Glencore (GLEN) announced after market close on Friday that it is facing a criminal investigation from Swiss Attorney General regarding a “failure to have the organizational measures in place to prevent alleged corruption in the Democratic Republic of Congo (DRC)”. This is the miner’s fourth regulatory probe in less than two years.
The US Department of Justice (DoJ) subpoenaed Glencore in July 2018, examining possible violations of the Foreign Corrupt Practices Act in its operations in Nigeria, Venezuela and the DRC. The US Commodity Futures Trading Commission initiated a probe in April last year looking at whether Glencore had fallen foul of certain provisions of the Commodity Exchange Act and engaged in “corrupt practices in connection with commodities”. To top things off, the UK Serious Fraud Office opened an investigation in December over suspicions of bribery.
While those probes remain ongoing, Glencore’s subsidiary Katanga Mining (CAN:KAT) was handed a C$30m (£18m) fine from the Ontario Securities Commission at the end of 2018 relating to its historic accounting, corporate governance and disclosure practices.
The new investigation comes at a tricky time. Weaker commodity prices saw adjusted cash profits drop by more than a quarter to $11.6bn (£9.3bn) in the year to 31 December. Meanwhile, on the back of $2.8bn of impairment charges – largely relating to its Colombian coal, Chad oil and African copper assets – Glencore swung to a $400m net loss. With the impact of Covid-19, the company has also delayed payment of its 20¢ dividend, with a final decision on the payout due alongside half-year results in August.
It’s not all bad news. According to the Financial Times, Glencore recently signed a contract with Tesla (US:TSLA) to supply up to 6,000 tonnes of cobalt per year for use in its electric vehicles (EVs). Cobalt is used to make lithium ion batteries and Glencore is one of the largest cobalt producers. Demand should be underpinned by the rise of EVs as well as the proliferation of devices such as smartphones and laptops - though the price of cobalt has dropped from around $37,000 per tonne in September last year to $28,850 at present.
