Glencore’s new boss faces tough tests at the waterfront


Glencore has only had three general managers since its inception in 1974. Next year it will get a fourth when 45-year-old South African Gary Nagle takes the reins.

He has a formidable predecessor to live up to – over 19 years as an outgoing CEO Ivan Glasenberg built risk-averse Glencore into a $ 42.5 billion trading and mining powerhouse that spans the world, employing 160,000 people and contractors in 35 countries.

Mr. Nagle also faces immediate challenges.

The company has undergone rigorous regulatory scrutiny in recent years, including a U.S. investigation into possible corruption in developing countries such as the Democratic Republic of the Congo.

He must decide to stay in coal mining, a disgraced sector with investors focused on environmental, social and governance criteria – and a division at Glencore currently headed by Mr Nagle.

And it needs to give a jolt to a stock price which, despite doubling from the March low, is still languishing well below its 2011 stock price.

“Glencore has to decide what it wants to be in the post-Ivan, ESG world,” said Paul Gait, a mining expert at Azvalor Asset Management. “My instinct is that the coal will eventually be separated.”

Now based in Australia, where he runs Glencore’s coal assets, Mr. Nagle will move to Switzerland next year. He will spend six months working alongside Mr. Glasenberg to get to know the company’s most important partners, including Felix Tshisekedi, President of the DRC, and the banks that finance his vast business operations.

Mr Nagle was in Sydney when Mr Glasenberg anointed him as his successor last week at the end of an investor presentation in which Glencore announced its ambition to be the first major miner fully aligned with the goals of the Paris agreement on climate change.

Mr Glasenberg did not want Mr Nagle’s appointment to distract from his vision of a new green-tinged Glencore that will attract climate-conscious investors, according to people close to his thinking.

Copper smelter in Altonorte in northern Chile: Glencore produces metals essential for the energy transition

The leadership transition comes as Glencore, which missed the iron ore bull market, is benefiting from a tailwind from rising industrial metal prices. If current prices persist, the group could generate $ 5.6 billion in excess cash next year, allowing it to pay off debt and resume dividend payments that were suspended this year.

From there, Nagle can take charge of the two big decisions that reflect Glencore’s unique position as a company on both ends of the carbon spectrum. It is the world’s largest exporter of thermal coal but also a major producer of metals essential to the energy transition – copper, cobalt, nickel and zinc.

At Friday’s event, Glencore pledged to reduce its greenhouse gas emissions, including the “scope 3” created when customers burn raw materials, to net zero by 2050.

It plans to do this primarily by placing its coal business into a controlled decline in which reserves are not replaced when they run out.

Glencore cash flow projection for 2021

By establishing a credible path to net zero, Mr. Glasenberg believes Glencore can hang on to a business it can milk for cash and not be penalized by investors.

Coal accounts for about 10 percent of earnings before interest, taxes, depreciation and amortization and 5 percent of income, so it does not represent a large part of its business.

The movement has met with a positive response. While Glencore’s commitments require careful consideration, they are “important,” according to Adam Matthews, director of ethics and engagement at the Church of England Pensions Council and co-chair of the Transition Pathway Initiative.

Copper foil during electrolytic refining in the Democratic Republic of Congo: when and where to increase metal production will be a big decision for Gary Nagle © Simon Dawson / Bloomberg

“It is clear that we are rapidly approaching a time when a standard on what is ambitious enough and what is not will be determined. Such a standard will clearly include scope 3 emissions, ”he said.

Ultimately, it will be up to Mr. Nagle to decide whether Glencore can stay in the coal or must dismantle the business.

“We believe that a coal split will eventually occur after Gary Nagle takes over as CEO and Glencore will then be the green wave miner, ”said Christopher LaFemina, analyst at Jefferies.

Nagle will then have another decision to make: when to increase production of the metals – mainly copper and nickel – that will be needed for the energy transition.

Copper pipeline shrinking Highly probable and probable index of copper projects 2001 = 100

Deciding when to pull the trigger on mine extensions will be crucial. If Mr. Nagle moves too early, he risks adding too much supply to the market and pushing prices down.

Analysts don’t expect big changes in Glencore’s corporate culture under the leadership of Mr. Nagle, who is considered “incredibly commercial”.

“We expect a seamless transition from Ivan to Gary,” said LaFemina.

The new CEO will also want to improve Glencore’s safety record – he has suffered eight deaths this year – and must decide whether to prune a tail of fringe assets, including Glencore’s oil exploration business and its copper unit in Zambia. Glencore has a sprawling base of more than 150 industrial assets, according to Deutsche Bank.

Mr. Nagle, who comes from the asset side of the business, will also need to familiarize himself with his business arm, or “marketing.”

One issue that Nagle has little control over relates to the various regulatory issues the company faces.

In 2018, it was order by the US Department of Justice to hand over documents and records relating to possible corruption and money laundering in Nigeria, Venezuela and the DRC for more than a decade.

DoJ investigations typically last at least three years, although the departure of Mr. Glasenberg and other senior officials involved in the investigations may speed up the process. The company said it was cooperating with the investigations.

Another challenge for Mr. Nagle will be maintaining a good relationship with Mr. Glasenberg, whose presence will dominate the company even after his retirement.

Mr Glasenberg said he had no plans to become the next chairman of the company – Tony hayward cannot continue to play its role any longer under the UK corporate governance code. But the outgoing leader will remain a large shareholder, with a 9.1% stake worth nearly $ 4 billion.

“If Gary wants to entrust me with help, I’ll be there to help if needed, but I certainly don’t intend to interfere with him,” Mr. Glasenberg said. “He has to run the business as he sees fit and create shareholder value.”

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