primarily Covid-19 linked, but also OPEC+’s
supply response deliberations. In the second half, a rebound in
demand for commodities coupled with supply constraints led
to extreme levels of market volatility, amid rapidly and materially
changing underlying supply and demand scenarios. This backdrop
provided overall supportive physical commodity marketing
conditions leading to the profitability of the Marketing business.
Judgement is required to determine when control is transferred
under certain contractual arrangements with third parties,
especially on or around year-end reporting periods, and in
particular where the sale of goods is connected with an
agreement to repurchase goods at a later date.
Marketing related activities depend on the reliability of the trade
capture systems and their IT infrastructure environment. As the
majority of the Group’s trades and marketing inventories are
measured at fair value through profit or loss (through either revenue
or cost of goods sold), 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. We identified a risk that the
capture of trades and their key contractual terms within the trade
book could be incomplete or inaccurate, either due to fraud or error,
resulting in misstatement of unrealised revenue and gross margin.
Determination of fair values can be a complex and subjective area,
requiring significant estimates, particularly where valuations
utilise unobservable inputs and are classified as ‘Level 3’ as
established by the hierarchy set out in IFRS 13 Fair value
measurements (e.g. price differentials, credit risk assessments,
market volatility and forecast operational estimates). At 31
December 2020, total ‘Level 3’ financial assets and liabilities
amounted to $690 million and $480 million respectively.
We refer readers to “Key sources of estimation uncertainty” within
note 1 and additionally notes 27 and 28.
Due to the abovementioned key judgement and estimation
uncertainty areas 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 and fair value
measurements in the Marketing segment as a key audit matter.
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. In addition, 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.
Glencore Annual Report 2020 123
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
CLASSIFICATION OF TRADING CONTRACTS AND ARRANGEMENTS WHICH CONTAIN A FINANCING ELEMENT
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
segment can be complex, particularly distinguishing the Group’s
regular marketing contracts, which are measured at fair value
through profit or loss, from those sales contracts where the Group
physically delivers its own production to a third party with no
history or intention of net settlement (“own use”), which 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, such as prepayments or extended payment
terms, which may require judgement in determining the most
appropriate accounting classification, presentation and disclosure.
Refer to notes 1, 21, 24, 27 and 28.
We obtained an understanding of the trading strategies
and associated product flows within the Group’s marketing
departments, including gaining an understanding of the
relevant 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.
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.
KEY OBSERVATIONS
Based on our procedures, we are satisfied that significant judgements applied in classification of contracts and arrangements with
a financing element were appropriate, and the respective accounting treatment and disclosures are in accordance with the
requirements of IFRS.
124 Glencore Annual Report 2020
TAXATION: UNCERTAIN TAX POSITIONS AND THE RECOGNITION AND RECOVERABILITY OF DEFERRED TAXES
Description of key audit matter
How the scope of our audit responded to the key audit matter
We engaged Deloitte tax specialists to assist in executing the
following audit procedures:
• 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 liabilities and disclosures having consideration
of the IFRIC 23 guidance.
• 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 models by comparing these forecasts against the
relevant entities’ budgets or underlying asset life of mine plans.
• We challenged management on the adequacy of disclosures in
the financial statements in relation to deferred tax assets and
liabilities for uncertain tax positions and the respective
sensitivity disclosures provided.
• In respect of tax exposures in the DRC:
‒ We challenged management’s position by inspecting
correspondence with local tax authorities, reviewing third
party expert tax opinions where appropriate, and utilising
Deloitte local DRC tax specialists to assess the probability of
the tax exposures submitted by the various tax authorities.
‒ We challenged the adequacy of associated liabilities and
disclosures having consideration of the IFRIC 23 guidance.
‒ In respect of the recognition of a full deferred tax asset in
Kamoto Copper Company (“KCC”), we challenged
management’s position regarding uncertainties arising from
the application of the 2018 Mining Code and current
negotiations with the DRC tax authorities having regard to
the current dispute resolution process.
The global tax environment is complex, particularly with respect
to cross border transactions. Furthermore, the interpretation
and application of tax legislation in certain jurisdictions in which
the Group operates can be unclear and unpredictable. There
continues to be an increase in enforcement activities, and
increasingly stringent interpretations of existing legislation by
local revenue authorities.
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 accounting
interpretation IFRIC 23 Uncertainty over Income Tax Treatments
is used by the Group together with IAS 12 Income Taxes to assess
and measure the uncertainty over income tax treatments.
As disclosed in notes 1 and 7:
• Management has updated its assessment of uncertain tax
positions and the recognition and recoverability of deferred
taxes. In recognising a liability for these taxation exposures,
consideration was given to the range of possible outcomes to
determine the Group’s best estimate of the amount to provide.
As at 31 December 2020, the Group has recognised $1,189
million of uncertain tax liabilities related to possible adverse
outcomes of these open matters.
• At 31 December 2020 the Group has recorded total deferred
tax liabilities of $4,721 million and total deferred tax assets of
$2,252 million.
• During 2018, the DRC parliament adopted a new mining code
(“2018 Mining Code”) which introduced wide-ranging reforms
including the introduction of higher royalties, a new Super
Profits Tax regime and further regulatory controls. The
uncertainties of the 2018 Mining Code, specifically the
application and interpretation of the Super Profits Tax, remain.
• During the latter half of 2020, various tax authorities in the DRC
issued assessments denying financing related costs and other
items, along with customs related claims for alleged non-
compliance or incorrect coding on certain filings. The Group is
currently engaged with these tax authorities working through a
dispute resolution process.
As a result, we have identified a risk of material misstatement of
the liability for uncertain tax positions and valuation of deferred
tax assets due to the significant estimation uncertainty and
subjectivity in certain judgements and key assumptions applied
by management, whether arising from management bias or
unintentional error.
KEY OBSERVATIONS
Based on our audit work on the Group’s tax liabilities and deferred tax assets recorded at 31 December 2020, we concur that the
recorded liabilities for uncertain tax positions and deferred tax assets and related disclosures are appropriate.
Glencore Annual Report 2020 125
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
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: $175 million (2019: $250 million)
Group performance materiality: $114 million (2019: $175 million)
The applied materiality is approximately 5% of the average 3-year adjusted pre-tax profit (2019: 5%), and equates
to less than 1% (2019: less than 1%) of equity.
Basis for
determining
materiality and
performance
materiality
Group
materiality
(US$ million)
250
250
Performance
materiality
(US$ million)
Maximum allowed component
performance materiality
(US$ million)
Audit Committee
reporting threshold
(US$ million)
175
175
175
114
87.5
-
t
e
k
r
a
M
g
n
i
70
t
e
s
s
a
d
n
I
105
-
t
e
k
r
a
M
g
n
i
87.5
t
e
s
s
a
d
n
I
68
-
t
e
k
r
a
M
g
n
i
57
t
e
s
s
a
d
n
I
12
12
9
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Consistent with the methodology applied in prior years, we have determined materiality by using a percentage
of the 3-year average (for 2020: 2018-2020) adjusted pre-tax profit. The selected materiality is 11.4% of current year
adjusted pre-tax profit without the effect of averaging (2019: 12.3%).
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 2020 audit has been set at $114 million at 65% of Group materiality (2019:
70% of Group materiality), based on our past audit experience, a low number of uncorrected misstatements
identified in prior years and taking into account the potential effect of the Covid-19 pandemic on the Group’s
control environment. Similarly, component audit procedures are scoped 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 performance materiality
for components within the Marketing segment was $68 million. Component performance materiality for
controlled industrial assets was limited to $57 million owing to their lower contribution to pre-tax profits on an
individual basis, while for associates and joint ventures it was limited to $102 million (at a grossed up 100%
holding).
The performance materiality applied to individual components ranged from $13 million to $102 million.
Rationale for the
benchmark applied
The pre-tax profits for the 2018-2020 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 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. Using
a 3-year average provides a more appropriate base reflective of the scale of the Group’s size and operations
through the cycle.
We agreed with the Audit Committee that we would report all audit differences in excess of $9 million (2019: $12 million), as well as
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Identification and scoping of components
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, Adjusted EBIT and Adjusted EBITDA), production output and qualitative criteria, such as
being a significant development project or exhibiting particular risk factors. Based on our assessment, we scoped in audit work at
126 Glencore Annual Report 2020
38 components (2019: 42 components), representing the Group’s most material marketing operations and industrial assets, and
utilised 22 component audit teams (2019: 25 component audit teams) in 16 countries (2019: 18 countries).
• 19 components (2019: 24 components) were subject to a full scope audit, and
• 19 components (2019: 18 components) were subject to specified audit procedures where the extent of our testing was based on our
assessment of the risk of material misstatement of certain specific financial balances and / or processes and of the materiality of the
Group’s operations at those locations.
These 38 components account for 80% of the Group’s net assets (2019: 83%), 88% of the Group’s revenue (2019: 89%) and 91% of the
Group’s Adjusted EBITDA (2019: 87%).
Net assets (%)
Revenue (%)
Adjusted EBITDA (%)
20
16
64
Working with other auditors
12
9
88
91
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, other 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.
Due to the global Covid-19 pandemic and the resulting travel restrictions, on-site meetings were limited to component teams in
Switzerland. As a result, the Group audit team increased the frequency of phone and video calls with component auditors, and
performed a virtual online programme of detailed reviews of the component audit teams’ files.
For all in-scope components, the Group audit team was involved in the audit work performed by the component auditors through a
combination of 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 during
component audit closing conference calls and regular interaction with the component teams during the year.
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.
Our consideration of the control environment
Glencore relies on the effectiveness of a number of IT systems and applications to ensure that financial transactions are recorded
completely and accurately. The main financial accounting, reporting, trading and treasury systems were identified as key IT systems
relevant to our audit. For the marketing business we planned to test and rely on key manual and automated controls over the revenue
business process, as discussed in the “Marketing revenue recognition and fair value measurements” key audit matter above. Industrial
activities are generally decentralised and thus the design of controls and testing approach varies between components.
The IT systems which are primarily managed from the centralised IT function in Switzerland were evaluated by IT specialists who were
part of the group engagement team. Other IT systems were evaluated by component IT specialists to determine whether these IT
systems could be relied upon to support our audit. IT control deficiencies relating to the review of user access rights and the
management of privileged access accounts were identified in a number of entities within the Group. As a result of these deficiencies,
certain component teams were unable to adopt a controls-based audit approach in the current year. Accordingly, these teams
extended the scope of audit procedures in response to the identified control deficiencies. Where centrally managed IT systems were
similarly impacted, mitigating controls were identified and / or additional procedures were performed in order to adopt a control
reliance approach.
As described in the “Impairment of non-current assets” key audit matter above, in the course of auditing the various impairments
during the year, certain modelling errors were identified. These constituted control deficiencies and were subsequently corrected by
management.
The Audit Committee has discussed these internal control deficiencies, and management’s actions to remediate them on pages 97-98.
As deficiencies in the control environment increase the risk of fraud and error within the financial statements, we performed additional
procedures to respond to the potential risks, including the risk of fraud as outlined below.
OTHER INFORMATION
The other information comprises the information included in the annual report other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the annual report.
We have nothing to report in this
regard.
Our opinion on the financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
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 course of 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 this gives rise to a material misstatement in the financial statements
themselves. 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.
Glencore Annual Report 2020 127
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the 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
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
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, we considered the following:
• 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’ remuneration, bonus levels and performance targets;
• the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
• the results of our enquiries of senior management, internal audit, members of the legal and compliance functions, and the Audit and
Investigations Committees about their own identification and assessment of the risks of irregularities, including obtaining and
reviewing the Group’s documentation of its 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 of fraud or non-compliance with laws and regulations;
• the matters discussed among the engagement team, including significant component audit teams, and 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 these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest 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;
• Key sources of estimation uncertainty in management’s recognition and measurement of deferred tax assets and uncertain tax
provisions, and
• Revenue transactions in the Marketing segment 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 provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The
key laws and regulations we considered in this context included Companies (Jersey) Law 1991, Primary and Secondary Listing Rules,
Disclosure Guidance and Transparency rules, the UK Corporate Governance code and related guidance and relevant tax laws.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the US
Foreign Corrupt Practices Act, the US Anti-Money Laundering regulations, the UK Bribery Act 2010 and the Group’s operating licences
and environmental regulations in the jurisdictions in which it operates.
128 Glencore Annual Report 2020
Audit response to risks identified
As a result of performing the above, we identified “Government investigations”, “Impairments of non-current assets”, “Marketing revenue
recognition and fair value measurements” and “Taxation: Uncertain tax positions and the recognition and recoverability of deferred
taxes” as key audit matters related to the potential risk of fraud or non-compliance with laws and regulations. The key audit matters
section of our report explains the matters in more detail and also describes the specific procedures we performed in response to those
key audit matters.
In addition, our procedures to respond to risks identified included the following:
• enquiring of management, the Audit Committee, the Investigations Committee, General Counsel and the Group’s external legal
counsel concerning actual and potential litigation and claims;
• enquiring of management, the Audit Committee, the Investigations Committee, General Counsel and the Group’s external legal
counsel regarding whether the Group is in compliance with laws and regulations relating to fraud, money laundering, bribery and
corruption;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
relevant regulatory and taxation authorities, where applicable;
• obtaining an understanding of the Group’s compliance policies, procedures and controls, including the Group’s procedures to
mitigate the risk of and response to allegations of fraud, bribery and corruption;
• obtaining an understanding of the Group’s business relationships with agents and intermediaries in certain high risk jurisdictions and
rationale for appointment;
• scrutinising expense accounts for evidence of improper payments in high risk jurisdictions;
• enhancing our audit procedures to identify and investigate suspicious payments to government officials, agents and intermediaries
by means of adding search parameters to our journal entry testing for key words relevant to potential fraudulent payments;
• working with our Deloitte forensic specialists to perform detailed audit procedures on business transactions with high risk individuals
and companies;
• 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;
• 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, and
• addressing the risk of fraud through management override of controls by testing the appropriateness of journal entries and other
adjustments, assessing whether the judgements made by management in making accounting estimates indicate 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.
Corporate Governance Statement
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 114;
• the directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 72-73;
• the directors’ statement on fair, balanced and understandable set out on page 115;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 72;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on
pages 70-84, and
• the section describing the work of the audit committee set out on pages 97-98.
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 this
regard.
• we have not received all the information and explanations we require for our audit; or
• proper accounting records have not been kept by the parent company, or proper returns
adequate for our audit have not been received from branches not visited by us, or
• the financial statements are not in agreement with the accounting records and returns.
Glencore Annual Report 2020 129
Strategic reportGovernanceAdditional informationFinancial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF GLENCORE PLC
Report on the audit of the financial statements continued
OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
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 auditor of Glencore plc is 10 years, covering
the years ending December 2011 to December 2020. 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
10 March 2021
130 Glencore Annual Report 2020
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF INCOME
OF INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
US$ million
US$ million
Revenue
Revenue
Cost of goods sold
Cost of goods sold
Selling and administrative expenses
Selling and administrative expenses
Share of income from associates and joint ventures
Share of income from associates and joint ventures
Loss on disposals of non-current assets
Loss on disposals of non-current assets
Other income
Other income
Other expense
Other expense
Impairments of non-current assets
Impairments of non-current assets
Impairments of financial assets
Impairments of financial assets
Dividend income
Dividend income
Interest income
Interest income
Interest expense
Interest expense
Loss before income taxes
Loss before income taxes
Income tax credit/(expense)
Income tax credit/(expense)
Loss for the year
Loss for the year
Attributable to:
Attributable to:
Non-controlling interests
Non-controlling interests
Equity holders of the Parent
Equity holders of the Parent
Loss per share:
Loss per share:
Basic (US$)
Basic (US$)
Diluted (US$)
Diluted (US$)
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
Notes
Notes
3
3
10
10
4
4
5
5
5
5
6
6
6
6
10
10
7
7
17
17
17
17
2020
2020
142,338
142,338
(138,640)
(138,640)
(1,681)
(1,681)
444
444
(36)
(36)
438
438
(611)
(611)
(5,715)
(5,715)
(232)
(232)
32
32
120
120
(1,573)
(1,573)
(5,116)
(5,116)
1,170
1,170
(3,946)
(3,946)
(2,043)
(2,043)
(1,903)
(1,903)
(0.14)
(0.14)
(0.14)
(0.14)
2019
2019
215,111
215,111
(210,434)
(210,434)
(1,391)
(1,391)
114
114
(43)
(43)
372
372
(545)
(545)
(2,322)
(2,322)
(86)
(86)
49
49
227
227
(1,940)
(1,940)
(888)
(888)
(618)
(618)
(1,506)
(1,506)
(1,102)
(1,102)
(404)
(404)
(0.03)
(0.03)
(0.03)
(0.03)
Glencore Annual Report 2020
Glencore Annual Report 2020
Glencore Annual Report 2020 131
1
1
Strategic reportGovernanceAdditional informationFinancial statements
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
US$ million
US$ million
Loss for the year
Loss for the year
Notes
Notes
2020
2020
(3,946)
(3,946)
2019
2019
(1,506)
(1,506)
Other comprehensive (loss)/income
Other comprehensive (loss)/income
Items not to be reclassified to the statement of income in subsequent periods:
Items not to be reclassified to the statement of income in subsequent periods:
Defined benefit plan remeasurements, net of tax of $3 million (2019: $19 million)
Defined benefit plan remeasurements, net of tax of $3 million (2019: $19 million)
(Loss)/gain on equity investments accounted for at fair value through other comprehensive
(Loss)/gain on equity investments accounted for at fair value through other comprehensive
income, net of tax of $1 million (2019: $11 million)
income, net of tax of $1 million (2019: $11 million)
Gain/(loss) due to changes in credit risk on financial liabilities accounted for at fair value
Gain/(loss) due to changes in credit risk on financial liabilities accounted for at fair value
through profit and loss
through profit and loss
Net items not to be reclassified to the statement of income in 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
Items that have been or may be reclassified to the statement of income
in subsequent periods:
in subsequent periods:
Exchange (loss)/gain on translation of foreign operations
Exchange (loss)/gain on translation of foreign operations
Losses on cash flow hedges, net of tax of $4 million (2019: $4 million)
Losses on cash flow hedges, net of tax of $4 million (2019: $4 million)
Cash flow hedges reclassifed to the statement of income
Cash flow hedges reclassifed to the statement of income
Share of other comprehensive loss from associates and joint ventures
Share of other comprehensive loss from associates and joint ventures
Net items that have been or may be reclassified to the statement of income
Net items that have been or may be reclassified to the statement of income
in subsequent periods
in subsequent periods
Other comprehensive (loss)/income
Other comprehensive (loss)/income
Total comprehensive loss
Total comprehensive loss
Attributable to:
Attributable to:
Non-controlling interests
Non-controlling interests
Equity holders of the Parent
Equity holders of the Parent
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
23
23
10
10
10
10
(17)
(17)
(630)
(630)
19
19
(628)
(628)
(189)
(189)
(42)
(42)
(12)
(12)
(14)
(14)
(257)
(257)
(885)
(885)
(4,831)
(4,831)
(2,067)
(2,067)
(2,764)
(2,764)
(80)
(80)
337
337
(1)
(1)
256
256
117
117
(51)
(51)
–
–
(37)
(37)
29
29
285
285
(1,221)
(1,221)
(1,103)
(1,103)
(118)
(118)
132 Glencore Annual Report 2020
Glencore Annual Report 2020
Glencore Annual Report 2020
2
2
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
AS AT 31 DECEMBER 2020
US$ million
US$ million
Assets
Assets
Non-current assets
Non-current assets
Property, plant and equipment
Property, plant and equipment
Intangible assets
Intangible assets
Investments in associates and joint ventures
Investments in associates and joint ventures
Other investments
Other investments
Advances and loans
Advances and loans
Other financial assets
Other financial assets
Inventories
Inventories
Deferred tax assets
Deferred tax assets
Current assets
Current assets
Inventories
Inventories
Accounts receivable
Accounts receivable
Other financial assets
Other financial assets
Income tax receivable
Income tax receivable
Prepaid expenses
Prepaid expenses
Cash and cash equivalents
Cash and cash equivalents
Assets held for sale
Assets held for sale
Total assets
Total assets
Equity and liabilities
Equity and liabilities
Capital and reserves – attributable to equity holders
Capital and reserves – attributable to equity holders
Share capital
Share capital
Reserves and retained earnings
Reserves and retained earnings
Non-controlling interests
Non-controlling interests
Total equity
Total equity
Non-current liabilities
Non-current liabilities
Borrowings
Borrowings
Deferred income
Deferred income
Deferred tax liabilities
Deferred tax liabilities
Other financial liabilities
Other financial liabilities
Provisions including post-retirement benefits
Provisions including post-retirement benefits
Current liabilities
Current liabilities
Borrowings
Borrowings
Accounts payable
Accounts payable
Deferred income
Deferred income
Provisions
Provisions
Other financial liabilities
Other financial liabilities
Income tax payable
Income tax payable
Liabilities held for sale
Liabilities held for sale
Notes
Notes
2020
2020
2019
2019
(Restated)1
(Restated)1
2018
2018
(Restated)1
(Restated)1
8
8
9
9
10
10
10
10
11
11
27
27
12
12
7
7
12
12
13
13
27
27
7
7
14
14
15
15
16
16
33
33
20
20
21
21
7
7
27
27
22
22
20
20
24
24
21
21
22
22
27
27
7
7
15
15
47,110
47,110
6,467
6,467
12,400
12,400
1,733
1,733
3,042
3,042
1,106
1,106
678
678
2,252
2,252
74,788
74,788
22,852
22,852
15,154
15,154
1,998
1,998
444
444
220
220
1,498
1,498
42,166
42,166
1,046
1,046
43,212
43,212
118,000
118,000
146
146
37,491
37,491
37,637
37,637
(3,235)
(3,235)
34,402
34,402
29,227
29,227
2,590
2,590
4,721
4,721
688
688
6,931
6,931
44,157
44,157
8,252
8,252
24,038
24,038
1,070
1,070
693
693
4,276
4,276
927
927
39,256
39,256
185
185
39,441
39,441
118,000
118,000
55,357
55,357
7,006
7,006
12,984
12,984
2,387
2,387
2,427
2,427
453
453
575
575
1,477
1,477
82,666
82,666
19,936
19,936
16,671
16,671
1,953
1,953
350
350
315
315
1,899
1,899
41,124
41,124
286
286
41,410
41,410
124,076
124,076
146
146
40,128
40,128
40,274
40,274
(1,038)
(1,038)
39,236
39,236
29,067
29,067
2,670
2,670
6,094
6,094
1,229
1,229
6,772
6,772
45,832
45,832
7,976
7,976
26,193
26,193
558
558
489
489
2,872
2,872
764
764
38,852
38,852
156
156
39,008
39,008
124,076
124,076
56,770
56,770
6,971
6,971
13,909
13,909
2,067
2,067
2,555
2,555
303
303
353
353
1,728
1,728
84,656
84,656
20,564
20,564
17,666
17,666
3,230
3,230
121
121
389
389
2,046
2,046
44,016
44,016
–
–
44,016
44,016
128,672
128,672
146
146
45,592
45,592
45,738
45,738
(355)
(355)
45,383
45,383
26,424
26,424
2,301
2,301
6,839
6,839
1,620
1,620
6,824
6,824
44,008
44,008
8,570
8,570
26,484
26,484
412
412
554
554
2,152
2,152
1,109
1,109
39,281
39,281
–
–
39,281
39,281
128,672
128,672
Total equity and liabilities
Total equity and liabilities
1 Certain balances have been represented to conform with current year presentation (see notes 7, 22 and 27).
1 Certain balances have been represented to conform with current year presentation (see notes 7, 22 and 27).
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
Glencore Annual Report 2020
Glencore Annual Report 2020
Glencore Annual Report 2020 133
3
3
Strategic reportGovernanceAdditional informationFinancial statements
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF CASH FLOWS
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
US$ million
US$ million
Operating activities
Operating activities
Loss before income taxes
Loss before income taxes
Adjustments for:
Adjustments for:
Depreciation and amortisation
Depreciation and amortisation
Share of income from associates and joint ventures
Share of income from associates and joint ventures
Streaming revenue and other non-current provisions
Streaming revenue and other non-current provisions
Loss on disposals of non-current assets
Loss on disposals of non-current assets
Unrealised mark-to-market movements on other investments
Unrealised mark-to-market movements on other investments
Impairments
Impairments
Other non-cash items – net1
Other non-cash items – net1
Interest expense – net
Interest expense – net
Cash generated by operating activities before working capital changes
Cash generated by operating activities before working capital changes
Working capital changes
Working capital changes
(Increase)/decrease in accounts receivable2
(Increase)/decrease in accounts receivable2
(Increase)/decrease in inventories
(Increase)/decrease in inventories
(Decrease)/increase in accounts payable3
(Decrease)/increase in accounts payable3
Total working capital changes
Total working capital changes
Income taxes paid
Income taxes paid
Interest received
Interest received
Interest paid
Interest paid
Net cash generated by operating activities
Net cash generated by operating activities
Investing activities
Investing activities
Net cash used in acquisition of subsidiaries
Net cash used in acquisition of subsidiaries
Net cash (used in)/received from disposal of subsidiaries
Net cash (used in)/received from disposal of subsidiaries
Purchase of investments
Purchase of investments
Proceeds from sale of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of property, plant and equipment
Dividends received from associates and joint ventures
Dividends received from associates and joint ventures
Net cash used by investing activities
Net cash used by investing activities
1
1
Notes
Notes
10
10
4
4
5
5
6
6
25
25
25
25
10
10
2020
2020
(5,116)
(5,116)
6,671
6,671
(444)
(444)
(205)
(205)
36
36
(59)
(59)
5,947
5,947
285
285
1,453
1,453
8,568
8,568
(385)
(385)
(3,189)
(3,189)
(436)
(436)
(4,010)
(4,010)
(820)
(820)
100
100
(1,174)
(1,174)
2,664
2,664
–
–
(222)
(222)
(122)
(122)
135
135
(3,569)
(3,569)
52
52
1,015
1,015
(2,711)
(2,711)
2019
2019
(888)
(888)
7,160
7,160
(114)
(114)
(296)
(296)
43
43
(47)
(47)
2,408
2,408
367
367
1,713
1,713
10,346
10,346
1,211
1,211
678
678
199
199
2,088
2,088
(2,301)
(2,301)
200
200
(1,604)
(1,604)
8,729
8,729
(123)
(123)
5
5
(125)
(125)
119
119
(4,712)
(4,712)
178
178
942
942
(3,716)
(3,716)
Includes certain non-cash items as disclosed in note 5, share based remuneration of $184 million (2019: $190 million) and inventory net realisable value adjustment of negative
Includes certain non-cash items as disclosed in note 5, share based remuneration of $184 million (2019: $190 million) and inventory net realisable value adjustment of negative
$37 million (2019: $184 million).
$37 million (2019: $184 million).
Includes movements in other financial assets, prepaid expenses and long-term advances and loans.
Includes movements in other financial assets, prepaid expenses and long-term advances and loans.
Includes movements in other financial liabilities, provisions and deferred income.
Includes movements in other financial liabilities, provisions and deferred income.
2
2
3
3
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
Glencore Annual Report 2020
Glencore Annual Report 2020
134 Glencore Annual Report 2020
4
4
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF CASH FLOWS
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
US$ million
US$ million
Financing activities1
Financing activities1
Proceeds from issuance of capital market notes2
Proceeds from issuance of capital market notes2
Repayment of capital market notes
Repayment of capital market notes
Repurchase of capital market notes
Repurchase of capital market notes
Repayment of revolving credit facility
Repayment of revolving credit facility
Proceeds from other non-current borrowings
Proceeds from other non-current borrowings
Repayment of other non-current borrowings
Repayment of other non-current borrowings
Repayment of lease liabilities
Repayment of lease liabilities
Margin receipts in respect of financing related hedging activities
Margin receipts in respect of financing related hedging activities
Proceeds from/(repayment of) current borrowings
Proceeds from/(repayment of) current borrowings
Proceeds from U.S. commercial papers
Proceeds from U.S. commercial papers
Acquisition of non-controlling interests in subsidiaries
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Return of capital/distributions to non-controlling interests
Purchase of own shares
Purchase of own shares
Disposal of own shares
Disposal of own shares
Distributions paid to equity holders of the Parent
Distributions paid to equity holders of the Parent
Net cash used by financing activities
Net cash used by financing activities
Decrease in cash and cash equivalents
Decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Effect of foreign exchange rate changes
Cash and cash equivalents, beginning of year
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash and cash equivalents, end of year
Cash and cash equivalents reported in the statement of financial position
Cash and cash equivalents reported in the statement of financial position
Cash and cash equivalents attributable to assets held for sale
Cash and cash equivalents attributable to assets held for sale
1 Refer to note 20 for reconciliation of movement in borrowings.
1 Refer to note 20 for reconciliation of movement in borrowings.
2 Net of issuance costs relating to capital market notes of $20 million (2019: $25 million).
2 Net of issuance costs relating to capital market notes of $20 million (2019: $25 million).
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
Notes
Notes
16
16
18
18
2020
2020
3,362
3,362
(4,017)
(4,017)
(72)
(72)
(870)
(870)
392
392
(44)
(44)
(560)
(560)
1,040
1,040
217
217
415
415
(56)
(56)
(127)
(127)
–
–
–
–
–
–
(320)
(320)
(367)
(367)
(36)
(36)
1,901
1,901
1,498
1,498
1,498
1,498
–
–
2019
2019
3,866
3,866
(3,167)
(3,167)
–
–
(29)
(29)
291
291
(325)
(325)
(358)
(358)
529
529
(682)
(682)
79
79
(24)
(24)
(305)
(305)
(2,318)
(2,318)
6
6
(2,710)
(2,710)
(5,147)
(5,147)
(134)
(134)
(11)
(11)
2,046
2,046
1,901
1,901
1,899
1,899
2
2
Glencore Annual Report 2020
Glencore Annual Report 2020
5
5
Glencore Annual Report 2020 135
Strategic reportGovernanceAdditional informationFinancial statements
CONSOLIDATED STATEMENT
CONSOLIDATED STATEMENT
OF CHANGES OF EQUITY
OF CHANGES OF EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
FOR THE YEAR ENDED 31 DECEMBER 2020
Retained
Retained
earnings
earnings
5,343
5,343
(404)
(404)
Share
Share
premium
premium
48,504
48,504
–
–
Other
Other
reserves
reserves
(Note 16)
(Note 16)
(4,937)
(4,937)
–
–
Own
Own
shares
shares
(Note 16)
(Note 16)
(3,318)
(3,318)
–
–
(118)
(118)
(522)
(522)
(115)
(115)
–
–
12
12
–
–
–
–
24
24
–
–
4,742
4,742
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,710)
(2,710)
45,794
45,794
404
404
404
404
–
–
–
–
–
–
(418)
(418)
–
–
(20)
(20)
–
–
(4,971)
(4,971)
Total
Total
reserves
reserves
and
and
retained
retained
earnings
earnings
45,592
45,592
(404)
(404)
286
286
(118)
(118)
84
84
(2,318)
(2,318)
–
–
–
–
199
199
(2,318)
(2,318)
Total equity
Total equity
attributable
attributable
to equity
to equity
holders
holders
45,738
45,738
(404)
(404)
Share
Share
capital
capital
146
146
–
–
Non-
Non-
controlling
controlling
interests
interests
(Note 33)
(Note 33)
(355)
(355)
(1,102)
(1,102)
286
286
(118)
(118)
84
84
(2,318)
(2,318)
(1)
(1)
(1,103)
(1,103)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
Total
equity
equity
45,383
45,383
(1,506)
(1,506)
285
285
(1,221)
(1,221)
84
84
(2,318)
(2,318)
–
–
12
12
–
–
–
–
–
–
–
–
(5,437)
(5,437)
(418)
(418)
–
–
4
4
(2,710)
(2,710)
40,128
40,128
12
12
–
–
12
12
–
–
–
–
–
–
–
–
146
146
(418)
(418)
–
–
4
4
(2,710)
(2,710)
40,274
40,274
358
358
371
371
(4)
(4)
(305)
(305)
(1,038)
(1,038)
(60)
(60)
371
371
–
–
(3,015)
(3,015)
39,236
39,236
4,742
4,742
(1,903)
(1,903)
(32)
(32)
(1,935)
(1,935)
(32)
(32)
45,794
45,794
–
–
–
–
–
–
–
–
(4,971)
(4,971)
–
–
(829)
(829)
(829)
(829)
–
–
(5,437)
(5,437)
–
–
–
–
–
–
133
133
40,128
40,128
(1,903)
(1,903)
(861)
(861)
(2,764)
(2,764)
101
101
57
57
–
–
–
–
–
–
57
57
–
–
17
17
–
–
2,849
2,849
–
–
–
–
–
–
45,794
45,794
(31)
(31)
(17)
(17)
–
–
(5,848)
(5,848)
–
–
–
–
–
–
(5,304)
(5,304)
(31)
(31)
–
–
–
–
37,491
37,491
146
146
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
146
146
40,274
40,274
(1,903)
(1,903)
(861)
(861)
(2,764)
(2,764)
101
101
(1,038)
(1,038)
(2,043)
(2,043)
(24)
(24)
(2,067)
(2,067)
–
–
39,236
39,236
(3,946)
(3,946)
(885)
(885)
(4,831)
(4,831)
101
101
57
57
–
–
57
57
(31)
(31)
–
–
–
–
37,637
37,637
(3)
(3)
–
–
(127)
(127)
(3,235)
(3,235)
(34)
(34)
–
–
(127)
(127)
34,402
34,402
1 January 2019
1 January 2019
Loss for the year
Loss for the year
Other comprehensive
Other comprehensive
(loss)/income
(loss)/income
Total comprehensive loss
Total comprehensive loss
Own share disposal1
Own share disposal1
Own share purchases1
Own share purchases1
Equity-settled share-based
Equity-settled share-based
expenses2
expenses2
Change in ownership interest
Change in ownership interest
in subsidiaries3
in subsidiaries3
Acquisition/disposal of business4
Acquisition/disposal of business4
Reclassifications
Reclassifications
Distributions paid5
Distributions paid5
31 December 2019
31 December 2019
1 January 2020
1 January 2020
Loss for the year
Loss for the year
Other comprehensive loss
Other comprehensive loss
Total comprehensive loss
Total comprehensive loss
Own share disposal1
Own share disposal1
Equity-settled share-based
Equity-settled share-based
expenses2
expenses2
Change in ownership interest
Change in ownership interest
in subsidiaries3
in subsidiaries3
Reclassifications
Reclassifications
Distributions paid5
Distributions paid5
31 December 2020
31 December 2020
1 See note 16.
1 See note 16.
2 See note 19.
2 See note 19.
3 See note 33.
3 See note 33.
4 See note 25.
4 See note 25.
5 See note 18.
5 See note 18.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
136 Glencore Annual Report 2020
Glencore Annual Report 2020
Glencore Annual Report 2020
6
6
NOTES TO THE
NOTES TO THE
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
1. Accounting policies
1. Accounting policies
CORPORATE INFORMATION
CORPORATE INFORMATION
Glencore plc (the “Company”, “Parent”, the “Group” or “Glencore”), is a leading integrated producer and marketer of natural
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
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
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,
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
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
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
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
which it markets and cultivate long-term relationships with a broad supplier and customer base across diverse industries and in
multiple geographic regions.
multiple geographic regions.
Glencore is a publicly traded limited company incorporated in Jersey and domiciled in Switzerland. Its ordinary shares are traded
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.
on the London and Johannesburg stock exchanges.
These consolidated financial statements were authorised for issue in accordance with the Directors’ resolution on 10 March 2021.
These consolidated financial statements were authorised for issue in accordance with the Directors’ resolution on 10 March 2021.
STATEMENT OF COMPLIANCE
STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with:
The consolidated financial statements have been prepared in accordance with:
• International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
• International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, and
European Union, and
• IFRS as issued by the International Accounting Standards Board (IASB).
• IFRS as issued by the International Accounting Standards Board (IASB).
CLIMATE CHANGE RELATED CONSIDERATIONS
CLIMATE CHANGE RELATED CONSIDERATIONS
The Group’s ambition on climate change is to achieve net zero total emissions by 2050. The accounting related measurement and
The Group’s ambition on climate change is to achieve net zero total emissions by 2050. The accounting related measurement and
disclosure areas most impacted by this position relate to the carrying value of our coal industrial assets where the underlying
disclosure areas most impacted by this position relate to the carrying value of our coal industrial assets where the underlying
accounting determination is subject to estimation uncertainties in the medium to long term such as: impairments and impairment
accounting determination is subject to estimation uncertainties in the medium to long term such as: impairments and impairment
reversals and useful economic lives of assets. The policies and where applicable, key estimates and sensitivities pertaining to
reversals and useful economic lives of assets. The policies and where applicable, key estimates and sensitivities pertaining to
reasonably possible changes in estimates, most impacted by climate change are covered below.
reasonably possible changes in estimates, most impacted by climate change are covered below.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions
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
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
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
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,
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
industry standard modelling techniques. Actual outcomes could result in a material adjustment to the carrying amount of assets
or liabilities affected in future periods.
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
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:
to make complex and/or subjective judgements, estimates and assumptions about matters that are inherently uncertain:
CRITICAL ACCOUNTING JUDGEMENTS
CRITICAL ACCOUNTING JUDGEMENTS
In the process of applying Glencore’s accounting policies, management has made the following judgements based on the relevant
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,
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.
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)
(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
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
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
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
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
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 2020 and 2019 and the key judgements made in determining control thereof.
of subsidiaries completed during 2020 and 2019 and the key judgements made in determining control thereof.
Glencore Annual Report 2020
Glencore Annual Report 2020
7
7
Glencore Annual Report 2020 137
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
Judgement is also required in determining the classification of a joint arrangement between a joint venture or a joint operation
through an evaluation of the rights and obligations arising from the arrangement and in particular, if the joint arrangement has
been structured through a separate vehicle, further consideration is required of whether:
(1) the legal form of the separate vehicle gives the parties rights to the assets and obligations for the liabilities;
(2) the contractual terms and conditions give the parties rights to the assets and obligations for the liabilities; and
(3) other facts and circumstances give the parties rights to the assets and obligations for the liabilities.
Joint arrangements in which the primary activity is the provision of output to the shareholders, typically convey substantially all the
economic benefits of the assets to the parties and judgement is required in assessing whether the terms of the offtake agreements
and any other obligations for liabilities of the arrangement result in the parties being substantially the only source of cash flows
contributing to the continuity of the operations of the arrangement.
Certain joint arrangements that are structured through separate vehicles including Collahuasi and Viterra (formerly 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 any 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 120 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 2020, trade payables include $7,178 million (2019:
$5,687 million) of such liabilities arising from supplier financing arrangements, the weighted average of which have extended the
settlement of the original payable to 91 days (2019: 86 days) after physical supply and are due for settlement 46 days (2019: 38 days)
after year end. There was no significant exposure to any individual financial institution under these arrangements. These payables
are not included within net funding and net debt as defined in the APMs section.
(iii) Critical judgement related to investigations by regulatory and enforcement authorities (note 31)
Glencore Annual Report 2020
138 Glencore Annual Report 2020
8
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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 and uncertain tax positions (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, notably the deferred tax
asset and uncertain tax position of the Group’s DRC operations as outlined in note 7. The recoverability of the Group’s deferred tax
assets and the completeness and accuracy of its uncertain tax positions, 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, 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 or 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 recoverable amount are discounted using asset or CGU
specific discount rates and are based on expectations about future operations, using a combination of internal sources and those
inputs available to a market participant, which primarily comprise 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 amounts 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 reversals’ 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 price environment most influencing the respective operation. Accordingly, the
Group assessed the recoverable amounts of these CGUs and as at 31 December 2020, except for those CGUs disclosed in notes 6
and 10, the estimated recoverable amounts exceeded the carrying values. However, for certain CGUs where no impairment was
recognised, should there be a significant deterioration in the key assumptions, 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
movements in these assumptions for each such CGU with limited headroom (relative to its estimated recoverable amount) is below.
In providing sensitivity analysis (and particularly on commodity price assumptions), a 10% change, representing a typical deviation
parameter common in the industry, has in some cases been provided. Where a higher or lower percentage is reasonably possible
on an operational assumption, this has been clearly identified.
Glencore Annual Report 2020
9
Glencore Annual Report 2020 139
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
Sensitivity to demand for fossil fuels
The impairment assessment assumes that through the remaining life of mine, there will continue to be a ready market for thermal
coal at a Newcastle FOB export price of $80/tonne (6,000 NAR), South African FOB export price of $80/tonne and Colombian CIF
price (destination: Rotterdam) of $65/tonne. The International Energy Agency (IEA) provides a comprehensive view of how the global
energy system could develop in the coming decades through a number of scenarios. Our base case production decline profile is
consistent with the demand decline profile of the IEA’s Paris-aligned scenarios. Should coal be displaced as a fuel for power
generation more rapidly than currently expected, the resulting supply overhang could result in lower commodity prices. We have
illustrated this by showing the various impairment scenarios versus current carrying values at possible commodity price curves
consistent with the IEA’s scenarios:
• Stated Policies scenario (STEPS) – the impact of existing policy frameworks and today’s announced policy intentions (consistent
with our “Current Pathway” scenario)
• Sustainable Development scenario (SDS) – the impact should additional policy mechanisms be implemented sufficient for full
alignment with the Paris Goals (consistent with our “Rapid Transition” scenario)
The sensitivity prices set out below are those included in the documentation to the IEA’s World Energy Model 2020, except that IEA
thermal coal prices are on a delivered basis. These have been adjusted to FOB pricing on the basis of forward freight costs.
The base case price used in the impairment assessment is higher than that in STEPS due to our assumption that such higher price
will be required to induce the required investment to maintain supply levels under this scenario. Notwithstanding this assumption,
we also consider prices in STEPS to be a reasonably possible change in our assumptions within the next financial year. Europe’s
demand for thermal coal has reduced significantly in recent years, and this is currently the key market for Colombian coal.
Accordingly we consider the SDS prices for Colombian coal to be a reasonably possible change in our assumptions within the next
financial year and have sensitised Cerrejon against these. The SDS price sensitivities for Australia and South Africa are provided for
additional information.
The sensitivities are presented on price alone and assume no mitigating actions, therefore the impairments in each scenario are
likely higher than would transpire. In practice, in a sustained lower price environment, management would alter mine plans to cut
operating and capital costs, potentially at the expense of future volumes, in order to reduce the overall NPV impact.
The IEA has also published a net zero emissions by 2050 scenario (consistent with our “Radical Transformation” scenario), but has
not published price assumptions for this scenario. Our assumption is that demand (and therefore price) would be similar to SDS, but
with large-scale uptake of carbon capture, utilisation and storage to mitigate the effects of such. In itself, this reflects that in all
credible energy transformation scenarios, thermal coal will continue to be required as a transition fuel for several decades.
Coking coal prices have not been sensitised, reflecting limited alternatives in relevant industrial applications. We have not sensitised
the NPV of our oil producing assets, reflecting the relatively low capital allocated to such.
Our life of mine planning reflects operating cash flows from Cerrejon until 2032, South African coal mines until 2043 and Australian
coal mines until at least 2050. Production is weighted towards the earlier part of the mines’ lives. We have illustrated this by showing
the year in which 50% of saleable coal would be extracted under the current plan, well within the next decade.
US$ million
Base case assumptions in life of mine plan:
– LOM saleable tonnes (Glencore consolidated) (million tonnes)
– projected year when 50% LOM tonnage depleted
– long-term price (Newcastle FOB / API4 FOB / API2 CIF) ($/t)
(real terms)
– discount rate applied (ranges represent opencut / underground)
Short- to long-term prices applied in selected scenarios:
– STEPS
– SDS
Thermal Australia
Thermal South
Africa
Cerrejon
Total thermal
coal
Cash-generating unit
1,300
2028
380
2028
80
6.1%-6.7%
80
7.9%-8.5%
85
2026
65
7.9%
77-74
67-58
72-79
62-63
63-73
54-59
Carrying value of non-current capital employed as 31 December 2020
8,565
2,804
595
11,964
Illustrative impairment arising:
– STEPS
– SDS
1,900
5,800
590
1,700
–
230
2,490
7,730
Glencore Annual Report 2020
140 Glencore Annual Report 2020
10
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
Sensitivity to project execution and ramp-up
Mutanda
The operations have been on care and maintenance since 2019 and have an accumulated impairment of $955 million. 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 short to long-term copper and cobalt price assumptions were $6,500-
$6,250/mt and $16.00 – $25.00/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 of $357 million or $402 million, respectively, would be recognised. Bringing
the operations back online more rapidly than the profile modelled may result in some or all of the accumulated impairment
being reversed.
Koniambo
The impairment assessment on the Koniambo CGU was prepared on the assumption that Koniambo would reach steady-state
capacity of circa 55ktpy contained nickel by 2028, and continue to produce at this rate until 2060. The assessment is sensitive to
the ramp-up profile to steady-state production, and the assumed modification of Mineral Resources to Ore Reserves, and their
eventual exploitation.
We have illustrated this by showing the effects of:
• limiting Koniambo’s production ramp-up to around 85% of the base case level up to 2038;
• limiting Koniambo’s production to currently defined Ore Reserves (17 years); and
• a 10% change in the long-term nickel price.
Modification of Mineral Resources in place to Ore Reserves available for economic extraction depends on a number of modifying
factors, including mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and
governmental factors. In a long-dated project, a lack of certainty about some of these factors over the timescales involved may
mean that it is not currently appropriate to show the existing Mineral Resource converted to Ore Reserves. This does not mean that
such Mineral Resource is without value.
US$ million
Base case assumptions in the life of mine plan:
– LOM saleable tonnes (thousand tonnes)
– projected annual production by 2028 (approximate)
– long-term nickel price ($/t) (real terms)
– discount rate applied
Alternative LOM assumptions:
– projected annual production by 2028 (approximate)
– currently defined ore reserves (thousand tonnes)
– change in nickel price
Carrying value of non-current capital employed as 31 December 2020
Illustrative impairment arising:
– slower production ramp-up
– limitation to currently defined ore reserves
– 10% change in nickel price
Koniambo
2,000
55Ktpa
15,322
9.3%
45Ktpa
870
10%
1,484
150
540
720
Koniambo has previously been impaired. A favourable change in the long-term nickel price, or the quantum and/or timing of
Koniambo’s ramp-up could result in a reversal of impairment.
(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.
Glencore Annual Report 2020
11
Glencore Annual Report 2020 141
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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. A material change in the provision within the next 12
months could arise from changes in risk-free rates. The aggregate effect of changes within 12 months as a result of revisions to cost
and timing assumptions is not expected to be material.
(iv) Fair value measurements (notes 11, 13, 25, 27 and 28)
In addition to recognising derivative instruments at fair value, as discussed below and for the purpose of measuring impairments as
described above, 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.
Financial 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.
(v) Retirement benefits (note 23)
The present value and costs of providing pensions and other post-employement benefits are determined on the basis of a number
of assumptions which include future earnings and pension increases, discount rates, long-term expected rates of return on plan
assets, inflation rate and mortality assumptions. Any changes in these assumptions will impact the carrying amount of the pension
and other post-employement benefits and may have a material impact on future results. Key assumptions and sensitivities are
disclosed within note 23.
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 2020, the
material changes being:
(i) Amendments to IFRS 3 – Definition of business
The amendments 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 acquisition within the scope of IFRS 3.
(ii) Amendments to IAS 1 and IAS 8 – Definition of material
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.
These amendments did not have a material impact on the Group.
Glencore Annual Report 2020
142 Glencore Annual Report 2020
12
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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) Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) – effective
for year ends beginning on or after 1 January 2021
The amendments introduce a practical expedient for modifications required by the reform, provide an exception that hedge
accounting is not discontinued solely because of the IBOR reform, and introduces disclosures that allow users to understand the
nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks
as well as the entity’s progress in transitioning from IBOR’s to alternative benchmark rates, and how the entity is managing this
transition. The Group intends to adopt these amendments in future to ensure continuity of existing hedge relationships.
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 expected date of approval of the
2020 Annual Report and Accounts. Therefore, they continue to adopt the going concern basis of accounting in preparing these
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 access to undrawn credit facilitites and monitoring of debt maturitites. 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, the presentation currency of the Group, unless otherwise stated.
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.
Glencore Annual Report 2020
13
Glencore Annual Report 2020 143
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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.
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.
Glencore Annual Report 2020
144 Glencore Annual Report 2020
14
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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.
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, liabilities and those 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, liabilities and those included in disposal groups 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 (sale of commodities) 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 2020, the outstanding repurchase commitments under such agreements were
approximately $0.3 billion (2019: $1.4 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.
Glencore Annual Report 2020
15
Glencore Annual Report 2020 145
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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.
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 (primarily gold and silver) 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
accruals 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.
For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at the end of each annual reporting period. Remeasurements comprising actuarial gains and
losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognised immediately in
the statement of financial position with a charge or credit to other comprehensive income in the period in which they occur.
Remeasurements recognised in other comprehensive income are not reclassified. Past service cost is recognised in profit or loss
when the plan amendment or curtailment occurs, or when the Group recognises related restructuring costs or termination benefits,
if earlier. Gains or losses on settlement of a defined benefit plan are recognised when the settlement occurs. Net interest is
calculated by applying a discount rate to the net defined benefit liability or asset. Defined benefit costs are split into three categories:
• service costs, which includes current service cost, past service cost and gains and losses on curtailments and settlements;
• net interest expense or income; and
• remeasurements.
The Group recognises service costs within the consolidated statement of income.
Glencore Annual Report 2020
146 Glencore Annual Report 2020
16
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
Net interest expense or income is recognised within interest expense or income within the consolidated statement of income.
Any past service cost (or the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated
assumptions and comparing benefits offered and plan assets before and after the plan amendment (or curtailment or settlement)
but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a suplus position). The Group uses the
updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the
reporting period after the change to the plan. In the case of the net interest for the period post-plan amendment, the net interest is
calculated by multiplying the net defined benefit liability (asset) as remeasured with the discount rate used in the remeasurement
(also taking into account the effect of contributions and benefit payments on the net defined benefit liability (asset)).
The retirement benefit obligation recognised in the consolidated statement of financial position represents the deficit or surplus in
the Group’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 Annual Report 2020
17
Glencore Annual Report 2020 147
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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.
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.
Glencore Annual Report 2020
148 Glencore Annual Report 2020
18
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
Deferred mining costs
Mainly comprises certain capitalised costs related to underground mining as well as pre-production and in-production stripping
activities as outlined below. Deferred mining costs are amortised using the UOP basis over the life of the ore body to which those
costs relate.
DEFERRED STRIPPING COSTS
Stripping costs incurred in the development of a mine (or pit) before production commences are capitalised as part of the cost
of constructing the mine (or pit) and subsequently amortised over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an identifiable component of the ore body to realise benefits in the form of
improved access to ore to be mined in the future (stripping activity asset), are capitalised within deferred mining costs provided
all the following conditions are met:
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
(b) the component of the ore body for which access has been improved can be identified; and
(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of income as they
are incurred.
The stripping activity asset is subsequently depreciated on a UOP basis over the life of the identified component of the ore body
that became more accessible as a result of the stripping activity and is then stated at cost less accumulated depreciation and any
accumulated impairment losses.
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.
Glencore Annual Report 2020
19
Glencore Annual Report 2020 149
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
RESTORATION, REHABILITATION AND DECOMMISSIONING
Restoration, rehabilitation and decommissioning costs arising from the installation of plant and other site preparation work,
discounted using a risk-free rate specific to the liability and the currency in which they are denominated to their net present value,
are provided for and capitalised at the time such an obligation arises. The costs are charged to the consolidated statement of
income over the life of the operation through depreciation of the asset and the unwinding of the discount on the provision.
Costs for restoration of subsequent site disturbance, which is created on an ongoing basis during production, are provided for at
their net present values and charged to the consolidated statement of income as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes to the estimated future costs are accounted for prospectively by
recognising an adjustment to the rehabilitation liability and a corresponding adjustment to the asset to which it relates, provided
a reduction, if any, in the provision is not greater than the depreciated capitalised cost of the related asset, in which case the
capitalised cost is reduced to Nil and the remaining adjustment recognised in the consolidated statement of income. In the case
of closed sites, changes to estimated costs are recognised immediately in the consolidated statement of income.
INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation (calculated on a straight-line basis over their useful lives) and accumulated impairment losses, if any.
Internally generated intangibles are not capitalised. Instead, the related expenditure is recognised in the consolidated statement
of income 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 amortised, 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
15 years
3 – 20 years
5 – 9 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. Investments that are
held for trading are subsequently measured at fair value through profit or loss.
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.
Glencore Annual Report 2020
150 Glencore Annual Report 2020
20
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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, with costs allocated using the first-in-first-out (FIFO)
method. 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 FIFO or the weighted average method and comprises material costs, labour costs and allocated production
related overhead costs. Typically raw materials and consumables are measured using the FIFO method and work in progress
inventories using the weighted average method. 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-current inventories primarily relate to stockpiles which are not expected to be utlised within the normal operating cycle.
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 subsequently measured at fair value through profit or loss, directly attributable
transaction costs. Trade receivables with no provisional price features and where there is no significant financing component, are
initially recognised at their transaction price. 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.
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 (accounted for as embedded derivatives) and derivatives are carried at FVTPL.
Glencore Annual Report 2020
21
Glencore Annual Report 2020 151
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for all financial assets (as well as for issued loan commitments and financial
guarantee contracts), other than those at FVTPL and investments in equity instruments measured at FVTOCI, 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.
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.
Glencore Annual Report 2020
152 Glencore Annual Report 2020
22
NOTES TO THE FINANCIAL STATEMENTS
continued
1. Accounting policies continued
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 in the consolidated statement of
comprehensive income and accumulated in the 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, if it is not closely related to 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 Annual Report 2020
23
Glencore Annual Report 2020 153
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
2. 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). The marketing related operating segments have been aggregated under the Marketing reportable
segment as their economic characteristics (historic and expected long-term Adjusted EBITDA margins and the nature of the
marketing services provided) are similar. The industrial related operating segments have been aggregated under the Industrial
reportable segment as the core activities (extracting raw material and / or processing it further into saleable product, as required,
and then selling it at prevailing market prices), the exposure to long-term economic risks (price movements, technology, sovereign
and production substitution) and the longer-term average Adjusted EBITDA margins are similar. The economic and operational
characteristics of our coal operating and commercial units are not expected to change in the foreseeable future and continue to be
included within the industrial assets and marketing reporting segments respectively.
Corporate and other: consolidated statement of income amount represents Group related income and expenses (including share
of Viterra (formerly 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 IAS 28 and 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 Annual Report 2020
154 Glencore Annual Report 2020
24
NOTES TO THE FINANCIAL STATEMENTS
continued
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
54,847
69,290
–
124,137
–
124,137
1,768
(101)
–
1,667
2,053
(292)
–
1,761
(89)
–
(89)
3,732
(393)
–
3,339
30,303
11,145
5
41,453
(2,449)
39,004
7,285
(3,868)
(363)
3,054
1,039
(2,294)
(110)
(1,365)
(496)
(116)
(612)
7,828
(6,278)
(473)
1,077
(18,859)
(1,944)
–
(20,803)
–
(20,803)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
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 significant items – Volcan
Movement in unrealised inter-segment profit elimination adjustments4
Loss on disposals of non-current assets
Other income/(expense) – net
Impairments
Interest expense – net
Income tax credit
Proportionate adjustment – net finance, impairment and income tax
expense1
Loss for the year
Total
66,291
78,491
5
144,787
(2,449)
142,338
9,053
(3,969)
(363)
4,721
3,092
(2,586)
(110)
396
(585)
(116)
(701)
11,560
(6,671)
(473)
4,416
(92)
–
(760)
(36)
(173)
(5,947)
(1,453)
1,170
(1,071)
(3,946)
1 Refer to APMs section for definition.
2 Marketing activities include $211 million of Glencore’s equity accounted share of Viterra.
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 Trevali
($36 million) and HG Storage ($20 million).
4 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Glencore Annual Report 2020
25
Glencore Annual Report 2020 155
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
2. Segment information continued
2019
US$ 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 significant items – Volcan
Movement in unrealised inter-segment profit elimination adjustments4
Loss on disposals of non-current assets
Other income/(expense) – net
Impairments
Interest expense – net
Income tax expense
Proportionate adjustment – net finance, impairment and income tax
expense1
Loss for the year
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)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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)
1 Refer to APMs section for definition.
2 Marketing activities include $58 million of Glencore’s equity accounted share of Viterra.
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 Viterra
($73 million), Trevali ($65 million) and Oil vessels’ entities ($62 million).
4 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Glencore Annual Report 2020
156 Glencore Annual Report 2020
26
NOTES TO THE FINANCIAL STATEMENTS
continued
2. Segment information continued
2020
US$ 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 expenditure3
Capital expenditure – reported measure4
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 – segmental
Proportionate adjustment – capital expenditure3
Capital expenditure – reported measure4
Marketing
activities
27,273
(23,906)
3,367
978
5,188
5,708
1,733
–
13,607
Industrial
activities
13,395
(7,098)
6,297
46,132
1,279
8,425
1,309
678
57,823
16,974
64,120
68
420
–
488
–
488
Marketing
activities
26,770
(23,919)
2,851
921
5,293
6,202
1,511
–
13,927
3,023
1,031
28
4,082
(426)
3,656
Industrial
activities
12,455
(6,957)
5,498
54,436
1,713
9,169
916
575
66,809
16,778
72,307
94
344
–
438
–
438
3,963
1,312
74
5,349
(419)
4,930
Corporate
and other
–
–
–
–
–
–
–
–
–
5,902
(52,594)
(46,692)
–
–
–
–
–
–
Corporate
and other
–
–
–
–
–
–
–
–
–
4,115
(53,964)
(49,849)
–
–
–
–
–
–
Total
40,668
(31,004)
9,664
47,110
6,467
14,133
3,042
678
71,430
5,902
(52,594)
34,402
3,091
1,451
28
4,570
(426)
4,144
Total5
39,225
(30,876)
8,349
55,357
7,006
15,371
2,427
575
80,736
4,115
(53,964)
39,236
4,057
1,656
74
5,787
(419)
5,368
1 Other assets include non-current financial assets, deferred tax assets, cash and cash equivalents and assets held for sale.
2 Other liabilities include borrowings, non-current deferred income, deferred tax liabilities, non-current provisions, non-current financial liabilities and liabilities held for sale.
3 Refer to APMs section for definition.
4
Includes $575 million (2019: $656 million), comprising $415 million (2019: $361 million) in Marketing activities and $160 million (2019: $295 million) in Industrial activities, of ‘right-of-use
assets’ capitalised in accordance with IFRS 16 – Leases.
5 Certain balances have been represented to conform with current year presentation (see note 27).
Glencore Annual Report 2020
27
Glencore Annual Report 2020 157
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
2. Segment information continued
GEOGRAPHICAL INFORMATION
US$ million
Revenue from third parties1
The Americas
Europe
Asia
Africa
Oceania
Non-current assets2
The Americas
Europe
Asia
Africa
Oceania
2020
2019
25,762
42,682
60,360
6,701
6,833
142,338
17,347
11,051
4,802
13,798
19,657
66,655
38,114
75,749
82,988
8,214
10,046
215,111
21,702
11,048
4,669
17,548
20,955
75,922
1 Revenue by geographical destination is based on the country of incorporation of the sales counterparty, however this may not necessarily be the country of the counterparty’s
ultimate parent and/or final destination of product.
2 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 $18,047 million (2019: $19,277 million), in Peru of $7,271 million (2019: $9,923 million) and the DRC of $6,849 (2019: $6,911 million).
3. Revenue
US$ million
Sale of commodities
Freight, storage and other services
Total
2020
139,486
2,852
142,338
2019
212,244
2,867
215,111
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 $1,217 million (2019: $221 million) of mark-to-market related adjustments on
provisionally priced sales arrangements. Revenue derived from freight, storage and other services is recognised over time as the
service is rendered. Revenue is measured based on consideration specified in the contract with the customer and is presented net
of amounts prepaid as incentives and/or rebates paid to customers, and excludes amounts collected on behalf of third parties. This is
consistent with the revenue information disclosed for each reportable segment (see note 2).
4. Loss on disposals of non-current assets
US$ million
Revaluation of previously held interest in newly acquired business (Polymet)
Gain on sale of Terminales Portuarios Chancay S.A.
Net gain/(loss) on sale of other investments/operations
Loss on disposal of property, plant and equipment
Total
Notes
25
25
2020
–
–
9
(45)
(36)
2019
(38)
26
(8)
(23)
(43)
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 $11 million, subsequently accounting for
its remaining share of 40% using the equity method (see notes 10 and 25).
Glencore Annual Report 2020
158 Glencore Annual Report 2020
28
NOTES TO THE FINANCIAL STATEMENTS
continued
5. Other income/(expense) – net
US$ million
Net changes in mark-to-market valuations on investments
Disposal of Rosneft stake related income
Total other income
Net foreign exchange losses
Legal related costs
Closed site rehabilitation costs
Closure and severance costs
Acquisition related costs
Other expenses – net
Total other expenses
Total other income/(expense) – net
Notes
25
2020
438
–
438
(192)
(113)
(80)
(214)
–
(12)
(611)
(173)
2019
47
325
372
(70)
(159)
(81)
(173)
(6)
(56)
(545)
(173)
Together with foreign exchange movements and mark-to-market movements on investments, other net 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), the ARM Coal non-discretionary dividend obligation
(see note 28) and deferred consideration related to Mototolo stake sale in 2018 (see notes 11 and 13), all carried at fair value.
LEGAL RELATED COSTS
Includes various investigations (legal, expert and compliance) related costs of $95 million (2019: $117 million)(see note 31).
In November 2020, claims brought against the Group by the Strategic Fuel Fund Association of South Africa (SFF) asserting that
certain historical purchases of oil from SFF were invalid were settled, with related costs and charges recognised amounting to
$18 million (2019: $42 million).
CLOSED SITE REHABILITATION COSTS
Comprises movements in restoration, rehabilitation and decommissioning estimates related to sites that are no longer operational
(see note 22).
CLOSURE AND SEVERANCE RELATED COSTS
In 2020, closure and severance related costs were primarily incurred in respect of the suspension of operations at Prodeco coal
in Colombia ($147 million), the Aguilar zinc mine in Argentina ($43 million) and the Lydenburg chrome smelter in South Africa
($24 million).
In 2019, closure and severance related costs were incurred at the following operations: Mutanda ($83 million), Katanga ($57 million)
and Brunswick lead smelter ($33 million).
DISPOSAL OF ROSNEFT STAKE RELATED INCOME
In September 2019, a gain of $325 million was recognised in respect of the settlement of a 50:50 consortium with Qatar Investment
Auhority that was established to acquire a stake in OSJC Rosneft Oil, representing the reversal of a provision of the same amount
recorded in 2018.
Glencore Annual Report 2020
29
Glencore Annual Report 2020 159
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
6. Impairments
US$ million
Property, plant and equipment and intangible assets
Investments
Advances and loans
VAT receivables
Inventory and other
Total impairments1
Notes
8/9
10
11/13
2020
(5,508)
(96)
(343)
–
–
(5,947)
2019
(1,954)
(137)
(86)
(162)
(69)
(2,408)
1
Impairments recognised during the year are allocated to Glencore’s operating segments as follows: Marketing activities $228 million (2019: $201 million) and Industrial activities
$5,719 million (2019: $2,207 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), or in certain cases value in use (VIU). In particular, market pressures regarding potential future investment in
Coal mining operations have reduced the availability of an active market for acquiring such operations, and thus the recoverable
amounts of our Coal CGUs have been measured using a VIU approach. The FVLCD or VIU of all CGUs are determined by discounted
cash flow techniques based on the most recent approved financial budgets, underpinned and supported by the life of asset plans of
the respective operations. The valuation models use a combination of internal sources and those inputs available to a market
participant, which comprise the most recent reserve and resource estimates, relevant cost assumptions generally and where
possible, market forecasts of commodity price and foreign exchange rate assumptions, discounted using operation specific post-tax
real discount rates (unless otherwise indicated) ranging from 6.1% – 13.5% (2019: 6.6% – 13.5%). The valuations generally remain most
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. In providing sensitivity analysis (and particularly on
commodity price assumptions), a 10% change, representing a typical deviation parameter common in the industry, has been
provided. Where a higher percentage is reasonably possible on an operational assumption, that has been clearly identified.
As a result of the regular impairment assessment, the following significant impairment charges were recognised:
2020
Property, plant and equipment and intangible assets
• Volcan is a listed zinc / silver mining entity in Peru, in which the Group acquired a 63% controlling (23% economic) interest at the
end of 2017 (Industrial activities segment). The operations primarily comprise two cash-generating units (Yauli and Chungar) and
at the time of the acquisition, approximately one third of the value was ascribed to realising the future potential of various
projects / resources. Due to the impact Covid-19 has had on the long-term outlook of the global economy, a comprehensive
review of the life of mine plan and related expansion projects was carried out in Q2 2020 where it was determined that the related
risk / confidence levels in deploying capital to longer-term greenfield projects and the probability of approving development and
realisation of these projects had reduced. This, along with the shift in long-term zinc pricing, lead to an impairment of
$2,347 million (related deferred tax obligations of $716 million were released) to its estimated recoverable amount of $1,503 million.
The valuation assumes long-term zinc and silver prices of $2,400/t and $20.00/lb, respectively and an operation specific discount
rate of 9.2%. Should the zinc and silver price assumptions fall by 10% (across the curve), a further impairment of $450 million would
be recognised. A 10% reduction in estimated annual production over the life of mine could result in an additional impairment of
$540 million.
• As a result of persistent operational challenges, further technical analysis resulting in a reduced life of mine forecast, delays in key
development projects and cost increases owing to inflation, tax and other regulatory pressures, a decision was made, in Q2 2020,
to place the Mopani copper operations in Zambia (Industrial activities segment) on extended care and maintenance subject to
government approval. In January 2021, an agreement was reached to sell Mopani to ZCCM (see note 15). At year end, the carrying
value was determined with reference to the estimated fair value of the consideration receivable from the sale transaction noted
above. The Mopani operations were therefore impaired by $1,041 million, to $861 million, reflecting the estimated fair value of the
agreed sales terms. The valuation remains sensitive to price and production volumes and a deterioration in these assumptions
could result in additional impairments. The operation specific discount rate used in the valuation was 10.5%. The short to long-
term copper price assumptions were $7,900/mt – 6,300/mt. Should the copper price assumptions fall by 10% (across the curve),
considering historical production performance, production volumes decline by 20%, a further $150 million and $235 million,
respectively, of impairment would be recognised.
• During H1 2020, pressure on the API2 European coal market (primary price reference market for our Colombian coal operations)
increased as European economies continue to progress their decarbonisation trajectory, exacerbated by the significant drop in
oil and gas prices (supply and demand factors). A review of Prodeco’s operations determined that, in addition to a deteriorating
market environment, there were increasing challenges with respect to obtaining several key approvals from government
agencies and other key stakeholders. In Q2 2020, an application was therefore made to place Prodeco on extended care and
maintenance until these conditions improve. In Q4, the application was rejected and it was subsequently decided to relinquish
the mining licenses.
Glencore Annual Report 2020
160 Glencore Annual Report 2020
30
NOTES TO THE FINANCIAL STATEMENTS
continued
6. Impairments continued
Consequently, the full carrying value of the mining operations related to such licenses ($835 million) (Industrial activities segment)
were fully impaired (property, plant and equipment – $789 million and non-current advances and loans – $46 million).
• As noted above, oil prices were significantly impacted by demand destruction from Covid-19, the lack of timely effective supply
response from OPEC+ and the longer term outlook for oil prices also deteriorated due to updated expectations surrounding
decarbonisation. In addition, Covid-19 disrupted and restricted international mobility, which had a particularly significant impact
on our workforce arrangements in Chad, resulting in these fields being placed on care and maintenance in March. As a result,
in Q2 2020, the Chad oil operations (Industrial activities segment) were impaired by $673 million to their estimated recoverable
amount of $145 million. The valuation remains sensitive to Covid-19 related disruptions on international mobility and a timely
restart of the operations in a safe and economic manner. Should such restart be prolonged by an extended period of time, an
additional future impairment of the balance of the carrying amount could result.
• In June 2020, it was determined to keep the Lydenburg chrome smelter (Industrial activities segment) on care and maintenance,
reflecting the challenging operating and market environment across the South African ferrochrome industry, including
unsustainably increasing electricity tariffs / supply interruption and other sources of real cost inflation. These macro factors
outweigh the significant efforts made over the past years to make the operation more competitive, rendering its estimated fair
value as negative. As a result, the entire carrying value of the Lydenburg smelter ($116 million) was impaired.
• The global macro-economic impact of Covid-19 on refined petroleum product demand and resulting global refinery overcapacity
has had a negative effect on refining margins. As a result, Astron (Industrial activities segment) has lowered its long term through-
the-cycle outlook on refining margins by approximately 30%. As a result, the Astron oil refinery was impaired by $480 million to its
estimated recoverable amount of $1,015 million, including its related downstream supply business. The operation specific discount
rate used in the valuation was a pre-tax nominal discount rate of 12.3%. The valuation remains most sensitive to refining margins
and a deterioration in these assumptions could result in additional impairments. Should the margin assumptions fall by $1/bbl
(across the curve), a further $243 million of impairment would be recognised. Should the discount rate increase by 1%, a further
$88 million of impairment would be 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 $62 million recognised in our
Industrial activities segment.
Advances and loans – current and non-current
In Q2 2020, loans of $103 million were impaired in full due to financial difficulties faced by one of the Group’s associates (Marketing
activities segment). The balance of the impairment charges on advances and loans (none of which were individually material) were
recognised in our Marketing activities segment ($125 million) and our Industrial activities segment ($115 million), following the
restructuring of certain loans and physical advances due to various non-performance factors.
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 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 long-term copper and cobalt price
assumptions were $6,500/mt and $27.00/lb, respectively. As at 31 December 2019, had the future copper and cobalt assumptions
fallen by 10% (across the curve), or had 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 have been 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 had 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 Annual Report 2020
31
Glencore Annual Report 2020 161
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
6. Impairments continued
• 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. As at 31 December 2019, had the future
price assumptions fallen by 10% (across the curve) with all other assumptions held constant, a further impairment of $466 million
would have been 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 was subject to customary regulatory approvals and 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 progressed 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 ($6 million).
Glencore Annual Report 2020
162 Glencore Annual Report 2020
32
NOTES TO THE FINANCIAL STATEMENTS
continued
7. Income taxes
Income taxes consist of the following:
US$ 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 credit/(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
2020
(931)
88
2,005
8
1,170
6
6
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 before income taxes
Less: Share of income from associates and joint ventures
Parent Company’s and subsidiaries’ loss before income tax and attribution
Income tax credit calculated at the Swiss income tax rate of 12% (2019: 15%)
Tax effects of:
Different tax rates from the standard Swiss income tax rate
Tax-exempt income ($206 million (2019: $175 million) from recurring items
and $4 million (2019: $37 million) from non-recurring items)
Items not tax deductible ($589 million (2019: $689 million) from recurring items
and $280 million (2019: $200 million) from non-recurring items)
Foreign exchange fluctuations
Changes in tax rates ($Nil (2019: $Nil) from recurring items
and $9 million (2019: $13 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 Australian tax restructuring
regulations
Tax losses not recognised
Adjustments in respect of prior years
Other
Income tax credit/(expense)
2020
(5,116)
(444)
(5,560)
667
1,572
210
(869)
(76)
(9)
(249)
–
(169)
96
(3)
1,170
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)
The non-tax deductible items of $869 million (2019: $889 million) primarily relate to financing costs, impairments and various
other expenses.
The impact of tax-exempt income of $210 million (2019: $212 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.
In 2020, adjustments in respect of non-recurring tax losses of $724 million (2019: $Nil) have been recognised, of which $130 million
relate to previously unrecognised tax losses and provisions, and $594 million to tax losses arising on intra-group impairments in the
current period.
Glencore Annual Report 2020
33
Glencore Annual Report 2020 163
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
7. Income taxes continued
DEFERRED TAXES
Deferred taxes as at 31 December 2020 and 2019 are attributable to the items in the table below:
US$ 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
741
33
774
1,550
(56)
(255)
1,239
2,013
–
3
3
–
–
3
3
6
–
–
–
–
–
–
–
–
(2)
(13)
(15)
75
(1)
3
77
62
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)
2020
1,951
301
2,252
(4,123)
(128)
(470)
(4,721)
(2,469)
20192
1,212
265
1,477
(5,680)
(71)
(343)
(6,094)
(4,617)
Other
2019
–
13
13
(68)
–
122
54
67
1,212
265
1,477
(5,680)
(71)
(343)
(6,094)
(4,617)
Other
2018
–
(13)
(13)
–
–
90
90
77
1,514
214
1,728
(6,318)
(73)
(568)
(6,959)
(5,231)
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.
2 As at 31 December 2019, deferred tax liabilities were restated by $120 million to reflect reclassification of uncertain tax provisions from provisions (see note 22).
Deferred tax assets are net of $579 million of uncertain tax liabilities related to tax estimation and judgement uncertainties with
respect to various open tax disputes discussed below.
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 2020, $2,998 million (2019: $1,571 million) of deferred tax assets related to available loss carry forwards
have been brought to account, of which $1,951 million (2019: $1,212 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:
• $843 million (2019: $517 million) in entities domiciled in the DRC,
• $658 million (2019: $287 million) in entities domiciled in Switzerland, and
• $365 million (2019: $366 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. With the exception of the deferred tax assets raised in respect of the Group’s DRC
operations (see below), 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.
Glencore Annual Report 2020
164 Glencore Annual Report 2020
34
NOTES TO THE FINANCIAL STATEMENTS
continued
7. Income taxes continued
The recognised losses carried forward in the DRC primarily relate to historical development, ramp-up and financing related costs at
KCC. The losses carried forward have an unlimited carry forward period, but are subject to annual utilisation limitation. Following
KCC’s successful ramp-up of its operations to near name plate capacity, deferred taxation assets have been recognised for the full
estimated available tax losses at 31 December 2020 as sufficient future taxable profits are expected to fully utilise the recognised
carry forward tax losses. In recognising these deferred tax assets, 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. As part of the DRC tax audit noted below, certain previously incurred tax losses
may be disallowed. In addition, as noted in our 2019 financial statements, during 2018, the DRC parliament adopted a new mining
code (“2018 Mining Code”) which introduced wide-ranging reforms including the introduction of higher royalties, a new Super
Profits Tax regime and further regulatory controls. The uncertainties of the 2018 Mining Code, specifically the application and
interpretation of the Super Profits Tax, remain. Any adverse challenge by the DRC tax authorities could materially impact the
currently recognised tax losses and could result in a reversal of part or all of the recognised deferred tax assets.
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.
INCOME TAX RECEIVABLE / PAYABLE
US$ million
Income tax receivable
Income tax payable
Net income tax payable
2020
444
(927)
(483)
20191
350
(764)
(414)
1 As at 31 December 2019, income tax payable was restated by $410 million to reflect reclassification of uncertain tax provisions from provisions (see note 22).
INCOME TAX JUDGEMENTS AND UNCERTAIN TAX LIABILITIES
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. In recognising a
provision for these taxation exposures, consideration was given to the range of possible outcomes to determine the Group’s best
estimate of the amount to provide. As at 31 December 2020, the Group has recognised $1,189 million (2019: $530 million) of uncertain
tax liabilities related to possible adverse outcomes of these open matters, of which, $579 million (2019: $120 million) has been
recognised net of deferred tax assets, with the balance of $610 million (2019: $410 million) recognised as an income tax payable.
UK Tax Audit
HMRC have issued formal transfer pricing, unallowable purposes and diverted profits tax assessments for the 2008-2018 tax years,
amounting to $774 million. The Group has appealed against, and continues to vigorously contest, these assessments, following, over
the years, various legal opinions received and detailed analysis conducted, supporting its positions and policies applied. Therefore,
the Group has not fully provided for the amount assessed. The matter is now proceeding through the Mutual Agreement Process,
pursuant to article 24 of the Switzerland – United Kingdom Income Tax Treaty 1977. Management does not anticipate a significant
risk of material changes in estimates in this matter in the next financial year.
DRC Tax Audit
Various tax authorities in the DRC have issued assessments denying financing related costs and other items, along with customs
related claims for alleged non-compliance or incorrect coding on certain filings. The Group is currently engaged with these tax
authorities working through a dispute resolution process. As the dispute resolution process is ongoing and its ultimate outcome
remains uncertain, there remains a risk that the outcome could materially impact the recognised balances within the next financial
year. It is impractical to provide further sensitivity estimates of potential downside variances.
Glencore Annual Report 2020
35
Glencore Annual Report 2020 165
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
7. Income taxes continued
AVAILABLE GROSS TAX LOSSES
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been
recognised in the consolidated financial statements, are detailed below and will expire as follows:
US$ million
1 year
2 years
3 years
Thereafter
Unlimited
Total
2020
1,155
496
530
11,099
8,366
2019
41
45
307
3,172
9,292
21,646
12,857
As at 31 December 2020, unremitted earnings of $56,677 million (2019: $55,282 million) have been retained by subsidiaries for
reinvestment. No provision is made for income taxes.
8. Property, plant and equipment
2020
Freehold land
and buildings
Plant and
equipment
Right-of-use
assets
Notes
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
US$ million
Gross carrying amount:
1 January 2020
Restatement1
1 January 2020 (restated)
Disposal of subsidiaries
Additions
Disposals
Effect of foreign currency
exchange movements
Reclassification to held for sale
Reclassification from held for sale
Other movements2
31 December 2020
Accumulated depreciation and
impairment:
1 January 2020
Restatement1
1 January 2020 (restated)
Disposal of subsidiaries
Disposals
Depreciation
Impairment
Effect of foreign currency
exchange movements
Reclassification to held for sale
Reclassification from held for sale
Other movements2
31 December 2020
Net book value 31 December 2020
25
15
15
25
6
15
15
6,211
–
6,211
(35)
32
(28)
(13)
(111)
176
344
6,576
2,017
–
2,017
(35)
(22)
375
278
46,225
(160)
46,065
(321)
2,746
(1,260)
(121)
(1,833)
36
(798)
44,514
24,646
–
24,646
(321)
(1,173)
2,680
1,120
–
(14)
(89)
27
75
2,626
3,950
(1,405)
–
(95)
25,438
19,076
2,313
–
2,313
(16)
575
(265)
(2)
–
1
(30)
2,576
633
–
633
(3)
(135)
519
–
1
–
–
(11)
1,004
1,572
30,223
540
30,763
(24)
58
(42)
(114)
(692)
16
530
30,495
10,910
150
11,060
(24)
(29)
1,363
2,860
(9)
(461)
14
64
14,838
15,657
2,248
–
2,248
–
–
(274)
–
–
1
(1)
1,974
2,158
–
2,158
–
(274)
–
–
–
–
1
(1)
1,884
90
Total
105,229
–
105,229
(629)
4,132
(1,959)
18,009
(380)
17,629
(233)
721
(90)
(1)
(251)
(1,002)
8
430
17,462
(3,638)
238
475
103,597
9,508
(150)
9,358
(234)
(88)
1,522
992
49,872
–
49,872
(617)
(1,721)
6,459
5,250
6
(16)
(938)
–
79
10,697
6,765
(2,893)
42
111
56,487
47,110
1 Certain balances in the prior year have been restated to reflect their appropriate classification. Other than the restatement within property, plant and equipment headings, there are
no depreciation or amortisation changes.
2 Primarily consists of increases in rehabilitation costs of $399 million and reclassifications within the various property, plant and equipment headings.
Plant and equipment includes expenditure for construction in progress of $3,247 million (2019: $4,161 million). Mineral and petroleum
rights include biological assets of $19 million (2019: $19 million). Depreciation expenses included in cost of goods sold are
$6,385 million (2019: $6,970 million) and in selling and administrative expenses, $74 million (2019: $46 million).
During 2020, $33 million (2019: $66 million) of interest was capitalised. With the exception of project specific borrowings, the rate
used to determine the amount of borrowing costs eligible for capitalisation was 3% (2019: 4%).
Glencore Annual Report 2020
166 Glencore Annual Report 2020
36
NOTES TO THE FINANCIAL STATEMENTS
continued
8. Property, plant and equipment continued
As at 31 December 2020, with the exception of leases, no property, plant or equipment was pledged as security for borrowings (2019:
$Nil).
LEASES
The Group leases various assets including land and buildings and plant and equipment. As at 31 December 2020, the net book value
of recognised right-of use assets relating to land and buildings was $519 million (2019: $595 million) and plant and equipment
$1,053 million (2019: $1,085 million). The depreciation charge for the period relating to those assets was $101 million (2019: $103 million)
and $418 million (2019: $293 million), respectively.
Disclosure of amounts recognised as lease liabilities in the statement of financial position and cash outflows for leases in the year are
included within note 20 and their maturity analysis within note 26.
Amounts recognised in the statement of income are detailed below:
US$ 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
2020
(519)
(96)
(863)
(4)
(3)
349
(1,136)
2019
(396)
(101)
(758)
(3)
(1)
231
(1,028)
At 31 December 2020, the Group is committed to $235 million of short-term lease payments and $370 million related to capitalised
leases not yet commenced.
2019
US$ million
Gross carrying amount:
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 (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
Freehold land
and buildings
Plant and
equipment
Right-of-use
assets
Notes
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
25
25
15
25
6
15
6,062
200
(59)
65
(33)
4
(176)
148
6,211
1,655
(4)
(6)
377
20
1
(27)
1
2,017
4,194
42,779
772
(32)
3,558
(679)
81
(36)
(218)
46,225
21,430
(32)
(553)
3,059
264
26
–
452
24,646
21,579
1,635
169
–
656
(90)
(1)
(1)
(55)
2,313
312
–
(77)
396
–
–
–
2
633
1,680
29,687
467
–
104
(40)
74
(16)
(53)
30,223
8,758
–
(1)
1,709
804
15
(14)
(361)
10,910
19,313
2,183
–
–
1
–
–
(1)
65
2,248
1,588
–
–
6
532
–
(1)
33
2,158
90
Total
99,412
1,623
(91)
5,346
(1,474)
17,066
15
–
962
(632)
9
167
(8)
597
18,009
(238)
484
105,229
8,112
–
(611)
1,469
265
41,855
(36)
(1,248)
7,016
1,885
–
42
–
273
9,508
8,501
(42)
400
49,872
55,357
Glencore Annual Report 2020
37
Glencore Annual Report 2020 167
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
9. Intangible assets
2020
US$ million
Cost:
1 January 2020
Additions
Disposals
Effect of foreign currency exchange movements
Other movements
31 December 2020
Accumulated amortisation and impairment:
1 January 2020
Disposals
Amortisation expense1
Impairment
Effect of foreign currency exchange movements
Other movements
31 December 2020
Net book value 31 December 2020
1 Recognised in cost of goods sold.
2019
US$ million
Cost:
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 expense1
Impairment
Effect of foreign currency exchange movements
Other movements
31 December 2019
Net book value 31 December 2019
1 Recognised in cost of goods sold.
Glencore Annual Report 2020
168 Glencore Annual Report 2020
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Customer
relationships
and other
13,293
–
–
–
–
13,293
8,293
–
–
–
–
–
8,293
5,000
1,374
–
–
(62)
–
1,312
198
–
52
–
(3)
–
247
1,065
596
5
(16)
(18)
18
585
315
(16)
44
5
(1)
(5)
342
243
720
7
(9)
(41)
16
693
171
(9)
116
253
(7)
10
534
159
6
Notes
Goodwill
Port allocation
rights
Licences,
tradmarks
and software
Customer
relationships
and other
25
25
6
13,293
–
–
–
–
–
–
13,293
8,243
–
–
50
–
–
8,293
5,000
1,336
–
–
–
(1)
40
(1)
1,374
159
–
33
–
7
(1)
198
1,176
521
24
–
10
(11)
(4)
56
596
268
(11)
35
–
–
23
315
281
424
347
(33)
12
(1)
(1)
(28)
720
86
(1)
76
19
–
(9)
171
549
Total
15,983
12
(25)
(121)
34
15,883
8,977
(25)
212
258
(11)
5
9,416
6,467
Total
15,574
371
(33)
22
(13)
35
27
15,983
8,756
(12)
144
69
7
13
8,977
7,006
38
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
Total
2020
3,326
1,674
5,000
2019
3,326
1,674
5,000
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.
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 15 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 3 – 20 years.
CUSTOMER RELATIONSHIPS
Customer relationships mainly represent intangible assets related to long-standing customer relationships recognised in respect of
business combinations completed in 2019 (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 2021 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 (2019: 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 Annual Report 2020
39
Glencore Annual Report 2020 169
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
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
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
6
2020
12,984
102
(14)
444
(14)
–
–
(96)
(1,015)
9
12,400
6,038
6,362
2019
13,909
104
(96)
114
(37)
(40)
150
(137)
(942)
(41)
12,984
6,858
6,126
As at 31 December 2020, the carrying value of our listed associates is $508 million (2019: $605 million), mainly comprising Century
Aluminum and Trevali, which have carrying values of $261 million (2019: $395 million) and $77 million (2019: $119 million), respectively.
The fair value of our listed associates, using published price quotations (a Level 1 fair value measurement) is $737 million (2019:
$427 million). As at 31 December 2020, $111 million (2019: $104 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 $100 million (2019:
$80 million)(see note 20).
Cerrejón
Included in share of income from associates is Glencore’s attributable share of impairment relating to Cerrejón amounting to
$445 million (net of taxes of $211 million). As at 31 December 2020, the carrying amount of Glencore’s investment in Cerrejón
amounts to $595 million (2019: $1,143 million) which is equivalent to its recoverable amount based on a VIU calculation. The
impairment results from lower API 2 coal price assumptions and reduced production estimates, including updated via mine-life
approval expectations. The operation specific discount rate used in the valuation was 7.9%. The short to long-term API 2 price
assumptions were $57 – 65/mt. Should the price assumptions fall by 10% (across the curve), with all other assumptions held constant,
a further impairment of $231 million would be recognised. A 10% reduction in estimated annual production over the life of mine
could result in an additional impairment of $216 million.
Impairments
Primarily comprises an impairment charge in respect of our investment in Century Aluminum ($73 million). 2019 primarily
comprised 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 $11 million (see notes 4 and 25),
subsequently accounting for its remaining share of 40% using the equity method.
Glencore Annual Report 2020
170 Glencore Annual Report 2020
40
NOTES TO THE FINANCIAL STATEMENTS
continued
10. Investments in associates, joint ventures and other investments continued
2020 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
US$ million
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 2020
Glencore's ownership interest
Acquisition fair value and other adjustments
Carrying value
Total
material
associates
7,057
2,039
(2,245)
(800)
Antamina
4,755
1,584
(1,538)
(698)
Collahuasi
5,141
1,407
(1,380)
(845)
Cerrejón
2,302
455
(707)
(102)
99
(20)
(15)
1,948
33.3%
(54)
595
91
(53)
(476)
4,103
33.8%
1,813
3,200
190
(73)
(491)
6,051
1,759
3,795
99
(288)
(100)
4,323
44.0%
1,089
2,991
Total
material
associates
and
joint
ventures
18,044
13,975
(6,682)
(10,686)
616
(4,712)
(3,138)
14,651
Total
material
joint
ventures
10,987
11,936
(4,437)
(9,886)
426
(4,639)
(2,647)
8,600
2,326
6,362
4,085
10,157
Viterra
5,846
10,529
(3,057)
(9,041)
327
(4,351)
(2,547)
4,277
49.9%
1,237
3,371
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 2020 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)/income
Total comprehensive (loss)/income
Glencore's share of dividends paid
Cerrejón
626
(1,613)
–
(1,613)
11
Antamina
3,126
794
–
794
363
Total
material
associates
3,752
(819)
–
(819)
374
Collahuasi
3,936
1,414
(19)
1,395
598
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)
(329)
–
(21)
(1,969)
692
(843)
–
(51)
–
(553)
(1,172)
–
(72)
(1,969)
139
(659)
2
(71)
–
(815)
Includes foreign exchange gains and other income of $4 million.
Includes foreign exchange losses and other expenses of $87 million.
1
2
3 Glencore’s attributable share of impairment relating to Cerrejón amounts to $445 million, net of taxes of $211 million.
Total
material
associates
and
joint
ventures
36,030
1,009
(15)
994
972
Total
material
joint
ventures
32,278
1,828
(15)
1,813
598
(1,207)
15
(247)
–
(958)
(2,379)
15
(319)
(1,969)
(819)
Viterra
28,342
414
4
418
–
(548)
13
(176)
–
(143)
Glencore Annual Report 2020
41
Glencore Annual Report 2020 171
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
10. Investments in associates, joint ventures and other investments continued
2019 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
US$ 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
Total
material
associates
6,988
1,906
(1,938)
(543)
Antamina
4,589
1,276
(1,170)
(486)
Collahuasi
4,905
1,306
(1,207)
(794)
Cerrejón
2,399
630
(768)
(57)
157
(21)
(15)
2,204
33.3%
409
1,143
55
(53)
(146)
4,209
33.8%
1,872
3,295
212
(74)
(161)
6,413
2,281
4,438
163
(15)
(95)
4,210
44.0%
1,116
2,968
Total
material
associates
and
joint
ventures
17,605
10,575
(7,000)
(6,726)
Total
material
joint
ventures
10,617
8,669
(5,062)
(6,183)
347
(2,785)
(3,545)
8,041
559
(2,859)
(3,706)
14,454
2,362
6,126
4,643
10,564
Viterra
5,712
7,363
(3,855)
(5,389)
184
(2,770)
(3,450)
3,831
49.9%
1,246
3,158
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
Antamina
3,038
892
–
892
243
Total
material
associates
4,521
(548)
–
(548)
309
Collahuasi
3,147
945
(23)
922
467
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
(811)
15
(3)
–
(489)
(1,376)
15
(15)
(1,305)
(443)
(640)
35
(25)
–
(437)
Total
material
associates
and
joint
ventures
32,725
368
(26)
342
776
Total
material
joint
ventures
28,204
916
(26)
890
467
(1,164)
63
(227)
–
(477)
(2,540)
78
(242)
(1,305)
(920)
Viterra
25,057
(29)
(3)
(32)
–
(524)
28
(202)
–
(40)
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. As at 31 December 2019, had the price assumptions fallen by 10% (across the curve) with all other assumptions held constant a further impairment
of $312 million would have been recognised.
Glencore Annual Report 2020
172 Glencore Annual Report 2020
42
NOTES TO THE FINANCIAL STATEMENTS
continued
10. Investments in associates, joint ventures and other investments continued
Aggregate information of associates that are not individually material:
US$ million
The Group's share of loss
The Group's share of other comprehensive loss
The Group's share of total comprehensive loss
Aggregate carrying value of the Group's interests
2020
(120)
(8)
(128)
2,243
2019
(110)
(25)
(135)
2,420
The amount of corporate guarantees in favour of associates and joint ventures as at 31 December 2020 was $560 million (2019:
$983 million). No amounts have been claimed or provided as at 31 December 2020. Glencore’s share of joint ventures’ capital
commitments amounts to $105 million (2019: $108 million).
OTHER INVESTMENTS
US$ million
Fair value through other comprehensive income1
EN+ GROUP PLC
OAO NK Russneft2
Yancoal
OSJC Rosneft
Other
Fair value through profit and loss
Century Aluminum cash-settled equity swaps
Champion Iron Limited share warrants3
2020
2019
701
309
164
357
116
1,647
49
37
86
674
869
172
440
135
2,290
69
28
97
Total
1,733
2,387
1 Fair value through other comprehensive income includes net disposals of $12 million for the period.
2 Glencore’s investment in OAO NK Russneft is pledged under a loan facility issued to OAO NK Russneft.
3 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 as the majority shareholder retains operational and board control.
During the year, dividend income from equity investments designated as at fair value through other comprehensive income
amounted to $32 million (2019: $49 million).
Glencore Annual Report 2020
43
Glencore Annual Report 2020 173
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
11. Advances and loans
US$ 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
Deferred consideration
Non-financial instruments
Pension surpluses
Advances repayable with product1
Land rights prepayment
Other non-current receivables
Total
Notes
2020
2019
28
23
246
600
148
102
302
40
1,334
150
120
3,042
294
466
147
116
45
42
1,172
–
145
2,427
1 Net of $1,534 million (2019: $1,216 million) provided by various banks, the repayment terms of which are contingent upon and connected to the future delivery of contractual production.
FINANCIAL ASSETS AT AMORTISED COST
Loans to associates
Loans to associates generally bear interest at applicable floating market rates plus a premium.
Other non-current receivables and loans
Other non-current receivables and loans comprise the following:
US$ million
Secured financing arrangements
Other
Total
2020
585
15
600
2019
448
18
466
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 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 loans to associates and 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.
Expected credit losses for these assets are measured as either 12-month expected credit losses, taking into account prior experience
regarding probability of default adjusted for forward looking information, or as lifetime expected credit losses (when there is
significant increase in credit risk or the asset is credit-impaired). The gross carrying value of other non-current receivables and loans
measured as 12-month expected credit losses was $626 million (2019:$507 million) and as lifetime expected credit losses $314 million
(2019:$302 million), the expected credit losses on which were $37 million (2019:$57 million) and $303 million (2019:$298 million)
respectively. The movement in loss allowance for financial assets classified at amortised cost is detailed below:
US$ million
Gross carrying value 31 December
Loss allowances
1 January
Released during the period1
Charged during the period1
31 December
Net carrying value 31 December
Loans to
associates
308
Other non-
current
receivables and
loans
940
31
–
31
62
246
355
(48)
33
340
600
Loans to
associates
325
Other non-
current
receivables and
loans
821
27
–
4
31
294
323
(10)
42
355
466
2020
1,248
386
(48)
64
402
846
1 $45 million (2019: $31 million) recognised as an impairment (see note 6) and the balancing credit of $29 million (2019: charge of $5 million) recognised in cost of goods sold.
Glencore Annual Report 2020
174 Glencore Annual Report 2020
2019
1,146
350
(10)
46
386
760
44
NOTES TO THE FINANCIAL STATEMENTS
continued
11. Advances and loans continued
FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Deferred consideration
In 2020, fair value movements of net positive $379 million (2019: $35 million) were recognised (see note 5).
NON-FINANCIAL INSTRUMENTS
Advances repayable with product
US$ million
Counterparty
Société Nationale d'Electricité (SNEL) power advances
Chad State National Oil Company
Société Nationale des Pétroles du Congo
Other1
Total
1 Comprises no individually material items.
2020
312
347
156
519
1,334
2019
303
360
18
491
1,172
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 facilitated a progressive increase in power
availability to 450 megawatts by the end of Q1 2020. Funding commenced in the second quarter of 2012 and is due to end in Q1 2021.
The loans are being repaid via discounts on electricity purchases, which are expected to accelerate upon completion of the
refurbishment programme.
Chad State National Oil Company
Glencore has provided a net $359 million (2019: $379 million) to the Chad State National Oil Company (SHT) to be repaid through
future oil deliveries over ten years. As at 31 December 2020 the advance is net of $714 million (2019: $778 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, $347 million (2019: $360 million) is receivable after 12 months and is presented within
Other non-current receivables and loans and $12 million (2019: $19 million) is due within 12 months and included within Accounts
receivable.
Société Nationale des Pétroles du Congo (SNPC)
Glencore has provided a net $156 million (2019: $156 million) to SNPC repayable through future oil deliveries over five years.
As at 31 December 2020, the advance is net of $498 million (2019: $498 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,
$156 million (2019: $18 million) is due after 12 months and is presented within Other long-term receivables and loans and $Nil (2019:
$138 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.
Land rights prepayment
On 19 December 2019, Kamoto Copper Company (“KCC”) entered into an agreement with La Générale des Carrières et des Mines
(“Gécamines”), Glencore’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 package 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.
In addition to the above consideration, the agreement includes the following key additional undertakings:
• obligations on KCC to remove tailings (estimated at circa 15m dmt), currently in a sub-section of these areas, to another suitable
location;
• contingent obligations to pay “Pas de Porte” payments to Gécamines if KCC declares a JORC compliant reserve or otherwise
elects to mine any resources in the Resource Areas; and
• a new royalty to Gécamines of 2.5% of net sales from the acquired land areas if KCC elects to mine any resources in such areas.
In August 2020, KCC advanced $150 million to Gécamines as an agreed prepayment of the consideration due. If the closing
conditions as prescribed in the agreement are not fulfilled, Glencore has the right to accrue interest on the prepaid amount,
terminate the agreement and, if funds are not returned, offset against future amounts owing to Gécamines. The balance of the
consideration is due 5 days after the respective closing conditions of each area to be transferred are satisfied.
Glencore Annual Report 2020
45
Glencore Annual Report 2020 175
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
12. Inventories
CURRENT INVENTORY
Inventories of $22,852 million (2019: $19,936 million) comprise $12,260 million (2019: $10,516 million) of inventories carried at fair value
less costs of disposal and $10,592 million (2019: $9,420 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 $124,037 million (2019: $192,418 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 2020, the total amount of inventory pledged under such facilities was $804 million (2019: $430 million). The
proceeds received and recognised as current borrowings were $679 million (2019: $339 million) and $80 million (2019: $80 million) as
non-current borrowings.
NON-CURRENT INVENTORY
$678 million (2019: $575 million) of inventories valued at lower of cost or net realisable value are not expected to be utilised or sold
within the normal operating cycle and are therefore classified as non-current inventory.
13. Accounts receivable
US$ 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
Finance lease receivable
Deferred consideration
Non-financial instruments
Advances repayable with product3
Other tax and related receivables
Total
Notes
2020
2019
3,360
–
3,692
288
356
4,459
9
130
922
1,938
15,154
3,692
44
2,198
326
394
6,526
14
37
1,433
2,007
16,671
28
28
28
1
2
3
Includes $65 million (2019: $635 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 of $241 million (2019: $129 million).
Includes advances, net of $298 million (2019: $1,248 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 24 days (2019: 18 days). The carrying value of trade receivables approximates fair value.
Glencore Annual Report 2020
176 Glencore Annual Report 2020
46
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. Expected credit loss provisions are
recognised in cost of goods sold and during the period, a credit of $3 million (2019: charge of $2 million) of such losses were
recognised. The following table details the risk profile of trade receivables based on the Group’s provision matrix.
US$ million
As at 31 December 2020
Gross carrying amount
Expected credit loss rate
Lifetime expected credit loss
Total
US$ million
As at 31 December 2019
Gross carrying amount
Expected credit loss rate
Lifetime expected credit loss
Total
Not past due
2,941
0.27%
(8)
2,933
Not past due
3,077
0.28%
(9)
3,068
Trade receivables – days past due
<30
224
0.54%
(1)
223
31 – 60
44
0.82%
(1)
43
Trade receivables – days past due
<30
356
0.55%
(2)
354
31 – 60
56
0.83%
–
56
61 – 90
21
1.09%
–
21
61 – 90
59
1.10%
(1)
58
>90
143
2.31%
(3)
140
>90
192
2.34%
(4)
188
The movement in allowance for credit loss relating to receivables from associates and other receivables is detailed below:
US$ million
Gross carrying value 31 December
Allowance for credit loss
1 January
Released during the period1
Charged during the period1
Utilised during the period
Effect of foreign currency exchange
movements
31 December
Net carrying value 31 December
Receivables
from associates
410
Other
receivables
488
Receivables
from associates
336
2020
898
Other
receivables
473
10
(1)
103
–
10
122
288
79
(3)
62
(6)
–
132
356
89
(4)
165
(6)
10
254
644
9
–
1
–
–
10
326
35
(7)
51
–
–
79
394
Total
3,373
(13)
3,360
Total
3,740
(16)
3,724
2019
809
44
(7)
52
–
–
89
720
1 $123 million (2019: $Nil) recognised as an impairment (see note 6) and the balancing $38 million (2019: $45 million) net charge recognised in cost of good 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 2020, the total amount of trade receivables pledged was $693 million (2019:
$837 million) and proceeds received and classified as current borrowings amounted to $567 million (2019: $719 million).
14. Cash and cash equivalents
US$ million
Bank and cash on hand
Deposits and treasury bills
Total
2020
1,387
111
1,498
2019
1,618
281
1,899
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 2020, $82 million (2019: $92 million) was restricted.
Glencore Annual Report 2020
47
Glencore Annual Report 2020 177
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
15. Assets and liabilities held for sale
In November 2020, Glencore agreed, subject to various conditions precedent and documentation, to sell its controlling interest in
Mopani to minority shareholder, ZCCM Investments Holding plc (ZCCM) for $1, leaving $1.5 billion of Glencore loans outstanding,
where the pace and size of repayment instalments is linked to Mopani’s future production and copper prices. Completion of the sale
is conditional on receipt of certain regulatory approvals in Zambia and ZCCM shareholders, expected to occur over H1 2021. The sale
is considered highly probable as at 31 December 2020 and as a result, 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 2020 at the lower of their carrying value or fair value less costs to sell. Also see note 6.
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 was subject to
customary regulatory approvals and was expected to close during 2020. The long stop date has, however, elapsed with the
conditions precedent not having been fulfilled. As a result, net assets (assets of $286 million and liabilities of $156 million) previously
classified as held for sale in 2019 were reclassified to the respective line items in the statement of financial position at depreciated
cost and a one-time depreciation charge of $18 million was recognised to reflect the additional depreciation that would have been
charged if the related assets had not previously been classified as held for sale.
Assets of $1,046 million and liabilities of $185 million have been classified as held for sale within the Industrial activities segment as
detailed below:
US$ million
Non-current assets
Property, plant and equipment
Advances and loans
Deferred tax assets
Current assets
Inventories
Accounts receivable
Prepaid expenses
Cash and cash equivalents
Total assets held for sale
Non-current liabilities
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Provisions
Income tax payable
Total liabilities held for sale
Total net assets held for sale
Glencore Annual Report 2020
178 Glencore Annual Report 2020
2020
2019
Mopani Cerro de Pasco
745
5
–
750
187
106
3
–
296
1,046
–
(64)
(64)
(26)
(58)
(24)
(13)
(121)
(185)
861
196
–
13
209
22
53
–
2
77
286
(68)
(52)
(120)
(2)
(34)
–
–
(36)
(156)
130
48
NOTES TO THE FINANCIAL STATEMENTS
continued
16. Share capital and reserves
Authorised:
31 December 2020 and 2019 Ordinary shares with a par value of $0.01 each
Issued and fully paid up:
1 January 2019 and 31 December 2019 – Ordinary shares
31 December 2020 – Ordinary shares
Number
of shares
(thousand)
Share capital
(US$ million)
Share
premium
(US$ million)
50,000,000
14,586,200
14,586,200
146
146
45,794
45,794
Own shares:
1 January 2019
Own shares purchased during the year
Own shares disposed during the year
31 December 2019
1 January 2020
Own shares disposed during the year
31 December 2020
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)
583,572
678,315
–
1,261,887
1,261,887
–
1,261,887
(2,483)
(2,318)
–
(4,801)
(4,801)
–
(4,801)
170,130
–
(40,138)
129,992
129,992
(26,991)
103,001
(835)
–
199
(636)
(636)
133
(503)
753,702
678,315
(40,138)
1,391,879
1,391,879
(26,991)
1,364,888
(3,318)
(2,318)
199
(5,437)
(5,437)
133
(5,304)
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 2020: 1,364,888,033 shares (2019: 1,391,879,129 shares), equivalent to 9.36% (2019: 9.54%) of the issued share capital
were held at a cost of $5,304 million (2019: $5,437 million) and market value of $4,341 million (2019: $4,347 million).
Glencore Annual Report 2020
49
Glencore Annual Report 2020 179
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
16. Share capital and reserves continued
OTHER RESERVES
US$ million
1 January 2020
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)
Gain due to changes in credit risk on financial liabilities
accounted for at fair value through profit and loss
Reclassifications
31 December 2020
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)
Loss due to changes in credit risk on financial liabilities
accounted for at fair value through profit and loss
Reclassifications
31 December 2019
Translation
adjustment
(2,665)
(167)
–
Cash flow
hedge reserve
(97)
–
(50)
Net
unrealised
gain/(loss)
364
–
–
Net ownership
changes in
subsidiaries
(2,573)
–
–
–
–
–
–
(2,832)
(2,779)
114
–
–
–
–
–
(2,665)
–
–
–
–
(147)
(47)
–
(51)
–
–
–
1
(97)
(631)
–
19
(18)
(266)
38
–
–
342
–
(1)
(15)
364
–
(31)
–
1
(2,603)
(2,149)
–
–
–
(418)
–
(6)
(2,573)
Total
(4,971)
(167)
(50)
(631)
(31)
19
(17)
(5,848)
(4,937)
114
(51)
342
(418)
(1)
(20)
(4,971)
The translation adjustment reserve is used to capture the cumulative impact of foreign currency translation adjustments arising
from the Group’s non-USD denominated functional currency subsidiaries.
The cash flow hedge reserve is used to accumulate the gains and losses from hedging instruments contained within hedge
relationships until the hedged item impacts profit or loss.
The net unrealised gain/loss reserve is used to accumulate the gains and lossess associated with the remeasurement of the Group’s
investments carried at FVTOCI.
The net ownership changes in subsidiaries reserve is used to capture equity movements arising from changes in the Group’s
ownership in its subdiairies.
Glencore Annual Report 2020
180 Glencore Annual Report 2020
50
NOTES TO THE FINANCIAL STATEMENTS
continued
17. Earnings per share
US$ million
Loss 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)1
Weighted average number of shares for the purposes of diluted earnings per share (thousand)
Basic loss per share (US$)
Diluted loss per share (US$)
2020
(1,903)
13,216,886
2019
(404)
13,684,091
139,989
13,216,886
92,470
13,684,091
(0.14)
(0.14)
(0.03)
(0.03)
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 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 earnings for the year
Headline earnings per share (US$)
Diluted headline earnings per share (US$)
2020
(1,903)
36
(11)
6,693
(1,596)
(1,214)
2,005
0.15
0.15
2019
(404)
43
(6)
3,191
(270)
(323)
2,231
0.16
0.16
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, investments and advances and loans (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
The proposed distribution in respect of the year ended 31 December 2020 of $0.12 per ordinary share amounting to $1,587 million is
subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements. Owing to the uncertainty resulting from the Covid pandemic and to support the Group’s overall financial position
during 2020, the Board elected not to pay any distributions in 2020. A distribution of $0.20 per ordinary share amounting to
$2,710 million was paid in 2019.
Glencore Annual Report 2020
51
Glencore Annual Report 2020 181
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
19. Share-based payments
US$ million
Deferred Bonus Plan – Bonus
share award
2018 Series
2019 Series
2020 Series
Performance Share Plan
2015 Series
2016 Series
2017 Series
2018 Series
2019 Series
2020 Series
Total
Number of
awards
granted
(thousands)
Fair value at
grant date
(US$ million)
Number
of awards
outstanding
2020
(thousands)
Number
of awards
outstanding
2019
(thousands)
Expense
recognised
2020
(US$ million)
Expense
recognised 2019
(US$ million)
12,891
10,791
45,798
69,480
79,787
23,984
19,732
28,458
29,689
19,761
201,411
270,891
65
37
85
109
84
95
104
90
59
4,316
7,914
45,798
58,028
9,509
–
5,965
18,396
28,330
19,761
81,961
139,989
11,052
9,552
–
20,604
11,878
7,407
12,498
27,912
12,171
–
71,866
92,470
–
–
85
85
–
3
10
29
55
–
97
182
–
33
–
33
5
9
27
54
–
–
95
128
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. 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. The fair value at grant date is
determined with respect to the average share price of Glencore plc in the month of granting.
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. The fair value at grant date is determined with respect to the average share price of
Glencore plc in the month of granting.
SHARE-BASED AWARDS ASSUMED IN PREVIOUS BUSINESS COMBINATIONS
1 January 2020
Lapsed
Exercised
31 December 2020
1 January 2019
Lapsed
Exercised1
31 December 2019
1 The weighted average share price at date of exercise of the share based awards was GBP3.03.
Total options
outstanding
(thousands)
102,623
(30,956)
–
71,667
106,637
–
(4,014)
102,623
Weighted
average
exercise
price (GBP)
3.98
3.38
–
4.25
3.88
–
1.10
3.98
Glencore Annual Report 2020
182 Glencore Annual Report 2020
52
NOTES TO THE FINANCIAL STATEMENTS
continued
19. Share-based payments continued
As at 31 December 2020, a total of 71,667,011 options (2019: 102,623,112 options) were outstanding and exercisable, having a range of
exercise prices from GBP3.91 to GBP4.80 (2019: GBP3.37 to GBP4.80) and a weighted average exercise price of GBP4.25 (2019:
GBP3.98). These outstanding awards have expiry dates ranging from February 2021 to February 2022 (2019: February 2020 to
February 2022) and a weighted average contractual life of 275 days (2019: 438 days). 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
Lease liabilities
Other bank loans
Total non-current borrowings
Current borrowings
Secured inventory/receivables/other facilities
U.S. commercial paper
Capital market notes
Lease liabilities
Other bank loans1
Total current borrowings
Total borrowings
Notes
2020
2019
10/12/13
22,353
4,766
1,008
1,100
29,227
1,346
1,090
2,018
513
3,285
8,252
37,479
21,452
5,615
1,158
842
29,067
1,138
675
2,455
484
3,224
7,976
37,043
1 Comprises various uncommitted bilateral bank credit facilities and other financings and is net of $135 million (2019: $Nil) of funds advanced by the Group under a netting arrangement
with a bank and a subsidiary.
RECONCILIATION OF CASH FLOW TO MOVEMENT IN BORROWINGS
US$ million
Cash related movements in borrowings1
Proceeds from issuance of capital market notes
Repayment of capital market notes
Repurchase of capital market notes
Repayment of revolving credit facilities
Proceeds from other non-current borrowings
Repayment of other non-current borrowings
Repayment of lease liabilities
Proceeds from U.S. commercial papers
Proceeds from/(repayment of) current borrowings
Non-cash related movements in borrowings
Borrowings (disposed of)/acquired in business combinations
Foreign exchange movements
Fair value hedge movements2
Impact of adoption of IFRS 16
Change in lease liabilities
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.
2 The fair value hedge movements were equivalent to the change in fair value of the respective hedging instrument (see note 26).
Notes
2020
2019
25
3,362
(4,017)
(72)
(870)
392
(44)
(560)
415
217
(1,177)
(13)
812
344
–
435
20
15
1,613
3,866
(3,167)
–
(29)
291
(325)
(358)
79
(682)
(325)
284
231
387
865
582
19
6
2,374
436
37,043
37,479
2,049
34,994
37,043
Glencore Annual Report 2020
53
Glencore Annual Report 2020 183
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
20. Borrowings continued
CAPITAL MARKET NOTES
US$ million
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
Euro 950 million 1.125% coupon bonds
Eurobonds
JPY 10 billion 1.075% coupon bonds
GBP 500 million 6.00% coupon bonds
GBP 500 million 3.125% coupon bonds
Sterling bonds
CHF 250 million 2.25% coupon bonds
CHF 175 million 1.25% coupon bonds
CHF 250 million 0.35% coupon bonds
CHF 225 million 1.00% coupon bonds
Swiss Franc bonds
US$ 1,000 million 4.95% coupon bonds
US$ 600 million 5.375% coupon bonds
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 1.625% 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$ 1,000 million 2.500% 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
Glencore Annual Report 2020
184 Glencore Annual Report 2020
Maturity
Mar 2021
Apr 2021
Jan 2022
Sep 2023
Oct 2023
Sep 2024
Mar 2025
Apr 2026
Oct 2026
Mar 2028
May 2022
Apr 2022
Mar 2026
May 2021
Oct 2024
Sep 2025
Mar 2027
Nov 2021
Feb 2022
May 2022
Oct 2022
Oct 2022
May 2023
Mar 2024
Apr 2024
Mar 2025
Apr 2025
Sep 2025
Mar 2027
Mar 2027
Oct 2027
Mar 2029
Sep 2030
Jun 2035
Nov 2037
Nov 2041
Oct 2042
2020
–
–
865
1,219
520
732
951
680
632
1,159
6,758
97
685
724
1,409
–
202
283
256
741
–
535
250
1,002
461
1,580
969
1,069
532
531
992
1,103
50
553
864
991
270
586
537
473
13,348
22,353
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
54
NOTES TO THE FINANCIAL STATEMENTS
continued
20. Borrowings continued
US$ million
GBP 500 million 7.375% coupon bonds
Euro 750 million 3.375% coupon bonds
Euro 600 million 2.750% coupon bonds
CHF 500 million 1.250% coupon bonds
CHF 250 million 2.250% coupon bonds
US$ 1,000 million 2.875% coupon bonds
US$ 1,000 million 4.950% coupon bonds
Total current bonds
2020 BOND ACTIVITIES
• In September 2020, issued:
– 7.5 year EUR 850 million, 1.125% coupon bonds
– 5.5 year CHF 225 million, 1.000% coupon bonds
– 5 year $1,000 million, 1.625% coupon bonds
–
10 year $1,000 million, 2.500% coupon bonds
• In December 2020, issued 7.5 year EUR 100 million, 1.125% coupon bonds
2019 BOND ACTIVITIES
• In March 2019, issued:
– 5 year $1,000 million, 4.125% coupon bonds
–
10 year $750 million, 4.875% coupon bonds
– 7 year GBP 500 million 3.125% coupon bonds
Maturity
May 2020
Sep 2020
Apr 2021
Dec 2020
May 2021
Apr 2020
Nov 2021
2020
–
–
724
–
284
–
1,010
2,018
2019
675
842
–
519
–
419
–
2,455
• In April 2019, issued 7 year EUR 500 million 1.50% coupon bonds
• In September 2019, issued 6 year CHF 250 million 0.35% coupon bonds and 5 year EUR 600 million 0.625% coupon bonds
COMMITTED SYNDICATED REVOLVING CREDIT FACILITIES
In March 2020 (effective May 2020), Glencore signed new one-year revolving credit facilities of $9,975 million, refinancing the
$9,775 million one-year revolving facilities signed in March 2019, as well as extended its medium term facilities of $4,650 million.
Funds drawn under the facilities bear interest at US$LIBOR plus a margin of 40 basis points.
As at 31 December 2020, the active facilities comprise:
• a $9,975 million one year revolving credit facility with a one-year borrower’s term-out option (to May 2022) and a one-year
extension option; and
• a $4,650 million medium-term revolving credit facility (to May 2025), with a one-year extension option.
As in previous years, these committed unsecured facilities contain no financial covenants, no rating triggers, no material adverse
change clauses and no external factor clauses.
SECURED FACILITIES
US$ million
Syndicated committed metals
inventory/receivables facilities2
Syndicated uncommitted metals and oil
inventory/receivables facilities
Other secured facilities
Total
Current
Non-current
Maturity1
Nov 2024
Interest
2020
3.2%
81
Jan3/Jul/Aug 2021
US$ LIBOR + 65 bps
Mar 2021
US$ LIBOR + 75 bps
1,245
100
1,426
1,346
80
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.
Glencore Annual Report 2020
55
Glencore Annual Report 2020 185
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
21. Deferred income
US$ million
1 January 2020
Additions
Accretion in the year
Utilised in the year
Effect of foreign currency exchange difference
31 December 2020
Current
Non-current
1 January 2019
Additions
Accretion in the year
Utilised in the year
Effect of foreign currency exchange difference
31 December 2019
Current
Non-current
Unfavourable
contracts Prepayments
2,619
1,047
127
(663)
1
3,131
991
2,140
609
–
–
(66)
(14)
529
79
450
684
–
–
(83)
8
609
78
531
2,029
940
134
(484)
–
2,619
480
2,139
Total
3,228
1,047
127
(729)
(13)
3,660
1,070
2,590
2,713
940
134
(567)
8
3,228
558
2,670
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 short to 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.
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 2020, $1,391 million (2019: $1,499 million) of product delivery obligations remain of
which, $118 million (2019: $103 million) are due within 12 months.
• 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. In December 2020, Glencore signed an extension of and one
new silver prepayment arrangement, in exchange for an upfront advance of $426 million required to deliver an average of
6 million ounces of silver per annum, over a five year period. As at 31 December 2020, $841 million (2019: $680 million) of product
delivery obligations remain of which, $292 million (2019: $265 million) are due within 12 months.
• 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 2020, $100 million (2019:
$102 million) of delivery obligations remain of which, $5 million (2019: $1 million) are due within 12 months.
• 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 ounces of palladium per annum over a five year. In May 2020, Glencore signed a three year palladium
prepayment arrangement in exchange for an upfront advance payment of $40 million. Under the terms of the arrangement,
Glencore is required to deliver a minimum of 12 thousand ounces of palladium per annum over three year period. As at
31 December 2020, $200 million (2019: $200 million) of product delivery obligations remain of which, $63million (2019:
$40 million) are due within 12 months.
Glencore Annual Report 2020
186 Glencore Annual Report 2020
56
NOTES TO THE FINANCIAL STATEMENTS
continued
21. Deferred income continued
• Gold supply arrangement – In December 2020, Glencore signed a 12 month gold prepayment arrangement in exchange for an
upfront advance payment of $360 million. Under the terms of the arrangement, Glencore is required to deliver an average of
19 thousand ounces of gold per month. As at 31 December 2020, $360 million (2019: $Nil) of product delivery obligations remain
of which, $360million (2019: $Nil) are due within 12 months.
22. Provisions (including post-retirement benefits)
US$ million
1 January 2020
Utilised
Released
Accretion
Disposal of subsidiaries
Additions
Reclassification to held for sale
Reclassification from held for sale
Effect of foreign currency exchange
movements
31 December 2020
Current
Non-current
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
Notes
Post-retirement
employee
benefits
958
(106)
–
26
–
94
–
–
25
15
15
8
980
–
980
798
(93)
–
28
44
153
–
–
28
958
–
958
25
15
Other
employee
entitlements
228
(71)
–
–
(9)
38
(10)
–
Rehabilitation
costs
4,847
(189)
–
144
(208)
614
(54)
45
Onerous
contracts
595
–
(282)
40
–
184
–
–
5
181
–
181
243
(25)
(8)
–
–
19
–
–
(1)
228
10
218
(17)
5,182
297
4,885
4,457
(171)
(46)
139
80
419
–
(45)
14
4,847
239
4,608
(2)
535
143
392
722
(1)
(195)
40
–
36
(8)
–
1
595
98
497
Other
633
(37)
(42)
4
(15)
245
(24)
7
(25)
746
253
493
628
(118)
(18)
3
2
151
–
(7)
(8)
633
142
491
Total1
7,261
(403)
(324)
214
(232)
1,175
(88)
52
(31)
7,624
693
6,931
6,848
(408)
(267)
210
126
778
(8)
(52)
34
7,261
489
6,772
1 As at 31 December 2019, provisions were restated by $530 million to reflect reclassification of uncertain tax provisions to current ($410 million) and deferred tax liabilities ($120 million).
POST-RETIREMENT EMPLOYEE BENEFITS
The provision for post-retirement employee benefits includes pension plan liabilities of $504 million (2019: $446 million) and post-
retirement medical plan liabilities of $476 million (2019: $512 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 23
years (2019: 24 years).
As at 31 December 2020, 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 1.6% (2019: 1.8%), South African rand 3.6%
(2019: 3.8%), Australian dollar 2.3% (2019: 2.5%), Canadian dollar 1.7% (2019: 2.0%), and Chilean peso 2.6% (2019: 2.8%).
Glencore Annual Report 2020
57
Glencore Annual Report 2020 187
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
22. Provisions (including post-retirement benefits) continued
The effect of decreasing the discount rates used by 0.5% would result in an increase in the overall rehabilitation provision by
$426 million, with a resulting movement of $348 million in property, plant and equipment and $78 million in the statement of
income. In the following year, the depreciation expense would increase by some $15 million, with an opposite direction interest
expense adjustment of $7 million. The resulting net impact in the statement of income would be a decrease of $8 million, eventually
netting to $Nil over the weighted average settlement date of the provision.
ONEROUS CONTRACTS
Onerous contracts represent liabilities related to contractual take or pay commitments for securing coal logistics capacity and LNG
re-gasification 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 and construction related claims.
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 2020 and 2019, were $5,403 million and $5,231 million, respectively. Personnel costs related to
consolidated industrial subsidiaries of $3,944 million (2019: $4,035 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 $122 million in 2020 (2019: $141 million).
POST-RETIREMENT MEDICAL PLANS
The Company participates in a number of post-retirement medical plans, principally in Canada, which provide coverage for
prescription drugs, medical, dental, hospital and life insurance to eligible retirees. Almost all of the post-retirement medical plans
in the Group are unfunded.
DEFINED BENEFIT PENSION PLANS
The Company operates defined benefit plans in various countries, the main locations being Canada, Switzerland, UK and the U.S..
Approximately 65% of the present value of obligations accrued relates to the defined benefit plans in Canada, which are pension
plans that provide benefits to members in the form of a guaranteed level of pension payable for life. Contributions to the Canadian
plans are made to meet or exceed minimum funding requirements based on provincial statutory requirements and associated
federal taxation rules.
The majority of benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where
Glencore meets the benefit payments as they fall due. Plan assets held in trusts are governed by local regulations and practices in
each country. Responsibility for governance of the plans – overseeing all aspects of the plans including investment decisions and
contribution schedules – lies with Glencore. Glencore has set up committees to assist in the management of the plans and has also
appointed experienced, independent professional experts such as investment managers, actuaries, custodians, and trustees.
Glencore Annual Report 2020
188 Glencore Annual Report 2020
58
NOTES TO THE FINANCIAL STATEMENTS
continued
23. Personnel costs and employee benefits continued
The movement in the defined benefit pension and post-retirement medical plans over the year is as follows:
US$ million
1 January 2020
Current service cost
Past service cost – plan amendments
Settlement of pension plan disposal
Interest expense/(income)
Total expense/(income) 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 (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 2020
Of which:
Pension surpluses
Pension deficits
Defined benefit pension plans
Notes
Post-retirement
medical plans
512
8
–
–
19
Present value
of defined
benefit
obligation
2,951
59
2
(41)
75
Fair value
of plan
assets
(2,547)
–
–
48
(68)
95
–
(3)
211
5
213
–
1
(8)
(174)
(181)
60
3,138
(20)
(150)
–
–
–
(150)
(83)
(1)
8
174
98
(55)
(2,674)
27
–
(75)
28
4
(43)
–
–
(23)
–
(23)
3
476
–
476
11
22
Net liability
for defined
benefit
pension plans
404
59
2
7
7
75
(150)
(3)
211
5
63
(83)
–
–
–
(83)
5
464
(40)
504
The actual return on plan assets in respect of defined benefit pension plans amounted to a gain of $273 million (2019: $396 million),
comprising interest income and the re-measurement of plan assets.
During the next financial year, the Group expects to make a contribution of $84 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
$121 million. Future funding requirements and contributions are reviewed and adjusted on an annual basis.
Glencore Annual Report 2020
59
Glencore Annual Report 2020 189
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
23. Personnel costs and employee benefits continued
US$ 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
Defined benefit pension plans
Notes
Post-retirement
medical plans
405
7
(1)
–
21
Present value
of defined
benefit
obligation
2,651
52
(5)
(86)
93
54
–
(2)
256
12
266
–
1
(8)
(153)
(160)
25
115
2,951
27
–
–
39
1
40
–
–
(21)
–
(21)
44
17
512
–
512
25
11
22
Fair value
of plan
assets
(2,299)
–
–
85
(83)
Net liability
for defined
benefit
pension plans
352
52
(5)
(1)
10
2
56
(207)
–
–
–
(207)
(72)
(1)
8
153
88
(25)
(106)
(2,547)
(207)
(2)
256
12
59
(72)
–
–
–
(72)
–
9
404
(42)
446
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 2020 and 2019. The net liability of any of the Group’s defined benefit plans outside of Canada as at
31 December 2020 does not exceed $92 million (2019: $108 million).
Glencore Annual Report 2020
190 Glencore Annual Report 2020
60
NOTES TO THE FINANCIAL STATEMENTS
continued
23. Personnel costs and employee benefits continued
2020
US$ 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 2020
Of which:
Pension surpluses
Pension deficits
Weighted average duration of defined benefit obligation – years
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
Canada
Other
Total
415
142
273
2,041
501
37
1,503
(1,917)
124
(38)
162
13
61
11
50
1,097
533
192
372
(757)
340
(2)
342
16
476
153
323
3,138
1,034
229
1,875
(2,674)
464
(40)
504
14
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
Estimated future benefit payments of the Canadian plans, which reflect expected future service but exclude plan expenses, up until
2030 are as follows:
US$ million
2021
2022
2023
2024
2025
2026-2030
Total
Post-retirement
medical plans
19
19
19
19
19
91
186
Defined benefit
pension plans
137
106
106
149
102
502
1,102
Total
156
125
125
168
121
593
1,288
Glencore Annual Report 2020
61
Glencore Annual Report 2020 191
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
23. Personnel costs and employee benefits continued
The plan assets consist of the following:
Cash and short-term investments
Fixed income
Equities
Other
Total
Active market
24
844
979
393
2,240
2020
Non-active
market
Active market
15
900
960
296
2,171
21
213
–
200
434
2019
Non-active
market
19
185
–
172
376
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
2019
2020
3.6%
–
–
4.6%
Defined benefit pension plans
2019
2020
2.2%
2.6%
0.4%
–
2.7%
2.6%
0.4%
–
3.9%
–
–
4.5%
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned. As at
31 December 2020, these tables imply expected future life expectancy, for employees aged 65, 16 to 23 years for males (2019: 16 to 24)
and 20 to 25 years for females (2019: 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 Annual Report 2020
192 Glencore Annual Report 2020
62
NOTES TO THE FINANCIAL STATEMENTS
continued
23. Personnel costs and employee benefits continued
The sensitivity of the defined benefit obligation to changes in principal assumptions as at 31 December 2020 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
(33)
37
–
–
–
–
60
(47)
14
(200)
219
41
(39)
65
(58)
–
–
77
(233)
256
41
(39)
65
(58)
60
(47)
91
Notes
2020
2019
8,021
1,033
1,209
1,844
7,099
310
1,501
1,776
28
11,264
14,808
289
378
240
459
24,038
26,193
1
Includes $988 million (2019: $263 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. As at 31 December
2020, 10% (2019: 2%) of total trade payables of $19,285 million (2019: $21,907 million) include liabilities under supplier financing
arrangements with maturities beyond 91 days (refer to note 1 for critical judgements associated with classification of liabilities which
contain a financing element). The carrying value of trade payables approximates fair value.
Glencore Annual Report 2020
63
Glencore Annual Report 2020 193
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
25. Acquisition and disposal of subsidiaries and other entities
2020 ACQUISITIONS
In 2020, there were no material acquisitions of subsidiaries.
2019 ACQUISITIONS
In 2019, Glencore acquired a 75% controlling interest in Chevron South Africa Proprietary Limited and a 100% interest in Chevron
Botswana Proprietary Limited (together “Astron Energy”), a 42.9% additional interest in Polymet Mining Corp (“Polymet”) and
increased its interest in Ulan and Hail Creek.
The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the
acquisition date are detailed below:
US$ 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 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 advances and loans 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 acquisition accounting
for Astron Energy has now been finalised, with no adjustments to the previously reported provisional fair values.
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 for the year ended 31 December 2019. From the date of acquisition, the operation
contributed $3,888 million of revenue and $71 million of attributable net loss for the year ended 31 December 2019.
Glencore Annual Report 2020
194 Glencore Annual Report 2020
64
NOTES TO THE FINANCIAL STATEMENTS
continued
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. 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 acquisition accounting for Polymet has now been finalised, with no adjustments to the previously
reported provisional fair values.
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 for the year ended 31 December 2019. From the date of acquisition, the operation
contributed $Nil of revenue and attributable net loss of $3 million for the year ended 31 December 2019.
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 $39 million respectively, increasing Glencore’s interest in Ulan and Hail Creek to 100% and 84.7%, respectively.
Glencore Annual Report 2020
65
Glencore Annual Report 2020 195
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
25. Acquisition and disposal of subsidiaries and other entities continued
2020 DISPOSALS
In 2020, Glencore disposed of its controlling interest in Minera Alumbrera Limited. The carrying value of the assets and liabilities over
which control was lost and the net cash used in the disposal are detailed below:
US$ million
Non-current assets
Property, plant and equipment
Current assets
Inventories
Accounts receivable
Cash and cash equivalents
Non-controlling interest
Current liabilities
Provisions
Current liabilities
Borrowings
Accounts payable
Provisions
Carrying value of net assets disposed
Net gain on disposal
Cash and cash equivalents received
Less: cash and cash equivalents disposed
Net cash used in disposal
Alumbrera
12
12
2
14
222
238
2
(182)
(182)
(13)
(9)
(50)
(72)
(2)
(2)
–
(222)
(222)
Minera Alumbrera Limited
In December 2020, Glencore disposed of its 50% interest in Minera Alumbrera Limited, a copper-gold operation in Argentina, in
return for a 24.99% interest in Minera Agua Rica Alumbrera Limited. Glencore is no longer able to unilaterally direct the key strategic,
operating and capital decisions of Minera Alumbrera Limited and was deemed to have disposed of its controlling interest at fair
value. The difference to the net carrying value was recognised through the statement of income, with Glencore subsequently
accounting for its share in Minera Agua Rica Alumbrera Limited using the equity method in accordance with IAS 28.
Glencore Annual Report 2020
196 Glencore Annual Report 2020
66
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 loss/(gain) on disposal
Cash and cash equivalents received
Less: cash and cash equivalents disposed
Net cash received from disposal
Terminales
Portuarios
Chancay
Others
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 Annual Report 2020
67
Glencore Annual Report 2020 197
Strategic reportGovernanceAdditional informationFinancial statements
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 (negative 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 25% of free cash flow generated by our industrial assets during the year. The actual variable distribution component
(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 declare additional distributions to be included with the distribution confirmed with respect
to the prior year, consider top-up distributions during the 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 Annual Report 2020
198 Glencore Annual Report 2020
68
NOTES TO THE FINANCIAL STATEMENTS
continued
26. Financial and capital risk management continued
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 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. Given H1 2020’s extreme implied market
volatility, together with statistically elevated commodity correlations and increased Glencore Carry Trade transactions, the Board
approved a temporary increase in the VaR limit to $120 million in May 2020. With markets having stabilized through June/July, the
original $100 million limit has been restored. There were no limit breaches during the year.
Position sheets are regularly distributed and monitored and daily Monte Carlo simulations are applied to the various business
groups’ net marketing positions to determine potential losses.
Market risk VaR (one-day 95% confidence level) ranges and year-end positions were as follows:
US$ million
Year-end position
Average during the year
High during the year
Low during the year
2020
33
39
102
14
2019
18
27
43
18
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 with the same critical terms as the
underlying interest rate exposures. See details on swap instruments used below.
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 for the year ended 31 December 2020 would
decrease/increase by $112 million (2019: $126 million).
Interest rate benchmark reform
Whereas initially the UK FCA announced that they would not compel the 20 panel banks to submit into the LIBOR interest rate
setting mechanism by the end of 2021, in November 2020 they issued a revised timetable, with the consequence that overnight,
1, 3 and 6 month USD LIBOR’s will continue to be quoted until 30 June 2023.
Glencore Annual Report 2020
69
Glencore Annual Report 2020 199
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
26. Financial and capital risk management continued
To cater for the envisaged transition of interest rate hedging arrangements, which have an accelerated timetable, the Group has
agreed to align with the ISDA fall-back protocol. Therefore, all existing and new commercial and financial arrangements referencing
LIBORs, will be amended in line with the timelines and announcements made by regulators in the respective currency jurisdiction.
The Group has additionally established a multidisciplinary working group, to prepare and implement a LIBOR transition plan. This
working group is assessing on an ongoing basis the potential impact of LIBOR reform. This transition plan includes updating
policies, systems and processes, in order to anticipate the appropriate changes as and when deemed necessary.
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
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
2020
2019
2020
2019
2020
2019
2020
2019
2,907
798
504
1,777
1,783
256
1.14
1.60
1.06
1.11
1.79
1.02
4,323
81
663
440
9,716
6,664
81
663
956
12,180
1.27
0.01
1.33
1.04
1.24
0.01
1.33
1.04
164
–
16
232
16
81
48
557
6
–
–
128
10
28
–
172
–
126
–
120
–
–
–
246
4
454
4
513
–
–
2
977
2025
2022
2026
2024
2022
2026
2022
5,250
14,966
5,670
17,850
–
–
525
1,082
235
407
4
250
1
978
2025
Glencore Annual Report 2020
200 Glencore Annual Report 2020
70
NOTES TO THE FINANCIAL STATEMENTS
continued
26. Financial and capital risk management continued
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
2020
2019
After 5 years Due 3 – 5 years Due 2 – 3 years Due 1 – 2 years Due 0 – 1 year
1,305
1,909
2,123
2,804
1,970
2,688
3,381
3,099
1,823
1,987
Total
10,602
12,487
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)
Of which,
accumulated
amount of fair value
hedge adjustments
2020
2019
2020
2019
4,372
97
486
724
5,702
11,381
6,213
92
957
672
5,850
13,784
184
–
5
45
489
723
154
–
1
12
213
380
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 5.1% (2019: 4.7%) of its
trade receivables (on a gross basis taking into account credit enhancements) or accounting for more than 3.1% of its revenues over
the year ended 31 December 2020 (2019: 3.5%)(see notes 3 and 13).
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 Annual Report 2020
71
Glencore Annual Report 2020 201
Strategic reportGovernanceAdditional informationFinancial statements
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 relatively 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 (2019: $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 2020, Glencore had available committed undrawn credit facilities and cash amounting to $10,259 million
(2019: $10,141 million), refer to Other reconciliations section. The maturity profile of Glencore’s financial liabilities based on the
contractual terms is as follows:
2020
US$ million
Borrowings excluding lease liabilities
Expected future interest payments
Lease liabilities – undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
2019
US$ million
Borrowings excluding lease liabilities
Expected future interest payments
Lease liabilities – undiscounted
Accounts payable
Other financial liabilities
Total
Current assets
Glencore Annual Report 2020
202 Glencore Annual Report 2020
8,887
1,993
1,013
–
336
After 5 years Due 3 – 5 years Due 2 – 3 years Due 1 – 2 years Due 0 – 1 year
7,739
846
593
23,371
4,628
37,177
43,212
9,077
642
426
–
–
3,690
524
235
–
–
6,566
724
267
–
–
12,229
10,145
4,449
7,557
8,294
2,586
618
–
379
After 5 years Due 3 – 5 years Due 2 – 3 years Due 1 – 2 years Due 0 – 1 year
7,492
925
569
25,494
3,722
38,202
41,410
4,000
613
239
–
–
6,343
866
289
–
–
9,272
834
385
–
–
10,491
11,877
7,498
4,852
Total
35,959
4,729
2,534
23,371
4,964
71,557
43,212
Total
35,401
5,824
2,100
25,494
4,101
72,920
41,410
72
NOTES TO THE FINANCIAL STATEMENTS
continued
27. Financial instruments
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables present the carrying values and fair values of Glencore’s financial instruments. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (most advantageous) market at the
measurement date under current market conditions. Where available, market values have been used to determine fair values.
When market values are not available, fair values have been calculated by discounting expected cash flows at prevailing market
interest and exchange rates. The estimated fair values have been determined using market information and appropriate valuation
methodologies, but are not necessarily indicative of the amounts that Glencore could realise in the normal course of business.
The financial assets and liabilities are presented by class in the tables below at their carrying values, which generally approximate
the fair values with the exception of $37,479 million (2019: $37,043 million) of borrowings, the fair value of which at 31 December 2020
was $38,672 million (2019: $37,670 million) based on observable market prices applied to the borrowing portfolio (a Level 2 fair value
measurement). Presentation of prior period balances relating to financial derivatives has been restated to reflect their appropriate
classification as either current or non-current, in accordance with contractual maturities. As a result, $428 million (2018: $252 million)
was reclassified from other financial assets to non-current other financial assets and $850 million (2018: $1,091 million) was
reclassified from other financial liabilities to non-current other financial liabilities as of 31 December 2019 and 31 December 2018
respectively.
2020
US$ 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
–
–
994
7,696
–
1,498
10,188
37,479
100
12,107
–
49,686
86
1,106
404
4,598
1,998
–
8,192
–
588
11,264
4,276
16,128
1,647
–
–
–
–
–
1,647
–
–
–
–
–
1,733
1,106
1,398
12,294
1,998
1,498
20,027
37,479
688
23,371
4,276
65,814
1 FVTPL – Fair value through profit and loss.
2 FVTOCI – Fair value through other comprehensive income.
3 Other investments of $1,691 million are classified as Level 1 measured using quoted market prices with the remaining balance of $41 million being investments in private companies,
classified as Level 2 measured using discounted cash flow models.
2019
US$ 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
1 FVTPL – Fair value through profit and loss.
Amortised
cost
FVTPL1
FVTOCI2
Total
–
–
907
6,654
–
1,899
9,460
37,043
98
10,686
–
47,827
97
453
161
6,577
1,953
–
9,241
–
1,131
14,808
2,872
18,811
2,290
–
–
–
–
–
2,290
–
–
–
–
–
2,387
453
1,068
13,231
1,953
1,899
20,991
37,043
1,229
25,494
2,872
66,638
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 $42 million being investments in private companies,
classified as Level 2 measured using discounted cash flow models.
Glencore Annual Report 2020
73
Glencore Annual Report 2020 203
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
27. Financial instruments continued
OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES
In accordance with IAS 32 the Group reports financial assets and liabilities on a net basis in the consolidated statement of financial
position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or
to realise the asset and settle the liability simultaneously. The financial assets and liabilities subject to offsetting, enforceable master
netting and similar agreements as at 31 December 2020 and 2019 were as follows:
2020
US$ million
Derivative assets1
Derivative liabilities1
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
Gross
amount
11,575
(12,941)
Amounts
offset
(9,678)
9,678
Net
amount
1,897
(3,263)
Financial
instruments
(246)
246
Financial
collateral
(925)
2,389
Net
amount
726
(628)
1 Presented within current other financial assets and current other financial liabilities.
Total as
presented
in the
consolidated
statement
of financial
position
3,096
(4,628)
Amounts
not subject
to netting
agreements
1,199
(1,365)
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
2019
US$ million
Derivative assets1
Derivative liabilities1
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
1 Presented within current and non-current other financial assets and current and non-current other financial liabilities.
Amounts
not subject
to netting
agreements
1,237
(1,953)
Net
amount
504
(269)
Total as
presented
in the
consolidated
statement
of financial
position
2,381
(3,722)
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 Annual Report 2020
204 Glencore Annual Report 2020
74
NOTES TO THE FINANCIAL STATEMENTS
continued
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 2020 and
2019. Other assets and liabilities which are measured at fair value on a recurring basis are marketing inventories, other investments
and certain advances and loans. There are no non-recurring fair value measurements.
FINANCIAL ASSETS
2020
US$ million
Accounts receivable
Deferred consideration (Note 11)
Other financial assets
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Current other financial assets
Non-current other financial assets
Cross currency swaps
Foreign currency and interest rate contracts
Purchased call options over Glencore shares1
Non-current other financial assets
Total
Level 1
–
–
Level 2
4,468
–
Level 3
130
302
107
19
142
–
–
268
–
–
–
–
268
75
13
249
916
219
1,472
529
569
8
1,106
7,046
–
–
–
258
–
258
–
–
–
–
690
1 Call options over the Company’s shares in relation to conversion rights of the $500 million non-dilutive convertible bond, due in 2025. See note 20.
2019
US$ million
Accounts receivable
Deferred consideration (Note 11)
Other financial assets
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Current other financial assets
Non-current other financial assets
Cross currency swaps
Foreign currency and interest rate contracts
Purchased call options over Glencore shares1
Non-current other financial assets
Total
Level 1
–
–
Level 2
6,540
–
Level 3
37
45
377
14
80
–
–
471
–
–
–
–
471
80
63
122
898
2
1,165
173
255
25
453
8,158
–
–
–
317
–
317
–
–
–
–
399
Total
4,598
302
182
32
391
1,174
219
1,998
529
569
8
1,106
8,004
Total
6,577
45
457
77
202
1,215
2
1,953
173
255
25
453
9,028
Glencore Annual Report 2020
75
Glencore Annual Report 2020 205
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
28. Fair value measurements continued
FINANCIAL LIABILITIES
2020
US$ million
Accounts payable
Other financial liabilities
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Current other financial liabilities
Non-current other financial liabilities
Cross currency swaps
Foreign currency and interest rate contracts
Non-discretionary dividend obligation1
Option over non-controlling interest in Ale
Deferred consideration
Embedded call options over Glencore shares2
Non-current other financial liabilities
Total
2019
US$ million
Accounts payable
Other financial liabilities
Commodity related contracts
Futures
Options
Swaps
Physical forwards
Financial contracts
Cross currency swaps
Current other financial liabilities
Non-current other financial liabilities
Cross currency swaps
Foreign currency and interest rate contracts
Non-discretionary dividend obligation1
Option over non-controlling interest in Ale
Deferred consideration
Embedded call options over Glencore shares2
Non-current other financial liabilities
Total
Level 1
–
Level 2
11,264
Level 3
–
Total
11,264
2,652
29
228
–
–
2,909
–
–
–
–
–
–
–
2,909
264
14
224
537
76
1,115
171
181
–
–
–
8
360
12,739
–
–
–
252
–
252
–
–
150
22
56
–
228
480
2,916
43
452
789
76
4,276
171
181
150
22
56
8
588
16,128
Level 1
–
Level 2
14,808
Level 3
–
Total
14,808
1,141
85
90
–
–
1,316
–
–
–
–
–
–
–
1,316
151
11
179
852
155
1,348
824
26
–
–
–
25
875
17,031
–
–
–
208
–
208
–
–
161
36
59
–
256
464
1,292
96
269
1,060
155
2,872
824
26
161
36
59
25
1,131
18,811
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 12 years as at 31 December 2020) and has no fixed repayment date and is not cancellable
within 12 months.
2 Embedded call option bifurcated from the 2025 convertible bond. See note 20.
Glencore Annual Report 2020
206 Glencore Annual Report 2020
76
NOTES TO THE FINANCIAL STATEMENTS
continued
28. Fair value measurements continued
The following table shows the net changes in fair value of Level 3 financial assets and financial liabilities:
US$ million
1 January 2020
Total gain recognised in revenue
Total loss recognised in cost of goods sold
Non-discretionary dividend obligation
Option over non-controlling interest
Deferred consideration
Realised
31 December 2020
1 January 2019
Total gain recognised in revenue
Total loss recognised in cost of goods sold
Non-discretionary dividend obligation
Option over non-controlling interest
Deferred consideration
Realised
31 December 2019
Accounts
Receivable
37
–
–
–
–
133
(40)
130
7
–
–
–
–
43
(13)
37
Physical
forwards
109
1
(63)
–
–
–
(41)
6
305
154
(226)
–
–
–
(124)
109
Options
–
–
–
–
–
–
–
–
(3)
–
–
–
–
–
3
–
Other
(211)
–
–
11
14
260
–
74
(239)
–
–
27
4
(3)
–
(211)
Total
Level 3
(65)
1
(63)
11
14
393
(81)
210
70
154
(226)
27
4
40
(134)
(65)
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.
Glencore Annual Report 2020
77
Glencore Annual Report 2020 207
Strategic reportGovernanceAdditional informationFinancial statements
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:
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
2020
107
(2,652)
Assets
Liabilities
75
(264)
2019
377
(1,141)
80
(151)
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
19
(29)
13
(14)
14
(85)
63
(11)
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
142
(228)
249
(224)
80
(90)
122
(179)
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 Annual Report 2020
208 Glencore Annual Report 2020
78
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:
Cross currency swaps – Level 2
Valuation techniques and key inputs:
Assets
Liabilities
2020
916
(537)
2019
898
(852)
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
258
(252)
317
(208)
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 1%–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
748
(247)
175
(979)
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
569
(181)
255
(26)
Significant unobservable inputs:
Foreign currency and interest rate contracts – Level 2
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
8
(8)
25
(25)
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 Annual Report 2020
79
Glencore Annual Report 2020 209
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
28. Fair value measurements continued
US$ million
Accounts receivable and payable – Level 2
Assets
Liabilities
2020
4,468
(11,264)
2019
6,540
(14,808)
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:
Significant unobservable inputs:
Deferred consideration (Mototolo) – Level 3
Valuation techniques and key inputs:
Significant observable inputs:
Deferred consideration (Orion) – Level 3
Valuation techniques and key inputs:
Significant observable 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
391
–
82
–
Discounted cash flow model
– Forecast commodity prices;
– Discount rates using weighted average cost
of capital methodology;
– Exchange rates;
The valuation remains sensitive to price and a 10% increase/decrease in commodity price
assumptions would result in an $48 million adjustment to the current carrying value.
Assets
Liabilities
41
–
–
–
Discounted cash flow model
– Estimated production plan;
– Forecast commodity prices;
– Discount rates using weighted average cost
of capital methodology;
The valuation remains sensitive to commodity price assumptions and a 10% increase/decrease
in gold price would result in a $14 million positive adjustment to the current carrying value of
the asset, while a 10% decrease in gold price would result in a $21 million negative adjustment
–
(161)
Assets
Liabilities
–
(150)
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 $105 million
adjustment to the current carrying value.
Option over non-controlling interest in Ale – Level 3
Assets
Liabilities
–
(22)
–
(36)
Valuation techniques and key inputs:
Significant unobservable inputs:
Discounted cash flow model
The resultant liability is the value of the remaining minority stake in the subsidiary, measured
as the higher value of the acquisition date valuation of the shares, and a discounted future
earnings based valuation. The valuation is additionally sensitive to movement in the spot
exchange rates between the Brazilian Real and US Dollar.
Glencore Annual Report 2020
210 Glencore Annual Report 2020
80
NOTES TO THE FINANCIAL STATEMENTS
continued
29. Auditor’s remuneration
US$ 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
Transaction services
Taxation compliance services
Other taxation advisory services
Other assurance services2
Total non-audit fees
Total professional fees
2020
2019
3
19
2
24
1
1
1
1
4
28
3
18
3
24
–
2
2
2
6
30
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.
2 Other assurance services primarily comprise assurance in respect of certain aspects of the Group’s sustainability reporting.
30. Future commitments
Capital expenditure for the acquisition of property, plant and equipment is generally funded through the cash flow generated
by the respective industrial entities. As at 31 December 2020, $859 million (2019: $1,240 million), of which 87% (2019: 89%) 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 2020,
$128 million (2019: $126 million) of such development expenditures are to be incurred, of which 27% (2019: 37%) 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 2020, $6,334 million (2019: $9,628 million)
of procurement and $4,138 million (2019: $3,953 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
($446 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.
Glencore Annual Report 2020
81
Glencore Annual Report 2020 211
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
31. Contingent liabilities
The amount of corporate guarantees in favour of third parties as at 31 December 2020 was $Nil (2019: $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 2020 and
2019, it was not feasible to make such an assessment.
LEGAL AND REGULATORY PROCEEDINGS
Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, a provision is recognised when Glencore has a present
obligation (legal or constructive), as a result of a past event, and it is probable that an outflow of resources embodying economic
benefits, that can be reliably estimated, will be required to settle the liability. A contingent liability is a possible obligation that arises
from a past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of Glencore. If it is not clear whether there is a present obligation, a past event is deemed to give
rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists at the
end of the reporting period. When a present obligation arises but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient
reliability, a contingent liability is disclosed.
The Group is subject to various legal and regulatory proceedings as detailed below. The facts and circumstances of these
proceedings are assessed on a regular basis to determine if the criteria for recognising a provision in accordance with IAS 37 are met.
At 31 December 2020 and 31 December 2019, the Group has concluded that the recognition criteria have not been met, as such no
liability has been recognised in relation to these matters in the consolidated statement of financial position at the end of the
reporting periods. The nature of these contingent liabilities is disclosed below.
INVESTIGATIONS BY REGULATORY AND ENFORCEMENT AUTHORITIES
The Group is subject to a number of investigations by regulatory and enforcement authorities including:
• The United States Department of Justice is investigating the Group with respect to compliance with various criminal statutes,
including the Foreign Corrupt Practices Act, United States money laundering statutes and fraud statutes related to the Group’s
business in certain overseas jurisdictions.
• The United States Commodity Futures Trading Commission ("CFTC") is investigating whether the Group 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 Office of the Attorney General of Switzerland is investigating Glencore International AG for failure to have the organisational
measures in place to prevent alleged corruption.
The Board has appointed a committee, the Investigations Committee (“the Committee”), to oversee the response to the
investigations on behalf of the Board. The Committee has engaged external legal counsel and forensic experts to assist in
responding to the various investigations and to perform additional investigations at the request of the Committee covering various
aspects of the Group’s business.
The Group is continuing to cooperate fully with the various authorities, including through reporting to those authorities facts
relevant to their investigations. The investigations are complex and dynamic including in relation to scope. The timing and outcome
of the various investigations remain uncertain.
At 31 December 2020, taking account of all available evidence, the Committee concluded that it is not probable that a present
obligation existed at the end of the reporting period for the above regulatory and enforcement proceedings. Consequently, the
timing and amount, if any, of financial effects (such as fines, penalties or damages, which could be material) or other consequences,
including external costs, from any of the various investigations and any change in their scope is not possible to predict or estimate.
OTHER LEGAL PROCEEDINGS
The Group was named in a securities class action suit in the United States District Court of New Jersey in connection with the
various regulatory and enforcement authorities investigations. The District Court issued an order dismissing the suit on 31 July 2020.
Other claims and unresolved disputes are pending against Glencore, however, based on the Group’s current assessment of these
matters any future individually material financial obligations are considered to be remote.
Glencore Annual Report 2020
212 Glencore Annual Report 2020
82
NOTES TO THE FINANCIAL STATEMENTS
continued
31. Contingent liabilities continued
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 2020, sales and purchases with associates and joint ventures amounted to
$2,710 million (2019: $3,727 million) and $5,033 million (2019: $4,923 million) respectively.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO and the Head of the Industrial
activities segment. 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 $19 million (2019:
$18 million). There were no other long-term benefits or share-based payments to key management personnel (2019: $Nil). Further
details on remuneration of Directors are set out in the Directors’ remuneration report on page 100.
33. Principal subsidiaries with material non-controlling interests
Non-controlling interest is comprised of the following:
US$ million
Volcan
Kazzinc
Koniambo
Other1
Total
2020
(136)
1,362
(4,098)
(363)
(3,235)
2019
1,217
1,298
(3,607)
54
(1,038)
1 Other comprises various subsidiaries in which no individual balance attributable to non-controlling interests is material.
2020 KML MINORITY SHARE ACQUISITION AND DELISTING
On 3 June 2020, Glencore completed the acquisition of the remaining 0.5% minority interest in Katanga Mining Limited (“KML”), an
entity listed on the Toronto Stock Exchange which in turn owns a 75% interest in Kamoto Copper Company (“KCC”) for $39 million
(Canadian $56 million). As a result, KML is now a wholly-owned subsidiary of the Group and an amount of $18 million was recognised
directly in ‘other equity reserves’ in accordance with IFRS 10. Following such acquisition, KML has been delisted from the Toronto
Stock Exchange and is no longer considered a “reporting issuer” under applicable Canadian securities legislation.
The remaining non-controlling interest balance of $232 million (2019: $159 million) represents the 25% interest in KCC held by La
Générale des Carrières et des Mines (“Gécamines”).
Glencore Annual Report 2020
83
Glencore Annual Report 2020 213
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
33. Principal subsidiaries with material non-controlling interests continued
Summarised financial information in respect of Glencore’s subsidiaries that have material non-controlling interest as at
31 December 2020, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
US$ million
31 December 2020
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 %
2020
Revenue
Expenses
Net profit/(loss) for the year
Profit/(loss) attributable to owners of the Company
Profit/(loss) attributable to non-controlling interests
Total comprehensive income/(loss) for the year
Dividends paid to non-controlling interests
Net cash inflow/(outflow) from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
Total net cash inflow
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
Glencore Annual Report 2020
214 Glencore Annual Report 2020
Kazzinc
Koniambo
Volcan
4,407
1,167
5,574
737
333
1,070
4,504
3,142
1,362
30.3%
3,032
(2,418)
614
428
186
614
(120)
1,010
(388)
(597)
25
1,594
307
1,901
12,719
91
12,810
(10,909)
(6,811)
(4,098)
51.0%
239
(1,201)
(962)
(471)
(491)
(962)
–
(194)
(36)
233
3
1,793
293
2,086
1,350
348
1,698
388
524
(136)
76.7%
547
(2,307)
(1,760)
(413)
(1,347)
(1,760)
–
129
(117)
67
79
Kazzinc
Koniambo
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
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)
84
NOTES TO THE FINANCIAL STATEMENTS
continued
34. Principal operating, finance and industrial subsidiaries and investments
Principal subsidiaries
Industrial activities
Minera Alumbrera Limited1
Cobar Management Pty Limited
Compania Minera Lomas Bayas
Complejo Metalurgico Altonorte S.A.
Compania Minera Antapaccay S.A.
Pasar Group
Glencore Recycling Inc
Mopani Copper Mines plc
Polymet Mining Corp.
Kamoto Copper Company SA2
Mutanda Group
Mount Isa Mines Limited
Kazzinc Ltd
Zhairemsky GOK JSC
Altyntau Kokshetau JSC
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 Operations Pty Limited
Koniambo Nickel S.A.S.3
Glencore Nikkelverk AS
McArthur River Mining Pty Ltd
Nordenhamer 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
2020
% interest
2019
Main activity
Antigua
Australia
Chile
Chile
Peru
Philippines
USA
Zambia
Canada
DRC
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
–
100.0
100.0
100.0
100.0
78.2
100.0
73.1
71.6
75.0
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
71.7
Copper/Cobalt production
74.6
100.0
Copper/Cobalt production
100.0 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
69.7 Copper/Zinc/Lead production
69.7
Gold production
Char production
100.0
Char production
100.0
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
23.3
Zinc production
Zinc/Lead production
100.0
Zinc/Lead production
100.0
Zinc/Lead production
97.6
Zinc/Tin production
100.0
1
In 2019, this investment was treated as a subsidiary as the Group was 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. The investment was disposed during 2020, refer to note 25.
2 Refer to note 33.
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 Annual Report 2020
85
Glencore Annual Report 2020 215
Strategic reportGovernanceAdditional informationFinancial statements
NOTES TO THE FINANCIAL STATEMENTS
continued
34. Principal operating, finance and industrial subsidiaries and investments continued
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
Glencore Capital Finance DAC
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
Country of
incorporation
% interest
2020
% interest
2019
Main activity
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
Ireland
Netherlands
Switzerland
UAE
USA
Australia
Canada
Singapore
Singapore
Switzerland
Switzerland
UK
UK
UK
83.0
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
88.0
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
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
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
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 Annual Report 2020
216 Glencore Annual Report 2020
86
NOTES TO THE FINANCIAL STATEMENTS
continued
34. Principal operating, finance and industrial subsidiaries and investments continued
Country of
incorporation
% interest
2020
% interest
2019
Principal joint ventures7
Viterra Group (formerly Glencore Agriculture Limited)
Clermont Coal Joint Venture8
BaseCore Metals LP
Compania Minera Dona Ines de Collahuasi
El Aouj Joint Venture
Principal joint operation 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
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 Tbk
HG Storage International Limited
Noranda Income Fund
Trevali Mining Company
Compania Minera Antamina S.A.
Recylex S.A.
Minera Agua Rica Alumbrera Limited
Other investments
EN+ GROUP PLC11
OAO NK Russneft12
Jersey
Australia
Canada
Chile
Mauritania
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
South Africa
South Africa
Australia
South Africa
South Africa
Colombia
Australia
Australia
Australia
South Africa
USA
Indonesia
Jersey
Canada
Canada
Peru
France
Argentina
Russia
Russia
49.9
37.1
50.0
44.0
50.0
75.0
72.6
90.0
84.7
49.0
67.5
55.0
75.0
47.5
49.0
74.0
70.0
79.5
74.0
33.3
13.9
35.7
25.0
19.3
47.0
30.2
49.0
25.0
26.3
33.8
29.8
25.0
10.6
25.0
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
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
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
Vanadium production
Coal production
Coal terminal
Coal terminal
Coal terminal
Coal terminal
Aluminium production
Alumina production
Oil storage
Zinc production
Zinc production
Zinc/Copper production
Zinc/Lead production
Copper 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% (2019: 42.9%) voting interest and 4% non-voting interest (2019:4%). Century is publicly traded on NASDAQ
under the symbol CENX.
In January 2019, Glencore agreed to exchange its interest in United Company Rusal plc into a 10.6% interest in EN+ GROUP PLC.
11
12 Although the Group holds more than 20% of the voting rights in Russneft, it is unable to exercise significant influence over the financial and operating policy decisions of Russneft.
Glencore Annual Report 2020
87
Glencore Annual Report 2020 217
Strategic reportGovernanceAdditional informationFinancial statements
Mariya Kuimova
Mariya Kuimova
Human Resources Director –
Kazzinc, Kazakhstan
SIMPLICITY
Mariya works in HR, where she says that the problems that need
to be dealt with are rarely straightforward. However, she has a
philosophy that helps her
“In order to solve complex problems, I look
for simple solutions. Simpler solutions are
more beautiful.”
Learn more about our culture and how we work
towards simple solutions on www.glencore.com
ENTREPRENEURIALISM
Tanya joined Glencore in 2011 as an Underground Truck Operator,
and has progressed her career through a number of roles,
recently completing our Future Leaders Development Program.
What does being an entrepreneur mean to her?
Tanya Cambetis
Tanya Cambetis
Operations Contract
Coordinator – Glencore
Australia
“There needs to be someone who is always
thinking ‘Is there a better way to get the
same task done but in a way that is better
for our people, better for our business and
just better overall’.”
Learn more about our culture and how we foster
entrepreneurialism on www.glencore.com
ADDITIONAL
INFORMATION
Alternative performance measures
Other reconciliations
Production by quarter –
Q4 2019 to Q4 2020
Resources and reserves
Shareholder information
219
226
228
235
243
218 Glencore Annual Report 2020
218 Glencore Annual Report 2020
ALTERNATIVE PERFORMANCE
ALTERNATIVE PERFORMANCE
MEASURES
MEASURES
Alternative performance measures are denoted by the symbol ◊
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
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
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 business performance
derived from the financial statements prepared in accordance with IFRS. The APMs are consistent with how business performance
is measured and reported within the internal management reporting to the Board and management and assist in providing
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
meaningful analysis of the Group’s results both internally and externally in discussions with the financial analyst and investment
community.
community.
The Group uses APMs to aid the comparability of information between reporting periods and segments and to aid the
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
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
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
basis) certain IFRS measures. APMs are also used to approximate the underlying operating cash flow generation of the operations
(Adjusted EBITDA).
(Adjusted EBITDA).
Investments in the extractive industry are typically significant and the initial spend generally occurs over several years, “upfront”,
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
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,
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
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
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.
performance and returns attributable to the Group.
Adjusted EBITDA is a useful approximation of the operating cash flow generation by eliminating depreciation and amortisation
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
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.
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
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
Group, irrespective of the differing accounting treatments required to account for our minority/joint ownership interests of our
relevant material investments.
relevant material investments.
Net funding is an aggregation of IFRS measures (Borrowings less cash and cash equivalents) and Net debt is Net funding less
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
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.
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
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
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,
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.
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.
Listed below are the definitions and reconciliations to the underlying IFRS measures of the various APMs used by the Group.
Proportionate adjustment
Proportionate adjustment
For internal reporting and analysis, management evaluates the performance of Antamina copper/zinc mine (34% owned), Cerrejón
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
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.
Glencore’s proportionate share of the revenues, expenses, assets and liabilities of these investments.
In November 2017, Glencore increased its voting interest in Volcan to 63%, but its total economic interest only increased to 23.3%. For
In November 2017, Glencore increased its voting interest in Volcan to 63%, but its total economic interest only increased to 23.3%. For
internal reporting and analysis, management evaluates the performance of Volcan under the equity method, reflecting the Group’s
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
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 consolidated
structure. The impact is that we reflect 23.3% of Volcan’s net income in the Group’s Adjusted EBIT/EBITDA and its consolidated
results are excluded from all other APM’s including production data.
results are excluded from all other APM’s including production data.
The Viterra joint venture is a stand-alone group with a fully independent capital structure, governance and credit profile, supporting
The Viterra joint venture is a stand-alone group with a fully independent capital structure, governance and credit profile, supporting
a global business, across many geographies, products and activities. Glencore’s management evaluates this investment’s financial
a global business, across many geographies, products and activities. Glencore’s management evaluates this investment’s financial
performance on a net return basis, as opposed to an Adjusted EBITDA basis and thus, the financial results of Viterra are presented
performance on a net return basis, as opposed to an Adjusted EBITDA basis and thus, the financial results of Viterra are presented
on a basis consistent with its underlying IFRS treatment (equity accounting).
on a basis consistent with its underlying IFRS treatment (equity accounting).
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
associates and joint ventures” below.
associates and joint ventures” below.
Glencore Annual Report 2020
Glencore Annual Report 2020
88
88
Glencore Annual Report 2020 219
Strategic reportFinancial statementsGovernanceAdditional information
ALTERNATIVE PERFORMANCE MEASURES
continued
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
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 and joint ventures
Share of income from associates and joint ventures2
2020
124,137
41,453
(20,803)
144,787
(2,996)
547
142,338
2020
2,061
(683)
1,378
(445)
(56)
(524)
(1,025)
353
91
444
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
1 Represents an impairment of $445 million, net of taxes of $211 million (2019: $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 earnings of $197 million (2019: losses of $58 million) from Marketing activities and share in earnings of $247 million (2019: $172 million) from Industrial activities.
Adjusted EBIT/EBITDA
Adjusted EBIT/EBITDA provide insight into our overall business performance (a combination of cost management, seizing market
opportunities and growth), and are the corresponding flow drivers towards our objective of achieving industry-leading returns.
Adjusted EBIT is the net result of revenue less cost of goods sold and selling and administrative expenses, plus share of income from
associates and joint ventures, dividend income and the attributable share of Adjusted EBIT of relevant material associates and joint
ventures, which are accounted for internally by means of proportionate consolidation, excluding Significant items, see below.
Glencore Annual Report 2020
220 Glencore Annual Report 2020
89
ALTERNATIVE PERFORMANCE MEASURES
continued
Adjusted EBITDA consists of Adjusted EBIT plus depreciation and amortisation, including the related Proportionate adjustments.
See reconciliation table below.
US$ 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
2020
2019
142,338
(138,640)
(1,681)
444
32
2,493
215,111
(210,434)
(1,391)
114
49
3,449
92
–
760
1,025
46
4,416
6,671
683
(210)
11,560
219
73
(468)
772
106
4,151
7,161
745
(456)
11,601
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 2020
US$ million
Share of Associates' significant items1
Movement in unrealised inter-segment profit elimination1
Loss on disposals of non-current assets2
Other expense – net3
Tax significant items in their own right4
Impairments attributable to equity holders
Impairments5
Impairment Volcan5
Impairments – net, related to material associates and joint ventures6
Total significant items
Gross
significant
charges
(92)
(760)
(36)
(173)
–
Non-controlling
interests’ share
–
–
–
(12)
–
(1,061)
(12)
Significant
items tax
–
80
–
(69)
479
490
Equity
holders’ share
(92)
(680)
(36)
(254)
479
(583)
(3,600)
(2,347)
(445)
(6,392)
(7,453)
350
1,251
–
1,601
1,589
270
716
–
986
1,476
(2,980)
(380)
(445)
(3,805)
(4,388)
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 Tax credits related to certain recognition of tax adjustments ($724 million), offset by tax expenses related to foreign exchange fluctuations ($76 million) and tax losses not recognised
($169 million), see note 7 of the financial statements.
5 See note 6 of the financial statements.
6 See Proportionate adjustment reconciliation above.
Glencore Annual Report 2020
90
Glencore Annual Report 2020 221
Strategic reportFinancial statementsGovernanceAdditional information
ALTERNATIVE PERFORMANCE MEASURES
continued
Reconciliation of net significant items 2019
US$ million
Share of Associates' significant items1
Share of significant items – Volcan
Movement in unrealised inter-segment profit elimination1
Loss on disposals of non-current assets2
Other expense – net3
Tax significant items in their own right4
Impairments attributable to equity holders
Impairments5
Impairments – net, related to material associates and joint ventures6
Total significant items
Gross
significant
charges
(219)
(73)
468
(43)
(173)
–
Non-controlling
interests’ share
–
–
–
–
–
–
Significant
items tax
–
–
(46)
–
–
(435)
Equity
holders’ share
(219)
(73)
422
(43)
(173)
(435)
(40)
–
(481)
(521)
(2,408)
(435)
(2,843)
(2,883)
286
–
286
286
232
–
232
(249)
(1,890)
(435)
(2,325)
(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 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 ($120 million), see note 7 of the financial statements.
5 See note 6 of the financial statements.
6 See Proportionate adjustment reconciliation above.
Net income attributable to equity shareholder pre-significant items
Net income attributable to equity shareholders pre-significant items is a measure of our ability to generate shareholder returns.
The calculation of tax items to be excluded from Net income, includes the tax effect of significant items and significant tax items
themselves. Refer to reconciliation below.
US$ million
Loss attributable to equity holders of the Parent
Significant items
Income attributable to equity holders of the Parent pre-significant items
APMS DERIVED FROM THE STATEMENT OF FINANCIAL POSITION
2020
(1,903)
4,388
2,485
2019
(404)
2,846
2,442
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 funding is defined as total current and non-current borrowings
less cash and cash equivalents and related Proportionate adjustments. Net debt is defined as Net funding less 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% 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
2020, $19,584 million (2019: $16,810 million) of inventories were considered readily marketable. This comprises $12,260 million (2019:
$10,516 million) of inventories carried at fair value less costs of disposal and $7,324 million (2019: $6,294 million) carried at the lower
of cost or net realisable value. Total readily marketable inventories includes $128 million (2019: $148 million) related to the relevant
material associates and joint ventures (see note 2) presented under the proportionate consolidation method, comprising inventory
carried at lower of cost or net realisable value. Given the highly liquid nature of these inventories, which represent a significant share
of current assets, the Group believes it is appropriate to consider them together with cash equivalents in analysing Group net debt
levels and computing certain debt coverage ratios and credit trends.
Glencore Annual Report 2020
222 Glencore Annual Report 2020
91
ALTERNATIVE PERFORMANCE MEASURES
continued
Net funding/net debt at 31 December 2020
US$ 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 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
Proportionate
adjustment
material
associates and
joint ventures
210
151
Proportionate
adjustment
Volcan
(889)
(33)
361
(107)
254
(128)
126
(922)
115
(807)
–
(807)
Reported
measure
29,227
8,252
37,479
(1,498)
35,981
(19,456)
16,525
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
Adjusted
measure
28,548
8,370
36,918
(1,490)
35,428
(19,584)
15,844
11,560
1.37
Adjusted
measure
28,586
7,786
36,372
(2,006)
34,366
(16,810)
17,556
11,601
1.51
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.
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
2020
488
4,082
4,570
(543)
117
4,144
2019
438
5,349
5,787
(609)
190
5,368
Glencore Annual Report 2020
92
Glencore Annual Report 2020 223
Strategic reportFinancial statementsGovernanceAdditional information
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 purchases 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.
2020 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
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
Proportionate
adjustment
material
associates and
joint ventures
(513)
4
(509)
Reported
measure
(3,569)
52
(3,517)
Proportionate
adjustment
Volcan
105
–
105
Proportionate
adjustment
material
associates and
joint ventures
(603)
–
(603)
Reported
measure
(4,712)
178
(4,534)
Proportionate
adjustment
Volcan
180
(9)
171
Adjusted
measure
(3,977)
56
(3,921)
Adjusted
measure
(5,135)
169
(4,966)
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.
2020
2020 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
Proportionate
adjustment
material
associates and
joint ventures
–
2,061
15
Reported
measure
8,568
–
–
Proportionate
adjustment
Volcan
–
(131)
–
8,568
(820)
100
(1,174)
1,015
7,689
2,076
(383)
1
(12)
(972)
710
(131)
14
(1)
44
–
(74)
Glencore Annual Report 2020
224 Glencore Annual Report 2020
Adjusted
measure
8,568
1,930
15
10,513
(1,189)
100
(1,142)
43
8,325
15,844
52.5%
93
ALTERNATIVE PERFORMANCE MEASURES
continued
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
Proportionate
adjustment
material
associates and
joint ventures
–
1,754
7
Proportionate
adjustment
Volcan
–
(232)
6
1,761
(544)
2
(8)
(776)
435
(226)
31
(1)
43
–
(153)
Reported
measure
10,346
–
–
10,346
(2,301)
200
(1,604)
942
7,583
Adjusted
measure
10,346
1,522
13
11,881
(2,814)
201
(1,569)
166
7,865
17,556
44.8%
Glencore Annual Report 2020
94
Glencore Annual Report 2020 225
Strategic reportFinancial statementsGovernanceAdditional information
OTHER RECONCILIATIONS
OTHER RECONCILIATIONS
AVAILABLE COMMITTED LIQUIDITY1
AVAILABLE COMMITTED LIQUIDITY1
US$ million
US$ million
Cash and cash equivalents – reported
Cash and cash equivalents – reported
Proportionate adjustment – cash and cash equivalents
Proportionate adjustment – cash and cash equivalents
Headline committed syndicated revolving credit facilities
Headline committed syndicated revolving credit facilities
Amount drawn under syndicated revolving credit facilities
Amount drawn under syndicated revolving credit facilities
Amounts drawn under U.S. commercial paper programme
Amounts drawn under U.S. commercial paper programme
Total
Total
1 Presented on an adjusted measured basis.
1 Presented on an adjusted measured basis.
CASH FLOW RELATED ADJUSTMENTS 2020
CASH FLOW RELATED ADJUSTMENTS 2020
US$ million
US$ million
Funds from operations (FFO)
Funds from operations (FFO)
Working capital changes
Working capital changes
Net cash received from disposal of subsidiaries
Net cash received from disposal of subsidiaries
Purchase of investments
Purchase of investments
Proceeds from sale of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of property, plant and equipment
Margin receipts in respect of financing related hedging activities
Margin receipts in respect of financing related hedging activities
Acquisition of non-controlling interests in subsidiaries
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Return of capital/distributions to non-controlling interests
Cash movement in net funding
Cash movement in net funding
CASH FLOW RELATED ADJUSTMENTS 2019
CASH FLOW RELATED ADJUSTMENTS 2019
US$ million
US$ million
Funds from operations (FFO)
Funds from operations (FFO)
Working capital changes
Working capital changes
Net cash used in acquisitions of subsidiaries
Net cash used in acquisitions of subsidiaries
Net cash received from disposal of subsidiaries
Net cash received from disposal of subsidiaries
Purchase of investments
Purchase of investments
Proceeds from sale of investments
Proceeds from sale of investments
Purchase of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of property, plant and equipment
Margin payments in respect of financing related hedging activities
Margin payments in respect of financing related hedging activities
Acquisition of non-controlling interests in subsidiaries
Acquisition of non-controlling interests in subsidiaries
Return of capital/distributions to non-controlling interests
Return of capital/distributions to non-controlling interests
Purchase of own shares
Purchase of own shares
Disposal of own shares
Disposal of own shares
Distributions paid to equity holders of the Parent
Distributions paid to equity holders of the Parent
Cash movement in net funding
Cash movement in net funding
2020
2020
1,498
1,498
(8)
(8)
14,625
14,625
(4,766)
(4,766)
(1,090)
(1,090)
10,259
10,259
2019
2019
1,899
1,899
107
107
14,425
14,425
(5,615)
(5,615)
(675)
(675)
10,141
10,141
Proportionate
Proportionate
adjustment
adjustment
material
material
associates and
associates and
joint ventures
joint ventures
710
710
(314)
(314)
–
–
–
–
–
–
(513)
(513)
4
4
–
–
–
–
–
–
(113)
(113)
Reported
Reported
measure
measure
7,689
7,689
(4,010)
(4,010)
(222)
(222)
(122)
(122)
135
135
(3,569)
(3,569)
52
52
1,040
1,040
(56)
(56)
(127)
(127)
810
810
Proportionate
Proportionate
adjustment
adjustment
Volcan
Volcan
(74)
(74)
6
6
–
–
–
–
–
–
105
105
–
–
–
–
–
–
–
–
37
37
Proportionate
Proportionate
adjustment
adjustment
material
material
associates and
associates and
joint ventures
joint ventures
435
435
122
122
–
–
–
–
–
–
–
–
(603)
(603)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(46)
(46)
Reported
Reported
measure
measure
7,583
7,583
2,088
2,088
(123)
(123)
5
5
(125)
(125)
119
119
(4,712)
(4,712)
178
178
529
529
(24)
(24)
(305)
(305)
(2,318)
(2,318)
6
6
(2,710)
(2,710)
191
191
Proportionate
Proportionate
adjustment
adjustment
Volcan
Volcan
(153)
(153)
(35)
(35)
–
–
1
1
–
–
–
–
180
180
(9)
(9)
–
–
–
–
–
–
–
–
–
–
–
–
(16)
(16)
Adjusted
Adjusted
measure
measure
8,325
8,325
(4,318)
(4,318)
(222)
(222)
(122)
(122)
135
135
(3,977)
(3,977)
56
56
1,040
1,040
(56)
(56)
(127)
(127)
734
734
Adjusted
Adjusted
measure
measure
7,865
7,865
2,175
2,175
(123)
(123)
6
6
(125)
(125)
119
119
(5,135)
(5,135)
169
169
529
529
(24)
(24)
(305)
(305)
(2,318)
(2,318)
6
6
(2,710)
(2,710)
129
129
Glencore Annual Report 2020
Glencore Annual Report 2020
226 Glencore Annual Report 2020
95
95
OTHER RECONCILIATIONS
continued
RECONCILIATION OF TAX EXPENSE 2020
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/(credit) on a proportionate consolidation basis
Adjustment in respect of material associates and joint ventures – tax
Adjustment in respect of Volcan – tax
Tax expense/(credit) on the basis of the income statement
1 See table above.
RECONCILIATION OF TAX EXPENSE 2019
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
Total
4,416
(1,453)
(56)
84
(183)
2,808
(306)
(524)
(3)
(833)
29.7%
Pre-significant
tax expense
833
(524)
(3)
Significant
items tax1
(971)
211
(716)
Total
tax credit
(138)
(313)
(719)
306
(1,476)
(1,170)
Total
4,151
(1,713)
5
82
(96)
2,429
(369)
(342)
(29)
(740)
30.5%
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.
Pre-significant
tax expense
740
(342)
(29)
Significant
items tax1
142
213
(106)
369
249
Total
tax expense
882
(129)
(135)
618
Glencore Annual Report 2020
96
Glencore Annual Report 2020 227
Strategic reportFinancial statementsGovernanceAdditional information
PRODUCTION BY QUARTER –
PRODUCTION BY QUARTER –
Q4 2019 TO Q4 2020
Q4 2019 TO Q4 2020
Metals and minerals
Metals and minerals
PRODUCTION FROM OWN SOURCES – TOTAL1
PRODUCTION FROM OWN SOURCES – TOTAL1
Q4
Q4
2019
2019
Q1
Q1
2020
2020
Q2
Q2
2020
2020
Q3
Q3
2020
2020
Q4
Q4
2020
2020
2020
2020
2019
2019
Copper
Copper
Cobalt
Cobalt
Zinc
Zinc
Lead
Lead
Nickel
Nickel
Gold
Gold
Silver
Silver
Ferrochrome
Ferrochrome
Coal
Coal
Oil (entitlement interest basis)
Oil (entitlement interest basis)
kt 355.4
kt 355.4
11.9
kt
kt
11.9
kt 268.3
kt 268.3
kt 60.2
kt 60.2
31.2
kt
kt
31.2
240
koz
240
koz
koz 8,285
koz 8,285
kt 408
kt 408
35.5
mt
mt
35.5
kbbl 1,880
kbbl 1,880
293.3
293.3
6.1
6.1
295.6
295.6
61.7
61.7
28.2
28.2
211
211
7,778
7,778
388
388
31.9
31.9
1,806
1,806
294.8
294.8
8.2
8.2
254.5
254.5
66.2
66.2
27.0
27.0
200
200
6,407
6,407
78
78
26.2
26.2
806
806
346.6
346.6
7.3
7.3
310.0
310.0
66.4
66.4
26.6
26.6
244
244
9,035
9,035
185
185
25.4
25.4
748
748
PRODUCTION FROM OWN SOURCES – COPPER ASSETS1
PRODUCTION FROM OWN SOURCES – COPPER ASSETS1
323.4
323.4
5.8
5.8
310.3
310.3
65.1
65.1
28.4
28.4
261
261
1,371.2
1,258.1
1,371.2
1,258.1
46.3
27.4
27.4
46.3
1,077.5
1,170.4
1,077.5
1,170.4
280.0
259.4
280.0
259.4
120.6
110.2
120.6
110.2
886
916
886
916
9,546 32,766 32,018
9,546 32,766 32,018
1,438
1,029
1,438
1,029
139.5
106.2
106.2
139.5
5,518
3,944
5,518
3,944
378
378
22.7
22.7
584
584
Q4
Q4
2019
2019
Q1
Q1
2020
2020
Q2
Q2
2020
2020
Q3
Q3
2020
2020
Q4
Q4
2020
2020
2020
2020
2019
2019
Change
Change
2020 vs
2020 vs
2019
2019
%
%
(8)
(8)
(41)
(41)
9
9
(7)
(7)
(9)
(9)
3
3
2
2
(28)
(28)
(24)
(24)
(29)
(29)
Change
Change
Q4 20 vs
Q4 20 vs
Q4 19
Q4 19
%
%
(9)
(9)
(51)
(51)
16
16
8
8
(9)
(9)
9
9
15
15
(7)
(7)
(36)
(36)
(69)
(69)
Change
Change
2020 vs
2020 vs
2019
2019
%
%
Change
Change
Q4 20 vs
Q4 20 vs
Q4 19
Q4 19
%
%
Mutanda
Mutanda
African Copper (Katanga, Mutanda, Mopani)
African Copper (Katanga, Mutanda, Mopani)
Copper metal
Katanga
Copper metal
Katanga
Cobalt2
Cobalt2
Copper metal
Copper metal
Cobalt2
Cobalt2
Copper metal
Copper metal
Copper in concentrates
Copper in concentrates
Mopani
Mopani
kt
kt
kt
kt
kt
kt
kt
kt
kt
kt
kt
kt
65.4
65.4
6.2
6.2
18.0
18.0
4.5
4.5
–
–
3.3
3.3
67.3
67.3
5.3
5.3
–
–
–
–
–
–
–
–
67.1
67.1
7.2
7.2
–
–
–
–
6.7
6.7
–
–
67.5
67.5
6.4
6.4
–
–
–
–
13.3
13.3
–
–
68.8
68.8
5.0
5.0
–
–
–
–
10.3
10.3
–
–
270.7
270.7
23.9
23.9
–
–
–
–
30.3
30.3
–
–
234.5
234.5
17.1
17.1
103.2
103.2
25.1
25.1
21.6
21.6
10.6
10.6
15
15
40
40
(100)
(100)
(100)
(100)
40
40
(100)
(100)
5
5
(19)
(19)
(100)
(100)
(100)
(100)
n.m.
n.m.
(100)
(100)
26.3
26.3
–
–
79.1
79.1
–
–
5.0
5.0
82.5
82.5
–
–
51.3
51.3
10.6
10.6
61
61
(100)
(100)
n.m.
n.m.
(100)
(100)
301.0
301.0
–
–
23.9
23.9
359.3
359.3
10.6
10.6
42.2
42.2
(16)
(16)
(100)
(100)
(43)
(43)
(5)
(5)
(100)
(100)
(53)
(53)
African Copper – total production including third party feed
African Copper – total production including third party feed
Mopani
Mopani
Copper metal
Copper metal
Copper in concentrates
Copper in concentrates
kt
kt
kt
kt
–
–
3.3
3.3
5.6
5.6
–
–
21.1
21.1
–
–
29.5
29.5
–
–
Total Copper metal
Total Copper metal
Total Copper in concentrates
Total Copper in concentrates
Total Cobalt2
Total Cobalt2
kt
kt
kt
kt
kt
kt
83.4
83.4
3.3
3.3
10.7
10.7
67.3
67.3
–
–
5.3
5.3
Collahuasi3
Collahuasi3
Copper in concentrates
Copper in concentrates
Silver in concentrates
Silver in concentrates
Gold in concentrates4
Gold in concentrates4
kt
kt
koz
koz
koz
koz
72.3
72.3
910
910
14
14
66.5
66.5
1,063
1,063
12
12
Antamina5
Antamina5
Copper in concentrates
Copper in concentrates
Zinc in concentrates
Zinc in concentrates
Silver in concentrates
Silver in concentrates
kt
kt
kt
kt
koz
koz
37.6
37.6
26.7
26.7
1,304
1,304
33.1
33.1
36.9
36.9
1,316
1,316
73.8
73.8
–
–
7.2
7.2
75.6
75.6
850
850
14
14
17.8
17.8
16.4
16.4
686
686
80.8
80.8
–
–
6.4
6.4
75.5
75.5
1,155
1,155
18
18
59.2 276.8 248.8
59.2 276.8 248.8
3,961 2,878
893
3,961 2,878
893
38
9
38
9
53
53
36.1
36.1
44.2
44.2
1,516
1,516
40.7
40.7
44.9
44.9
2,017
2,017
127.7
127.7
142.4
142.4
5,535
5,535
151.4
151.4
102.4
102.4
5,051
5,051
Other South America (Antapaccay, Lomas Bayas)
Other South America (Antapaccay, Lomas Bayas)
Antapaccay
Antapaccay
Copper in concentrates
Copper in concentrates
Gold in concentrates
Gold in concentrates
Silver in concentrates
Silver in concentrates
Lomas Bayas Copper metal
Lomas Bayas Copper metal
kt
kt
koz
koz
koz
koz
kt
kt
47.5
47.5
23
23
338
338
19.2
19.2
38.0
38.0
22
22
270
270
18.4
18.4
43.1
43.1
12
12
295
295
18.5
18.5
53.0
53.0
24
24
378
378
19.2
19.2
51.5
51.5
32
32
355
355
18.0
18.0
185.6
185.6
90
90
1,298
1,298
74.1
74.1
197.6
197.6
85
85
1,576
1,576
78.9
78.9
Total Copper metal
Total Copper metal
Total Copper in concentrates
Total Copper in concentrates
Total Gold in concentrates
Total Gold in concentrates
and in doré
and in doré
Total Silver in concentrates
Total Silver in concentrates
and in doré
and in doré
kt
kt
kt
kt
19.2
19.2
47.5
47.5
18.4
18.4
38.0
38.0
18.5
18.5
43.1
43.1
19.2
19.2
53.0
53.0
18.0
18.0
51.5
51.5
74.1
74.1
185.6
185.6
78.9
78.9
197.6
197.6
koz
koz
23
23
22
22
12
12
24
24
32
32
90
90
85
85
koz
koz
338
338
270
270
295
295
378
378
355
355
1,298
1,298
1,576
1,576
(18)
(18)
11
11
38
38
39
39
(16)
(16)
39
39
10
10
(6)
(6)
6
6
(18)
(18)
(6)
(6)
(6)
(6)
(6)
(6)
6
6
(18)
(18)
(2)
(2)
(36)
(36)
8
8
68
68
55
55
8
8
39
39
5
5
(6)
(6)
(6)
(6)
8
8
39
39
5
5
97
97
Glencore Annual Report 2020
Glencore Annual Report 2020
228 Glencore Annual Report 2020
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Metals and minerals
PRODUCTION FROM OWN SOURCES – COPPER ASSETS1 CONTINUED
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
Australia (Mount Isa, Ernest Henry, Townsville, Cobar)
Mount Isa, Ernest Henry, Townsville, Cobar
Copper metal
Gold
Silver
kt
koz
koz
45.8
18
245
31.8
22
156
32.6
24
165
40.5
22
208
33.9
25
226
138.8
93
755
151.1
100
1,154
Mount Isa, Ernest Henry, Townsville – total production including third party feed
Copper metal
Gold
Silver
Cobar
Copper in concentrates
Silver in concentrates
kt
koz
koz
kt
koz
Total Copper metal
Total Copper in concentrates
Total Gold
Total Silver
kt
kt
koz
koz
61.2
36
395
11.1
119
45.8
11.1
18
364
53.2
33
331
11.8
117
31.8
11.8
22
273
49.8
39
321
11.0
126
32.6
11.0
24
291
59.7
45
393
10.7
129
40.5
10.7
22
337
54.5
41
372
217.2
158
1,417
220.5
140
1,389
12.7
144
46.2
516
43.5
461
33.9
12.7
25
370
138.8
46.2
93
1,271
151.1
43.5
100
1,615
Total Copper department
Copper
Cobalt
Zinc
Gold
Silver
kt
kt
kt
koz
koz
320.2
10.7
26.7
55
2,916
266.9
5.3
36.9
56
2,922
272.4
7.2
16.4
50
2,122
315.8
6.4
44.2
64
3,386
295.1
5.0
44.9
66
3,635
1,150.2
23.9
142.4
236
12,065
1,241.2
42.2
102.4
223
11,120
(8)
(7)
(35)
(1)
13
2
6
12
(8)
6
(7)
(21)
(7)
(43)
39
6
8
(26)
39
(8)
(11)
14
(6)
14
21
(26)
14
39
2
(8)
(53)
68
20
25
Glencore Annual Report 2020
98
Glencore Annual Report 2020 229
Strategic reportFinancial statementsGovernanceAdditional information
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Metals and minerals
PRODUCTION FROM OWN SOURCES – ZINC ASSETS1
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
Kazzinc
Zinc metal
Lead metal
Lead in concentrates
Copper metal6
Gold
Silver
Silver in concentrates
kt
kt
kt
kt
koz
koz
koz
38.5
4.2
–
12.7
177
1,214
–
43.3
5.5
–
8.7
150
844
–
Kazzinc – total production including third party feed
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
kt
kt
kt
kt
koz
koz
koz
kt
kt
koz
kt
kt
koz
76.3
29.8
–
19.9
263
75.0
29.8
–
14.9
197
6,056 4,704
–
–
75.3
33.8
1,108
70.4
16.0
525
85.2
38.1
1,341
68.5
14.6
472
41.6
6.8
–
8.8
144
936
–
73.9
35.2
–
14.2
218
5,406
–
89.5
41.3
1,637
68.6
14.1
340
43.9
5.7
–
10.6
175
1,218
–
74.1
29.9
–
16.9
256
5,631
–
91.3
43.6
1,517
65.8
11.2
315
38.7
7.6
–
8.9
190
1,714
–
167.5
25.6
–
37.0
659
172.5
31.6
2.8
44.0
634
4,712 4,546
92
–
75.2
30.1
–
14.7
294
293.3
298.2
129.0
125.0
2.8
–
65.1
60.7
962
965
6,399 22,140 23,129
92
–
–
88.2
38.9
1,295
76.4
15.0
487
354.2
161.9
5,790
279.3
54.9
1,614
326.4
158.0
5,518
271.2
55.3
1,675
Total Zinc in concentrates
Total Lead in concentrates
Total Silver in concentrates
kt
kt
koz
145.7
49.8
1,633
153.7
52.7
1,813
158.1
55.4
1,977
157.1
54.8
1,832
164.6 633.5
53.9
216.8
1,782 7,404
597.6
213.3
7,193
North America (Matagami, Kidd)
Matagami
Zinc in concentrates
Copper in concentrates
Zinc in concentrates
Copper in concentrates
Silver in concentrates
Kidd
kt
kt
kt
kt
koz
10.6
1.3
15.8
9.6
561
Total Zinc in concentrates
Total Copper in concentrates
Total Silver in concentrates
kt
kt
koz
26.4
10.9
561
14.5
1.8
19.3
8.1
517
33.8
9.9
517
11.8
1.6
11.8
5.3
412
23.6
6.9
412
12.4
1.4
18.7
11.1
679
31.1
12.5
679
13.5
1.9
12.7
9.5
517
52.2
6.7
62.5
34.0
2,125
43.8
5.6
67.6
33.5
1,654
26.2
11.4
517
114.7
40.7
2,125
111.4
39.1
1,654
(3)
(19)
(100)
(16)
4
4
(100)
2
(3)
(100)
(7)
–
(4)
(100)
9
2
5
3
(1)
(4)
6
2
3
19
20
(8)
1
28
3
4
28
1
81
n.m.
(30)
7
41
n.m.
(1)
1
n.m.
(26)
12
6
n.m.
17
15
17
9
(6)
(7)
13
8
9
27
46
(20)
(1)
(8)
(1)
5
(8)
Glencore Annual Report 2020
230 Glencore Annual Report 2020
99
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Metals and minerals
PRODUCTION FROM OWN SOURCES – ZINC ASSETS1 CONTINUED
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Other Zinc: South America (Argentina, Bolivia, Peru)7
Zinc in concentrates
kt
Lead in concentrates
kt
Copper in concentrates
kt
Silver in concentrates
koz
31.0
6.2
0.4
1,851
27.9
3.5
0.4
1,574
14.8
4.0
0.2
844
33.7
5.9
0.5
1,871
35.9
3.6
0.5
1,832
112.3
17.0
1.6
93.6
32.3
2.7
6,121 6,906
Total Zinc department
Zinc
Lead
Copper
Gold
Silver
kt
kt
kt
koz
koz
241.6
60.2
24.0
177
975.1
65.1 259.4 280.0
85.8
79.3
20.8
634
659
190
5,259 4,748 4,169 5,600 5,845 20,362 20,391
265.8 265.4 1,028.0
66.4
23.6
175
258.7
61.7
19.0
150
238.1
66.2
15.9
144
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
20
(47)
(41)
(11)
5
(7)
(8)
4
–
16
(42)
25
(1)
10
8
(13)
7
11
Glencore Annual Report 2020
100
Glencore Annual Report 2020 231
Strategic reportFinancial statementsGovernanceAdditional information
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Metals and minerals
PRODUCTION FROM OWN SOURCES – NICKEL ASSETS1
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
Nickel metal
Nickel in concentrates
Copper metal
Copper in concentrates
Cobalt metal
Gold
Silver
Platinum
Palladium
Rhodium
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
kt
kt
kt
kt
kt
koz
koz
koz
koz
koz
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
14.5
0.1
3.4
4.0
0.1
5
108
12
28
1
22.4
0.1
5.1
4.9
0.9
9
174
21
69
1
13.1
0.1
2.9
3.6
0.1
6
116
12
29
1
21.3
0.1
4.6
4.8
1.0
9
200
22
73
1
13.8
–
3.4
3.8
0.2
5
49
6
21
1
23.9
0.1
5.3
5.0
1.3
10
82
13
48
2
15.1
0.2
3.8
3.7
0.2
5
66
10
23
1
23.5
0.1
5.5
2.9
1.2
8
89
16
48
1
56.5
0.4
13.5
15.1
0.6
21
339
40
101
4
91.1
0.4
20.5
17.6
4.4
36
545
72
238
5
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
(6)
(20)
(15)
(47)
(14)
(28)
(33)
(22)
(10)
–
(1)
(33)
(7)
(46)
–
(16)
(27)
(14)
4
–
1
100
(19)
(43)
100
(38)
(40)
233
(8)
–
–
(50)
(13)
(62)
–
(27)
(45)
(16)
(9)
–
Murrin Murrin
Total Nickel metal
Total Cobalt metal
kt
kt
9.7
1.1
7.6
0.7
10.2
0.9
9.5
0.7
9.1
0.6
36.4
2.9
36.6
3.4
(1)
(15)
(6)
(45)
Murrin Murrin – total production including third party feed
Total Nickel metal
Total Cobalt metal
kt
kt
10.6
1.1
8.6
0.8
11.5
0.9
10.9
0.9
9.8
0.7
40.8
3.3
40.7
3.7
–
(11)
(8)
(36)
Koniambo
Nickel in ferronickel
kt
6.5
6.0
3.6
3.3
4.0
16.9
23.7
(29)
(38)
Total Nickel department
Nickel
Copper
Cobalt
Gold
Silver
Platinum
Palladium
Rhodium
kt
kt
kt
koz
koz
koz
koz
koz
31.2
11.2
1.2
8
110
3
25
1
28.2
7.4
0.8
5
108
12
28
1
27.0
6.5
1.0
6
116
12
29
1
26.6
7.2
0.9
5
49
6
21
1
28.4
7.5
0.8
5
66
10
23
1
110.2
28.6
3.5
21
339
40
101
4
120.6
44.2
4.1
29
507
51
112
4
(9)
(35)
(15)
(28)
(33)
(22)
(10)
–
(9)
(33)
(33)
(38)
(40)
233
(8)
–
Glencore Annual Report 2020
232 Glencore Annual Report 2020
101
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Metals and minerals
PRODUCTION FROM OWN SOURCES – FERROALLOYS ASSETS1
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Ferrochrome8
Vanadium pentoxide
kt
mlb
408
4.4
388
4.2
78
4.1
185
5.3
378
5.9
1,029
19.5
1,438
20.2
TOTAL PRODUCTION – CUSTOM METALLURGICAL ASSETS1
Copper (Altonorte, Pasar, Horne, CCR)
Copper metal
Copper anode
kt
kt
109.0
132.3
123.0
127.4
124.1
102.8
119.5
125.5
116.0 482.6
490.1
134.4
432.9
510.7
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
Zinc (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
204.6
50.6
Zinc metal
Lead metal
kt
kt
195.9
44.6
195.6
54.7
192.1
52.9
203.6
45.8
787.2
198.0
805.7
190.5
Change
2020 vs
2019
%
(28)
(3)
Change
Q4 20 vs
Q4 19
%
(7)
34
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
11
(4)
(2)
4
6
2
–
(9)
Glencore Annual Report 2020
102
Glencore Annual Report 2020 233
Strategic reportFinancial statementsGovernanceAdditional information
PRODUCTION BY QUARTER – Q4 2019 TO Q4 2020
continued
Energy products
PRODUCTION FROM OWN SOURCES – COAL ASSETS1
Australian coking coal
Australian semi-soft coal
Australian thermal coal (export)
Australian thermal coal (domestic)
South African thermal coal (export)
South African thermal coal (domestic)
Prodeco
Cerrejón9
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
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
mt
mt
mt
mt
mt
mt
mt
mt
3.1
1.3
16.4
2.4
2.9
2.8
4.3
2.3
1.8
1.6
14.5
2.0
3.7
2.5
3.8
2.0
1.9
1.0
14.9
1.7
3.5
2.5
–
0.7
1.9
1.0
13.5
1.2
4.3
2.4
–
1.1
2.0
1.0
12.8
1.5
3.3
1.8
–
0.3
7.6
4.6
55.7
6.4
14.8
9.2
3.8
4.1
9.2
6.4
64.2
8.6
13.0
13.9
15.6
8.6
Change
2020 vs
2019
%
(17)
(28)
(13)
(26)
14
(34)
(76)
(52)
Change
Q4 20 vs
Q4 19
%
(35)
(23)
(22)
(38)
14
(36)
(100)
(87)
mt
35.5
31.9
26.2
25.4
22.7
106.2
139.5
(24)
(36)
Q4
2019
Q1
2020
Q2
2020
Q3
2020
Q4
2020
2020
2019
597
1,106
177
522
1,083
201
569
29
208
524
–
224
345
–
239
1,960
1,112
872
1,895
3,371
252
1,880
1,806
806
748
584 3,944
5,518
2,906
1,511
514
3,080
1,481
582
2,810
40
603
2,674
–
650
1,871
–
693
10,435
9,236
1,521 4,608
730
2,528
4,931
5,143
3,453
3,324 2,564 14,484 14,574
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
kbbl
Change
2020 vs
2019
%
Change
Q4 20 vs
Q4 19
%
3
(67)
246
(29)
13
(67)
246
(1)
(42)
(100)
35
(69)
(36)
(100)
35
(48)
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 Reported from Q4 2020 given higher gold price and production, with resulting increased materiality. Comparatives updated accordingly.
5 The Group’s pro-rata share of Antamina production (33.75%).
6 Copper metal includes copper contained in copper concentrates and blister.
7 South American production excludes Volcan Compania Minera.
8 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
9 The Group’s pro-rata share of Cerrejón production (33.3%).
Glencore Annual Report 2020
234 Glencore Annual Report 2020
103
RESOURCES AND RESERVES
RESOURCES AND RESERVES
The resource and reserve data in the following tables comprise summary extracts of the Glencore Resources and Reserves report
The resource and reserve data in the following tables comprise summary extracts of the Glencore Resources and Reserves report
as at 31 December 2020, as published on the Glencore website on 3 February 2021. The Glencore Resources and Reserves report
as at 31 December 2020, as published on the Glencore website on 3 February 2021. 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
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 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)
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
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.
of oil and natural gas reserves and resources.
Data is reported as at 31 December 2020, unless otherwise noted. For comparison purposes, data for 2019 has been included. Metric
Data is reported as at 31 December 2020, unless otherwise noted. For comparison purposes, data for 2019 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
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
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.
therefore be small differences in the totals.
Metals and minerals: Copper
Metals and minerals: Copper
COPPER MINERAL RESOURCES
COPPER MINERAL RESOURCES
Name of operation
Name of operation
African copper
African copper
Katanga
Katanga
Mutanda
Mutanda
Collahuasi
Collahuasi
Antamina
Antamina
Other South
Other South
America
America
Australia
Australia
Commodity
Commodity
(Mt)
(Mt)
Copper (%)
Copper (%)
Cobalt (%)
Cobalt (%)
(Mt)
(Mt)
Copper (%)
Copper (%)
Cobalt (%)
Cobalt (%)
(Mt)
(Mt)
Copper (%)
Copper (%)
Molybdenum (%)
Molybdenum (%)
(Mt)
(Mt)
Copper (%)
Copper (%)
Zinc (%)
Zinc (%)
Silver (g/t)
Silver (g/t)
Molybdenum (%)
Molybdenum (%)
(Mt)
(Mt)
Copper (%)
Copper (%)
Gold (g/t)
Gold (g/t)
Silver (g/t)
Silver (g/t)
(Mt)
(Mt)
Copper (%)
Copper (%)
Gold (g/t)
Gold (g/t)
Silver (g/t)
Silver (g/t)
Measured Mineral
Measured Mineral
Resources
Resources
Indicated Mineral
Indicated Mineral
Resources
Resources
Measured and
Measured and
Indicated Resources
Indicated Resources
Inferred
Inferred
Mineral Resources
Mineral Resources
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2019
2019
–
–
–
–
–
–
368
368
1.39
1.39
0.55
0.55
876
876
0.79
0.79
0.02
0.02
329
329
0.82
0.82
0.64
0.64
9
9
0.02
0.02
509
509
0.44
0.44
0.04
0.04
0.8
0.8
71
71
2.15
2.15
0.05
0.05
1.6
1.6
16
16
3.58
3.58
0.57
0.57
368
368
1.39
1.39
0.55
0.55
857
857
0.80
0.80
0.02
0.02
344
344
0.84
0.84
0.67
0.67
9
9
0.02
0.02
659
659
0.44
0.44
0.11
0.11
0.7
0.7
108
108
1.79
1.79
0.06
0.06
0.7
0.7
290
290
4.73
4.73
0.55
0.55
96
96
0.97
0.97
0.44
0.44
4,729
4,729
0.8
0.8
0.02
0.02
642
642
0.89
0.89
0.72
0.72
12
12
0.02
0.02
2,131
2,131
0.39
0.39
0.04
0.04
0.8
0.8
178
178
1.44
1.44
0.21
0.21
0.4
0.4
249
249
3.69
3.69
0.54
0.54
96
96
0.97
0.97
0.44
0.44
4,534
4,534
0.81
0.81
0.02
0.02
650
650
0.86
0.86
0.75
0.75
11
11
0.02
0.02
1,971
1,971
0.43
0.43
0.04
0.04
0.8
0.8
167
167
1.39
1.39
0.23
0.23
0.4
0.4
290
290
4.73
4.73
0.55
0.55
464
464
1.31
1.31
0.53
0.53
5,605
5,605
0.8
0.8
0.02
0.02
971
971
0.86
0.86
0.69
0.69
11
11
0.02
0.02
2,639
2,639
0.41
0.41
0.04
0.04
0.8
0.8
249
249
1.68
1.68
0.16
0.16
0.7
0.7
265
265
3.68
3.68
0.54
0.54
464
464
1.31
1.31
0.53
0.53
5,391
5,391
0.81
0.81
0.02
0.02
994
994
0.86
0.86
0.72
0.72
10
10
0.02
0.02
2,629
2,629
0.43
0.43
0.06
0.06
0.8
0.8
275
275
1.54
1.54
0.16
0.16
0.5
0.5
99
99
1.56
1.56
0.47
0.47
17
17
0.72
0.72
0.54
0.54
4,898
4,898
0.73
0.73
0.02
0.02
1,272
1,272
1.01
1.01
0.58
0.58
11
11
0.01
0.01
654
654
0.29
0.29
0.01
0.01
0.1
0.1
33
33
1.83
1.83
0.30
0.30
2.6
2.6
163
163
3.80
3.80
0.45
0.45
17
17
0.72
0.72
0.53
0.53
4,806
4,806
0.73
0.73
0.02
0.02
1,295
1,295
1.02
1.02
0.60
0.60
11
11
0.02
0.02
703
703
0.31
0.31
0.02
0.02
0.2
0.2
160
160
1.09
1.09
0.06
0.06
0.6
0.6
3,023
3,023
3,023
3,023
0.39
0.39
0.39
0.39
Other projects1
Other projects1
(El Pachon,
(El Pachon,
West Wall,
West Wall,
Polymet)
Polymet)
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 3 February 2021.
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 3 February 2021.
Copper (%)
Copper (%)
2,318
2,318
0.45
0.45
0.50
0.50
(Mt)
(Mt)
2,319
2,319
853
853
0.47
0.47
0.45
0.45
3,171
3,171
853
853
0.51
0.51
3,171
3,171
0.47
0.47
Glencore Annual Report 2020 235
Glencore Annual Report 2020
Glencore Annual Report 2020
104
104
Strategic reportFinancial statementsGovernanceAdditional information
RESOURCES AND RESERVES
Resources and reserves
continued
continued
COPPER ORE RESERVES
Name of operation
African copper
Katanga
Mutanda
Collahuasi
Antamina
Other South America
Australia
Other projects1
(Polymet)
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2020
2019
2020
2019
2020
2019
(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)
(Mt)
Copper (%)
–
–
–
48
1.36
0.62
491
1.01
0.02
206
0.90
0.77
9
0.026
328
0.41
0.05
0.7
17
2.64
0.13
4.7
157
0.29
9
3.56
0.56
48
1.36
0.62
486
1.03
0.02
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
143
3.66
0.49
82
1.59
0.75
3,685
0.78
0.02
1.76
0.92
1.06
10
0.022
510
0.34
0.04
0.6
56
1.37
0.30
0.8
106
0.29
115
3.18
0.53
82
1.59
0.75
2,569
0.90
0.03
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
143
3.66
0.49
130
1.15
0.70
4,176
0.80
0.02
382
0.91
0.91
9
0.024
838
0.37
0.04
0.6
73
1.66
0.26
1.7
264
0.29
124
3.20
0.53
130
1.51
0.70
3.055
0.92
0.03
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
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 3 February 2021.
236 Glencore Annual Report 2020
Glencore Annual Report 2020
105
RESOURCES AND RESERVES
Resources and reserves
continued
continued
Metals and minerals: Zinc
ZINC MINERAL RESOURCES
Name of operation
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovskoye)
Australia
Mount Isa
McArthur River
North America
Zinc North America
Copper North America
Volcan
Lead/zinc/silver deposits
Copper deposits
Other Zinc
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
2020
2019
2020
2019
2020
2019
2020
2019
(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)
111
2.8
0.9
0.3
18
1.1
73
1.9
85
9.1
4.1
78
106
9.5
4.1
40
20.8
4.3
0.5
1.4
46
0.4
75
0.4
0.2
26
5.3
1.5
84
18.4
–
0.5
14.1
5.6
1.5
0.3
129
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
123
1.4
0.4
0.2
13
1.0
53
2.1
310
6.3
3.4
67
57
10.2
4.8
52
33
4.6
0.6
0.6
114
0.3
255
0.4
0.2
115
3.6
1.1
82
34.3
–
0.5
21
4.1
1.3
0.3
132
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
234
2.0
0.6
0.3
15
1.0
126
2.0
395
6.9
3.6
69
162
9.7
4.4
45
54
4.4
0.6
0.9
88
0.4
330
0.4
0.2
141
3.9
1.1
82
53
–
0.5
35
4.7
1.4
0.3
131
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
172
2.2
1.2
0.3
21
0.8
2.0
1.8
290
5
3
48
–
–
–
–
77
4.1
0.8
0.7
124
0.2
120
0.4
0.2
215
4.4
1.5
83
148
0.2
0.4
75
6.4
1.1
0.1
84
149
2.0
1.0
0.1
23
1.0
0.1
1.0
226
6
3
61
–
–
–
–
70
4.0
1.0
1.0
134
0.2
120
0.4
0.1
228
2.9
1.1
78
148
0.2
0.4
76
6.0
1.0
0.2
83
Glencore Annual Report 2020 237
Glencore Annual Report 2020
106
Strategic reportFinancial statementsGovernanceAdditional information
RESOURCES AND RESERVES
Resources and reserves
continued
continued
ZINC ORE RESERVES
Name of operation
Kazzinc
Kazzinc Polymetallic
Kazzinc Gold (Vasilkovskoye)
Australia
Mount Isa
McArthur River
North America
Volcan
Other Zinc
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
2020
2019
2020
2019
2020
2019
(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)
68
3.5
1.0
0.2
18
0.6
43
2.0
26
7.7
3.9
72
74
9.4
4.3
43
4.5
4.04
1.67
41
0.2
6.7
4.3
1.1
80
3.6
5.6
1.2
0.2
152
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
23.8
3.5
0.6
0.3
15
0.8
36
1.8
46
6.9
3.5
64
12.7
7.8
3.8
39
1.7
4.0
1.6
38
–
20.8
4.6
1.1
91
9.0
2.8
0.8
0.2
113
13.0
4.5
0.5
0.5
19
0.9
44
1.8
50
7.3
3.4
62
27.0
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
92
3.5
0.9
0.2
17
0.7
79
1.9
72
7.3
3.7
67
87
9.2
4.2
42
6
4.0
1.6
40
0.1
27.6
4.6
1.1
88
13.0
3.6
0.9
0.2
124
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
238 Glencore Annual Report 2020
Glencore Annual Report 2020
107
RESOURCES AND RESERVES
Resources and reserves
continued
continued
Metals and minerals: Nickel
NICKEL MINERAL RESOURCES
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 (%)
2020
9.6
2.59
0.85
0.06
0.73
1.47
144.1
1.00
0.074
11.5
2.47
2019
10.8
2.77
1.06
0.06
0.79
1.53
144.5
1.01
0.073
11.7
2.48
2020
36.7
2.55
1.95
0.06
0.92
1.59
74.6
1.00
0.084
44.0
2.41
2019
37.6
2.48
1.90
0.06
0.96
1.59
75.5
0.99
0.084
41.7
2.41
2020
46.2
2.55
1.72
0.06
0.88
1.57
218.8
1.00
0.077
55.5
2.42
2019
48.4
2.54
1.72
0.06
0.92
1.58
220.0
1.00
0.077
53.5
2.42
2020
49
1.6
1.8
0.003
0.8
1.4
17
0.9
0.07
84
2.5
2019
42
1.7
1.9
0.04
1.0
1.6
17
0.9
0.07
82
2.5
NICKEL ORE RESERVES
Name of operation
INO
Murrin Murrin
Koniambo
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 (%)
2020
8.30
1.93
0.67
0.04
0.57
1.05
103.0
1.02
0.081
11.0
2.23
2019
8.40
1.92
0.81
0.04
0.60
1.01
103.6
1.03
0.080
11.5
2.24
2020
19.90
2.33
0.95
0.06
0.53
0.95
33.9
1.04
0.109
26.0
2.17
2019
21.6
2.30
0.92
0.05
0.52
0.97
37.8
1.04
0.103
30.3
2.18
2020
28.2
2.21
0.87
0.05
0.54
0.99
136.8
1.03
0.088
37.2
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
Glencore Annual Report 2020 239
Glencore Annual Report 2020
108
Strategic reportFinancial statementsGovernanceAdditional information
RESOURCES AND RESERVES
Resources and reserves
continued
continued
Metals and minerals: Ferroalloys
FERROALLOYS MINERAL RESOURCES
Name of operation
Western Chrome Mines
Western Chrome Mines
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Commodity
2020
2019
2020
2019
2020
2019
2020
2019
(Mt)
Cr2O3 (%)
58.347
42.05
55.121
42.09
58.55
41.4
61.11
41.5
116.89
41.7
116.23
41.8
101.4
42
2.9
17
101.8
42
2.8
17
Tailings
(Mt)
Cr2O3 (%)
–
–
–
–
–
–
–
–
–
–
–
–
Eastern Chrome Mines
Eastern Chrome Mines
Tailings
Vanadium
Manganese
(Mt)
Cr2O3 (%)
72.017
41.36
66.172
40.04
44.73
40.2
49.23
40.4
116.76
40.9
115.40
40.2
180.7
39
186.4
39
(Mt)
Cr2O3 (%)
–
–
–
–
(Mt)
V2O5 (%)
(Mt)
Mn (%)
49.754
0.47
27.186
37.24
51.160
0.48
–
–
–
–
35.56
0.5
19.55
36.5
–
–
34.90
0.5
–
–
–
–
85.31
0.5
46.74
36.9
–
–
86.06
0.5
–
–
4.9
20
93
0.5
3
36
4.6
20
91
0.5
–
–
FERROALLOYS ORE RESERVES
Name of operation
Western Chrome Mines
Eastern Chrome Mines
Vanadium
Manganese
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Commodity
(Mt)
Cr2O3 (%)
2020
10.418
30.23
2019
17.791
30.79
(Mt)
Cr2O3 (%)
27.701
33.55
24.554
33.23
(Mt)
V2O5 (%)
(Mt)
Mn (%)
22.223
0.47
21.650
36.34
23.100
0.47
–
–
2020
3.13
29.0
4.43
33.8
9.45
0.43
4.10
35.9
2019
6.65
28.0
8.68
33.6
9.50
0.4
–
–
2020
13.56
29.9
32.13
33.6
31.67
0.5
25.75
36.3
2019
24.44
33.0
33.23
33.3
32.6
0.5
–
–
Metals and minerals: Aluminium/Alumina
ALUMINA MINERAL RESOURCES
Name of operation
Aurukun
Commodity
(Mt)
Al2O3 (%)
2020
96
53.3
2019
95
53.4
2020
352
49.7
2019
334
49.9
2020
448
50.5
2019
429
50.6
2020
4
48.8
2019
3
49.3
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
240 Glencore Annual Report 2020
Glencore Annual Report 2020
109
RESOURCES AND RESERVES
Resources and reserves
continued
continued
Metals and minerals: Iron Ore
IRON ORE MINERAL RESOURCES
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
El Aouj Mining Company S.A.
Commodity
(Mt)
Iron (%)
2020
470
36
Sphere Mauritania S.A.
(Askaf)
Sphere Lebtheinia S.A.
(Mt)
Iron (%)
(Mt)
Iron (%)
215
36
–
–
2019
470
36
215
36
–
–
Jumelles Limited
(Zanaga)
(Mt)
Iron (%)
2,300
34
2,300
34
2020
1,435
36
190
35
2,180
32
2,500
30
2019
1,435
36
190
35
2,180
32
2,500
30
2020
1,905
36
405
36
2,180
32
2019
1,905
36
405
36
2,180
32
2020
2,520
35
251
35
560
32
2019
2,520
35
251
35
560
32
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 (%)
2020
380
35
770
37
2019
380
35
770
37
2020
551
35
1,290
32
2019
551
35
2020
931
35
2019
931
35
1,290
32
2,070
34
2,070
34
Measured
Coal Resources
Indicated
Coal Resources
Inferred
Coal Resources
Commodity
2020
2019
2020
2019
2020
2019
Coking/Thermal Coal (Mt)
Coking/Thermal Coal (Mt)
3,671
3,852
3,745
3,849
South Africa
Thermal Coal (Mt)
2,314
2,346
Thermal Coal (Mt)
190
190
Thermal Coal (Mt)
3,300
3,250
1,250
1,250
3,644
5,203
839
155
3,669
5,279
839
147
7,591
9,000
344
60
600
7,591
8,925
344
60
600
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)
Coking/Thermal Coal (Mt)
45
45
113
113
130
130
Glencore Annual Report 2020 241
Glencore Annual Report 2020
110
Strategic reportFinancial statementsGovernanceAdditional information
RESOURCES AND RESERVES
Resources and reserves
continued
continued
COAL RESERVES
Name of operation
Australia
New South Wales
Queensland
South Africa
Prodeco
Cerrejón
Coal Reserves
Marketable
Coal Reserves
Proved
Probable
Proved
Probable
Total Marketable
Coal Reserves
Commodity
2020
2019
2020
2019
2020
2019
Coking/Thermal Coal (Mt)
1,142
606
824
431
1,266
1.325
Coking/Thermal Coal (Mt)
416
225
Thermal Coal (Mt)
598
238
Thermal Coal (Mt)
–
–
357
375
–
174
528
1,241
133
508
543
–
–
135
Thermal Coal (Mt)
270
90
260
85
350
330
Energy products: Oil
NET RESERVES (PROVEN AND PROBABLE)1
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
31 December 2019
Revisions
Production
31 December 2020
Oil mmbbl
13
1
(3)
11
Gas bcf Oil mmbbl
100
(2)
(1)
97
151
1
–
152
Gas bcf Oil mmbbl
3
2
(1)
4
–
–
–
–
Gas bcf Oil mmbbl
116
1
(5)
112
–
–
–
–
Gas bcf
151
1
–
152
Combined
mmboe
142
1
(5)
138
NET CONTINGENT RESOURCES (2C)1
Equatorial Guinea
Chad
Cameroon
Total
Working Interest Basis
31 December 2019
31 December 2020
Oil mmbbl
23
26
Gas bcf Oil mmbbl
61
61
454
434
Gas bcf Oil mmbbl
4
2
–
–
Gas bcf Oil mmbbl
88
89
–
–
1
“Net” reserves or resources are equivalent to Glencore’s working interest in the asset/property.
Gas bcf
454
434
Combined
mmboe
166
164
242 Glencore Annual Report 2020
Glencore Annual Report 2020
111
SHAREHOLDER INFORMATION
Glencore plc is registered in Jersey, is headquartered in Switzerland and has
operations around the world.
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
HEADQUARTERS
Baarermattstrasse 3
P.O. Box 1363
CH-6341 Baar
Switzerland
REGISTERED OFFICE
13 Castle Street
St Helier, Jersey
JE1 1ES
Channel Islands
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
13 Castle Street
St Helier, Jersey
JE1 1ES
Channel Islands
Tel: +44 (0) 370 707 4040
Johannesburg
Computershare Investor Services (Pty) Ltd
Rosebank Towers,
15 Biermann Avenue,
Rosebank, 2196,
South Africa
Tel: +27 (0) 11 370 5000
Glencore Annual Report 2020 243
Strategic reportFinancial statementsGovernanceAdditional information
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.
IMPORTANT NOTICE CONCERNING THIS REPORT
INCLUDING FORWARD LOOKING STATEMENTS
This document contains statements that are, or may be deemed to
be, “forward looking statements” which are prospective in nature.
These forward looking statements may be identified by the use of
forward looking terminology, or the negative thereof such as “outlook”,
“plans”, “expects” or “does not expect”, “is expected”, “continues”,
“assumes”, “is subject to”, “budget”, “scheduled”, “estimates”, “aims”,
“forecasts”, “risks”, “intends”, “positioned”, “predicts”, “anticipates” or
“does not anticipate”, or “believes”, or variations of such words or
comparable terminology and phrases or statements that certain
actions, events or results “may”, “could”, “should”, “shall”, “would”,
“might” or “will” be taken, occur or be achieved. 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 in
the Risk Management section of this report.
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.
244 Glencore Annual Report 2020
This report is printed on Heaven 42 and UPM Fine Offset.
Both papers are made of FSC® certified and other
controlled material.
They also EMAS 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 100% 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
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