JOHANNESBURG (miningweekly.com) – 2021 has been a great year for the company, CEO of Glencore Gary Nagle said on Tuesday, when the company reported record earnings before amortization and amortization of interest (Ebitda) of $21.3 billion, record marketing performance Ebit of $3.7 billion and record industry performance of 17.1 billion dollars Ebitda.

As a result, net debt of $6 billion is now well below the London and Johannesburg-listed company’s $10 billion cap, paving the way for a $4 billion distribution to shareholders, consisting a cash position of $3.45 billion. and a $550 million stock buyback. (Also watch the attached video from Creamer Media.)

On the industrial side, Glencore reported strong demand across the globe as countries emerged from Covid in a constrained, part-Covid, regulatory and geopolitical supply environment.

On top of that, there were low inventories across all commodities, across the globe, which resulted in very strong margins across the business.

“Market conditions remain supportive, we see dislocations in the market, we see arbitrage opportunities and hopefully a good result for 2022 as well,” Nagle said during an in-person results presentation and online covered by Weekly mining.

CLIMATE CHANGE STRATEGY

Glencore, which did not have a short-term target for Scope 1, 2 and 3 emission reductions until 2021, now has a strict climate change strategy: “By 2026 , we will be down 15% on scope 1, 2 and 3 emissions,” Nagle said.

The company’s former medium-term emissions target of a 40% reduction by 2035 has now been raised to 50% from its 2019 baseline.

“Socially it’s very difficult to report but we had four deaths in our business in 2021 and that’s four too many,” Nagle said.

“We continue to work very hard, day and night, Peter Freyberg and his team devote considerable effort to our Safe Work program. We have revised our Safe Work program. Safe Work 2 is being rolled out. We are seeing great results, but so far not good enough. We are not there. We believe in zero harm in our business and we believe we can make it happen,” Nagle added.

A working group has been set up to promote diversity and inclusion, which are driven in the company.

On the governance side, Glencore has what Nagle described as a top-notch ethics and compliance program.

“I sincerely believe that this is a top notch program and it is not a one-size-fits-all product. We continue to work on it day in and day out to ensure that we are a responsible and ethical operator,” he said.

As previously reported, Glencore is the subject of a number of investigations by regulatory and enforcement authorities, including the US Department of Justice, US Commodity Futures Trading Commission, UK Serious Fraud Office and the Brazilian Federal Prosecutor’s Office.

“Ass announced his morning we also expect to resolve the US, UK and Brazilian investigations during 2022 and we have recorded a provision for these costs in our accounts,” Nagle said.

FINANCIAL DETAILS

The 84% increase in Ebitda translated into free cash flow of $13 billion – “that’s the key number ultimately in any business. This is what flows from your debt reduction, your ability to make distributions and payments to your shareholders,” Glencore’s chief financial officer said. Steve Kalmin.

“The real boost from H1 to H2 was in the coal sector,” Kalmin said.

Coal EBITDA margin in 2021 was $50.6/t on production down 3% from $11/t in 2020. Coal production of 103.3 million tons was 2 .9 million tons.

“We have a 12% higher annualized tailwind even in 2022 with the current macros,” Kalmin added.

Copper and cobalt made a significant contribution, along with zinc, nickel and ferroalloy activity.

“Ferro itself is almost on the podium. They have had a great result from our South African business over the year, both in terms of production and margins,” Kalmin said.

Earlier this month, Glencore reported 43% higher ferrochrome production in 2021, with ferrochrome production centered on South Africa rising from 1,029,000 t in 2020 to 1,468,000 t in 2021.

In response to Weekly mining during the press conference, the CEO of Glencore Alloys Japie Fullard said the main driver for the success of the ferrochrome business in 2021 was the supply and demand position, good sustainable ferrochrome pricing and excellent efficiency drivers.

The increase in the price of electricity as well as the prospect of even higher electricity tariffs in the future were negative.

“I hope it doesn’t reduce our performance,” Fullard said.

Regarding the introduction of self-generated clean energy, Fullard said there were three key areas of interest, the first being the use of off-gases.

“We have concluded a pilot project with Swedish Stirling, so we use the exhaust gases and also generate electricity from it. This involves the generation of exhaust gases on site and we focus a lot on this.

“The second area we are also looking at is on-site generation, ie behind the meter, and we are looking at solar and wind power. We’re quite advanced in our pre-feasibility on that as well.

“Thirdly, there will be the off-grid concentration zone. As you know, we also sent out the request for proposals in this regard. We are studying wind and solar projects. We’re starting to see some benefits of that and we’ll focus on that,” Fullard added.

DECARBONIZATION

Regarding the inclusion of South Africa in Glencore’s decarbonization plans, Nagle pointed out in response to Mining Weekly that coal and ferrochrome were a significant part of the South African business.

“South Africa features prominently in our climate change strategy. We will reduce our South African coal activity over time and this will contribute to the targets we have set of a 15% reduction by 2026, 50% reduction by 2035 and net zero by 2050” , added Nagle.

Regarding the possibility of recycling being carried out in South Africa by Glencore, which is active in the circular economy in other countries, Nagle said the company is looking for recycling opportunities across the world.

“Some geographies are a little more ready for recycling right now given the infrastructure that’s being built. Let’s say, for example, Europe, where they’re building green factories, places where we have foundries like in Europe and North America, where we can use this existing infrastructure to accelerate our recycling business.

“But South Africa is not excluded. In the South, of course, we are looking for opportunities, but that will come as those opportunities arise,” added Nagle.

ANALYST COMMENTS

Glencore’s free cash flow of $14.1 billion was described by Citi analyst Ravi Ephrem as being “materially ahead of our expectations”.

Barclays Ian Rossouw said in a note that Glencore “remains our top choice” given its catalyst-rich investment scenario, strong free cash flow and return potential, which is expected to increase significantly in the second half of the year.

RBC Capital Markets Research Tyler Broda described the results as offering Glencore the potential to “start to reassess itself further” due to the continued expectation of strong free cash flow. “We consider the assessment to provide substantial support for a reassessment,” Broda reiterated.