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Business Last Updated: Jun 14, 2011 - 1:16:33 PM


Glencore to Lift The Lid Some More
By Geoff Hiscock, The Australian June 14, 2011
Jun 14, 2011 - 1:15:10 PM

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Glencore International PLC Chief Executive Ivan Glasenberg speaks during the first day of trading at the Hong Kong Stock Exchange Wednesday, May 25, 2011. Glencore already controls a large share of the global commodities business. Its 55,000 employees across 40 countries mine, farm, ship and trade essential raw materials needed to manufacture industrial goods from cars to consumer cereals. (AP Photo/Kin Cheung) Source: AP

The world will get a further insight into the workings of Swiss-based global commodities trader Glencore International when it outlines its business dealings for the first three months of 2011 on Tuesday (4 pm Sydney time, June 14).

It will be the first interim management statement since Glencore went public last month, when it raised close to $US10 billion with an initial share offer that valued the company at just over $US59 billion.

In its IPO prospectus, Glencore revealed it had turnover of $US145 billion for the 2010 calendar year, ranking it second among the big commodities traders. No. 1 is Dutch-based Vitol, which turnoved over $US195 billion in 2010. Trafigura, the other big independent trader – also based in the Netherlands – had turnover of about $US80 billion last year.

Glencore holds a key 34.5 per cent stake in mining giant Xstrata along with stakes in a host of other energy, mining and metal producers, including Century Aluminum in the United States and zinc/leader producer Kazzinc in Kazakhstan.

Glencore also holds 8.75 per cent of the world’s largest aluminium producer, United Co. Rusal, which in turn holds 25 per cent of Russian nickel and palladium producer Norilsk Nickel. Last December, Glencore’s rival Trafigura agreed to pay about $US3.5 billion for a stake of 8 per cent in Norilsk, and just last week was awarded its first contract to handle Norilsk’s metal sales in Southeast Asia. Glencore has handled up to 38 per cent of Norilsk’s sales in the past.

Glencore, which dates its origins back to 1974 as Marc Rich and Co, revealed a wealth of information about its assets, trading interests and key staff in its share offer prospectus. Chief executive Ivan Glasenberg, South African-born but an Australian citizen, emerged as almost the “$10 billion man” on paper, with a holding of 1.087 billion shares worth just over $US9.3 billion at Glencore’s listing price of 530 pence in London on May 24, or $US8.56 a share. Glencore shares closed in London yesterday (Monday) at 523.4 pence. Glasenberg’s shares are locked up for between one and five years.

Glasenberg’s right-hand man and finance whizz is another Australian citizen, Steven Kalmin, who holds a relatively modest stake of 70.7 million shares worth US$605 million. Kalmin, Glencore’s chief financial officer since 2005, is a business graduate from the University of Technology Sydney who began his working life with Horwath Chartered Accountants in Sydney.

Earlier this month he was elected to the board of Century Aluminum, in which Glencore holds a 44 per cent economic interest. It was a regular filing to the US Securities and Exchange Commission about Glencore’s relationship with Century that confirmed Glasenberg’s status as an Australian citizen.

Four other long-standing Glencore directors have also been exceptionally well rewarded for their efforts, even though their stakes are locked up to varying degrees over the next four years. They are Daniel Francisco Mate Badenes, co-director of zinc/copper/lead with 416.35 million shares worth $US3.56 billion; Aristotelis Mistakidis, also co-director of zinc/copper/lead with 411.77 million shares worth $US3.52 billion; coal/coke director Tor Peterson, with 366.25 million shares worth $US3.14 billion; and oil director Alex Beard with 320.5 million shares worth $US 2.74 billion.

The top six directors of Glencore therefore hold 2.67 billion shares worth almost $US23 billion. Their holding equates to 38.6 per cent of total shares on offer, meaning that another 44.52 per cent of the shares are held by other Glencore personnel. The most senior of these are Steven Blumgart, co-director, alumina/aluminium; Stuart Cutler, co-director, ferroalloys/nickel/cobalt; Gary Fegel, do-director, alumina/aluminium; Chris Mahoney, director, agricultural products; Christian Wolfensberger, co-director, ferroalloys/nickel/cobalt; Giles Jones, chief risk officer; and Richard Marshall, a Sydney lawyer who has been Glencore’s general counsel since 2005. Marshall spent almost 20 years with Mallesons Stephen Jaques before moving to the UK in 2003 to work for US law firm Cadwalader, Wickersham & Taft. While at Mallesons he advised Glencore on its bondholder renegotiations for the Anaconda Nickel project in Western Australia, and worked with Xstrata on its $3 billion takeover of MIM Holdings in 2003.

All together, Glencore directors and other staff hold 83.12 per cent of the company. The 12 “cornerstone” investors for the float, led by the Abu Dhabi investment company Aabar Investments, the Singapore Government Investment Corporation, and global investment firm BlackRock, hold another 5.1 per cent, leaving an effective 11.8 per cent in the hands of ordinary investors.

Before the float, a Jersey-based charitable trust named Penwith was identified in the Glencore prospectus as the “selling shareholder” which would sell 238.8 million shares, worth just over $2 billion, into the share offer.

A spokesman for Glencore confirmed to The Australian this week that “the selling shareholder is the vehicle through which existing shareholders sold shares solely to cover tax liabilities arising from the reorganisation prior to the IPO and to repay certain small loans. There were no other sales by existing shareholders.”

There is no mention of what stake, if any, former Glencore chairman and Glasenberg’s predecessor as CEO, Willy R. Strothotte, may hold in the company.

Glasenberg is likely to face questions on Tuesday about whether Glencore plans to bid for the UK-listed Eurasian Natural Resources Corp (ENRC), a $US6.5 billion-turnover mining group with interests in Kazakhstan and Africa. Last week the company removed two independent directors after a clash over corporate governance. ENRC is held 11.65 per cent by the government of Kazakhstan and 43.8 per cent by three key shareholders, Alexander Mashkevitch, Patokh Chodiev and Alijan Ibragimov. The Kazakh government has a further interest through its 26 per cent holding in copper producer Kazakhmys, which in turn is the single biggest investor in ENRC with a 26 per cent stake.

Another issue for the future is Xstrata, where Glencore holds a key stake. Analysts speculate that Glasenberg may seek to merge with the Anglo-Swiss mining group over the next 12 months

 


Source:Ocnus.net 2011

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