MAC: Mines and Communities

Glencore in deep water

Published by MAC on 2012-06-19
Source: National Post, Reuters

Glencore, the world’s biggest commodities trader, has agreed to purchase half of a seabed mining venture which could eclipse others currently being promoted by Nautilus and Neptune.

Meanwhile, Glencore's head honcho, Ivan Glasenberg, has defended bumper executive payments made to himself and his fellow traders.

DeepGreen strikes deal with Glencore for undersea mining metals

By Peter Koven

National Post (Canada)

15 June 2912

The world's largest commodity trader has endorsed speculative undersea mining as a handful of entrepreneurs continue to try to put the industry on the map.

Vancouver-based DeepGreen Resources Inc. has struck a deal with Glencore International Inc. under which the commodity giant agreed to buy 50% of the nickel and copper DeepGreen plans to produce from a seafloor project located west of Mexico.

DeepGreen is a private company founded by David Heydon, the man who built industry leader Nautilus Minerals Inc. and kick-started the underwater mining business. He has planned to take DeepGreen public in Toronto for more than a year, and Glencore's commitment is a potential catalyst to attract investors to an IPO. The offering has already been delayed because of weak market conditions.

Mr. Heydon views the Glencore deal as evidence that DeepGreen - and seafloor mining as a whole - need to be taken seriously.

"There are hundreds of mining companies on the TSX, but how many of them have offtake agreements with majors? You can draw some conclusions from that," he said in an interview.

The Glencore news comes just as the seafloor industry hits a major speed bump.
Nautilus was making good progress on its Solwara 1 project until two weeks ago, when it shocked investors with two pieces of bad news: a legal dispute with the government of Papua New Guinea, and funding problems related to its main vessel. The stock plunged 50% over the next two trading days, though it has recovered since then.

There are many skeptical investors that have watched this industry with interest, but won't believe in it until a project comes to fruition. The Nautilus setbacks appeared to confirm many of their fears. Nautilus planned to enter production next year until its recent problems left the timeline up in the air.

Mr. Heydon raised more than US$360-million in his time at Nautilus, but that company's plans are child's play compared to what he hopes to do with DeepGreen's Clipperton project.

He envisions a gigantic, multi-billion-dollar operation producing 60,000 tonnes of nickel, 50,000 tonnes of copper and 1.3 million tonnes of manganese a year. The nickel output alone would place it among the largest producers of that metal.

"It's a massive project and will produce a lot of metal," Mr. Heydon said.
Financing will obviously be a major hurdle for this project. Mr. Heydon and partner Peter Barnes (formerly of Silver Wheaton Corp.) plan to re-visit an IPO late this year or early next year. In the meantime, the company has been raising money privately. Mr. Heydon expects that DeepGreen will need US$200-million over the next four years to complete trial mining and a demonstration plant, though how the company raises capital will depend on market conditions.

While the Clipperton project represents a speculative new frontier for the mining industry, it is actually an old project. A consortium of mining companies did some work on it in the 1970s to prove it could be mined. But they could not get title to the deposit, located in international waters.

Glencore CEO defends bumper executive pay deals


8 June 2012

LONDON - Glencore CE Ivan Glasenberg defended bumper executive pay on Thursday, brushing aside a "shareholder spring" that has seen widespread protests at UK-listed firms and telling investors they had to pay for entrepreneurial spirit.

Glasenberg, in a rare public address, also signalled support for the CE of miner Xstrata, which commodities trader Glencore plans to take over in a $30-billion purchase, after some shareholders criticised proposed retention payments for Xstrata's top managers as "excessive", "unacceptable" and "depressing", stoking fears the backlash could threaten the all-share deal.

Glencore, the world's largest diversified commodities trader, owns almost 34% of Xstrata and the deal to combine the two groups into a mining and trading powerhouse is expected to be voted through next month, but the "golden handcuffs" have angered minority shareholders.

In an impassioned defence of executive compensation - a week after Xstrata announced it would pay retention deals to 73 of its key employees totalling more than £170-million - Glasenberg told an industry dinner that shareholders needed to pay for managers that deliver returns, acting like shareholders rather than caretakers.

"[For a chief executive who does not own shares], to get him to have this entrepreneurial culture, to work like one of us, to chase every deal like we do, we are going to have to pay him," Glasenberg said.

"If I were the CEO and my shareholders voted down my salary, my compensation, because they did not believe I was worth it, then you have to leave... If you want good CEOs, you are going to have to pay."

Glasenberg himself earns a modest salary compared to industry peers, but he also owns almost 16% of Glencore and made almost $110-million from last year's final dividends alone. Xstrata's Mick Davis, meanwhile, is one of the best paid executives in the FTSE 100, taking home £5.4-million last year in salary, cash bonus and benefits - excluding long-term incentives, deferred bonuses and retirement benefits.

Glasenberg said that Davis had long been one of the best-paid executives: "So be it ... We are a major shareholder in Xstrata. I am happy to pay him well, because he is giving us great returns," he said.

Asked specifically about Davis' retention payment and those for others at Xstrata, Glasenberg said the decision was taken by Xstrata's independent directors and not by Glencore, an interested party.

"Should [the packages] be performance [related]? They decided it was more important to keep these gentlemen in the job, to make sure they are there for the good integration of the companies," he said.

Edited by: Reuters

Glencore, others accused of paying bribes in EU case

By Ben Deighton


10 May 2012

BRUSSELS - A subsidiary of commodities trader Glencore has been accused of paying an EU official's bumper phone bills and laying on a French holiday to secure market-sensitive information, according to court documents relating to a Brussels corruption case.

Glencore, the world's largest diversified commodities trader, said last year ahead of its listing that its subsidiary Glencore Grain Rotterdam, a former employee and a current employee had been charged as part of the criminal case.

The case, which also involves the former incarnation of Dutch grains firm Codrico, centres on former EU agriculture department official Karel Brus, who is accused of passing  confidential information about
EU export subsidy applications.

Court documents seen by Reuters show Glencore is accused of corrupting a public official and obtaining confidential information that allowed it to bid favourably in tenders for European export subsidies for cereals in 2002 and 2003.

Glencore paid a 20,000 euro ($25,900) phone bill, bought a week-long holiday in the south of France and made thousands of euros in payments connected to Brus, according to the documents.

The papers said Glencore exchanged phone calls with Brus while 15 separate tenders were taking place in 2002 and 2003.

The former EU official was also allegedly provided with nights in hostess bars, trips to Thailand and bottles of champagne by some of Glencore's co-defendants in exchange for market-sensitive information, the court documents show.

Glencore's co-defendant, Union Invivo, a French agricultural cooperative, is among those that gave Brus a total of 78,000 euros worth of dinners in restaurants and hostess bars, cases of wine and champagne and a 12,000-euro luxury Christofle cutlery set.

Codrico also paid for a trip to Thailand, the document shows.

Union Invivio could not be reached for comment, and a spokesperson for Codrico pointed out that the case related to a former company also called Codrico which ceased trading in 2009.

Judgement in the case is expected in the summer.

The case is the culmination of an investigation that has been running for more than seven years.

Glencore declined to comment.

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