Annual Report
2021
Responsibly sourcing
the commodities that
advance everyday life
Our purpose
Living our values
Our values reflect our
purpose, our priorities
and the beliefs by which
we conduct ourselves.
They define what it
means to work at
Glencore, regardless of
location or role. They are
the heart of our culture
and the way we do
business.
Glencore.com
Safety
We never compromise on
safety. Welook out for one
another and stopwork if it’s
not safe
Responsibility
We take responsibility for our
actions. Wetalk and listen to
others to understand what
they expect from us. We work
to improve our commercial,
social and environmental
performance
Simplicity
We work efficiently and focus
onwhat’simportant. We
avoid unnecessary complexity
and look forsimple,
pragmatic solutions
Integrity
We have the courage to do
what’s right,even when it’s
hard. We do whatwe say and
treat each other fairlyand
with respect
Openness
We’re honest and
straightforward when we
communicate. We push
ourselves toimprove by
sharing information and
encouraging dialogue and
feedback
Entrepreneurialism
We encourage new ideas and
quicklyadapt to change.
We’re alwayslooking for new
opportunities tocreate value
and find better and saferways
of working
Chairman’s introduction 04
Chief Executive Officer’s review 05
Investment case 08
Our market drivers 09
Business model 11
Our strategy for a sustainable future 12
Key performance indicators 16
Climate change 19
Sustainability 27
Our people 34
Section 172 and stakeholder engagement 38
Ethics and compliance 43
Financial review 48
Risk management 68
Corporate Governance
Chairman’s governance statement 85
Directors and officers 86
Corporate governance report 90
ECC Committee report 96
HSEC Committee report 97
Audit Committee report 98
Nomination Committee report 100
Directors’ Remuneration Report 101
Directors’ report 119
Financial Statements
Independent Auditor’s Report
to the members of Glencore plc 125
Consolidated financial statements 143
Additional Information
Alternative performance measures 234
Other reconciliations 241
Production by quarter – Q4 2020 to Q4 2021 243
Resources and reserves 250
Independent Auditor’s Reasonable Assurance 260
Report on ESEF prepared Annual Financial Report
◊ Alternative performance measures
Adjusted measures referred to as Alternative
performance measures (APMs) which are not defined or
specified under the requirements of International
Financial Reporting Standards; refer to APMs section on
page 234 for definitions, explanation of use and
reconciliations and note 2 of the financial statements for
reconciliation of Adjusted EBIT/EBITDA.
See Page 234
Strategic Report
Glencore Annual Report 2021 01Glencore Annual Report 2021 01
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
Head Office Industrial assets Marketing office/other
Where we operate
One of the world’s largest natural resource companies
6 35 >40c135,000
continents countries employees and contractors offices
Our business at a glance
Integrating sustainability
throughout our business
Our Financial
Highlights
by 2035
50%
Targeted reductions
in total emissions
2020: 24.2
25.7
CO
2
e Scope 1 and 2
(Million tonnes)
2020: 271
254
CO
2
e Scope 3
(Million tonnes)
Sustainability
Page 27
Financial review
Page 48
2021
2020
2019
21.3
2020: 11.6
Adjusted EBITDA◊ (US$ billion)
Net income/(loss) attributable to
equityholders
(US$ billion)
5.0
2020: (1.9)
2021
2020
2019
Cash generated by operating
activities before working capital
changes, interest and tax
(US$ billion)
2021
2020
2019
16.7
2020: 8.3
Glencore Annual Report 2021 02
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
●
Metal 61%
●
Energy 39%
Our business at a glance continued
Two business segments
Total Adjusted EBITDA◊ 2021
$21.3bn
2020: $11.6bn
2020: $7.8bn
Industrial business
Marketing business
$17.1bn
Adjusted EBITDA◊ Marketing 2021
2020: $3.7bn
$4.2bn
0.83
2.4
Lost time injury frequency rate
per million hours worked
Total recordable injury frequency rate
per million hours worked
2020: 0.94
2020: 2.7
●
Metal 70%
●
Energy 30%
●
Metal 70%
●
Energy 30%
Adjusted EBITDA◊ Industrial 2021
Total borrowings
(US$ billion)
2021
2020
2019
34.6
37.0
37.5
Net debt◊
(US$ billion)
2021
2020
2019
6.0
17.6
15.8
Glencore Annual Report 2021 03
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
often disproportionate to such
contribution.
We continue to focus on our Values based
culture. The Company has invested
significant resources over the last few years
to build and implement a best-in-class
ethics and compliance programme. To
provide stakeholders with a better
understanding of our programme, starting
this year, we will publish a stand-alone
report on this vital area for our business
and reputation.
On climate change, we continue to be a
mining industry leader in our approach
and with our plans for the future. Having
published our first progress report in
December 2021, we will be tabling a
resolution on our progress for shareholders
to vote on at our AGM.
At the date of this report, the conflict in
Ukraine continues. We are looking to see
how we can best support humanitarian
efforts for the people of Ukraine.
ESG topics led by climate continue to
dominate discussion in the industry and
more widely. We are pleased to be able to
make a meaningful contribution to this
dialogue as our industry shows its
increasing importance to the green
economy of the future. Glencore will be a
key player in providing the metals that are
the building blocks for the world’s energy
transformation.
Kalidas Madhavpeddi,
Chairman
Kalidas Madhavpeddi, Chairman
Chairman’s introduction
Transition,
Renewal,
Progress and
Performance
Dear Shareholders
I was honoured to be appointed as your
Chairman last year.
I have spent my entire working life in the
mining and commodities business, having
started in 1980 with Phelps Dodge Corp. In
that time, I have been fortunate to witness
the industry’s transformation in many
ways. For example, Phelps Dodge was then
one of the titans of the global mining
industry while Glencore’s roots were a
trading company with no industrial assets.
Today Glencore is one of the industry
giants with large-scale, world-class mining
assets and one of the world’s most
enterprising trading and marketing
businesses, while Phelps Dodge has long
since disappeared. Scale usually brings
bulk and bureaucracy with the stifling of
innovation. What is so remarkable about
Glencore is that its entrepreneurial spark
still burns brightly. The dislocation in
markets in the last two years has provided
opportunities for our marketing business
which led to record earnings for this
segment.
We have initiated various business
improvements across our operations,
ranging from innovations in the processes
of individual assets to material new
procurement initiatives on equipment
purchases. We are excited by our
promising and growing recycling business,
which extracts metals from spent electric
batteries and electronic circuit boards,
which we see expanding as an important
part of the transition to a low-carbon
economy. Along with innovation, we have
relentlessly pursued improvements in our
ESG performance such as the relaunch of
SafeWork. Although we have seen a
significant decline in fatalities, we are
saddened to report that we lost four of our
colleagues in industrial accidents during
the year. We will continue our efforts to
eliminate such events. We also progressed
our continued focus on tailings dams
management.
The succession to Gary Nagle and an entire
senior business team with a new
generation of leaders was completed last
year. Gary has hit the ground running and
quickly taken over management of all
facets of the business leading to a smooth
and rapid transition in leadership.
We continue to rejuvenate our Board, with
the retirements of Tony Hayward and John
Mack last year and we were pleased to
welcome Cynthia Carroll and David
Wormsley, as well as Gary Nagle as
Executive Director.
As reflected in this report, a number of
priorities for the Board were met in 2021,
including strengthening our balance sheet
and establishing a robust and transparent
shareholder returns framework. Also,
although we cannot forecast the timing
with certainty, we hope to resolve a
number of our outstanding historical
investigations this year and have
accordingly provisioned for these
resolutions.
Management continued the work that had
been started more than a year ago in
simplifying our portfolio and in particular
looking at disposing of assets that are
either non-core or are too small to make an
effective contribution, with challenges
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 04
Strategic Report
Progress and
performance
through
challenge
and change
Although 2022 is likely to see a moderation in
global growth, including as authorities seek to
tame inflation, many commodity markets
currently exhibit low inventories and are
prone to supply disruption, which, when set
against the significant new investment in
electrification and decarbonisation, should
support prices for our key metals in 2022
and beyond.
2021 Financial scorecard
Reflecting this environment and leveraging
the unique combination of our transition and
energy commodities, along with the global
reach and scale of our marketing business,
the Group has achieved a record Adjusted
EBITDA result of $21.3 billion, up 84% over
prior year. Net income before significant items
increased 267% to $9.1 billion, while significant
items reduced Net income attributable to
equity holders to $5.0 billion, mainly due to
the required accounting recycling to the
statement of income of Mopani’s non-
controlling interests upon its disposal, an
impairment charge related to our Koniambo
nickel operation and recording a provision for
costs currently estimated to resolve the
various government investigations.
In marketing, tight physical commodity
markets and supply chain challenges, which
resulted in elevated levels of volatility,
generated ideal trading conditions, with
Adjusted EBIT growing 11% to a record $3.7
billion. Strong trading performances were
delivered across all commodity departments.
Agricultural markets also offered favourable
market conditions, with our 49.9% share of
Viterra’s earnings contributing $473 million.
Industrial Adjusted EBITDA of $17.1 billion was
118% higher than 2020, primarily reflecting
strong margin expansion at our copper,
ferroalloys and coal assets. Coal (Newc),
cobalt, copper, nickel and zinc average
year-over-year price increases were 125%, 60%,
51%, 34% and 32% respectively.
In spite of the ongoing challenges of
Covid-19, 2021 was an extraordinary
year for Glencore, reflecting rising
demand for our metals and energy
products, record Adjusted EBITDA
and the transition to new leadership.
As in 2020, the pandemic overshadowed our
daily lives, remaining an ongoing challenge
for colleagues, our families, our local
communities and society at large. As a
responsible operator, our top priority is to
protect the safety and health of our people
and the communities that host our
businesses. Sadly, we experienced four
fatalities in 2021. We believe all fatalities are
avoidable, and are committed to our goal of
zero fatalities.
While economic activity remained below
potential in many key global economies, our
sector continued to perform well, given its
critical function in delivering the world’s
energy, food, housing, infrastructure and
mobility requirements. Against the backdrop
of material global central bank
accommodation and government fiscal
spending, prices for many of our key
commodities rose to multi-year or record
highs, reflecting resurgent global demand
and widespread supply challenges. Copper
prices rose as mine production struggled to
meet general industrial expansion and new
energy demand. The rapid growth in electric
vehicle sales supported double-digit demand
growth for nickel and cobalt, while surging
power costs and environmental controls
disrupted zinc and aluminium supply.
Thermal coal, oil and gas markets, impacted
by substantial recent underinvestment in
supply capacity, and low inventory levels,
were unable to efficiently respond to the rapid
demand growth, significantly lifting prices.
Gary Nagle, Chief Executive Officer
Aided by strong cash generation, Net debt
reduced during the year by $9.8 billion to $6.0
billion. Net funding also declined, however
down by a lesser $4.6 billion to $30.8 billion,
due to increased readily marketable
inventories on hand, on account of the
significantly higher prices noted above. With
Net debt/Adjusted EBITDA and FFO/Net debt
metrics of 0.28x and 282.3% respectively, we
currently enjoy significant financial headroom
and strength.
Shareholder returns
At our investor update in December 2021, we
refined our capital allocation policy to
manage Net debt, in the ordinary course of
business, to around a c.$10 billion cap, with
deleveraging below such cap (after the base
distribution), being periodically returned to
shareholders via special cash distributions
and/or share buybacks as appropriate.
In 2021, we delivered c.$2.8 billion of
shareholder returns, comprising a $1.6 billion
base cash distribution (in respect of 2020 cash
flows), a c.$500 million special cash
distribution and $750 million of share
purchases.
For 2022, basis 2021 cash flows, we are
recommending to shareholders a $0.26 per
share (c.$3.4 billion) base cash distribution,
payable in two equal instalments, comprising
$1 billion from Marketing cash flows and 25%
($2.4 billion) of Industrial attributable cash flows.
The application of our ‘Top up’ returns
framework generates an additional payment
of c.$550 million to restore Net debt to our
target optimal cap level of c.$10 billion. We are
therefore announcing a new $550 million
share buyback programme to be completed
before release of our 2022 interim results,
representing an additional c.$0.04 per share.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 05
Strategic Report
Chief Executive
Officer’s review
Pathway to succeed in a net zero
economy
During 2021 we identified further carbon
reduction opportunities across the portfolio
and significantly expanded our Marginal
Abatement Cost Curve. Additionally, our
assessment of the impact of carbon prices on
industry cost curves for our key commodities
illustrated that our portfolio is resilient to a
range of carbon pricing scenarios given our
assessment that these costs will be passed
onto the consumer and the favourable
emissions intensity positions that our overall
weighted average industrial portfolio
occupies on these curves.
Reflecting additional work on our emissions
profile and opportunities to deliver
reductions, we strengthened our medium-
term emissions reduction target and
introduced a new short-term target. We are
now committed to reducing total emissions
(Scope 1+2+3) by 15% by 2026 and 50% by 2035,
both on 2019 levels. Post 2035, our ambition
remains to achieve net zero total emissions by
2050 with a supporting policy environment.
Our targets and ambition reflect our
commitment to align our business strategy
with the goals of the Paris Agreement. Our
strategy of responsibly depleting our coal
portfolio over time reflects our belief that the
energy transition will be non-linear across
time and geography, with the responsible
decline of our coal portfolio meeting critical
regional energy needs and affordability
through this evolution.
Many of our shareholders have expressed the
importance they attach to climate change
considerations and their expectation for
Glencore to align its business strategy with
the goals of the Paris Agreement. Our 2026
target lies within the range of IPCC 1.5°C
scenarios and our 2035 target is aligned with
the IEA NZE 2050 scenario, itself consistent
with IPCC.
At our 2021 AGM, we provided our
shareholders with their first advisory vote on
our climate action transition plan, with more
than 94% of shareholders voting in favour. I
look forward to continued engagement with
our stakeholders as we progress the
implementation of our strategy and respond
to the global challenges of climate change
and meeting the UN’s Sustainable
Development Goals.
Governance
We continue to cooperate extensively with
the various authorities investigating Glencore
in order to resolve these investigations as
expeditiously as possible. While we cannot
forecast with certainty the cost, extent, timing
or terms of the outcomes of the
investigations, we presently expect to resolve
the US, UK and Brazilian investigations in
2022. Accordingly, and based on our current
information and understanding, we have
recorded a provision as at 31 December 2021
of $1,500 million representing the Company’s
current best estimate of the costs to resolve
these investigations. In addition, we continue
to cooperate with the previously disclosed
investigation by the Office of the Attorney
General of Switzerland (OAG) and are also in
contact with the Dutch authorities in
connection with an investigation which has a
similar scope to that of the OAG investigation
and is being coordinated with the OAG. The
timing and outcome of these investigations
remain uncertain, but we would expect any
possible resolution to avoid duplicative
penalties for the same conduct.
Year end net debt◊
$6.0bn
Returns to shareholders
$4.0bn
We are committed to upholding a culture of
ethics and compliance across our business.
We have taken a number of remedial
measures in light of what we have learned
during the investigations and have dedicated
substantial resources over the last few
years to upgrade and implement a best-in-
class Ethics and Compliance programme.
This includes significant investments in
compliance personnel, systems and
external assurance.
We have strengthened our Values and Code
of Conduct and rolled these out through a
comprehensive global campaign designed to
embed them throughout our business. Our
Values of safety, integrity, responsibility,
openness, simplicity and entrepreneurialism
guide us in everything that we do. We expect
all employees to commit to our Code
regardless of who they are or where they
work. We have also strengthened our policy
framework which comprises a suite of
policies, standards, procedures and
guidelines. The policies are publicly available
on our website and set out the commitments
through which we strive to be a responsible
and ethical operator.
The safety and security of our workforce and
the communities living around our assets are
a priority recognised across our operational
activities. Our ambition is to prevent all
fatalities, occupational diseases and injuries
wherever we operate. We relaunched
‘SafeWork’ during the year to address
underlying issues in historical safety
performance. We believe that consistent
application of SafeWork through strong
visible leadership will drive a culture of safe
operating discipline and get our people
home safe.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 06
Strategic Report
Chief Executive Officer’s review
continued
We are also very pleased to have appointed
Kalidas Madhavpeddi as Chairman of the
Board as well as Cynthia Carroll and David
Wormsley as new independent Non-
Executive Directors during the year.
Kalidas’ 40 years of experience in the
international mining industry is instrumental
to Glencore as we focus on achieving our
objectives of delivering sustainable
shareholder returns, playing a leading role in
the green energy transition and securing our
ambition of being a net zero total emissions
company by 2050. David brings 35 years of
extensive experience in investment banking,
both in the UK and internationally. We look
forward to their continued contribution to
our Board.
Outlook
We are focused on continuing to position our
portfolio towards larger, higher-margin,
longer-life assets essential to the transition. In
this regard, we have progressively announced
a series of transactions (primarily disposals)
delivering further portfolio alignment and
simplification.
In January 2022, Viterra announced that,
subject to customary regulatory approvals, it
would acquire Gavilon, a major US based
origination and handling business, for $1.125
billion, plus working capital, with funding
provided from its own balance sheet. The
acquisition will give scale in this key producing
region, largely completing Viterra’s coveted
geographic network coverage.
Our low-carbon advantaged commodities,
geographies and recycling capabilities give us
the unique ability to supply the sustainable
commodities that our customers increasingly
need. We have the right strategy and the right
business model to generate sustainable
long-term value for all stakeholders.
Gary Nagle,
Chief Executive Officer
Chief Executive Officer’s review
continued
Our culture
Read more page 34
We believe in empowering our
leaders and our people to drive the
performance of our business.
We foster an environment where
our different backgrounds,
cultures and beliefs are supported
and encouraged.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 07
Strategic Report
Investment case
Our asset portfolio is
populated with large,
long-life and low-carbon
advantaged commodities
Unique capability to supply
the sustainable commodities
of the future
Highly resilient
and cash generative
business model
•
Our business model covers the
production, recycling, sourcing,
marketing and distribution of the
commodities needed by our
suppliers and customers to
decarbonise, while simultaneously
reducing our own emissions
•
Leading climate strategy: targeting
total Scope 1, 2 and 3 reductions
relative to 2019 of 15% by 2026 and
50% by 2035, alongside a total
emissions net zero ambition by 2050
•
Responsible stewardship of
declining coal business
•
We are focusing our portfolio on
larger, higher-margin, longer-life
assets essential to the transition
•
We are a leading producer of key
transition metals, including copper,
cobalt, nickel, zinc and vanadium
•
Our low-carbon advantaged
commodities, geographies and
recycling capability supply our
marketing business with the
products that our customers
increasingly need
•
Our coal portfolio will supply critical
regional energy needs as the
transition evolves along a non-linear
path through time and geography,
in line with our decarbonisation
commitments
•
Our Marketing segment’s carbon
strategy is expected to create
additional value over time as
markets/demand for carbon
solutions in the commodity supply
chain evolves/matures
•
As a vertically integrated extractive
and marketing business, we will
leverage our own carbon reduction
efforts and market expertise to meet
the increasing needs for attestable
low-carbon products
•
Our diversified business model and
strong balance sheet support
enhanced shareholder payouts
•
2021 Adjusted EBITDA up 84% to
$21.3bn; Net Debt down 62% to
$6.0bn. Shareholder returns basis
2021 cash flows: $3.4bn ($0.26/share)
payable in 2022, plus $0.6bn of new
share buybacks
•
We are uniquely positioned to
generate sustainable and growing
returns in the transition to a low-
carbon economy
A major supplier of energy
and transition metals and
solutions that support
the journey to Net zero
emissions
1 2 3 4
Glencore Annual Report 2021 08
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
We are dependent upon the supply, demand and pricing for our commodities.
Our market drivers
Net zero emissions
by2050
Demand for
the commodities
we produce
Future commodity
supply
Substitution
Efforts to limit global temperature
rises will impact fossil fuel
demand
Timing within the economic cycle
isvery important when bringing
newmine supply to market
Changes in population and
growth ofdeveloping economies
is generally impactful on
commodity demand
Higher commodity prices and
resource scarcity increases the
risk of material substitution
•
Momentum to decarbonise the global
economy has accelerated as nations
increasingly coordinate efforts aimed at
minimising greenhouse gas emissions,
including the targeting of net zero
emissions by 2050
•
The Paris Agreement aims to keep
the global temperature rise this century
to well below 2ºC
•
The pro-cyclical nature of mining
investment means that new mines are
usually approved when commodity prices
are higher
•
Given the long development time frames
required to bring new mine supply on line,
the timing as to when this becomes
available in the economic cycle is difficult to
predict and could become available at low
points in the economic cycle, creating
excess supply in the market
•
The industrialisation and urbanisation of
developing economies over almost two
decades has driven significant growth
in commodity demand
•
China’s rapid growth over this period now
means that it accounts for up to half of
global demand for many commodities
•
Looking forward, the world is forecast to
add 1.9 billion people by 2050, with much
of this growth in highly populous
industrialising economies
•
All potential decarbonisation pathways
require significantly more non-fossil
fuelcommodities
•
Widespread adoption of renewable energy
sources as a means of decarbonising energy
supply will create significant new demand
for the current key enabling commodities,
including copper, nickel and cobalt
•
The quantum of potential new demand is
generally of a size that is large relative to the
current annual production and known
defined global resources of thatcommodity
Key market drivers Emerging drivers
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 09
Strategic Report
Net zero emissions
by2050
Demand for the
commodities we produce
Future commodity
supply
Substitution
Impact on our industry
How we are responding
•
This transition is likely to increase the cost
for fossil fuels, impose levies for emissions,
increase costs for monitoring and reporting
and reduce demand
•
Third parties, including potential or actual
investors, may introduce policies materially
adverse to Glencore due to our interest in
fossil fuels, particularly coal
•
Technological advances are making
renewable energy sources more
competitive with fossil fuels, which is likely
to increase renewable energy’s market
share over the longer run
•
Over-investment creates over-supply and,
with it, potentially prolonged periods of
lowcommodity prices
•
Although commodity prices have increased
from the lows seen in early 2020, the
experience of the last economic cycles has
increased investor pressure on companies
tobe more cautious about investing in
newsupply
•
Balancing a finite, declining resource base
with the need to grow to meet expected
future demand is an inherent challenge for
companies in the resource sector
•
Current levels of industrialisation and
urbanisation suggest, in isolation, that
demand growth rates for commodities
could be lower in the future.
•
Lower or negative demand growth could
generate excess supply along with lower
commodity prices. However, post Covid-19,
large-scale government stimulus,
particularly if directed towards general and
decarbonisation related infrastructure,
could be supportive for commodity
demand
•
Continued population growth, particularly
in Africa and South East Asia could
generate additional demand for
commodities
•
Revenue and earnings of substantial parts
of our industrial asset activities, and to a
lesser extent, our marketing activities, are
dependent on prevailing commodity prices
•
Under a rapid decarbonisation scenario, a
significant increase in demand for the
commodities that currently underpin
renewable technologies is likely to result in
significantly higher prices for those
commodities
•
Higher sustained commodity prices will
increase the risk of accelerating efforts to
either reduce the quantity of material
needed for a certain application or
substitute an alternative that provides
similar performance at a lower price. For
example, demand for cobalt could fall if
newer battery technologies provide similar
results with less or no cobalt content
•
Our disciplined approach to capital
allocation seeks to reflect market supply
anddemand dynamics
•
Given the unpredictability of costs, risks and
timing of large-scale greenfield projects,
we prefer to add supply via targeted capital
efficient/lower risk brownfield expansions
when required
•
With the expectation that growth drivers in
the global economy will become weighted
towards decarbonisation spending, in
addition to the commodities needed for
everyday life, our large-scale metals'
portfolio is well placed to benefit from this
transition
•
Diversification of our portfolio of
commodities, currencies, assets and
liabilities is likely to mitigate the financial
impact of a negative demand shift in the
event of a particular commodity
substitution
•
Our market research teams continue
to assess the underlying demand for our
commodities as well as the new materials
that could impact current renewable
technology solutions
•
Energy transition commodities such as copper,
nickel, cobalt, zinc and vanadium could
become substantially more important given
their role in the technologies/infrastructure that
underpin low or no carbon energy sources
•
We are a leading producer of metals that
enable low-carbon and carbon-neutral
technologies
•
We are prioritising capex towards transition
commodities, including our Collahuasi
copper JV, our African copper / cobalt
operations and our Canadian INO nickel
life extension projects
•
All energy demand decarbonisation pathways
require our enabling commodities
•
We recognise our responsibility to
contribute to the global effort to achieve
the goals of the Paris Agreement by
decarbonising our own operational
footprint
•
We believe that our contribution should
take a holistic approach and have
considered our commitment through the
lens of our total emissions footprint
•
Against a 2019 base line, we are committing
to decline our total emissions (Scope 1+2+3)
15% by 2026, 50% by 2035 and we have an
ambition of net zero by 2050
Key market drivers Emerging drivers
Our market drivers continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 10
Strategic Report
Glencore Annual Report 2021 11
Industrial business activities
Exploration, acquisition and development
We focus on brownfield opportunities, cost
control and synergies.
Extraction and production
We diversify our product offering and have
wide geographical presence.
Processing and refining
We optimise end products to suit a wider
customer base.
Inputs and resources
on which our business
model depends:
Assets and natural resources
Many long-life and high-quality
assets
Value over volume approach
Embedded network and
knowledge in Marketing
operations
Our people and partners
Established long-term
relationships with customers
and suppliers
Major employer with c.135,000
people globally
Financial discipline
Capital deployed in disciplined
manner
Marketing hedges out the
majority of absolute price risk
Marketing profitability driven by
volume-driven activities and
value-added services
Unique market knowledge
Finding value at every stage in
the commodity chain
Outputs and impact
on key stakeholders:
Marketing business activities
Logistics and delivery
We fulfil customer orders and take advantage
of demand and supply imbalances, aided by
the scale of our network.
Blending and optimisation
We offer a wide range of product
specifications, seeking to meet customer-
specific requirements and provide a high-
quality service.
Strategic priorities
Responsible production
and supply
Responsible portfolio
management
Responsible product
use
Payments to governments
$7.6bn
Investors
$21.3bn
2021 Adjusted EBITDA
◊
Our people
11%
Reduction in Total Recordable
Injury Frequency Rate
$13.1bn
Equity free cash flow (FFO
◊
less net purchases of
property, plant and
equipment and dividends
to minorities)
Climate change
5%
Reduction in total emissions
versus 2020
Our business
model
Industrial
business
Marketing
business
Carbon
solutions
Recycling
We move commodities from where they
are plentiful to where they are needed
Our industrial business spans the metals
and energy markets, producing multiple
commodities from over 65 assets
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 11
Strategic Report
Our purpose
Responsibly sourcing the commodities
that advance everyday life.
Our values
Safety Integrity
Responsibility Openness
Entrepreneurialism Simplicity
Aligned with our purpose, our portfolio
enables the transition to a low-carbon
economy, while meeting society’s energy
needs as it progresses through the
transition.
Responsibly sourcing
the commodities that
advance everyday life.
To be a leader in
enabling
decarbonisation of
energy usage and help
meet continued
demand for themetals
needed in everyday life
while responsibly
meeting the energy
needs of today.
Our strategy for
a sustainable future
Strategic Priorities
Our
Purpose
Strategic
objective
Responsible
production and supply
Our core values are embedded
in everything we do. We are
committed to operating ethically,
responsibly, and to contributing
to socioeconomic development in
the countries where we operate.
We will continue to focus on
reducing the carbon footprint of
our operations and will allocate
financial returns towards
fulfilment of our business strategy.
Our commitment is delivered
through our operational
excellence, health and safety
and ethics and compliance
programmes, advancing our
environmental performance,
respecting human rights and
by developing, maintaining and
strengthening our relationships
with all of our stakeholders.
Responsible portfolio
management
We will prioritise investment
in metals that support the
decarbonisation of energy usage
as well as help meet demand for
metals needed in everyday life.
We will also reduce our coal
production in line with our various
climate action commitments
and the electrification and
decarbonisation of energy systems.
Our capital allocation supports
this strategy through the optimal
balance of debt and equity,
distributions to shareholders and
business reinvestment in
transition commodities and value
accretive Scope 1+2 abatement
opportunities that help achieve
our climate commitments.
Responsible
product use
A low-carbon future requires
responsibly produced low-carbon
metals. We will seek opportunities
to increase the proportion of green
metals we can supply to customers
from our own operations and
through our extensive marketing
activities. Supporting this, we are
scaling up our power and carbon
trading teams to help provide
carbon solutions for commodity
supply chains as these markets
evolve and mature.
We will participate in global
efforts to improve abatement
technologies and availability,
as well as resource use efficiency
by contributing to the circular
economy.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 12
Strategic Report
Priorities going forward
Operational excellence
Continued focus on operational efficiencies
and improvements to optimise operating
costs and margins.
Sustainability
We continue to implement activities that
promote integration of sustainability
throughout our business to support our
commitment to continuously improve our
standards of health, safety, environmental
and community and human rights
performance.
Managing emissions
We are working with global specialists and
draw on local expertise within our operational
teams to identify value accretive abatement
opportunities to further reduce our
carbon footprint.
In 2021, we almost doubled the volume of
NPV positive abatement opportunities and
are working to identify additional MACC
initiatives to close the remaining gap on
meeting our medium-term target and net
zero ambition.
Under all credible scenarios, fossil fuels (coal,
gas and oil) will continue to be a part of the
global energy mix for many years to come. We
will responsibly steward the decline of our
coal business as it meets society’s energy
needs through the energy transition.
Transparency
We are committed to operating transparently,
responsibly and meeting or exceeding
applicable laws.
Our strategy for a sustainable future continued
Performance in 2021
Operational performance
Solid performance across the asset base.
Previous voluntary reductions in coal
production, in line with weak demand, were
progressively unwound during the year as the
world's energy needs changed. In copper,
Katanga delivered towards its potential, while
Mutanda restarted processing operations
inQ4.
Safety
Regrettably, there were four fatalities during
the year. We implemented an enhanced
fatality reduction programme, including via
relaunching our ‘SafeWork’ programme in H1
2021 to address underlying issues in historical
safety performance.
Our ambition is to prevent all fatalities,
occupational diseases and injuries wherever
we operate.
Our TRIFR and LTIFR each decreased by 11%
compared to 2020.
Climate change
We recognise our responsibility to contribute
to the global effort to achieve the goals of the
Paris Agreement by decarbonising our own
operational emissions footprint and
responsibly managing the depletion of our
fossil fuels portfolio.
In line with the ambitions of the 1.5-degree
Celsius (ºC) scenarios set out by the
Intergovernmental Panel on Climate Change
(IPCC), against a 2019 baseline, we have set
ourselves the target of reducing our total
(Scope 1, 2 and 3) emissions in the shorter
term by 15% by 2026, and in the medium term
by 50% by 2035. Post-2035, our ambition is to
achieve, with a supportive policy
environment, net zero total emissions by
2050.
Community engagement
Our community development programmes
are an integral part of our community and
stakeholder engagement strategies. In 2021,
we spent $68 million on these support
programmes (2020: $95 million, including
significant amounts on Covid-19 related
initiatives).
Responsible
production
and supply
KPIs
•
Value for our shareholders – Adjusted
EBIT/EBITDA, Net income attributable
to equity holders
•
Safe and healthy workplace – fatalities,
FFR, TRIFR, LTIFR and occupational
disease cases
•
Environmental performance – total
carbon emissions, meeting our
commitments on climate change
•
Long-term value for communities –
community investment spend
See Page 16
Principal risks
•
Health, safety andenvironment
•
Climate change
•
Community relations and human rights
See Pages 81 - 84
TRIFR
11%
Decrease
LTIFR
11%
Decrease
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 13
Strategic Report
Bonds
We issued $3.4 billion, EUR 1.1 billion
and CHF 150 million of bonds across a range
of maturities from 5 to 30 years. Maturities are
managed around a cap of c.$3 billion in any
one year.
Reinvestment
Our net 2021 cash capital expenditure of $3.8
billion was weighted towards transition
commodities with c.80% of our expansionary
capital invested in our metals business,
including the INO life extension projects
(nickel), Collahuasi desalination infrastructure
and the Zhairem zinc project.
Credit rating
The Group’s credit ratings are currently Baa1
(stable outlook) from Moody’s and BBB+
(stable) from Standard & Poor’s.
Credit facility
During the year, revolving credit facilities were
extended and voluntarily reduced to $11.2
billion, in line with lower financing needs.
Committed available liquidity of $10.3 billion
at year-end covers more than three years of
upcoming bond maturities.
December 2021 net debt◊
$6.0bn
Committed available liquidity
$10.3bn
Performance in 2021
Conservatively positioned
The capital structure and credit profile is
managed around a $10bn Net debt cap, with
sustainable deleveraging (after base
distribution) below the cap periodically
returned to shareholders via special
distributions/buy backs as appropriate.
The Net debt cap may be flexed temporarily
up to $16bn for M&A opportunities, subject to
accelerated deleveraging to reposition Net
debt back to optimal levels. Year-end Net debt
and Net debt to Adjusted EBITDA were $6.0
billion and 0.28x, respectively.
This allows for $4.0 billion of shareholder
returns to restore the $10 billion optimal level.
Responsible
portfolio
management
Priorities going forward
Balance sheet
We are committed to maintaining a strong
balance sheet capable of supporting our
Purpose and Strategy.
Investment grade rating
We will preserve a robust capital structure
and business portfolio that reflects our
commitment to maintaining a strong BBB/
Baa investment grade rating.
Our optimal leverage target of a $10bn cap
provides significant current rating headroom
at Net debt/Adjusted EBITDA levels <1x.
Reinvestment
Prioritise investment in transition
commodities and value accretive Scope
1+2 abatement opportunities that help
achieve our medium-term Paris alignment
and 2050 net-zero ambition.
KPIs
•
Returns to shareholders – Funds from
operations, Net funding and Net debt
and annual capital returns/distributions
•
Value for our shareholders – Adjusted
EBIT/EBITDA, Net income attributable
to equity holders
See Page 16
Principal risks
•
Supply, demand and prices of
commodities
•
Currency exchange rates
•
Liquidity
•
Counterparty credit and performance
See Pages 73 - 78
Our strategy for a sustainable future continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 14
Strategic Report
Performance in 2021
Collaborating with our value chains
As a vertically integrated extractive and
marketing business, we are leveraging our
own carbon reduction efforts and market
expertise to meet the increasing needs
for attestable low-carbon products.
Power and carbon trading
We are scaling up our power and carbon
trading teams, establishing enhanced
transactional expertise and capabilities
in power, low carbon and environmental
products, and origination and structuring
in relation to both regulatory and
voluntary products.
Strategic partnerships
Recognising the need for strategic
partnerships between raw material
and battery producers, in 2021 we signed
a number of long-term supply agreements
for responsibly sourced low-carbon
aluminium and cobalt.
These include:
•
Five-year supply of Century Aluminum’s
Natur-Al low-carbon aluminium to
Hammerer of Austria
•
Supply of up to 1,500 tonnes of cobalt to
FREYR in the form of cobalt cut cathodes
made from partially recycled cobalt at our
Nikkelwerk facility in Norway
•
Investment in and long-term supply of
responsibly sourced cobalt to Britishvolt
Responsible
product use
Priorities going forward
Partnerships
Working with our customers and supply-
chain to enable greater use of low-carbon
metals and support progress towards
technological solutions.
Abatement
Supporting uptake and integration of
abatement – an essential contributor to
achieving low or net zero carbon objectives.
Circular economy
Leveraging our value chain to expand the
volumes of recyclable commodities for
processing through our global network
of metallurgical assets.
Responsible sourcing
Pursuing strategic long-term agreements
to provide a reliable supply of responsibly-
produced commodities essential to the
low-carbon economy.
KPIs
•
Returns to shareholders – Funds from
operations, Net funding and Net debt
and annual capital returns/distributions
•
Value for our shareholders – Adjusted
EBIT/EBITDA, Net income attributable
to equity holders
See Page 16
Principal risks
•
Geopolitical, permits and licence
to operate
•
Laws and enforcement
•
Operating
See Pages 74 – 80
Our strategy for a sustainable future continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 15
Strategic Report
Strategic priorities
Responsible production
and supply
Responsible portfolio
management
Responsible
product use
Key performance
indicators
Our financial and non-financial
key performance indicators
(KPIs) provide a measure of
ourperformance against the
key drivers of our strategy
Non-financial key performance indicators*
Policy
We take a proactive, preventative approach
towards health and safety. We require an
effective safety management system at each
asset to ensure the integrity of plant and
equipment, structures, processes and
protective systems, as well as the monitoring
and review of critical controls.
We believe that every work-related incident,
illness and injury is preventable and we are
committed to providing a safe workplace.
2021 Performance
We are saddened to report that four people
lost their lives at our operations during 2021
(2020: eight). All loss of life is unacceptable
and we are determined to eliminate fatalities
across our business.
Our 2021 fatality frequency rate, the total
number of fatalities from incidents and
occupational diseases per 1 million man-hours
worked, was 0.014 (2020: 0.027). Through
strong safety leadership, we can create and
maintain safe workplaces for all our people.
The vast majority of our assets have been
fatality free for many years.
* Non-financial indicators includes information
and data from our industrial activities in respect
of assets where we have operational control,
and excludes investment, marketing and
holding companies.
Safety: number of fatalities
Four
2020: Eight
Link to strategy
Policy
In line with the ambitions of the 1.5-degree
Celsius scenarios set out by the IPCC, against
a 2019 baseline, we have set ourselves the
target of reducing our total (Scope 1, 2 and 3)
emissions in the short-term by 15% by 2026,
and in the medium term by 50% by 2035. Post
2035, our ambition is to achieve, with a
supportive policy environment, net zero total
emissions by 2050.
2021 Performance
Our 2021 total emissions decreased by 5%
compared to 2020. This is a 25% reduction on
our 2019 baseline, reflecting pandemic,
market and weather-related coal and
ferroalloys production cuts across 2020 and
2021. We expect our total emissions to rise in
2022 with the unwinding of the earlier
demand-led coal production cuts. We remain
committed to delivering emissions reductions
of 15% by 2026 and 50% by 2035.
Total carbon emissions (Scope 1, 2 and 3)
(million tonnes CO
2
e)
280
2020: 295
Link to strategy
Definition
Community investments are our contributions
to, and financial support of, the broader
communities in the regions where we operate.
Funds are set aside to support initiatives
that benefit communities and local
sustainable development. We also make
in-kind contributions, such as equipment
and management. We support
programmes for community development,
enterprise and job creation, health,
education and the environment.
2021 Performance
In 2021, we spent $68 million on community
development programmes (2020: $95 million),
including $20.7 million spent during 2020 and
2021 on Covid-19 related initiatives. The
decrease reflects a number of initiatives being
temporarily placed on hold due to the global
pandemic, as well as the divestment of
Mopani and relinquishment of Prodeco.
Community investment
(US$ million)
2020: 95
68
Link to strategy
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 16
Strategic Report
Key performance indicators continued
Definition
Net income attributable to equity
shareholders is a measure of our ability
togenerate shareholder returns.
2021 Performance
Net income attributable to equity holders
before significant items was $9.1 billion.
Significant items of $4.1 billion principally
comprised:
•
the required accounting recycling to the
income statement of Mopani's non-
controlling interests on disposal ($1.0
billion);
•
impairment charges of $1.8 billion mainly
attributable to Koniambo; and
•
a $1.5 billion provision raised with respect to
regulatory investigations.
Net income attributable to equity holders was
$5.0billion in 2021, equivalent to 38¢ per share.
Net income attributable to equity holders
(US$ billion)
5.0
2020: (1.9)
Link to strategy
Financial key performance indicators
Definition
Adjusted EBIT/EBITDA provide insight
intoouroverall business performance
(acombination of cost management, seizing
market opportunities and growth), and are
thecorresponding flow drivers towards our
objective of achieving industry-leading returns.
Adjusted EBIT is the net result of revenue
less cost of goods sold and selling and
administrative expenses, plus share of income
from associates and joint ventures, dividend
income and the attributable share of Adjusted
EBIT of relevant material associates and joint
ventures, which are accounted for internally
by means of proportionate consolidation,
excluding Significant items.
Adjusted EBITDA consists of Adjusted EBIT
plus depreciation and amortisation, including
the related Proportionate adjustments.
2021 Performance
Adjusted EBITDA was $21.3 billion, a record level,
underpinned by significantly higher commodity
prices with many reaching record or multi-year
highs, amid widespread supply/demand deficits.
Marketing's results reflected a strong broad-
based performance, as many key markets
exhibited strong demand, supply constraints
and inventory drawdowns.
Link to strategy
Adjusted EBITDA◊
(US$ billion)
21.3
2020: 11.6
Definition
Net funding/Net debt demonstrates how our
debt is being managed and is an important
factor in ensuring we maintain an investment
grade rating status and a competitive cost
of capital.
Net funding is defined as total current and
non-current borrowings less cash and cash
equivalents and related Proportionate
adjustments. Net debt is defined as Net
funding less readily marketable inventories
and related Proportionate adjustments.
The relationship of Net debt to Adjusted
EBITDA is an indication of our financial
flexibility and strength.
2021 Performance
Net funding as at 31 December 2021 decreased
by $4.6 billion to $30.8 billion, while Net debt
decreased by $9.8 billion to $6.0 billion.
Net debt is being managed around a $10
billion cap, with deleveraging below such cap
returned to shareholders.
Year end net debt allows for $4.0 billion of
such returns structured as a $3.4 billion
distribution and $0.6 billion share buyback.
Net debt◊
(US$ billion)
6.0
2020: 15.8
Link to strategy
Definition
Funds from operations (FFO) is a measure
that reflects our ability to generate cash for
investment, debt servicing and distributions
to shareholders.
It comprises cash provided by operating
activities before working capital changes, less
tax and net interest payments plus dividends
received and related Proportionate
adjustments, as appropriate.
2021 Performance
FFO was up $8.7 billion (105%) on 2020, driven
by strong Adjusted EBITDA. Cash taxes
totalled $2.7 billion and net interest cash flows
were $0.9 billion, the latter reflecting lower
average costs of financing and levels of net
funding.
Link to strategy
Funds from operations (FFO)◊
(US$ billion)
17.1
2020: 8.3
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 17
Strategic Report
Circular copper – ensuring
supply through smart value
chain cooperation
The world is facing the challenge of meeting
the increasing energy needs of a growing
population, while drastically reducing its
carbon footprint. As the world reduces
dependency on fossil-based fuels, the
demand for refined metals that support
battery and renewable energy production,
such as copper, cobalt and nickel, is expected
to grow markedly.
Part of this change will come from a smarter
use of resources, as well as evolving
technology and changing consumer
behaviours. Although we will still need mining
to meet global demand, recycling will play an
ever more essential role.
Recycling end-of-life electronics has been an
important part of Glencore’s business since
the 1980s. Further industrialisation and
urbanisation in the developed and developing
world creates significant demand for energy
infrastructure; at the same time nationally-
determined contributions (NDCs) to
decarbonisation demand a reduction in
energy intensity. The resulting question for
society is how effectively to incentivise
circularity, and ultimately a closed-loop
economy with production, use, disposal and
recycling fully integrated.
Recycling is an increasingly important part of
Glencore’s business and reflects our Purpose
of responsibly sourcing the commodities that
advance everyday life.
One of the key metals needed to support a
low carbon future is copper. Copper demand
is expected to double over the next decades
to about 60 million tonnes per year in 2050.
While mining remains likely the most
important source for this additional metal
demand, the current project pipeline for
copper mine production is not sufficient to fill
the gap, meaning recycling has an important
role to play in making up for the shortfall.
As a founding member of the World
Economic Forum-backed Circular Electronics
Partnership (CEP), launched in 2021, we are
moving this process along with Dell,
Microsoft, Google, Vodafone, Cisco, SIMS, and
many other companies and partner
organisations.
Where product design used to be linear,
today’s environmental targets and future
supply shortfalls mean that thinking about
how best to recycle a product after its use
needs to start during the design process.
Recycled content has to translate into
downstream capacity.
Stories of the year
Traditionally, recycling sits at the end of this
chain, managing the transport of sometimes
hazardous materials safely to recycling sites and
then bringing the recycled and refined metals
back to market. However, we are increasingly
finding opportunities to have ‘Circular
Conversations’ – with big tech, OEMs, recyclers,
policy makers, and other stakeholders in this
ecosystem to discuss how to best design
products that can be easily recycled at the
end of their lifetime. That is also why Glencore
continues to develop, market, and support
state-of-the-art technology and is adapting
existing technology. By working together across
the entire end-to-end electronics supply chain,
we can help upstream stakeholders achieve
their, and eventually the world’s, net zero goals.
“We need to change the
paradigm – if you want to
achieve a circular economy,
you have to think of post-
consumer materials as a
resource, not as waste.
Copper is a great example.
It has a dual role to play on
the path to net zero. For
one, it is vital to powering
electrification. But it is also
an easily recyclable
commodity that doesn’t
lose any of its properties in
the process, meaning we
can produce more low
carbon copper to fuel the
low carbon energy
transition.”
Kunal Sinha
Global Lead, Recycling business
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 18
Strategic Report
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 19
Strategic Report
Climate change
Pathway to net zero
In late 2020, we published our climate change
strategy, Pathway to Net Zero. This set out our
pathway to delivering our climate-related
targets and longer-term ambition of becoming
a net zero total emissions company by 2050.
In December 2021, we published our Pathway
to Net Zero: 2021 Progress Report detailing the
steps we took during the year to identify and
implement emission reduction opportunities
and to make progress in the seven priority
areas we identified in our climate strategy.
This report also includes a full discussion of
Glencore's approach to climate change
governance, risk management and
engagement with industry organisations.
These publications are available on our
websiteat: glencore.com/sustainability/
reports-and-presentations
This section of the annual report includes a
summary of the developments in the year to
provide for concise text. The fuller discussion
from our Progress Report has not been
reproduced.
Taken together, these publications represent
Glencore's compliance with the requirements
of Listing Rule 9.8.6R. A cross-reference to the
TCFD recommendations is included later in
this section.
Our targets and ambition
We take a holistic approach to carbon
reduction, recognising that a meaningful
contribution to addressing climate change is
only possible through total (Scope 1, 2 and 3)
emissions reductions.
We recognise the need for action. We have set
ourselves a short-term target of an absolute
15% reduction of our total emissions by 2026
and a medium-term target of a 50% reduction
by 2035, both on our 2019 level of emissions.
Post 2035, our ambition is to be a net zero
total emissions company by 2050, assuming
a supportive policy environment.
1
We use the Intergovernmental Panel on
Climate Change (IPCC) scenarios to illustrate
our compliance with the net zero ambition.
Our 2026 target lies within the range of IPCC’s
1.5ºC scenarios and our 2035 target aligns to
the International Energy Agency’s (IEA) Net
Zero Emissions by 2050 Scenario (NZE 2050),
which is consistent with IPCC Shared Socio-
economic Pathway 1-1.9. While being aligned
with the respective scenarios, our base case
and scenario assumptions take into account
the different rates of progression that
developed and developing economies may
achieve in reducing emissions by decreasing
dependency on fossil fuels and shifting to
renewables energy supply.
The graphic opposite illustrates our pathway
to achieve our targets and long-term ambition.
As one of the world’s largest diversified natural resource
companies, we have a key role to play in enabling the global
transition to a low carbon economy.
Managing our footprint
Contributing to global decarbonisation
Footprint
Managing our
operational footprint
Reducing our Scope 1
and 2 emissions
Partnership
Collaborating with
our value chains
Working in
partnership with
our customers and
supply chain to
enable greater use
of low-carbon
metals and support
progress towards
technological
solutions to address
climate change
Abatement
Supporting uptake
and integration
of abatement
An essential
contributor to
achieving low or
netzero carbon
objectives
Technology
Utilising
technology to
improve resource
use efficiency
Contributing to the
circular economy
Transparency
Transparent
approach
Reporting on
our progress and
performance
Reduction
Reducing Scope 3
emissions
Our diverse portfolio
uniquely allows us to address
this portion of our footprint
through investing in our
metals portfolio, reducing
our coal production and
supporting deployment of
low emission technologies
Capital
Allocating
capital to prioritise
transition metals
Investing in the metals
that the world needs
1 Coordinated government policies, including incentives
to drive accelerated uptake of lower carbon and
decarbonisation technologies, and market-based
regulations governing industrial practices that drive a
competitive, least-cost emissions reduction approach.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 20
Strategic Report
Our position on climate change
We recognise climate change science as set
out by the IPCC. We support the global
climate change goals outlined in the United
Nations Framework Convention on Climate
Change (UNFCCC) and the Paris Agreement.
We believe that only through collective
inclusive action can the world achieve the
goals of the Paris Agreement and limit the
impact of climate change.
The global response to climate change should
pursue twin objectives: limiting temperatures
in line with the goals of the Paris Agreement
and supporting the United Nations
Sustainable Development Goals.
In order to achieve these goals, the world
requires a global transformation in energy
networks, industrial best practices and how
land is used and conserved. We believe this
transition is a key part of the global response
to the increasing risks posed by climate change.
In response to the ongoing decarbonisation of
global energy supply and electrification of key
sectors, including mobility and its associated
infrastructure, we expect demand to grow
exponentially for renewable energy
technologies, and the metals and minerals
required to build them.
As one of the largest diversified natural
resource companies in the world, we can
support the delivery of the goals by producing,
recycling, marketing, and supplying the metals
and minerals that are essential to the transition
to a low-carbon economy and to meeting the
needs of everyday life.
Our focus remains on our total emissions
footprint, including our Scope 3 emissions,
which is critical in order to achieve the goals
of the Paris Agreement. We have linked our
capital allocation strategy to the achievement
of our climate targets.
Executive oversight and Board
involvement
During 2021, we revised our internal climate
change governance framework to drive
implementation of the climate strategy
and the supporting work programmes.
Our new Climate Change Taskforce (CCT) is
accountable to our Board of Directors, to whom
it provides regular progress and status updates.
Its members include our Chief Executive Officer,
Chief Financial Officer, Head of Industrial Assets
and General Counsel, as well as
representatives from key corporate functions
including investor relations, finance and
sustainable development. Commodity
departments, including heads of the
departments and nominated representatives,
participate in the working groups that
support the CCT.
The CCT is responsible for overseeing our
climate strategy and progress against our
climate commitments. In 2021, the CCT
met on four occasions and established four
working groups to drive the delivery of our
targets and net zero ambition.
The working groups focus on areas specific to
our industrial activities, marketing activities,
climate-related data and its disclosure and
external stakeholder engagement and
advocacy activities.
It is through these working groups that we
assess initiatives to reduce our carbon footprint,
identify and leverage carbon marketing
opportunities, design and implement systems
to support complete, accurate and attestable
reporting and monitor external trends while
coordinating and overseeing advocacy and
communication efforts.
Strategic decisions, including those on
capital allocation and portfolio management,
are decided on by Group management and
the Board.
Our Chief Executive Officer is the named
executive for driving the climate strategy
within our Board. This is reflected in his
remuneration package. Of the scorecard for
his annual variable compensation, 30% is for
KPIs relating to HSEC matters: 15% for safety
performance and 15% for progress towards
our short- and medium-term absolute
emission reduction targets.
Climate change governance including an
organisational chart is further discussed in our
Pathway to Net Zero: 2021 Progress Report.
We work with global
specialists and draw
on the local expertise
within our operational
teams to identify ways
to reduce our Scope
1 and 2 emissions
Climate change continued
Scope 1 and 2 emissions reduction pathway
2019 emissions (1+2)
Mt CO
2
2019 2026 2035 2050
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2019 Scope 1
2019 Scope 2
Hard to Abate/Offsets
2050 Net Zero
Portfolio Depletion
Further Abatement
2035 Scope 1+2
Additional Abatement
MACC Scope 2
MACC Scope 1
Portfolio Depletion
2026 Scope 1+2
MACC Scope 2
MACC Scope 1
Portfolio Depletion
The chart below illustrates our pathway to achieve our targets and long-term ambition
with regard to our own operational footprint
Illustrative emissions pathway to net zero (Scope 1 & 2)
(million tonnes CO
2
)
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 21
Strategic Report
Reducing our operational footprint
We work with global specialists and draw on
the local expertise within our operational
teams to identify ways to reduce our Scope 1
and 2 emissions. Our approach has led to the
implementation of initiatives that reduce
these emissions, while continuing to meet our
obligations to our customers.
Our Group-wide marginal abatement cost
curve (MACC) enables an assessment of viable
and economic abatement opportunities,
supporting our assessment and, when
appropriate, implementation of such
opportunities. For example, identifying when
increases to carbon taxes make the building
of renewable power installations more cost
effective than purchasing grid-generated
power.
We undertake a uniform approach to MACCs at
a commodity department level. This enables a
group-wide aggregation of key decarbonisation
actions, which in turn supports a holistic
approach to reviewing the pipeline of initiatives
from concept to execution stages.
Through understanding the impact of the
different carbon prices from the key climate
scenarios on our assets’ cost curves and
emission profiles, we can identify where and
when to make capital expenditure in
abatement opportunities. This ensures that
we make value-accretive investments
thereby incorporating climate change
considerations into our business strategy
rather than considering emissions reduction
as a standalone work stream.
We divide CO
2
emissions reporting into three
different scopes, in line with the Greenhouse
Gas Protocol, and measure both the direct
and indirect emissions generated by the
industrial activities, entities and facilities
where we have operational control, as well as
emissions resulting from activities within our
value chain.
•
Scope 1 (measured in CO
2
e) includes
emissions from combustion in owned or
controlled boilers, furnaces, and vehicles/
vessels, from the use of reductants and
fugitive emissions from the production of
coal and oil (direct emissions).
•
Scope 2 location-based emissions
(measured in CO
2
) principally relate to
purchased electricity for our operations,
inparticular our metals processing assets,
which require secure and reliable energy
24hours a day, 365 days a year. For the
calculation of the Scope 2-location-based
emissions we apply the relevant grid
emission factors to all our purchased
electricity, regardless of specific renewable
electricity contracts (indirect emissions).
•
Scope 3 emissions (measured in CO
2
e) relate
to the indirect greenhouse gas emissions
further up and down our value chain. These
include upstream emissions associated with
the products and services we purchase from
suppliers and downstream emissions that
include emissions resulting from our
customers' use of the fossil fuels that we
produce, their processing of our metals and
concentrates, the emissions resulting from
time-chartered vessels and emissions
resulting from joint ventures that we do not
operate.
Our performance in 2021
During the year, we completed our work on
enhancing our climate governance process.
This included an updated Environmental
Policy with clear commitments on energy
efficiency and climate change, supported by
global working groups and a new Energy &
Climate Change Standard.
During 2021, we emitted 15.0 million tonnes
CO
2
e of Scope 1 (direct emissions) from our
consumed fuel (2020: 14.8 million tonnes).
This figure includes emissions from
reductants used in our metallurgical smelters.
It also includes CO
2
e of methane emissions
from our coal and oil operations, which is
around 20% of our Scope 1 emissions.
The consumption of electricity purchased by
our assets, our Scope 2 emissions, is also a
major action area within our decarbonisation
plans. In 2021, we emitted 10.8 million tonnes
CO
2
of Scope 2 location-based (indirect
emissions) (2020: 9.4 million tonnes).
The increase between 2020 and 2021 Scope 1
and 2 emissions reflects an increase in some
production volumes, in line with the global
economic recovery from the Covid-19
pandemic, notably at the grid-powered
Ferroalloys smelters in South Africa, which
were idled during the national lockdown in
2020. Our Scope 1 and 2 emissions have
decreased by 13% from our baseline year of
2019, and we remain confident of our progress
in meeting our short-term and medium-term
absolute reduction targets.
Our performance
Scope 1 (direct emissions)
1
(CO
2
e million tonnes)
Scope 2 location-based
2
(CO
2
million tonnes)
Scope 3
(CO
2
e million tonnes)
Total global energy use at our
operated assets
3
(petajoules)
202120202019
18.3
15.0
14.8
202120202019
11.1
10.8
9.4
202120202019
344
254
271
202120202019
210
178
180
1 This includes emissions from reductants used in our metallurgical smelters. It also includes CO
2
e of methane emissions from our operations, which is around 20% of our Scope 1
emissions.
2 We apply appropriate country-by-country grid emission factors to all of our purchased electricity, regardless of specific renewable electricity contracts.
3 Renewable energy sources deliver 13.4% of our total energy needs (2020: 13.3%). In Australia, we use coal seam gas from our mines to supplement power generation at a number of our
assets and have flares installed at those underground coal mines with the necessary supply and concentration of methane.
Climate change continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 22
Strategic Report
Reducing Scope 3 emissions
Our Scope 3 emissions are the indirect GHG
emissions across our value chain. They include
emissions from upstream supply chains,
downstream customer use of our products,
third-party logistics and transportation, and
emissions associated with joint ventures that
we do not operate. While these emissions are
the result of activities outside of our direct
control, we can exert an indirect influence
through taking a collaborative approach with
our value chain stakeholders and by making
changes to our product portfolio.
For the extractive sector, Scope 3 emissions
tend to be the largest proportion of total
emissions. For Glencore, these emissions
represent over 90% of our total carbon
footprint and including a reduction in Scope 3
emissions is essential for making a meaningful
contribution to reducing global emissions.
The most significant contributor to our Scope
3 emissions is our customers’ usage of the
fossil fuels we produce (predominantly coal).
In the Asia-Pacific region, the key destination
for our Australian and South African coal
production, coal is generally the largest
source of fuel for power generation and, we
believe, will remain a vital fuel until such time
as alternative energy infrastructure can be
approved, financed, and constructed.
Our performance in 2021
During 2021, we increased our engagement
with our key equipment manufacturing
suppliers and customers to improve our
understanding of the emissions within our
value chain. We are actively looking for
opportunities to partner with our stakeholders
to drive the uptake of carbon neutral solutions
and low emission technologies, as well as to
develop robust and consistent emission
tracking and data collection throughout
our value chain.
In the short term, we are actively monitoring our
stakeholders’ decarbonisation efforts and
exploring partnership opportunities to develop
and commercialise carbon-neutral goods,
services, and processes. Over the medium term,
we plan to systemise the integration of our
climate targets into our supplier selection criteria
and to develop internal systems that more
accurately track value chain emissions that will
feed into our annual Scope 3 inventory reporting.
Our total Scope 3 emissions in 2021 were 254
million tonnes CO
2
e, compared to 271 million
tonnes CO
2
e in 2020. The decrease was
principally due to pandemic-driven lower coal
volumes. We expect our Scope 3 emissions to
rise in 2022 with the unwinding of such cuts,
and remain committed to delivering
emissions reductions of at least 15% by 2026.
Our customers’ usage of the fossil fuels we
produced totalled 237 million tonnes CO
2
e
(2020: 253 million tonnes CO
2
e), being around
93% of our total Scope 3 emissions.
Our 2021 Sustainability Report will provide a
full disclosure of all the Scope 3 categories
that are relevant and material to our activities.
Investing in transition metals
We recognise the importance of disclosing
how we ensure our material capital expenditure
and investments align with delivering our
short- and medium-term targets and longer-
term ambition, as well as the goals of the Paris
Agreement. This includes transparently
reporting in our annual report on our capital
expenditure to develop, maintain and expand
the production of metals associated with the
transition to a low-carbon economy. We also
disclose the costs associated with the
responsible depletion of our coal assets.
Our current and forecast capital expenditure
aligns with our emissions-reduction targets,
reflecting our commitment to prioritise the
development of our portfolio's transition
metals. Running down our coal business will
contribute to the reduction of our total
emissions. Going forward, we have allocated
capital to deplete our coal business in a
responsible manner that is consistent with our
Values and our climate strategy. We expect
that our capital spend on our coal business will
decline in line with lower production.
In support of the delivery of our targets, we
have committed expansionary capital for:
•
Construction of the next generation of
nickel mines in Canada (Onaping Depth
and Raglan); we expect to commission
these in 2024-25;
•
Our attributable share of Collahuasi’s
desalination plant and associated pipeline
and pumping infrastructure;
•
Progressive ramp-up of the Mutanda
copper/cobalt operation; and
•
Feasibility stage work on certain longer-
dated copper and zinc resources.
* Derived from IEA WEO 2021 figure 6.14
In addition, we are assessing further value-
accretive opportunities within our project
pipeline. We base our investment decisions
on several factors, including carbon
considerations and impact on delivering our
emissions-reductions targets. We test our
investment decisions against Paris-aligned
carbon prices which in advanced economies
are projected at $180/t CO2e by 2035.
Our assessment of the acceleration of metals
demand under all scenarios has been
corroborated with work completed by the IEA
and others. The energy transition relies
heavily on the electrification of systems
together with rapid adoption of wind, solar
and energy storage solutions. These solutions
are metals intensive and will require
significant investment to new mines and
expansion of existing assets to access the
resources.
The IEA shows that by 2050 the metals
requirements for clean energy technologies
will require between 2.1 and 3.4 times more
copper than in 2020, between 10.8 and 30.1
times more nickel and between 9.9 and 32.9
times more cobalt
*
.
Responding to carbon pricing
We operate successfully in multiple
jurisdictions that have direct and indirect
carbon pricing or regulation. We take a
systematic approach to local regulation and
carbon price sensitivities as part of our
ongoing business planning for existing
industrial assets, new investments and as part
of our marketing activities.
We use carbon price scenarios to assess the
potential impacts on operating costs arising
from existing and future potential carbon
pricing regulation. We assess these impacts
through applying emission costs to the carbon
emissions and cost curves for the various
Climate change continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 23
Strategic Report
industries in which we operate. This enables us
to understand how underlying cost structures
will change over time and allows us to identify
where costs can be passed on. In the Radical
Transformation scenario we have assumed the
carbon price assumptions as shown in the
Carbon Price table.
Applying these carbon prices to each of our
major commodities shows marginal supply
costs (90th percentile) would increase by 10%
to over 60%.
Assuming supply and demand are broadly
balanced, this implies commodity prices
rising to account for the additional input costs
(in this case, carbon). For a fourth-quartile
producer, the increase is unlikely to
compensate for the additional costs of
production; whereas for a top-quartile
producer the net financial effect may be
beneficial.
Most of our assets lie in the lower to middle
part of their respective industry costs curves
and would benefit from a higher marginal
supply cost. Against a backdrop of rapidly
increasing demand, we anticipate that cost
and demand forces will drive prices higher
nickel (14%). Key projects during the year were
approval of a major water management project
at the Collahuasi JV; progression of the
Zhairem zinc mine in Kazakhstan; significant
fleet replacements at our South American
copper assets; and development of new nickel
mines in Canada.
Managing risk and opportunity
Climate change-related impacts present both
risks and opportunities to our operations,
which we must identify and manage to
ensure the long-term sustainability and
resilience of our business.
Assessing climate change-related risks is part
of our Group risk management and strategy
development processes. Effective and
strategic management of climate change-
related risks and opportunities across all
aspects of our business is considered vital to
our continued ability to operate.
We take an integrated approach to risk
management throughout our business
through a structured process that establishes
a common methodology for identifying,
assessing, managing, and monitoring risks.
We assess climate, operational and financial
risks holistically.
We require our commodity departments to
annually update their climate change risk
Effective and strategic
management of climate
change-related risks and
opportunities across all
aspects of our business
is considered vital to
our continued ability
to operate
Carbon price – US$/t 2021 2025 2030 2035 2040
Advanced economies
As
legislated
80 130 180 200
Emerging markets 40 90 140 160
Developing economies 5 15 25 35
Source: Carbon prices reflect Our Radical Transformation Scenario (equivalent to IEA NZE2050)
* Glencore carbon cost analysis
2020 2025 2030 2035 2040 2020 2025 2030 2035 2040 2020 2025 2030 2035 2040 2020 2025 2030 2035 2040
Carbon price impact on industry cost curves*
Copper Zinc Thermal coal Nickel
25th percentile 50th percentile 90th percentile
35%
30%
25%
20%
15%
10%
5%
0%
70%
60%
50%
40%
30%
20%
10%
0%
and be passed through to consumers,
resulting in little impact on our business.
In fact, current first and second quartile
emission intensity producers are likely to see
margin expansion, the area of the emission
intensity curves in which we see our copper/
cobalt and zinc portfolio currently residing,
together with our Canadian nickel assets.
As carbon border adjustment mechanisms
are imposed, we expect global supply chains
to adjust to minimise the exposure to carbon
costs. We are well positioned through our
marketing business to respond to revised
commodity market flows.
We anticipate that our thermal coal business,
which primarily delivers high energy coal, will
be less impacted than producers of lower
energy, high moisture coals.
2021 capital allocation, including capex
allocated to coal and oil
Our disciplined approach to capital allocation
seeks to reflect market supply and demand
dynamics. As a major producer of the
commodities that underpin the current
battery chemistry and infrastructure growth
initiatives that are expected to power electric
vehicles and energy storage systems, our
capital expenditure (currently and into the
future) is heavily weighted towards energy
transition metals, including various South
American copper projects, African copper and
cobalt, Kazakhstan polymetallic investments
and nickel projects in Canada.
In 2021, industrial capital expenditure was $4.4
billion (2020: $4.1 billion), of which $724 million
or 16% related to coal (2020: $787 million). The
currently approved capital programme for the
coal business is limited to stay-in-business
capital expenditure and extensions at existing
mines.
The remaining 84% of our 2021 industrial capital
expenditure was weighted towards copper
and cobalt (together 43%), zinc (20%) and
Climate change continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 24
Strategic Report
assessments. They utilise a bottom-up
approach to consider regulatory risks,
including carbon taxes, project approval
considerations, impact on license to operate,
and physical risks, such as flooding, droughts
and extreme weather events. Identified
material risks are incorporated into each
asset’s lifecycle planning. The risks are
assessed and characterised in accordance
with the Group’s Risk Matrix and consider the
period from now until 2035 (or the end of an
asset’s lifecycle).
A detailed analysis of the climate-related risks
most significant to Glencore, and mitigations
of those risks, is set out in our Pathway to Net
Zero: 2021 Progress Report.
During the year, our climate change risk
assessments utilised the World Bank's Climate
Change Knowledge Portal to assess each of our
operating jurisdiction’s risk of material impacts
from weather-related events. The country
profile consolidates the most relevant data and
information on climate change, disaster risk
reduction, and adaptation actions and policies
for individual countries, drawing on information
from the World Bank’s portal as well as the
latest IPCC reports and datasets.
This year’s risk assessments found no
fundamental changes to the risks identified or
for the assets that we have assessed as being
most at risk.
Engagement and disclosure
We are committed to reporting transparently
on our progress in meeting our climate change
objectives and data on our total emissions.
We support the Task Force on Climate-related
Financial Disclosures (TCFD) framework for the
reporting of climate-related financial risk
disclosures for use by lenders, insurers,
investors and other stakeholders.
Industry association review
We take an active and constructive role in public
policy development and participate in relevant
industry associations. We acknowledge the
IIGCC Investor Expectations on Corporate
Climate Lobbying and recognise the importance
of ensuring that our membership in relevant
industry associations does not undermine our
support for the Paris Goals.
Our Pathway to Net Zero: 2021 Progress
Report includes our annual Review of our
Industry Organisation’s Positions on Climate
Change. The Review considered these
industry organisations’ advocacy activities
and public statements and whether they
aligned with our support for the goals of the
Paris Agreement.
Our assessment of these activities identified
three regions/countries with significant
discussion on climate policies over the last few
years: Australia, Europe, and South Africa. As
such, we focused our 2021 review on our direct
and indirect advocacy activities in these
jurisdictions, recognising the importance of
concerted and pragmatic policy action to help
achieve the goals of the Paris Agreement.
COP26
We welcome the Glasgow Climate Pact that was
agreed during the COP26 proceedings in
November 2021. The Pact signals a continued
ambition to keep the average rise in global
temperatures to below 1.5°C. Our existing
strategy of responsibly depleting our coal
portfolio over time, as we prioritise investment in
metals needed for the transition, is consistent
with the Pact's commitment to phase down the
use of fossil fuels.
Climate change continued
Scenario testing
We have considered the resilience of our
portfolio against scenarios / pathways as set
out in Climate Report 2020: Pathway to Net
Zero and summarised on the following
pages.
Our scenarios are defined below. In line with
TCFD guidance that they be reviewed
periodically, we shall review and, if needed,
update them during 2023.
No single pathway can define how individual
economies and the world will transition.
These scenarios describe a range of potential
outcomes dependent on the rate at which
transition policies are implemented. While
our approach draws principally on IEA
scenarios, our benchmarking of these
against those of other experts, including
Bloomberg New Energy Finance and the
International Renewable Energy Agency
(IRENA), shows broad alignment on the
energy and emissions trajectory being
fashioned by current policy and ambition.
The scenarios are:
Current Pathway: Adopting the IEA’s Stated
Energy Policies Scenario (STEPS), which
takes into account long-term energy and
climate targets only to the extent that they
are backed up by specific policies and
measures. The Current Pathway has been
assessed as being consistent with global
temperatures rising on average by 2.7°C by
the end of the century.
Rapid Transition: Adopting the IEA’s
Sustainable Development Scenario (SDS).
The SDS is based on the same economic
outlook as STEPS but works backwards from
climate, clean air and energy access goals,
examining what actions would be necessary
to achieve those goals. This requires
accelerated adoption of renewables
delivering global net zero emissions in 2070
and limiting the rise of global temperatures
to 1.5°C by the end of the century.
Radical Transformation: Adopting the IEA’s
Net Zero Emissions by 2050 Scenario
(NZE2050), which the IEA states, “sets out
what additional measures would be
required over the next ten years to put the
world as a whole on track for net zero
emissions by mid-century. Achieving this
goal would involve a significant further
acceleration in the deployment of clean
energy technologies together with wide-
ranging behavioural changes.” This Radical
Transformation would place the world on a
pathway consistent with delivering global
net zero emissions in 2050 and limiting the
rise of global temperatures to 1.5°C by the
end of the century.
Results of scenario testing
Commodity businesses
and outlook
Scenarios as set out in Climate Report 2020: Pathway to Net Zero
Current pathway Rapid Transition and Radical Transformation
Copper (37% of 2021
Adjusted EBITDA)
Outlook: positive
Growth in renewables power generation capacity, electric vehicle sales and
associated infrastructure to underpin our forecasted 15% increase in copper
demand by 2025 on 2019 levels. The Current Pathway is projected to increase
demand by 45% by 2035 and 95% by 2050.
The required greater acceleration in investments to decarbonise economies
under the Rapid Transition and Radical Transformation could further drive
copper demand and support rises of 50% and 100% on 2019 levels in 2035 and
2050 respectively.
Ferroalloys (4%)
Outlook: neutral
In South Africa, rising electricity prices and carbon taxes will exacerbate
the pressure currently felt in ferrochrome smelting. Continuing demand
for chrome will support the ongoing operation of ferrochrome mines
in South Africa.
The accelerated adoption of renewable technologies such as solar and wind
power generation, which depend on chrome and vanadium, amongst other
metals, for the generation, transmission and storage of low-carbon energy
underpins demand growth for our ferroalloys business, balanced by pressures
on ferrochrome smelting in South Africa.
Nickel (4%)
Outlook: positive
Nickel’s use in batteries, EVs and energy storage systems will result in its
demand rising in the Current Pathway to 130% of 2019 levels by 2025. By 2035,
the scenario requires 135% more nickel and by 2050, cobalt displacement
leads to increases in nickel demand of 250% above 2019 levels.
The adoption of policies needed for the Rapid Transition and Radical
Transformation could drive a 200% increase in demand growth by 2035
on 2019 levels and a continued growth to 270% by 2050.
Zinc (12%)
Outlook: positive
The electrification, industrialisation and urbanisation of developing
economies supports demand growth for zinc, due to its anti-corrosive
properties and use as an alloy in materials used in automobiles, electrical
components, and household fixtures. This leads to zinc demand rising to
106% of 2019 levels by 2025. By 2035, the Current Pathway requires 20%
more zinc, and by 2050 demand reaches 145% of 2019 levels.
The major transformation of the global energy system necessary to achieve the
goals of the Paris Agreement is supported by zinc’s use in offshore wind-energy
generating facilities. These scenarios show zinc demand growing to 150% of
2019 levels by 2035 and to 200% by 2050.
Coal (24%)
Outlook: neutral to
negative
Up to 2030, the Current Pathway sees coal demand growth in Asia offsetting
further declines in the Atlantic markets and demand exceeding supply
capacity in the absence of substantial investment to mine extensions.
Policies supporting the Rapid Transition and Radical Transformation will lead to
significant coal demand decline over the longer term. The ongoing use of
existing coal power generation facilities will require negative carbon
technologies, including Carbon Capture, Utilisation and Storage and Direct Air
Capture to achieve net zero emissions and limit global temperature increases.
Sensitivity analysis of the carrying values of our coal assets to such scenarios is
presented in note 1 to the financial statements.
Marketing (20%)
Outlook: positive
Marketing remains core to our business model, differentiating Glencore from its mining peers. Marketing and trading margins are expected to adapt with
climate initiatives. The agility of our marketing business enables it to adapt to changing circumstances and benefit from various trading and arbitrage
opportunities that will inevitably arise as economies transition at different rates. Our marketing business will continue to expand into new areas, as already
evidenced with the addition of LNG and carbon trading into our portfolio. Under any scenario, our marketing business is well-positioned to support the
responsible sourcing and delivery of products needed for the low-carbon economy. Goodwill of circa $1.7 billion has been allocated to the coal marketing
business. Sensitivity analysis of this balance to lower valuation multiples is presented in note 1 to the financial statements.
Climate change continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 25
Strategic Report
Climate change continued
Climate Report 2020:
Pathway to Net Zero
Pathway to Net Zero:
2021 Progress Report
Cross reference to Task Force on Climate-related Financial Disclosures
Governance Strategy Risk management Metrics and Targets
Disclose the organisation’s governance
around climate-related risks and
opportunities
a) Describe the Board’s oversight of climate-
related risks and opportunities
•
Corporate governance report: page 93
•
Strategic Report – Climate change:
page 20
•
Pathway to Net Zero: 2021 Progress
Report: page 7
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities
•
Pathway to Net Zero: 2021 Progress
Report: pages 7-8
Disclose the actual and potential impact of
climate-related risks and opportunities on the
organisation’s business, strategy, and financial
planning where such information is material
a) Describe the climate-related risks and
opportunities the organisation has
identified over the short, medium and long
term
•
Risk management – Climate change:
pages 82-83
•
Pathway to Net Zero: 2021 Progress
Report: pages 9-11
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy and financial planning
•
Strategic Report – Climate change:
page 25
•
Pathway to Net Zero: 2021 Progress
Report: pages 9-11, 13-31
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
lower scenario
•
Strategic Report – Climate change:
pages 23-25
•
Climate Report 2020: Pathway to Net
Zero: pages 12-21
Disclose how the organisation identifies,
assesses and manages climate-related risks
a) Describe the organisation’s processes for
identifying and assessing climate-related
risks
•
Pathway to Net Zero: 2021 Progress
Report: pages 9-11
b) Describe the organisation’s processes for
managing climate-related risks
•
Risk management – Climate change:
pages 82-83
•
Pathway to Net Zero: 2021 Progress
Report: pages 9-11
c) Describe how processes for identifying,
assessing and managing climate-related
risks are integrated into the organisation’s
overall risk management
•
Risk management – Climate change:
pages 82-83
•
Pathway to Net Zero: 2021 Progress
Report: pages 9-11
Disclose the metrics and targets used to
assess and manage relevant climate-related
risks and opportunities where such
information is material
a) Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with its strategy
and risk management process
•
Strategic Report – Climate change:
pages 20-23
•
Pathway to Net Zero: 2021 Progress
Report: pages 15-21
b) Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions,
and the related risks
•
Strategic Report – Climate change:
page 21
c) Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets
•
Strategic Report – Climate change:
pages 19-23
•
Pathway to Net Zero: 2021 Progress
Report: pages 1, 5, 6
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 26
Strategic Report
Sustainability framework
Material topics
• Internal and external
materiality assessment
process to identify
materialtopics
• Material topics are the focus
of oursustainability strategy
review andreporting
• Operational activities
focus on addressing
and progressing the
material topics
Corporate strategy
Responsible production
and supply
Responsible portfolio
management
Responsible
product use
Values
Code of Conduct
Safety Integrity
Responsibility
Openness
Simplicity
Group sustainability strategy
Health
Become a leader in
protecting and
improving
the wellness of
our people
and communities
Safety
Become a leader in
safety and create a
workplace free from
fatalities and injuries
Environment
Become a leader in
environmental
performance
Community and
human rights
Foster socio-economic
resilient communities
and respect
human rights
where we operate
Board HSEC Committee
has oversight and ultimate
responsibility. It receives
regular updates and has
oversight of how our
business is performing
across all our internally
defined, sustainability
related material risk areas.
Group HSEC-HR
governance
Policies, Standards,
Procedures, Guidelines
Metrics, reporting
and assurance
Entrepreneurialism
Our approach to sustainability
reflects our Purpose to responsibly
source the commodities that
advance everyday life. We take our
responsibilities to our people, to
society and to the environment
seriously, and align our activities with
relevant international standards.
Strategic approach
Our primary strategic objective is to be a
leader in enabling decarbonisation of energy
usage and help meet continued demand for
the metals needed in everyday life while
responsibly meeting the energy needs of
today. This strategic objective drives our
sustainability strategy.
Our sustainability strategy sets out our
ambitions against four core pillars: health,
safety, environment, and community and
human rights (HSEC&HR) and drives positive
change throughout our business. Each pillar
has clearly defined strategic imperatives,
objectives, policies, priority areas and targets.
We review our approach annually to confirm
that it continues to fulfil the needs of
our business.
Through our HSEC&HR governance, policies,
standards, procedures, and guidelines, we
establish and implement ethical and
consistent business practices and standards.
These support our commitment to be a
responsible operator and our aspiration to
maintain our reputation for doing things the
right way.
Governance of our Group sustainability
strategy and framework rests with the
Board’s HSEC Committee, who sets the
strategic direction for our sustainability
activities andoversees the development and
implementation of our strategic
HSEC&HRprogrammes.
Oversight and ultimate responsibility for our
Group sustainability strategy and framework
as well as its implementation across the
Group rests with our senior management
team, including the CEO and heads of our
commodity departments. They take a
hands-on approach to monitoring and
managing sustainability activities around the
Group.
Further details on our sustainability strategy,
our approach to its implementation, as well as
its performance and ambitions, are available
in our sustainability-related publications.
These include a sustainability report
published annually in accordance with the
core requirements of the Global Reporting
Initiative (GRI), as well as the following
publications:
•
Sustainability Summary
•
2020 Climate Report: Pathway to Net Zero
•
Pathway to Net Zero: 2021 Progress Report
•
Payments to Governments Report
•
Modern Slavery Statement
•
ESG A-Z section on our website
•
Water microsite
Our sustainability communications
are available on our website:
glencore.com/sustainability
Sustainability
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 27
Strategic Report
Sustainability continued
Strengthening our Group
policyarchitecture
In 2020, we initiated a cross-functional project
to develop and implement a more
streamlined and consistent approach to our
Group policy architecture and the underlying
policies, standards, procedures, and
guidelines.
The project considered the commitments we
are required to meet through our
membership and support for external
organisations such as the UN Global Compact,
International Labour Organization Declaration
on Fundamental Principles and Rights at
Work, and the UN Guiding Principles on
Business and Human Rights. It also took into
account the International Council for Mining
and Metal’s (ICMM) Performance
Expectations.
During 2021, we conducted a Group-wide roll
out of the new and revised Group policies, as
well as their supporting governance
documents such as standards and guidelines.
In 2021, we also rolled out nine new standards,
covering areas such as Health, Environment,
Social performance, and Human Rights. We
are tracking implementation progress
through a gap analysis for each asset and
targeting a substantial implementation by the
end of 2023.
Engaging with our stakeholders
We engage with relevant stakeholder groups
to build meaningful relationships and
understand their expectations and
aspirations. Further information on our
stakeholder engagement activities is available
on page 38 and in our annual sustainability
report.
External commitments
We participate in a wide range of external
initiatives, supporting our commitment to
ongoing improvements to our approach
andperformance across sustainability topics.
Ourengagement varies from reporting on
ourprogress to taking a role in driving
strategic change.
We are signatories to the United Nations
Global Compact (UNGC), aligning our
strategies and operations with its principles,
which cover human rights, labour,
environment, and anti-corruption. We
recognise the UNGC’s Sustainable
Development Goals (SDGs) and their
systematic global approach to society’s
overall development. We believe that we
can play a role in supporting our host
governments to meet the SDGs.
We uphold the International Labour
Organization (ILO) Declaration on
Fundamental Principles and Rights at Work,
the UN Universal Declaration of Human
Rights, and the UN Guiding Principles on
Business and Human Rights.
We are members of the Plenary of the
Voluntary Principles on Security and Human
Rights.
We have been a member of the ICMM since
2014. We endorse its Mining Principles, are
active in its working groups and are currently
undertaking work to prepare to report against
its Performance Expectations in 2023.
We strongly support transparency in the
redistribution and reinvestment of the
payments we make to local and national
governments. We are active participants,
both in our operating countries and at a
global level, in the Extractive Industries
Transparency Initiative (EITI). We comply with
the EU Accounting and Transparency
Directives; in line with those provisions, we
publish a separate report annually, detailing
material payments made to governments,
broken down by country and project.
As part of our commitment to responsible
product stewardship, we follow the UN
globally harmonised system for classification
and labelling of chemicals (GHS), the EU
REACH regulations on the registration,
evaluation, authorisation and restriction of
chemicals, and the London Bullion Market
Association Responsible Gold guidance.
Where appropriate, we participate in the
REACH consortia related to the materials we
produce; these include the consortia for zinc,
cobalt, cadmium, sulphuric acid, lead, and
precious metals.
Our responsible sourcing strategy considers
production, sourcing of metals and minerals
and procuring goods and services. Our
Supplier Standards form the basis of our
risk-based supply chain due diligence
programme and adheres to the Organization
of Economic Cooperation and Development’s
(OECD) Due Diligence Guidance for
Responsible Supply Chains of Minerals from
Conflict-Affected and High-Risk Areas.
Risk management and assurance
Our management of HSEC&HR-related risks
aligns with Glencore’s approach to the
identification, assessment, and mitigation of
risk. Our assets use the risk framework to
identify hazards, including those with
potentially major or catastrophic
consequences, and to develop plans to
address and eliminate, or mitigate, the related
risks. For each of the identified catastrophic
hazards we have implemented a standardised
approach to identifying and understanding
their causes and controls.
Our internal HSEC assurance programme
primarily focuses on our systematic
management of the catastrophic hazards
and their controls. Internal and external senior
subject matter experts participate in this
programme.
Multi-disciplinary assessments allow us to
audit complex issues from a range of
viewpoints for a more robust appraisal. We
use these assessments to review operations
and activities with different risk factors, such
as underground operations, open pit mines
and metal processing plants.
The HSEC Committee reviews the results of all
the audits, together with their key findings,
observations and good practice.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 28
Strategic Report
Materiality assessment
We regularly undertake a sustainability-
related materiality assessment that considers
input from within our business and from
other stakeholders. We use this assessment
to inform our HSEC&HR strategic overview
and our sustainability-related disclosures
and publications. This assessment identifies
topics that are material to our development,
performance, and current position as well
as for our future prospects.
We identified the following material topics for
the 2019–21 period: catastrophic hazards,
safety and health, climate change (see page
19), water, land stewardship, human rights,
responsible citizenship, responsible sourcing
and supply and our people (see page 34).
In 2021, we initiated a materiality assessment
that we expect to conclude during the first
half of 2022. This assessment will determine
our material topics for the 2022 and 2023
reporting periods.
Performance overview
The rollout and implementation of our new
Policies and their supporting standards
have strengthened our governance for
overseeing the achievement of our Group
targets. Both the HSEC&HR corporate
team and commodity departments review
progress on a monthly and quarterly
basis, depending on the target.
Group targets 2021 progress
Risk management and governance
Implement a proactive risk-based approach to prevent
HSEC&HRincidents.
During 2021 we updated our Enterprise Risk Management Standard
and introduced a number of technical standards to manage our
group material risks.
Compliance with Global Industry Standard for Tailings Management
(GISTM) for ‘Very High’ and ‘Extreme’ consequence by 5 August 2023
(allothers by 5 August 2025).
We progressed our reporting and auditing platforms to support
implementation and conformance to the requirements of the
GISTM. We are on track to meet the GISTM's deadlines.
Health
Year-on-year reduction in the number of new occupational disease
cases (excluding new cases from legacy exposures).
During the year, we recorded a decrease in the number of new
cases of occupational disease, 109 cases, compared to 124 in 2020.
Safety
No fatalities
1
.
We did not achieve our target of zero fatalities. Four people lost their
lives at our operations during 2021, compared to eight during 2020.
Environment
15% absolute reduction in Scope 1, 2 and 3 emissions by the end of 2026
against a 2019 baseline.
Our 2021 total emissions decreased by 5% compared to 2020. This is
a 25% reduction on our 2019 baseline, reflecting pandemic, market
and weather-related coal and ferroalloys production cuts across
2020 and 2021. We expect our total emissions to rise in 2022 with
the unwinding of the earlier demand-led coal production cuts. We
remain committed to delivering emissions reductions of 15% by
2026 and 50% by 2035.
50% absolute reduction in Scope 1, 2 and 3 emissions by the end of 2035
against a 2019 baseline.
Ambition of achieving net zero for Scope 1, 2 and 3 emissions by the
end of 2050.
By 2023, all managed operations located in water stressed regions
2
to finalise the assessment of their material water-related risks, setting
local targets and implementing actions to reduce impacts and improve
performance.
We are on track for all managed operations located in water
stressed regions
to finalise the assessment of their material
water-related risks, setting local targets and implementing actions
to reduce impacts and improve performance by 2023.
No major or catastrophic
3
environmental incidents. No major or catastrophic environmental incidents occurred during
2021.
Community and Human Rights
Do not cause or contribute to incidents resulting in severe
4
human
rights impacts
During 2021, our operating assets did not cause or contribute to
incidents resulting in severe human rights impacts.
1 Refer to the Basis of Reporting on our homepage for how fatalities are defined.
2 Water stressed regions are defined as having a medium to extremely high or arid and low water-use baseline, as per the World Resources Institute definitions.
3 For environment, major or catastrophic incidents refers to incidents causing both widespread irreversible and reversible environmental impact to ecosystems, habitat or species.
4 Severe is the equivalent of Catastrophic and Major on Glencore’s incident classification scale. For human rights, a Catastrophic incident is one with a gross human rights violation or grave
systemic human rights impacts and a Major incident involves an isolated grave or serious systemic abuses on economic, social and cultural rights.
Sustainability continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 29
Strategic Report
Our material topics
Catastrophic hazard management
We define catastrophic events as those with
a low probability but severe consequences
that could cause widespread loss of life or
significant environmental harm, or result in
major reputational or financial damage. We
are committed to eliminating catastrophic
incidents at our industrial assets.
We recognise the exceptional nature of such
events and we have developed specific
programmes to actively identify, monitor and
mitigate catastrophic hazards within our
business. We review our catastrophic risks to
understand whether they are adequately
controlled. We require our assets to put in
place appropriate management and
mitigation measures.
Our HSEC audit programme focuses on
catastrophic hazards and critical control
management, using both internal and external
expert assessors. It gives particular attention to
identifying catastrophic hazards, their critical
controls and management plans, as well as the
effectiveness of verification and reporting
processes. The Board receives and reviews all
assurance findings.
Managing our tailing storage facilities
Tailings, the fine waste materials left over after
the processing of ore, are stored in tailings
storage facilities (TSFs). In recent years, a small
number of high-profile TSFs failures at the
operations of large mining companies have
resulted in catastrophic consequences.
We require an effective safety management
system at each asset to ensure the integrity of
plant and equipment, structures, processes
and protective systems, as well as the
monitoring and review of critical controls.
SafeWork is Glencore’s approach to
eliminating fatalities, however, our overall
safety performance across our business
signalled that SafeWork had not reached all
assets in its full potential and that a step
change was needed to achieve our goal.
To understand our gaps, we conducted
reviews and engaged with the business. The
results showed that SafeWork was the right
approach. However, we also identified the
need to clarify and reset expectations around
SafeWork so it reaches every part of our
business. As a result, in 2021, a revised version
of SafeWork was launched through a change
project called ‘SafeWork 2.0’. It is still
SafeWork, but with more clarity on roles and
accountabilities, defined requirements and
resources that are easier to access and adapt
to the risks in our work environment.
SafeWork is built on a set of minimum
expectations and mandatory Fatal Hazard
Protocols, Life-Saving Behaviours, and safety
tools. These must be fully implemented by
our assets. We believe consistent application
of SafeWork through strong visible leadership
will drive a culture of safe operating discipline
and get our people home safe.
Our occupational health management
strategy addresses the health risks facing our
workforce, their families and the communities
inside and outside our gates. We use a variety
of on-site programmes to manage
occupational diseases and exposure to health
hazards; we extend many of these health
programmes to our host communities, to
combat regional health problems and
promote healthy lifestyles.
We have a robust governance process and in
2021 released a new Group Tailings Storage
Facilities Policy and updated our Standard to
align with the Global Industry Standard for
Tailings Management.
We monitor our TSFs for integrity and
structural stability. Our industrial assets
evaluate natural phenomena and incorporate
these considerations into their tailings facility
designs where relevant. Flooding and seismic
activity are the main natural phenomena that
may affect TSFs. In addition, our TSFs undergo
regular external inspections.
We continue to manage closed TSFs
responsibly post-closure. We regularly inspect
our facilities and external experts conduct
independent inspections and reviews.
Performance during 2021
We target zero major or catastrophic
incidents, which we achieved during 2021.
Further information on our approach to
tailings management is available on our
website (glencore.com/sustainability/
tailings). It provides an overview of our
approach towards managing our TSFs and
includes details on each of our TSFs.
Safety and health
In line with Glencore’s values, our first priority
in the workplace is to protect the safety,
health and wellbeing of all our people. We
take a proactive, preventative approach
towards health and safety. We believe that all
fatalities, injuries and occupational diseases
are preventable. Through strong safety
leadership, we can create and maintain safe
workplaces for all our people. A large number
of our assets have been fatality free for many
years.
Performance during 2021
We are saddened to report the loss of four
lives at our operations during 2021, compared
to eight during 2020. All loss of life is
unacceptable and we are determined to
eliminate fatalities across our business.
During the year, both our lost time injury
frequency rate
1,2
(LTIFR) and total recordable
injury frequency rate
3
(TRIFR) were lower than
the previous year at 0.83 (2020: 0.94) and 2.4
(2020: 2.7) respectively.
In 2021, our high potential risk incidents
(HPRIs) fell to 385 (2020: 399). The reporting of
HPRIs represents a supportive part of our
strategy to reduce fatalities and, as such, we
do not target a reduction in this metric. They
allow the identification of activities that need
prioritising in order to advance further our
learning and safety performance. The majority
of HPRIs related to mobile equipment and
working at height, ground/strata failure and
nearly 80% resulted in no injuries.
We recorded a decrease in the number of new
cases of occupational disease, 109 cases (2020:
124).
1 Lost time injuries (LTIs) are recorded when an employee or contractor is unable to work following an incident. We record lost days as beginning on the first rostered day that the worker is
absent after the day of the injury. The day of the injury is not included. LTIs do not include restricted work injuries (RWIs) and fatalities.
2 The lost time injury frequency rate (LTIFR) is the total number of LTIs recorded per million hours worked.
3 The total recordable injury frequency rate (TRIFR) is the sum of fatalities, lost time injuries (LTIs), restricted work injuries (RWIs) and medical treatment injuries (MTIs) per million hours
worked. The metric represents all injuries that require medical treatment beyond first aid.
Sustainability continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 30
Strategic Report
Water
Water is an essential resource for many of our
industrial activities. Some of our assets are
located in areas with high to extremely high
water baseline stress and share access to
water with other local water users. Other
industrial assets manage surplus water that
may involve dewatering activities and flood
protection measures. Regardless of their
location, our industrial assets undertake
detailed assessments of their local
environmental conditions during the
operational changes in lifecycle, to develop
water management strategies that maximise
the efficient and sustainable use of this
important natural resource.
We recognise access to safe and clean water
and sanitation as a salient human right. We
seekto fully understand and minimise our
operational water footprint and manage our
activities in a way that protects our shared
water resources. We are committed to
ensuring good water management is in place
at all of our assets and undertake detailed
assessments, target setting, monitoring and
implementation of corrective actions. Our
assets consult their host communities and
other relevant local water users to understand
local priorities and to collaborate on
sustainable solutions.
Performance during 2021
In 2021, we withdrew 999 million m3 of water
(2020: 1,033 million m3). The decrease is
primarily related to the sale of Mopani and
maintenance activities at some sites, as well
as Covid-related impacts.
Our total water withdrawal includes 40
million m3 moved from one site to another
through dedicated sharing networks that
were installed to increase our overall water
efficiency.
Land stewardship
We are committed to managing our land in a
productive and sustainable manner ensuring
proactive stewardship of our landholdings,
including those that have not undergone
industrial activity. We align our approach to
cultural heritage and archaeologically
sensitive locations on our landholdings with
local regulatory requirements and best
practice. We respect legally designated areas
and commit to neither mine nor explore in
World Heritage Sites.
We require our industrial assets to implement
land stewardship management systems,
including progressive land rehabilitation
target setting tied to life of asset planning,
that includes standard elements such as an
environmental policy, data collection and
monitoring, adaptive management, and
continuous improvement.
We are committed to identifying and
addressing the potential impacts of our
business on ecosystems services and
achieving no net loss of biodiversity through
the application of mitigation hierarchy. We
require all operations to develop risk-based
biodiversity action plans and site-level
biodiversity targets, to drive progress in this
critical area.
Biodiversity
Mining activities directly impact the
surrounding land, flora and fauna throughout
their lifecycle; our goal is to minimise and
manage those impacts. Our industrial assets’
land stewardship and biodiversity
management plans can include measures for
preliminary clearing works, habitat relocation,
flora and fauna conservation, weed and pest
control and fire and grazing management.
Where possible, these plans support the
continuation of existing land practices,
including grazing and other agricultural
activities.
As an ICMM member, we commit to not
conduct any exploration, drilling or mining in
World Heritage areas and International Union
for Conservation of Nature (IUCN) category
I-IV protected areas (‘no-go’ areas), and not to
put the integrity of such properties at risk. Our
industrial assets work to avoid the loss of any
IUCN Red List threatened species.
Rehabilitation
A core component of our operations’ lifecycle
is progressive rehabilitation. Where active
operations have ceased, we review
opportunities for restoration in the previously
operated areas. Progressive rehabilitation has
many benefits, including reducing an
operation’s footprint, improving the visual
appeal of the landscape and reducing dust,
erosion and sedimentation, as well as
improving conditions for local communities
and future land users.
To support progressive rehabilitation, our
industrial assets may excavate and reserve
topsoil and overburden from areas prior to
development.
Closure management
Unlike many other industrial uses of the land,
mining has a finite life and transitions to
post-mining land use at the end of its
operational lifecycle. We require our industrial
assets to have a closure plan that could be
initiated at any time whether on planned life
of asset closure or for an earlier ‘unplanned’ or
temporary closure. The plans must include
financial provision and, where possible,
progressive rehabilitation, to support a
responsible exit. Our industrial assets
regularly review their closure plan to ensure it
remains fit-for-purpose, and aligns with the
asset’s lifecycle.
The closure plans align with good practice,
such as the ICMM’s Integrated Mine Closure
Good Practice Guide. Our industrial assets are
required to consult with local communities on
the development of their closure plans and
monitor the societal risks and opportunities
associated with closure.
Glencore has acquired, through mergers and
acquisitions, a number of older mines and
legacy operations. We have a specialised
management process for these legacy
operations, which supports the identification
and implementation of appropriate
monitoring and responsible restoration.
Performance during 2021
We actively participated in the development
and refinement of ICMM's Closure Maturity
Framework, a tool for building a common
understanding of closure concepts across an
asset’s lifecycle and across mining disciplines.
In 2020, as part of the Framework
development process, we conducted pilot
testing of the tool at six representative assets.
In 2021, we expanded testing to include an
additional 25 operations, representative of
various regions, remaining life of assets, and
across all commodity groups. In addition,
requirements related to the implementation
of the Closure Maturity Framework were
included in the enhanced Closure Planning
governance, rolled out in 2021, to advance
consistent performance improvements
across our global operations.
Sustainability continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 31
Strategic Report
Human rights
We recognise that we have the potential to
impact human rights directly through our
operations, or through our relationships with
joint ventures, contractors, and suppliers. We
are committed to respecting human rights
and actively support our employees, business
partners and others to understand and meet
this commitment.
We uphold the dignity, fundamental
freedoms and human rights of our people,
communities and others potentially affected
by our activities.
We seek to align with relevant international
standards to understand, control and mitigate
our impacts. Our policies and practices align
with the Universal Declaration of Human
Rights, the United Nations (UN) Guiding
Principles, the UN Global Compact and
International Labour Organization’s core
conventions and we articulate these in our
Code of Conduct and Group Human Rights
Policy. In addition, we operate in accordance
with the Voluntary Principles on Security and
Human Rights, and International Finance
Corporation’s Standard 5 on Involuntary
Resettlement.
We respect the rights, interests and
aspirations of Indigenous Peoples and
acknowledge their right to maintain their
culture, identity, traditions, and customs, and
operate in accordance with the ICMM Position
Statement on Indigenous Peoples and
Mining.
Our assets are required to conduct regular
human rights training for their workforces,
with a focus on those employees in positions
exposed to human rights concerns, such as
security. This covers general human rights
awareness during day-to-day activities for our
wider workforce, as well as focused training
on the Voluntary Principles on Security and
Human Rights for our security employees and
contractors.
Enabling complaints and grievance processes
All our operations are required to have in place
local complaints and grievance processes
designed to be legitimate, accessible,
predictable, equitable, transparent, rights
compatible and in line with the United
Nations Guiding Principles’ effectiveness
criteria. These processes encourage people to
raise concerns in a manner that respects the
rights of the complainant. Where people have
complaints or grievances, we aim to
investigate and resolve them at the local level.
Assets are required to investigate and record
all complaints.
We do not allow any form of punishment,
discipline, or retaliatory action to be taken
against people for speaking up or cooperating
with an investigation.
Indigenous Peoples
Some of our industrial assets are located on or
near the traditional territories of Indigenous
Peoples. Our approach aligns with the ICMM
Position Statement on Indigenous People and
Mining, which requires mining projects
located on lands traditionally owned by or
under customary use of Indigenous Peoples
to respect Indigenous Peoples’ rights,
interests, special connections to lands and
waters, and perspectives.
ICMM Members must adopt and apply
engagement and consultation processes that
ensure the meaningful participation of
Indigenous communities in decision making,
through a process consistent with their
traditional decision-making processes. We
seek, through good faith negotiation, to reach
agreements with Indigenous Peoples who
maintain an interest in, or connection to the
land on which we operate, formalising
engagement processes and sustainable
benefits.
Performance during 2021
During 2021, we commenced an internal
campaign to strengthen our management of
local-level complaints and grievances. We
conducted a Group-wide desktop review of
local processes against the United Nations
effectiveness criteria. Areas for improvement
were identified and assets have a target to
close these gaps by the end of 2021.
To support improved understanding of
challenges and good practices in the
implementation of grievance processes, we
conducted an interactive webinar series in
early 2021. Over 150 operational managers and
social, environment and legal professionals
attended the sessions that spanned seven
geographical regions and four languages.
Following events in Western Australia in 2020,
where mining activities impacted on
significant cultural heritage, we undertook an
internal review of our own heritage risks, with
the intent of addressing any deficient areas
during 2021. The review was supported by
independent cultural heritage experts. In 2021
McArthur River Mine (MRM) in Australia
commenced negotiation with Traditional
Owners, facilitated by the Northern Land
Council (NLC), on an Indigenous Land Use
Agreement (ILUA), and commissioned an
independent third-party review of their
Cultural Heritage Management Plan in line
with leading practice.
We also developed and launched a Group-
wide Cultural Heritage Standard that requires
all our industrial assets to identify and review
Cultural Heritage risks and opportunities,
integrating them into business decision-
making and managing them effectively and
consistently.
Responsible citizenship
Our activities can make a significant
contribution to the national, regional, and
local economies through the production and
marketing of commodities that provide
thebasic building blocks for development.
Weprovide employment and training,
business partner opportunities, tax and
royaltypayments to governments that help
provide essential services, socio-economic,
development and environmental
stewardship.
We aim to minimise adverse impacts from
our activities and to build partnerships to
support sustainable development and
growth.
Stakeholder engagement
Through meaningful stakeholder
engagement and integration of social
performance into our core business, we
support the advancement of the mutual
interests of our host communities, broader
society, and our assets. With activities ranging
from exploration to mines and mineral
processing facilities to assets in closure,
wearepresent in a hugely diverse range
ofgeographies and cultures around the
world.Some of our businesses operate in
challenging socio-political contexts and we
remain committed to working with others to
help find and implement solutions to social
issues and to build resilient and peaceful
communities.
We work hard to get to know our local
communities and identify the individuals,
groups, or organisations with an interest in
our business or who are affected by it. We
implement a range of engagement activities
designed to be relevant and appropriate for
different stakeholders, including vulnerable
groups, with access to local level complaints
and grievance processes (seeHuman Rights).
Sustainability continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 32
Strategic Report
Social investment
In addition to our employment, local
procurement and taxes and royalties
payments, we seek to make a positive
contribution to social and economic
development of our host communities and
society more broadly through our voluntary
social investment programmes.
Our strategic objective is to support initiatives
that build resilient communities and regions
by reducing dependency on our operations.
This is challenging when the immediate,
short-term needs in many of our communities
are high. Our aim is to focus our efforts on
developing programmes that contribute to
longer-term social objectives through
activities such as enterprise and job creation,
education, health and wellbeing and capacity
building.
Our socio-economic development activities
are founded on the resources, needs and
plans identified at a local or regional level and
are informed by relevant data gathering and
community engagement.
Performance during 2021
In 2021, we spent $68 million on community
development programmes (2020: $95 million).
$20.7 million was spent during 2020 and 2021
on specific Covid-19 related initiatives.
Responsible sourcing andsupply
Our responsible sourcing strategy considers
the production and sourcing of metals and
minerals and procurement of goods and
services. An integral part of our responsible
sourcing approach is supply chain due
diligence for our metals and minerals supply
chain.
For our suppliers of metals and minerals, we
conduct due diligence in accordance with the
five-step approach framework defined in
Annex I of the OECD Due Diligence Guidance
for Responsible Supply Chains of Minerals
from Conflict Affected and High Risk Areas
(CAHRAs) 3rd Edition.
Our risk assessment and management
strategy identifies and assesses risks,
including those relating to CAHRAs. We take a
collaborative risk management and
mitigation approach to the identified human
rights risks within our supply chain.
As part of our system of controls and
transparency, we have an online platform that
manages due diligence-related information,
supplier assessment, collection and retention.
Our responsible sourcing team engages with
internal stakeholders to increase awareness
on the responsible sourcing of metals and
minerals.
Performance overview 2021
During the year, we reviewed and revised our
Supplier Standards and developed
a Responsible Sourcing Policy. These will be
rolled out Group-wide during 2022.
In 2021, Glencore did not produce, process or
market any ‘conflict minerals’ originating from
the conflict areas as defined under the
Dodd-Frank Act (tin, tungsten, tantalum and
gold from the DRC and adjoining countries).
All of our sustainability communications are
available on our website: glencore.com/
sustainability
Sustainability continued
In October, Lomas Bayas in northern
Chile renewed an important
agreement between our operation
and the National Forestry Corporation
of Chile, CONAF.
In 1996, Compañía Minera Lomas
Bayas began to develop a reforestation
and conservation strategy to help
address the issue of desertification
around Calama in northern Chile.
Since then, it has supported efforts to
conserve the Calama Oasis which
includes the 20-hectare Explora
Lomas Park.
In 2009, Lomas Bayas established a
partnership with CONAF to continue
the park’s conservation efforts and
offer an extensive environmental
education programme. Visitors can
participate in guided tours of the park
to learn more about biodiversity,
efficient water use, forest fire
prevention and environmental care.
Cultural activities are also available,
such as storytelling competitions and
performances.
There are more than 2,000 trees in
Explora Lomas Park, including
varieties of Prosopis alba – the white
carob tree – and Prosopis tamarugo – a
flowering tree from the pea family
known simply as Tamarugo. Both
species are native to the desert and
can survive in the most arid regions in
the world.
This next phase of collaboration
between Lomas Bayas and CONAF will
continue to strengthen the traditional
activities of environmental education,
research and forestry development, as
well as promote a new phase of the
management of the white carob
forest, benefiting the local agricultural
communities.
Lomas Bayas supports reforestation
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 33
Strategic Report
Our People
We are proud of the role we play in
our industry and our communities
and believe that our strategy is an
essential element in the
decarbonisation of our world.
We also recognise that our contribution relies
on the skills, behaviours and individual
decisions of our 135,000 workers every day.
Following last year's successful rollout of our
Purpose and Values campaign, our focus this
year has shifted from the organisation to the
individual; making our expectations clear to
our employees and our managers wherever
they are in the world.
Our revised Code of Conduct spells out our
expectations regarding employee behaviour,
operating responsibly and safely, acting with
integrity and protecting our assets and
information. The code operates in conjunction
with our Group Policies to promote inclusion,
fairness and equality and prohibits
discrimination based on race, nationality,
gender, age, sexual orientation, disability,
ancestry, social origin, trade union
membership, political belief or any other
potential bias.
During the year we transitioned to a new CEO
and leadership team and these senior leaders
led our campaign to launch the Code both
internally and externally. As well as global
video and written messages, a Code of
Conduct toolbox was developed with 25
separate communications resources,
translated into 12 languages which could be
deployed through various channels. 800
individual pieces of content were produced
across the globe and leadership teams in all
our business participated in making sure
everyone in our business knows what is
expected of us.
Generating consistent and high
standards of performance
Our Group policy framework encompasses
our Values, Code of Conduct and a suite of
policies, standards, procedures and guidelines
on various key matters and risks to Glencore.
This framework reflects our commitment to
uphold responsible and ethical business
practices.
In 2020, we embarked on a comprehensive
review of our entire Group policy framework.
This was a collaborative, cross-functional
project to develop and implement a more
streamlined and consistent approach to
policy governance at Glencore. Throughout
2021 we have continued to reinforce our
commitment to good governance by defining
and implementing a set of Human Resources
standards across our business. These bring
more granularity and clarity to our
overarching policy commitments.
Whilst maintaining our decentralised and
autonomous culture, the standards ensure we
develop as an organisation with consistently
high-levels of expectations and performance.
The standards set out the specific
requirements we expect our businesses to
conform to across a range of HR topics
including but not limited to:
•
performance management requirements;
•
recruitment practices, including mandatory
reference and background checks for all
new joiners;
•
the measurement of pay equity including
gender pay gaps in all of our businesses;
•
transparent disciplinary and grievance
procedures;
•
Group reporting requirements.
A process of assurance against the standards
will be implemented in 2022.
The Group has a very well established process
for employees to raise concerns, including our
Raising Concerns programme, and a
committee comprised of the CEO, CFO, Head
of Industrial Assets, General Counsel and
Head of Group HR reviews the process and
outcomes relating to concerns received into
the programme on a quarterly basis. This
enables management to ensure patterns of
issues are spotted at the Group level and that
disciplinary outcomes are being implemented
consistently. A summary of the material
concerns and any associated disciplinary
action is also regularly reported to and
reviewed by the Board.
Creating a more diverse and equitable
organisation
We believe that a diverse business is a strong
business. Operating globally requires us to
understand and adapt to different cultures
whilst maintaining our corporate culture and
standards. Around 950 people work at our
corporate headquarters in Switzerland, of
whom around half are Swiss and half from 57
other nations. The male:female ratio is 56:44
and the gender pay gap is 6%. We are keen to
further narrow the gender pay gap and this
will remain a central focus of our strategy.
20% of managers are women, a modest
improvement on previous years. We
recognise we are still some way short of the
33% target from the Hampton-Alexander
review and will continue to look for
opportunities to diversify our most senior
teams.
Management diversity in 2021
20%
80%
●
Male 80%
●
Female 20%
Management diversity in 2021
Diversity
83%
17%
●
Male 83%
●
Female 17%
Senior manager* diversity in 2021
85%
15%
●
Male 85% (359)
●
Female 15% (61)
2020: 87% male – 13% female
2019: 87% male – 13% female
* a senior manager as defined in section 414C of the UK Companies Act 2006 to include
members of the management team and Glencore appointed directors on the boards
of subsidiaries. This definition is only relevant to this data and does not apply to other
references of ‘senior management’ that are included in this Annual Report.
Glencore Annual Report 2021 34
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
Our next steps
During 2021 we developed a Diversity and
Inclusion strategy at Group level. Whilst many
of our business units have pursued such
objectives separately, this is the first time the
business has come together to develop a
unified strategy and framework for the
coming years.
The objectives of our IDEAL Framework are to:
•
Build a culture of intentional inclusion
throughout the organisation
•
Better reflect society by increasing diversity
of our workforce
•
Ensure fair treatment and access to
opportunities for all in our programmes,
processes and practices
•
Remove perceived barriers and enable all
groups to advance throughout the
organisation
In developing this Group strategy, we
undertook a review of the work underway in
each of our businesses and assessed their
level of maturity in relation to Diversity and
Inclusion. This bottom-up process will enable
us to set relevant and contextual targets for
each of our businesses and our leaders.
Human Resources is currently finalising the
global and local actions that will define the
work programme and the specific targets for
each element of the strategy over the coming
year. Most or all businesses are likely to have
gender-based targets in the first wave.
The strategy and its delivery will be governed
by a special diversity taskforce with
representatives from management, Human
Resources and staff. Progress against actions
will be reviewed quarterly and reported to the
Board and will be disclosed in future Annual
Reports.
Our People continued
Our IDEAL
framework
spellsout our
commitment
to creating an
environment
where
employees
can achieve
theirpotential,
wherever
they are:
I
Inclusion
How we all behave
The behaviours we consistently and intentionally demonstrate to create a
collaborative culture that values our differences, encourages our people to be
themselves and enables them to participate and contribute to their full potential.
D
Diversity
Who we all are
The collection of unique visible characteristics that make each of us different
including, but not limited to, sexual orientation, education, age, ethnicity,
cultural background, family status, experience and beliefs.
E
Equity
How we all succeed
The actions necessary to ensure fair treatment and access to opportunities,
resources, programmes and practices forall, especially those who are under-
represented or have been historically disadvantaged, such that they can participate
fully, regardless of their identity.
A
Advancement
How we all grow
The removing of barriers that might prevent any person or group of people
from developing to their full potential. Different steps may be required to
facilitate growth opportunities for under-represented groups.
L
Local
Where it all happens
There is no ‘one size fits all’. Building a more inclusive work environment and
removing barriers requires that we set some global priorities and a framework
that is customised locally and implemented according to the local context.
Glencore Annual Report 2021 35
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
Kazzinc
Kazzinc actively creates and supports an
environment of equal opportunities across
its 20,000 strong workforce, and at all
levels of the organisation. It has
undertaken a number of initiatives to
attract, retain and grow the number of
female employees.
In a traditionally male dominated industry,
and where legislation in Kazakhstan
prevents certain job roles being staffed by
women, our efforts are showing positive
progress. 22% of the total workforce of
Kazzinc are women, matched by 21%
representation in line management.
McArthur River
McArthur River is in the Northern Territory
of Australia. In this remote location,
accepting and celebrating Indigenous
culture is key to making the workplace a safe
and inclusive environment for all its people.
In 2021, the mine increased its Indigenous
employment ratio from 18% to 24% of the
workforce, with the majority of new
employees coming from the local
community. The number of Indigenous
employees grew from 80 to 125 while the
number of employees from the local region
almost doubled from 23 to 45.
Our People continued
Our people by region
The majority of our employees work on mine
and smelter sites and are employed through
full time employment contracts. Contractors
represent approximately 35-40% of our
workforce, many of which operate alongside
our full time staff, providing essential service
and specialist maintenance support to our
operations. In Africa our major employment
hubs are in South Africa and the DRC. In Asia,
the majority of our people work in our
operations in Kazakhstan.
Workforce Composition
and Development
Our business is deliberately decentralised as
we believe this gives greater accountability
and ownership to our managers. However, the
decentralised nature of the business creates
challenges for the collection and
management of Group-wide data and trends.
We understand that good data is a central
element of a diversity strategy and began to
capture more data regarding diversity from
2020. Further work is underway to provide
greater detail in future years.
We have seen a modest increase in the
representation of female workers in our
operations but have made greater progress at
management levels. Employee turnover in
continuing operations is 9.1%, with statistically
insignificant differences between the
retention rates for men and women.
Employment type
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Employees: 81,284 Contractors: 53,630
Africa Asia Australia Europe North
America
South
America
41,688
31,350
19,863
6,344
8,252
27,417
Employees – permanent Employees – temporary
Contractors
Gender balance of employees / Percentage full-time
0
5,000
10,000
15,000
20,000
25,000
Male: 67,659 Female: 13,625
percentage full-time
Africa Asia Australia Europe North
America
South
America
98% 100% 97% 93% 96% 100%
Male Female
3,491
19,512
4,980
17,256
2,097
11,257
845
3,672
1,047
5,374
1,165
10,588
Glencore Annual Report 2021 36
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
tools such as our Health Needs Assessment
(HNA). Where key health issues, needs and
interests of workers are identified, we
develop and implement a Fit for Life
wellness strategy. Our businesses are also
required to provide health promotion and
education in line with the HNA including
measures around maintaining work-life
balance.
At a Group level our communication
strategy has continued to raise awareness of
mental health issues throughout the year.
As part of this year's campaign, a global
webinar was recorded in both English and
French with experts from International SOS
(ISOS) providing practical tips on how to
recognise the signs of stress and build
mental resilience in the workplace and at
home, and focused in particular on some of
the challenges of working remotely.
COVID
Our business and staff continue to operate
despite the challenges presented by the
pandemic. Many of our businesses have had
to continue to operate flexibly in response to
changing rates of infection and restrictions.
We have participated in vaccination
programmes and aided governments and
health authorities where appropriate. In some
locations this included our own vaccination
programmes, which complement the efforts
of local health authorities.
We continue to utilise the expert resources at
ISOS to guide our decision making and work
closely with them to assess current and
potential impacts on the business. We host
regular updates for our global HSEC
community. The Group has continued to
communicate with staff to ensure they are
aware of their obligations in an ever-
changing landscape of restrictions.
Investing in our people
During the year we completed a seamless
transition to a new CEO and completed the
change in leadership in a number of our
Marketing departments. The vast majority of
the positions have been filled through
internal succession – testament to the
strength in depth of talent in the business.
We completed a global People Survey in
2020 which identified a number of shared
concerns, including training and
development opportunities, open
communications with management, and
succession planning. At a Group and
business unit level, we have reviewed our
training and development offerings to
ensure they deliver value for the business
and opportunities for staff.
Maintaining a strong pipeline of talent to
staff our operations remains an area of
significant focus for some of our assets,
especially those in developed economies
such as Australia. Each of our business units
has targeted recruitment programmes
aimed at school leavers and graduates, for
example bursaries for study and vacation
work experience. We offer apprenticeships
and graduate employment programmes
that equip people with the operational and
commercial skills they need to be effective
in business.
Mental Health
Raising awareness of the importance of
mental health is a continued priority for the
business. Mental health issues arising from
the pandemic provided an additional
challenge. Our newly-updated Health
Standard requires each asset to identify and
assess the physical and psychosocial
wellbeing of workers through the use of
Our People continued
Listening to employees
Our global Zinc business has focused on
improving the communication of training
and development opportunities and on
improving the systems and processes that
drive development planning and
succession. Action plans flowing from the
2020 People Survey are reviewed
quarterly to ensure momentum is
maintained.
At Nikkelverk in Norway, management
and union representatives collaborated to
prepare Mission 2022; a revitalised
business strategy with the goal of making
Nikkelverk a more attractive workplace.
Status, progress and results are
communicated monthly to the
management team and quarterly to the
employees, and periodically to the unions.
The ‘Home from Home’ programme in
our Ferroalloys business in South Africa
aims to create a more inclusive culture,
building on our Openness value. There
was a significant increase in
communications activities and elevated
levels of visibility and sponsorship from
the senior management group. Next steps
in 2022 are enhanced communications
training for leaders and a focus on
respectful behaviour and fairness in the
workplace.
Glencore Annual Report 2021 37
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 38
Strategic Report
Section 172 Statement and Stakeholder Engagement
Statement regarding Section 172
of the UK Companies Act 2006 and
how the Board complied with its
Section 172 duty
The UK Corporate Governance Code (the
Code) requires the Board to understand the
views of the Company’s other key
stakeholders and report how their interests
and the matters set out in section 172 of the
UK Companies Act 2006 have been
considered in Board discussions and decision-
making. The Board considers the interests of a
range of stakeholders in its discussions,
decision making and implementation of
strategy, and considers the impact of
decision-making on the long-term success
ofthe Group.
During the year, the Directors consider that
they have acted in a way, and have made
decisions that would most likely promote the
success of the Group for the benefit of its
members as a whole, with particular
regardfor:
•
the likely consequences of any decision in
the long term: see Strategy on pages 12-15,
and Risk Management from page 68.
•
the interests of the Group's employees: see
Our People section from page 34, ECC
Committee Report on page 96, and
Directors' Remuneration Report from page
101.
•
the need to foster the Company's business
relationships with suppliers, customers and
others: refer to next pages where we
provide further details on stakeholder
engagement.
•
the impact of the Company's operations on
the community and environment: see our
Sustainability section from page 27 and our
Sustainability Report (to be released in April
2022), Climate section from page 19 and
Risk Management section from pages 81 - 84.
•
the desirability of the Company maintaining
a reputation for high standards of business
conduct: see our Ethics and Compliance
section from page 43, our Ethics and
Compliance report (to be released in March
2022), Climate change section from page 19,
Sustainability section from page 27 and
Sustainability Report, and discussion of
risks around permitting, licence to operate,
and laws and enforcement on pages 74-76.
•
the need to act fairly between members of
the Company: the Corporate Governance
section, page 95, outlines the material ways
in which the Board and management
interact with and communicate to
shareholders
When discharging their duty under Section
172, the Directors have focussed on mapping
out the Company's key stakeholder groups
and reviewing our level of engagement with
them. We operate assets in 35 countries and
have around 135,000 employees and
contractors. Engaging and responding to our
stakeholder groups, regardless of their
location or opinion, is fundamental to how we
operate. In addition to direct Board
engagement, engagement by management
at different levels of the Group, with
appropriate feedback and reporting, enables
the Board to understand the perspectives of
our stakeholders and consider the likely
consequences of decisions in the long term.
To enable and ensure stakeholder
considerations are reflected in our decision-
making, the Board:
•
Oversees a strategy than can achieve
lasting success and generate sustainable
returns for business, whilst maintaining our
licence to operate
•
Has standing agenda items at Board and
Committee meetings that reflect our
different stakeholder groups’ interests.
•
Remains focused on its stakeholder
awareness and strengthening its
understanding of the broad range of views
expressed by Glencore's stakeholders.
•
Holds management to account on their
commitments, particularly in relation to
matters relating to climate, local
communities, and health and safety,
ensuring they are acting in accordance with
our Purpose and Values.
The Board is aware that some of the decisions
that are made have an adverse impact on
certain stakeholder groups, however, those
considerations are integral to decision-
making and the Board encourages
transparent and constructive stakeholder
engagement and consultation, particularly
where difficult decisions have to be made.
For example, one of the principal decisions
made by the Board during the year was the
acquisition of the remaining two-thirds of
Cerrejon when our joint venture (JV) partners
notified us that they intended to sell their
stakes. The options available to Glencore were
essentially to buy out the partners, stand to
one side while they sold their stakes, or join
them in selling. Various stakeholder groups
were considered and the Board carefully
reviewed how to respond to the sale notice in
a manner that was consistent with our Paris
aligned coal depletion strategy, recognising
our obligation to act as a responsible steward
of assets. A key consideration was the
consolidation of control under our sustainable
operating philosophy and commitment to
operating responsibly, versus the risk of a new
venturer joining, with equal or greater rights,
who might not agree to this approach.
•
This decision was therefore considered to
contribute to the long-term success of the
Company. Further details on key topics
considered and principal decisions taken by
the Board in the year are detailed on page 94.
Unfortunately, as a result of the global
pandemic, some planned interactions
between the designated Non-Executive
Directors and our workforce had to be
curtailed. However, virtual town hall meetings
were organised, giving our workforce the
opportunity to engage directly with them (see
Our people and ECC Committee report).
In addition, the designated workforce
engagement Directors held focus groups with
a cross section of employees across the Group.
The Directors gained valuable insight into
company culture and issues that are
important to the workforce, including
diversity, training and development, safety,
and the transition to green energy. The
feedback from the sessions was discussed at
the ECC meetings and fed back to the Board
and senior management where follow-up
actions were recommended.
The following pages outline our key
stakeholder groups, how we interact with
them and how the Board considers their
interests and opinions during its discussions
and decision-making processes.
As a global resources business, we
recognise that robust, respectful and
two‑way relationships with stakeholders are
essential for our social licence to operate.
Stakeholder
Why they are important
to the Company
What is important
to the stakeholder
How the Group
maintains engagement
How the Board takes account of these
interests
Our people The success of our industrial
assets and marketing offices
would not be possible without
the dedication of our workforce
•
Training, compensation and
career opportunities
•
Health, safety and wellbeing
•
Company culture and reputation
•
Industrial relations
•
Covid-19 engagement
•
Intranet, emails, newsletter
updates
•
Posters and leaflets
•
Virtual town hall meetings and
forums
•
Pre-shift ‘toolbox’ talks
•
Culture surveys
•
Webinars
•
Raising Concerns platform
•
Workforce engagement by
designated Non-Executive
Directors
•
Regular updates from the Group
Head of Human Resources
•
Regular updates on progress and
actions on the Raising Concerns
programme by the General
Counsel
•
Results of culture surveys
Communities Mutually beneficial relationships
with communities are crucial to
our Licence to operate within
communities
•
Local employment and
procurement opportunities
•
Socio-economic development
projects
•
Environmental management
•
Operational impacts
•
Potential site closure
•
Tailings storage facilities
•
Security and its engagement with
civil society
•
Artisanal and small-scale mining
(ASM)
•
Community liaison teams
•
Various meeting formats to reflect
local expectations
•
Radio and television broadcasts
•
Social media channels and asset’s
websites
•
Asset-specific publications
•
Group HSEC-HR provides the
Board HSEC Committee with
regular updates on Glencore’s
impact on the communities living
around its operations
•
Asset management provide
details of community
considerationS as input into
Directors’ discussions on
operational matters
•
Updates on ASM
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 39
Strategic Report
Section 172 Statement and Stakeholder Engagement continued
Stakeholder
Why they are important
to the Company
What is important
to the stakeholder
How the Group
maintains engagement
How the Board takes account of these
interests
Investors, financial analysts
andthe media
Our strategy and long-term
success depends on the support
of our investors. Financial
analysts and the media are
important in ensuring all
investors have equal access to
quality information
•
Financial and operational
performance
•
Climate change
•
Compliance with laws and
regulations
•
Presence in developing countries
•
Tailings storage management
•
Transparent payments to
government
•
Human rights
•
Industrial relations
•
Regular calls, one-on-one
meetings and group events/
presentations
•
Corporate Affairs teams regularly
speak to media at global, national
and local levels
•
Site visits (Covid permitting)
•
Webinars and online Q&A
sessions
•
Annual report, sustainability
report, modern slavery statement,
payments to governments report
and other reports and
presentations
•
AGM
•
Website, social media channels,
media releases, and listing
regulatory announcements
•
Results meetings
•
AGM
•
Meetings with shareholders,
analysts and key media
•
Group Investor Relations provide
analysts’ reports and investor
feedback
•
Following any major
announcements, Group
Corporate Communications
provides feedback to the Board
•
Board resolution on Climate
Change
Governments and regulators Governments and regulators
provide the legal and policy
framework that supports our
businesses and ensure that our
communities and people are
protected
•
Tax and royalty payments
•
Compliance with laws and
regulations
•
Local employment and
procurement
•
Operational environmental
management, including tailings
storage
•
Climate change
•
Socio-economic development
projects
•
Transparency and human rights
•
Public health
•
Security
•
Provide information and updates
on key topics, either directly or as
part of industry associations
•
Participation in multi-stakeholder
organisations, initiatives and
roundtables, such as the
Voluntary Principles on Security
and Human Rights, the OECD and
the Extractive Industries
Transparency Initiative (EITI)
•
Direct engagement with national,
regional and local government on
key topics
•
Site visits
•
Public reporting
•
Reports on material regulatory
issues and emerging legislation
•
Reports on engagement with
governments and regulators
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 40
Strategic Report
Section 172 Statement and Stakeholder Engagement continued
Stakeholder
Why they are important
to the Company
What is important
to the stakeholder
How the Group
maintains engagement
How the Board takes account of these
interests
Suppliers and customers Well established relationships
with suppliers and customers are
essential to the long-term
viability of the business model
and strategy
•
Responsible sourcing and supply
•
Transparency in the supply chain
•
Procurement spend
•
Human rights
•
Compliance with laws and
regulations
•
Competitive pricing
•
Performance
•
Regular meetings and updates
•
Customer site visits (Covid
permitting)
•
Participation in commodity-
specific responsible sourcing
initiatives
•
Local procurement initiatives
•
Oversight of the implementation
of the Group Supplier Standards
•
Discussions as to relationships
with and comments from
suppliers and customers
Unions Unions provide the workforce
with representation where
required and our workforce is
critical to our success
•
Health, safety and wellbeing
•
Negotiation of workplace
agreements
•
Industrial relations
•
Regular meetings with asset
management
•
Union participation in asset safety
committees
•
Periodic updates from the Group
Head of Human Resources and
Head of Industrial Assets on
material workforce issues
NGOs and civil society groups Maintaining effective
engagement with NGOs is vital in
ensuring we continue to operate
ethically and sustainably
•
Human rights
•
Tailings storage facilities
•
Social incidents
•
Public health
•
Operational and environmental
management
•
Socio-economic development
projects
•
Transparency in payments to
governments
•
Security and its engagement with
civil society
•
Compliance with laws and
regulations
•
Direct engagement with global
and local NGOs and civil society
groups
•
Sustainability Reporting,
including Sustainability Report,
Modern Slavery Statement,
Payments to Government Report,
and Human Rights Report
•
Social media channels and
corporate website
•
External forums and
organisations, such as the
Voluntary Principles on Security
and Human Rights, the OECD
and the EITI
•
Group Sustainable Development
provides regular updates to the
Directors on the opinions and
activities of NGOs and civil society
groups
•
Regular discussions on major
issues of concern to NGOs and
civil society groups and
engagement with them
Section 172 Statement and Stakeholder Engagement continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 41
Strategic Report
Mpumalanga Winter Wheat
Pilot Project
Glencore’s South African flagship food
security social investment is the Mpumalanga
Winter Wheat initiative, a pilot project
repurposing remediated coal mine land and
using mine water for subsistence and
commercial farming in an area not known for
winter cropping. This is aimed at improving
smallholder subsistence agricultural practices
with facilitated market access for surplus
produce. With an initial one-year time frame
and potential five year extension, the pilot
aims to test:
•
the feasibility of utilising remediated mine
land and mine water to grow commercially
viable winter wheat crops
•
the community desirability of winter wheat
cropping
•
the viability of commercial cropping and
capacity to meet market requirements.
The Mpumalanga Winter Wheat pilot is being
undertaken in partnership with the Mine
Water Coordinating Body (MWCB), a multi-
stakeholder organisation formed in 2016 to
incubate collaboration between public and
private stakeholders of the Upper Olifants
Catchment in the Mpumalanga Coalfields, of
which Glencore is a founding financial partner.
Other partners of the Winter Wheat project
include the ICMM (financial and advocacy),
Kelloggs (technical assistance, access to seed
and market facilitation), and Business for
Development (project execution, monitoring
and reporting).
Glencore’s contribution comprises access to
land, water for irrigation, funding, and support
for communities, with potential to scale to
commercial levels. A multi-stakeholder
approach, facilitated by the MWCB, is
expected to yield sustainable transformation
as it leverages collective partner capabilities
to address the crop-to-market agricultural
supply chain.
Stories of the year
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 42
Strategic Report
We fulfil our purpose and remain a
business partner of choice by
upholding our commitment to
ethical business practices
Our approach
We are committed to maintaining a culture of
ethics and compliance throughout the Group,
rather than simply performing the minimum
required by law. We do not knowingly assist
any third party in breaching the law, or
participate in any criminal, fraudulent or
corrupt practice in any country.
To support this, our Group Ethics and
Compliance programme includes risk
assessments, policies, standards, procedures
and guidelines, training and awareness,
advice, monitoring, speaking openly and
investigations. We consider guidance from
relevant authorities and international
organisations and work with leading advisers
to ensure we are aligned with international
best practices.
Our employees, directors and officers, as well
as contractors under Glencore’s direct
supervision, working for a Glencore office or
industrial asset directly or indirectly controlled
or operated by Glencore worldwide, must
comply with our Code and policies, as well as
applicable laws and regulations, regardless of
location. Our Supplier Standards set out the
expectations we have for all suppliers,
including expectations regarding ethical
business practices. We assert our influence
over joint ventures we don’t control to
encourage them to act in a manner
consistent with our Values and Code.
Ethics and compliance
Glencore Ethics and Compliance programme
Risk
assessments
Policies,
standards,
procedures
and guidelines
Training and
awareness
Advice
Monitoring
Speaking
openly and
raising
concerns
Investigations
Discipline and
incentives
VALUES
Safety
Integrity
Responsibility
Openness
Simplicity
Entrepreneurialism
B
o
a
r
d
o
v
e
r
s
i
g
h
t
a
n
d
g
o
v
e
r
n
a
n
c
e
Providing advice and guidance
toemployees onethics and
compliance matters
Together with other
functions, ensuring an
appropriate system for
discipline and
incentives
Establishing
approaches and
requirements to
mitigate compliance
risks and reflect
ethical and legal
expectations and
requirements
Training and raising
awareness on ethics /
compliance risks
Identifying, assessing
and evaluating
compliance risks
andcontrols
Coordinating objective
and consistent
internalinvestigations,
whilst maintaining
confidentiality and
protecting against
retaliation
Providing safe channels to
raise concerns regarding
potential misconduct
including our Group Raising
Concerns Programme
Assessing the effectiveness of
programme implementation and
identifying opportunities for improvement
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 43
Strategic Report
Board and management
oversightandsupport
Our Board of Directors plays a critical role in
overseeing and assessing our culture of ethics
and compliance, and ensuring policies,
practices and behaviour are consistent with
our Values. Our Board has established a
separate Ethics, Compliance and Culture
(ECC) committee, dedicated to overseeing
and approving key ethics, compliance and
culture-related matters within the Group.
The Board’s role in ethics and compliance
continues to evolve. Members of the Board
regularly engage with Compliance Function
leadership. Members of the Board have also
been designated as Engagement Directors
who, through ‘town-hall’ engagements with
employees, promote the Company’s
compliance culture, connect with employees
through question and answer sessions, and
facilitate the Ethics and Compliance
programme. Board members are also
featured in Company communications on
specific compliance initiatives and participate
in events where ethics and compliance topics
are covered.
We provide training to the Board,
emphasising to Directors their role in ethics
and compliance oversight and programme
implementation. Furthermore, the ECC
committee receives regular updates covering
topics such as the Compliance team
structure, status of risk assessments, policies,
standards, procedures or guidelines under
development or review, updates on training
and awareness activities, overviews of
monitoring visits and key findings. Board
members also receive updates on material
reports that have come in via our Raising
Concerns platform and the progress of
investigations.
Group compliance function structure
Our Group Compliance team supports the
implementation of our Ethics and Compliance
programme and is comprised of our full-time
Corporate and Regional teams, as well as local
Compliance Officers in our offices and
industrial assets.
The Corporate Compliance team is
responsible for designing, monitoring and
continuously improving the Ethics and
Compliance programme. The Corporate team
includes subject matter experts for each
element of our programme and the various
compliance risks that it covers. The Regional
Compliance teams are responsible for
implementation of the programme across
regions and commodities. They provide
guidance to the business and support the
local Compliance Officers and a network of
part-time Compliance Coordinators based in
our offices and industrial assets. The
Compliance Coordinators have a compliance
role in addition to their primary business or
corporate role. We appoint full-time specialist
local Compliance Officers or part-time
Compliance Coordinators depending on the
nature and risks identified at the relevant
office or industrial asset and have a formal
process for nominating, assessing and
appointing qualified individuals for the
Compliance Coordinator role.
Both roles support our employees in day-to-
day business considerations, particularly
those seeking advice on ethical and lawful
behaviour or policy implementation.
The following management committees
also support the implementation of our
Ethics and Compliance programme and
report to the Board:
The Environment, Social and Governance
(ESG) committee, comprises Glencore’s CEO,
CFO, Head of Industrial Assets, General
Counsel, Head of Compliance, Head of Human
Resources, Head of HSEC and Human Rights,
and Head of Sustainability. It also includes
senior members of executive management
representing marketing and industrial assets
across different commodities. The ESG
committee considers issues relevant to the
Group’s corporate functions regarding the
various ESG programmes and projects
implemented across the Group. It also reviews
and approves policies, standards, procedures,
systems and controls relevant to the
corporate functions.
The Business Approval Committee (BAC),
a sub-committee of the ESG, comprises
Glencore’s CEO, CFO, General Counsel, Head
of Sustainable Development and other
relevant corporate or business heads as
required. It determines, sets guidance and
criteria, and reviews business relationships,
transactions or counterparties that may give
rise to ethical or reputational concerns.
The Raising Concerns Investigations
Committee (RCIC), comprises Glencore’s
CEO, CFO, General Counsel, Head of Industrial
Assets and Head of Human Resources. The
RCIC oversees the operation of our Raising
Concerns Programme and the conduct of
investigations, ensuring recommendations
and sanctions are applied consistently across
the Group.
Group ethics and compliance
programme
Risk assessments
In order to ensure the Ethics and Compliance
programme is appropriately designed, tailored
to our business and that resources are
adequately allocated, we identify, assess and
evaluate compliance risks faced by our business.
We achieve this by performing an annual
Group Compliance risk assessment to identify,
record and assess risks relevant to the entire
Group. We document these risks consistently
in the Group Compliance Risk Register which
covers several risk areas, but focuses in
particular on anti-corruption given the nature
of our business and the geographies in which
we operate.
In addition, these risks are assessed at
appropriate intervals within each office and
industrial asset across the Group. These local
risk assessments help us understand and
document the specific compliance risks faced
by each of our businesses, as well as identify
and assess the controls in place to mitigate
those risks.
These risk assessments also form the basis for
drafting and updating Group policies,
standards, procedures and guidelines, as well
as determining our training programme and
compliance team resourcing needs.
Ethics and compliance
continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 44
Strategic Report
Group policy framework
Our Group policy framework encompasses
our Values, Code of Conduct and a suite of
policies, standards, procedures and guidelines
on various compliance matters and risks.
These include bribery and corruption,
conflicts of interest, sanctions, anti-money
laundering, market conduct, the prevention of
the facilitation of tax evasion, competition law,
fraud and information governance. This
framework reflects our commitment to
uphold ethical business practices and to
meet, or exceed, applicable laws and
external requirements.
Employees can access our compliance
policies, standards, procedures, and
guidelines in up to 11 languages, through
various channels, including the Group and
local intranets. Our managers and supervisors
are responsible for ensuring employees
understand and comply with the policies,
standards and procedures. Employees who
have access to a work computer must confirm
their awareness and understanding of our
compliance requirements when they begin
working at Glencore and annually thereafter.
Our offices and industrial assets are
responsible for implementing Group
procedures in their domains and developing
and implementing local procedures,
consistent with Group policies and standards,
but adapted for local risks and requirements.
We look to implement system and financial
controls to ensure that our requirements are
operationalised and embedded in
our business.
Our policy framework is comprehensive and
addresses relevant compliance risks, with a
strong emphasis on key risks such as anti-
corruption, sanctions and money laundering.
Policy and are not given or received with the
intent or prospect of influencing the
recipient’s decision-making or other conduct.
We have requirements for pre-approval of
gifts and entertainment based on localised
thresholds, and additional requirements
regarding public officials.
Interactions with public officials
Dealings with public officials bring a higher
risk of perceived bribery, so we are especially
careful in our interactions with them, and
have various requirements that guide how we
interact with public officials in order to
mitigate corruption risks.
Participation in external
anti-corruption organisations
We are a member of the Partnering Against
Corruption Initiative (PACI) whose members
collaborate on collective action and share
leading practice in organisational compliance.
The initiative has a commitment of zero
tolerance to bribery and requires its members
to implement practical and effective anti-
corruption programmes. We are also an
associate member of the Maritime Anti-
Corruption Network (MACN).
We actively participate in PACI and MACN’s
annual events and have incorporated
guidelines from both organisations into our
programme. We are an active supporter of
the Extractive Industries Transparency
Initiative, which is a multi-stakeholder
initiative between governments, companies
and civil society, which promotes the open
and accountable management of
extractive resources.
Transparency
Each year we report our total payments to
governments and provide country-by-country
and project-by-project information.
Additionally, and where applicable, we have
aligned our reporting on such payments with
the requirements of Chapter 10 of the
European Union accounting directive.
Anti-corruption and bribery
Our Anti-Corruption and Bribery Policy is
clear: the offering, providing, authorising,
requesting or receiving of bribes is
unacceptable, and we do not engage in
corruption or bribery, including facilitation
payments. We assess corruption risk within
our businesses and work to address these
risks through policies, standards, procedures,
and guidelines on various topics. These cover:
Political contributions
We do not contribute any of our funds or
resources as contributions to any political
campaign, political party, political candidate
or any such affiliated organisations.
Political engagement
Although we do not directly participate in
party politics, we do engage in policy debate
on subjects of legitimate concern to our
business, employees, customers, end users
and the communities in which we operate. All
officers, employees and persons who lobby
on our behalf must comply with all relevant
Glencore policy and procedural requirements
and all applicable legislation, including, but
not limited to, the laws and regulations
relating to registration and reporting.
Sponsorships, charitable contributions
andcommunity investments
We never make a sponsorship, charitable
contribution or community investment in
order to disguise a bribe, or to gain an
improper business advantage.
We ensure that when we make sponsorships,
charitable contributions or community
investments, we conduct risk-based due
diligence and, when required, monitor the
appropriate use of our funds or resources.
Gifts and entertainment
We only give and accept reasonable,
appropriate and lawful gifts and
entertainment that satisfy the general
principles of our Anti-Corruption and Bribery
Sanctions and trade controls
Our Sanctions Policy sets out our
commitment to complying with all applicable
sanctions, appropriately managing sanctions
risk and not participating in transactions
designed or intended to evade
applicable sanctions.
To manage our sanctions risk exposure and
ensure compliance, we implement a range of
controls and processes. These include
screening and conducting due diligence on
our counterparties and vessels using a
risk-based approach to determine whether
they are a sanctions target, subject to sectoral
sanctions or otherwise attract sanctions risk.
Anti-money laundering
Our Anti-Money Laundering Policy sets out
our approach to ensuring that we comply
with all applicable laws and regulations to
prevent tax evasion and money laundering,
and appropriately manage the related risks.
We do not tolerate tax evasion of any kind and
we do not knowingly or wilfully facilitate tax
evasion.
To manage our money laundering and tax
evasion risk exposure and ensure compliance,
we implement a number of controls and
processes including in respect of payments to
third parties.
Ethics and compliance
continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 45
Strategic Report
Business partners
We work with a range of business partners
and expect them to share our commitment
to ethical business practices. Business
partners include our suppliers, customers,
joint ventures (JVs), JV partners, service
providers and other counterparties. We have
a comprehensive framework for managing
the key risks associated with our business
partners, from onboarding through to
offboarding, and including continuous
monitoring. Through this framework, we
seek to comply with applicable laws
(including bribery and corruption,
sanctions and money laundering) and
to manage the reputational risks that can
arise from engaging with certain categories
of counterparties.
Our framework seeks to ensure that all
counterparties are assessed based on
their risk and then directed to the most
appropriate due diligence and
management process for their risk level
– either Know Your Counterparty (KYC)
or Third Party Due Diligence and
Management. All our procedures require
beneficial ownership identification.
Our KYC programme differs for our offices
and industrial assets due to the different risk
profile of the business, but each applies a
risk-based approach to due diligence for
suppliers, customers and service providers.
Our Third Party Due Diligence and
Management Procedure is a standardised
procedure across offices and industrial
assets. It sets out a detailed, risk-based
assessment process whereby we identify,
assess and mitigate the corruption risk
exposure of third party relationships that
present the highest risk to Glencore. This
applies particularly to intermediaries,
government facing third parties, charitable
contributions, sponsorships and community
investments. The procedure also requires
ongoing training, monitoring and review of
the relationships.
Through our Joint Ventures and Mergers and
Acquisitions Procedure, we ensure that our
Ethics and Compliance programme is
implemented at all JVs that we control or
operate. For JVs which we do not control or
operate, we seek to influence our JV partners
to adopt our commitment to responsible
business practices and implement
appropriate compliance programmes.
In respect of mergers, acquisitions and
disposals, we conduct thorough pre-
transaction due diligence. We incorporate
acquired or merged entities which we
control or operate, into our Ethics and
Compliance programme.
Training and awareness
Training
Training on and awareness of our policies,
standards, procedures, and guidelines are
critical components of our Ethics and
Compliance programme. They ensure our
employees and relevant contractors
understand the behaviour expected of them
and provide guidance on how they can
identify and practically approach ethics and
compliance dilemmas in their daily work.
Our training programmes mix eLearning
with live training. eLearning sessions are
designed for employees and contractors
with regular access to a work computer.
Where regular access to a work computer
is not available, employees and contractors
receive training in other ways, including
induction sessions, pre-shift training and
toolbox talks.
Awareness
Awareness-raising activities and initiatives,
in addition to online and in-person training,
are key to reminding employees of the
importance of ethics and compliance.
While in-person activities and initiatives
have been heavily impacted by Covid-19,
we have continued to develop awareness
materials in the form of electronic guides,
checklists, newsletters, videos and intranet
communications.
We also continue to develop content for the
Glencore Ethics and Compliance app which
supports employees in making choices in
line with our Values, our Code of Conduct
and the law. It provides easy, user-friendly
mobile access to key ethics and compliance
principles, and allows for easy access to our
Raising Concerns platform, Conflicts of
Interest declaration platform, and Gifts and
Entertainment register.
We carefully consider the audience of our
training and awareness materials to make
the training effective and have established a
process for assigning employees a
compliance risk rating based on their
function or role, which rating we use when
we roll out our training and awareness
materials. We tailor our training and
awareness materials to the audience and
make them relevant by including
hypothetical scenarios illustrating how ethics
and compliance dilemmas might manifest
themselves in employees’ daily work.
New joiners receive in-person compliance
training sessions on our Values, Code of
Conduct, and key compliance risks including
how to raise concerns.
A critical element of our training programme
is measuring its effectiveness. We do this
through soliciting post-course feedback
from employees themselves and testing
employees' understanding and retention of
key messages through various (pre-/post)
knowledge quizzes.
We actively monitor compliance training
completions. Compliance escalates non-
completions to management. Employees
who fail to complete training may be subject
to disciplinary action according to the
Mandatory Compliance Training
Escalation Procedure.
We also train and develop our own
compliance personnel to increase their
understanding of key compliance risks and
important developments. We encourage
them to participate in relevant conferences,
lectures, webinars and podcasts, where
possible, to continuously enhance their
knowledge and skills.
Ethics and compliance
continued
For training statistics please refer to
the separately issued Glencore Ethics
and Compliance Report.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 46
Strategic Report
Ethics and compliance
continued
Monitoring
We continuously monitor and test the
implementation of our Ethics and Compliance
programme in order to determine its
effectiveness, and that it is operationalised
and embedded into business operations.
These monitoring activities also enable us to
identify opportunities for improvement that
help develop and evolve the programme and
respond to changes in our business, the
environments we operate in and applicable
laws and regulations.
We have implemented a number of systems
across the Group to ensure that we
consistently manage and track our
compliance data across our different
modules. This includes risk assessment,
training and policies and gives us an overall
picture of the risks in each of our offices and
industrial assets and the status of
implementation of our programme.
Our Annual Monitoring Plan comprises
on-site and desktop reviews. On-site reviews
are visits to our offices and/or industrial assets
to assess the implementation of our Ethics
and Compliance programme. In light of the
Covid-19 pandemic, these reviews have been
performed remotely. Desktop reviews focus
on the analysis, sampling and transaction
testing of either compliance processes and
controls or other business processes, systems
and controls that the Monitoring team can
access centrally. Over the last few years, we
have worked with external advisers to execute
data analytics over our systems. In 2021, we
implemented an in-house data analytics
programme across our Marketing ERP
system, trading platforms and expense
management systems to monitor for
transactions and activities that represent an
elevated level of bribery and corruption risk.
We will continue to develop and enhance our
systems analytics capability across the Group.
Speaking openly and raising concerns
We are committed to creating a culture where
everyone feels free to speak about concerns
in a secure and confidential way. We do not
tolerate retaliation against anyone who
speaks openly about conduct they believe
is unethical, illegal or not in line with our
Code and policies, even if the concern is
not substantiated.
We have a comprehensive suite of documents
which establish a framework for managing
concerns, including our Whistleblowing
policy. This policy encourages employees
to report concerns, explains the process
for reporting, escalating, investigating,
and remedying concerns, and makes clear
that retaliation is absolutely prohibited,
regardless of whether the reported concern
is ultimately substantiated.
We encourage whistleblowers to first raise
concerns with relevant managers or
supervisors as they are usually best equipped
to resolve concerns quickly and effectively.
Reporters also have the option of reaching out
to nominated whistleblowing contacts, who
are members of senior management at the
office or industrial asset.
If a concern remains unresolved or a
whistleblower is uncomfortable using local
channels, concerns can also be reported via
our Raising Concerns programme, our
corporate whistleblowing programme,
managed in Switzerland.
Raising Concerns allows whistleblowers to
raise concerns anonymously in any of 15
languages, by internet or phone. Hotlines are
available in most of the countries where we
operate, and details are published on the
platform’s website and on posters at offices
and industrial assets.
All concerns are taken seriously and handled
promptly, using an objective, fact-based
rationale. Concerns are investigated either by
our corporate office in Switzerland, or locally,
depending on factors such as the nature and
severity of the concern.
Where disciplinary action is taken, this depends
in each case on the behaviour exhibited, the
effects of that behaviour and the different
disciplinary measures applicable to employees,
contractors and other third parties on-site.
For statistics on our Raising Concerns
programme, please refer to the
separately issued Glencore Ethics and
Compliance Report.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 47
Strategic Report
Glencore Annual Report 2021 48
Financial results
Following Covid-19’s severe economic impacts
in 2020, a recovery in demand, together with
multiple supply-side issues, resulted in
generally significant inventory drawdowns
and prices for most of our key commodities
reaching multi-year highs. These higher
prices, along with our industrial portfolio’s
competitive cost structure, gave rise to a
record Adjusted EBITDA contribution for our
industrial asset segment. Our marketing
segment also delivered a record performance,
owing to tight physical supply/demand
fundamentals for our core commodities and
the associated improvement in arbitrage
opportunities. Group net income attributable
to equity holders improved from a loss of
$1,903 million in 2020 to an income of
$4,974 million in 2021, after recognising
various significant items discussed below.
EPS increased from negative $0.14 per share
to positive $0.38 per share.
The economic recovery seen in late 2020
continued into 2021, helped significantly
by major governments and central banks
initiating and sustaining the provision of
material stimulus to the global economy.
Average year-over-year price increases for
coal (Newc), cobalt, copper, nickel and zinc
were 125%, 60%, 51%, 34% and 32%
respectively. Owing mainly to such higher
prices, Adjusted EBITDA set a record of
$21,323 million and Adjusted EBIT was
$14,495 million in 2021, compared to
$11,560 million and $4,416 million in 2020.
The positive impact of the higher commodity
prices on Adjusted EBITDA was somewhat
tempered by higher costs (mainly energy), the
effects of a weaker US dollar against most of
our producer currencies, including average
year-over-year declines against the Australian
dollar (9%) and the South African rand (10%)
and modestly lower production levels.
Adjusted EBITDA mining margins improved
to 45% (2020: 36%) in our metal operations
and to 47% (2020: 17%) in our energy
operations. See page 61.
Financial review
Market conditions
Select average commodity prices
Highlights
Spot
31 Dec
2021
Spot
31 Dec
2020
Average
2021
Average
2020
Change in
average %
S&P GSCI Industrial Metals Index 499 382 457 318 44
S&P GSCI Energy Index 252 164 230 138 67
LME (cash) copper price ($/t) 9,741 7,749 9,320 6,186 51
LME (cash) zinc price ($/t) 3,590 2,729 3,005 2,269 32
LME (cash) lead price ($/t) 2,338 1,976 2,202 1,826 21
LME (cash) nickel price ($/t) 20,881 16,554 18,474 13,803 34
Gold price ($/oz) 1,829 1,898 1,799 1,771 2
Silver price ($/oz) 23 26 25 21 19
Metal Bulletin cobalt standard grade,
in-warehouse Rotterdam ($/lb)
34 15 24 15 60
Ferro-chrome 50% Cr import, CIF main
Chinese ports, contained Cr (¢/lb)
114 73 113 70 61
Iron ore (Platts 62% CFR North China) price
($/DMT)
113 154 156 105 49
Coal API4 ($/t) 126 93 125 65 92
Coal Newcastle (6,000) ($/t) 166 82 137 61 125
Oil price – Brent ($/bbl) 78 52 71 43 65
Currency table
Spot
31 Dec
2021
Spot
31 Dec
2020
Average
2021
Average
2020
Change in
average %
AUD : USD 0.72 0.77 0.75 0.69 9
USD : CAD 1.26 1.27 1.25 1.34 (7)
EUR : USD 1.14 1.22 1.18 1.14 3
GBP : USD 1.35 1.37 1.37 1.28 7
USD : CHF 0.91 0.89 0.91 0.94 (3)
USD : KZT 435 421 427 414 3
USD : ZAR 15.94 14.69 14.79 16.46 (10)
Group Adjusted EBITDA
◊
(US$ billion)
Net income attributable
to equity holders (US$ billion)
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 48
Strategic Report
21.3
2021
2020
2019
2018
2017
11.6
11.6
15.8
14.5
5.0
(1.9)
(0.4)
3.4
5.8
2021
2020
2019
2018
2017
Adjusted EBITDA/EBIT
◊
Adjusted EBITDA by business segment is as follows:
2021 2020
US$ million
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Marketing
activities
Industrial
activities
Adjusted
EBITDA
Change
%
Metals and minerals 2,588 12,017 14,605 1,768 7,285 9,053 61
Energy products 1,829 5,603 7,432 2,053 1,039 3,092 140
Corporate and other
*
(194) (520) (714) (89) (496) (585) 22
Total 4,223 17,100 21,323 3,732 7,828 11,560 84
Adjusted EBIT by business segment is as follows:
2021 2020
US$ million
Marketing
activities
Industrial
activities
Adjusted
EBIT
Marketing
activities
Industrial
activities
Adjusted
EBIT
Change
%
Metals and minerals 2,494 8,128 10,622 1,667 3,054 4,721 125
Energy products 1,395 3,252 4,647 1,761 (1,365) 396 1,073
Corporate and other
*
(194) (580) (774) (89) (612) (701) 10
Total 3,695 10,800 14,495 3,339 1,077 4,416 228
* Corporate and other Marketing activities includes $473 million (2020: $211 million) of Glencore’s equity accounted share of Viterra.
Financial review continued
Marketing activities
Marketing delivered record results as the scale
of commodity demand recovery, intersecting
with numerous primary supply and supply
chain shocks and constraints, resulted in
elevated levels of market volatility and rapidly
and materially changing underlying supply
and demand scenarios. This backdrop
provided overall supportive physical
commodity marketing conditions, with
Adjusted EBITDA and EBIT increasing by 13%
to $4,223 million and by 11% to $3,695 million,
respectively. Metals and minerals Adjusted
EBIT was up 50% with nearly all departments
contributing double-digit % increases over
the prior year. Energy products Adjusted EBIT
was down 21% over 2020, with a strong 2021
coal result limiting the net overall reduction,
given oil’s lower contribution relative to the
prior year, wherein it capitalised on the
exceptional price movements and
dislocations across crude oil, refined products,
storage and logistics.
Across 2021, agricultural markets also saw
record prices for many commodities. On the
back of strong global demand and solid
production in most major origins, Viterra
reported an EBITDA and Net Income of
approximately $2.2 billion and $1 billion
respectively. Accordingly, our 49.99% share of
its net earnings (captured within Corporate
and Other) was $473 million (post-interest
and tax) compared to $211 million in 2020.
Viterra paid Glencore a dividend of $150
million in H2 2021.
Industrial activities
Industrial Adjusted EBITDA increased by 118%
to $17,100 million (Adjusted EBIT was $10,800
million, compared to $1,077 million in 2020).
As noted above, the increase was primarily
driven by stronger average year-over-year
commodity prices, particularly related to our
copper, cobalt, ferrochrome, nickel and coal
operations, driven by recovery of global
demand and various supply challenges, most
notably seen across the energy spectrum
(gas, coal and oil), impacting product
availability and cost.
Net finance costs
Net finance costs were $1,140 million during
2021, a 22% decrease compared to $1,453
million in the comparable reporting period,
due to lower average base rates (mainly US$
Libor) and lower net funding levels year-over-
year. Interest expense for 2021 was $1,348
million, down 14% over 2020 and interest
income was $208 million compared to $120
million in the prior year. See note 6.
Income taxes
An income tax expense of $3,026 million was
recognised during 2021, compared to a credit
of $1,170 million in 2020. The effective tax rate
is 63.6%, and when adjusting for significant
items (primarily impairments, foreign
exchange adjustments and tax losses not
recognised), the effective tax rate reduces to
33.5% (29.7% in 2020).
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 49
Strategic Report
Significant items
Significant items are items of income and
expense, which, due to their nature and
variable financial impact or the expected
infrequency of the events giving rise to them,
are separated for internal reporting, and
analysis of Glencore’s results, to aid in
providing an understanding and comparative
basis of the underlying financial performance.
In 2021, Glencore recognised a net expense,
after tax and non-controlling interests, of
$4,151 million (2020: $4,388 million) in
significant items comprised of:
•
Expenses of $11 million (2020: $92 million)
relating to Glencore’s share of significant
expenses recognised directly by our
associates.
•
Loss on disposals of non-current assets of
$607 million (2020: $36 million) primarily
related to the required accounting recycling
to the statement of income of Mopani’s
non-controlling interests upon disposal (see
note 26), net of gains recognised on disposal
of other investments/operations of $208
million and gains on disposal of property,
plant and equipment of $207 million.
•
Income tax credit of $137 million (2020: credit
of $1,476 million) – see income taxes below.
•
Other income/(expense) – net expense of
$1,947 million (2020: $173 million) see note 5.
Balance primarily comprises:
– $64 million (2020: $438 million) of
mark-to-market gains on equity
investments/derivative positions
accounted for as held for trading,
including the commodity price linked
deferred consideration related to the sale
of Mototolo in 2018.
– $187 million net loss (2020: $192 million) of
net foreign exchange movements.
– $1,640 million (2020: $113 million) relating
to various legal matters, including the
provision and related costs (legal, expert
and compliance) for the ongoing
investigations (see notes 23 and 32).
– $Nil (2020: $214 million) of closure and
severance costs. 2020 related primarily to
suspension of operations at Prodeco coal
in Colombia and the closure of the Aguilar
zinc mine in Argentina.
•
Impairments of $1,838 million (2020: $6,392
million), see note 7. The corresponding net
impact, after income taxes and non-controlling
interests was $1,137 million (2020: $3,805
million). The 2021 charge primarily relates to:
– Koniambo ($1,170 million), due to lower
throughput and higher cost assumptions,
and the emergence of higher discounts
on non-battery application nickel relative
to the LME benchmark, such having been
reassessed following failures at the power
plant and a slag leak at the metallurgical
plant over H1 2021.
– HG Storage ($331 million) our 49% interest
in an oil storage and terminals business,
following review of the carrying value
against valuations benchmarks.
– Net $98 million reversal of impairments
following an improvement in the
underlying financial condition of various
counterparties and the restructuring of
certain loans and physical advances.
– $151 million relating to continued
challenge and non-performance by
certain government authorities in
settling long outstanding VAT claims.
The 2020 impairment related primarily to the
Mopani copper operations ($1,041 million), the
Volcan zinc operations ($2,347 million), the
Prodeco coal operations ($835 million), the
Chad oil operations ($673 million) and the
Astron oil refinery ($480 million).
Earnings
A summary of the differences between reported Adjusted EBIT and income attributable to equity
holders, including significant items, is set out in the following table:
US$ million 2021 2020
Adjusted EBIT
◊
14,495 4,416
Net finance and income tax expense in relevant material associates and joint
ventures
1
(1,207) (580)
Proportionate adjustment Volcan
1
179 (46)
Net finance costs
(1,140) (1,453)
Income tax expense
2
(3,163) (306)
Non-controlling interests
(39) 454
Income attributable to equity holders of the Parent pre-significant items
◊
9,125 2,485
Earnings per share (Basic) pre-significant items (US$)
3◊
0.68 0.19
Significant items
◊
Share of Associates’ significant items
4
(11) (92)
Movement in unrealised inter-segment profit elimination
5
(549) (760)
Net loss on disposals of non-current assets
6
(607) (36)
Other expense – net
7
(1,947) (173)
Impairments
8
(1,838) (6,392)
Income tax credit
2
137 1,476
Non-controlling interests’ share of significant items
9
664 1,589
Total significant items (4,151) (4,388)
Income/(loss) attributable to equity holders of the Parent 4,974 (1,903)
Earnings/(loss) per share (Basic) (US$)
3
0.38 (0.14)
1 Refer to note 2 of the financial statements and to APMs section for reconciliations.
2 Refer to other reconciliations section for the allocation
of the total income tax expense between pre-significant and significant items.
3 Based on weighted average number of shares, refer to note 18 of the financial statements.
4 Recognised within share of income from associates and joint ventures, see note 2 of the financial statements.
5 Recognised within cost of goods sold, see note 2 of the financial statements.
6 Refer to note 4 of the financial statements and to APMs section for reconciliations.
7 Recognised within other income/(expense) – net, see note 5 of the financial statements and to APMs section for
reconciliations.
8 Refer to note 7 of the financial statements and to APMs section for reconciliations.
9 Recognised within non-controlling interests, refer to APMs section.
Financial review continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 50
Strategic Report
Statement of financial position
Current and non-current assets
Total assets were $127,510 million as at 31
December 2021, compared to $118,000 million
as at 31 December 2020. Current assets
increased from $43,212 million to $57,776
million, due primarily to an increase in
marketing inventories and receivables,
including margin calls paid in respect of the
Group’s hedging activities, owing mainly to
the significantly higher year-end commodity
prices compared to prior-year (aluminium,
copper, zinc, nickel and oil-Brent up 42%, 26%,
32%, 26% and 50% respectively). Non-current
assets decreased from $74,788 million to
$69,734 million, primarily due to capital
expenditure over the period being below
depreciation and amortisation expense, $1,452
million of impairments to property, plant and
equipment and $1,321 million of asset values
reclassified to held for sale (see note 16).
Current and non-current liabilities
Total liabilities were $90,593 million as at 31
December 2021, compared to $83,598 million
as at 31 December 2020. Current liabilities
increased from $39,441 million to $49,459
million, primarily due to an increase in
accounts payable and fair value of our
derivative hedging instruments (other financial
liabilities), on account of the higher commodity
prices noted above and a provision for the
on-going investigations of $1,500 million (see
note 5), offset by a decrease in current
borrowings (see note 21). Non-current liabilities
decreased from $44,157 million to $41,134
million, primarily due to a decrease of non-
current borrowings (see note 21).
Movements relating to current and non-
current borrowings are set out below in the
net funding and net debt movement
reconciliation and in note 21.
Equity
Total equity was $36,917 million as at 31
December 2021, compared to $34,402 million
as at 31 December 2020, the movements
being primarily the income for the year of
$4,349 million, including non-controlling
interests and a modest increase in other
comprehensive income noted below, offset
by shareholder distributions and buybacks
($2,688 million) concluded during the year.
Other comprehensive income/(loss)
An income of $42 million was recognised during
2021, compared to a loss of $885 million in 2020
primarily relating to remeasurements on defined
benefit plans of $223 million, net of mark-to-
market adjustments of $56 million with respect
to various minority investments (see note 11)
and exchange losses on translation of foreign
operations of $87 million, primarily our South
African ZAR-denominated subsidiaries.
Cash and non-cash movements in net
funding
The reconciliation in the table adjacent is the
method by which management reviews
movements in net funding and net debt and
comprises key movements in cash and any
significant non-cash items.
Net funding as at 31 December 2021
decreased by $4.6 billion to $30,837 million
and net debt (net funding less readily
marketable inventories) decreased by $9.8
billion to $6,042 million, as funds from
operations of $17,057 million significantly
exceeded the $3,802 million of net capital
Cash flow and net funding/debt
Net funding
US$ million
31.12.2021 31.12.2020
Total borrowings as per financial statements 34,641 37,479
Proportionate adjustment – net funding
1
(563) (553)
Cash and cash equivalents (3,241) (1,498)
Net funding
◊
30,837 35,428
1 Refer to APMs section for definition and reconciliations.
Cash and non-cash movements in net funding
US$ million 2021 2020
Cash generated by operating activities before working capital changes,
interest and tax
16,725 8,568
Proportionate adjustment – Adjusted EBITDA
1
3,619 1,930
Non-cash adjustments included within EBITDA – 15
Net interest paid
1
(853) (1,042)
Tax paid
1
(2,676) (1,189)
Dividends received from associates
1
242 43
Funds from operations
◊
17,057 8,325
Net working capital changes
2
(5,289) (4,318)
Acquisition and disposal of subsidiaries – net
2
252 (222)
Purchase and sale of investments – net
2
108 13
Purchase and sale of property, plant and equipment – net
2
(3,802) (3,921)
Net margin (payments)/receipts in respect of financing related hedging
activities
(970) 1,040
Proceeds received/(paid) on acquisition of non-controlling interests in
subsidiaries
10 (56)
Distributions paid and transactions of own shares – net (3,024) (127)
Cash movement in net funding 4,342 734
Change in lease obligations (915) (457)
Foreign currency revaluation of borrowings and other non-cash items 1,164 (1,339)
Total movement in net funding 4,591 (1,062)
Net funding
◊
, beginning of the year (35,428) (34,366)
Net funding
◊
, end of year (30,837) (35,428)
Less: Readily marketable inventories
2
24,795 19,584
Net debt
◊
, end of year (6,042) (15,844)
1 Refer to APMs section for definition and reconciliations.
2 Refer to Other reconciliations section.
Financial review continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 51
Strategic Report
In March 2021, Glencore extended and
voluntarily cancelled a portion of its committed
revolving credit facilities, such that as at
31 December 2021, the facilities comprise:
– a $6,572 million one year revolving credit
facility with a one-year borrower's
term-out option (to May 2023);
– a $450 million medium-term revolving
credit facility (to May 2025); and
– a $4,200 million medium-term revolving
credit facility (to May 2026).
As at 31 December 2021, Glencore had available
committed liquidity amounting to $10.3 billion.
Credit ratings
In light of the Group’s extensive funding
activities, maintaining investment grade credit
rating status is a financial priority. The Group’s
credit ratings are currently Baa1 (stable) from
Moody’s and BBB+ (stable) from Standard &
Poor’s. Glencore’s publicly stated objective, as
part of its overall financial policy package, is to
seek and maintain strong Baa/BBB credit
ratings from Moody’s and Standard & Poor’s
respectively. In support thereof, Glencore
targets a maximum 2x Net debt/Adjusted
EBITDA ratio through the cycle, augmented
by a Net debt cap objective of c.$10 billion.
Distributions
The Directors have recommended a 2021
financial year base cash distribution of $0.26
per share amounting to some $3.4 billion,
accounting for own shares held as at 31
December 2021. Payment will be effected as
a $0.13 per share distribution in May 2022 and
a $0.13 per share distribution in September
2022 (in accordance with the Company’s
announcement of the 2022 Distribution
timetable made on 15 February 2022). The
Company will also conduct a buy-back of its
own shares to the value of up to $550 million,
with intended completion by the time of the
Group’s interim results announcement in
August 2022.
The cash distribution is to be effected as a
reduction of the capital contribution reserves
of the Company. As such, this distribution
would be exempt from Swiss withholding tax.
As at 31 December 2021, Glencore plc had CHF
25 billion of such capital contribution reserves
in its statutory accounts. The distribution is
subject to shareholders’ approval at
Glencore’s AGM on 28 April 2022.
The distribution is ordinarily paid in US dollars.
Shareholders on the Jersey register may elect
to receive the distribution in sterling, euros or
Swiss francs, the exchange rates of which will
be determined by reference to the rates
applicable to the US dollar at the time.
Shareholders on the Johannesburg register
will receive their distribution in South African
rand. Further details on distribution
payments, together with currency election
and distribution mandate forms, are available
from the Group’s website (www.glencore.
com) or from the Company’s Registrars.
expenditure and $3,024 million of distribution
to shareholders, non-controlling interests and
purchase of own shares.
Business and investment acquisitions
and disposals
Net inflows from business and investment
disposals/acquisitions were $370 million over
the year, compared to an outflow of $265
million in 2020. The net inflow comprises
disposals of a number of minority interest
investments, none of which were individually
material and proceeds from the sale of
Chemoil Terminals (oil storage facilities in the
US) for $248 million (see note 26). The net
outflow in 2020 was primarily cash
derecognised upon disposal of Minera
Alumbera, the acquisition of a 30% interest in
PT CITA Mineral Investindo Tbk and the
acquisition of the remaining 0.5% minority
interest held in Katanga Mining Limited.
Liquidity and funding activities
In 2021, the following significant financing
activities took place:
•
In February 2021, issued:
– 5 year $475 million, 4.375% coupon bond
(Volcan)
•
In March 2021, issued:
– 8 year EUR600 million, 0.75% coupon bond
– 12 year EUR500 million, 1.25% coupon bond
•
In April 2021, issued:
– 5 year $600 million, 1.625% coupon bond
– 10 year $600 million, 2.85% coupon bond
– 30 year $500 million, 3.875% coupon bond
•
In September 2021, issued:
– 7 year CHF150 million, 0.5% coupon bond
– 10 year $750 million, 2.625% coupon bond
– 30 year $500 million, 3.375% coupon bond
Basis of presentation
The financial information in the Financial
Review and sections headed Our Marketing
Business and Our Industrial Business is
presented on a segmental measurement
basis, including all references to revenue (see
note 2) and has been prepared on the basis as
outlined in note 1 of the financial statements,
with the exception of the accounting
treatment applied to relevant material
associates and joint ventures for which
Glencore’s attributable share of revenues and
expenses are presented. In addition, the
Peruvian listed Volcan, while a subsidiary of
the Group, is accounted for using the equity
method for internal reporting and analysis due
to the relatively low economic interest (23%)
held by the Group.
The Group’s results are presented on an
“adjusted” basis, using alternative
performance measures (APMs) which are not
defined or specified under the requirements
of IFRS, but are derived from the financial
statements, prepared in accordance with IFRS,
reflecting how Glencore’s management
assesses the performance of the Group. The
APMs are provided in addition to IFRS
measures to aid in the comparability of
information between reporting periods and
segments and to aid in the understanding of
the activities taking place across the Group by
adjusting for Significant items and by
aggregating or disaggregating (notably in the
case of relevant material associates and joint
ventures accounted for on an equity basis)
certain IFRS measures. APMs are also used to
approximate the underlying operating cash
flow generation of the operations (Adjusted
EBITDA). Significant items (see reconciliation
above) are items of income and expense,
which, due to their nature and variable
financial impact or the expected infrequency
of the events giving rise to them, are
separated for internal reporting and analysis of
Glencore’s results, to aid in providing an
understanding and comparative basis of the
underlying financial performance.
Alternative performance measures are
denoted by the symbol ◊ and are further
defined and reconciled to the underlying IFRS
measures in the APMs section on page 234.
Financial review continued
Shareholder returns
(US$ billion)
15.8
(9.8)
4.0
6.0
10.0
Net debt at 31.12.2020
Net reduction in 2021
Net debt at 31.12.2021
Capacity for shareholder retur
ns
Optimal net debt
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 52
Strategic Report
We responsibly source the
commodities that advance everyday
life – this means moving them from
where they are plentiful to where
they are needed
Market insight and customer
understanding
Our global scale and presence in more than
60commodities across 35countries gives us
extensive market knowledge and insight
tohelp us fully understand the needs of
ourcustomers.
Anticipating supply anddemand
Our strategy seeks to maximise value through
our integrated marketing and industrial
businesses working side-by-side to give us
presence across the entire supply chain,
delivering in-depth knowledge of physical
market supply and demand dynamics and
anability to rapidly adjust to market
conditions.
Creating opportunities
The significant scale of both our own
production and the volumes secured from
third parties allows us to create margin
opportunities from our ability to supply the
exact commodities the market needs through
processing and/or blending and optimisation
ofqualities.
Generating returns
We generate returns as a fee-like income from
distribution of physical commodities and
arbitrage, including blending and other
optimisation opportunities. Our use of
hedging instruments results inprofitability
being largely determined by these activities
rather than by absolute pricemovements.
Our Marketing
business
Arbitrage opportunities
Many of the physical commodity markets
in which we operate are fragmented
orperiodically volatile. This canresult
in arbitrage: price discrepancies between
theprices for the same commodities in
different geographic locations ortimeperiods.
Other factors with arbitrage opportunities
include freight andproduct quality.
Geographic Arbitrage
Disparity
Different prices for the sameproduct
in different geographic regions, taking
intoaccount transportation and
transaction costs.
Execution
Leverage global relationships
andproduction, processing and logistical
capabilities to source product in one
location and deliver in another.
Product Arbitrage
Disparity
Pricing differences between blends,
grades or types ofcommodity, taking
into accountprocessing and
substitution costs.
Execution
Ensure optionality with commodity supply
contracts, andlook to lock-in profitable
pricedifferentials through blending,
processing or end-product substitution.
Time Arbitrage
Disparity
Different prices for a commodity
depending on whether delivery
isimmediate or at a future date, taking
intoaccount storage andfinancing costs.
Execution
Book ‘carry trades’ that benefitfrom
competitive sources of storage, insurance
and financing.
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
Glencore Annual Report 2021 53
Highlights
Commodity markets generally performed
well throughout the year, bolstered by a
widespread economic recovery, following the
pandemic’s severe economic impacts in 2020,
characterised by the imposition of lengthy
lockdowns. In the context of resurgent
industrial demand and generally low
inventory balances, any supply-side issues
(from primary production and supply chain)
exacerbated the market tightness. The energy
supply shortages and price increases that
intensified in H2 2021 not only required careful
risk (market and counterparty) management
by our energy marketing units, but also had
profound indirect impacts on metals
marketing, as smelters globally faced higher
energy costs and/or limitations on energy use.
Overall market volatilities, measured both in
relation to primary commodity prices and
their associated pricing adjustments, such as
premiums, refining margins, quality
adjustments etc, were extremely elevated
during 2021.
In this context, Marketing performed strongly
across all major commodity groups.
Marketing Adjusted EBIT was $3,695 million,
up 11% over the prior period. Metals and
minerals Adjusted EBIT increased by 50% to
$2,494 million, while Energy Products was
down 21% on an outsized 2020 result to $1,395
million. Our 49.9% interest in the Viterra
agricultural products business recorded
earnings of $473 million, on a share of net
income basis.
Market review
and outlook
Financial overview
US$ million
Metals and
minerals
Energy
products
Corporate
and other
1
2021
Metals and
minerals
Energy
products
Corporate
and other
1
2020
Revenue 74,727 107,037 – 181,764 54,847 69,290 – 124,137
Adjusted EBITDA
◊
2,588 1,829 (194) 4,223 1,768 2,053 (89) 3,732
Adjusted EBIT
◊
2,494 1,395 (194) 3,695 1,667 1,761 (89) 3,339
Adjusted EBITDA margin 3.5% 1.7% n.m. 2.3% 3.2% 3.0% n.m. 3.0%
1 Corporate and other Marketing activities includes $473 million (2020: $211 million) of Glencore’s equity accounted share of Viterra.
Selected marketing volumes sold
Units 2021 2020 Change %
Copper metal and concentrates
1
mt 3.1 3.4 (9)
Zinc metal and concentrates
1
mt 2.7 2.8 (4)
Lead metal and concentrates
1
mt 1.1 1.0 10
Gold moz 1.8 2.0 (10)
Silver moz 65.5 64.9 1
Nickel kt 202 149 36
Ferroalloys (including agency) mt 9.3 8.5 9
Alumina/aluminium mt 8.9 7.2 24
Iron ore mt 49.9 57.6 (13)
Thermal coal
2
mt 67.7 67.1 1
Metallurgical coal
2
mt 4.6 1.3 254
Crude oil mbbl 706 791 (11)
Oil products mbbl 704 738 (5)
1 Estimated metal unit contained.
2 Includes agency volumes.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 54
Strategic Report
Copper
LME copper ($/t)
Starting the year below $8,000/t, copper
prices set a record high of $10,748/t in May,
basis improved physical demand conditions,
continued financial stimulus and high
speculative positioning. Global copper
demand remained strong during H2,
particularly in North America and Europe
where consumption had recovered to
pre-Covid levels. Mine supply growth in 2021,
however, was nominal, given the challenges
faced in returning to pre-Covid operating
rates. Against this backdrop, refined copper
inventories reached multi-year lows in H2
2021, with exchange inventories drawing to
their lowest levels since 2008. Cathode
premiums moved to their highest levels in five
years, while LME cash copper traded at a
premium to the three-month price, with a
difference of over $1,000/t in October. During
2021, net imports of refined copper to the USA
were at levels not seen in more than 10 years.
Market review and outlook
continued
Spot smelter treatment and refining charges,
the fee paid by mines to smelters, reached
multi-year lows in 2021, as competition for
available concentrates increased. The 2022
benchmark level, however, increased year-
over-year, following six years of steady
declines, reflecting the market’s anticipation
of concentrate mine supply growth.
Looking forward, we expect mine supply
growth to be constrained by ageing assets,
declining ore grades, a diminished project
pipeline and the measures taken to contain
the spread of Covid-19, with various new
projects likely to experience delays. In the
near term, we expect global demand to
remain strong, with steady growth rates
longer term, driven by population growth and
rising living standards in emerging
economies. Climate change policies will also
be a key driver for copper growth sectors,
given its crucial role in accelerating the clean
energy transition, from renewable power
generation and distribution, to energy storage
and electric vehicles (EVs).
Cobalt
MB cobalt ($/lb)
2021 started strongly from a demand and
pricing perspective, with positive momentum
in Chinese and European EV demand and a
level of stockpiling key strategic materials,
particularly in China. Commencing 2021 at
$15.30/lb, prices rallied 65% through Q1 to
reach a H1 high of $25.30/lb. Prices then
cooled off somewhat before a strong recovery
in H2 saw the year-end price at $33.50/lb.
While the EV sector has been the main
demand catalyst for cobalt, a number of
metal demand segments exhibited post-
Covid recovery.
The cobalt hydroxide supply bottlenecks
witnessed during H2 2020 eased in early 2021,
but stronger lithium-ion battery demand
from both EV and non-EV applications (e.g.
phones) resulted in hydroxide payables
marking a high of 94% early in the year, with
major producers having limited spot
availability. Payables averaged 90% during H1
and remained within a stable band of
c.88-90% for H2.
There is mounting EV investment and adoption.
The Chinese and European EV sales markets
have developed strongly, while the North
American market is emerging as a major EV
growth region with key manufacturers deploying
tens of billions of dollars in investment. The
diminishing cobalt per kWh requirement
through R&D gains is being outstripped by the
rate of EV sales growth, underpinning strong
cobalt demand.
Various cobalt supply projects are due to
commission over the coming years, however
elevated execution risk is likely to temper the rate
at which new cobalt units are available, while
incumbent production may also be impacted by
continued logistical challenges. As a result, the
cobalt market fundamental outlook remains
robust.
0
2,000
4,000
6,000
8,000
10,000
12,000
2019 2020 2021
2019 2020 2021
0
15
10
5
20
25
30
35
40
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 55
Strategic Report
Zinc
LME zinc ($/t)
The zinc market recorded a deficit in 2021,
driven by strong recovery in global demand
(+6%), combined with production disruptions
and supply chain bottlenecks. Zinc price,
metal premiums, market backwardation,
concentrates spot TCs and metal exchange
inventory levels all signalled tight market
conditions at year end.
Average zinc prices increased 32% from
$2,269/t in 2020 to $3,005/t in 2021, closing the
year at around $3,600/t. Metal premiums were
particularly strong outside China (Q4 2021:
USA >$300/mt and EU c.$250/mt). At the
same time, China required a significant
amount of metal, with China’s State Reserves
Bureau (SRB) releasing 180kt in 2021. At
year-end, stocks remained at low levels, both
in visible metal (~350kt or c.10 days of global
consumption) and concentrates (only c.4 days
above typical smelter requirements of 30
days).
Market review and outlook
continued
Mine supply ex-China is estimated to have
grown c.0.5mt–0.6mt, missing higher
predictions earlier in the year. The
continuation in mine disruptions eroded
concentrates spot TCs, which dropped by
c.$100/dmt to $78/dmt on average in 2021.
The energy price environment in Europe,
where c.2.3mt p.a. of zinc metal is produced
(c.17% of global supply), poses risk of further
metal production cutbacks in the region.
Should these materialise, both zinc price and
premiums could rise as there is no SRB
parallel in the EU/US to ease the market.
Looking ahead into 2022, refined zinc
consumption is expected to increase, albeit
not matching the percentage increase in 2021.
There are risks to demand, including any
Chinese construction slowdown and/or
power-related demand destruction in Europe,
however, there is upside from the potential
comeback of the automotive sector as
semiconductor shortages recede.
Bottlenecks in logistics are expected to
continue in the short and medium-term,
creating regional differences.
Regional differences and supply disruptions
were also evident in the lead market. LME
stocks reduced c.60% since December 2020
and the average price increased by 20%
year-over-year to $2,204/t.
Nickel
LME nickel ($/t)
Primary nickel consumption rebounded
sharply in 2021 (+17.5%), driven by record levels
of stainless steel production in China and
Indonesia and accelerating growth in the
battery sector. The nickel market was in a
substantial deficit in H1 2021, which narrowed
in H2 as Indonesian nickel production
continued to ramp up. Nickel stocks in LME
warehouses fell by 60% in 2021.
Stainless steel production in China,
accounting for more than half of global
primary demand, reached historic highs
driven by strong global demand. Also, in a
policy change aimed at reducing pollution
and carbon emissions, the Chinese
government eliminated tax incentives on
stainless steel exports and initiated a tax
removal on imports. The resulting increase in
Indonesian production was particularly
pronounced, while in other regions, stainless
steel production also reached multi-year
highs.
Nickel demand from alloys and specialty
steels continued to gradually recover towards
pre-pandemic levels. Despite signs of
recovery, commercial aerospace remains
challenged by travel restrictions and lack of
forward visibility, further delaying the
recovery in the superalloys segment.
EV sales grew strongly, despite a global
slowdown in total automotive sales amid a
shortage of parts and semiconductors.
Automakers have broadly committed to
electric mobility and are actively sourcing
battery cells and raw materials. Stringent ESG
requirements throughout the EV supply chain
have resulted in a preference for high-grade
nickel with a low carbon footprint.
2019 2020 2021
0
2,000
2,500
3,000
500
1,000
1,500
3,500
4,000
4,500
2019 2020 2021
0
5,000
10,000
15,000
20,000
25,000
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 56
Strategic Report
Ferroalloys
MB ferrochrome (c/lb)
Ferrochrome supply from South Africa, India
and Europe recovered to pre-pandemic levels,
resulting in global production growth of 15%
year-on-year. This supply growth was met by a
strong increase in global stainless steel melt
rates, with Indonesian stainless steel
production increasing by 87% year-on-year to
5mt, becoming the world’s second largest
producer.
Vanadium demand recovered to pre-
pandemic levels with stronger carbon steel
markets absorbing excess inventory. The
aerospace demand sector remained weak as
previously noted.
Market review and outlook
continued
Iron ore
Platts iron ore ($/t)
Iron ore prices were extremely volatile
throughout the year, driven by shifting policy
initiatives and supply/demand rebalancing.
Global resumption of construction activities
and Chinese mills’ post winter restocking saw
strong demand in H1 2021, supported by
positive steel margins, with iron ore prices
reaching 10-year highs in June. Chinese steel
production cuts, instituted in large part to
achieve annual environmental goals, led to a
demand decrease in H2 while seaborne
supply improved. Iron ore quickly became
over-supplied, resulting in a significant price
correction.
Aluminium
LME aluminium ($/t)
The aluminium market continued its strong
recovery from the initial Covid-19 shock,
backed by strong fundamentals, including a
supply deficit. The price environment was
volatile, as a surge in demand during H1 2021
was followed by rising energy costs first in
China (Q2-Q3 2021) and then Europe during
Q4 2021. Chinese imports of primary
aluminium reached record levels, leading to a
price rise on the LME, peaking at a decade-
high of $3,229/t in mid-October. Prices
retreated after China’s timely and effective
coal reform, with the rally resuming towards
year-end, mainly due to the European power
crisis and subsequent smelter shutdowns.
Supported by physical tightness, Chinese
imports and high logistics costs, premiums
across the Americas, Asia and Europe
increased significantly during 2021. The
Midwest premium rose to an all-time-high of
35.4c/lb, ending the year at 30c/lb, while the
Main Japanese Port premium finished the
year at $170/t, up from $125/t at the beginning
of the year.
Alumina prices in H1 2021 underperformed
aluminium prices, which supported smelting
margins. A fire at the Jamalco refinery in
August and Chinese energy and emission
policies led to price increases during H2, with
ex-China FOB Australia alumina prices
increasing by c.60% in less than two months
to peak at c.$480/t before closing the year at
c.$345/t.
The global bauxite market continued to be
well-supplied. The military coup in Guinea in
September raised concerns around supply-
side risks, but these had largely eased by the
end of the year, given alternative sources of
supply.
2019 2020 2021
0
20
40
60
80
100
120
140
160
2019 2020 2021
0
50
100
150
200
250
300
2019 2020 2021
0
500
1,500
1,000
2,000
2,500
3,000
3,500
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 57
Strategic Report
Coal
FOB coal ($/t)
Strong demand driven by economic recovery
and constrained supply chains beset by
weather, geological and mining incidents
resulted in a substantial draw on coal stocks
and record high coal prices.
Global seaborne thermal coal demand rose by
c.43mt (5%) during 2021. Chinese seaborne
demand increased by 64mt with supply from
Australia falling from 31mt to zero as
Australian coal restrictions persisted. The bulk
of the 95mt swing in trade flows to China was
supplied by Indonesia (+71mt) and Russia
(+15mt). High gas prices supported increased
thermal coal demand in Europe (+11mt), Korea
(+5mt) and Taiwan (+4mt).
2021 saw record high average thermal coal
prices for gCNewc ($137) and API4 ($125). API2
averaged $120/t, marginally below 2011. Coal
prices peaked during October which was also
a high point for LNG, as consumers looked to
restock ahead of the winter period. GCNewc,
API4 and API2 monthly prices peaked at
258%, 232% and 341% respectively above
January’s price levels, before closing the year
at $170/t (198%), $136/t (150%) and $137/t
(202%) respectively.
Although Chinese seaborne coking coal
demand declined by 15mt during 2021, Japan,
India, Europe and Brazil saw increased
seaborne demand, as record global steel
prices supported improved blast furnace
capacity utilisation. Together with a number
of temporary mine closures, the net overall
increase in global seaborne coking coal
demand, led spot HCC prices higher from
$124/t during January to a peak of $398/t in
October before moderating to close at $342/t
in December, 175% above January price levels.
Forward gas prices are at relatively high levels,
with thermal coal remaining the lowest cost
baseload fuel for power generation in all
major seaborne markets. Weather-related
supply impacts in Australia during December
2021 resulted in production and export
shortfalls, which together with Indonesia’s
temporary ban on coal exports, substantially
limited spot coal availability in early 2022.
Market review and outlook
continued
Oil
Brent crude oil ($/bbl)
2021 marked another year of elevated volatility
as the recovery from Covid-19 drove strong
underlying demand growth for oil and gas.
Prices were further supported by favourable
financial markets and fiscal conditions.
Further outbreaks of Covid-19 related strains
in Q3 (Delta) and in Q4 (Omicron) threatened
the trajectory of oil demand recovery,
however such concerns proved short-lived,
with Brent closing the year at $78 per barrel.
The rising oil price through the year also
prompted some releases of strategic
petroleum reserves, led by the USA. This was
absorbed by the market and did little to halt
the price trajectory.
In Q3, European and UK energy markets came
under severe pressure due to a multitude of
factors including low output from renewable
energy sources during the summer and
low-running gas inventories heading into
winter. This was the catalyst for further
disruption in global energy markets, with
prices impacted throughout the energy chain.
The European TTF natural gas benchmark
price jumped more than 300% to over
EUR100/MWh and shortages of natural gas,
LNG and coal caused some utilities and major
industrial users to switch to oil as a source of
power.
The oil price forward curve structure
remained in varying degrees of
backwardation throughout the year. This
steepened considerably during H2 as the
energy crisis took hold and global inventories
dropped below the closely tracked five-year
range levels.
Refining margins in all regions continued to
improve during 2021, largely driven by the
recovery in transportation fuel markets as
mobility restrictions eased and refined
product inventories needed to be restocked.
Other factors were Hurricane Ida disrupting
refining operations in the US, elevated natural
gas input costs in H2 2021 and China curbing
oil product exports as part of its reforms to
reduce carbon emissions and protect
domestic supplies.
In shipping, tanker freight markets remained
depressed for most of the year. Whilst they
lifted in Q4, particularly in the ‘clean’ refined
products segment, market expectations of a
year-end upward momentum failed to
materialise.
2019 2020 2021
0
50
150
100
200
250
300
400
350
450
gCNewc Aust HCC
2019 2020 2021
0
50
40
30
20
10
60
70
80
90
100
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 58
Strategic Report
We are a major producer of
commodities that support the
energy and mobility transition,
including copper, cobalt, nickel
and zinc, while our high-quality
coal provides affordable and
reliable energy
Glencore Annual Report 2021 59
Our Industrial
business
Glencore Annual Report 2021 59
Industrial activities capex
(US$ billion)
2021
2020
2019
4.4
4.1
5.3
Industrial activities
Adjusted EBITDA
◊
(US$ billion)
2021
2020
2019
Adjusted EBITDA
◊
weighting
Energy products margin
◊
47%
2020: 17%
Volatility in energy markets
precipitated demand for coal
Metals and minerals
miningmargin
◊
45%
2020: 36%
Resurgent demand in major
industrial sectors
Production highlights
(own sourced)
Copper
(kt)
2021
2020
2019
Zinc
(kt)
2021
2020
2019
Coal
(mt)
2021
2020
2019
17.1
9.0
7.8
4.4
5.3
4 .1
1,195.7
1,371.2
1,258.1
1,117.8
1,077.5
1,170.4
103.3
139.5
106.2
20%
37%
12%
24%
7%
●
Copper
●
Zinc
●
Coal
●
Other industrial
activities
●
Marketing
39%
19%
10%
32%
2020
2021
| Corporate Governance | Financial Statements | Additional InformationStrategic Report
Glencore Annual Report 2021 59
20%
37%
12%
24%
7%
●
Copper
●
Zinc
●
Coal
●
Other industrial
activities
●
Marketing
39%
19%
10%
32%
2020
2021
20%
37%
12%
24%
7%
●
Copper
●
Zinc
●
Coal
●
Other industrial
activities
●
Marketing
39%
19%
10%
32%
2020
2021
Our Industrial business
continued
Highlights
Industrial Adjusted EBITDA increased by 118%
to a record $17,100 million compared to the
$7,828 million in 2020. The increase was
primarily driven by higher commodity prices,
offset by higher costs (mainly energy) and the
effects of a weaker US dollar (on average)
against many of our key producer country
currencies.
Adjusted EBITDA contribution from metals
and minerals assets was $12,017 million, up
65% compared to the prior year, with
substantial improvements across most
operations, owing to higher average
commodity prices over the year. Noteworthy
were the increased contributions from the
African copper assets (up $1,462 million),
aided by higher cobalt production, Collahuasi
(up $832 million) and the Ferroalloys assets
(total contribution of $809 million, up 508%
over prior year) owing to higher prices and
recovery of production, following South
Africa’s national Covid lockdown in 2020.
The Mount Isa copper mine, smelter and
Townsville copper refinery were transferred
for management purposes from the Copper
department to the Zinc department, to be
managed as an overall Mount Isa polymetallic
integrated complex.
Adjusted EBITDA contribution from Energy
products assets was $5,603 million, up 439%
compared to 2020, mainly due to the
significant increase in average realised export
thermal and coking coal prices year over year
and to a lesser extent, higher oil and gas
prices.
US$ million
Metals
and
minerals
Energy
products
Corporate
and other 2021
Metals and
minerals
Energy
products
Corporate
and other 2020
Revenue
◊
41,535 19,269 6 60,810 30,303 11,145 5 41,453
Adjusted EBITDA
◊
12,017 5,603 (520) 17,100 7,285 1,039 (496) 7,828
Adjusted EBIT
◊
8,128 3,252 (580) 10,800 3,054 (1,365) (612) 1,077
Adjusted EBITDA mining margin 45% 47% 44% 36% 17% 29%
Production from own sources – Total
1
2021 2020 Change %
Copper kt 1,195.7 1,258.1 (5)
Cobalt kt 31.3 27.4 14
Zinc kt 1,117.8 1,170.4 (4)
Lead kt 222.3 259.4 (14)
Nickel kt 102.3 110.2 (7)
Gold koz 809 916 (12)
Silver koz 31,519 32,766 (4)
Ferrochrome kt 1,468 1,029 43
Coal – coking mt 9.1 7.6 20
Coal – semi-soft mt 4.5 4.6 (2)
Coal – thermal mt 89.7 94.0 (5)
Coal mt 103.3 106.2 (3)
Oil (entitlement interest basis) kboe 5,274 3,944 34
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis, except for joint ventures, where the Group’s
attributable share of production is included.
Reflecting the above, Adjusted EBITDA
mining margins were 45% (2020: 36%) in our
metals operations and 47% (2020: 17%) in
our energy operations.
Capex of $4,423 million (2020: $4,082
million) was 8% higher year over year
reflecting a normalisation of sustaining
activities, following delays/deferrals in the
prior year, brought on by many severe
pandemic-related restrictions.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 60
Strategic Report
Our Industrial business
continued
1 Represents the Group’s share of these JVs.
2 Mount Isa copper operations (including Townsville)
previously recorded under copper department
moved to zinc department. Prior year was restated
accordingly.
3 Adjusted EBITDA mining margin for Metals and
Minerals is Adjusted EBITDA excluding non-mining
assets as described below ($11,422 million (2020:
$6,448 million)) divided by Revenue excluding
non-mining assets and intergroup revenue
elimination ($ 25,609 million (2020: $18,139 million) i.e.
the weighted average EBITDA margin of the mining
assets. Non-mining assets are the Copper custom
metallurgical assets, Zinc European custom
metallurgical assets, Zinc North America (principally
smelting/ processing), the Aluminium/Alumina
group and Volcan (equity accounted with no relevant
revenue) as noted in the table above.
4 Energy products EBITDA margin is Adjusted EBITDA
for coal and Oil E&P (but excluding Oil refining)
($5,455 million (2020: $1,144 million)), divided by the
sum of coal revenue from own production and Oil
E&P revenue ($11,504 million (2020: $6,647 million)).
Financial information 2021
2021
US$ million Revenue◊
Adjusted
EBITDA◊
Adjusted
EBITDA
mining
margin
3,4
◊
Depreciation
and
amortisation
Adjusted
EBIT◊
Capital expenditure
Sustaining Expansionary Total
Copper assets
Africa 4,256 2,174 51% (504) 1,670 258 42 300
Collahuasi
1
2,599 2,133 82% (287) 1,846 292 95 387
Antamina
1
1,791 1,416 79% (311) 1,105 287 9 296
Other South America 2,494 1,400 56% (515) 885 658 26 684
Australia
2
889 477 54% (125) 352 81 – 81
Polymet – (13) – (13) 7 – 7
Custom metallurgical 10,186 325 (159) 166 164 – 164
Intergroup revenue elimination (249) – – – – – –
Copper 21,966 7,912 63% (1,901) 6,011 1,747 172 1,919
Zinc assets
Kazzinc 3,501 1,103 32% (437) 666 252 90 342
Australia
2
4,246 946 22% (566) 380 281 2 283
European custom metallurgical 4,035 71 (132) (61) 89 87 176
North America 1,964 281 (129) 152 33 2 35
Volcan – 9 – 9 – – –
Other Zinc 524 111 21% (102) 9 48 – 48
Intergroup revenue elimination (10) – – – – – –
Zinc 14,260 2,521 26% (1,366) 1,155 703 181 884
Nickel assets
Integrated Nickel Operations 1,811 836 46% (396) 440 258 312 570
Australia 763 196 26% (29) 167 51 – 51
Koniambo 242 (164) (68%) (81) (245) 16 – 16
Nickel 2,816 868 31% (506) 362 325 312 637
Ferroalloys 2,493 809 32% (115) 694 104 24 128
Aluminium/Alumina – (91) (1) (92) 5 – 5
Iron ore – (2) – (2) – – –
Metals and minerals 41,535 12,017 45% (3,889) 8,128 2,884 689 3,573
Coking Australia 1,975 959 49% (229) 730 132 8 140
Thermal Australia 6,976 3,270 47% (1,398) 1,872 279 146 425
Thermal South Africa 1,488 563 38% (438) 125 126 3 129
Prodeco – (18) (11) (29) – – –
Cerrejón
1
772 452 59% (89) 363 30 – 30
Coal revenue (own production) 11,211 5,226 47% (2,165) 3,061 567 157 724
Coal other revenue (buy-in coal) 865 – – – – – –
Oil E&P assets 294 229 78% (110) 119 35 – 35
Oil refining assets 6,899 148 (76) 72 60 – 60
Energy products 19,269 5,603 47% (2,351) 3,252 662 157 819
Corporate and other 6 (520) (60) (580) – 31 31
Industrial activities 60,810 17,100 44% (6,300) 10,800 3,546 877 4,423
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 61
Strategic Report
Our Industrial business
continued
1 Represents the Group’s share of these JVs.
2 Mount Isa copper operations (including Townsville)
previously recorded under copper department
moved to zinc department. Prior year was restated
accordingly.
3 Adjusted EBITDA mining margin for Metals and
Minerals is Adjusted EBITDA excluding non-mining
assets as described below ($11,422 million (2020:
$6,448 million)) divided by Revenue excluding
non-mining assets and intergroup revenue
elimination ($ 25,609 million (2020: $18,139 million) i.e.
the weighted average EBITDA margin of the mining
assets. Non-mining assets are the Copper custom
metallurgical assets, Zinc European custom
metallurgical assets, Zinc North America (principally
smelting/ processing), the Aluminium/Alumina
group and Volcan (equity accounted with no relevant
revenue) as noted in the table above.
4 Energy products EBITDA margin is Adjusted EBITDA
for coal and Oil E&P (but excluding Oil refining)
($5,455 million (2020: $1,144 million)), divided by the
sum of coal revenue from own production and Oil
E&P revenue ($11,504 million (2020: $6,647 million)).
Financial information 2020
2020
US$ million Revenue◊
Adjusted
EBITDA◊
Adjusted
EBITDA
mining
margin
3,4
◊
Depreciation
and
amortisation
Adjusted
EBIT◊
Capital expenditure
Sustaining Expansionary Total
Copper assets
Africa 3,105 712 23% (564) 148 220 196 416
Collahuasi
1
1,732 1,301 75% (290) 1,011 287 44 331
Antamina
1
1,055 755 72% (283) 472 180 10 190
Other South America 2,025 1,042 51% (524) 518 309 12 321
Australia
2
714 317 44% (142) 175 87 – 87
Polymet n.a. (20) – (20) 8 – 8
Custom metallurgical 7,842 336 (174) 162 144 – 144
Intergroup revenue elimination
(308) – – – – – –
Copper 16,165 4,443 48% (1,977) 2,466 1,235 262 1,497
Zinc assets
Kazzinc 3,031 1,228 41% (404) 824 201 193 394
Australia
2
2,493 452 18% (611) (159) 294 – 294
European custom metallurgical 2,883 327 (146) 181 80 25 105
North America 1,746 240 (166) 74 52 – 52
Volcan – (33) – (33) – – –
Other Zinc 317 (21) (7%) (271) (292) 47 – 47
Intergroup revenue elimination
– – – – – – –
Zinc 10,470 2,193 28% (1,598) 595 674 218 892
Nickel assets
Integrated Nickel Operations 1,461 670 46% (435) 235 142 306 448
Australia 646 117 18% (25) 92 33 – 33
Koniambo
239 (196) (82%) (102) (298) 38 – 38
Nickel 2,346 591 25% (562) 29 213 306 519
Ferroalloys 1,321 133 10% (94) 39 87 28 115
Aluminium/Alumina 1 (73) – (73) – – –
Iron ore
– (2) – (2) – – –
Metals and minerals 30,303 7,285 36% (4,231) 3,054 2,209 814 3,023
Coking Australia
5
971 244 25% (245) (1) 138 39 178
Thermal Australia
5
4,031 799 20% (1,327) (528) 256 113 368
Thermal South Africa 969 183 19% (347) (164) 147 28 175
Prodeco 357 (72) (61) (133) 44 – 44
Cerrejón
1
208 5 2% (110) (105) 22 – 22
Coal revenue (own production) 6,536 1,159 18% (2,090) (931) 607 180 787
Coal other revenue (buy-in coal) 400 – – – – – –
Oil E&P assets 111 (15) (14%) (172) (187) 119 – 119
Oil refining assets
4,098 (105) (142 (247) 125 – 125
Energy products 11,145 1,039 17% (2,404) (1,365) 851 180 1,031
Corporate and other
5 (496) (116) (612) – 28 28
Industrial activities 41,453 7,828 29% (6,751) (1,077) 3,060 1,022 4,082
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 62
Strategic Report
Our Industrial business
continued
Operating highlights
Copper assets
Own sourced copper production of 1,195,700
tonnes was 62,400 tonnes (5%) lower than
2020, mainly due to the Mopani disposal
(23,800 tonnes), expected lower copper
grades at Antapaccay (14,800 tonnes) and
lower copper by-products from our mature
zinc and nickel mines (26,600 tonnes).
Own sourced cobalt production of 31,300
tonnes was 3,900 tonnes (14%) higher than
2020 due to the limited restart of production
at Mutanda in 2021.
African Copper
Own sourced copper production of 277,200
tonnes was 23,800 tonnes (8%) lower than
2020, mainly reflecting the disposal of Mopani.
The contribution from Mutanda’s limited
restart was largely offset by the impact of
intermittent power outages at Katanga.
Own sourced cobalt production of 27,700
tonnes was 3,800 tonnes (16%) higher than
2020, reflecting Mutanda’s restart.
Collahuasi
Attributable copper production of 277,200
tonnes was in line with 2020.
Antamina
Attributable copper production of 150,000
tonnes and zinc production of 153,700 tonnes
was respectively 22,300 tonnes (17%) and
11,300 tonnes (8%) higher than 2020 reflecting
Covid-relating mining suspensions in the
base period.
Other South America
Own sourced copper production of 235,200
tonnes was 24,600 tonnes (9%) lower than
2020, reflecting expected lower copper
grades at Antapaccay and temporarily
reduced production at Lomas Bayas due to
short-term leach pad issues, now rectified.
Australia
Own sourced copper production of 85,300
tonnes was 10,100 tonnes (11%) lower than
2020 due to expected changes in mine
sequencing at Ernest Henry and additional
mine development at Cobar.
Custom metallurgical assets
Copper cathode production of 490,600
tonnes was in line with 2020.
Copper anode production of 454,000 tonnes
was 36,100 tonnes (7%) lower than 2020,
mainly reflecting scheduled maintenance at
Altonorte in July 2021.
Production from own sources – Copper assets
1
2021 2020 Change %
African Copper (Katanga, Mutanda, Mopani)
Copper metal kt 277.2 301.0 (8)
Cobalt
2
kt 27.7 23.9 16
Collahuasi
3
Copper in concentrates kt 277.2 276.8 –
Silver in concentrates koz 4,219 3,961 7
Gold in concentrates koz 45 53 (15)
Antamina
4
Copper in concentrates kt 150.0 127.7 17
Zinc in concentrates kt 153.7 142.4 8
Silver in concentrates koz 6,135 5,535 11
Other South America (Antapaccay, Lomas Bayas)
Copper metal kt 64.3 74.1 (13)
Copper in concentrates kt 170.8 185.6 (8)
Gold in concentrates and in doré koz 90 90 –
Silver in concentrates and in doré koz 1,382 1,298 6
Australia (Ernest Henry, Cobar)
5
Copper metal kt 44.8 49.2 (9)
Copper in concentrates kt 40.5 46.2 (12)
Gold koz 64 93 (31)
Silver koz 654 714 (8)
Total Copper department
Copper kt 1,024.8 1,060.6 (3)
Cobalt kt 27.7 23.9 16
Zinc kt 153.7 142.4 8
Gold koz 199 236 (16)
Silver koz 12,390 11,508 8
Total production – Custom metallurgical assets
1
2021 2020 Change %
Copper (Altonorte, Pasar, Horne, CCR)
Copper metal kt 490.6 482.6 2
Copper anode kt 454.0 490.1 (7)
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 63
Strategic Report
Our Industrial business
continued
Zinc assets
Own sourced zinc production of 1,117,800
tonnes was 52,600 tonnes (4%) lower than
2020, mainly reflecting: (i) the expected
decline of Maleevsky mine in Kazakhstan,
being lagged by the slower than expected
ramp-up of replacement Zhairem mine
tonnage (19,600 tonnes); (ii) Mount Isa
producing additional metal from ore stockpile
drawdowns in the base period (24,400
tonnes); and (iii) Kidd lower grades (13,800
tonnes). These factors were partly offset by
stronger zinc production at Antamina, which
was suspended for part of 2020 due to Covid
restrictions.
Kazzinc
Own sourced zinc production of 147,900
tonnes was 19,600 tonnes (12%) lower than
2020, reflecting expected lower grades from
Maleevsky mine (also affecting lead and
copper noted below).
Own sourced lead production of 19,800
tonnes was 5,800 tonnes (23%) lower than
2020, and own sourced copper production of
25,600 tonnes was 11,400 tonnes (31%) down,
also due to Maleevsky’s progressive depletion.
Own sourced gold production of 595,000
ounces was 64,000 ounces (10%) lower than
the comparable 2020 period, mainly
reflecting expected lower grades at
Vasilkovsky.
The new Zhairem zinc/lead mine was
commissioned in May 2021, with ramp up
through 2022 and steady-state annualised
production expected by 2023.
Australia
Zinc production of 609,400 tonnes was 24,100
tonnes (4%) lower than 2020, mainly reflecting
Mount Isa processing additional metal from
ore stockpile drawdowns in 2020.
Lead production of 188,100 tonnes was 28,700
tonnes (13%) down on 2020 reflecting lower
Mount Isa grades.
The Mount Isa copper operations are now
reported within the Zinc business unit. Own
sourced copper production of 91,500 tonnes
was broadly in line with 2020, noting that this
figure excludes units from the held-for-sale
Ernest Henry mine.
North America
Zinc production of 96,100 tonnes was 18,600
tonnes (16%) lower than 2020, reflecting the
reducing production profile of both assets as
they approach end of mine life.
South America
Zinc production of 110,700 tonnes was 1,600
tonnes below 2020 mainly reflecting the
planned cessation of mining at Aguilar
(Argentina) and Iscaycruz (Peru), partly offset
by higher production in Bolivia following
Covid-related suspensions in 2020.
European custom metallurgical assets
Zinc metal production of 800,600 tonnes was
modestly higher than 2020.
Lead metal production of 244,900 tonnes was
46,900 tonnes (24%) higher than 2020, mainly
reflecting the contribution of the Nordenham
Metall lead smelter that was acquired in
September 2021 (38,200 tonnes).
Production from own sources – Zinc assets
1
2021 2020 Change %
Kazzinc
Zinc metal kt 147.9 167.5 (12)
Lead metal kt 19.8 25.6 (23)
Copper metal
6
kt 25.6 37.0 (31)
Gold koz 595 659 (10)
Silver koz 2,921 4,712 (38)
Australia (Mount Isa, Townsville, McArthur River)5
Zinc in concentrates kt 609.4 633.5 (4)
Copper metal kt 91.5 89.6 2
Lead in concentrates kt 188.1 216.8 (13)
Silver koz 625 557 12
Silver in concentrates koz 6,521 7,404 (12)
North America (Matagami, Kidd)
Zinc in concentrates kt 96.1 114.7 (16)
Copper in concentrates kt 30.3 40.7 (26)
Silver in concentrates koz 1,383 2,125 (35)
Other Zinc: South America (Argentina, Bolivia,
Peru)
7
Zinc in concentrates kt 110.7 112.3 (1)
Lead in concentrates kt 14.4 17.0 (15)
Copper in concentrates kt 1.7 1.6 6
Silver in concentrates koz 7, 383 6,121 21
Total Zinc department
Zinc kt 964.1 1,028.0 (6)
Lead kt 222.3 259.4 (14)
Copper kt 149.1 168.9 (12)
Gold koz 595 659 (10)
Silver koz 18,833 20,919 (10)
Total production – European custom metallurgical assets
1
2021 2020 Change %
Zinc (Portovesme, San Juan de Nieva, Nordenham,
Northfleet)
Zinc metal kt 800.6 787.2 2
Lead metal kt 244.9 198.0 24
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 64
Strategic Report
Our Industrial business
continued
Nickel assets
Nickel production of 102,300 tonnes was 7,900
tonnes (7%) lower than in 2020, mainly due to
the lengthy scheduled statutory shutdown
and maintenance issues at Murrin Murrin
earlier in the year.
Integrated Nickel Operations (INO)
Own sourced nickel production of 55,200
tonnes was 1,700 tonnes (3%) below 2020.
Murrin Murrin
Own sourced nickel production of 30,100
tonnes was 6,300 tonnes (17%) below 2020,
reflecting the lengthy scheduled statutory
shutdown in May/June and various
maintenance issues earlier in the year.
Koniambo
Nickel production of 17,000 tonnes was In line
with 2020 production, following a much
improved Q4 2021 performance.
Ferroalloys assets
Attributable ferrochrome production of
1,468,000 tonnes was 439,000 tonnes (43%)
higher than 2020 mainly due to the South
African national lockdown in the prior year,
and a strong operating performance.
Production from own sources – Nickel assets
1
2021 2020 Change %
Integrated Nickel Operations (INO) (Sudbury,
Raglan, Nikkelverk)
Nickel metal kt 55.0 56.5 (3)
Nickel in concentrates kt 0.2 0.4 (50)
Copper metal kt 13.5 13.5 –
Copper in concentrates kt 8.3 15.1 (45)
Cobalt metal kt 1.1 0.6 83
Gold koz 15 21 (29)
Silver koz 296 339 (13)
Platinum koz 33 40 (18)
Palladium koz 83 101 (18)
Rhodium koz 4 4 –
Murrin Murrin
Nickel metal kt 30.1 36.4 (17)
Cobalt metal kt 2.5 2.9 (14)
Koniambo
Nickel in ferronickel kt 17.0 16.9 1
Total Nickel department
Nickel kt 102.3 110.2 (7)
Copper kt 21.8 28.6 (24)
Cobalt kt 3.6 3.5 3
Gold koz 15 21 (29)
Silver koz 296 339 (13)
Platinum koz 33 40 (18)
Palladium koz 83 101 (18)
Rhodium koz 4 4 –
Production from own sources – Ferroalloys assets
1
2021 2020 Change %
Ferrochrome
8
kt 1,468 1,029 43
Vanadium Pentoxide mlb 20.5 19.5 5
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 65
Strategic Report
Coal assets
Coal production of 103.3 million tonnes was 2.9
million tonnes (3%) lower than 2020, reflecting
Prodeco’s care and maintenance status and
lower domestic power demand/export rail
capacity constraints in South Africa, offset by
higher production at Cerrejón, following a
Covid suspension and strike in 2020.
Australian coking
Production of 9.1 million tonnes was 1.5 million
tonnes (20%) higher than 2020 reflecting
additional coking-quality production from the
Collinsville mine, and various planned
maintenance activities in 2020.
Australian thermal and semi-soft
Production of 66.4 million tonnes was broadly
in line with 2020.
South African thermal
Production of 20.0 million tonnes was 4.0
million tonnes (17%) under 2020, reflecting
lower domestic power demand and export
rail capacity constraints.
Cerrejón
Attributable production of 7.8 million tonnes
was 3.7 million tonnes (90%) higher than 2020,
reflecting the base period being disrupted by
both a Covid-related temporary suspension
and strike action.
Oil assets
Exploration and production
Entitlement interest production of 5.3 million
boe was 1.3 million boe (34%) higher than
2020 mainly due to commencement of the
gas phase of the Alen project in Equatorial
Guinea. There was no production from the
Chad fields in 2021.
Our Industrial business
continued
Coal assets
1
2021 2020 Change %
Australian coking coal mt 9.1 7.6 20
Australian semi-soft coal mt 4.5 4.6 (2)
Australian thermal coal (export) mt 55.9 55.7 –
Australian thermal coal (domestic) mt 6.0 6.4 (6)
South African thermal coal (export) mt 14.7 14.8 (1)
South African thermal coal (domestic) mt 5.3 9.2 (42)
Cerrejón
9
mt 7.8 4.1 90
Prodeco mt – 3.8 (100)
Total Coal department mt 103.3 106.2 (3)
Oil assets
2021 2020 Change %
Glencore entitlement interest basis
Equatorial Guinea kboe 4,141 1,960 111
Chad kbbl – 1,112 (100)
Cameroon kbbl 1,133 872 30
Total Oil department kboe 5,274 3,944 34
Gross basis
Equatorial Guinea kboe 20,137 10,435 93
Chad kbbl – 1,521 (100)
Cameroon kbbl 2,866 2,528 13
Total Oil department kboe 23,003 14,484 59
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis, except for joint ventures, where the
Group’s attributable share of production is included.
2 Cobalt contained in concentrates and hydroxides.
3 The Group’s pro rata share of Collahuasi production (44%).
4 The Group’s pro rata share of Antamina production (33.75%).
5 Mount Isa copper operations (including Townsville) previously recorded under copper department moved to zinc
department.
6 Copper metal includes copper contained in copper concentrates and blister.
7 South American production excludes Volcan Compania Minera.
8 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
9 The Group’s pro rata share of Cerrejón production (33.3%).
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 66
Strategic Report
Carbon intensity of Industrial Activities
We show the carbon intensity of our
operations as Scope 1 and 2 emissions
compared to production from those
operations. We have shown metals mining,
coal mining, metals smelting and oil refining
separately. Emissions data is collected on a
site-by-site rather than activity-by-activity
basis. Integrated sites with mining and
smelting capability have therefore been
allocated to the most appropriate category.
Around 40-50% of Glencore's operational CO
2
footprint relates to the smelter portfolio. The
South African national lockdown in 2020
resulted in significantly lower production and
emissions from the Ferroalloys business.
These tonnes and emissions were largely
restored in 2021. Power supplies for the
smelter assets are almost exclusively from
national grids and therefore dependent on
the mix of fuel sources in the respective
jurisdiction. Scope 1 smelter emissions also
include reductants which are hard to abate.
Mining operations are mainly operated with
diesel-fuelled equipment. Lower absolute
Scope 1 emissions in mining operations
compared to pre-Covid (2019) levels mainly
reflects the closure of mining operations at
Prodeco and the sale of Mopani copper
mines, plus temporary demand-led
production cuts in the coal portfolio during
2020-21.
Our Industrial business
continued
Metals mining
1
2021 2020 2019
Reported own sourced metals production Copper kt 1,195.7 1,258.1 1,371.2
Zinc kt 1,117.8 1,170.4 1,077. 5
Cobalt kt 31.3 27.4 46.3
Nickel kt 102.3 110.2 120.6
Lead kt 222.3 259.4 280.0
Gold koz 809 916 886
Silver koz 31,519 32,766 32,018
Converted to copper equivalents
3
kt 2,465 2,592 2,803
Less: attributable Cu-equivalent
production from JVs
kt (530) (503) (474)
Add: Cu-equivalent production from Volcan kt 157 120 164
Relevant Cu-equivalent production kt 2,092 2,209 2,493
CO
2
emissions of managed assets (Scope 1)
mt 5.0 5.2 5.6
CO
2
emissions of managed assets (Scope 2)
mt 2.4 2.6 2.6
CO
2
emissions of managed assets (Scope 1 & 2)
mt 7.4 7.8 8.3
Carbon intensity of metals mining t CO
2
/t Cu-equiv 3.6 3.5 3.6
Metals smelting
2
2021 2020 2019
Reported smelter production Copper
anode
kt
454.0 490.1 510.7
Copper
cathode
kt 490.6 482.6 432.9
Lead kt 244.9 198.0 190.5
Zinc kt 800.6 787.2 805.7
Ferroalloys kt 1,468.3 1,028.8 1,438.4
Converted to copper equivalents
3
kt 1,573 1,518 1,552
Add: minority interests share of managed JVs kt 54 37 52
Relevant Cu-equivalent production kt 1,627 1,556 1,605
CO
2
emissions of managed assets (Scope 1) mt 4.8 3.7 5.0
CO
2
emissions of managed assets (Scope 2) mt 7.2 5.6 7.2
CO
2
emissions of managed assets (Scope 1 & 2)
mt 12.0 9.3 12.2
Carbon intensity of metals smelting t CO
2
/t Cu-equiv 7.4 6.0 7.6
1 Includes integrated mine/smelter operations: Mount Isa, Kazzinc, INO, Murrin Murrin,
Koniambo, Mopani (disposed 2021).
2 Includes integrated mine/smelter operations: Ferroalloys.
3 Converted to Cu-equivalents on the basis of 2019 (baseline year) average prices.
4 Astron Energy's refining operations have been suspended since early 2020. While the
refinery is being repaired and upgraded, Astron Energy has imported refined products
for distribution in South Africa and Botswana.
Coal mining
2021 2020 2019
Reported coal production mt 103.3 106.2 139.5
Add: minority interests share of managed JVs mt 17.9 18.7 23.0
Less: Cerrejon JV mt (7.8) (4.1) (8.6)
Less: other non-managed JVs mt (5.6) (7.5) (8.5)
Relevant coal production mt 107.7 113.2 145.5
Converted to copper equivalents
3
mt 1,238 1,301 1,671
CO
2
emissions of managed assets (Scope 1) mt 5.1 5.7 6.7
CO
2
emissions of managed assets (Scope 2) mt 1.1 1.2 1.2
CO
2
emissions of managed assets (Scope 1 & 2) mt 6.2 6.8 7.9
Carbon intensity of coal mining t CO
2
/t coal 0.058 0.060 0.054
Carbon intensity of coal mining t CO
2
/t Cu-equiv 5.0 5.3 4.7
Oil refining and distribution
2021 2020 2019
Astron Energy oil products sold million litres 6,386 5,149 3,877
CO
2
emissions of Astron Energy (Scope 1) mt – 0.1 0.6
CO
2
emissions of Astron Energy (Scope 2) mt – – 0.1
CO
2
emissions of Astron Energy (Scope 1 & 2) mt – 0.1 0.7
Carbon intensity of Astron Energy
4
t CO
2
/million
litres 3.7 27.6 177.2
CO
2
emissions of managed assets (Scope 1 & 2)
2021 2020 2019
Metals mt 7.4 7.8 8.3
Coal mt 6.2 6.8 7.9
Smelters mt 12.0 9.3 12.2
Astron Energy mt 0.0 0.1 0.7
Add: Chad E&P (held for sale) and other assets mt – 0.1 0.4
Total reported CO
2
emissions (Scope 1 & 2) mt 25.7 24.2 29.4
Change vs 2019 baseline -13% -18%
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 67
Strategic Report
Risk management is one of the core
responsibilities of the Group’s
leadership and it is central to our
decision-making processes. The
Group leadership's fundamental
duties as to risk management are:
•
making a robust assessment of
emerging and principal risks
•
monitoring risk management and
internal controls
•
promoting a risk aware culture
Effective risk management is crucial in
helping the Group achieve its objectives
ofpreserving its overall financial strength
forthe benefit of all stakeholders and
safeguarding its ability to continue as a
goingconcern, while generating sustainable
long-term returns.
The Board assesses and approves our overall
risk appetite, monitors our risk exposure and
overall evaluation of internal controls. This
process is supported by the Audit, HSEC and
ECC Committees, whose roles include
evaluating and monitoring the risks inherent
in their respective areas via reporting from the
Group corporate functions:
•
Industrial and Marketing risk functions
(Group Risk Functions)
•
Compliance
•
Legal
•
Finance
•
Internal Audit
•
HSEC-HR / HSEC audit
•
Sustainable Development
•
Human Resources
•
IT
The Committees' work concerning these
various risks is set out in their reports on
pages 96 to 100.
The Board actively manages and monitors the
Group's risks, financial exposure and related
internal controls to mitigate these risks.
Monitoring and reporting are the
responsibility of the Group Risk Functions and
the Heads of corporate functions who provide
regular updates to the Board and its
Committees covering various risks and the
performance of the relevant controls in place.
These reports cover various topics, including
Group VaR, credit exposure, material risks
from the risk register, internal audit findings,
compliance monitoring, HSEC-HR matters
and HSEC assurance. The Board also receives
updates from the ESG committee and on the
Raising Concerns programme.
As well as the ongoing work of the Board and
its Committees on the various major areas of
risk, the Board undertakes a complete review
of the Group's principal and emerging risks in
its main Q4 meeting, which is then updated
and considered in subsequent meetings for
the purposes of this report and the
interim report.
Risk management framework
Our Group functions support senior
management and those with
responsibilities for risk within the
business, in the development and
maintenance of an appropriate
institutional risk culture of managing and
mitigating risk across the Group,
as appropriate.
Industrial risk management
Responsibilities for business risk
management are decentralised across the
departments and assets and supported by
the Industrial Assets' Risk Management
teams. We believe that all employees should
be accountable for the risks related to their
roles. As a result, we encourage our
employees to escalate risks (not limited to
hazards), whether potential or realised, to their
immediate supervisors. This enables risks to
be tackled and mitigated at an early stage by
the team with the relevant level of expertise.
Led by the Head of Industrial Assets and the
Industrial Leads across each commodity
department, management teams at each
industrial operation are responsible for
Risk management
Risk management framework
•
Risk organisation
•
External disclosure
•
Risk monitoring and reporting
•
Management team
Oversight
Tone from
the top
Infrastructure
Risk process
People
Identify Measure Mitigate Control Report
TechnologyProcess
Industrial risk process Marketing risk process
HSEC risk and compliance processes
•
Risk culture
•
Risk strategy and appetite
•
Risk governance
•
Risk identification
•
Risk assessment
•
Risk management
•
Business departments
and corporate functions
•
Board of Directors
Industrial Marketing
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 68
Strategic Report
implementing processes that identify, assess
and manage risk.
The industrial risk process is driven by
ongoing risk assessment informing risk
registers maintained at asset, department
and Group levels based on risk rating and
controls evaluation, with risks owned,
escalated and approved according to
materiality and following the guidance
contained in the Glencore enterprise
risk matrix.
HSEC-HR & sustainability
riskmanagement
These risk management processes are managed
at asset level, with the support and guidance
from the central Sustainability and HSEC and
Human Rights (HSEC-HR) teams, and subject to
the leadership and oversight of the HSEC
Committee. The Head of Industrial Assets drives
the risk management framework for all industrial
assets, covering HSEC-HR, and his team
monitors its implementation across the Group.
Our risk management framework allows us to
identify, assess and mitigate HSEC-HR related
risks. The framework identifies material matters
and supports our ongoing assessment of what
matters most to our business and to our
stakeholders. The framework is supported by our
HSEC assurance process. On a quarterly basis we
monitor and review the progress to close out the
corrective actions and address any outstanding
issues with the local management teams. The
Group’s internal HSEC assurance programme
focuses on catastrophic risks, assessing and
monitoring compliance with leading practices.
Further information is provided in the report
from the HSEC Committee on page 97 and will
be published in the Group’s Sustainability Report
for 2021.
Marketing risk (MR) management
Glencore’s marketing activities are exposed to
a variety of risks, such as commodity price,
basis, volatility, foreign exchange, interest rate,
credit and performance, liquidity and
regulatory. Glencore devotes significant
resources to developing and implementing
policies and procedures to identify, monitor
and manage these risks.
Glencore’s MR is managed at an individual,
business and central level. Initial responsibility
for risk management is provided by the
businesses in accordance with and
complementing their commercial decision-
making. A support, challenge and verification
role is provided by the central MR function
headed by the Chief Risk Officer (CRO) via its
daily risk reporting and analysis which is split
by market and credit risk.
The MR function monitors and analyses the
large transactional flows across many
locations using its timely and comprehensive
recording and reporting of resultant
exposures, which provides the encompassing
positional analysis, and continued assessment
of universal counterparty credit exposure.
The MR team provides a wide array of daily
and weekly reporting. For example, daily risk
reports showing Group Value at Risk (VaR),
back testing results and various stress tests
and analysis are distributed to the CEO, CFO
and CRO. Additionally, business risk
summaries showing positional exposure and
other relevant metrics, together with
potential margin call requirements, are also
Value at risk
One of the tools used by Glencore to
monitor and limit its primary market risk
exposure, namely commodity price risk
related to its physical marketing activities,
is the use of a value at risk (VaR)
computation. VaR is a risk measurement
technique, which estimates the potential
loss that could occur on risk positions as a
result of movements in risk factors over a
specified time horizon, given a specific
level of confidence. The VaR methodology
is a statistically defined, probability based
approach that takes into account market
volatilities, as well as risk diversification by
recognising offsetting positions and
correlations between commodities and
markets. In this way, risks can be measured
consistently across all markets and
commodities and risk measures can be
aggregated to derive a single risk value.
Glencore’s Board has set a consolidated
VaR limit (one day 95% confidence level) of
$150 million (2020: $100 million)
representing less than 0.4% of total equity,
which the Board reviews annually. Given
2021’s elevated implied market volatilities,
together with statistically higher
commodity correlations and the nature /
extent (e.g. increased size and tenor of the
LNG business) of transaction volumes, the
Board approved an increase in the VaR
limit in H2 2021, initially to $130 million on a
temporary basis and then to $150 million
going forward, with effect from 1 January
2022.
Glencore uses a one-day VaR approach
based on a Monte Carlo simulation with a
weighted data history computed at a 95%
confidence level. Average market risk VaR
(1 day 95%) during 2021 was $54 million,
with an observable high of $126 million and
low of $27 million, while average equivalent
VaR during 2020 was $39 million. There
were no limit breaches during the period.
The Group remains aware of the extent of
coverage of risk exposures and their
limitations. In addition, VaR does not
purport to represent actual gains or losses
in fair value on earnings to be incurred by
the Group, nor are these VaR results
considered indicative of future market
movements or representative of any actual
impact on its future results. VaR remains
viewed in the context of its limitations;
notably, the use of historical data as a proxy
for estimating future events, market
illiquidity risks and risks associated with
longer time horizons as well as tail risks.
Recognising these limitations, the Group
complements and refines this risk analysis
through the use of stress and scenario
analysis. The Group regularly back-tests its
VaR to establish adequacy of accuracy and
to facilitate analysis of significant
differences, if any.
The Board has approved the Audit
Committee’s recommendation of a one
day, 95% VaR limit of $150 million for 2022.
Risk management continued
Metals and minerals
Energy
Dec 21
Nov 21
Oct 21
Sept 21
Aug 21
Jul 21
Jun 21
May 21
Apr 21
Mar 21
Feb 21
Jan 21
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
$m
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 69
Strategic Report
circulated daily. The MR function strives to
continuously enhance its stress and scenario
testing as well as improve measures to
capture additional risk exposure within the
specific areas of the business.
The Group makes extensive use of credit
enhancement tools, seeking letters of credit,
insurance cover, discounting and other means
of reducing credit risk from counterparts. In
addition, mark-to-market exposures in
relation to hedging contracts are regularly
and substantially collateralised (primarily with
cash) pursuant to margining agreements in
place with such hedge counterparts.
The Group-wide credit risk policy governs
higher levels of credit risk exposure, with an
established threshold for referral of credit
decisions by business heads to the CRO, CFO
and the CEO (relating to unsecured amounts
in excess of $75 million with BBB- (or
equivalent) or lower rated counterparts). At
lower levels of materiality, decisions may be
taken by the business heads where key
strategic transactions or established
relationships, together with credit analysis,
suggest that some level of open account
exposure may be warranted.
Managing risk for joint ventures (JVs)
The Board, through the ECC and HSEC
Committees, reviews and determines the
appropriate level of risk management
oversight for the Group’s material JVs. We
ensure that our material risk management
programmes are implemented at the JVs that
we operate. In other JVs, we seek to influence
our JV partners to adopt our commitment to
responsible business practices and
implement appropriate programmes in
respect of their main business risks.
Legal and compliance
For legal and compliance risk, see Ethics and
Compliance section on page 43, and the laws
and enforcement risk on page 75.
Internal audit
Glencore’s Internal Audit function reports
directly to the Audit Committee. Its role is to
evaluate and improve the effectiveness of
business risk management, internal control,
and business governance processes.
A risk-based audit approach is applied in
order to focus on high-risk areas during the
audit process. It involves discussions with
management on key risk areas identified in
the Group’s budgeting process, emerging
risks, operational changes, new investments
and capital projects. On an annual basis,
Internal Audit also performs reviews at the
direction of senior management and the
Audit Committee. Internal Audit reviews these
areas of potential risk, and suggests controls
to mitigate exposures identified.
The Audit Committee considers and approves
the risk-based Internal Audit plan, areas of
audit focus and resources and is regularly
updated on audits performed and relevant
findings, as well as the progress on
implementing the actions arising. In
particular, the Committee considers Internal
Audit’s main conclusions, its KPIs and the
effectiveness and timeliness of
management’s responses to its findings. The
Audit Committee has concluded that the
Internal Audit function remains effective.
Principal and emerging risks
Our approach is framed by the ongoing
understanding of the risks that we are
exposed to, emerging trends that could
seriously impact our business model, our risk
appetite in respect of these risks, how these
risks change over time and ensuring risk
monitoring takes place across multiple
organisational levels.
In accordance with UK Financial Reporting
Council guidance, we define a principal risk as
a risk or combination of risks that could
seriously affect the performance, future
prospects or reputation of Glencore. These
include those risks which would threaten the
business model, future performance,
solvency, or liquidity of the Group.
The Group understands an emerging risk as a
risk that has not yet fully crystallised but is at
an early stage of becoming known and/or
coming into being and expected to grow in
significance in the longer term.
Emerging risks typically have their origin
outside Glencore and there is often
insufficient information for these risks to be
fully understood and prevention by the Group
may not be possible.
The Board mandates its ECC, HSEC and Audit
Committees to identify, assess and monitor
the principal and emerging risks relevant to
their respective remits. These Committees
usually meet five times a year and are always
followed by a meeting of the Board to review
and discuss their work.
The assessment of our principal risks,
according to exposure and impact, is detailed
on the following pages.
The commentary on the risks in this section
should be read in conjunction with the
explanatory text under Understanding our
risks information which is set out on page 72.
2021 developments and
overview of principal risks
and uncertainties
Principal risks
1. Supply, demand and prices
of commodities
2. Currency exchange rates
3. Geopolitical, permits and licences
to operate
4. Laws and enforcement
5. Liquidity
6. Counterparty credit and performance
7. Operating
8. Cyber
9. Health, safety and environment
10. Climate change
11. Community relations and
human rights
1
5
6
102 3
4 9
8
7
11
Moderate
impact
Major
impact
Severe
impact
Increase Stable Decrease
Risk probability change in 2021 v 2020
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 70
Strategic Report
Evolution in principal and emergingrisks
Covid-19
Globally, Covid-19 has continued to disrupt
and affect our business. The main issues this
year have been:
•
the implementation of several new health
and safety measures at our industrial sites
and offices around the globe
•
further mandatory shutdowns imposed
by governments and shifts to
remote working
•
the various restrictions in travel,
domestically and internationally, and
•
strained supply chains.
Notwithstanding these challenges and their
related impact on our risks, Covid-19’s impact
on our industry and the Company has been
uneven. Global trading flows continue to
operate and no critical infrastructure assets
have been suspended. The benefits of global
policy responses to tackle the impacts of the
pandemic have helped reduce the negative
consequences on the global economy.
This year has also seen significant increases in
energy prices.
Russia/Ukraine conflict
In February 2022, the Russian government
commenced a war against the people of
Ukraine, resulting in a humanitarian crisis and
significant disruption to financial and
commodity markets. The United States of
America, European Union, Switzerland and
United Kingdom imposed a series of
sanctions against the Russian government,
various companies, and certain individuals.
Glencore complies with all sanctions
applicable to our business activities.
Given the importance of Russian/Ukrainian
supply to a number of key commodities
including oil, natural gas, coal, grain,
aluminium and nickel, volatilities in all of these
have spiked. Applicable Sanctions are also
significantly impacting traditional commodity
trade flows.
Glencore has no operational footprint in
Russia and our trading exposure is not
significant. We are reviewing all our business
activities in the country including our equity
stakes in En+ and Rosneft (see note 35).
Over time, global commodity trade flows will
need to adapt to some or all of Russian/
Ukrainian supply being unavailable, whether
due to infrastructure damage, sanctions or
ethical concerns.
2021 update
Consistent with the prior year, there are 11
principal risks of the Group, of which the
following six are the most significant and may
potentially give rise to the most material and
adverse effects on the Group:
•
supply, demand, and prices of commodities
•
geopolitical, permits and licences
to operate
•
laws and enforcement
•
health, safety, environment, including
catastrophic hazards
•
liquidity, and
•
climate change risks.
The pages which follow provide a detailed
analysis of each of the principal risks and
uncertainties with comments on changes of
impact, mitigation, controls, actions, and
other relevant comments.
Longer-term viability
In accordance with the requirements of the
UK Corporate Governance Code, the Board
has assessed the prospects of the Group’s
viability over the four-year period from
1January 2022. This period is consistent with
the Group’s established annual business
planning and forecasting processes and cycle,
which is subject to review and approval each
year by the Board.
The Board also assessed the medium- and
long-term impact of climate change on the
outlook for our commodity businesses, under
a range of possible scenarios, as set out on
pages 24-25. Such impacts are uncertain,
being particularly dependent on long-term
changes in the energy mix related to power
generation and transportation, as well as
consumption efficiencies, behavioural change
and co-ordinated implementation of
government policy and regulation
frameworks, which will materially fall outside
the four-year period selected for assessment
of longer term viability. This analysis, however,
indicates stable or improving opportunities
across the portfolio in the Current Pathway
scenario. In the Rapid Transformation and
Radical Transition scenarios, we project
significant coal demand decline over the
longer term, more than compensated
however (from a financial perspective) by
materially stronger demand for battery and
new energy infrastructure required metals.
The four-year plan considers Glencore’s
Adjusted EBITDA, capital expenditure, funds
from operations (FFO) and Net debt, and the
key financial ratios of Net debt to adjusted
EBITDA and FFO to Net debt over the forecast
years and incorporates stress tests to simulate
the potential impacts of exposure to the
Group’s principal risks and uncertainties.
For the 2022-25 plan these scenarios included:
•
a prolonged downturn in the price and
demand of commodities most impacting
Glencore’s operations. Prices and FX over
Q2 2020 (lowest average quarter in recent
history, accounting for Covid-19) are assumed
to prevail for the outlook period to 2025;
•
foreign exchange movements to which the
Group is exposed as a result of its global
operations;
•
actions at the Group’s disposal to mitigate
the adverse impacts of the above,
principally the ability to defer or cancel
capital expenditure, to manage the
working capital cycle and to reduce or
stop distributions to shareholders; and
•
consideration of the potential impact of
adverse movements in macroeconomic
assumptions and their effect on the
above key financial KPIs and ratios which
could increase the Group’s access to or cost
of funding.
The scenarios were assessed taking into
account current risk appetite and any
mitigating actions Glencore could take, as
required, in response to the potential
realisation of any of the stressed scenarios.
Based on the results of the related analysis,
the Directors have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall
due over the four-year period of this
assessment. They also believe that the
review period of four years is appropriate
having regard to the Group’s business model,
strategy, principal risks and uncertainties,
and viability.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 71
Strategic Report
Understanding our risks information
There are many risks and uncertainties
which have the potential to significantly
impact our business. The order in which
these risks and uncertainties appear does
not necessarily reflect the likelihood of their
occurrence or the relative magnitude of
their potential material adverse effect on
our business.
We have sought to provide examples of
specific risks. However, in every case these
do not attempt to be an exhaustive list.
These principal risks and uncertainties
should be considered in connection with
any forward looking statements in this
document as explained on page 259.
Identifying, quantifying and managing risk
is complex and challenging. Although it is
our policy to identify and, where appropriate
and practical, actively manage risk, our
policies and procedures may not adequately
identify, monitor and quantify all risks.
This section describes our attempts to
manage, balance or offset risk. Risk is,
however, by its very nature uncertain and
inevitably events may lead to our policies
and procedures not having a material
mitigating effect on the negative impacts of
the occurrence of a particular event. Our
scenario planning and stress testing may
accordingly prove to be optimistic,
particularly in situations where material
negative events occur in close proximity.
Since many risks are connected, our analysis
should be read against all risks to which it
may be relevant.
In this section, we have sought to update
our explanations, reflecting our current
outlook. Mostly this entails emphasising
certain risks more strongly than other risks
rather than the elimination of, or creation of,
risks. Certain investors may also be familiar
with the risk factors that are published in
the Group debt or equity prospectuses or
listing documents. These provide in part
some differing descriptions of our
principal risks.
Our latest documentation for debt investors
and their related risk disclosures is available
at: glencore.com/investors/debt-investors
In addition, more information on our risks
is available in the relevant sections of
our website.
To provide for concise text:
•
where we hold minority interests in
certain businesses, although these
entities are not generally subsidiaries and
would not usually be subject to the
Group’s operational control, these
interests should be assumed to be
subject to these risks. ‘Business’ refers to
these and any business of the Group
•
where we refer to natural hazards, events
of nature or similar phraseology we are
referring to matters such as earthquake,
flood, severe weather and other
natural phenomena
•
where we refer to ‘mitigation’ we do not
intend to suggest that we eliminate the
risk, but rather it refers to the Group’s
attempt to reduce or manage the risk.
Our mitigation of risks will usually include
the taking out of insurance where it is
customary and economic to do so
•
this section should be read as a whole –
often commentary in one section is
relevant to other risks
•
‘commodity/ies’ will usually refer to those
commodities which the Group produces
or sells
•
‘law’ includes regulation of any type
•
‘risk’ includes uncertainty and hazard and
together with ‘material adverse effect on
the business’ should be understood as a
negative change which can seriously
affect the performance, future prospects
or reputation of the Group. These include
those risks which would threaten the
business model, future performance,
reputation, solvency or liquidity of
the Group
•
a reference to a note is a note to the 2021
financial statements
•
a reference to the sustainability report is
our 2021 sustainability report to be
published in April 2022.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 72
Strategic Report
of and demand for commodities, speculative
activities by market participants, global
political and economic conditions, related
industry cycles and production costs in major
producing countries.
The dependence of the Group (especially our
industrial business) on commodity prices,
supply, and demand of commodities, make
this the Group’s foremost risk.
We are dependent on the expected volumes
of supply or demand for commodities which
can vary for many reasons, such as competitor
supply, changes in resource availability,
government policies and regulation, costs of
production, global and regional economic
conditions and demand in end markets for
products in which the commodities are used.
Supply and demand volumes can also be
impacted by technological developments,
e.g. commodity substitutions, fluctuations in
global production capacity, geopolitical
events, global and regional weather
conditions, natural disasters, and diseases, all
of which impact global markets and demand
for commodities.
Future demand for certain commodities
might decline (e.g. fossil fuels), whereas others
might increase (e.g. copper, cobalt, and nickel
for their use in electric vehicles and batteries
more broadly), taking into consideration the
transition to a low carbon economy.
Furthermore, changes in expected supply
and demand conditions impact the expected
future prices (and thus the price curve) of each
commodity and significant falls in the prices
of certain commodities (e.g. copper, coal, zinc
and cobalt) can have a severe drag on our
financial performance, impede shareholder
returns and could lead to concerns by external
stakeholders as to the strength of the Group’s
balance sheet.
This risk is more prevalent in fossil fuels, given
the drive towards net zero emissions over the
long term. Net zero emissions requires
demand for unabated coal and other
hydrocarbon fuel sources to materially reduce
over time, driven on by political pressures,
societal expectations, and generally increased
access to, and cost competitiveness of, lower
carbon alternatives (i.e. renewables) and the
likelihood of increased and broader
implementation of carbon pricing/taxes
across the geographies where the
Group operates.
The new or improved energy production
possibilities and/or technologies are likely to
reduce the demand for some commodities
such as coal, however, at the same time, are
likely to materially increase demand for
other commodities.
Any adverse economic developments,
particularly those impacting China and fast
growing developing countries, could lead to
reductions in demand for, and consequently
price reductions of, commodities, with
particular risk to commodities used in
steelmaking such as iron ore, metallurgical
coal and zinc.
Developments
Energy markets tightened significantly in
H2 2021 leading to energy price increases
across the board. Industrial metals prices
remained at strong levels throughout the
year.
In this environment, our long-term plans for
our industrial operations remained
appropriate with no market-driven
corrections required. Material portfolio
changes were the acquisition of the two-
thirds of the Cerrejon thermal coal business
we did not already own, and the restart of the
Mutanda copper/cobalt operation.
Marketing operations benefited from
underlying supply/demand tightness and
volatility spikes across a number of
commodities, also leading to the Board
approving a temporary (and ultimately
permanent) increase request to the Group’s
Value at Risk limit.
The Russia/Ukraine conflict in 2022 has led to
elevated volatility across many asset classes,
including commodities. Depending on the
duration of the conflict and the sanctions
regime, global commodity flows may change
materially from their pre-2022 situation.
Mitigating factors
We continue to maintain focus on cost
discipline and achieving greater
operational efficiency, and we actively
manage marketing risk, including daily
analysis of Group value at risk (VaR).
We maintain both a diverse portfolio of
commodities, geographies, currencies, assets
and liabilities and a global portfolio of
customers and contracts.
We seek to prepare for anticipated shifts in
commodity demand, for example by putting
a special focus on the parts of the business
that will potentially grow with increases in
usage of electric vehicles and battery
production and recycling, and by closely
monitoring fossil fuel (particularly thermal
coal) demands. We can also reduce the
production of any commodity within our
portfolio in response to changing
market conditions.
Risk management continued
1. Supply, demand, and
prices of commodities
2021 vs 2020 Risk appetite Link to strategy
High
Medium
Low
Being a resources company, we are subject
to the inherent risk of sustained low prices
of our main commodities, particularly
affecting our industrial business.
Description and potential impact
The revenue and earnings of substantial parts
of our industrial asset activities and, to a lesser
extent, our marketing activities, are
dependent upon prevailing commodity
prices. Commodity prices are influenced by
several external factors, including the supply
Strategic priorities
Responsible production
and supply
Responsible
portfolio management
Responsible
product use
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 73
Strategic Report
2. Currency exchange (FX)rates
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
This affects us as a global company usually
selling in US dollars but having costs in a
large variety of other currencies.
Description and potential impact
FX changes happen all the time but are often
difficult to predict. Producer country
currencies tend to increase in correlation with
relevant higher commodity prices. Similarly,
decreases in commodity prices are generally
associated with increases in the US dollar
relative to local producer currencies.
The vast majority of our sales transactions are
denominated in US dollars, while operating
costs are spread across many different
countries, the currencies of which fluctuate
against the US dollar. A depreciation in the
value of the US dollar against one or more of
these currencies will result in an increase in
the cost base of the relevant operations in US
dollar terms.
The main currency exchange rate exposure is
through our industrial assets, as a large
proportion of the costs incurred by these
operations is denominated in the currency of
the country in which each asset is located.
Developments
Higher commodity prices supported a level of
producer currency strengthening versus the
US dollar in 2021.
Near term confidence in stability of global
demand (and thus indirectly FX rates for
relevant producer countries) hinges on many
factors, particularly those that relate to the
prospects of global economic recovery and
growth, including U.S./China trade
relationship, political/economic tension across
the CIS and the ongoing disruption caused by
the coronavirus pandemic.
Mitigating factors
Ordinarily, where material, FX exposure to
non-operating FX risks is hedged. The inverse
FX correlation (against USD commodity
prices) usually provides a partial natural FX
hedge for the industrial business. In respect of
commodity purchase and sale transactions
denominated in currencies other than US
dollars, the Group’s policy is usually to hedge
the specific future commitment through a
forward exchange contract. From time to
time, the Group may hedge a portion of its
currency exposures and requirements in an
attempt to limit any adverse effect of
exchange rate fluctuations.
We continuously monitor and report on
financial impacts resulting from foreign
currency movements.
3. Geopolitical, permits
and licences to operate
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
We operate in many countries across the
globe. Regulatory regimes applicable to
resource companies can often be subject to
adverse and short-term changes.
Description and potential impact
We operate and own assets in a large number
of geographic regions and countries, some of
which are categorised as developing, complex
or having unstable political or social
environments. As a result, we are exposed to a
wide range of political, economic, regulatory,
social and tax environments. The Group
transacts business in locations where it is
exposed to a risk of overt or effective
expropriation or nationalisation. Our
operations may also be affected by political
and economic instability, including terrorism,
civil disorder, violent crime, war, and
social unrest.
Increased scrutiny by governments and tax
authorities in pursuit of perceived aggressive
tax structuring by multinational companies
has elevated potential tax exposures for the
Group. Additionally, governments have
sought additional sources of revenue by
increasing rates of taxation, royalties or
resource rent taxes or may increase
sustainability obligations. The tax codes of
some countries can be uncertain in their
application and the access to impartial
administrative and judicial redress may be
limited. In certain cases, a government
authority may make material demands
without robust justification with a view to
negotiating a settlement.
The terms attaching to any permit or licence
to operate may be onerous and obtaining
these and other approvals, which may be
revoked, can be particularly difficult.
Furthermore, in certain countries, title to land
and rights and permits in respect of resources
are not always clear or may be challenged.
Adverse actions by governments and others
can result in operational/project delays or loss
of permits or licences to operate. Policies or
laws in the countries in which we do business
may change in a manner that may negatively
affect the Group.
The suspension or loss of our permits or
licences to operate could have a material
adverse effect on the Group and could also
preclude Glencore from participating in
bidsand tenders for future business and
projects, therefore affecting the Group’s
long-term viability.
Our licences to operate through mining rights
are dependent on a number of factors,
including compliance with regulations and
constructive relationships with a wide and
diverse range of stakeholders.
The continued operation of our existing assets
and future plans are in part dependent upon
broad support, our ‘social licence to operate’,
and a healthy relationship with the respective
local communities – see further Community
Relations and Operating risks concerning
workforce disputes.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 74
Strategic Report
Developments
The Group has increased its engagement,
including due to Covid-19 with employees,
relevant governmental authorities, regulators,
and other stakeholders.
Resource nationalism continues to be a
challenging issue in many countries.
Emerging uncertainty regarding global
supply of commodities due to the Russia/
Ukraine conflict may disrupt certain global
trade flows and place significant upwards
pressure on commodity prices and input
costs as seen through early March 2022.
Challenges for market participants may
include availability of funding to ensure
access to raw materials, ability to finance
margin payments and heightened risk of
contractual non-performance.
Ongoing scrutiny by governments and tax
authorities has maintained potential tax
exposures for the Group at elevated levels,
with some tax authorities taking an
aggressive approach to engaging with the
Group, which has in some cases led
to litigation.
In 2021, we published our annual Payments to
Governments report. This detailed total
government contributions in 2020 of $5.8
billion. It also set out details of payments on a
project by project basis.
Also see Community relations and Human
Rights risk below.
Mitigating factors
We endeavour to operate our businesses
according to high legal, ethical, social, and
human rights standards, and to ensure that
our presence in host countries leaves a
positive lasting legacy (see sustainability risks
later in this section). This commitment is
essential to enable us to effectively manage
these risks and to maintain our permits and
licences to operate.
We operate under a Group Tax Policy, annually
reviewed by the Board, which sets out the
Group’s commitment to comply with all
applicable tax laws, rules and regulations,
without exception, and to be characterised as
a ‘good corporate fiscal citizen’.
The Group’s industrial assets are diversified
across various countries. The Group has an
active engagement strategy with the
governments, regulators, and other
stakeholders in the countries in which it
operates or intends to operate. Through
strong relationships with stakeholders we
endeavour to secure and maintain our
licences to operate.
4. Laws and Enforcement
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
Some of our existing industrial and
marketing activities are located in countries
that are categorised as developing or as
having challenging political or social
climates or where the legal system is
uncertain, and/or where corruption is
generally understood to exist, and therefore
there will always be residual risk in relation
to our compliance with laws and external
requirements.
Description and potential impact
We are exposed to extensive laws, including
those relating to bribery and corruption,
sanctions, taxation, anti-trust, financial
markets regulation and rules, environmental
protection, use of hazardous substances,
product safety and dangerous goods
regulations, development of natural
resources, licences over resources,
exploration, production and post-closure
reclamation, employment of labour and
occupational health and safety standards. The
legal system and dispute resolution
mechanisms in some countries in which we
operate may be uncertain, meaning that we
may be unable to enforce our understanding
of our rights and obligations under these laws.
The costs associated with compliance with
these laws and regulations, including the
costs of regulatory permits, are substantial
and increasing. Any changes to these laws or
their more stringent enforcement or
restrictive interpretation could cause
additional significant expenditure to be
incurred and/or cause suspensions of
operations and delays in the development of
industrial assets. Failure to obtain or renew a
necessary permit or the occurrence of other
disputes could mean that we would be
unable to proceed with the development or
continued operation of an industrial asset
and/or impede our ability to develop new
industrial assets.
As a diversified sourcing, marketing and
distribution company conducting complex
transactions globally, we are particularly
exposed to the risks of fraud, corruption,
sanctions, and other unlawful activities both
internally and externally. Our marketing
activities are large in scale, which may make
fraudulent, corrupt, or other unlawful
transactions difficult to detect.
In addition, some of our industrial activities
are located in countries where corruption is
more prevalent; and some of our
counterparties have in the past, and may in
the future, become the targets of sanctions.
Corruption and sanctions risks remain highly
relevant for businesses operating in
international markets, as shown by recent
enforcement actions both inside and outside
the resources sector.
Governmental and other authorities have
commenced, and may in the future
commence, investigations against the Group
(including those listed in note 23 to the
financial statements) in relation to alleged
non-compliance with these laws, and/or may
bring proceedings against the Group in
relation to alleged non-compliance. The cost
of cooperating with investigations and/or
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 75
Strategic Report
defending proceedings can be substantial.
Investigations or proceedings could lead to
reputational damage, the imposition of
material fines, penalties, redress or other
restitution requirements, or other civil or
criminal sanctions on the Group (and/or on
individual employees of the Group), the
curtailment or cessation of operations, orders
to pay compensation, orders to remedy the
effects of violations and/or orders to take
preventative steps against possible future
violations. The impact of any monetary fines,
penalties, redress or other restitution
requirements, and the reputational damage
that could be associated with them as a result
of proceedings that are decided adversely to
the Group, could be material.
In addition, the Group may be the subject of
legal claims brought by private parties in
connection with alleged non-compliance
with these laws, including class or collective
action suits in connection with governmental
and other investigations and proceedings,
and lawsuits based upon damage resulting
from our operations. Any successful claims
brought against the Group could result in
material damages being awarded against the
Group, the cessation of operations,
compensation and remedial and/or
preventative orders.
Developments
The Group has been cooperating extensively
with the relevant authorities in order to
resolve as expeditiously as possible the
government investigations disclosed in note
23 to the financial statements. The
Investigations Committee (‘Committee’) of
the Board manages the Group’s responses to
these investigations. While the Committee
cannot forecast with certainty the cost,
extent, timing or terms of the outcomes of the
investigations, the Committee presently
expects to resolve the US, UK and Brazilian
investigations in 2022. Accordingly, and based
on the Company’s current information and
understanding, the Group has raised a
provision as at 31 December 2021 in the
amount of $1.5 billion representing the
Committee’s current best estimate of the
costs to resolve these investigations (included
in other expenses, see note 5).
Glencore continues to cooperate with a
previously disclosed investigation by the
Office of the Attorney General of Switzerland
(OAG) into Glencore International AG for
failure to have the organisational measures in
place to prevent alleged corruption. The
timing and outcome of this investigation
remain uncertain.
Glencore has also been notified by the Dutch
authorities of a criminal investigation into
Glencore International AG related to potential
corruption pertaining to the DRC and is in
contact with the Dutch authorities in respect
of this investigation. The scope of the
investigation is similar to that of the OAG
investigation. The Dutch authorities are
coordinating their investigation with the OAG
and we would expect any possible resolution
to avoid duplicative penalties for the same
conduct.
Mitigating factors
We seek to ensure compliance through our
commitment to complying with or exceeding
the laws and regulations applicable to our
operations and products and through
monitoring of legislative requirements,
engagement with government and
regulators, and compliance with the terms of
permits and licences.
We seek to mitigate the risk of breaching
applicable laws and external requirements
through our risk management framework.
We have implemented a Group Ethics and
Compliance programme that includes risk
assessments, a range of policies, standards,
procedures, guidelines, training and
awareness, monitoring and investigations.
See also the Ethics and Compliance section of
this report on page 43.
We have increased in recent years our focus
on, and resources dedicated to, the Group
Ethics and Compliance programme, including
through increasing the number of dedicated
compliance professionals, enhancing our
compliance policies and procedures and
controls, increasing our training and
awareness activities and strengthening the
Group’s Raising Concerns programme and
investigations function. We engage with
reputable external legal firms and consultants
as necessary to support these efforts.
However, there can be no assurance that such
policies, standards, procedures, and controls
will adequately protect the Group against
fraud, bribery and corruption, market abuse,
sanctions breaches or other unlawful
activities.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 76
Strategic Report
Developments
Note 28 details the fair value of our financial
assets and liabilities. Note 27 details our
financial and capital risk management
including liquidity risk.
The Group’s strong 2021 profitability and cash
flows led to the reduction of Net debt from
$15.8 billion at 31 December 2020 to $6.0
billion at 31 December 2021. Our net funding
at 31 December 2021 was $30.8 billion (31
December 2020: $35.4 billion).
The Group’s business model relies on ready
access to substantial borrowings at
reasonable cost, which has continued to be
forthcoming, noting the Group’s successful
issuance of some $4.3 billion of long-term
bonds in 2021 at attractive interest rates, and
the ongoing availability of supplier financing
arrangements in the form of extended letters
of credit provided by the Group’s various
banks.
During 2021 the Group issued $2.95 billion in
US markets and EUR 1.1 billion debt under its
EMTN programme. Certain tranches of the
refinancing were longer dated than the
instruments they replaced, up to 30 year
maturities. This provided the opportunity to
lock in attractive funding rates for the long
term while maintaining our overall maturity
profile of no more than approximately $3
billion in any one year.
In September, Moody’s affirmed its Baa1
rating for the Group and changed its outlook
to stable from negative. The outlook from S&P
(BBB+) is also stable.
Mitigating factors
It is the Group’s policy to operate a strong
BBB/Baa rated balance sheet and to ensure
that a minimum level of cash and/or
committed funding is available at any
given time.
Diversification of funding sources is sought
via bank borrowings, bonds, and trade
finance, further diversified by currency,
interest rate and maturity.
In light of the Group’s extensive funding
activities, maintaining investment grade
credit rating status is a financial priority.
In support of this, Glencore targets a
maximum 2x Net debt/Adjusted EBITDA ratio
through the cycle, and a c.$10 billion net debt
cap in the ordinary course of business. The net
debt cap may be extended to $16 billion for
M&A opportunities with swift deleveraging
back to the $10 billion level being a key part of
our assessment of any such opportunity.
Deleveraging below the $10 billion cap is
periodically returned to shareholders. Our
financial policies seek to ensure access to
funds, even in periods of elevated market
volatility.
It should be noted that the credit ratings
agencies make certain adjustments,
including a discount to the value of our
Readily Marketable Inventories, so that their
calculated net debt is higher.
Risk management continued
5. Liquidity
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
Liquidity risk is the risk that we are unable to
meet our payment obligations when due, or
are unable, on an ongoing basis, to borrow
funds in the market at an acceptable price
to fund our commitments.
Description and potential impact
While we adjust our minimum internal
liquidity threshold from time to time in
response to changes in market conditions,
this minimum internal liquidity target may be
breached due to circumstances we are unable
to control, such as general market disruptions,
sharp movements in commodity prices or an
operational problem that affects our suppliers,
customers or ourselves.
Our failure to access funds (liquidity) would
severely limit our ability to engage in desired
activities and may mean that we will not have
sufficient funds available for our marketing
and industrial activities, both of which employ
substantial amounts of capital. If we do not
have funds available for these activities, then
they will decrease.
Funding costs may rise owing to ratings
agency downgrades and the possibility of
more restricted access to funding.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 77
Strategic Report
Open account risk is taken but this is
governed by the Group-wide Corporate
CreditRisk Management procedure for
higherlevels of credit risk exposure, with an
established threshold for referral of credit
decisions by department heads to the CEO,
CFO and CRO,relating to unsecured amounts
in excessof $75 million with BBB- or lower rated
counterparts.
Developments
Some of our customers and suppliers are
experiencing financial difficulties particularly
arising from Covid-19 or the recent material
price volatility in some commodity markets.
However, the overall credit quality of our
counterparty portfolio significantly improved
in2021 as global economic growth improved,
Covid-19 restrictions eased and, in particular,
energy prices rebounded strongly. We have
regular contact with our key counterparties
and, in the vast majority of cases, deliveries and
payments have continued in the normal course
of business.
The Group’s accounts receivable balance,
including assessment of doubtful accounts,
isset out in note 14.
Mitigating factors
We seek to diversify our counterparties and
toensure adherence to open account limits.
The Group makes extensive use of credit
enhancement tools, seeking letters of credit,
insurance cover, discounting, and other
means of reducing credit risk with
counterparts. Where desirable and possible,
credit exposures are to be covered through
credit mitigation products.
We monitor the credit quality of our physical
and hedge counterparties and seek to reduce
the risk of customer default or non-
performance by requiring credit support from
creditworthy financial institutions.
Specific credit risk rules apply to open
account risk with an established threshold for
referral of credit positions by departments to
central management.
Risk management continued
6. Counterparty credit and
performance
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
We are subject to non-performance risk by
our suppliers, customers, and hedging
counterparties, in particular via our
marketing activities.
Description and potential impact
Financial assets consisting principally of
receivables and advances, derivative
instruments and long-term advances and
loans can expose us to concentrations of
creditrisk.
Non-performance by suppliers, customers
and hedging counterparties may occur and
cause losses in a range of situations, such as:
•
a significant increase in commodity prices
resulting in suppliers being unwilling to
honour their contractual commitments to
sell commodities at pre-agreed prices;
•
a significant reduction in commodity prices
resulting in customers being unwilling or
unable to honour their contractual
commitments to purchase commodities at
pre-agreed prices; and
•
suppliers subject to prepayment may find
themselves unable to honour their
contractual obligations due to financial
distress or other reasons
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 78
Strategic Report
Risk management continued
7. Operating
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
Our industrial activities are subject to a level
of significant residual risk throughout each
operation’s life cycle, from initiation through
development, operation and/or expansion
and ultimate closure
Description and potential impact
Notwithstanding our enterprise risk
management practices, some of these risks are
beyond our control. These include a level of
geological risk relating to factors such as
structure and grade as well as geotechnical
and hydrological risks, natural hazards,
processing problems, technical malfunctions,
unavailability of materials and equipment,
unreliability and/or constraints of
infrastructure, industrial accidents, labour
force challenges, disasters, protests, force
majeure factors, cost overruns, delays in
permitting or other regulatory matters,
vandalism and crime.
The maintenance of positive employee and
union relations and engagement, and the
ability to attract and retain skilled workers,
including senior management, are key to our
success. This attraction and retention of
highly qualified and skilled personnel can be
challenging, especially in locations
experiencing political or civil unrest, or in
which employees may be exposed to other
hazardous conditions.
Many employees, especially at the Group’s
industrial activities, are represented by labour
unions under various collective labour
agreements. Their employing company may
not be able to satisfactorily renegotiate its
collective labour agreements when they
expire and may face tougher negotiations or
higher wage demands than would be the
case for non-unionised labour. In addition,
existing labour agreements may not prevent
a strike or work stoppage.
The development and operating of assets may
lead to future upward revisions in estimated
costs, delays or other operational difficulties or
damage to properties or facilities. This may
cause production to be reduced or to cease
and may further result in personal injury or
death, third party damage or loss or require
greater infrastructure spending. Also, the
realisation of these risks could require
significant additional capital and
operating expenditures.
Some of the Group’s interests in industrial
assets do not constitute controlling stakes.
Although the Group has various agreements
in place which seek to protect its position
where it does not exercise control, the other
shareholders in these entities may have
interests or goals that are inconsistent with
ours and may take action contrary to the
Group’s interests or be unable or unwilling to
fulfil their obligations.
Severe operating or market difficulties may
result in impairments, details of which are
recorded in note 7.
Developments
Businesses continued to be affected by the
Covid-19 pandemic. The response to the
pandemic has varied by jurisdiction, with
authorities imposing different requirements,
often changing as the pandemic evolves.
Operations sought to develop protocols/
working practices to minimise virus
transmission risks in the workplace. Some
businesses continued to be affected as a
result of new outbreaks which led to
challenges such as the inability to mobilise
skilled resources when required.
Glencore’s Nickel operations in New
Caledonia continued to face particular
operating challenges; in 2021 there was a
significantly extended shutdown on a furnace
because of the pandemic leading to an
extended run time on the other furnace
resulting in difficulties being experienced
with this furnace. We continue to experience
challenges with this complex operation.
Following a detailed business review,
Glencore disposed of its majority stake in
Mopani in Zambia. The structure of the
transaction should result in some recovery of
the residual economic value in the asset
whilst reducing operating and country risks
that had proven to be challenging.
Cost control remains a significant area of
management focus, noting that in the context
of mineral resources, absolute costs tend to
increase over time as incremental resources are
likely further away from the processing plant
and/or deeper with sometimes decreasing
grades. A number of operations have adopted
structured programmes to analyse their costs
and identify marginal savings which are then
implemented. Maintenance and, where possible,
reduction of unit costs is regularly reviewed
by management.
Infrastructure availability remains a key risk.
Exposures continue to include the delivery of
reliable electrical power to our DRC
operations. This has improved over the last
several years but is not yet at a consistent level
of reliability, and management continues to
work with local entities to improve the service.
Our South African operations have been
significantly adversely affected by local rail
and power issues. Our Astron Energy refinery
continues to carry out repairs to the refinery
following the 2020 explosion which tragically
also resulted in the loss of two lives. Improved
governance and operating management
systems are being developed and
implemented to address the underlying
issues that led to the incident.
Despite the challenges created by the global
pandemic, we have maintained engagement
campaigns with employees to receive direct
feedback on the Group’s culture and practices.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 79
Strategic Report
Risk management continued
Mitigating factors
Development and operating risks and
hazards are managed through our
continuous project status evaluation and
reporting processes and ongoing
assessment, reporting and communication
of the risks that affect our operations along
with updates to the risk register.
We publish our production results quarterly
and our assessment of reserves and resources
based on available drilling and other data
sources annually. Conversion of resources to
reserves and, eventually, reserves to
production is an ongoing process that takes
into account technical and operational
factors, economics of the particular
commodities concerned and the impact on
the communities in which we operate.
Local cost control measures are complemented
by global procurement that leverages our scale
to seek to achieve favourable terms on
high-consumption materials such as fuel,
explosives, and tyres.
One of the key factors in our success is a good
and trustworthy relationship with our people.
This priority is reflected in the principles of our
sustainability programme and related guidance,
which require regular, open, fair, and respectful
communication, zero tolerance for human rights
violations, fair remuneration and, above all,
a safe working environment as outlined in
the Our people section on page 34 and our
website at: glencore.com/careers/our-culture
8. Cyber
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
A cyber security breach, incident or failure
of Glencore’s IT systems could disrupt our
businesses, put employees at risk, result in
the disclosure of confidential information,
damage our reputation, and create significant
financial and legal exposure for the Group.
Description and potential impact
Cyber risks for firms have increased significantly
in recent years owing in part to the proliferation
of new digital technologies (e.g. ransomware),
nation-state activity, increasing degree of
connectivity and a material increase in
monetisation of cybercrime.
Our activities depend on digital capabilities
for industrial production, efficient operations,
environmental management, health and safety,
communications, transaction processing and
risk management. We also depend on third
parties in long supply chains that are exposed
to the same cyber risks, but which are largely
outside our control.
The security of long interconnected
commodity supply chains is an area of
concern that we monitor closely to reduce
the impact on the Group.
The emergence of machine learning and
artificial intelligence increases the volume
and sophistication of fraud attempts. The rise
of ‘Deepfake’ technology using machine
learning makes it easier to manipulate audio
content that could be used in phishing or fraud
attacks by impersonating senior executives.
Although Glencore invests heavily to monitor,
maintain, and regularly upgrade its systems,
processes and networks, absolute security is
not possible.
Developments
Our cyber security monitoring platforms
frequently detect attempts to breach our
networks and systems. During 2021, none of
these events resulted in a significant breach
of our IT environment nor resulted in any
material business impact.
Covid-19 has increased the degree of remote
working and the potential attack surface area.
We continue to witness a heightened level of
sophistication and frequency of cyberattacks
against all firms.
We anticipate that ‘supply chain cyberattacks’
through which legitimate third party software
is manipulated in an attempt to spread malware
or gain access to systems will increase. We also
expect that ransomware will remain an area of
heightened threat focus.
Mitigating factors
We publish IT security standards and
proactively educate our employees in order
to raise awareness of cyber security threats.
Where possible, cyber exposure risks are
mitigated through layered cyber security,
proactive monitoring, and independent cyber
security penetration tests to confirm the
security of systems.
We seek to keep our system software patches
up to date and have global platforms to
proactively manage patch compliance. We have
adopted strict privileged access management
to ensure administrator rights on critical
systems are protected. We have multiple layers
of email security and harden our computers and
servers to protect against malware. Corporate
applications and communications are secured
with multiple layers of security including
two-factor authentication and virtual private
network (VPN) technology for remote access.
We use global IT security platforms to
proactively monitor and manage our cyber
risks. We routinely conduct third party
penetration tests to independently assess the
security of our IT systems. We have a dedicated
programme to enhance the monitoring and
security of our Operational Technology
(OT) platforms.
Our IT Security Council sets the global cyber
security strategy, conducts regular risk
assessments, and designs cyber security
solutions that seek to protect against
emerging malware, viruses, vulnerabilities,
and other cyber threats. Our Cyber Defence
Centre is responsible for day-to-day
monitoring of cyber vulnerabilities across
the Group and driving remediation of threats.
We have an incident response team that is
accountable for coordinating the response
in the event of a major cyber incident.
During 2021, we continued to implement
new capabilities to further enhance
protection against ransomware, enhance
perimeter security and enhance the security
of our OT platforms.
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 80
Strategic Report
9. Health, safety, and environment
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
Industrial operations are inherently
dangerous. Catastrophic events that take
place in the natural resource sector can have
disastrous impacts on workers,
communities, the environment, and
corporate reputation, as well as a substantial
financial cost.
Description and potential impact
The success of our business is dependent on a
safe and healthy workforce. Identifying and
managing risks to the safety and health of our
people is essential for their long-term
wellbeing. It also helps us to maintain
our productivity.
A number of our assets are in regions with
poor approaches towards personal safety,
little or no access to health facilities, and poor
working conditions, and organisational
cultures.
Our operations around the world can have
direct and indirect impacts on the
environment and host communities. Our
ability to manage and mitigate these may
impact maintenance of our operating licences
as well as affect future projects, acquisitions,
and our reputation.
Environmental, safety and health regulations
may result in increased costs or, in the event
of non-compliance or incidents causing injury
or death or other damage at or to our facilities
or surrounding areas, may result in significant
losses. Failure to perform well may have
long-term negative impacts for host
communities and erode trust in the integrity
of our organisation. Examples include, those
arising from (1) interruptions in production,
litigation and imposition of penalties and
sanctions, (2) having licences and permits
withdrawn or suspended while being forced
to undertake extensive remedial clean-up
action or to pay for government-ordered
remedial clean-up actions, and (3) paying
compensation and reparations to negatively
impacted communities.
Liability may also arise from the actions of any
previous or subsequent owners or operators
of the property, by any past or present owners
of adjacent properties, or by third parties.
We operate in some countries characterised
with complex and challenging political and/or
social climates. This results in a residual risk for
compliance with our HSEC&HR policies and
standards, as well as with external laws
and regulations.
Developments
In response to Covid-19, Glencore focused on
efforts to ensure the resilience of the business,
including daily monitoring of global
conditions, anticipation of potential impacts,
and development of action plans and controls
to mitigate risks. At the start of the crisis, the
corporate Covid-19 Global Response Incident
Management Team and Steering Committee
were established to maintain continuous
communication and response support for our
global industrial and marketing teams,
resolving potential threats to business
continuity, and focusing on the health and
well-being of our workforce. In June 2021,
Glencore developed its Covid-19 Vaccination
Policy and Guiding Principles, in consultation
with leading medical experts and released it
to the business.
Starting In 2020 and continuing through 2021,
we conducted a review of our SafeWork
programme, which is Glencore’s approach to
eliminating fatalities. SafeWork focuses on
identifying and managing the hazards in
every workplace and is built on a set of
minimum expectations and mandatory
protocols, standards, behaviours, and safety
tools. Well-led, consistent application of
SafeWork drives operating discipline and
prevents fatal incidents.
Reflecting the review’s findings, we launched
a refreshed SafeWork in early 2021, which
included performance expectations and 2022
and 2023 targets. The Group continues to
invest in its sustainability risks assurance
process and its focus continues to be on the
Group’s HSEC catastrophic hazards.
We continued the implementation of our
Group-wide Tailings Storage Facility and Dam
Management Standard throughout the
business and participated in the development
of the new Global Industry Standard on
Tailings Management, in association with
International Council on Mining & Metals
member companies. In collaboration with
industry tailings experts, we also initiated the
development of our Tailings Management
Academy, to provide training and capacity-
building for our employees in tailings
management, and environmental, closure,
and community-related practices.
We regret that we have recorded 4 fatalities at
our operations (2020: 8). Our Board and senior
management are committed to ongoing
efforts to improve practices to provide a safe
working environment. No major or
catastrophic environmental, community or
human rights incidents have occurred during
the year.
Mitigating factors
We are committed to ensuring the safety and
wellbeing of our people, communities, and
environment around us.
We implement Health, Safety, Environment,
Community and Human Rights (HSEC&HR)
policies and standards designed to (1) protect
our people, communities, and the
environment, and (2) ensure we comply with
laws and external regulations.
Our approach to the management of health,
safety and the environment and our
expectations of our workers and our business
partners, are outlined in our policies and
standards. These underpin our approach
towards social, environmental, health, safety,
and compliance indicators, providing clear
guidance on the standards we expect all our
operations to achieve.
During 2021, the corporate HSEC&HR team
continued its work in enhancing Group-level
HSEC&HR governance and technical
standards to ensure an efficient and
consistent approach to managing HSEC&HR
related issues across the business.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 81
Strategic Report
We are working towards creating a workplace
without fatalities, injuries, or occupational
diseases through establishing a positive
safety culture. We strive to achieve our
ambitions of zero workplace fatalities and no
major or catastrophic environmental incidents.
Our commitment to complying with or
exceeding the health, safety and
environmental laws, regulations, and best
practice guidelines applicable to our
operations and products is driven through our
sustainability and policies frameworks.
We remain focused on the significant risks
facing our industry arising from operational
catastrophic events and take steps to
implement appropriate controls to mitigate
them.
We work with local authorities, local
community representatives and other
partners, such as NGOs, to help overcome
major public health issues in the regions
where we work, such as Covid-19, HIV/AIDS,
malaria and tuberculosis.
Further details will also be published in our
2021 Sustainability Report.
There can be no assurances that our policies,
standards, procedures and guidelines will
protect the Group against health, safety, and
environmental risks.
10. Climate change
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
Climate change is a material issue that can
affect our business through regulations to
reduce emissions, carbon pricing
mechanisms, extreme climatic events,
access to capital, permitting risks and
fluctuating energy costs, as well as
changing demand for the commodities we
produce and market. We consider our risk
appetite as high due to our significant
exposure to coal producing assets.
Description and potential impact
A number of governments have already
introduced or are contemplating the
introduction of regulatory responses to
support the achievement of the goals of the
Paris Agreement and the transition to a
low-carbon economy. This includes countries
where we have assets such as Australia,
Canada, Chile, and South Africa, as well as our
customer markets such as China, South
Korea, Japan, United States and Europe.
A transition to a low-carbon economy and its
associated public policy and regulatory
developments may lead to:
•
the imposition of new regulations, and
climate change related policies on fossil
fuels by actual or potential investors,
customers, and banks, that potentially
impacts Glencore’s reputation, access to
capital and financial performance
•
import duties / carbon taxes in our
customer’s markets potentially affect our
access to those markets as well as our
commodities’ delivery costs
•
increased costs for energy and for
other resources, which may impact
the productivity of our assets and
associated costs
•
the imposition of levies related to
greenhouse gas emissions
•
impacts on the development or
maintenance of our assets due to
restrictions in operating permits, licences,
or similar authorisations.
These cost increases are likely to reduce
demand for fossil fuels and could lead to coal
assets no longer being economically viable.
Variations in commodity use from emerging
technologies, moves towards renewable
energy generation and policy changes may
affect demand for our products, both
positively and negatively. Some may choose
not to invest in or transact with us, due to our
fossil fuels operations.
Climate change may increase physical risks to
our assets and related infrastructure, largely
driven from extreme weather events and
water related risks such as flooding or
water scarcity.
Implementing low-carbon processes and
technologies at our assets may increase our
operating costs, while also potentially
growing/changing our customer base.
Social concerns may increase pressure to
divest our coal assets, limit/stop our access to
finance, close assets and impact our ability to
optimise our portfolio.
Socio-economic concerns associated with the
transition to a low-carbon economy may
increase expectations of our closure plans and
increase closure liabilities.
There has been a significant increase in
litigation (including class actions), in which
climate change and its impacts are a
contributing or key consideration, including
administrative law cases, tortious cases and
claims brought by investors. In particular, a
number of lawsuits have been brought
against companies with fossil fuel operations
in various jurisdictions seeking damages
related to climate change.
Developments
The commitments made by a number of
countries, including China, Australia and the
US, to achieve carbon neutrality by 2050 or
2060, and subsequent introduction of
supporting policies, such as import taxes and
carbon trading mechanisms, are a strong
indicator of the pace of change and the
longer-term global trajectory. New European
regulation, particularly the ‘EU Taxonomy’ and
the ‘EU Green Deal’ is likely to accelerate the
flow of capital to products and technologies
needed in the low-carbon economy, and
place greater scrutiny on the carbon footprint
of European industrial companies, as well as
on those importing products into the
Eurozone. This is relevant for Glencore
because of the carbon footprint of
our products.
While the transition to renewables
technologies continues to accelerate, the
global economic recovery from Covid-19 has
highlighted the ongoing importance in the
short term of traditional fuels in meeting
global energy needs.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 82
Strategic Report
Mitigating factors
We seek to integrate climate considerations,
such as energy and climate policies in
countries where we operate and sell our
products, expectations of our value chains,
and the various commitments to achieve
the goals of the Paris Agreement, into our
strategic decisions and day-to-day
operational management.
We balance our ownership of coal assets with
our interests in our metals’ businesses which
are considered crucial to the green economy
such as copper, nickel, and cobalt.
Our internal Climate Change Taskforce, led by
our CEO, co-ordinates our analysis and
planning of the effects of climate change on
our business.
We have set ourselves a short-term target of
an absolute 15% reduction of our total
emissions (Scope 1, 2 and 3) by 2026, and a
medium-term target of an absolute 50%
reduction of our total emissions by 2035. Our
medium-term target is consistent with the
midpoint of Intergovernmental Panel on
Climate Change’s 1.5°C scenarios, and with the
Net Zero scenario set out by the International
Energy Agency. Post 2035, we have set
ourselves the ambition to achieve, with a
supportive policy environment, net zero total
emissions by 2050.
We monitor and report our Scope 1, 2 and 3
emissions, and use this data in managing our
operational carbon footprint, as well as for the
development and tracking of our targets.
To better understand and plan for the effects
of climate change on our business, we have a
framework for identifying, understanding,
quantifying and, ultimately, managing
climate-related challenges and opportunities
facing our portfolio which covers Government
policy, lobbying activities, carbon pricing,
energy costs, physical impacts, access to
capital, permitting risk, product demand and
litigation risks.
Further information is available at:
glencore.com/sustainability/climate-change
11. Community relations
and human rights
2021 v 2020 Risk appetite Link to strategy
High
Medium
Low
We have a geographically diverse business,
operating in both developed and developing
countries in an array of different contexts.
A perception that we are not respecting
human rights or generating local sustainable
benefits could have a negative impact on our
ability to operate effectively, our reputation
with stakeholders, our ability to secure access
to new resources, our capacity to attract
and retain the best talent and ultimately,
our financial performance.
Description and potential impact
Respecting human rights and building strong
relationships are fundamental to the current
and future viability of our business.
Areas that may be affected negatively include
the health and safety of our workforce and
surrounding communities, environmental
damage and interactions with individuals
and groups who live and work in or near our
local communities. Poor performance can
contribute to social instability and the
perceived and real value of our assets.
We have a geographically diverse business,
operating in both developed and developing
countries in an array of different contexts. In a
number of regions where we operate, the
socio-political environment is complex which
presents additional business, social and security
risks if not well understood and managed.
The consequences of adverse community
reactions or allegations of human rights
incidents could also have a material adverse
impact on the cost, profitability, ability to
finance or even the viability of an operation
and the safety and security of our workforce
and assets. In addition, global connectivity
means that local issues can quickly escalate
to a regional, national and global level
potentially resulting in reputational damage
and social instability.
Some of our mining operations are in remote
areas where they are a major employer in the
region. This presents particular social
challenges when the mine’s resources are
depleted to an extent that it is no longer
economic to operate and must be closed.
Robust planning and stakeholder
engagement are key to mitigating
environmental and social closure risks.
The destruction of indigenous cultural heritage
during mining activities in Australia has
highlighted the need for effective management
processes and engagement, to protect areas
and items of cultural significance, and to avoid
business and reputation risks.
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 83
Strategic Report
Developments
During 2021, Covid-19 continued to impact
people’s quality-of-life and contributed to
localised areas of uncertainty around the
world. Our first and foremost priority during
the pandemic has been the health and
wellbeing of our employees and communities,
especially vulnerable groups. We have sought
to support our communities by augmenting
communication programmes to promote
prevention measures, providing basic
sanitation and medical materials and
supporting local health systems and services.
We continue where possible to work to
support local health authorities in encouraging
and delivering vaccines, where needed.
The ensuing economic impacts of Covid-19
have amplified existing inequalities around
the world, resulting in an escalation of civil
unrest in many countries. In the Espinar
region of Peru, social protests impacted our
Antapaccay operation. The government
deployed public security to return law and
order in the region around the operation
without harm to community members,
security forces or our workforce.
Artisanal and small-scale mining (ASM)
continues to be a challenge at certain
operations, most notably in the DRC. An area
of the Mutanda permits, Chabara, has been
illegally occupied by ASM cooperatives
supported by semi-mechanised operators.
We have been engaging with DRC authorities
to try to recover control of Chabara following a
peaceful relocation of the ASM cooperatives.
Mitigating factors
Our approach is to minimise the local
detrimental impacts of our business, engage
openly and honestly to build lasting
relationships and foster socio-economic
resilient communities.
In 2021, we enhanced our Closure Planning
expectations and governance through our
new Closure Planning Standard to ensure
consistent and proactive performance in this
important aspect of our operations’ lifecycle.
While our Group policies and standards apply
to all our businesses, we tailor our community
approach to be relevant and appropriate to
the local context. We strive to uphold and
respect the human rights of our workforce,
local communities and others who may be
affected by our activities, in line with the
United Nations Guiding Principles on
Business and human rights (UNGPs), and
support resilience and capacity within our
host communities. We have processes to
identify, prevent and mitigate human rights
risks and impacts across our business, and are
committed to understanding and
documenting the social risk and opportunities
in the communities in which we operate. In
the event that we cause or contribute to a
negative impact on human rights, we strive to
provide appropriate remedy to those affected
in line with the UNGPs.
We seek to apply the UN Voluntary Principles
on Security and Human Rights in regions
where there is a high risk to human rights
from the deployment of public and private
security forces.
We respect communities’ perspectives and
actively seek to consult with them to inform
our decision-making. Our ambition is to be a
responsible, engaged and valued company
wherever we operate and to contribute to
healthy, resilient communities. We support
the advancement of the interests of both our
host communities and our assets.
We seek to build enduring and trusting
relationships by engaging openly and
honestly and participating as an active
member of society. We focus our social
investments on initiatives and programmes
todeliver long-term benefits fostering
socio-economic resilience.
We implement locally appropriate complaints
and grievance processes in line with the UNGPs
and welcome feedback and comments on our
performance. We review all complaints received
and take actions when necessary to address
the issues raised.
During late 2020, our Social Performance and
Human Rights policies were updated
following consultation with external subject
matter experts and internal and external
stakeholders. In 2021 we reviewed and/or
updated our Social Performance, Human
Rights and Security Standards.
Our approach to ASM considers how ASM and
large-scale mining can sustainably co-exist as
distinct yet complementary sectors of a
successful mining industry. We believe that
legal ASM can play an important and
sustainable role in many economies when
carried out responsibly and transparently,
including the DRC. We partner with the Fair
Cobalt Coalition, an NGO aiming to positively
transform ASM in the DRC. It is working
towards eliminating child and forced labour,
improving work practices in ASM operations
and supporting alternative livelihoods to help
increase incomes and reduce poverty.
We continue to review and implement new or
revised policies concerning cultural
heritage management.
Further information is available on our
website at: glencore.com/sustainability/
community-and-human-rights
Risk management continued
| Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 84
Strategic Report
Chairman’s Governance Statement
Kalidas Madhavpeddi, Chairman
Dear Shareholders
The year 2021 has been one of dynamic
change for Glencore. The Company said
farewell to Ivan Glasenberg after almost 20
years of remarkable leadership. This was
capped with a long planned and effective
succession to Gary Nagle who has seamlessly
stepped into the very demanding role that
being the CEO of Glencore entails.
Shortly afterwards the Board selected me as
Tony Hayward’s successor as Chairman.
The Board has also continued its process
of renewal. Tony left us after more than 10
years on the Board. He had originally been
appointed as the Senior Independent Director
on the IPO in 2011 and succeeded to the Chair
two years later following the Xstrata
acquisition. John Mack retired in April
following 8 years of service on our Board. We
thank them again for their dedication to the
Board and the Company. We are pleased to
have Cynthia Carroll and David Wormsley join
us last year. Cynthia had a long track record in
the industry culminating in being the CEO of
Anglo American, while David brings a wealth
of UK market knowledge and global
investment banking experience. Both have
made a strong start. We look forward to
making a further appointment to the Board
this year. Diversity remains an important
objective and all except one of our Board
Committees are led by diverse directors.
While diversity remains a key aim, Boards
must also not lose sight of the need to
concentrate on core skills.
A
complete succession of all the main
department leadership roles which had
started at the beginning of 2019 was also
completed last year in concert with Gary’s
appointment. It says a lot about Glencore’s
culture that the original management who
are major shareholders had remained at the
Company for so long after its IPO in 2011. It is
also a testament to the strength of the
Company that the succession was completed
with all being internal promotions.
We announced last month a provision for our
current best estimate of the costs to resolve
the U.S., UK and Brazilian investigations of
$1.5billion. We continue to work hard to bring
these and the other investigations in the
Group to a close.
The report from the Board HSEC committee
sets out a summary of the considerable work
that continues across all areas of the Group’s
health, safety, environment and communities’
programme. This has always been an area in
which the Board has demonstrated strong
leadership and this will continue.
Climate remains centre stage for the Board.
We have established our industry leading
credentials in publishing our Scope 3 targets.
Reflecting additional work on our emissions
profile and opportunities to deliver
reductions, in 2021 we strengthened our
medium-term emissions reduction target
and introduced a new short-term target. We
are now committed to reducing total
emissions (Scope 1+2+3) by 15% by 2026 and
50% by 2035, both on 2019 levels. Post 2035,
our ambition is to be a net zero total emissions
by 2050, assuming a supportive policy
environment.
We were also the first of our peers to provide
shareholders with a say on our climate policy
in a similar way as we do on pay: having put
our policy to a vote at last year’s AGM – on
which there was a 94% vote in favour – we will
this year table our progress report for
shareholders to advise the Company as to
whether they support the progress or not, in
the same way as update votes on the
implementation of our remuneration policy
are tabled every year to shareholders.
It was a pleasure to be able to engage with
many of our large shareholders in the autumn,
whether in person or on video. I look forward
to continuing this dialogue this year as
Glencore seeks to continue to improve in ESG
matters to complement its outstanding
financial performance. The Board remains
determined to ensure all the Group’s
stakeholders see Glencore not only as the
leading resources company but also as a
reliable and trusted partner.
Kalidas Madhavpeddi
Chairman
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 85
| Corporate Governance
Notes
All the Directors are non-executive apart from the CEO.
The Chairman is considered not to be independent due to
the nature of his role. Mr Madhavpeddi was independent
up to his appoinrment to the role of Chairman. The remaining
Non-Executive Directors are designated as independent
apart from Mr Coates.
Committee membership is as follows:
Audit
A
E
Ethics, Compliance and Culture (ECC)
H
Health, Safety, Environment
and Communities (HSEC)
I
Investigations
N
Nomination
R
Renumeration
denotes commitee chair
Experience
Kalidas Madhavpeddi has
over 40 years of experience in
the international mining
industry, including being CEO
of CMOC International, the
operating subsidiary of China
Molybdenum Co Ltd (China
Moly), from 2008 to 2018.
His career started at Phelps
Dodge, where he worked
from 1980 to 2006, ultimately
becoming senior VP
responsible for the
company’s global business
development, acquisitions
and divestments, as well as
its global exploration
programs. Mr Madhavpeddi
is currently a director of
Novagold Resources
(TSX:NG), Trilogy Metals
(TSX:TMQ), and Dundee
Precious Metals Inc (TSX:
DPM). He was formerly
director and chair of the
governance committee of
Capstone Mining (TSX:CS). He
has degrees from the Indian
Institute of Technology,
Madras, India and the
University of Iowa and has
completed the Advanced
Management Program at
Harvard Business School.
Experience
Gary Nagle joined Glencore
in 2000 in Switzerland as
part of the Coal business
development team. He was
heavily involved in seeding a
portfolio of assets to Xstrata
in 2002, in conjunction with
its initial listing on the
London Stock Exchange.
Mr Nagle worked for five
years (2008-2013) in
Colombia as CEO of
Glencore's Prodeco
operation. He then moved to
South Africa to be Head of
Glencore's Ferroalloys assets
(2013-2018). Following that he
was the Head of Glencore’s
Coal Assets based in
Australia. He also served on
the Board of Lonmin plc from
2013 - 2015 and has
represented Glencore on the
Minerals Councils of Australia
and Colombia.
Mr Nagle has commerce and
accounting degrees from the
University of the
Witwatersrand, and qualified
as a Chartered Accountant in
South Africa in 1999.
Kalidas Madhavpeddi
Chairman (66)
H R
I
N
Appointed in February 2020.
Gary Nagle
Chief Executive Officer
(47)
Joined Glencore in 2000;
Chief Executive Officer since
July 2021.
Directors and officers
Directors
Board diversity
Pages 89 & 95
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 86
| Corporate Governance
Directors and officers
Experience
Martin Gilbert is Chairman of
AssetCo plc (LON:ASTO) and
Revolut Limited.
Mr Gilbert co-founded
Aberdeen Asset
Management in 1983, leading
the company for 34 years and
overseeing its 2017 merger
with Standard Life. He is also
chair of Toscafund and
Saranac Partners. He was
deputy chair of the board of
Sky PLC until 2018. He was
formerly co-CEO of Standard
Life Aberdeen.
Mr Gilbert is a member of the
International Advisory Board
of British American Business.
Mr Gilbert was educated in
Aberdeen. He has an LLB, an
MA in Accountancy and is a
Chartered Accountant.
Directors
Martin Gilbert
Senior Independent
Director (66)
I
N
RA
Senior Independent Director
since May 2018; appointed in
May 2017.
Experience
Peter Coates worked in
senior positions in a range of
resource companies before
joining Glencore’s coal unit as
a senior executive in 1994.
When Glencore sold its
Australian and South African
coal assets to Xstrata in 2002
he became CEO of Xstrata’s
coal business, stepping down
in December 2007.
He was non-executive
chairman of Xstrata Australia
(2008–09), Minara Resources
Ltd (2008–11) and Santos Ltd
(2009–13 and 2015–18). He is
currently a non-executive
director of Event Hospitality
and Entertainment Ltd
(ASX:EVT).
Mr Coates holds a Bachelor of
Science degree in Mining
Engineering from the
University of New South
Wales.
He was appointed as an
Officer of the Order of
Australia in June 2009 and
awarded the Australasian
Institute of Mining and
Metallurgy Medal for 2010.
Experience
Following initial roles with
Molson and Canadian Pacific,
Patrice Merrin worked at
Sherritt for ten years until
2004, latterly as COO. She
then became CEO of Luscar.
She is currently non-
executive chair of Metals
Acquisition Corp. and a
non-executive director of
Samuel, Son & Co. Limited.
She was non-executive chair
of Detour Gold Corporation
(TSX:DGC) from June 2019 to
January 2020 and non
executive director of
Stillwater Mining Company
(NYSE:SWC) from 2013 to
2017.
Ms Merrin chaired CML
Healthcare and was also a
director of Arconic Inc., NB
Power, and the Alberta
Climate Change and
Emissions Management
Corporation.
Ms Merrin is a graduate of
Queen’s University, Ontario
and completed the
Advanced Management
Programme at INSEAD.
Peter Coates AO
Non-Executive Director
(76)
H
N
E
Non-Executive Director since
January 2014; previously
Executive Director from June
to December 2013 and
Non-Executive Director from
April 2011 to May 2013.
Patrice Merrin
Non-Executive Director
(73)
H
I
E N
Appointed in June 2014.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 87
| Corporate Governance
Directors and officers
Experience
Gill Marcus was Governor of
the South African Reserve
Bank from 2009–14.
She worked in exile for the
African National Congress
from 1970 before returning to
South Africa in 1990. In 1994
she was elected to the South
African Parliament. In 1996
she was appointed as the
deputy minister of finance
and from 1999 to 2004 was
deputy governor of the
Reserve Bank.
Ms Marcus was the non-
executive chair of the Absa
Group from 2007–09 and has
been a non-executive
director of Gold Fields Ltd
and Bidvest. She has acted as
chair of a number of South
African regulatory bodies.
From 2018 to 2019, she was
appointed to the Judicial
Commission of Inquiry into
allegations of impropriety at
the Public Investment
Corporation.
Ms Marcus is a graduate of
the University of South Africa.
Directors
Gill Marcus
Non-Executive Director
(72)
Appointed in January 2018.
E
N
A
Experience
Cynthia Carroll has over 30
years’ experience in the
resources sector. She began
her career as an exploration
geologist at Amoco before
joining Alcan. She held
various executive roles there
culminating in being CEO of
the Primary Metal Group,
Alcan’s core business. From
2007 to 2013 she served as
CEO of Anglo American plc.
Ms Carroll is currently a
non-executive director of
Hitachi, Ltd (TYO: 6501), Baker
Hughes Company (NYSE:
BKR) and Pembina Pipeline
Corporation (TSE: PPL).
She is a fellow of the Royal
Academy of Engineers and a
Fellow of the Institute of
Materials, Minerals and
Mining.
Ms Carroll holds a Bachelor’s
degree in Geology from
Skidmore College (NY), a
Master’s degree in Geology
from the University of Kansas
and a Masters in Business
Administration from Harvard
University.
Experience
David Wormsley worked in
investment banking for 35
years. His last position at
Citigroup was Chairman, UK
banking and broking when
he retired in March 2021. Mr
Wormsley led a wide variety
of corporate transactions in
the UK and internationally,
including IPOs and equity
fundraising, both public and
private, mergers &
acquisitions and debt
financing. During his period
of management, Citigroup
successfully acquired and
integrated the majority of
ABN Amro’s broking
business. Under his
leadership, the Citigroup UK
M&A franchise was ranked
between number 1 and 5 in
the market.
Mr Wormsley is currently a
non-executive director of
Stanhope plc and a Governor
of the Museum of London. He
holds an economics degree
from Downing College,
Cambridge.
Cynthia Carroll
Non-Executive Director
(65)
R
H
N H N
Appointed in February 2021.
David Wormsley
Non-Executive Director
(61)
Appointed in October 2021.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 88
| Corporate Governance
Directors and officers
Experience
Mr Kalmin joined Glencore in
September 1999 as general
manager of finance and
treasury functions at
Glencore’s coal industrial unit
in Sydney. He moved to
Glencore’s head office in
2003 to oversee Glencore’s
accounting function,
becoming CFO in June 2005.
From November 2017 to June
2020 he was a director of
Katanga Mining Limited (TSX:
KAT).
Mr Kalmin holds a Bachelor
of Business (with distinction)
from the University of
Technology, Sydney and is a
member of Chartered
Accountants Australia and
New Zealand and the
Financial Services Institute of
Australasia.
Before joining Glencore, Mr
Kalmin worked for nine years
at Horwath Chartered
Accountants.
Experience
From 2006 to 2011, Mr Burton
was company secretary and
general counsel of Informa
plc, where he established the
group legal function and a
new company secretarial
team. Before that he had
been a partner of CMS in
London for 8 years, advising
on a broad range of corporate
and securities law matters.
Mr Burton holds a B.A.
degree in Law from Durham
University. He was admitted
as a Solicitor in England and
Wales in 1990.
Officers
Steven Kalmin
Chief Financial Officer
(51)
Appointed as Chief Financial
Officer in June 2005.
John Burton
Company Secretary
(57)
Appointed Company
Secretary in September 2011.
Board tenure
0-2 yrs
3-6 yrs
9+ yrs
7-9 yrs
Board diversity
62.5%
37.5%
Male
Female
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 89
| Corporate Governance
Corporate governance report
This report should be read in conjunction with
theDirectors’ report and the remainder of the
Governance section.
Board governance and structure
This Governance report, along with the
Strategic report and the Directors’ report, sets
out how Glencore has complied with the
principles and provisions of the 2018 UK
Corporate Governance Code (the Code) in a
manner which enables shareholders to
evaluate how these principles have been
applied. The Board believes that the Company
has throughout the year complied with all
relevant provisions contained in the Code
except for:
•
Provision 24, regarding membership of
Audit Committee – Mr Madhavpeddi
became Chairman of the Board on 30 July
2021 and had been Chair of the Audit
Committee since August 2020. He
remained Chair of the Audit Committee
until 1 October 2021 when Ms Marcus was
appointed as Chair.
•
Provision 17 regarding membership of the
Nomination Committee – from 1 October
until 31 December 2021 the Committee
comprised Mr Madhavpeddi (designated
independent on appointment), Mr Coates
(considered non-independent), and Ms
Marcus (independent). From 1 January 2022,
all other remaining Non-Executive Directors
(all of whom are independent) were
appointed as members of the Nomination
Committee.
•
Provision 21, regarding externally facilitated
Board evaluation – during the year there
were broad changes to the Board:
– the previous Chairman, Tony Hayward,
retired from the Board and was replaced
by Mr Madhavpeddi;
– the CEO, Ivan Glasenberg, retired from
the Board and was replaced as CEO and
Director by Mr Nagle;
– John Mack retired from the Board;
– Ms Carroll and Mr Wormsley were
appointed to the Board; and
– there were significant changes to the
Committees including a change of Chair
of all the Board Committees except for
HSEC (see below).
Therefore, the Directors agreed that it was
more appropriate to delay the external
evaluation by one year.
A revamped internal evaluation was
conducted instead (see page 94).
In accordance with provision 19 of the Code,
the following serves as explanation for the
extended tenure of Dr Hayward until 30 July
2021. In early 2020, we consulted with our
largest institutional shareholders regarding
his tenure on the Board which was to exceed
nine years in May 2020. This had clear support
and the shareholders vote at the 2020 AGM in
favour of his reappointment exceeded 96% of
those cast. The Board reconsidered his
position prior to the 2021 AGM and continued
to believe that, until the management
succession was complete, it was in the
shareholders’ interest that he remained as
Chairman for a final period. Following further
consultation, shareholders remained
supportive and so he was nominated again at
the 2021 AGM, receiving a 94% vote in favour.
He retired on 30 July.
During 2021, due to the changes listed below,
the Board comprised either six, seven or eight
Non-Executive Directors (including the
Chairman) and one Executive Director. A list of
the current Directors, with their brief
biographical details and other significant
commitments, is provided in the previous
pages.
Retirements Appointments
John Mack,
29 April 2021
Cynthia Carroll,
2 February 2021
Ivan Glasenberg,
30 June 2021
Gary Nagle,
1 July 2021
Anthony Hayward,
30 July 2021
David Wormsley,
15 September 2021
The Chief Financial Officer attends all
meetings of the Board and Audit Committee.
The Company Secretary attends all meetings
of the Board and its Committees.
Division of responsibilities
As a Jersey incorporated company, Glencore
has a unitary Board, meaning all Directors
share equal responsibility for decisions taken.
Glencore has established a clear division
between the respective responsibilities of the
Non-Executive Chairman and the Chief
Executive Officer, which are set out in a
schedule of responsibilities approved by the
Board and reviewed annually. While the
Non-Executive Chairman is responsible for
leading the Board’s discussions and decision-
making, the CEO is responsible for
implementing and executing strategy and for
leading Glencore’s operating performance
and day-to-day management. The Company
Secretary is responsible for ensuring that
there is clear and effective information flow to
the Non-Executive Directors.
The CEO, CFO and General Counsel have line
of sight across the Group. Together with the
Head of Industrial Assets, they lead our
management team supported by the heads
of each marketing and industrial department
and the heads of corporate functions.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 90
| Corporate Governance
Corporate governance report continued
Roles and responsibilities
Chairman
•
Leading the Board
•
Shaping the culture in the boardroom
•
Promoting sound and effective Board
governance
•
Ensuring effective communication with
shareholders
•
Leading the annual performance evaluation
of the Board
Senior Independent Director
•
Acting as confidant of the Chairman and,
when appropriate, as an intermediary for
other independent Directors
•
Acting as Chair of the Board if the Chairman
is unable to attend
•
Leading the Chairman’s performance
appraisal along with other independent
Directors
•
Answering shareholders’ queries when
usual channels of communication are
unavailable
Chief Executive Officer
•
Leading the management team
•
Executing the Group’s strategy developed
in conjuction with the Board
•
Implementing the decisions of the Board
and its Committees
•
Delivering on the Group’s commercial
objectives
•
Developing Group policies and ensuring
effective implementation
Company Secretary
•
Ensuring that Board procedures are
complied with and that papers are provided
in sufficient detail and on time
•
Informing and advising the Board on all
governance matters
•
Informing the Board on all matters reserved
to it
•
Assisting the Chairman and the Board
regarding the annual performance
evaluation process
Other Non-Executive Directors
•
Challenging the Chief Executive Officer
and senior management constructively
•
Bringing an independent mindset and a
variety of backgrounds and experience
around the Board table
•
Providing leadership and challenge as
chairs or members of the Board
Committees, which comprise only Non-
Executive Directors
•
Assisting the Senior Independent Director
in assessing the Chairman’s performance
and leadership
Board attendance throughout the year
Attendance during the year for all scheduled full agenda Board and all permanent Board
Committee meetings is set out in the table below:
Board
of 5
HSEC
of 5
ECC
of 5
Audit
of 4
Rem
of 4
Nom
of 3
Cynthia Carroll¹ 6 4 2
Peter Coates
3
6 5 5 2
Martin Gilbert 6 4 4
Ivan Glasenberg² 3 2
Anthony Hayward² 3 2 2
John Mack² 1 2 1
Kalidas Madhavpeddi
3
6 2 1 3 4 3
Gill Marcus
3
6 5 4 1
Patrice Merrin
3
6 5 5 2
Gary Nagle¹ 3
David Wormsley¹ 2 1
1 Ms Carroll, Mr Nagle and Mr Wormsley attended all relevant meetings from their appointments on 2 February, 1 July and
15September 2021 respectively.
2 Mr Mack, Mr Glasenberg and Dr Hayward attended all relevant meetings until their retirements on 29 April, 30Juneand
30 July 2021 respectively.
3 Mr Coates, Mr Madhavpeddi, Ms Marcus and Ms Merrin attended all meetings of the relevant Board Committees following
their respective appointments as Chair or member.
There were another 7 limited agenda meetings of the Board, 4 additional Audit Committee
meetings and one additional HSEC meeting. MostDirectors also attend, by invitation, the
meetings of the Committees of which they are not members.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 91
| Corporate Governance
Corporate governance report continued
Board diversity and experience
Kalidas
Madhavpeddi
American
Gary
Nagle
S. African
Martin
Gilbert
British
Cynthia
Carroll
American
Peter
Coates
Australian
Gill
Marcus
S. African
Patrice
Merrin
Canadian
David
Wormsley
British
Experience
Resources
Non-executive directorship
C-suite
Global transactions
Technical Skills*
Leadership & Strategy
Financial Expertise
Ethics & Governance
Health & Safety
Investor Relations
Communications & Reputation
Risk Management
* The majority of these skills have been acquired through exposure and experience at leadership level, rather than as part of a formal education.
Senior Independent Director
Mr Gilbert is the Senior Independent Non-
Executive Director. He is available to meet
with shareholders and acts as an intermediary
between the Chairman and other
independent Directors when required. This
division of responsibilities, coupled with the
schedule of reserved matters for the Board,
ensures that no individual has unfettered
powers of decision. Further details of these
responsibilities are set out on page 91.
Non-Executive Directors
The Company’s Non-Executive Directors
provide a broad range of skills and experience
to the Board (see table above), which assists in
their roles in formulating the Company’s
strategy and in providing constructive
challenge to senior management.
Independence of Non-Executive Directors
Glencore regularly assesses its Non-Executive
Directors’ independence. Except for Peter
Coates, who was first appointed to the Board
in May 2011 and the Chairman, all are regarded
by the Board as Independent Non-Executive
Directors within the meaning of
‘independent’ as defined in the Code and free
from any business or other relationship which
could materially interfere with the exercise of
their independent judgement. Mr
Madhavpeddi was considered independent at
the time of his appointment as Chairman.
Management of conflicts of interest
All Directors endeavour to avoid any situation
of conflict of interest with the Company.
Potential conflicts can arise and therefore
processes and procedures are in place
requiring Directors to identify and declare any
actual or potential conflict of interest. Any
notifications are required to be made by the
Directors prior to, or at, a Board meeting and
all Directors have a duty to update the whole
Board of any changes in circumstances.
Glencore’s Articles of Association and Jersey
law allow for the Board to authorise potential
conflicts and the potentially conflicted
Director must abstain from any vote
accordingly. During the year, no abstention
procedures for conflicts had to be activated.
Related Party Transactions
In the course of its business, the Group enters
into transactions with organisations which
may constitute related parties.
All material related party transactions are
required to be reviewed and approved by the
Board. If a conflict exists for a Director, they
will not be allowed to vote on the resolution
approving the transaction. The Company also
seeks advice whenever an assessment is to be
made as to whether any material transaction
may be a related party transaction under the
terms of FCA Listing Rule 11.
During the year the Board reviewed the
purchase from BHP and Anglo-American of
their one-third interest each in Cerrejon.
Transactions between the Group and its
significant joint ventures and associates are
summarised in note 33 to the Financial
Statements.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 92
| Corporate Governance
Acquisition and disposal of assets
The Board reviews and approves all material
proposed transactions, including acquisitions
and disposals of assets. Additionally, there is
an assessment as to whether material
transactions comply with FCA Listing Rule 10
requirements.
If required, the Board may engage an
independent third-party adviser to review the
proposed transaction and provide an
independent opinion for the Board to assist in
its decision making in addition to the
requirements to have advice from a sponsor
under the FCA Listing Rules.
Board Committees
The following permanent Committees are in
place to assist the Board in exercising its
functions: Audit, Nomination, Remuneration,
HSEC and ECC. The Board is provided with
technical and commercial updates as
appropriate during the year, including as to
our Raising Concerns programme and
relevant investigations. The Board may also
establish temporary committees for specific
purposes, such as the Investigations
Committee. As each Committee reports to
the Board, meetings are held prior to Board
meetings, during which the chair of each
Committee leads a discussion concerning the
Committee’s activities since the previous
Board meeting.
A report from each chair of the permanent
Committees is set out later in this Corporate
Governance report.
All permanent Committees’ terms of
reference are available at:
glencore.com/who-we-are/governance
Each Committee reports to, and has its terms
of reference approved by, the Board and the
minutes of the Committee meetings are
circulated to the Board. Each Committee
regularly reviews its terms of reference to
ensure they reflect the Board’s expectations
as to the Committee’s role as well as the latest
corporate governance requirements and
recommended practices.
Investigations
In July 2018, following receipt of a subpoena
from the U.S. Department of Justice (DOJ), the
Board reconstituted the then existing
Investigations Committee to direct the
Company’s response. The Investigations
Committee’s mandate has continued and
includes oversight and responsibility for
material decision making as to the Company’s
response to all the investigations listed in
notes 23 and 32. It also monitors the Group’s
exposure arising from the investigations and
concludes on the appropriate disclosure in
the financial statements.
Oversight of management of climate-
related risks and opportunities
Climate change is a Board-level standing
agenda item. During 2021, we revised our
internal climate change governance
framework to drive implementation of the
climate strategy and the supporting work
programmes. Our new Climate Change
Taskforce (CCT) is accountable to the Board, to
whom it provides regular progress and status
updates. It is led by the CEO and other
members include the CFO, Head of Industrial
Assets, and General Counsel, as well as
representatives from key corporate functions
including investor relations, finance and
sustainable development. Commodity
departments, including heads of the
departments and nominated representatives,
participate in the working groups that
support the CCT.
In recognition of the desire of shareholders to
have the opportunity directly to advise the
Company of their opinion on its plans and
their implementation, the Board resolved in
2021 to follow the same shareholder
engagement model which it uses for
remuneration by which a policy is issued at
least every three years and a report is
published annually on the implementation of
that policy, each of which is put to an advisory
vote.
Board meetings
The Board has approved a schedule that sets
out the matters reserved for its approval,
including Group strategy, financial statements
and annual budget, and material acquisitions
and disposals. Meetings are usually held at
the Company’s headquarters in Baar,
Switzerland. However, during 2021, due to
travel restrictions, some or all Non-Executive
Directors were often unable to attend
meetings in person.
The Board and its Committees have standing
agenda items to cover their proposed
business at their scheduled meetings. The
Chairman seeks to ensure that the very
significant work of the Committees feeds into,
and benefits through feedback from, the full
Board. The Board and Committee meetings
seek to cover all aspects of the Group and, for
this purpose, receive input and support from
senior management through reports and
presentations, which among others cover
operational, financial, audit, risk, legal and
compliance, governance, and investor
relations. These reports and presentations
allow Directors to further their understanding
of the business and provide the insights
necessary for defining the Company’s
strategy and objectives, in turn contributing
to a more effective Board.
Corporate governance report continued
Corporate governance
Shareholders
Board of
Directors
Audit
Committee
Elect
Directors
Renumeration
Committee
Nomination
Committee
HSEC
Committee
ECC
Committee
Investigations
Committee
Ongoing
engagement
Chief Executive
Officer and
Chief Financial
Officer
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 93
| Corporate Governance
Board and Committees’ main
activitiesand decisions during 2021
Below are details of the main topics which
were reviewed, discussed, and when required,
approved during 2021:
Regular updates
•
Reports from Committee Chairs
•
Reports from CEO, CFO, Company
Secretary, General Counsel and senior
management, including climate strategy
•
Group Strategy, including M&A and capital
expenditure, including:
– acquisition of 66.6% of Cerrejon,
– sale of Ernest Henry Mine, and
– review of Nickel Canadian Onaping Depth
project and Koniambo operations
•
Group performance report
Financial & Risk
•
Finance reports, forecasts and capital
position updates
•
2022 budget and 2023–25 business plan, life
of asset planning and costs analysis
•
Capital management, debt and returns
analysis
•
Financial statements
•
Group risk appetite
•
Group risk management framework,
including new ERM policies
•
Tax policies and provisions
Governmental investigations
•
Regular scheduled and ad hoc meetings of
the Investigations Committee to review
progress and receive updates on
interactions with relevant authorities
•
Decisions concerning ongoing
investigations and accounting disclosures
Governance & Stakeholders
•
Revised Code of Conduct
•
Annual report
•
AGM, voting results and outcomes
•
Investor relations reports
•
Analysts updates
•
Corporate governance framework
•
Stakeholder engagement
•
Board and Directors’ evaluation
•
Chairman’s performance
Legal, Regulatory & Compliance
•
Group policies
•
Legal matters updates
•
Regulatory & Compliance updates
•
Group Ethics and Compliance Programme
•
Raising Concerns reports and analysis
•
Analysis of legal risks concerning climate
change
•
Board training
•
Material permitting and licences
Health, Safety, Environment & Communities
•
Fatalities, major incidents and other safety
issues
•
Tailings Storage Facilities reviews
•
Environmental incidents reports
•
HSEC and Human-Rights policy framework
•
Human Rights and Communities analysis
•
Supply chain traceability
•
Cultural heritage
Succession and Remuneration
•
Succession planning for Board and senior
management
•
Tender and appointment for Remuneration
Committee advisor
•
Senior management remuneration
Other activities
•
Covid-19 related activities including analysis
of impact on health & safety, business and
audit risks
•
External Audit tender
Appointment of Non-Executive Directors
All the Non-Executive Directors have letters of
appointment and the details of their terms are
set out in the Directors’ remuneration report.
No other contract with the Company or any
subsidiary undertaking of the Company in
which any Director was materially interested
existed during or at the end of the financial
year.
Information, management meetings, site
visits and professional development
It is considered essential that the Non-
Executive Directors attain a good knowledge
of the Company and its business and allocate
sufficient time to Glencore to discharge their
responsibilities effectively. The Board calendar
is planned to ensure that Directors are briefed
on a wide range of topics.
During 2021, similarly to the previous year,
there were no site visits due to the global
pandemic. However, various virtual site
engagements took place.
All Directors have access to the advice and
services of the Company Secretary, who is
responsible to the Board for ensuring that
Board procedures are complied with and have
access to independent and professional
advice at the Company’s expense, where they
judge this to be necessary to discharge their
responsibilities as Directors.
Corporate governance report continued
Board performance and effectiveness
For 2021, a performance evaluation was
conducted internally. As part of this process,
each Director completed questionnaires that
covered various key indicators of Board and
Committee performance and effectiveness,
including the findings from the previous
evaluation (summarised in the 2020 Annual
Report). Results were provided to the
Chairman and the Senior Independent
Director by the Company Secretary.
Final results were presented to the Board
collectively for discussion.
Issues of focus raised by the Directors
included:
•
need to resume meetings in person and
site visits whenever permitted
•
health and safety, and fatalities elimination
•
resolving the investigations
•
government relations/country risks
•
refreshment of the Board with an emphasis
on greater ethnic and geographic diversity,
strong resource industry experience, and
accounting expertise
•
senior management transition
•
succession planning, including for
corporate functions
•
workforce diversity and inclusion
•
more active remuneration committee
•
more work on ESG and carbon strategy
•
risk management, compliance, culture and
internal audit/controls and whistleblowing
arrangements
•
divestments of ‘tail’ assets
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 94
| Corporate Governance
Director induction andinformation
New Directors receive a full, formal and
tailored induction on joining the Board,
including meetings with management and a
comprehensive introduction to the main
aspects of the Group, its business and
functions, the roles and responsibilities of a
UK premium listed company director, and the
Company’s Purpose, Values and Code of
Conduct.
The Directors receive training on legal and
compliance topics and regular updates on
relevant business and governance matters.
Ms Carroll and Mr Wormsley both completed
their induction during the year.
Diversity
The diversity policy which is applied to
appointments to governance bodies with
regard to aspects such as age, gender, or
education and professional backgrounds is
the same as for all Group employees.
The Board is very cognisant of the ongoing
desire from stakeholders for greater diversity
in senior management and boards.
Inparticular, leading UK institutional
shareholders have set a target for women to
comprise 33% of senior management and
boards of FTSE 100 companies by the end
of2020. This board target was achieved on
2February 2021 and we remain compliant
atthe date of this report.
The Board acknowledges that much more
needs to be done to achieve greater diversity
in the senior management of the Group,
including through the development of an
internal pipeline of candidates. Accordingly
during 2021 it has overseen development of
the Group’s first Diversity and Inclusion
strategy – see further on page 35. While we
support the aims of diversity, we do not
believe that a one size fits all policy is
appropriate or currently achievable. Still today,
we find it challenging to find female
candidates for senior positions in remote
mining locations and for the marketing of
commodities.
Accountability and audit
Financial reporting
The Group has in place a comprehensive
financial review cycle, which includes a
detailed annual planning/budgeting process
where business units prepare budgets for
overall consolidation and approval by the
Board. The Group uses many performance
indicators to measure both operational and
financial activity in the business. Depending
on the measure, these are reported and
reviewed on a daily, weekly or monthly basis.
In addition, management in the business
receives weekly and monthly reports of
indicators which are the basis of regular
operational meetings, where corrective action
is taken if necessary. At a Group level, a
well-developed management accounts pack,
including income statement, balance sheet,
cash flow statement as well as key ratios is
prepared and reviewed monthly by
management. As part of the monthly
reporting process, a reforecast of the current
year projections is performed. To ensure
consistency of reporting, the Group has a
global consolidation system as well as a
common accounting policies and procedures
manual. Management monitors the
publication of new reporting standards and
works closely with our external auditor in
evaluating any impact.
Risk management and internal control
The Board has complied with provisions 28 to
31 of the Code by establishing an ongoing
process for identifying, evaluating and
managing the risks that are considered
significant by the Group in accordance with
the Guidance on Risk Management, Internal
Controls and Related Financial and Business
Reporting published by the Financial
Reporting Council, as detailed on pages 68-71.
This process has been in place for the period
under review and up to the date of approval of
the Annual Report and financial statements.
The process is designed to manage and
mitigate rather than eliminate risk, and can
only provide reasonable and not absolute
assurance against material misstatement or
loss. This review excludes associates of the
Group as Glencore does not have the ability to
dictate or modify the internal controls of these
entities. The Directors confirm that they have
carried out a robust assessment of the
principal and emerging risks facing the Group
and have reviewed the effectiveness of the
risk management and internal control
systems, and concluded that there are no
significant failings or weaknesses in internal
controls other than certain internal control
deficiencies noted by the external auditor, see
page 98.
Interactions with shareholders
The Board aims to present a balanced and
clear view of the Group in communications
with shareholders and believes that being
transparent in describing how we see the
market and the prospects for the business is
extremely important.
We communicate with shareholders in a
number of different ways. The formal
reporting of our full- and half-year results and
quarterly production reports is achieved
through a combination of releases,
presentations, group calls and individual
meetings. The full- and half-year reporting is
followed by investor meetings across a variety
Corporate governance report continued
of locations where we meet institutional
shareholders. We also regularly meet with
existing and prospective shareholders. Absent
Covid-19 related travel restrictions, we
regularly facilitate visits to parts of the
business to give analysts and major
shareholders a better understanding of how
we manage our operations. These visits and
meetings are principally undertaken by a
combination of the CEO, CFO, Head of
Industrial Assets and Head of Investor
Relations.
In addition, many major shareholders have
meetings with the Chairman and appropriate
senior personnel, including other
Non-Executive Directors, the Company
Secretary and senior members of the
Sustainability team. The matters covered by
meetings with the Chairman and Company
Secretary include the work of the Board’s
Committees. Unfortunately, in 2021, due to
Covid-19 related restrictions, some of these
engagements have taken place virtually.
For minor shareholders, the AGM is often the
only time when direct interaction with the
Board and Management is possible. As we
again could not hold an AGM in person this
year, and in an attempt to stay close to the
spirit of a traditional AGM, all shareholders
were able to submit questions, live or in
writing, to the Chairman and CEO. Members
of the public were able to listen without
restrictions and the record of these virtual
sessions were published on our website.
AGM
The Company’s next AGM is due to be held on
28 April 2022. Full details of the meeting will
be set out in the AGM notice of meeting. All
documents relating to the AGM will be
available on the Company’s website at:
glencore.com/agm
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 95
| Corporate Governance
Ethics, Compliance and Culture (ECC) Committee
report
Other members
Gill Marcus
Peter Coates
The Committee met five times during the
year. Mr Madhavpeddi temporarily chaired the
Committee upon Dr Hayward’s retirement on
30 July. On 1 October Ms Merrin was
appointed as Chair. Remaining Committee
members served throughout the year and
attended all of the meetings. Nicola Leigh is
the secretary of this Committee.
Responsibilities
The main responsibilities of the Committee
are:
•
Overseeing the implementation of the
Group Ethics and Compliance Programme
including Group policies, standards,
procedures, guidelines, systems and
Patrice Merrin, Chair
controls for the prevention of unethical
business practices and misconduct.
•
Reviewing reports and the activities of
relevant management committees: ESG
and Business Approval Committees – see
page 44.
•
Assessing and monitoring culture to ensure
alignment with the Company’s Purpose
and Values.
•
Monitoring the Group’s stakeholder
engagement.
Main activities
During the year, the Committee’s activities
included the following:
Ethics and Compliance
•
Provided oversight of the key elements of
the Ethics and Compliance Programme,
including risk assessments, policy
implementation, training and awareness,
internal monitoring, and reviews conducted
by third party specialists.
•
Reviewed the implementation and
effectiveness of the Ethics and Compliance
Programme.
•
Reviewed the compliance structure and
resourcing to assess whether it is sufficient
for the Group.
•
Considered a variety of other material ethics
and compliance issues.
•
Reviewed and recommended to the Board
policies for Information Governance and
Market Conduct.
Stakeholder engagement
•
Reviewed and recommended to the Board
the new Code of Conduct and received
feedback on rollout.
•
Reviewed our ESG engagement, including
with NGOs and multi-stakeholder
organisations that invest or engage on ESG
issues, and track the development of
reporting on ESG related topics.
•
Considered the significant matters on
which the Group has made political
representations and our use of lobbyists
and the conduct and positions of our
member organisations during 2021 on
material issues in accordance with our
Political Engagement Policy. This included a
detailed analysis of activities in the main
countries in which the Group operates.
•
Considered regulatory developments in
relation to responsible sourcing and the
Group’s proposed planned actions.
Workforce Engagement
•
Considered management of health related
concerns, policies and communications
with a focus on mental health and
wellbeing and providing accurate Covid-19
health advice and support.
•
Considered Group HR policies, standards,
legislative compliance around the globe
and greater use of technology.
•
Reviewed policies on Equality of
Opportunity, and Diversity and Inclusion,
and the related standards.
•
Consideration of the employee campaign
and launch of the new Code of Conduct, the
Group’s Purpose and Values and ensuring
these are aligned with the Group's culture
– see the Ethics and Compliance section
starting on page 43.
•
Reporting on culture surveys: Employee
attitudes toward the Group’s Values, its
commitment to ethical behaviour and
scores covering the compliance
programme were considered in particular.
The Value and Culture index is reviewed by
the Committee and, where necessary,
corrective actions are taken. Examples in
the last year include promoting mental
health wellbeing and awareness and
ensuring there is a clear and concise
understanding by the workforce of our
Purpose, Values and Code of Conduct.
•
As part of the Committee’s role in assessing
and monitoring Group culture, individual
Non-Executive Directors held a series of
forums with a cross section of employees in
different parts of the business, representing
different commodities and different levels
of responsibility. These forums were
attended in-person where possible with
virtual engagements being held where
travel was still difficult. Discussions were
focused on topics such as diversity and
inclusion, health and safety, climate change,
compliance and Glencore’s strategy,
Purpose and Values and the feedback from
employees was shared with the Committee
and notes provided to the Board. Further
forums are planned for 2022 given the
positive feedback received from employees
on this type of Director engagement.
The Board considers having designated
workforce engagement Directors as the most
constructive method of workforce
engagement. In order for this role to be
effective, given the vast geographic reach of
the Group, the Board has chosen for all
members of this Committee to be such
workforce engagement directors. Each
Director uses the forum of this Committee to
provide feedback to the Board on the
concerns of the workforce and ensure that
employees' voices are heard in the
Boardroom.
Engagement by the Board and senior
management is covered in the Our people
section starting on page 34.
Patrice Merrin
Chair of the ECC Committee
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 96
| Corporate Governance
Health, safety, environment
& communities (HSEC) report
Peter Coates, Chair
Other members
Patrice Merrin
Cynthia Carroll
Kalidas Madhavpeddi
The Committee met five times during the
year. Ivan Glasenberg retired on 30 June 2021
and Anthony Hayward retired on 30 July 2021.
Cynthia Carroll joined the Committee on
2February 2021 and Kalidas Madhavpeddi
joined the Committee on 1 October 2021. Each
Committee member attended all meetings
during their period of appointment. Every
scheduled meeting had a substantial agenda,
reflecting the Committee’s objective of
monitoring the achievement by management
of ongoing improvements in HSEC
performance.
John Burton is the Secretary of this
Committee.
Responsibilities
The main responsibilities of the Committee
are:
•
Ensuring that appropriate Group policies
are developed in line with our Values and
Code of Conduct for the identification and
management of current and emerging
health, safety, environmental, community
and human rights risks
•
Ensuring that the policies are effectively
communicated throughout the Company
and that appropriate processes and
procedures are developed at an operational
level to implement and evaluate the
effectiveness of these policies through:
– assessment of operational performance
– review of updated internal and external
reports
– independent audits and reviews of
performance with regard to HSEC
matters, and action plans developed by
management in response to issues raised
•
Evaluating and overseeing the quality and
integrity of any reporting to external
stakeholders concerning HSEC matters
•
Reporting to the Board
Main activities
During the year, the Committee engaged in
the following activities:
•
HSEC & Human Rights Strategy: reviewing
the Group’s annual HSEC & Human Rights
strategy and its implementation
•
Governance: approved 5 new or updated
HSEC and human rights policies:
– Health and Safety Policy
– Environmental Policy
– Social Performance Policy
– Human Rights Policy
– Tailings Storage Facility Policy
•
Health and Safety: overseeing the Group’s
fatality reduction programme including
SafeWork which is Glencore’s approach to
eliminating fatalities. In 2021, a revised
SafeWork was launched through a change
project called ‘SafeWork 2.0’. There was a
detailed review of KCC given certain
challenging issues that had arisen relating
to safety and tailings management
•
Health and Safety: review of each fatality
occurring with emphasis on lessons to be
learned across the Group; oversight of a
revamping of leadership of fatality
investigations including a training
programme; reviews of critical incidents
and trends in TRIFR, LTIFR, HPRIs and other
relevant statistics
•
Environment: assessing the Group’s
strategy concerning GHG emissions,
energy, water and stewardship and other
impacts
•
Communities: reviewing material issues,
investigations and complaints
•
Social and human rights: monitoring the
Group’s strategy and reviewing serious
incidents
•
Assurance: reviewing work of the HSEC
Audit function including its training
activities
•
Enterprise Risk Management: overseeing
the development of a revised ERM standard
for the industrial business
•
Tailings storage facilities: overseeing the
work on the new Tailings Management
Policy Framework and updated Tailings
Storage Facility Standard which is now
aligned to the Global Industry Standard for
Tailings Management and the internal work
on the Group’s facilities, particularly those
designated as high risk
•
External affairs: monitoring the Group’s
external HSEC reporting, continuing
engagement on material issues and
stakeholder and investor engagement
•
Other matters: Considering a variety of
other material HSEC issues.
Peter Coates
Chair of the HSEC Committee
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 97
| Corporate Governance
Audit Committee report
Other members
Martin Gilbert
David Wormsley
The Committee met eight times during the
year, four of which related to the audit tender
only. In October 2021, Gill Marcus replaced
Kalidas Madhavpeddi as Chair of the
Committee and David Wormsley was
appointed as a member of the Committee.
Each Committee member attended all of the
meetings during their period of appointment.
All current Committee members are
considered by the Board to be Independent
Non-Executive Directors and to be financially
literate by virtue of their relevant financial
experience. As a whole, the Committee has
the skills and experience relevant to the
sector.
John Burton is the Secretary to the
Committee.
Gill Marcus, Chair
The Committee usually invites the CEO, CFO,
General Counsel, Group Financial Controller,
Chief Risk Officer and Head of Internal Audit
and the lead partner from the external auditor
to attend each meeting. Other members of
management and the external auditor may
attend as and when required. Other Directors
also usually attend its meetings.
Additionally, the Committee holds closed
sessions with the external auditors and the
Head of Internal Audit without members of
management being present. The Committee
has adopted guidelines allowing certain
non-audit services to be contracted with the
external auditors.
Role and responsibilities
The primary function of the Committee is to
assist the Board in fulfilling its responsibilities
with regard to financial risk management and
internal controls, financial reporting, and
oversight of external and internal audit.
During the year, the Committee’s principal
work included the following:
•
Reviewing the Group’s internal financial
controls and financial risk management
systems
•
Reviewing the Group’s financial and
accounting policies and practices including
discussing material issues with
management and the external auditor,
especially matters that influence or could
affect the presentation of accounts and key
figures
•
Considering the output from the Group-
wide processes used to identify, evaluate
and mitigate financial risks, including credit
and performance risks, across the industrial
and marketing activities
•
Reviewing the global audit plan, scope and
fees of the audit work to be undertaken by
the external auditor
•
Reviewing the Internal Audit department’s
annual audit plan
•
Monitoring the progress made in
remediating the internal control
deficiencies noted by the external auditor
(IT access controls and certain review
controls over journal entries and complex
valuation models). The Committee regularly
discusses these matters, the actions to
remediate them and the progress being
made with management and the external
auditor, refer to point 3 below Internal
Controls Review – UK SOX readiness
programme
•
Reviewing and agreeing the preparation
and scope of the year-end reporting
process
•
Considering applicable regulatory changes
to reporting obligations
•
Considering the scope and methodologies
to determine the Company’s going concern
and longer-term viability statements
•
Reviewing the full-year and half-year
financial statements with management
and the external auditor
•
Evaluating the Group’s procedures for
ensuring that the Annual Report and
accounts, taken as a whole, are fair,
balanced and understandable
•
Monitoring the independence of the
external auditor and the operation of the
Company’s policy for the provision of
non-audit services by the external auditor
•
Conducting a competitive tender for the
appointment of an external auditor, details
noted below
•
Recommending to the Board a resolution
to be put to the shareholders for their
approval on the appointment of the
external auditor and to authorise the Board
to fix the remuneration and terms of
engagement of the external auditor
Risk management and internal
controls review process
The Committee receives reports and
presentations at each meeting on
management of marketing and other risks
(excluding operational and sustainability risks
which are reviewed by the HSEC Committee
and compliance risks which are reviewed by
the ECC) and at least once a year considers an
in-depth study of the perceived main and
emerging risks and uncertainties and the
Group’s risk management framework as a
whole.
The Board's internal controls review processes
are outlined under Risk management and
internal control on page 95 and detailed on
pages 68-71.
External audit tender
The Audit Committee oversaw a formal and
competitive tender process during 2021 in
relation to the Group’s external auditor. The
process started in January with a review of
potential audit firms that were independent
and could therefore participate in a tender
process. After this review, two firms were
selected, KPMG LLP and Deloitte LLP, and
each was sent a Request for Proposal (RFP).
They each met with a number of members of
senior management, including regional
finance directors and heads of departments
and corporate functions. The firms were also
invited to present their capabilities that would
complement the audit in relation to IT,
compliance and sustainability. Written
responses to the RFP were submitted to a
steering committee which comprised
members of the Finance and Company
Secretarial teams and the Audit Committee
Chair. Areas of consideration included
individual and firm audit quality scores,
cultural fit, a demonstrable understanding of
the Group’s business, technical expertise and
proposed fee structure and development. The
tender was further used as an opportunity to
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 98
| Corporate Governance
Audit Committee report continued
seek input on the approach to the audit and
the Company’s external reporting given the
changes in legislation and the enhanced role
of the Audit Committee. In relation to the
outcome of the tender, the Audit Committee
recommended to the Board that Deloitte LLP
be reappointed as the Company’s external
auditor while identifying certain opportunities
for improvement by them. The Board
approved the Audit Committee’s
recommendation and the Directors will be
proposing the reappointment of Deloitte LLP
for the financial year ending 31 December
2022 and the setting of its fees at the
Company’s 2022 AGM. Deloitte LLP are
required to rotate the audit partner
responsible for the Group audit every five
years and therefore the current lead audit
partner, Geoff Pinnock, having served since
the 2018 accounting year, will rotate after the
2022 year end.
Significant issues
The Committee assesses whether suitable
accounting policies, including the
implementation of new accounting
standards, have been adopted and whether
management has made appropriate
estimates and judgements. It also reviews the
external auditor’s reports outlining audit work
performed and conclusions reached in
respect of key judgements, as well as
identifying any issues in respect of these
reports.
During the year, the Committee has focused
in particular on these key matters:
1. Audit plan review
The Committee reviewed key developments
and audit risks central to planning for the half
year review and annual audit. These included
asset valuations, DRC matters, internal
controls, scaling up of LNG commercial
activities, ongoing government
investigations and acquisition of the
remaining 66.66% interest in Cerrejon.
2. Significant accounting matters
The Committee considered a number of
current or prospective significant accounting
matters including relating to the disposal of
Mopani, TCFD disclosure requirements,
accounting for LNG contracts as well as a
number of key judgements and estimates.
3. Internal Controls Review – UK SOX
readiness programme
In response to the Corporate Reform changes
being considered in the UK regarding,
amongst other proposals, a Sarbanes-Oxley
type internal controls attestation regime, the
Committee is overseeing an intensive
management review, supported by Ernst &
Young, of the Group’s internal controls.
Initially this focused on compliance related
financial controls and then broadened to
internal controls related to financial reporting.
4. Covid-19
The Committee continued to consider the
risks to management accounting and internal
controls processes due to the effects of Covid,
including relocation of staff and inaccessibility
of some business locations.
5. Impairments
The Committee considered whether the
carrying value of goodwill, industrial assets,
physical trade positions and material loans
and advances may be impaired as a result of
commodity price volatility and some asset
specific factors including the impact of
climate change. The Committee reviewed
management’s reports, outlining the basis for
the key assumptions used in calculating the
recoverable value for the Group’s assets.
Future performance assumptions used are
derived from the Board-approved business
plan. As part of the process for approval of this
plan, the Committee considered the feasibility
of strategic plans underpinning future
performance expectations, and whether they
remain achievable. Considerable focus was
applied to management’s commodity price
and exchange rate assumptions and their
sensitivities within the models. The Group’s
interest in the Cerrejon coal asset (with the
remaining two-thirds interests to be acquired)
and the Koniambo nickel asset in New
Caledonia have been subject to particular
scrutiny. In relation to coal, there continues to
be particular focus around price outlook and
climate change related risks.
The Committee was satisfied with the
positions adopted by management.
6. Taxation
Due to its global reach, including operating in
many higher-risk jurisdictions, the Group is
subject to enhanced complexity and
uncertainty in accounting for income taxes,
particularly the evaluation of tax exposures
and recoverability of deferred tax assets. The
Committee has engaged with management
to understand the potential tax exposures
globally and the key estimates taken in
determining the positions recorded, including
the status of communications with local tax
authorities and the carrying values of deferred
tax assets. The African copper assets and tax
risk exposures in the UK have been particular
areas of focus.
The Committee was satisfied with the
positions adopted by management.
7. Counterparty exposures
The Group’s global operations expose it to
credit and performance risk, which result in
the requirement to make estimates around
recoverability of receivables, loans, trade
advances and contractual non-performance.
As part of an ongoing review, the Committee
considered material continuing exposures,
the robustness of processes followed to
evaluate recoverability and whether the
amounts recorded in the financial statements
are reasonable.
The Committee was satisfied with the
positions adopted by management.
8. Other material issues
These included going concern and long-term
viability assessments. The Committee was
satisfied with the going concern and longer-
term viability conclusions reached as set out
on page 71.
Internal and external audit
The Committee monitored the internal audit
function as described under Internal Audit on
page 70.
The Committee's assessment of the quality
and effectiveness of the external audit
process was considered as part of the audit
tender process (see previous page).
The application of the FRC’s Revised Ethical
Standard 2019, from 1 January 2021, has
introduced significantly extended restrictions
regarding the use of the Company’s external
auditor for non-audit services, to preserve the
auditor’s independence and the Group’s
non-audit services policy has been amended
accordingly.
For 2021, fees paid to the external auditor were
approximately $26 million. These included
audit related assurance services of $3 million
and non-audit fees of $1 million; further details
are contained in note 30 to the financial
statements.
Gill Marcus
Chair of the Audit Committee
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 99
| Corporate Governance
Nomination Committee Report
Other members
All other Non-Executive Directors
During the year, the Committee’s
composition was initially Patrice Merrin, John
Mack and Kalidas Madhavpeddi. Mr Coates
replaced Mr Mack on his retirement from the
Board. Following his appointment as
Chairman, Mr Madhavpeddi became chair of
the Committee and Ms Marcus replaced Ms
Merrin. From 1 January 2022, all Non-Executive
Directors became members of the
Committee.
The Committee met three times during the
year.
John Burton is the Secretary of this
Committee.
Kalidas Madhavpeddi, Chair
Role and responsibilities
The main responsibilities of the Nomination
Committee are to assist the Board with
succession planning and with the selection
process for the appointment of new Directors,
both Executive and Non-Executive, including
the Chair, and overseeing succession plans for
senior management.
This involves:
•
Evaluating the balance of skills, knowledge
and experience of the Board and identifying
the capabilities required for a particular
appointment
•
Overseeing the search process
•
Evaluating the need for Board rejunevation
and succession planning generally
•
Overseeing planning for CEO and CFO
succession
•
Monitoring the CEO’s planning for senior
management succession to seek to ensure
that the Company has a suitable pipeline of
candidates
•
Considering diversity in appointments
Main activities
The Committee focused on four main tasks
during this year.
Firstly, the Committee oversaw the
completion of the senior management
succession upon the retirement of Mr
Glasenberg and the departure of the
remaining Marketing department heads such
that the CEO and all such business leaders
were replaced during the period from the
beginning of 2019 to 30 June 2021.
Secondly, prior to the notice of 2021 AGM
being compiled, the Committee considered
the performance of each Director. It
concluded that (other than Mr Mack who had
announced his intention not to seek re-
election) that each Director is effective in their
role and continues to demonstrate the
commitment required to remain on the
Board. Accordingly, it recommended to the
Board that re-election resolutions be put for
each continuing Director at the 2021 AGM.
Thirdly, the Committee considered the
appointment of a successor to Dr Hayward as
Chairman, which led to the appointment of
Kalidas Madhavpeddi who was already a
member of the Board
Finally, the Committee oversaw overall Board
refreshment which led to the appointment of
David Wormsley, reflecting the desire for
additional financial and UK markets
experience.
The Committee acknowledged the
recommendations of the Hampton-Alexander
Review on gender and the Parker Review on
ethnic diversity. It is part of the Committee’s
policy when making new Board appointments
to consider the importance of diversity on the
Board, including gender and ethnicity, which
is considered in conjunction with experience
and qualifications. While the Board satisfies
the diversity targets set by the Hampton-
Alexander and Parker Reviews, it is
acknowledged that more work needs to be
done to address diversity at senior
management level.
Kalidas Madhavpeddi
Chair of the Nomination Committee
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 100
| Corporate Governance
Directors’ Remuneration Report
For the year ended 31 December 2021
Other members
Kalidas Madhavpeddi
Martin Gilbert
Cynthia Carroll, Chair
On behalf of the Board, I am pleased to
present Glencore’s Remuneration Report for
the financial year ended 31 December 2021,
my first as Chair of Glencore’s Remuneration
Committee.
This report is presented to reflect the
reporting requirements on remuneration
matters for companies with a UK governance
profile, particularly the UK’s Large and
Medium-sized Companies and Groups
(Accounts and Reports) (Amendment)
Regulations 2013, unless stated otherwise.
Thereport also describes how the Board has
complied with the provisions set out in the
UKCorporate Governance Code relating
toremuneration matters. Our auditors
havereported on certain parts of the
Directors’ Remuneration Report and stated
whether, in their opinion, those parts of the
report have been properly prepared. Those
sections of the report which have been
subject to audit are clearly indicated.
Our report is divided into three sections:
•
This letter from me as Chair of the
Remuneration Committee
•
Glencore’s Remuneration at a Glance
•
Our Annual Report on Remuneration
detailing the outcomes from 2021 and how
we will implement our Remuneration Policy
in 2022.
Introduction
2021 was a year of leadership transition for
Glencore as Ivan Glasenberg retired as CEO
and as a member of the Glencore Board on 30
June 2021 and Gary Nagle succeeded him in
the role of CEO and a member of the Glencore
Board on 1 July 2021.
A key focus for the Committee’s work during
the year was therefore the implementation of
the Remuneration Policy for the new CEO,
including reviewing shareholders’ feedback
and the development of frameworks,
processes and structures for the
measurement and assessment of
performance given the unusual nature of the
former CEO’s pay package.
We have been guided in our decision making
by the principles of responsible pay and
believe that our remuneration policy achieves
its intended objectives to provide due
recognition and to support Glencore’s growth
now and into the future. A number of
important considerations have informed our
decisions this year, including:
•
financial and non-financial performance;
•
the views and expectations of our
stakeholders;
•
the Company’s sustainability commitment;
•
our continued focus on capital projects and
maintaining production to meet higher
levels of global demand;
•
the ongoing impact of the Covid-19
pandemic; and
•
Glencore’s leadership transition against a
challenging operating backdrop.
Remuneration policy
2021 represents the first year of application of
the Remuneration Policy for the new CEO,
which was developed following extensive
consultation with major shareholders and
investor bodies in mid-2020. The changes to
the Remuneration Policy were guided by a
need to support the Company’s transition to a
more market aligned CEO remuneration
package, as well as its future needs as a major
global miner and one of the world’s largest
commodity trading companies.
While the Policy was approved by 74.2% of
shareholders at the 2021 Annual General
Meeting, the Committee and Board recognise
the views of those shareholders who felt they
could not support the resolution. Reflecting
the Board’s philosophy on shareholder
engagement, the Board Chairman consulted
extensively with the largest shareholders who
voted against to discuss their feedback
relating to CEO pay quantum compared to
predecessor pay levels and the performance
orientation of the Restricted Share Plan. The
diversity of feedback received was
underpinned by an acknowledgement that
the Company had sought to implement a
fit-for-purpose remuneration policy and an
expectation for transparent disclosure of the
operation of the Policy in 2021.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 101
| Corporate Governance
Directors’ Remuneration Report continued
The Company believes the Policy reflects a
more market aligned, competitive, and
fit-for-purpose remuneration, comprising:
•
a total remuneration package that is
positioned competitively but not
excessively versus the FTSE30 and a peer
group that represents the internationality,
complexity, and scale of our operations,
taking into account Glencore’s continued
growth;
•
an appropriate mix of rewards for short-
and long-term performance, with a
mandatory three-year deferral of 50% of any
bonus earned;
•
a Restricted Share Plan that rewards
sustainable value creation and commercial
effectiveness, rather than short-term share
price volatility primarily driven by
commodity price cycles, with vesting
subject to the Committee’s assessment of
robust performance underpins aligned
with the stakeholder experience;
•
one of the longest LTIP time horizons in
the FTSE to reinforce our ownership ethos,
as the CEO is unable to realise value from
restricted shares until the later of five years
from the date of award or two years
post-departure; and
•
Annual bonus and Restricted Share awards
are subject to malus and clawback
provisions to mitigate excessive risk-taking
and payment for failure.
The Committee strives to implement the
Policy in a considered way and will continue to
monitor the views of shareholders and
engage directly with them as appropriate.
Performance and incentive outcomes
in 2021
The social, economic, and political problems
presented by the Covid-19 pandemic are
without precedent in recent history. In these
challenging circumstances, under the
leadership of Gary Nagle who assumed his
role as CEO on 1 July 2021, Glencore navigated
with agility and resiliency to deliver
exceptionally strong performance in 2021,
while protecting the safety and health of our
people and host communities.
The Committee recognises that a record year
for Adjusted EBITDA depended on
management and employees around the
world during a challenging period.
In addition, Glencore remained steadfastly
focused on shaping the business for the
future, aligning the Company’s sustainability
ambitions with tangible actions throughout
the business.
In line with the new annual bonus scorecard
outlined in the Remuneration Policy, which
provides consideration for financial, safety,
climate and individual performance initiatives,
the Remuneration Committee considered
Glencore’s performance and the CEO’s
leadership during 2021 and determined that a
93.6% outcome is warranted in respect of the
outstanding performance delivered in 2021.
In reaching this decision, the Committee
considered the formulaic outcome against
the stretching targets for each financial
measure (see below) set at the start of the
year. In 2021, Glencore delivered record
Adjusted EBITDA and significantly
deleveraged its balance sheet (see page 48).
Additionally, Funds from Operations in 2021
significantly exceeded Glencore’s three-year
average. In consideration of all those factors, it
was determined that a full payout in respect
of the financial measures was warranted. The
Committee also considered performance
against the non-financial categories for which
a 96.7% payout was deemed appropriate,
including considerations such as:
•
Demonstrable progress to advance
Glencore’s safety culture, promote climate
change leadership, and embed its climate
strategy across its global operations
•
Continued portfolio simplification to focus
on larger, higher-margin, longer-life assets
essential to the transition to a low-carbon
economy, including:
– the sales of Ernest Henry and Mopani;
– a commitment to responsible ownership
and depletion through the Cerrejon
acquisition; and
– investment in energy transition
exemplified by various recycling
initiatives.
•
The roll out of a revised Code of Conduct
that set out the business principles and
values critical to Glencore’s success as a
responsible and ethical Company and
maintenance of a best-in-class Ethics and
Compliance programme
•
The CEO’s leadership during the 2021
transition year to advance Glencore’s
strategic priorities; in particular, his role in
installing new executive leadership and
management across operations and
developing a new diversity and inclusion
strategy to attract and retain the next
generation of leaders for Glencore globally.
The formulaic outcome was therefore 98.5%
of maximum opportunity. However, it was
noted that despite the strong overall
performance delivered and value creation for
shareholders, as well as a significant year-
over-year improvement in health and safety
indicators across the business, including
LTIFR and TRIFR, there were unfortunately
four tragic fatalities recorded in 2021. Any loss
of life is unacceptable and this is an important
reminder that there is still work to do to
further improve safety across all operations.
Additionally, whilst 2021 was a hallmark year of
earnings for Glencore, there is work to be
done to further bolster production levels
globally. Reflecting on Glencore’s safety
commitment and accountability for
sustainable value creation, beyond superior
financial returns, the Committee applied
downwards discretion to reduce the overall
bonus outcome by 5%, resulting in a bonus
outcome of 93.6% of maximum. Further
details of how the Committee assessed the
2021 annual bonus scorecard for the CEO are
provided in the Annual Report on
Remuneration.
The vesting outcome for the new RSP will be
disclosed for the first time in the 2024
Remuneration Report. Vesting is subject to a
holistic assessment of performance
underpins (shareholder distributions, overall
company performance, and ESG
performance) which ensures that vesting
outcomes are entirely consistent with the
stakeholder experience over the vesting
period. Further details of the Committee’s
interim assessment of these underpins are
provided in the section of this report headed
‘RSP awards vesting in 2021’.
Wider workforce considerations
The Committee is advised of pay and
conditions around the Group and considers
such information when considering executive
pay. The Head of Group HR also attends
meetings by invitation and is able to share
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 102
| Corporate Governance
Directors’ Remuneration Report continued
Remuneration for the Chairman and
Non-Executive Directors
Fees for the Chairman and Non-executive
Directors are reviewed annually and are
benchmarked against peer companies.
Based on our latest review, no changes to the
Chairman or Non-Executive Directors' base
fees will be made for 2022. In October 2021,
adjustments were made to Committee
membership fees for some Committees - see
page 117.
Engaging with shareholders
We remain committed to delivering a
transparent remuneration framework,
supported by strong governance processes,
designed to drive the right behaviours across
the whole organisation and deliver long-term
success, meeting the needs of our
stakeholders. As demonstrated by our Board
Chairman’s leadership in consulting
extensively with shareholders following our
last AGM, we welcome an open dialogue with
shareholders and look forward to receiving
your feedback and support at the upcoming
AGM.
Summary and priorities for 2022
In closing, I would like to thank the
Committee for its support during the
challenging year and our shareholders for
their constructive engagement and feedback.
Thanks also to our management team for
their decisive leadership and relentless efforts
to continue to deliver exceptional value to our
stakeholders and driving positive change, and
to our employees who worked tirelessly
throughout the year. Finally, I would like to
express my gratitude to John Mack, the
former Chair of the Remuneration
Committee, for his invaluable input and
contributions during his tenure and for
ensuring an orderly transition.
The Committee’s priorities for 2022 will
remain the continued implementation of our
remuneration policy and ensuring that our
approach to executive remuneration is fair,
responsible, and provides a dynamic
framework that can accommodate the
evolving demands of a changing business
environment and the priorities of our
shareholders and other stakeholders.
Cynthia Carroll
Chair of Remuneration Committee
15 March 2022
information about the wider workforce. In
2021, several virtual focus groups were also
conducted with the aim of promoting
employee engagement and facilitating direct
communication between employees and
Board members. Topics and issues discussed
include diversity and inclusion, safety,
business and strategy, executive and wider
workforce pay, compliance, our Purpose and
Values, and the Code of Conduct.
Remuneration in 2022
2021 was a year of significant change for Glencore during which a more market aligned,
competitive, and fit-for-purpose remuneration structure was introduced for the CEO, following
extensive consultation with shareholder and investor bodies. Given that Mr Nagle was appointed
on 1 July, the Committee was mindful of the fact that his remuneration package has only been in
place for 6 months. As a result, no changes to the remuneration are being proposed for the
following year.
Fixed Remuneration Annual Bonus Long Term Incentive
•
$1.8m Base Salary
•
Benefits/Pension
•
125% target, 250%
maximum bonus
•
50% deferred into shares
vesting on the third
anniversary, subject to
continuing employment
•
Scorecard comprises:
– 55% Financial
– 15% Safety
– 15% Climate
– 15% Individual targets
•
225% RSUs per year
•
Comprehensive underpin
focused on a holistic review
of the overall business and
ESG performance
•
Test of underpin and, subject
to satisfactory performance
based on the assessment of
the underpin, cliff vesting on
the third anniversary.
Requirement to hold all
vested restricted stock until
the later of 5-years from the
date of grant or 2 years
post-employment
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 103
| Corporate Governance
Directors’ Remuneration Report continued
Remuneration committee
Remuneration Committee meetings in 2021
The Committee formally met 4 times during
the year and considered, amongst other
matters, the Remuneration Policy and the
packages applicable to the Chairman, the
CEO and senior management, the content
and approval of the remuneration report and
the appointment of new independent
advisers.
All Committee members were considered
independent on their appointment to the
Board. Further details concerning
independence of the Non-Executive Directors
are contained on page 92.
The CEO and CFO are usually invited to attend
some or all of the proceedings of
Remuneration Committee meetings;
however, they do not participate in any
decisions concerning their own remuneration.
Similarly the Chairman is not involved in
discussions regarding his own fees.
Membership and experience of the
Remuneration Committee
The members of the Committee provide a
useful balance of skills, experience and
perspectives to provide the critical analysis
required in carrying out the Committee’s
function. Each Committee Member has had a
long career in the management of large
organisations and therefore provides
considerable experience of remuneration
analysis, design and implementation.
Role of the Remuneration Committee
The terms of reference of the Committee set
out its role. They are available on the
Company’s website at:
glencore.com/who-we-are/governance
Its principal responsibilities are to:
•
Regularly review the appropriateness and
relevance of the Remuneration Policy
•
Determine and agree with the Board the
framework for the remuneration of the
Company’s Chairman and the Chief
Executive Officer
•
Establish the remuneration package for the
CEO including the scope of pension
benefits
•
Determine the remuneration package for
the Chairman, in consultation with the CEO
•
Determine the policy for senior
management remuneration
•
Oversee schemes of performance related
remuneration (including share incentive
plans), and determine awards for the CEO
(as appropriate)
•
Ensure that the contractual terms on
termination for the CEO are fair and not
excessive
The philosophy of the Remuneration
Committee is to set the Company’s
remuneration policies and practices to
promote the long-term success of the
Company and support the implementation of
the Group’s strategy, while aligning the
interests of the Executive Directors and
executives with those of shareholders
generally. This policy has consistently
underpinned our approach to executive
remuneration.
The Committee considers corporate
performance on ESG and governance issues
when setting remuneration for the Executive
Director. Additionally, the Committee seeks to
ensure that the incentive structure for the
Group’s senior management does not raise
ESG or governance risks by inadvertently
promoting and/or rewarding behaviours that
are not aligned with the Group Values, culture
and policies.
Advisers to the Remuneration Committee
At the start of the year, the Committee
received remuneration advice from FIT
Remuneration Consultants LLP (‘FIT’). During
the year, the Committee conducted a formal
tender process following which it appointed
and received independent remuneration
advice from Mercer UK Limited (‘Mercer’), its
new independent external adviser. Mercer is a
member of the Remuneration Consultants
Group (the UK professional body for
Remuneration Consultants) and adheres to its
code of conduct. The Committee is satisfied
that the advice provided by Mercer was
objective and independent.
The fees paid for advice in respect of 2021
were: FIT $92,919 (2020: $59,554) and Mercer
$96,243 (September to December 2021).
Neither FIT or Mercer have any connection
with the Company or individual Directors.
The Head of Group HR also attends meetings
at the invitation of the Committee.
AGM Shareholder Voting
The votes cast to approve the Directors’
remuneration report, for the year ended 31
December 2020 at the AGM, held on 29 April
2021, were as follows. The factors
underpinning the votes against the policy are
discussed in the introductory letter from the
Chair of the Remuneration Committee.
Votes ‘For’ Votes ‘Against’ Votes ‘Withheld
1
’
Directors’ remuneration policy 74.21% 25.79%
(7,295,913,840 ) (2,535,818,550 ) (229,047,152 )
Directors’ remuneration report 91.30% 8.70%
(9,174,048,114 ) (873,699,107 ) (13,032,321 )
1 A vote withheld is not counted in the calculation of the proportion of votes for and against the resolution.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 104
| Corporate Governance
Directors’ Remuneration Report continued
UK corporate governance code considerations
The Committee has considered the factors set out in provision 40 of the Corporate Governance Code. In our view, the Remuneration Policy which was approved by shareholders at the 2021 AGM
addresses those factors as set out below:
Clarity: remuneration arrangements should be transparent and
promote effective engagement with shareholders and the
workforce.
Our remuneration policy and pay arrangements are clearly disclosed each year in the Annual Report. The
Remuneration Committee proactively seeks engagement with shareholders on remuneration matters.
Simplicity: remuneration structures should avoid complexity
and their rationale and operation should be easy to understand.
Our remuneration structure comprises fixed and variable remuneration, with the performance conditions for
variable elements clearly communicated to, and understood by, participants. The RSP provides a simple and
transparent mechanism for aligning Executive Director and shareholder interests.
Risk: remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks
that can arise from target-based incentive plans, are identified
and mitigated.
The rules of the annual bonus scheme and RSP provide suitable mechanisms for the Committee to reduce
award levels and are subject to malus and clawback provisions. The RSP reduces the risk of unintended
remuneration outcomes associated with complex performance conditions associated with other forms of
long-term incentive. The comprehensive RSP underpins also mitigate the risk of payments for failure.
Predictability: the range of possible values of rewards to
individual directors and any other limits or discretions should be
identified and explained at the time of approving the policy.
The RSP increases the predictability of reward values (removing the risk of potentially unintended outcomes).
Maximum award levels and discretions are set out in the policy tables and the policy includes scenario charts
showing the potential outcomes on a range of assumptions.
Proportionality: the link between individual awards, the delivery
of strategy and the long-term performance of the Company
should be clear. Outcomes should not reward poor performance.
Variable performance-related pay represents a significant proportion of the total remuneration opportunity. The
Committee considers the appropriate financial and personal performance measures each year to ensure that
there is a clear link to strategy. Discretion is available to the Committee with the ability to reduce awards if
necessary, to ensure that formulaic outcomes do not reward poor performance.
Alignment to culture: incentive schemes should drive
behaviours consistent with company purpose, values and
strategy.
The Committee seeks to ensure that personal performance measures under the annual bonus scheme
incentivise behaviours consistent with the Company’s Purpose, Values and culture. The RSP will clearly align the
Executive Director’s interests with those of shareholders by ensuring a focus on delivering against strategy
including strategy related to environmental, social and governance factors to generate long-term value for
shareholders.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 105
| Corporate Governance
Remuneration at a glance/Policy
Summary of Remuneration Policy
The table below summarises Glencore’s
remuneration policy which was approved by
shareholders at the 2021 AGM, how we have
applied this policy for the CEO for the year
ending 31 December 2021 and how we will
apply the policy for 2022. The Policy for the
Executive Directors currently only applies to
Mr Nagle as he is the only Executive Director.
Mr Nagle was appointed to the Board on 1 July
2021. Our policy is based on an extensive
external benchmarking exercise focused on
our UK-listed peer group comprising of Anglo
American, BHP, BP, Rio Tinto and Shell. This
group was chosen because the mining
companies are the best comparators for our
industrial business while, for the oil
companies, the combined industrial and
marketing business model is closely aligned
to Glencore’s activities. The full text of the
policy can be found in our 2020 Annual
Report on the Company’s website at
glencore.com/investors/reports-
results/2020-annual-report
Pay Element Purpose and link to strategy Details
2021-22 implementation
for Gary Nagle CEO
Base Salary Provides market competitive fixed
remuneration that rewards
relevant skills, responsibilities and
contribution
Reviewed annually and any
increases take account of those
applied across the wider
workforce
From 1 July 2021: US$1.8m
2022: $1.8m (no change)
Pension and
benefits
Provides basic retirement and
non-monetary benefits which
reflect local market practice
The pension opportunity and
retirement age (65) are aligned
with the requirements set for
other employees based in
Switzerland.
Non-monetary benefits include salary loss,
(long-term sickness) and accident/travel
insurance. For the retirement benefits, an
annual cap of $150k has been set
Annual Bonus Supports delivery of short-term
operational, financial and
strategic goals
On-target/maximum
opportunity (% of salary)
125%/250%
Performance conditions (and
weightings)
•
Funds From Operations (30%)
•
Net debt (15%)
•
Capex (10%)
•
Safety (15%)
•
Progress towards 2035 CO2 targets (15%)
•
Individual targets (15%)
Bonus deferral 50% of annual bonus deferred in shares for three
years
Restricted
Share Plan
Incentivises the creation of
shareholder value over the longer
term
Grant (% of salary) 225%
Vesting conditions Vesting subject to satisfactory performance
assessed with a comprehensive underpin which
is based on a holistic review of overall business
and ESG performance over the vesting period
Vesting period Three years
Holding period The latter of five years after the date of grant or
twoyears post-employment
Minimum
Shareholding
Requirement
Provides long-term alignment
with shareholders
In-post (% of pre-tax salary) 500%
Post-exit shareholding
requirement (% salary)
The lower of the shareholding at departure or
500% of salary for a period of two years
Directors’ Remuneration Report continued
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 106
| Corporate Governance
Malus & clawback
Awards subject to the applicable plan rules
governing the annual bonus and RSP are
subject to malus and clawback provisions that
allow the Committee to reduce or clawback
awards and may be applied in certain
circumstances, such as material failures in the
financial, operational, compliance, or HSEC
and HR performance of the Company and a
failure to identify and/or report such failure(s);
and any other circumstances that are deemed
to have a significant impact on the reputation
or financial prospects of the Company. These
provisions apply irrespective whether an
award is made in cash or equity.
The Committee may, in its discretion, decide
to delay vesting and therefore extend the
period during which malus and clawback may
be applied if facts come to light within the
period warranting an investigation.
Discretion and vesting subject to the
underpin
In addition to the specific discretions set out
in the policy table on the preceding page, the
Committee may exercise various discretions
related to the operation of the policy. In
particular, these include, but are not limited
to, the following:
•
the participants of the respective incentive
plans;
•
the timing of award grants, vesting and/or
payment;
•
the size of an award and/or payment (subject
to the limits set out in the policy table);
•
the determination of vesting;
•
dealing with a change of control or corporate
restructuring;
•
the determination of a good/bad leaver for
incentive plan purposes and the treatment
of pro-rating and holding periods;
•
adjustments required in certain
circumstances (e.g. rights issues, corporate
reorganisation and/or change to capital
structure); and
•
determining the appropriate performance
conditions, underpins, weightings and
targets for the annual bonus scheme and
LTI.
The holistic, qualitative judgement, which is
applied as an underpin test before final
vesting of restricted stock is confirmed, is an
important aspect to ensure that vesting is not
simply driven by a formula or the passage of
time that may give unexpected or unintended
remuneration outcomes.
The exercise of any discretion will be fully
disclosed in the applicable statement of
implementation of the policy.
Directors’ service contracts
Executive Director’s Contract
The table below summarises the key features
of the service contract for Mr Nagle.
A copy of the service contract of Mr Nagle is
available for inspection at the Company’s
registered office as noted on page 258 or as
otherwise indicated in the Notice of 2022
AGM.
Provision Service contract terms
Notice period Twelve months’ notice by
either party
Contract date 01 July 2021
Expiry date Rolling service contract
Termination Policy Summary
In practice, the facts surrounding any termination do not always fit neatly into defined
categories for good or bad leavers. Therefore, it is appropriate for the Committee to consider
the suitable treatment on a termination having regard to all of the relevant facts and
circumstances available at that time. This Policy applies both to any negotiations linked to
notice periods on a termination and any treatment which the Committee may choose to apply
under the discretions available to it under the terms of the annual bonus and long-term
incentive arrangements. The potential treatments on termination under these plans are
summarised below.
Incentives Good leaver Bad leaver
Definition If a leaver is deemed to be a
‘good leaver’; i.e. leaving
through serious ill health or
death or otherwise at the
discretion of the Committee
If a leaver is deemed to be a
‘bad leaver’; typically, voluntary
resignation or leaving for
disciplinary reasons
Annual Bonus Pro-rated bonus, typically
with the normal proportion
subject to deferral
No awards made and any
unvested awards would lapse
Deferred element of
bonuses earned
previously
Typically retained for the
balance of the deferral period
(although the Committee
may exceptionally approve
early release)
May be retained or forfeited at
Committee discretion
Restricted Share Plan Will receive a pro-rated
vesting (if applicable, subject
to the application of the
underpin at the normal
measurement date)
The Committee retains the
discretion to disapply
pro-rating however it does
not expect to use this other
than in exceptional
circumstances
All unvested awards would
normally lapse
In the event of a change of control or similar event, awards may become payable or vest early
with treatment broadly in line with that for good leavers. Rules permit a roll-over of awards in
appropriate circumstances.
The UK legislation does not require the inclusion of a cap or limit in relation to payments for loss
of office. The Committee will take all relevant factors into account in deciding whether any
discretion should be exercised in an individual’s favour in these circumstances, and the
Committee will aim to ensure that any payments made are, in its view, appropriate having
Directors’ Remuneration Report continued
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 107
| Corporate Governance
regard to prevailing best practice guidelines. The Committee may also, after taking appropriate
legal advice, sanction the payment of additional sums in the settlement of potential legal
claims and/or the provision of outplacement and similar services.
External appointments
None currently. The appropriateness of any future appointment will be considered as part of a
wider review of Directors’ interests/potential conflicts.
Potential rewards under various scenarios
The chart below is based on the following scenarios, in accordance with UK reporting
regulations:
•
Minimum: Mr Nagle’s salary of $1.8m and 2021 benefits of $80k
•
Target pay: as Minimum plus bonus at 50% of maximum plus the LTI grant
•
Maximum pay: as Target pay except bonus payable at maximum
•
Maximum plus 50%: as Maximum pay except the share price on the LTI is assumed
to increase by 50%
Directors’ Remuneration Report continued
Annual report on Remuneration
The Annual Report on Remuneration and the Annual Statement will be put to an advisory
Shareholder vote at the AGM on 28 April 2022. Sections of the report are subject to audit and
these have been flagged where applicable.
Implementation report – auditedinformation
Executive Director remuneration
The emoluments of the Executive Directors for 2021 were as follows:
Single figure table (US$’000)
Ivan Glasenberg
1
Gary Nagle
2
2021 2020 2021
Salary 723 1,447 900
Benefits3 4 4 14
Pension 29 57 24
Other4 0 – 165
Total fixed remuneration 756 1,508 1,103
Annual Bonus – – 2,105
Long-term incentives – – –
Total variable remuneration – – 2,105
Total 756 1,508 3,208
1 Mr Glasenberg retired as Chief Executive Officer on 30 June 2021 and his salary was pro rated accordingly in 2021.
2 Mr Nagle was appointed Chief Executive Officer on 1 July 2021 and his 2021 remuneration was pro rated accordingly.
3 Lunch card and unemployment insurance covered by employer, in line with all other Swiss-based employees.
4 Comprises one-time relocation benefits consisting of household goods shipment, airfare, temporary accommodation and
tax assistance.
The aggregate fees for all Non-Executive Directors for 2021 were $2,756,000 (2020: $2,884,000).
The total emoluments of all Directors for 2021 (including pension contributions) were
$6,720,000 (2020: $4,392,000). The variance between 2020 and 2021 is largely due to Mr
Glasenberg never participating in the Company’s bonus scheme and share plans, and he did
not receive any shares as part of a compensation scheme during his tenure.
Incentive outcomes for 2021
Annual Bonus
The Company has designed a bonus scorecard for Mr Nagle with a mix of financial and non-
financial measures which the Committee believes appropriately supports the achievement of
Glencore’s financial and strategic ambitions. For 2021, the annual bonus scorecard comprised
55% financial measures, 30% HSEC (safety and climate), and 15% individual targets.
Target Bonus
Fixed Remuneration
LTI Grant
LTI + 50%
Minimum Target Maximum Maximum Plus
$0
$2
$4
$6
$8
$10
$12
$14
1,880 1,880 1,880 1, 880
2,250
4,500 4,500
4,050
4,050 4,050
2,025
1,880
8,180
10,430
12,455
US$’000
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 108
| Corporate Governance
The financial targets were set at the start of the financial year based on the comprehensive
annual business planning process and in anticipation of Mr Nagle succeeding as Chief
Executive Officer on 1 July 2021. These financial targets were set to reflect challenging levels of
performance across a number of operating scenarios and price assumptions, including
historical performance delivered and the expected impact of the Covid-19 pandemic. The
non-financial targets were developed by the Board in consultation with Mr Nagle, following his
appointment as Chief Executive Officer.
The financial measures selected include Funds from Operations (FFO), Net Debt, and Capital
Expenditure (Capex). These financial measures are in line with the key metrics tracked by
Glencore’s four-year plan (2021 to 2024) developed as part of its longer-term viability
assessment. FFO was selected to measure Glencore’s ability to deliver margins and generate
cash that may be returned to shareholders or further invested in the business for growth. Net
Debt was selected to evaluate the actions taken to continuously strengthen Glencore’s balance
sheet and capital structure. Capex was selected to evaluate Glencore’s capital allocation and
progress towards pursuing business reinvestment opportunities that support the pathway to
net zero emissions. Collectively, these financial measures reinforce the importance of
advancing multiple strategies and objectives in parallel to support the Company’s long-term
viability.
The non-financial measures selected include HSEC (safety and progress towards CO2 reduction
targets), and individual objectives which, for 2021, considers individual contributions towards
portfolio simplification; maintaining a culture of ethics and compliance throughout Glencore,
and developing and nurturing Glencore’s next generation of leadership, including through the
development of a diverse and inclusive culture.
The Committee’s assessment of year-end performance is further described below.
Bonus scorecard – Financial measures
The table below sets out the 2021 performance delivered against the financial targets under the
annual bonus scorecard which comprise a total weighting of 55%.
As detailed in the Strategic Report, 2021 was an extraordinary year for Glencore. Amid the
ongoing challenges of Covid-19 and under the new leadership team, surging demand for
metals and energy products combined with swift and decisive management action enabled
Glencore to achieve record cash generation. FFO delivered in 2021 significantly exceeded the
trailing three year average of $9.3 billion and a sharp focus on achieving the optimal capital
structure for Glencore drove the reduction of net debt to $6.0 billion, from $15.8 billion in 2020,
significantly deleveraging Glencore’s balance sheet. The financial flexibility also enabled a
continued focus on investing in sustaining and expansionary capital projects, as well as
transition metals and value accretive Scope 1 and 2 reduction opportunities, in line with and
supporting the Company’s Paris-aligned total emissions reduction commitments. 2021 actual
performance delivered against each of the financial metrics exceeds the maximum level of
performance based on the performance ranges set at the beginning of the year.
Directors’ Remuneration Report continued
Financial
Measures Weighting Threshold Target Maximum
2021
Actual
Performance
Percentage
of maximum
opportunity
Funds From
Operations
30% $11.1 bn $12.3 bn $13.5 bn $17.1 bn 100%
Net debt 15% $16.0 bn $13.0 bn $10.0 bn $6.0 bn 100%
Capex 10% $5.6 bn $5.1 bn $4.6 bn $4.5 bn
1
100%
Total Financial 100%
1 Segmental basis as shown in note 2 to the financial statements, adjusted for Marketing segment lease capex and proceeds
from sales of Industrial PP&E
Bonus scorecard – Non-Financial Measures
Non-financial performance categories include safety, climate, and individual initiatives that
reflect short-term operational and strategic priorities of the business that are critical to our
continued success and are assessed based on performance in line with our business plan and
the contributions of the CEO for the six-month period from the date of his appointment. These
measures comprise a total weighting of 45%. The table below sets out the performance
delivered against these non-financial performance categories.
Reference 2021 achievements
Safety
Weighting
15%
2021 Outturn
90%
•
Drove significant year-over-year improvements in all key
health and safety indicators across the business
•
Positive multi-year trend with year-on-year improvement
exceeding 10% for Lost Time Injury Frequency Rates (LTIFR)
and Total Recordable Injury Frequency Rates (TRIFR)
•
Decrease in number of fatalities, in line with multi-year
trend, and a year-on-year improvement exceeding 45% for
the Fatality Frequency Rate (FFR)
•
Led the relaunch of the ‘SafeWork’ programme to identify
and address underlying issues in safety performance and
reinvigorate the safety culture across all operations. In 2021,
all assets were assessed against the SafeWork framework.
Identified gaps are captured in action plans, with regular
status update reporting to the Board of Directors
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 109
| Corporate Governance
Reference 2021 achievements
Progress towards
2035 CO
2
reduction
targets
Weighting
15%
2021 Outturn
100%
•
Continued to strengthen and demonstrate climate change
including the establishment of a CEO-led taskforce and
further embedding a climate change governance structure
across the organisation
•
Strengthened medium-term total emissions (Scope 1, 2, 3)
reduction target and introduced a new short-term target:
15% reduction by 2026 and 50% reduction by 2035 (both
against 2019 baseline levels), in line with the goals of the
Paris Agreement, identifying detailed pathways for
achievement.
•
Progressed the identification of carbon abatement
opportunities to support the achievement of Glencore’s
emissions reductions targets across the portfolio and
significantly expanded our Marginal Abatement Cost Curve
(MACC)
•
Assessment of the impact of carbon prices on industry cost
curves for our key commodities illustrated that our
portfolio is resilient to a range of carbon pricing scenarios
given the favourable positions that the majority of our
assets occupy on these curves
Directors’ Remuneration Report continued
Reference 2021 achievements
Individual objectives,
comprising:
•
Portfolio
simplification
•
Compliance
•
People
Weighting
15%
2021 Outturn
100%
•
Ongoing portfolio simplification through efficient and
commercially attractive disposals of Ernest Henry, Chemoil
US terminals, and the Enyo oil downstream business
•
Acquisition of Cerrejon and investments in energy
transition, illustrated by the Britishvolt joint venture, are
consistent with Glencore's climate change strategy and its
stated emissions reduction targets
•
Rolled out a strengthened Code of Conduct through a
comprehensive global campaign designed to embed our
Values of safety, integrity, responsibility, openness,
simplicity and entrepreneurialism throughout our business
•
Strengthened our Group policy framework, setting out the
commitments through which we strive to be a responsible
and ethical operator. In addition to our Values and Code,
our Group policy framework comprises a suite of policies,
standards, procedures and guidelines on various key
matters and risks to Glencore
•
Led the development of a diversity and inclusion strategy
to help Glencore attract, develop, and retain the best talent.
Year-over-year improvement and progress in line with the
Hampton-Alexander Review targets (see Our People
section, page 34)
•
Defined a new executive leadership team to bolster
leadership and management capability across the
business
•
Collaborated effectively with leadership in operations and
all functions across the Group to ensure seamless transition
to CEO role and decisively navigate the impacts of Covid-19
•
Continued to strengthen a culture of ethics and
compliance across the business by driving top-down
accountability, investing in personnel, systems, and
external assurance
Total Non-Financial 96.7%
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 110
| Corporate Governance
2021 annual bonus outcomes for the CEO
The Committee conducted a comprehensive assessment in respect of the progress achieved
against the financial and non-financial measures. As discussed above, full payout was
determined to be appropriate for the financial objectives as well as the individual and climate
objectives. A 90% payout was determined to be appropriate for the safety objective. The
combined formulaic result from the scorecard assessment was 98.5%.
The Committee also noted that despite the strong overall performance delivered and value
created for shareholders in 2021, there were also four tragic fatalities. Whilst that is the lowest
fatality rate recorded in our business since IPO, safety is of paramount importance and this is
reflected in Glencore’s ultimate ambition of zero fatalities. Therefore, any loss of life is
unacceptable and an important reminder that there is still work to do to improve Glencore’s
safety across the business. Given the scale of Glencore’s operations, maintaining the
momentum with driving the global roll out of SafeWork 2.0 remains a key priority to thoroughly
embed structures, systems, and standards to reinforce the requisite safety culture across the
business. Additionally, it was noted that whilst 2021 was a hallmark year of earnings for
Glencore, there is work to be done to deliver targeted production levels in respect of various
projects underway. Reflecting on Glencore’s safety commitment and accountability for
sustainable value creation beyond superior financial returns, the Committee applied downward
discretion to reduce the overall bonus outcome by 5%, resulting in a bonus outcome of 93.6% of
maximum.
The following table sets out the outcome of the 2021 annual bonus for Mr Nagle. Note that the
CEO was appointed on the 1 July 2021 and therefore the bonus award has been pro-rated for the
period for which Mr Nagle has been in office, resulting in an award of 50% of the annual
opportunity. Consistent with prior periods, no bonus awards have been made to Mr Glasenberg.
Max opportunity
(% of salary)
Performance
measures Weighting
Formulaic
Outturn
(% of max)
Gary Nagle 250% Financial 55% 100%
Non-financial 45% 96.7%
Total formulaic bonus outturn 100% 98.5%
Discretion applied - 5%
2021 Annual Bonus Outturn (% of maximum opportunity) 93.6%
2021 Outturn
1
$2.105 million
1 For 2021, the maximum opportunity was 250% applied to $900,000, being Mr Nagle's base salary for six months’ service.
Bonus deferral
The Remuneration Policy states that 50% of any Annual Bonus plan outcome is deferred into
shares for a period of up to three years unless otherwise determined by the Committee. The
following table sets out the number of shares that were awarded as a result of the 50% deferral.
Date of grant
Face value
of award
1
(US$) No. shares Vesting date
Gary Nagle 14 March 2022 $1.053m 216,667 13 March 2025
1 Based on a share price of $4.86 which is the Volume Weighted Average Price (VWAP) of December 2021.
RSP Awards vesting in 2021
There were no RSP awards due to vest during the year.
To provide insight into the performance orientation embedded in our Restricted Share Plan
and to ensure that the performance underpins remain appropriate in the context of market
developments and the Company’s strategy, the Committee conducted a review of the
performance delivered to date versus the RSP underpins for outstanding awards.
The performance underpins are designed to mitigate the risk of payments for failure by
enabling a reduction in vesting when: (1) shareholders do not receive the minimum distribution
required under the Company’s stated distribution policy; (2) absolute and relative shareholder
performance over the vesting period is deemed unsatisfactory; or (3) progress against ESG
initiatives, including the implementation of Company’s Ethics and Compliance programme
and the ambitious climate action transition plan is considered to be unsatisfactory. These
performance underpins enable a more holistic consideration of performance to reward
sustainable value creation and commercial effectiveness, rather than short-term share price
volatility primarily driven by commodity price cycles that is characteristic of traditional total
shareholder return-based measures commonly used in long-term incentive plans by other
mining companies.
Overall, the Committee is pleased with the performance of the company against the underpins
set at the grant of the awards which remain appropriate. A summary of the main considerations
is provided on the next page.
Directors’ Remuneration Report continued
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 111
| Corporate Governance
Weighting Performance considerations
Distributions to
shareholders
During 2021, in line with our record cash generation, we completed c.$2.8
billion of shareholder returns, being c.$1.6 billion of base distribution (in
respect of 2020 cash flows), a $500 million special distribution and $746
million of share repurchases.
For 2022, based on 2021 cash flows, we are recommending to shareholders a
$0.26 per share ($3.4 billion) base distribution, payable in two equal
instalments.
Additionally a new buyback programme of $550 million (c.$0.04 per share)
has been announced.
Company
performance
over the year
2021 was a year marked by continuing Covid-19 challenges, surging demand
for our metals and energy products, record cash flow generation for
Glencore and the transition to a new leadership team. The Group achieved
record results, with Adjusted EBITDA rising 84% to $21.3 billion. Net income
before significant items increased 267% to $9.1 billion, while significant items
reduced Net income attributable to equity holders to $5.0 billion.
For Marketing, Adjusted EBIT grew 11% to a record $3.7 billion.
For Industrial, Adjusted EBITDA of $17.1 billion was 118% higher compared to
2020, primarily reflecting strong margin growth from our copper, ferroalloys
and coal assets.
Our balance sheet health increased during the year demonstrated by
current Net debt/Adjusted EBITDA and FFO/Net debt metrics of 0.28x and
282.3% respectively, as well as significant rating headroom at our BBB+/Baa1
credit ratings.
ESG
performance
Our strong environmental performance has continued with no major or
catastrophic events.
Our safety performance has been strong, resulting in significant year-
over-year improvements in all key health and safety indicators across the
business. We have continued to demonstrate climate change leadership by
strengthening the medium-term total emissions reduction targets and
introduced a new short-term target. We have also made progress towards
the carbon footprint reduction goals.
From a governance perspective, we are committed to ensuring a culture of
ethics and compliance across the Group.
Reflecting this, we have dedicated substantial resources over the last few
years to build and implement a best-in-class Ethics and Compliance
programme and during 2021 we rolled out our strengthened Values and
Code of Conduct through a comprehensive global campaign.
2021 Restricted share plan awards
During the year ended 31 December 2021, Mr Nagle received an award of restricted shares
which may vest after a three-year period ending on 30 June 2024, subject to the achievement
of three stretching performance underpins as discussed above. The award is set out in the table
below. The value of the award has been pro-rated to reflect the period of the year that the new
CEO has been in the role since the 1st of July 2021 (i.e. 6 months). This has resulted in an award
with a value equal to half of the normal annual award.
No RSP awards were made to Mr Glasenberg.
Grant
(% of
annual salary)
Face value
of award
1
(US$’000) No. shares
2
Vesting date
3
Holding Period
4
Gary Nagle 225% 2,025 461,108 30 June 2024 5-years after grant
or 2-years
post-employment
1 Face value of award based on the 225% award opportunity multiplied by the pro-rated annual salary of $900k.
2 Based on a share price of $4.39 which was the VWAP of the month prior to award, June 2021.
3 Vesting subject to underpins described in the RSP Awards vesting in 2021 section.
4 Whichever occurs latest.
Directors’ Remuneration Report continued
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 112
| Corporate Governance
Statement of Directors’ shareholdings and interests in shares
As at 31 December 2021 the Executive Director’s shareholding in the Company is as follows:
Outstanding scheme interests at 31 December 2021 Vested scheme interests
Total of all scheme
interests as at
31 Dec 2021
Unvested scheme
interests subject to
performance
1
Unvested scheme
interests not subject
to performance
2
Total
outstanding scheme
interests As at 31 Dec 2020 As at 31 Dec 2021
Gary Nagle 461,108 – 461,108 – – 461,108
1 Includes awards under the Restricted Share Plan.
2 Exclude awards under the deferred bonus plan issued in the course of 2022.
Former Executive Director and CEO, Ivan Glasenberg, waived his rights under the Company’s share plan and did not receive any shares as part of a compensation scheme during his tenure.
Non-Executive Directors do not participate in the Company’s share plan and their interest in shares of the Company is included in the Directors’ report, page 120.
Between 1 January 2022 and the date of this 2021 Annual Report, the Executive and Non-Executive Directors' beneficial interests in the table above remained unchanged, except for the portion of
the Executive Director's 2021 bonus deferred into shares, which was granted in 2022 as disclosed above.
Plan Date of award
1
Interests at
1 January 2021
Interests awarded
during the year
Interests vested
during the year
Interests lapsed
during the year
Interests outstanding
at 31 December 2021
Date at which award
vests
Gary Nagle 21 LTIP 1 July 2021 – 461,108 – – 461,108 30 June 2024
Directors’ Remuneration Report continued
Share Ownership Guidelines
Glencore is founded on an ownership ethos and the Committee therefore promotes the critical
importance of aligning the interests of the CEO with those of shareholders. The aim is to
encourage the build-up of a meaningful shareholding in the Company over time by retaining
shares received through the RSP, pursuant to which vested shares cannot be sold until the later
of five years from the date award or two years post-departure, or from purchases in the market.
The in-post shareholding requirement for the CEO is 500% of salary. The CEO will be required to
retain the lower of: (1) actual shareholding on stepping down from the Board and (2) such
shares as then represents the policy level of 500% of salary for 2 years after stepping down
(although the Board may relax this requirement in appropriate cases) with such policy
enforceable through a requirement to lodge such shares at the Company’s request.
Director
Beneficially owned
shares as at
31 Dec 2021
Shareholding
requirement
(as % of salary)
Current shareholding
(as % of salary)
1
Shareholding
requirement met?
Gary Nagle 2,000,000 500% 564% Yes
1 The share price of £3.75 and the exchange rate of £1=US$1.35 as at 31 December 2021 has been used for the purpose of
calculating the current shareholding as a percentage of salary. Unvested awards do not count towards the satisfaction of
the shareholding guidelines.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 113
| Corporate Governance
CEO pay ratio
The table below shows the ratio of CEO single figure remuneration for 2021 to the comparable,
indicative, full-time equivalent total remuneration for employees globally, whose pay is ranked
at the 25th percentile, median and 75th percentile. As we are a global group, which is not
headquartered in the UK and whose UK employees represent less than one percent of all our
employees worldwide, we have decided to amend this comparison to all employees. Our
methodology is fully compliant with the UK Remuneration Regulations except that we have
substituted all of our employees for just the UK employees as specified in the Regulations on
the basis that this is a more meaningful comparison. The increase between 2020 and 2021 is
due to the change of CEO and the application of the renewed remuneration policy, as noted
earlier in this report.
Year Method (A)
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
2021 A $10,404
381:1
$23,530
169:1
$67,734
59:1
2020 A $8,525
177:1
$21,212
71:1
$65,025
23:1
Additional UK remuneration disclosures
Under UK laws and remuneration regulations, UK companies are also required to disclose
various data comparing the percentage change in Directors’ year-on-year remuneration
compared with employees of the listed company itself, i.e. not on a Group-wide basis. As
Glencore plc has no direct employees, there would be no non-director data to disclose. The
changes relative to the Executive Director solely relate to the change of CEO, to whom the new
policy applied for the second half of the year, and all the relevant information is included in this
report. Minor adjustments relating to Non-Executive Directors’ Committee fees are listed
below. On this basis, it was considered unnecessary to include such data.
Directors’ Remuneration Report continued
Relative importance of remuneration spend
The table below illustrates the change in total remuneration, distributions paid and net profit
from 2020 to 2021.
2021 US$m 2020 US$m
Distributions and buy-backs attributable to equity holders 2,861 –
Net income/(loss) attributable to equity holders 4,974 (1,903)
Total remuneration 6,012 5,403
The figures presented have been calculated on the following bases:
•
Distributions and buy-backs – distributions paid and shares bought back during the year
•
Net income/(loss) attributable to equity holders – our reported net income/loss in respect of
the financial year
•
Total remuneration – represents total personnel costs as disclosed in note 24 to the financial
statements which includes salaries, wages, social security, other personnel costs and
share-based payments receivable by all employees of the Group
Loss of office payments
No additional payments for loss were made.
Payments to past Directors
No payments to past Directors.
Fees retained for external Non-Executive Directorships
Not applicable.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 114
| Corporate Governance
Alignment between pay and performance
Total shareholder return (“TSR”) performance
This graph shows the value to 31 December 2021, on a total shareholder return (TSR) basis, of
£100 invested in Glencore plc on 31 December 2011 compared with the value of £100 invested in
the FTSE 350 Mining Index.
The Committee believes that the FTSE 350 Mining Index is an appropriate comparator as it
includes companies listed in London in the same sector as Glencore.
The UK reporting regulations also require that a TSR performance graph is supported by a table
summarising aspects of CEO remuneration, as shown below for the same period as the TSR
performance graph:
History of CEO remuneration
Single figure
of total
remuneration
1
(US$’000)
Annual
variable
element
award rates
against
maximum
opportunity
Long-term
incentive
vesting rates
against
maximum
opportunity
2021 Gary Nagle
2
3,208 93.6% n/a
2021 Ivan Glasenberg
3
756 – –
2020 Ivan Glasenberg 1,508 – –
2019 Ivan Glasenberg 1,503 – –
2018 Ivan Glasenberg 1,503 – –
2017 Ivan Glasenberg 1,513 _ _
2016 Ivan Glasenberg 1,509 _ _
2015 Ivan Glasenberg 1,510 _ _
2014 Ivan Glasenberg 1,513 – –
2013 Ivan Glasenberg 1,509 – –
2012 Ivan Glasenberg 1,533 – –
1 The figures in this table are reported in US dollars and have been translated to US dollars where applicable at the exchange
rates used for the preparation of the financial statements in each relevant financial year. The value of benefits and pension
provision in the single figure vary as a result of the application of exchange rates.
2 Mr Nagle was appointed Chief Executive Officer on 1 July 2021 and his salary was prorated accordingly in 2021.
3 Mr Glasenberg retired as Chief Executive Officer on 30 June 2021 and his salary was prorated accordingly in 2021.
Directors’ Remuneration Report continued
Glencore FTSE350 Mining
(100)
(80)
(60)
(40)
(20)
0
20
40
60
80
May-11 Dec-12 Dec-13 Dec-14 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21
FTSE100
(3.8)
21.7
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 115
| Corporate Governance
Non-Executive Director fees
The emoluments of the Non-Executive Directors for 2021 and 2020 were as follows:
Name
2021
Base Fees
US$’000
2020
Base Fees
US$’000
2021
Committee
Fees
US$’000
2020
Committee
Fees
US$’000
Total 2021
US$’000
Total 2020
US$’000
Non-Executive Chairman
Kalidas Madhavpeddi
1
558 122 77 66 635 188
Anthony Hayward
2
671 1,150 n/a n/a 671 1,150
Non-Executive Directors
Cynthia Carroll
3
123 n/a 61 n/a 184 n/a
Peter Coates 135 135 186 175 321 310
Martin Gilbert
4
200 200 101 100 301 300
Patrice Merrin 135 135 163 165 298 300
Gill Marcus 135 135 96 87 231 222
David Wormsley
5
40 n/a 10 n/a 50 n/a
John Mack
6
44 135 21 65 65 200
Leonhard Fischer
7
n/a 135 n/a 79 n/a 214
1 Mr Madhavpeddi was appointed as Non-Executive Chairman on 30 July 2021, from which date he was paid the Chairman’s
fee that encompasses all Committee memberships.
From 1 January to 30 July 2021, he was paid the same base fee as other Non-Executive Directors plus Committee fees. For
this period he received $156k, corresponding to a prorated base fee of $79k plus prorated committee fees of $77k. From
31July to 31 December 2021, he received a prorated Chairman fee of $479k.
2 Mr Hayward has stepped down as Non-Executive Chairman on 30 July 2021.
3 Ms Carroll was appointed as Non-Executive director on 2 February 2021.
4 Mr Gilbert is the Senior Independent Director.
5 Mr Wormsley was appointed as Non-Executive Director on 15 September 2021.
6 Mr Mack stepped down as a Non-Executive Director on 29 April 2021.
7 Mr Fischer stepped down as a Non-Executive Director on 31 December 2020.
Directors’ Remuneration Report continued
Implementation report – unaudited information
Implementation of Remuneration Policy in FY2022
This section provides details of how the Remuneration Policy will be implemented for 2022.
Fixed remuneration
Base salary Effective date Increase % Reason
Gary Nagle US$1,800k 1 January 2022 0% The pay package for the CEO
has only been in place for 6
months and therefore the
Committee decided to not
make any adjustments .
Glencore's annual pension provision for the CEO is fully aligned with the Swiss requirements
and that of other employees based in Switzerland, where the CEO is located, which at present
amounts to a maximum of c.$65,000 per annum.
Annual bonus
As the annual bonus scorecard has only been in place for 6 months, the structure of the annual
bonus will remain largely unchanged for 2022; the CEO will continue to have a maximum
opportunity of 250% of salary; 50% of any bonus earned will be deferred into shares for 3 years. A
combination of financial, safety and climate measures, as well as individual initiatives that align
with Glencore’s strategy will continue to apply.
The Committee considers that the detailed performance targets for the 2022 bonus are
commercially sensitive and that disclosing precise targets in advance would not be in the
interest of shareholders. Actual targets, performance achieved, and outturns will be disclosed
in the 2022 Annual Report so that shareholders can fully assess the basis for any payouts.
Financial Funds From Operations 30%
Net debt 15%
Capex 10%
ESG Safety 15%
Progress towards 2035 CO2 targets 15%
Individual initiatives 15%
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 116
| Corporate Governance
Restricted share plan
For 2022, the LTIP will continue to operate on the same basis as in 2021. Awards will be granted
in January 2022 to the CEO under the RSP. When considering grant levels each year, the
Committee takes account of share price performance over the preceding year. Given the share
price growth during 2021, the Committee has decided to make no adjustment to the size of the
award which will be maintained at 225% of salary.
Shares will only be released (other than to meet tax obligations) on the later of five years from
grant and two years post-employment.
In line with the approach taken in 2021, the Committee will retain discretion to approve the
vesting of these awards, subject to the satisfaction of the performance underpins following the
third anniversary of the grant, and will carefully evaluate the overall performance of the
company to ensure there is no reward for failure. In reaching its decision, the Committee will
look at both financial and non-financial performance noting that there may be short-term
trade-offs between different factors. In particular, it will consider reducing the level of vesting if
any of the following occur:
•
Failure to pay the minimum distribution required under the Company’s stated distribution
policy;
•
The overall performance and outcomes, both on absolute and relative basis, is considered by
the Committee unsatisfactory to permit full vesting;
•
ESG performance (including climate) is considered unsatisfactory to permit full vesting.
Given the complexity of the Group structure and its clear exposure to commodity price
movements, the underpin deliberately does not apply a formula driven approach to
determining vesting levels. Instead, broad discretion has been reserved to consider the position
in the round and to reduce vesting levels if the overall company financial or ESG performance is
not at an adequate level. The Remuneration Committee will make use of all relevant data points
for its review, including the Company’s Ethics and Compliance programme and climate action
transition plan to assess the progress across the Group concerning material ESG matters. In
reaching any decision, it will balance both the design principle that the default for restricted
stock is to accept lower awards levels for greater certainty of vesting and, therefore, there
should be a default to full vesting while ensuring that the Remuneration Committee considers
the overall outcome and avoids payments for failure.
Non-Executive Director fees for 2022
The annual fees are paid in accordance with a Non-Executive Director’s role and responsibilities.
The Chairman’s fee is inclusive of all his committee responsibilities. The Committee reviewed
Non-Executive Director fees in October 2021 and determined that adjustments were required
for some Committee membership fees, mostly due to the increased workload required of
Committee members. The Committee believes that the fees remain competitively positioned
against the market. The notes to the table below shows the changes to the Committees' fees.
There was no change to the base fees.
As a result, the fees payable for 2022 are as follows:
US$‘000
Non-Executive Directors base fees
Chairman 1,150
Senior Independent Director 200
Non-Executive Director 135
Committee
1
Fees:
ECC
Chair
2
60
Member
3
40
Remuneration
Chair
4
55
Member 25
Audit
Chair
4
70
Member 35
Nomination
Chair 40
Member 20
HSEC
Chair 125
Member 40
Investigations
Member 40
1 Fees do not apply to the Chairman when he is a member of a Committee.
2 There were no fees previously assigned for the Chair of the ECC Committee as the role was previously fulfilled by the
Chairman.
3 Fees for members of the ECC Committee were decreased by $10k, effective 1 October 2021.
4 Fees for the Chairs of the Remuneration Committee and Audit Committee increased by $10k each, effective 1 October 2021.
Directors’ Remuneration Report continued
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 117
| Corporate Governance
Directors’ Remuneration Report continued
Non-Executive Directors' letters of appointment and re-election
All Non-Executive Directors have letters of appointment with the Company for an initial period
of three years from their date of appointment, subject to re-election at each AGM. The Company
may terminate each appointment by immediate notice and there are no special arrangements
or entitlements on termination except that the Chairman is entitled to three months’ notice.
Copies of the letter of appointment for Non-Executive Directors are available for inspection at
the Company’s registered office address as noted on page 258.
Approval
This report in its entirety has been approved by the Committee and the Board of Directors and
signed on its behalf by:
Cynthia Carroll
Chair of the Remuneration Committee
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 118
| Corporate Governance
Directors’ Report
John Burton, Company Secretary
Introduction
This Annual Report is presented by the
Directors on the affairs of Glencore plc (the
‘Company’) and its subsidiaries (the ‘Group’
or‘Glencore’), together with the financial
statements and auditor’s report, for the year
ended 31 December 2021. The Directors’
Report includes details of the business, the
development of the Group and likely future
developments as set out in the Strategic
Report, which together form the
management report for the purposes of the
UK Financial Conduct Authority’s Disclosure
and Transparency Rule (DTR) 4.1.8R. The
notice concerning forward-looking
statements is set out at the end of the Annual
Report.
Corporate governance
A report on corporate governance and
compliance with the UK Corporate
Governance Code is set out in the Corporate
Governance report and forms part of this
report by reference.
Health, safety, environment &
communities (HSEC)
An overview of health, safety and
environmental performance and community
participation is provided in the Sustainability
section of the Strategic report. The work of the
HSEC Board committee is contained in the
Corporate Governance report.
Greenhouse gas emissions
A summary of the Group’s greenhouse gas
emissions is included on page 21.
Taxation policy
Our Tax Policy: glencore.com/group-tax-
policy and our most recent Payments to
Governments report: glencore.com/
payments-to-governments-report set out the
Company’s approach to tax and transparency
and disclose the payments to governments
made by the Group on a country-by-country
and project-by-project basis.
Exploration and research and
development
The Group’s business units carry out
exploration and research and development
activities that are necessary to support and
expand their operations.
Employee policies and involvement
Glencore has diversity and recruitment
policies that aim to treat individuals fairly and
not to discriminate on the basis of gender,
race, ethnicity, disability, religion or beliefs, or
on any other basis. Applications for
employment and promotion are fully
considered on their merits, and employees
are given appropriate training and equal
opportunities for career development and
promotion.
If disability occurs during employment, the
Group seeks to accommodate that disability
where reasonably possible, including with
appropriate training.
The Group’s Code of Conduct and other
policies support and protect the interests of
employees in a number of ways such as
requiring open, fair and respectful
communication, commitment to respect
human rights, fair and equitable conditions of
employment and, above all, a safe working
environment.
Employee communication is mainly provided
through the Group’s intranet, corporate
website and via emails. A range of information
is made available to employees, including all
policies and procedures applicable to them as
well as information on the Group’s financial
performance and the main drivers of its
business. Employee consultation depends
upon the type and location of assets or office
but includes Group-wide surveys – see the
Our people section on page 34.
Directors’ conflicts of interest
Under Jersey law and the Company’s Articles
of Association (which mirror section 175 of the
UK Companies Act 2006), a Director must
avoid a situation in which the Director has, or
can have, a direct or indirect interest that
conflicts, or possibly may conflict, with the
interests of the Company. The duty is not
infringed if the matter has been authorised by
the Directors. Under the Articles, the Board
has the power to authorise potential or actual
conflict situations. The Board maintains
effective procedures to enable the Directors
to notify the Company of any actual or
potential conflict situations and for those
situations to be reviewed and, if appropriate,
to be authorised by the Board. Directors’
conflict situations are reviewed annually.
Aregister of authorisations is maintained.
Corporate structure
Glencore plc is a public company limited by
shares, incorporated in Jersey and domiciled
in Baar, Switzerland. Its shares are listed on
the London and Johannesburg Stock
Exchanges.
Financial results and distributions
The Group’s financial results are set out in
the financial statements section of this
Annual Report.
A total capital distribution of US$0.16 per share
was paid in two instalments in 2021 in respect
of the 2020 financial year. The Board is
recommending to shareholders an aggregate
capital distribution of US$0.26 per share in
respect of the 2021 financial year as further
detailed on page 52.
Review of business, future
developments and post balance
sheetevents
A review of the business and the future
developments of the Group is presented in
the Strategic Report.
A description of acquisitions, disposals, and
material changes to Group companies
undertaken during the year is included in the
Financial review and in note 26 to the financial
statements.
Financial instruments
Descriptions of the use of financial
instruments and financial risk management
objectives and policies, including hedging
activities and exposure to price risk, credit risk,
liquidity risk and cash flow risk are included in
notes 27 and 28 to the financial statements.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 119
| Corporate Governance
Directors’ Report continued
Directors’ liabilities and indemnities
The Company has granted third party
indemnities to each of its Directors against
any liability that attaches to them in
defending proceedings brought against
them, to the extent permitted by Jersey law.
In addition, Directors and Officers of the
Company and its subsidiaries are covered by
directors & officers liability insurance.
Directors and officers
The names of the Company’s Directors and
Officers who were in office at the end of 2021,
together with their biographical details and
other information, are shown on pages 86-89.
Directors’ interests
Details of interests in the ordinary shares of
the Company of those Directors who held
office as at 31 December 2021 are given below:
Name
Number
of Glencore
Shares
Percentage
of Total Voting
Rights
Executive Director
Gary Nagle 2,000,000 0.01
Non-Executive Directors
Cynthia Carroll – –
Peter Coates 1,665,150 0.01
Martin Gilbert 50,000 0.00
Kalidas
Madhavpeddi
– –
Gill Marcus – –
Patrice Merrin 60,000 0.00
David Wormsley – –
Share capital and shareholder rights
As at 28 February 2022, the issued ordinary
share capital of the Company was
$145,862,001 represented by 14,586,200,066
ordinary shares of $0.01 each, of which
1,401,241,158 shares are held in treasury and
33,541,915 shares are held by Group employee
benefit trusts.
Major interests in shares
Taking into account the information available
to Glencore as at 28 February 2022, the table
below shows the Company’s understanding
of the interests in 3% or more of the Total
Voting Rights attaching to its issued ordinary
share capital:
Name
Number
of Glencore
Shares
Percentage
of Total
Voting
Rights
Qatar Holding 1,221,497,099 9.26
Ivan Glasenberg 1,211,957,850 9.19
BlackRock, Inc. 1,070,599,712 8.12
Aristotelis Mistakidis 435,175,134 3.30
Share capital
The rights attaching to the Company’s
ordinary shares, being the only share class of
the Company, are set out in the Company’s
Articles of Association (the ‘Articles’), which
can be found at glencore.com/who-we-are/
governance. Subject to Jersey law, any share
may be issued with or have attached to it such
preferred, deferred or other special rights and
restrictions as the Company may by special
resolution decide or, if no such resolution is in
effect, or so far as the resolution does not
make specific provision, as the Board may
decide.
No such resolution is currently in effect.
Subject to the recommendation of the Board,
holders of ordinary shares may receive a
distribution. On liquidation, holders of
ordinary shares may share in the assets of the
Company.
Holders of ordinary shares are also entitled to
receive the Company’s Annual Report and
Accounts (or a summarised version) and,
subject to certain thresholds being met, may
requisition the Board to convene a general
meeting (GM) or submit resolutions for
proposal at AGMs. None of the ordinary shares
carry any special rights with regard to control
of the Company.
Holders of ordinary shares are entitled to
attend and speak at GMs of the Company and
to appoint one or more proxies or, if the holder
of shares is a corporation, a corporate
representative. On a show of hands, each
holder of ordinary shares who (being an
individual) is present in person or (being a
corporation) is present by a duly appointed
corporate representative, not being himself a
member, shall have one vote. On a poll, every
holder of ordinary shares present in person or
by proxy shall have one vote for every share of
which he or she is the holder. Electronic and
paper proxy appointments and voting
instructions must be received not later than
48 hours before a GM. A holder of ordinary
shares can lose the entitlement to vote at GMs
where that holder has been served with a
disclosure notice and has failed to provide the
Company with information concerning
interests held in those shares. Except as (1) set
out above and (2) permitted under applicable
statutes, there are no limitations on voting
rights of holders of a given percentage,
number of votes or deadlines for exercising
voting rights.
The Directors may refuse to register a transfer
of a certificated share which is not fully paid,
provided that the refusal does not prevent
dealings in shares in the Company from
taking place on an open and proper basis or
where the Company has a lien over that share.
The Directors may also refuse to register a
transfer of a certificated share unless the
instrument of transfer is:
(i) lodged, duly stamped (if necessary), at the
registered office of the Company or any
other place as the Board may decide
accompanied by the certificate for the
share(s) to be transferred and/or such other
evidence as the Directors may reasonably
require as proof of title; or
(ii) in respect of only one class of shares.
Transfers of uncertificated shares must be
carried out using CREST and the Directors can
refuse to register a transfer of an
uncertificated share in accordance with the
regulations governing the operation of CREST.
The Directors may decide to suspend the
registration of transfers, for up to 30 days a
year, by closing the register of shareholders.
The Directors cannot suspend the registration
of transfers of any uncertificated shares
without obtaining consent from CREST.
There are no other restrictions on the transfer
of ordinary shares in the Company except: (1)
certain restrictions may from time to time be
imposed by laws and regulations (for example
insider trading laws); (2) pursuant to the
Company’s share dealing code whereby the
Directors and certain employees of the
Company require approval to deal in the
Company’s shares; and (3) where a
shareholder with at least a 0.25% interest in
the Company’s issued share capital has been
served with a disclosure notice and has failed
to provide the Company with information
concerning interests in those shares. There
are no agreements between holders of
ordinary shares that are known to the
Company, which may result in restrictions on
the transfer of securities or on voting rights.
The rules for appointment and replacement
of the Directors are set out in the Articles.
Directors can be appointed by the Company
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 120
| Corporate Governance
Directors’ Report continued
by ordinary resolution at a GM or by the Board
upon the recommendation of the Nomination
Committee. The Company can remove a
Director from office, including by passing an
ordinary resolution or by notice being given
by all the other Directors. The Company may
amend its Articles by special resolution
approved at a GM.
The powers of the Directors are set out in the
Articles and provide that the Board may
exercise all the powers of the Company
including to borrow money. The Company
may by ordinary resolution authorise the
Board to issue shares, and increase,
consolidate, sub-divide and cancel shares in
accordance with its Articles and Jersey law.
Purchase of own shares
In August 2021, the Company announced the
commencement of a buyback programme of
up to $650 million that terminated on 7
January 2022, and pursuant to which the
Company purchased 135,120,406 of its own
ordinary shares. The authority to purchase
own shares was approved by the shareholders
on 29 April 2021.
As announced on 15 February 2022, the
Company launched a new buyback
programme of $550 million, which started on
21 February 2022.
The Directors will seek a similar authority at
the Company’s AGM on 28 April 2022.
Going concern
The financial position of the Group, its cash
flows, liquidity position and borrowing
facilities are set out in the Strategic Report.
Furthermore, notes 27 and 28 to the financial
statements include the Group’s objectives
and policies for managing its capital, its
financial risk management objectives, details
of its financial instruments and hedging
activities and its exposure to credit and
liquidity risk. Significant financing activities
that took place during the year are detailed in
the Financial review section, which starts on
page 48.
The results of the Group, principally pertaining
to its industrial asset base, are exposed to
fluctuations in both commodity prices and
currency exchange rates whereas the
performance of marketing activities is
primarily physical volume driven with
commodity price risk substantially hedged.
The Directors have a reasonable expectation,
having made appropriate enquiries, that the
Group has adequate resources to continue in
its operational existence for the foreseeable
future. For this reason they continue to adopt
the going concern basis in preparing the
financial statements. The Directors have
made this assessment after consideration of
the Group’s budgeted cash flows and related
assumptions including appropriate stress
testing of the identified uncertainties (being
primarily commodity prices and currency
exchange rates) and undrawn credit facilities,
monitoring of debt maturities, and after
review of the Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting 2014 as published by the
UK Financial Reporting Council.
Longer-term viability
In accordance with provision 31 of the Code,
the Directors have assessed the prospects of
the Group’s viability over a longer period than
the 12 months required by the going concern
assessment above. A summary of the
assessment made is set out on page 71 in the
Risk Management section.
Based on the results of the related analysis,
the Directors have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall
due over the four-year period of this
assessment. They also believe that the review
period of four years is appropriate having
regard to the Group’s business model,
strategy, principal risks and uncertainties,
sources of funding and liquidity.
Auditor
Each of the persons who is a Director at the
date of approval of this Annual Report
confirms that:
a. so far as the Director is aware, there is no
relevant audit information of which the
Company’s auditor is unaware; and
b. the Director has taken all the steps that he
or she ought to have taken as a director in
order to make himself or herself aware of
any relevant audit information and to
establish that the Company’s auditor is
aware of that information.
Deloitte LLP have expressed their willingness
to continue in office as auditor and a
resolution to reappoint them will be proposed
at the forthcoming AGM.
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 121
| Corporate Governance
Directors’ Report continued
Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Annual Report and financial statements in
accordance with applicable law and
regulations.
Company law requires the Directors to
prepare financial statements for the Company
for each financial year.
The financial statements are prepared in
accordance with International Financial
Reporting Standards (IFRS) adopted by the
United Kingdom, and IFRS as issued by the
International Accounting Standards Board.
The financial statements are required by law
to be properly prepared in accordance with
the Companies (Jersey) Law 1991. International
Accounting Standard 1 requires that financial
statements present fairly for each financial
year the Company’s financial position,
financial performance and cash flows. This
requires the faithful representation of the
effects of transactions, other events and
conditions in accordance with the definitions
and recognition criteria for assets, liabilities,
income and expenses set out in the
International Accounting Standards Board’s
Framework for the preparation and
presentation of financial statements.
In virtually all circumstances, a fair
presentation will be achieved by compliance
with all applicable IFRSs.
The Directors confirm that the Annual Report
and accounts taken, as a whole, is fair,
balanced and understandable, and provides
the information necessary for shareholders to
assess the performance, strategy and
business model of the Company.
However, the Directors are also required to:
•
Properly select and apply accounting
policies
•
Present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information
•
Provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users to
understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance
•
Make an assessment of the Company’s
ability to continue as a going concern
The Directors are responsible for keeping
proper accounting records that disclose with
reasonable accuracy at any time the financial
position of the Company and enable them to
ensure that the financial statements comply
with the Companies (Jersey) Law 1991. They
are also responsible for safeguarding the
assets of the Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities. The
Directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company’s
website. The legislation governing the
preparation and dissemination of the
Company’s financial statements may differ
from legislation in other jurisdictions.
Signed on behalf of the Board
John Burton
Company Secretary
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 122
| Corporate Governance
Directors’ Report continued
Information required by Listing Rule LR 9.8.4C
In compliance with UK Listing Rule 9.8.4C the Company discloses the following information:
Listing Rule Information required Relevant disclosure
9.8.4(1) Interest capitalised by the Group See note 9 to the financial statements
9.8.4(2) Unaudited financial information as
required (LR 9.2.18)
See Chief Executive Officer’s review
9.8.4(5) Director waivers of emoluments See Directors’ remuneration report
9.8.4(6) Director waivers of future emoluments See Directors’ remuneration report
9.8.4(12) Waivers of dividends See note 19 to the financial statements
9.8.4(13) Waivers of future dividends See note 19 to the financial statements
9.8.4(14) Agreement with a controlling
shareholder (LR 9.2.2A)
Not applicable
There are no disclosures to be made in respect of the other numbered parts of LR 9.8.4.
Confirmation of Directors’
Responsibilities
We confirm that to the best of our knowledge:
•
The consolidated financial statements,
prepared in accordance with International
Financial Reporting Standards (IFRS)
adopted by the United Kingdom, and IFRS
as issued by the International Accounting
Standards Board and the Companies
(Jersey) Law 1991, give a true and fair view of
the assets, liabilities, financial position and
income of the Group and the undertakings
included in the consolidation taken as a
whole
•
The management report, which is
incorporated in the Strategic Report,
includes a fair review of the development
and performance of the business and the
position of the Group and the undertakings
included in the consolidation taken as a
whole, together with a description of the
principal risks and uncertainties they face
•
The Annual Report and consolidated
financial statements, taken as a whole, are
fair and balanced and understandable and
provide the information necessary for
shareholders to assess the performance,
position, strategy and business model of
the Company
The consolidated financial statements of the
Group for the year ended 31 December 2021
were approved on the date below by the
Board of Directors.
Signed on behalf of the Board
Kalidas Madhavpeddi
Chairman
Gary Nagle
Chief Executive Officer
15 March 2022
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 123
| Corporate Governance
This report is printed on Heaven 42 which is made of FSC
®
certified and other controlled material.
Printed sustainably in the UK by Pureprint, a Carbon Neutral
company with FSC
®
Chain of custody and an ISO
14001-certified environmental management system recycling
over 100% of all dry waste.
Designed and produced by Brunswick Creative
www.brunswickgroup.com
Useful links
Strategic Report | Financial Statements | Additional Information
Glencore Annual Report 2021 124
| Corporate Governance
2021 production tables
(Excel format)
2021 Resources and
Reserves report
Climate Report 2020:
Pathway to Net Zero
Pathway to Net Zero:
2021 Progress Report
ESG A-Z
Sustainability
Summary - 2020
Water microsite
Payments to Governments
Report - 2020
Modern Slavery
Statement - 2020
Latest Glencore
financial reports
Financial
Statements
2021
Independent Auditor’s report to the members of Glencore plc
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of Glencore plc and its subsidiaries (together “the Group”):
•
give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of the Group’s profit for the year then
ended;
•
have been properly prepared in accordance with United Kingdom adopted international accounting standards; and
International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”), and
•
have been properly prepared in accordance with Companies (Jersey) Law1991.
We have audited the financial statements of the Group which comprise:
•
the consolidated statement of income;
•
the consolidated statement of comprehensive income;
•
the consolidated statement of financial position;
•
the consolidated statement of cash flows;
•
the consolidated statement of changes of equity; and
•
the related notes 1 to 36.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted
international accounting standards and IFRSs as issued by the IASB.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the “FRC’s”) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group for the year are disclosed in note 30 to the financial statements. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard to the Group.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 125Glencore Annual Report 2021 125
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
• Government investigations;
• Impairments of non-current assets;
• Potential impact of climate change on non-current assets;
• Classification of trading contracts and arrangements which contain a financing element;
• Marketing revenue recognition and fair value measurements; and
• Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes.
Our assessment of the Group’s key audit matters is consistent with those identified in 2020.
Materiality The materiality that we used for the Group financial statements in the current year was $300 million
(2020: $175 million). We have enhanced our approach to determining materiality by adding a balance
sheet metric (net assets) in addition to our previous approach of using a 3-year average adjusted profit
before tax metric.
Scoping We focused our Group audit scope primarily on the audit work at 25 components, representing the
Group’s most material marketing operations and industrial assets. These 25 components account for
77% of the Group’s net assets, 87% of the Group’s revenue and 83% of the Group’s adjusted EBITDA
(refer to segment information in note 2 to the financial statements).
We have enhanced the description of our climate-related considerations in the scoping section in this
report providing additional background and context to our climate change risk assessment and
scoping of our audit procedures.
Significant
changes in our
approach
Other than the above and the enhancement of our approach to determining materiality, there were no
significant changes to our audit approach when compared to 2020.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting
included:
•
We considered the effect of key risks on the Group’s business model as part of our risk assessment and analysed how these
risks might affect the Group’s liquidity position, including access to capital, and thus its ability to continue to operate as a going
concern. The risks we considered to have the greatest impact are commodity prices over the forecast period, and the unutilised
funding facilities available.
•
We assessed the basis for the assumptions used in the forecast information including operational profitability, the Group’s debt
repayment obligations and capital expenditure requirements as well as undrawn facilities.
•
We assessed the downside stress scenarios applied by the directors in their analysis, in particular whether the downside
scenarios represented an appropriately robust sensitivity. We evaluated the effect of these scenarios on key metrics such as
liquidity headroom, net debt and net debt to Adjusted EBITDA over the going concern period and performed additional
sensitivities to further challenge the Group’s forecast position.
•
We assessed whether the investigations settlement and contingent liabilities could have a material effect on the Group’s ability
to continue as a going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
Independent Auditor’s report to the members of Glencore plc continued
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021126
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
5.1 Government investigations
Description of key audit matter
The Group remains the subject of certain investigations by regulatory and enforcement authorities as disclosed in notes 23 and
32 to the financial statements. The Board discussions on this matter are set out in the Corporate Governance Report on page 93
and the Group’s discussion on the Laws and enforcement principal risk in the Strategic Report set out on pages 75-76.
The Investigations Committee of the Board is overseeing the Group’s response to these investigations. The Group has engaged
external legal counsel and forensic experts (“the advisors”) to assist the Group in responding to the various investigations, to
represent it in litigation and to perform additional investigations at the request of the Investigations Committee covering
various aspects of the Group’s business.
In accordance with the accounting criteria set out under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the
judgement of the Investigations Committee (guided by the General Counsel and the Group’s external legal counsel) is required in:
•
determining whether the Group’s provision estimate to resolve the U.S., UK and Brazilian investigations is complete and
accurate, and that the related disclosures made by the Group on the nature, timing and associated uncertainties relating to the
provision as required by IAS 37 are adequate; and
•
evaluating whether a present obligation exists for the ongoing Swiss and Dutch investigations and potential additional
follow-on investigations or claims, and whether the disclosure of these as contingent liabilities is adequate.
On 15 February 2022, the Group announced that it presently expects to resolve the U.S., UK and Brazilian investigations in 2022.
Accordingly, and based on the Company’s current information and understanding, the Group has recognised a provision as at 31
December 2021 in the amount of $1,500 million representing the Company’s current best estimate of the costs to resolve these
investigations – refer note 23.
At 31 December 2021, taking all available evidence into account, with respect to the Swiss and Dutch investigations and any
potential additional investigations or claims, the Investigations Committee concluded that it is not probable that a present
obligation existed at the end of the reporting period. The timing and amount, if any, of financial effects (such as fines, penalties
or damages, which could be material) or other consequences, including external costs, from any of the various investigations or
claims and any change in the investigations’ scope is not possible to predict or estimate. Consequently, no liability has been
recognised, nor has any estimate of the contingent liability been disclosed, in relation to these matters in the consolidated
statement of financial position at 31 December 2021. The Group continues to cooperate with the Swiss and Dutch authorities –
refer note 32.
We identified the following matters that led us to consider this to be a key audit matter:
•
the risk that the provision made by the Group is not complete and accurate, and the related disclosure made by the Group on
the nature, timing and associated uncertainties relating to the provision as required by IAS 37 is inadequate; and
•
the risk that the judgement on the probability that a present obligation did not exist for the Swiss and Dutch investigations
and potential additional investigations or claims is inappropriate, and the disclosure of these as contingent liabilities may not
be adequate.
How the scope of our audit responded to the key audit matter
In response to the investigations by regulatory and enforcement authorities we performed the following:
General procedures
•
We gained an understanding of the Investigations Committee’s and General Counsel’s process and internal controls for
reviewing the IAS 37 assessment and review of the disclosures in the Annual Report.
•
We attended regular briefings from the General Counsel and the Group’s external legal counsel during the year.
•
We assessed the competence, capability and objectivity of all the key advisors used by the Group.
•
We considered whether the advisors’ scope and outcomes were sufficient to inform the Investigations Committee’s
assessment and representation of whether a present obligation exists and the adequacy of the provision made at
31 December 2021.
•
We reviewed documents from the investigating authorities and the internal meeting minutes of the Investigations Committee.
•
We obtained an understanding of the stage of each investigation and process being followed by each regulatory and
enforcement authority in reaching resolution with Glencore from the Glencore General Counsel and gave direct challenge to
and sought confirmation from external counsel on each matter.
•
We performed a benchmark of Glencore’s disclosure against announced resolutions of similar magnitude with similar
regulatory and enforcement authorities.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 127
Independent Auditor’s report to the members of Glencore plc continued
Completeness and accuracy of provision made in respect of the U.S., UK and Brazilian investigations
•
We agreed the provision amount to supporting documents from relevant authorities, where available. In the absence of these,
we sought independent confirmation from relevant external legal counsel on the status of engagement with the authorities
and a confirmation of the provision amounts under negotiation.
•
In our challenge of the provision calculation prepared by management’s experts, we utilised Deloitte forensic specialists and
audit team members familiar with the relevant trading businesses to:
•
challenge the use of the methods selected, the significant assumptions applied, and the sources of data used by
management and its advisors, including testing the reconciliation to documents from the enforcement authorities;
•
directly challenge the work performed by management’s experts by performing walk through procedures on a sample of
items included in the calculation and reperforming the provision calculation; and
•
challenge the assumptions adopted for those assumptions where a range of outcomes is possible and reperform the range
of outcomes calculation.
•
We enquired of the General Counsel and reviewed a memorandum prepared by the Group’s independent external counsel to
determine whether the conduct currently taken into account in the provision calculation is complete based on known
information to date.
•
We challenged the adequacy of the Group’s disclosure in describing the nature, timing and associated uncertainties relating to
the provision recognised.
Appropriateness of contingent liability assessment and relevant disclosures in relation to the ongoing Swiss and Dutch
investigations, and potential additional follow-on investigations or claims
•
We enquired of the Investigations Committee, the General Counsel and the Group’s external legal counsel as to their
awareness of known or likely non-compliance with laws and regularions from the Swiss and Dutch investigations to date which
could indicate the existence of a present obligation at 31 December 2021, and whether any such non-compliance could result in
a potential material outflow (penalty or fine).
•
We obtained direct written confirmation from Swiss and Dutch legal counsel as to the current stage of the Swiss and Dutch
investigations respectively, and their assessment of the probability of a present obligation existing at the reporting date.
•
Having regard to potential additional follow-on investigations or claims, we enquired of the General Counsel and obtained
written confirmation from external legal counsel on the potential for additional follow-on investigations or claims, and their
assessment of the probability of a present obligation existing at the reporting date.
•
Working with our Deloitte forensic specialists, we considered whether the Investigations Committee’s conclusions were
reasonable that a present obligation did not exist at the end of the reporting period and that the timing and amount, if any, of
financial effects from any of these investigations and any change in their scope is not possible to predict or estimate.
Key observations
Based on the results of our procedures, we concluded that:
• the provision recognised in respect of the U.S., UK and Brazilian investigations is reasonable and in accordance with the
requirements of IAS 37;
• the financial statement disclosures relating to the investigations by regulatory and enforcement authorities (note 23),
including key judgement and estimation uncertainty sensitivities, are appropriate and in accordance with the requirements
of IAS 37 and IAS 1; and
• the contingent liability disclosures made covering the ongoing Swiss and Dutch investigations, and potential future
investigations and/or claims (note 32), are complete, appropriate and in accordance with the requirements of IAS 37 and
IAS 1.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021128
5.2 Impairments of non-current assets
Description of key audit matter
The carrying value of the Group’s non-current assets within the scope of IAS 36 Impairment of assets includes intangible assets,
property, plant and equipment (“PPE”), non-current advances and loans, and investments in associates and joint ventures,
which amounted in total to $65,215 million at 31 December 2021. Refer to notes 7, 9, 10, 11 and 12.
In assessing the recoverability of non-current assets, management must make significant assumptions about factors such as:
•
expected future prices of commodities key to the Group (particularly coal, oil, copper, cobalt, zinc, ferroalloys and nickel), foreign
exchange rates, production levels, operating costs and discount rates;
•
future mining and tax legislation, and political and other macro-economic developments;
•
responses to climate change impacts by regulators and consumers, which could negatively impact demand for the Group’s
products, particularly coal (refer to ‘Potential impact of climate change on non-current assets’ key audit matter below); and
•
geological and other operational challenges that could negatively affect an asset’s performance over time.
For non-current advances and loans, the Group is also exposed to credit and performance risk arising from risks related to
non-performance by the counterparty, particularly in markets demonstrating significant price volatility with limited liquidity
and terminal markets, where suppliers may be incentivised to default on delivery and customers may be unwilling to take
contracted deliveries or be unable to pay. Assessing counterparty performance, solvency and liquidity risks can be highly
subjective.
When an impairment or impairment reversal indicator exists in the Group’s significant assets and investments, management
completes an impairment review.
As disclosed in note 7, pre-tax impairments totalling $1,452 million were recorded in PPE and intangible assets and $484 million
of impairments were recognised in investments and non-current VAT receivables. In addition, $98 million of pre-tax impairment
reversals were recognised in advances and loans.
The outcome of impairment or impairment reversal assessments can vary significantly if different assumptions are applied as
further described in the sensitivity disclosures made by the Group within “Key sources of estimation uncertainty” in notes 1 and
note 7, as well as the Audit Committee Report on page 99.
We have identified a potential risk of fraud through management bias due to the significant estimation uncertainty and
subjectivity in certain judgements and key assumptions applied by management in its impairment and impairment reversal
assessment.
How the scope of our audit responded to the key audit matter
General procedures
•
We considered management’s assessment of impairment risk and its assessment of the indicators of impairment or
impairment reversal, and performed an independent assessment of impairment and impairment reversal indicators.
•
We analysed management’s determination of relevant cash-generating units (“CGUs”) by reference to the requirements of the
accounting standards and our understanding of the nature of the mining operations and the extent to which active markets
are considered to exist for intermediary products.
•
We obtained an understanding of the methodology applied by management in developing its impairment and impairment
reversal assessments, which included understanding the inherent subjectivity and complexity of underlying key assumptions,
as well as relevant controls in management’s impairment and impairment reversal assessment process.
•
For non-current advances and loans, we obtained an understanding of management’s method of assessing these assets for
impairment, which included obtaining an understanding of relevant controls in the Group’s centralised and local credit and
performance risk monitoring processes.
Challenge of key model assumptions and overall reasonableness of impairment or impairment reversal assessment
•
We challenged the significant macroeconomic assumptions used and the data sources on which these assumptions were
based.
•
We considered the risk of management bias in macroeconomic forecast assumptions and estimates with the support of
Deloitte valuations specialists by analysing management’s inputs against third party forecast data, Deloitte’s independent
assessment of discount rates, and reconciliations to latest internal budget information.
•
Where indicators of impairment or impairment reversal were identified, we performed detailed testing on management’s
impairment calculations and where appropriate based on our risk assessment, we utilised Deloitte valuation and mining
specialists to assess the reasonableness of management’s underlying model inputs and key assumptions, and the basis for
technical mining, operational and financial inputs (e.g. price, discount rate, reserve and resource estimation, production
parameters, grade and recovery rates, resource conversion rates, and operating and capital costs). Production and cost
assumptions were analysed against historical performance as well as approved budgets and life of mine (“LOM”) plans, where
applicable, and minable tonnes assumptions were assessed against reserves and resources estimates.
•
We assessed the competence, capability and objectivity of management’s experts responsible for preparing the resources and
reserves statements.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 129
Independent Auditor’s report to the members of Glencore plc continued
•
We assessed the appropriateness of key mine-specific assumptions and the judgements taken in applying these assumptions
within the LOM models, such as the incorporation of price-specific discounts or premiums, changes in tax legislation or other
legal or regulatory assumptions (e.g. rehabilitation provisions).
•
We performed a stand back assessment and evaluated management’s impairment or impairment reversal assessment for any
evidence of management bias in assumptions and judgements applied.
•
We challenged management’s assessment of recoverability of advances and loans by reviewing supporting agreements and
obtaining evidence of current performance, historical patterns of trading and settlement, correspondence with the third party
and any other information we are aware of that may influence the third party’s ability to perform.
•
We evaluated the adequacy of impairment related disclosures in the financial statements, including the key assumptions used
and the completeness and accuracy of sensitivities disclosed.
•
For climate related impairment matters, please refer to our key audit matter under 5.3 below.
Key observations
Based on the results of our assessment of management’s methodology for impairment and impairment reversal testing and
modelling, we concluded that the methodology applied complies with the accounting framework, and that management’s
assessment of impairment indicators was appropriate. We found that the level of management review and documentation
retained relating to certain judgements and key assumptions in complex models requires improvement and considered this
finding in our audit response.
We concluded that key assumptions to which impairment or impairment reversal outcomes were sensitive were reasonable in
comparison to historical actuals achieved, third party evidence and/or our specialists’ judgements.
Based on the results of our testing, we concluded that the recoverable amounts for the CGUs tested were within an acceptable
range of outcomes, although certain assumptions applied are subject to high levels of estimation uncertainty. We considered
management’s disclosures on key assumptions and impairment or impairment reversal sensitivities and found them to be in
compliance with IFRS requirements.
We concluded that the Group’s impairment charge in relation to non-current loans and advances and non-current VAT
receivables was appropriate.
5.3 Potential impact of climate change on non-current assets
Description of key audit matter
As described on pages 82-83 and 19-26 of the Annual Report, climate change is a material issue that can affect Glencore’s
business through currently enacted and prospective regulations to reduce carbon emissions and ultimately limit extreme
climate events. This may impact the company through increased costs through carbon pricing mechanisms, access to capital
and changes in energy prices amongst others.
In December 2020, the Group published its climate change strategy, Pathway to Net Zero which set out the pathway to
delivering its climate-related targets and longer-term ambition of becoming a net-zero total emissions company by 2050. In
December 2021, the Group published its Pathway to Net Zero: 2021 Progress Report detailing the steps taken during the year to
identify and implement emission reduction opportunities and to make progress in the seven priority areas identified in the
Group’s climate strategy.
As outlined in Note 1, Glencore’s exposure to assets that produce fossil fuels relates mainly to its coal mining operations in
Australia, South Africa and Colombia and its Astron oil refining asset in South Africa. It also has goodwill in its coal marketing
CGU. All of these assets are long-term in nature and, other than goodwill which is not required to be amortised, none are being
depreciated or amortised over a period that extends beyond 2050. There are also rehabilitation liabilities linked to the coal and
oil producing assets and the Astron refinery totalling $1,996 million ($3,843 million undiscounted). At 31 December 2021, the
carrying values of fossil fuel producing assets and linked rehabilitation liabilities make up 26% of total non-current assets and 5%
of total non-current liabilities respectively.
In note 1 to the financial statements, the Group identifies the accounting measurement and disclosure impacts of assets and
liabilities that are most impacted by climate change and Glencore’s climate commitments, including:
•
estimation of the carrying value of certain assets exposed to climate change risk impacted by demand and supply for the
Group’s commodities, related commodity pricing and carbon pricing;
•
estimation of the remaining useful economic life of assets for depreciation and amortisation purposes; and
•
estimation of timing of rehabilitation and decommissioning closure activities.
To test the resilience of its portfolio to the impacts of climate change, the Group has developed a number of downside scenarios
including:
•
Current Pathway scenario, consistent with the IEA Stated Policies scenario (STEPS);
•
Rapid Transition scenario, consistent with IEA Sustainable Development scenario (SDS); and
•
Radical Transformation scenario, consistent with the IEA Net Zero Emissions by 2050 scenario (NZE2050).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021130
In addition to the above, the Group has also run downside scenarios against the IEA’s Announced Pledges Scenario (APS) and its
own Complete Displacement Scenario (CDS).
In note 1, Glencore has presented illustrative climate related sensitivities based on IEA pricing assumptions for 2020, 2030 and
2050 which differ from management’s best estimate of forecast pricing and has applied the 2020 IEA price as a starting point.
Management’s sensitivity therefore illustrates the combined effect of assuming weaker short term prices (than management has
assumed in its base case), together with weaker long-term prices as a result of decarbonisation as illustrated in the respective IEA
scenarios. We identified a key audit matter relating to the financial impacts of climate change on the Group and the impact on
key judgements and estimates within the financial statements, and the consistency of reporting in the Strategic and Corporate
Governance reports on pages 1-124 with the financial impacts in the financial statements. Our audit focused on the following
areas in particular:
•
Glencore’s coal pricing assumptions used to asssess its coal producing assets for impairment or impairment reversals;
•
the appropriateness of Glencore’s useful life assessment of fossil fuel producing assets based on anticipated demand for coal
and oil in the medium to long term;
•
the appropriateness of Glencore’s judgement that carbon costs will likely be passed on to the consumer (refer pages 22-23 and
the climate change related considerations in note 1 for details);
•
the valuation of goodwill relating to its coal marketing cash generating unit which is based on an earnings multiple approach of
12x (down from 15x in 2020) (refer note 10);
•
the appropriateness of the timing of rehabilitation cash flows at operations that produce fossil fuels; and
•
the consistency between Glencore’s announced climate related targets and the above areas.
How the scope of our audit responded to the key audit matter
Coal pricing
•
As the availability of long-term (“LT”) coal pricing and demand and supply market data (particularly for coal produced outside of
Australia) is extremely limited, we engaged valuation experts to analyse historical price correlations between the three primary
coal benchmark prices: Newcastle (Australian coal benchmark) which has the largest number of brokers forecasting data, API 4
(South African coal benchmark) and API 2 (North West Europe coal benchmark for the sale of the Group’s Colombian coal). This
assessment was used to extrapolate a forward curve against which we challenged Glencore’s forecast price assumptions.
•
We compared Glencore’s LT coal pricing to pricing assumptions provided by brokers and the IEA’s STEPS scenario noting that
some adjustments were required to the IEA’s data to ensure comparability (e.g. appropriate freight adjustments, etc).
•
We considered management’s updated illustrative sensitivities in note 1, and challenged whether these presented
contradictory evidence to management’s conclusion that there were no further impairment indicators relating to the Group’s
thermal coal assets.
Asset useful lives
•
We evaluated Glencore’s coal production profile against the IEA scenarios and evaluated the consistency of management’s
internal modelling with its external climate reporting.
•
With the support of South African refinery specialists, we challenged the useful life of the Astron’s oil refinery by evaluating a
third party expert report commissioned by management (that covered the period up to 2035), as well as data on oil demand
expectations provided by the IEA up to 2050. We also considered factors such as the refinery’s geographical and competitive
landscape in our assessment.
•
We challenged management’s assessment of useful lives and the basis used to depreciate/amortise physical and intangible
assets.
•
We assessed whether any assets’ useful lives exceeded management’s modelled life of mine/asset of the operation.
Carbon costs
•
We analysed the IEA’s World Energy Outlook 2021 report and evaluated management’s position on carbon pricing against the
IEA’s assessment of carbon costs.
•
We challenged the consistency of management’s modelling of carbon costs with commodity price assumptions, evaluating
whether forecast assumptions included or excluded these anticipated increases in costs.
•
We reviewed management’s position paper on global demand and supply balance and the impact that carbon costs would
have on the highest cost producers and challenged management’s position that carbon costs are likely to be passed on to the
end consumer.
•
We performed our own sensitivities analysis on carbon costs.
Marketing coal goodwill
•
We determined an independent range of price to earnings multiples based on companies with coal trading, coal production or
coal logistics exposure to evaluate the reasonableness of management’s use of the earnings multiple approach.
•
We obtained management’s value in use calculation which is based on a bottom-up assessment of forecast trading volumes
and margins. We challenged management’s assumptions on coal volumes with reference to Glencore’s declining volume
production and scenarios provided by the IEA.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 131
Independent Auditor’s report to the members of Glencore plc continued
Rehabilitation provisions
•
We updated our understanding of the current and any proposed legislative requirements and considered the impact on the
timing of the rehabilitation provision.
•
We challenged the timing of planned rehabilitation activities of Glencore’s fossil fuel operations and whether modelled cash
flows aligned with management’s announced plans of winding down coal production by 2050.
•
We re-performed the calculations behind management’s sensitivity analysis to assess the impact of management’s 3 and 5
year accelerations to forecast cash flows of all rehabilitation provisions impacting fossil fuel producing CGUs.
Consistency between Glencore’s announced targets and accounting policies
•
We have used Deloitte climate and sustainability specialists to challenge the Group’s climate change narrative and related
disclosures.
•
We have read the other information included in the annual report and considered whether there was any material
inconsistency between the other information and the financial statements, or whether there was any material inconsistency
between the other information and our understanding of the business based on audit evidence obtained and conclusions
reached in the audit.
•
We considered whether management’s sensitivity and estimation uncertainty disclosures were adequate in the context of
climate change risks and uncertainties.
Key observations
With respect to Glencore’s base case assessment of coal pricing assumptions we found Glencore’s longer term Newcastle
pricing assumptions to be above broker ranges, and the API 4 and API 2 prices were at the upper end of our acceptable range.
When comparing Glencore’s assumptions to the IEA’s data points, we found their assumptions to be higher than the IEA’s
STEPS forecast. Aligning Glencore’s base case commodity pricing assumption within our acceptable range did not result in
impairment.
In light of the current pricing environment for thermal coal, we concur with management’s disclosure in Note 1 that no
reasonably possible change in key assumptions would result in a material impairment in the next financial year.
With respect to the illustrative climate related sensitivities provided in note 1, and whether these contradict management’s
impairment conclusions and our related audit conclusions, we observed that management’s illustrative sensitivities reflect the
combined effect of adopting the IEA’s long term price assumptions based on the various IEA climate scenarios, together with
the effect of adopting the 2020 IEA price as a starting point for short term price assumptions. The short term price assumptions
in these sensitivities do not therefore reflect the benefit of the current pricing environment which has increased significantly
over the 2020 price assumptions referenced in the IEA’s report, and accordingly we are satisfied that these do not contradict
management’s assessment that an impairment is not reasonably possible within the next financial year. We further calculated
that applying Glencore’s contemporary short to medium price assumption up to 2025 instead of the IEA STEPS sensitivity price
assumptions as described in Note 1, and then reverting to the IEA STEPS price assumptions from 2026 onwards, would not
result in an impairment for thermal coal assets. We consider management’s position on carbon pricing to be reasonable and
concur with management that it is a key judgement (refer “Climate change related considerations” within note 1).
We concluded that the assumed timing of anticipated restoration, rehabilitation and decommissioning cash flows associated
with Glencore’s fossil fuel related assets was reasonable. We found management’s sensitivity disclosures in note 1 to be
appropriate.
We found no material inconsistencies between management’s coal and oil impairment modelling, rehabilitation forecasts or
asset useful lives as set out in note 1 and its stated response to climate change as described in the Strategic Report.
We concluded that reasonable consideration and weight had been given by management to the likely impacts of climate
change in the valuation for impairment testing purposes of its coal assets, Coal marketing business CGU and oil refining assets
at 31December 2021.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021132
5.4 Classification of trading contracts and arrangements which contain a financing element
Description of key audit matter
Glencore trades a diverse portfolio of commodities and utilises a wide variety of trading strategies in order to profit from
volatility in market prices, differentials and spreads whilst maximising flexibility and optionality.
The classification of contracts relating to the Group’s Marketing segment can be complex, particularly distinguishing the
Group’s regular marketing contracts, which are measured at fair value through profit or loss, from those sales contracts where
the Group physically delivers its own production to a third party with no history or intention of net settlement (“own use”), which
are exempt from fair value measurement (i.e. mark-to-market accounting).
During 2021 the Group entered into a number of long term liquified natural gas (“LT LNG”) supply contracts. As these contracts
are entered into for trading of LNG and there is an established practice of net settlement in LNG trades, these contracts have
been classified as derivatives under IFRS 9 Financial Instruments and are required to be measured at fair value through profit or
loss.
Transactions for the sale or purchase of commodities may contain a financing element, such as prepayments or extended
payment terms, which may require judgement in determining the most appropriate accounting classification, presentation
and disclosure.
Refer to notes 1, 21, 22 and 25.
How the scope of our audit responded to the key audit matter
•
We obtained an understanding of the trading strategies and associated product flows within the Group’s marketing
departments, including gaining an understanding of the relevant controls over market risk management using financial
instrument specialists embedded within the audit team with experience in commodity trading.
•
We analysed the trade books to understand unusual or complex derivatives open at year-end. We also analysed the trading
results for portfolios designated as “own use” for evidence of any net settlements, which may indicate potential tainting of the
IFRS 9 Financial Instruments “own use” criteria.
•
We challenged management’s judgement and conclusion associated with the classification and accounting for the new
longer term LNG contracts by evaluating the key characteristics of Glencore’s business model to confirm whether it is to trade
LNG rather than act as a physical distributor/wholesaler and confirmed that there is a past practice of net settling certain
contracts.
•
We challenged management’s judgement and conclusions associated with the classification and accounting for new
significant arrangements and/or significant changes to existing arrangements containing a financing element. Our challenge
included evaluation of the commercial substance of the arrangements in the context of applicable IFRS guidance and
industry practice.
•
We assessed the adequacy of related disclosures in the financial statements in accordance with the requirements of IFRS.
Key observations
Based on our procedures, we are satisfied that the significant judgements applied in the classification of contracts, and
arrangements with a financing element, were appropriate, and the respective accounting treatment and disclosures are in
accordance with the requirements of IFRS.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 133
5.5 Marketing revenue recognition and fair value measurements
Description of key audit matter
Marketing revenue for the year (prior to inter-segment eliminations) was $181,764 million (2020: $124,137 million). Refer to note 1
for the revenue recognition accounting policies and note 2 for segment information. The increase in revenues year-on-year is
principally due to the impact of higher commodity prices amid resurgent global demand and widespread supply challenges.
Glencore generates revenue as a fee-like income from physical asset handling and arbitrage, as well as blending and trade
optimisation opportunities. Judgement is required to determine when control is transferred under certain contractual
arrangements with third parties, and there is a particular risk in transactions that occur close to period end which contain
complex terms and have a significant gross margin impact and/or may be reversed in a subsequent period.
Marketing related activities depend on the reliability of the trade capture systems and their IT infrastructure environment. As
the majority of the Group’s trades and marketing inventories are measured at fair value through profit or loss (through either
revenue or cost of goods sold), a complete and accurate trade capture process that includes all specific and bespoke terms
within the commodity contracts is critical for accurate financial reporting and monitoring of trade book exposures and
performance.
Determination of fair values can be a complex and subjective area, requiring significant estimates, particularly where valuations
utilise unobservable inputs and are classified as ‘Level 3’ as established by the hierarchy set out in IFRS 13 Fair value
measurements (e.g. price differentials, medium and long term LNG pricing assumptions, credit risk assessments, market
volatility and forecast operational estimates).
At 31 December 2021, total ‘Level 3’ financial assets and liabilities amounted to $996 million and $454 million respectively. We
refer readers to “Critical accounting judgements” within note 1 and additionally notes 28 and 29.
Due to the abovementioned key judgement and estimation uncertainty areas, as well as the fact that substantially all output
from industrial assets is sold by the Group’s marketing divisions, we have identified revenue recognition and fair value
measurements in the Marketing segment as a key audit matter.
How the scope of our audit responded to the key audit matter
•
We reviewed Glencore’s accounting policies on revenue recognition and fair value measurements to assess compliance with
the requirements of IFRS.
•
We tested relevant controls surrounding the completeness and accuracy of trade capture and the revenue and trade cycle.
•
We tested general IT controls surrounding major technology applications and critical interfaces involving revenue recognition
and the completeness and accuracy of trade capture.
•
We utilised data analytics tools to enhance audit effectiveness over large transaction volumes tracing realised revenue to
cash receipts.
•
We traced, on a sample basis, recorded sales occurring on or around 31 December 2021 per the trade book system to relevant
shipping documents to assess whether the IFRS revenue recognition criteria were met for recorded sales.
•
We tested the accuracy and completeness of unrealised trades as of the reporting date by tracing and agreeing a sample of
trades entered into around the year-end from source documents to the trade book system.
•
We tested relevant internal controls over management’s fair value measurement processes and performed detailed
substantive testing of the related fair value measurements on a sample basis.
•
We have embedded financial instrument specialists with experience in commodity trading within our team, and tested
management significant unobservable inputs utilised in ‘Level 3’ measurements in the fair value hierarchy as set out in notes
28 and 29 to the financial statements. This work included assessing management’s valuation assumptions against
independent price quotes, recent transactions, and other relevant documentation. For the LT LNG contracts we assessed
management’s modelling techniques used in extrapolating the directly observable inputs.
Key observations
Based on the results of our testing, we are satisfied that the revenue recognition policies are in line with IFRS and were
appropriately applied throughout the period. In addition, we are satisfied that the ‘Level 3’ fair value measurements are
supported by reasonable assumptions in line with recent transactions and/or externally verifiable information. We found the
financial statement disclosures on fair value measurements to be appropriate.
Independent Auditor’s report to the members of Glencore plc continued
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021134
5.6 Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes
Description of key audit matter
The global tax environment is complex, particularly with respect to cross border transactions. Furthermore, the interpretation
and application of tax legislation in certain jurisdictions in which the Group operates can be unclear and unpredictable. There
continues to be an increase in enforcement activities, and increasingly stringent interpretations of existing legislation by local
revenue authorities.
These developments give rise to complexity and uncertainty in respect of the calculation of income taxes and deferred tax
assets and consideration of contingent liabilities associated with tax years open to audit and other exposures. The accounting
interpretation IFRIC 23 Uncertainty over Income Tax Treatments is used by the Group together with IAS 12 Income Taxes to
assess and measure the uncertainty over income tax treatments.
As disclosed in notes 1 and 8:
•
Management has updated its assessment of uncertain tax positions and the recognition and recoverability of deferred taxes. In
recognising a liability for these taxation exposures, consideration was given to the range of possible outcomes to determine the
Group’s best estimate of the amount to provide. As at 31 December 2021, the Group has provided $880 million (2020: $1,189
million) for uncertain tax liabilities related to possible adverse outcomes of these matters.
•
At 31 December 2021 the Group has recorded total deferred tax liabilities of $4,469 million (2020: $4,721 million) and total
deferred tax assets of $1,779 million ($2,252 million).
The most significant estimation uncertainty relates to the DRC:
•
During 2018, the DRC parliament adopted a new mining code (2018 Mining Code) which introduced wide-ranging reforms
including the introduction of higher royalties, a new Super Profits Tax regime and further regulatory controls. The uncertainties
of the 2018 Mining Code, specifically the application and interpretation of the Super Profits Tax, remain.
•
During 2020 and 2021, tax authorities in the DRC have challenged the tax filings; some matters have subsequently been agreed
while others are still outstanding. The Group is currently responding to the challenges raised.
Further estimation uncertainty arises from the challenges of forecasting future taxable profits in various jurisdictions given the
inherent volatility of trading results.
As a result, we have identified a risk of material misstatement of the liability for uncertain tax positions and the valuation of
deferred tax assets due to the significant estimation uncertainty and subjectivity in certain judgements and key assumptions
applied by management, whether arising from management bias or unintentional error. Refer Audit Committee reporting on
page 99.
How the scope of our audit responded to the key audit matter
We engaged Deloitte tax specialists to assist in executing the following audit procedures:
•
We challenged management’s assessment of uncertain tax positions by reviewing correspondence with local tax authorities
and reviewing third party expert tax opinions where appropriate, to assess the adequacy of associated liabilities and disclosures
having consideration of the IFRIC 23 guidance.
•
We considered the appropriateness of management’s assumptions and estimates to support the recognition of deferred tax
assets with reference to forecast taxable profits. We challenged the appropriateness of management’s tax utilisation models by
comparing these forecasts against the relevant entities’ budgets or underlying asset LOM plans.
•
We assessed the adequacy of disclosures in the financial statements in relation to deferred tax assets, and liabilities for
uncertain tax positions, and the respective sensitivity disclosures provided.
•
In respect of tax exposures in the DRC:
•
we challenged management’s position by inspecting correspondence with local tax authorities, reviewing third party expert
tax opinions where appropriate, and utilising Deloitte local DRC tax specialists to assess the probability and extent of
outflows from the challenges or expected challenges from the various tax authorities;
•
we challenged the adequacy of associated liabilities and disclosures having consideration of IFRIC 23 guidance;
•
in respect of the recognition of a full deferred tax asset in Kamoto Copper Company (“KCC”), we challenged management’s
position regarding uncertainties arising from the application of the 2018 Mining Code and current challenges received from
the DRC tax authorities on open tax years; and
•
we assessed the adequacy of disclosures in the financial statements in relation to the KCC deferred tax asset and the
respective sensitivity disclosures provided.
Key observations
Based on our audit work, we concur that the recorded liabilities for uncertain tax positions and deferred tax assets and related
disclosures are appropriate.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 135
6. Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group materiality
and performance
materiality
Group materiality: $300 million (2020: $175 million, 2019: $250 million)
Group performance materiality: $195 million (2020: $114 million, 2019: $175 million)
The increase in materiality is driven by significantly higher adjusted profit before tax compared to the
prior year.
300
175
250
195
114
175
136
68
105
12
9
12
US$ million
Group materiality Performance materiality Maximum allowed component
performance materiality
Audit Committee
reporting threshold
2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019
Basis for
determining
materiality and
performance
materiality
We have enhanced our approach to determining materiality by adding a balance sheet metric (net
assets) to our previous approach of using a 3-year average adjusted profit before tax metric. Based on our
professional judgement, we determined materiality to be $300 million which is:
• 5.9% of three-year average adjusted profit before tax
• 0.8% of net assets
Performance materiality
Group performance materiality for the 2021 audit has been set at $195 million being 65% of Group
materiality (2020: $114 million being 65% of Group materiality). We maintained a factor of 65% to
determine performance materiality based on our past experience and low number of uncorrected
misstatements identified in the prior years as well as the ongoing risks associated with remote working
on the company’s internal control environment. Component audit procedures are scoped with
reference to the component performance materiality (see ranges applied below).
Component materiality
Due to the diversified nature of the Group’s operations, we have historically applied a maximum
allowed component performance materiality such that our component level procedures are set at a
level that is commensurate with the contributions of each component. The maximum permitted
performance materiality for individual components which were of a significant size to the Group was
$136 million (2020: $68 million). The actual performance materiality applied to individual components
ranged from $13 million to $136 million.
Independent Auditor’s report to the members of Glencore plc continued
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021136
Rationale for the
benchmark
applied
3-year average adjusted PBT (unchanged from prior years)
Using a 3-year average continues to be an effective approach in the mining industry to normalise a
profit orientated benchmark that is highly exposed to cyclical commodity price fluctuations. This
benchmark is further normalised for items, which due to their nature and variable financial impact and
/ or expected infrequency of the underlying events, are not considered indicative of the continuing
operations of the Group (such as impairment charges, losses disposals of businesses, and the
government investigations provision). The absence of these normalisation steps results in a volatile
materiality that may not represent the scale of the Group’s operations. In evaluating the changes in
Glencore’s environment and the evolving stakeholder focus areas, net debt and the impact of climate
change on asset valuations have become important metrics for stakeholders. As an emerging risk,
we’ve observed that the impact of climate change is not necessarily captured in a mining company’s 12
month performance but rather on the company’s business model and long-term decision making,
which includes access to capital. Incorporating a net assets metric into our approach improves the
alignment of our materiality with the scale of the business and focus areas of investors.
Net assets as an additional benchmark
In evaluating the changes in Glencore’s environment and the evolving stakeholder focus areas, net debt
and the impact of climate change on asset valuations have become important metrics for stakeholders.
As an emerging risk, the impact of climate change is not necessarily captured in a mining company’s 12
month performance but rather on the company’s business model and long-term decision making,
which includes access to capital. Incorporating a net assets metric into our approach improves the
alignment of our materiality with the scale of the business and focus areas of investors.
Range approach to determining materiality
We consider a range approach to be appropriate to capture the upper and lower bounds of a
reasonable materiality level that takes into consideration both of the above benchmarks. We then
selected a point within that range that, in our professional judgement, appropriately reflects the
sensitivity of the users of the financial statements to Glencore’s current year performance and financial
position.
The selected group materiality of $300 million amounts to 2.5% of current year adjusted pre-tax profit
without the effect of averaging (2020: 11.4%).
Error reporting
threshold
We agreed with the Audit Committee that we would report all individual audit differences in excess of
$15 million (2020: $9 million), as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 137
7. An overview of the scope of our audit
7.1 Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment and assessing the risks of material
misstatement at the Group level. Our scoping considered both quantitative and qualitative factors including a component’s
contribution to financial metrics (Revenue, Adjusted EBIT, Adjusted EBITDA, and non-current assets), production output and
qualitative criteria, such as being a significant development project or exhibiting particular risk factors. Based on our assessment,
we scoped in audit work at 25 components (2020: 38 components), representing the Group’s most material marketing operations
and industrial assets.
Our Group audit utilised the work of 14 component audit teams (2020: 22 component audit teams) in 12 countries (2020: 16
countries). The decrease in the number of components and component teams compared to the prior period is primarily due to
the aggregation of 7 components into one single Copper Group component, following a change in the Group’s reporting
structure in 2021.
The following audit scoping was applied:
•
12 components (2020: 19 components) were subject to a full scope audit; and
•
13 components (2020: 19 components) were subject to specified audit procedures where the extent of our testing was based on
our assessment of the risk of material misstatement of certain specific financial balances and / or processes and of the
materiality of the Group’s operations at those locations.
These 25 components account for 77% of the Group’s net assets (2020: 80%), 87% of the Group’s revenue (2020: 88%) and 83% of
the Group’s Adjusted EBITDA (2020: 91%).
At the parent entity level, we tested the consolidation process and carried out analytical procedures to confirm our conclusion
that there was no reasonable possibility of a risk of material misstatement in the aggregated financial information of the
remaining components not subject to audit or audit of specified account balances.
17%
60%
23%
●
Full audit scope
●
Specific audit procedures
●
Review and
analytical procedures
Net assets
3%
84%
13%
Revenue
83%
17%
Adjusted
EBITDA
7.2 Working with other auditors
Detailed audit instructions were sent to the auditors of these in-scope components. These instructions identified the significant
audit risks, other areas of audit focus, the account balances, classes of transactions and disclosures considered material and their
relevant risks of material misstatement as assessed by the Group audit team. The instructions also set out the audit procedures to
be performed and set out the information to be reported back to the Group audit team and other matters relevant to the audit.
Due to the global Covid-19 pandemic and the resulting travel restrictions, on-site meetings were limited to component teams in
Switzerland. As a result, the Group audit team increased the frequency of phone and video calls with component auditors, and
performed a virtual online programme of detailed reviews of the component audit teams’ files.
For all in-scope components, the Group audit team was involved in the audit work performed by the component auditors
through a combination of provision of referral instructions, regular interaction with the component teams during the year, review
and challenge of related component inter-office reporting and of findings from their work (which included the audit procedures
performed to respond to risks of material misstatement), and attendance during component audit closing conference calls.
7.3 The impact of climate change on our audit
Climate change impacts Glencore’s business in a number of ways as set out in the Strategic report on pages 19-26 of the Annual
Report and Note 1 to the financial statements.
In planning our audit, the financial impacts on the Group of climate change and the transition to a low carbon economy were
considered where these factors have the potential to directly or indirectly impact key judgements and estimates and related
assumptions within the financial statements. We worked with Deloitte internal environmental specialists in considering potential
climate change risk factors. Our risk assessment was based on:
•
enquiries of senior management to understand the potential impact of climate change risk including physical risks to
producing assets, the potential changes to the macro economic environment and the potential for the transition to a low
carbon environment to occur quicker than anticipated;
•
reading and considering Glencore’s climate change report and position papers;
Independent Auditor’s report to the members of Glencore plc continued
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021138
•
consideration together with each of our component teams of immediate and possible longer-term impacts of climate change
in their jurisdiction; and
•
reading and considering external publications by recognised authorities on climate change such as the IEA’s World Energy
Outlook amongst others.
The principal audit risk that we have identified for our audit is that coal forecast assumptions (particularly coal price assumptions
and the expected economic lives of these assets) used in management’s impairment testing may not appropriately reflect
anticipated changes in supply and demand due to climate change and the energy transition.
Our response to this principal audit risk and other climate risks that we considered relevant to the audit have been summarised in
the Key Audit Matter, ‘Potential impact of climate change on non-current assets’ above.
7.4 Our consideration of the control environment
Glencore relies on the effectiveness of a number of IT systems and applications to ensure that financial transactions are recorded
completely and accurately. The main financial accounting, reporting, trading and treasury systems were identified as key IT
systems relevant to our audit. For the marketing business we planned to test and rely on key manual and automated controls
over the revenue business process, as discussed in the “Marketing revenue recognition and fair value measurements” key audit
matter above. Industrial activities are generally decentralised and thus the design of controls and testing approach varies
between components, except for revenue where a controls reliance approach was adopted for third-party revenue across all
components which was new in 2021.
The IT systems which are primarily managed from the centralised IT function in Switzerland were evaluated by IT specialists who
were part of the Group audit team. Other IT systems were evaluated by component IT specialists to determine whether these IT
systems could be relied upon. IT control deficiencies relating to the review of user access rights and the management of
privileged access accounts were identified in a number of entities within the Group. As a result of these deficiencies, certain
component teams were unable to adopt a controls-based audit approach in the current year. Accordingly, these teams extended
the scope of audit procedures in response to the identified control deficiencies. Where centrally managed IT systems were
similarly impacted, mitigating controls were identified and / or additional procedures were performed in order to adopt a control
reliance approach.
At certain components of the Group, we observed insufficient segregation of duties around the posting of manual journal entries
and a lack of evidence and precision of review and approval of manual journal entries. We modified our approach to auditing
manual journal entries by assessing compensating controls and by enhancing our selection criteria in the testing of manual
journal entries.
As described in the Impairment of non-current assets key audit matter above, we found that the level of review and
documentation retained relating to certain judgements and key assumptions in complex models requires improvement.
The Audit Committee has discussed these internal control deficiencies, and management`s actions to remediate them on
page98. As deficiencies in the control environment increase the risk of fraud and error within the financial statements, we
performed additional procedures to respond to the potential risks, including the risk of fraud as outlined below.
8. Other information
The other information comprises the information included in the annual report other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 139
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our auditor’s report..
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
11.1 Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with
laws and regulations, we considered the following:
•
the nature of the industry and sector, control environment and business performance including the design of the Group’s
remuneration policies, key drivers for remuneration, bonus levels and performance targets;
•
the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error;
•
the results of our enquiries of senior management, internal audit, members of the legal, risk and compliance functions, and the
Audit and Investigations Committees about their own identification and assessment of the risks of irregularities, including
obtaining and reviewing the Group’s documentation of its policies and procedures relating to:
•
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-
compliance;
•
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
and
•
reviewing internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
•
the matters discussed among the engagement team, including significant component audit teams, and relevant internal
specialists, including forensic, tax, mining, valuations and IT, regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud
and identified the greatest potential for fraud in the following areas:
•
the use of agents and intermediaries in certain higher-risk jurisdictions, and other higher-risk transaction types;
•
key sources of estimation uncertainty within management’s provisioning for ongoing regulatory investigations and the testing
of impairment of non-current assets within the scope of IAS 36 Impairment of Non-current Assets;
•
the use of supply chain finance arrangements and their classifications and disclosure within trade creditors;
•
key sources of estimation uncertainty in management’s recognition and measurement of deferred tax assets and uncertain tax
positions;
•
the judgement that LNG forward physical transactions meet the definition of a derivative and are accordingly accounted for at
fair value through profit and loss; and
•
valuation of unrealised forward physical positions.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of
those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this context included Companies (Jersey) Law 1991, Primary and
Secondary Listing Rules, Disclosure Guidance and Transparency rules, the UK Corporate Governance code and related guidance
and relevant tax laws.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements
but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included
the US Foreign Corrupt Practices Act, the US Anti-Money Laundering regulations, the UK Bribery Act 2010 and the Group’s
operating licences and environmental regulations in the jurisdictions in which it operates.
Independent Auditor’s report to the members of Glencore plc continued
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021140
11.2 Audit response to risks identified
As a result of performing the above, we identified “Government investigations”, “Impairments of non-current assets”,
“Classification of trading contracts and arrangements which contain a financing element“, “Marketing revenue recognition and
fair value measurements” and “Taxation: Uncertain tax positions and the recognition and recoverability of deferred taxes” as key
audit matters related to the potential risk of fraud or non-compliance with laws and regulations. The key audit matters section of
our report explains the matters in more detail and also describes the specific procedures we performed in response to those key
audit matters.
In addition, our procedures to respond to risks identified included the following:
•
enquiring of management, the Audit Committee, the Investigations Committee, General Counsel and the Group’s external
legal counsel concerning actual and potential litigation and claims;
•
enquiring of management, the Audit Committee, the Investigations Committee, General Counsel and the Group’s external
legal counsel regarding whether the Group is in compliance with laws and regulations relating to fraud, money laundering,
bribery and corruption;
•
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with relevant regulatory and taxation authorities, where applicable;
•
obtaining an understanding of the Group’s business relationships with agents and intermediaries in certain high risk
jurisdictions and rationale for appointment;
•
scrutinising higher risk expense accounts for evidence of improper payments in high risk jurisdictions;
•
performing audit procedures to identify and investigate suspicious payments to government officials, agents and
intermediaries by means of adding search parameters to our journal entry testing for key words relevant to potential fraudulent
payments;
•
working with our Deloitte forensic specialists to evaluate fraud risk factors and support the engagement team in performing
certain audit procedures as required;
•
challenging management’s key judgements and assumptions for determining the recoverable amounts and credit
adjustments for trade advances, and provisioning for uncertain tax positions;
•
used analytical tools to identify unrealised forward physical positions of increased audit interest and challenged the method
and inputs to those valuations;
•
used analytical tools to confirm the completeness of management’s identification of transactions that may indicate supply
chain financing features, and challenged the nature of such supply chain financing arrangements and whether they qualify for
separate disclosure or classification as debt;
•
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
•
performing focused analytical procedures on key financial metrics of non-significant components to identify any unusual or
material transactions that may indicate a risk of material misstatement and evaluating the business rationale of such
transactions;
•
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions
of relevant laws and regulations described as having a direct effect on the financial statements; and
•
addressing the risk of fraud through management override of controls by testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made by management in making accounting estimates indicate a
potential bias and evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members,
including internal specialists and all component audit teams, and remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 141
Independent Auditor’s report to the members of Glencore plc continued
Report on other legal and regulatory requirements
12. Opinion on other matters prescribed by our engagement letter
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
provisions of the UK Companies Act 2006 as if that Act had applied to the company.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance
Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
•
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified (set out on page 121);
•
the directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and why the
period is appropriate (set out on page 121);
•
the directors’ statement on fair, balanced and understandable (set out on page 122);
•
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks (set out on page 95);
•
the section of the annual report that describes the review of effectiveness of risk management and internal control systems (set
out on pages 68-84); and
•
the section describing the work of the audit committee (set out on pages 98-99).
14. Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies (Jersey) Law, 1991 we are required to report to you if, in our opinion:
•
we have not received all the information and explanations we require for our audit; or
•
proper accounting records have not been kept by the parent company, or proper returns adequate for our audit have not been
received from branches not visited by us; or
•
the financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1 Auditor tenure
Following the recommendation of the Audit Committee, we were initially appointed by the Board of Directors on 22 August 2011
to audit the financial statements of Glencore plc for the year ending 31 December 2011 and subsequent financial periods.
Following a competitive tender process, we were reappointed as auditor of Glencore plc for the period ending 31 December 2023
and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and
reappointments of the firm as auditor of Glencore plc is 11 years, covering the years ending December 2011 to December 2021. The
Engagement Partner has rotated twice during this period, with the most recent rotation being after the 2017 audit.
15.2 Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with
ISAs (UK).
16 Use of our report
This report is made solely to the company’s members, as a body, in accordance with Article 113A of the Companies (Jersey) Law,
1991. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial
statements form part of the ESEF-prepared Annual Financial Report filed on the National Storage Mechanism of the UK FCA in
accordance with the ESEF Regulatory Technical Standard ((‘ESEF RTS’). This auditor’s report provides no assurance over whether
the annual financial report has been prepared using the single electronic format specified in the ESEF RTS.
We have provided assurance on whether the annual financial report has been prepared using the single electronic format
specified in the ESEF RTS and have reported separately to the members on this.
Geoffrey Pinnock, CA (SA)
for and on behalf of Deloitte LLP
Recognised Auditor
London, UK
15 March 2022
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021142
Statement of income
Consolidated statement of income
For the year ended 31 December 2021
Statement of income
US$ million | Notes | 2021 | 2020 |
Revenue | 3 | ||
Cost of goods sold | ( | ( | |
Selling and administrative expenses | ( | ( | |
Share of income from associates and joint ventures | 11 | ||
Loss on disposals of non-current assets | 4 | ( | ( |
Other income | 5 | ||
Other expense | 5 | ( | ( |
Impairments of non-current assets | 7 | ( | ( |
Reversal of impairments/(impairments) of financial assets | 7 | ( | |
Dividend income | 11 | ||
Interest income | 6 | ||
Interest expense | 6 | ( | ( |
Income/(loss) before income taxes | ( | ||
Income tax (expense)/credit | 8 | ( | |
Income/(loss) for the year | ( | ||
Attributable to: | |||
Non-controlling interests | ( | ( | |
Equity holders of the Parent | ( | ||
Earnings/(loss) per share: | |||
Basic (US$) | 18 | ( | |
Diluted (US$) | 18 | ( | |
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
US$ million | Notes | 2021 | 2020 |
Income/(loss) for the year | ( | ||
Other comprehensive income/(loss) | |||
Items not to be reclassified to the statement of income in subsequent periods: | |||
Defined benefit plan remeasurements | 24 | ( | |
Tax (charge)/credit on defined benefit plan remeasurements | ( | ||
Loss on equity investments accounted for at fair value through other comprehensive income | 11 | ( | ( |
Tax charge on equity investments accounted for at fair value through other comprehensive income | ( | ( | |
(Loss)/gain due to changes in credit risk on financial liabilities accounted for at fair value through profit and loss | ( | ||
Net items not to be reclassified to the statement of income in subsequent periods | ( | ||
Items that have been or may be reclassified to the statement of income in subsequent periods: | |||
Exchange loss on translation of foreign operations | ( | ( | |
(Loss)/gain on cash flow hedges1 | ( | ||
Cash flow hedges reclassified to the statement of income1 | ( | ||
Tax (charge)/credit on cash flow hedges reclassified to the statement of income | ( | ||
Share of other comprehensive loss from associates and joint ventures | 11 | ( | ( |
Net items that have been or may be reclassified to the statement of income | ( | ( | |
Other comprehensive income/(loss) | ( | ||
Total comprehensive income/(loss) | ( | ||
Attributable to: | |||
Non-controlling interests | ( | ( | |
Equity holders of the Parent | ( | ||
1Certain prior year balances have been restated to conform with current year presentation to show gross movements in the cash flow hedge reserve.
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of financial position
As at 31 December 2021
US$ million | Notes | 2021 | 2020 |
Assets | |||
Non-current assets | |||
Property, plant and equipment | 9 | ||
Intangible assets | 10 | ||
Investments in associates and joint ventures | 11 | ||
Other investments | 11 | ||
Advances and loans | 12 | ||
Other financial assets | 28 | ||
Inventories | 13 | ||
Deferred tax assets | 8 | ||
Current assets | |||
Inventories | 13 | ||
Accounts receivable | 14 | ||
Other financial assets | 28 | ||
Income tax receivable | 8 | ||
Prepaid expenses | |||
Cash and cash equivalents | 15 | ||
Assets held for sale | 16 | ||
Total assets | |||
Equity and liabilities | |||
Capital and reserves – attributable to equity holders | |||
Share capital | 17 | ||
Reserves and retained earnings | 17 | ||
Non-controlling interests | 34 | ( | ( |
Total equity | |||
Non-current liabilities | |||
Borrowings | 21 | ||
Deferred income | 22 | ||
Deferred tax liabilities | 8 | ||
Other financial liabilities | 28 | ||
Provisions1 | 23 | ||
Post-retirement and other employee benefits1 | 24 | ||
Current liabilities | |||
Borrowings | 21 | ||
Accounts payable | 25 | ||
Deferred income | 22 | ||
Provisions | 23 | ||
Other financial liabilities | 28 | ||
Income tax payable | 8 | ||
Liabilities held for sale | 16 | ||
Total equity and liabilities | |||
1In the current year, post-retirement and other employee benefits have been disaggregated from provisions. The prior year balances have been restated to conform with current year presentation.
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of cash flows
For the year ended 31 December 2021
US$ million | Notes | 2021 | 2020 |
Operating activities | |||
Income/(loss) before income taxes | ( | ||
Adjustments for: | |||
Depreciation and amortisation | |||
Share of income from associates and joint ventures | 11 | ( | ( |
Streaming revenue and other non-current provisions | ( | ( | |
Loss on disposals of non-current assets | 4 | ||
Unrealised mark-to-market movements on other investments2 | 5 | ( | ( |
Impairments | 7 | ||
Other non-cash items – net1,2 | |||
Interest expense – net | 6 | ||
Cash generated by operating activities before working capital changes, interest and tax | |||
Working capital changes | |||
Increase in accounts receivable3 | ( | ( | |
Increase in inventories | ( | ( | |
Increase/(decrease) in accounts payable4 | ( | ||
Total working capital changes | ( | ( | |
Income taxes paid | ( | ( | |
Interest received | |||
Interest paid | ( | ( | |
Net cash generated by operating activities | |||
Investing activities | |||
Net cash received from/(used in) disposal of subsidiaries | 26 | ( | |
Purchase of investments | ( | ( | |
Proceeds from sale of investments | |||
Purchase of property, plant and equipment | ( | ( | |
Proceeds from sale of property, plant and equipment | |||
Dividends received from associates and joint ventures | 11 | ||
Net cash used by investing activities | ( | ( | |
1See reconciliation below.
2Prior year balances relating to mark-to-market movements on other investments of $
3Includes movements in other financial assets, prepaid expenses and long-term advances and loans.
4Includes movements in other financial liabilities, provisions and deferred income.
Other non-cash items comprise the following:
US$ million | Notes | 2021 | 2020 |
Net foreign exchange losses | 5 | ||
Closed site rehabilitation costs | 5 | ||
Closure and severance costs | 5 | ||
Share based and deferred remuneration costs | 20 | ||
Legal and regulatory proceedings | 5/23 | ||
Other | ( | ||
Total | |||
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of cash flows continued
For the year ended 31 December 2021
US$ million | Notes | 2021 | 2020 |
Financing activities1 | |||
Proceeds from issuance of capital market notes2 | |||
Repayment of capital market notes | ( | ( | |
Repurchase of capital market notes | ( | ( | |
Repayment of revolving credit facility | ( | ( | |
Proceeds from other non-current borrowings | |||
Repayment of other non-current borrowings | ( | ( | |
Repayment of lease liabilities | ( | ( | |
Margin (payments)/receipts in respect of financing related hedging activities | ( | ||
(Repayment of)/proceeds from current borrowings | ( | ||
Proceeds from U.S. commercial papers | |||
Proceeds received on acquisition of non-controlling interests in subsidiaries | |||
Payments on acquisition of non-controlling interests in subsidiaries | ( | ( | |
Return of capital/distributions to non-controlling interests | ( | ( | |
Purchase of own shares | 17 | ( | |
Distributions paid to equity holders of the Parent | 19 | ( | |
Net cash used by financing activities | ( | ( | |
Increase/(decrease) in cash and cash equivalents | ( | ||
Effect of foreign exchange rate changes | ( | ||
Cash and cash equivalents, beginning of year | |||
Cash and cash equivalents, end of year | |||
Cash and cash equivalents reported in the statement of financial position | |||
Cash and cash equivalents attributable to assets held for sale | 16 | ||
1Refer to note 21 for reconciliation of movement in borrowings.
2Net of issuance costs relating to capital market notes of $
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of changes of equity
For the year ended 31 December 2021
Retained earnings | Share premium | Other | Own | Total reserves and retained earnings | Share capital | Total equity attributable to equity holders | Non-controlling interests (Note 34) | Total | |
1 January 2020 | ( | ( | ( | ||||||
Loss for the year | ( | ( | ( | ( | ( | ||||
Other comprehensive (loss)/income | ( | ( | ( | ( | ( | ( | |||
Total comprehensive loss | ( | ( | ( | ( | ( | ( | |||
Own share disposal1 | ( | ||||||||
Equity-settled share-based expenses2 | |||||||||
Change in ownership interest | ( | ( | ( | ( | ( | ||||
Reclassifications | ( | ||||||||
Distributions paid5 | ( | ( | |||||||
31 December 2020 | ( | ( | ( | ||||||
Retained | Share premium | Other | Own | Total reserves and retained earnings | Share capital | Total equity attributable to equity holders | Non-controlling interests (Note 34) | Total | |
1 January 2021 | ( | ( | ( | ||||||
Income for the year | ( | ||||||||
Other comprehensive income | ( | ( | |||||||
Total comprehensive income | ( | ( | |||||||
Own share disposal1 | ( | ||||||||
Own share purchases1 | ( | ( | ( | ( | |||||
Equity-settled share-based expenses2 | |||||||||
Change in ownership interest in subsidiaries3 | ( | ( | ( | ||||||
Acquisition/disposal of business4 | |||||||||
Reclassifications | ( | ( | ( | ||||||
Distributions paid5 | ( | ( | ( | ( | ( | ||||
31 December 2021 | ( | ( | ( | ||||||
1See note 17.
2See note 20.
3See note 34.
4See note 26.
5See note 19.
The accompanying notes are an integral part of the consolidated financial statements.
Notes to the financial statements
1. Accounting policies
Corporate information
Glencore is a publicly traded
These consolidated financial statements were authorised for issue in accordance with the Directors’ resolution on 15 March 2022.
Statement of compliance
The consolidated financial statements have been prepared in accordance with:
- • International Financial Reporting Standards (IFRS) adopted by the United Kingdom; and
- • IFRS as issued by the International Accounting Standards Board (IASB).
Climate change related considerations
The Group has committed to total emissions (Scope 1, 2 and 3) reductions, relative to 2019, of 15% by 2026 and 50% by 2035 and has an ambition to achieve net zero total emissions by 2050. The accounting related measurement and disclosure items that are most impacted by our commitments, and climate change risk more generally, relate to those areas of the financial statements that are prepared under the historical cost convention and are subject to estimation uncertainties in the medium to long term. Climate change impacts can also introduce more volatility in assets and liabilities carried at fair value. Future changes to the Group’s climate change strategy or realisation of global decarbonisation ambitions quicker than currently anticipated may impact some of the Group’s significant judgements and key estimates and result in material changes to financial results and the carrying values of certain assets and liabilities in future reporting periods. The Group’s current climate change strategy is reflected in the Group’s significant judgements and key estimates, and therefore the Financial Statements, as follows:
(i) Property, plant and equipment and Intangible assets – estimation of the remaining useful economic life of assets for depreciation and amortisation purposes
Property, plant and equipment and intangible assets are depreciated / amortised to estimated residual values over the estimated useful lives of the specific assets concerned, or the estimated remaining life of the associated mine, field or lease, using a straight-line or a units of production over recoverable reserves method. The estimated useful lives of our specific assets and / or operations (and therefore the rate of depreciation / amortisation) aligns with our climate change commitments and ambition. Property, plant and equipment and intangible assets policies are further covered below and within impairment and impairment reversal estimation uncertainties, together with key estimates and sensitivities pertaining to a reasonably possible change in the realisation of global decarbonisation ambitions, which could also change the useful economic lives of the related assets.
(ii) Restoration, rehabilitation and decommissioning provisions – estimation of the timing of closure and rehabilitation activities
A provision for future restoration, rehabilitation and decommissioning costs requires estimates and assumptions to be made around the relevant regulatory framework, the magnitude of the possible disturbance and the timing, extent and costs of the required closure and rehabilitation activities. Many of these rehabilitation and decommissioning events are expected to take place when the underlying commercial reserves are extracted and the operations move into closure mode. Our current estimates of the timing of these closure activities align with the trajectory of our climate change emission reduction commitments and ambition. Sensitivities pertaining to a reasonably possible change in the realisation of global decarbonisation ambitions (i.e. the timing of the restoration, rehabilitation and decommissioning costs) of our fossil fuel related obligations are outlined below in the key estimation uncertainty - restoration, rehabilitation and decommissioning costs.
Notes to the financial statements continued
1. Accounting policies continued
(iii) Property, plant and equipment and Intangible assets (including the carrying value of goodwill in our coal marketing CGU) – estimation of the valuation of assets and potential impairment charges or reversals
The Group acknowledges that there is a wide range of possible energy transition scenarios, including those aligned with the Paris Agreement goals, that would indicate different outcomes for individual commodities. The decarbonisation transition could result in increasing or decreasing demand for the Group’s various commodities, due to policy, regulatory (including carbon pricing mechanisms), legal, technological, market or societal responses to climate change, which, on the negative side, may result in some or all of a cash-generating unit’s reserves becoming uneconomic to extract and / or our coal marketing CGU no-longer being able to generate returns and realise the benefits of its associated goodwill balance. While not currently the Group’s central planning case, the resilience of the Group’s portfolio to 1.5°C aligned and net zero ambition scenarios have been considered.
We use carbon price scenarios to assess the potential impacts on commodity specific operating cost curves and related supply / demand outcomes, arising from existing and future potential carbon pricing regulation. A key component of this analysis is to understand the potential development of a range of underlying cost curve structures over time and to consider, identify and make reasonable judgments, on the extent to which costs are likely to be passed onto the end-consumer. Our analysis shows that in our Radical Transformation scenario, marginal supply costs would increase by 10% to over 60%, for the range of our most relevant and material commodities. Against a backdrop of generally healthy expected increasing metals demand to support decarbonisation, we anticipate that cost (via carbon) and demand forces (lower supply in the case of coal) will drive those commodity prices higher, such increases being passed through to consumers, resulting in no expected overall materially negative impacts on our business. In fact, first and second quartile (below average) emission intensity producers, where we see the weighted average of our portfolio residing, are likely to see margin expansion. Sensitivities pertaining to a reasonably possible change in the recoverable value of our assets are outlined below in the key estimation uncertainty – impairments and impairment reversals.
Notwithstanding the above, for coal and other fossil fuels, should global decarbonisation ambitions materialise along a Paris-aligned scenario or other more ambitious net zero scenarios, essentially an accelerated displacement of coal and other fossil fuels as an energy source, the potential impact on the current carrying value of these cash generating units is outlined below in the key estimation uncertainty – impairments and impairment reversals (Sensitivity to demand for fossil fuels). It should be noted, that in these scenarios, we would expect to see positive valuation developments within our industrial production portfolio exposed to the metals currently required to deliver such rapid decarbonisation scenarios, including copper, nickel and cobalt.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable and relevant under the circumstances, independent estimates, quoted market prices and common industry standard modelling techniques. Actual outcomes could result in a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Glencore has identified the following areas as being critical to understanding Glencore’s financial position as they require management to make complex and/or subjective judgements, estimates and assumptions about matters that are inherently uncertain:
Critical accounting judgements
In the process of applying Glencore’s accounting policies, management has made the following judgements based on the relevant facts and circumstances including macro-economic circumstances and, where applicable, interpretation of underlying agreements, which have the most significant effect on the amounts recognised in the consolidated financial statements.
(i) Determination of control of subsidiaries and joint arrangements
Judgement is required to determine when Glencore has control of subsidiaries or joint control of joint or other unincorporated arrangements. This requires an assessment of the relevant activities (those relating to the operating and capital decisions of the arrangement, such as: the approval of the capital expenditure programme for each year, and appointing, remunerating and terminating the key management personnel or service providers of the operations) and when the decisions in relation to those activities are under the control of Glencore or require unanimous consent. See note 26 for a summary of the acquisitions of subsidiaries completed during 2021 and 2020 and the key judgements made in determining control thereof.
Judgement is also required in determining the classification of a joint arrangement between a joint venture or a joint operation through an evaluation of the rights and obligations arising from the arrangement and in particular, if the joint arrangement has been structured through a separate vehicle, further consideration is required of whether:
(1)the legal form of the separate vehicle gives the parties rights to the assets and obligations for the liabilities;
(2)the contractual terms and conditions give the parties rights to the assets and obligations for the liabilities; and
(3)other facts and circumstances give the parties rights to the assets and obligations for the liabilities.
Notes to the financial statements continued
1. Accounting policies continued
Joint arrangements in which the primary activity is the provision of output to the shareholders, typically convey substantially all the economic benefits of the assets to the parties and judgement is required in assessing whether the terms of the offtake agreements and any other obligations for liabilities of the arrangement result in the parties being substantially the only source of cash flows contributing to the continuity of the operations of the arrangement.
Certain joint arrangements that are structured through separate vehicles including Collahuasi and Viterra are accounted for as joint ventures. The Collahuasi arrangement is primarily designed for the provision of output to the shareholders sharing joint control, the offtake terms of which are at prevailing market prices and the parties are not obligated to cover any potential funding shortfalls. In management’s judgement, Glencore is not the only possible source of funding and does not have a direct or indirect obligation to the liabilities of the arrangement, but rather shares in its net assets and, therefore, such arrangements have been accounted for as joint ventures.
Differing conclusions around these judgements may materially impact how these businesses are presented in the consolidated financial statements – under the full consolidation method, equity method or recognition of Glencore’s share of assets, liabilities, revenue and expenses, including any assets or liabilities held jointly. See note 11 for a summary of these joint arrangements and the key judgements made in determining the applicable accounting treatment for any material joint arrangements entered during the year.
(ii) Classification of transactions which contain a financing element (notes 21, 22 and 25)
Transactions for the purchase of commodities may contain a financing element such as extended payment terms. Under such an arrangement, a financial institution may issue a letter of credit on behalf of Glencore and act as the paying party upon delivery of product by the supplier and Glencore will subsequently settle the liability directly with the financial institution, generally from 30 up to 90 days after physical supply. Judgement is required to determine the most appropriate classification and presentation of these transactions within the statements of cash flows and financial position. In determining the appropriate classification, management considers the underlying economic substance of the transaction and the significance of the financing element to the transaction. Typically, the economic substance of the transaction is determined to be operating in nature as the financing element is insignificant and the time frame in which the original arrangement is extended by, is consistent and within supply terms commonly provided in the market. As a result, the entire cash flow is presented as operating in the statement of cash flows with a corresponding trade payable in the statement of financial position. As at 31 December 2021, trade payables include $8,565 million (2020: $7,178 million) of such liabilities arising from supplier financing arrangements, the weighted average of which extended settlement of the original payable to 77 days (2020: 91 days) after physical supply and are due for settlement 33 days (2020: 46 days) after year end. There was no significant exposure to any individual financial institution under these arrangements. These payables are not included within net funding and net debt as defined in the APMs section.
(iii) Classification of physical liquefied natural gas (LNG) purchase and sale contracts at amortised cost or fair value through profit and loss (notes 28 and 29)
Judgement is required to determine the appropriate IFRS 9 classification of physical LNG purchase and sale contracts as being measured at amortised cost or fair value through profit and loss. This requires an assessment of whether the contracts to buy or sell LNG (a non-financial item) can be settled net in cash or with another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments, and whether there is a past practise of net settling similar contracts. Those physical LNG contracts that can be net settled are considered to be derivatives, measured at fair value through profit or loss (see notes 28 and 29). Contracts that do not meet the definition of derivative are considered own use contacts and are to be accounted for as executory contracts measured at amortised cost.
Differing conclusions around classification of these contracts, may materially impact their presentation as financial assets or liabilities and any fair value adjustments recognised through profit and loss. As at 31 December 2021, the net fair value of physical LNG contracts on the statement of financial position is $912 million ($1,786 million forward physical asset and $874 million forward physical liability).
(iv) Investigations by regulatory and enforcement authorities – Critical judgement in relation to whether a present obligation exists (note 32) and key estimation uncertainty in relation to the measurement of the provision recognised for such investigations (note 23).
(v) Impact of carbon pricing – refer to climate change related considerations above
Notes to the financial statements continued
1. Accounting policies continued
Key sources of estimation uncertainty
In the process of applying Glencore’s accounting policies, management has made key estimates and assumptions concerning the
future and other key sources of estimation uncertainty. The key assumptions and estimates at the reporting date that have a
significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year, are
described below. Actual results may differ from these estimates under different assumptions and conditions and may materially
affect financial results or the financial position reported in future periods.
(i) Recognition of deferred tax assets and uncertain tax positions (note 8)
Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable. This involves an
assessment of when those deferred tax assets are likely to reverse, and a judgement as to whether there will be sufficient taxable
income available to offset the tax assets when they do reverse. These judgements and estimates are subject to risk and uncertainty
and therefore, to the extent assumptions regarding future profitability change, there can be a material increase or decrease in the
amounts recognised in the consolidated statement of income in the period in which the change occurs, notably the deferred tax
asset and uncertain tax position of the Group’s DRC operations as outlined in note 8. The recoverability of the Group’s deferred tax
assets and the completeness and accuracy of its uncertain tax positions, including the estimates and assumptions contained
therein are reviewed regularly by management.
(ii) Impairments and impairment reversals (note 7)
Investments in associates and joint ventures, advances and loans, property, plant and equipment and intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying value of an individual asset or a cash-
generating unit (CGU) may not be fully recoverable, or at least annually for CGUs to which goodwill and other indefinite life
intangible assets have been allocated. Indicators of impairment may include changes in the Group’s operating and economic
assumptions, including those arising from changes in reserves or mine planning, updates to the Group’s commodity supply,
demand and price forecasts, or the possible impacts from emerging risks such as those related to climate change and the transition
to a lower carbon economy. If an asset or CGU’s recoverable amount is less than its carrying amount, an impairment loss is
recognised in the consolidated statement of income. For those assets or CGUs which were impaired in prior periods, if their
recoverable amount exceeds their carrying amount, an impairment reversal is recorded in the consolidated statement of income.
Future cash flow estimates which are used to calculate the asset’s or CGU’s recoverable amount are discounted using asset or CGU
specific discount rates and are based on expectations about future operations, using a combination of internal sources and those
inputs available to a market participant, which primarily comprise estimates about production and sales volumes, commodity prices
(considering current and future prices and price trends including factors such as the current global trajectory of climate change),
reserves and resources, operating costs and capital expenditures. Estimates are reviewed regularly by management. Changes in
such estimates and in particular, deterioration in the commodity pricing outlook, could impact the recoverable amounts of these
assets or CGUs, whereby some or all of the carrying amount may be impaired or the impairment charge reversed (if pricing outlook
improves significantly) with the impact recorded in the statement of income.
As noted above and further described below in the ‘impairment or impairment reversals’ accounting policy, the Group carries out, at
least annually, an impairment assessment. Following this review, indicators of impairment or impairment reversal were identified for
various CGUs, including those due to an improvement in the underlying commodity price environment most influencing the
respective operation. The Group assessed the recoverable amounts of these CGUs and as at 31 December 2021, except for those
CGUs disclosed in note 7, the estimated recoverable amounts exceeded the carrying values. For certain CGUs where no impairment
was recognised, should there be a significant deterioration or improvement in the key assumptions, a material impairment or
reversal could result within the next financial year. A summary of the carrying values, the key / most sensitive assumptions and a
sensitivity impact of potential movements in these assumptions for each such CGU with limited headroom (relative to its estimated
recoverable amount) is shown below. In providing sensitivity analysis (and particularly on commodity price assumptions), a 10%
change, representing a typical deviation parameter common in the industry, has generally been provided. Where a higher or lower
percentage is reasonably possible on an operational assumption, this has been clearly identified.
Glencore Annual Report 2021152
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021152
Notes to the financial statements continued
1. Accounting policies continued
Sensitivity to project execution and ramp-up (reasonably possible within the next financial year)
Mutanda
Mutanda’s non-current capital employed is carried at approximately $2,200 million net of an accumulated impairment of
$955 million. Following care and maintenance status since 2019, a limited restart of operations commenced in 2021, utilising
stockpiles of oxide ore. The valuation includes value attributable to the long-term copper / cobalt sulphide resource potential. The
valuation is sensitive to price and eventual commercialisation of the sulphide resources, and deteriorations or improvements in
these key assumptions may result in additional impairments or reversals.
The short to long-term copper and cobalt price assumptions were $8,500-$7,000/t and $24-$25/lb respectively. A 10% reduction in
the copper and cobalt price assumptions is not expected to result in a further impairment. Should the copper and cobalt
assumptions rise by 10% (across the curve), the previously recognised impairment could be reversed in its entirety. Any such
adjustment would also be considered in light of the remaining development risks relating to sulphide resources. Similarly, at such
time as the sulphides resources may be commercialised, the balance of the historical impairment could be reversed.
Volcan
Volcan’s non-current capital employed is carried at approximately $1,300 million net of an accumulated impairment of $1,903 million.
Impairments principally related to value attributable to the future potential of various projects / resources. The valuation is sensitive
to price and eventual commercialisation of the projects / resources, and deteriorations or improvements in these key assumptions
may result in additional impairments or reversals.
The short to long-term zinc and silver price assumptions were $2,750-$2,400/t and $24-$20/oz respectively. Should the zinc and
silver assumptions reduce by 10% (across the curve) or production reduce by 10%, an additional impairment of $470 million or $530
million, respectively, could be recognised. Should the zinc and silver assumptions rise by 10% (across the curve) an impairment
reversal of $570 million could be recognised.
Climate change (additional illustrative disclosures)
Based on the current pricing environment, we do not consider there to be a reasonably possible change in key assumptions that
would result in a material change in carrying values of any of our coal CGUs in the next financial year. With respect to our oil CGUs, a
change in oil refining margin assumptions (across the curve) of $1/bbl is reasonably possible and could result in a $240 million
change (increase or decrease) to the carrying value of the Astron Energy CGU.
All other sensitivities below are therefore illustrative of changes in assumptions beyond the next financial year.
Energy fossil fuels industrial operations
Our base case assessment takes into account the short-, medium- and longer-term seaborne coal demand outlook. While we have
aligned our operational objectives and resulting emissions with a net zero by 2050 pathway, any such projected global pathway
relies on additional efforts by governments, corporations and individuals to shift from a “business as usual” trajectory to a lower
emissions trajectory. In particular, economic incentivisation of such shift, whether through carbon pricing and / or incentives to drive
accelerated uptake of lower carbon and decarbonisation technologies, could result in different financial results on the same
tonnage profile.
Our assessment applies a value in use methodology and assumes that, beyond the next 3 years when shorter term pricing
assumptions have been used, through the remaining life of mine, there will continue to be a market for thermal coal at a real
Newcastle FOB export price of $83/tonne (6,000 NAR), South African FOB export price of $83/tonne and Colombian CIF price
(destination: Rotterdam) of $67/tonne, which represents our best estimate of long term pricing based on our view of projected likely
supply and demand fundamentals and the industry cost structure.
Notwithstanding these assumptions, we present illustrative impairments arising under alternate price scenarios which are
consistent with our IEA aligned climate scenarios. The IEA scenarios are described below:
• IEA’s Stated Policies scenario (STEPS) – the impact of existing policy frameworks and announced policy intentions, subject to the
IEA’s assessment of the likelihood of such ambitions being implemented (consistent with our “Current Pathway” scenario);
• IEA’s Announced Pledges scenario (APS) – the impact of all major national announcements of 2030 targets and longer term net
zero and other pledges, regardless of whether these have been anchored in legislation or nationally determined contributions;
• IEA’s Sustainable Development scenario (SDS) – the impact should additional policy mechanisms be implemented sufficient for
full alignment with the Paris Goals of less than 2 degrees (consistent with our “Rapid Transition” scenario);
• IEA’s Net zero emissions by 2050 scenario (NZE) – a pathway for the global energy sector to achieve net zero emissions by 2050
(consistent with our “Radical Transformation” scenario) and price assumptions for this scenario; and
In addition, for illustrative purposes, we have shown a Complete Displacement Scenario (CDS) – reflecting the impact of fossil fuels
being immediately displaced as an energy source and the resulting immediate fall in commodity prices to zero.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 153Glencore Annual Report 2021 153
Notes to the financial statements continued
1. Accounting policies continued
Our life of mine planning reflects operating cash flows from Cerrejon and the E&P oil portfolio until 2032, and some South African
and Australian mines until 2043 and around 2050, respectively. Overall portfolio production is heavily weighted towards the earlier
part of these mine lives and is broadly aligned with the IEA’s SDS outlook for reducing coal demand. We have illustrated this by
showing the year in which 50% and 80% of saleable coal would be extracted under the current plan, by 2029 and 2037 respectively.
The sensitivities are presented on price alone and assume no mitigating actions, therefore the impairments in each scenario are
likely higher than would transpire. In practice, in a sustained lower price environment, management would alter mine plans to cut
operating and capital costs, potentially at the expense of future volumes, in order to reduce the overall NPV impact.
The STEPS, APS, SDS and NZE sensitivity prices adopted are those included in the documentation to the IEA’s World Energy Model
2021, except that IEA thermal coal prices are on a delivered basis. These have been adjusted to FOB pricing on the basis of forward
freight costs. Furthermore, in determining the Colombian CIF price, we have used a weighting of the IEA Japan and IEA European
prices to take into account that Colombian coal sold from Cerrejon is likely to be delivered to a combination of different markets in
the future as coal demand in Europe declines.
The IEA assumes, in each scenario, additional decarbonisation measures leading to declining fossil fuel prices by the years 2030 and
2050, anchored in each case in a 2020 baseline. For the purpose of our climate change sensitivities below, we have assumed linear
progression of prices between these points. Our base case thus reflects significantly higher short-term prices informed by more
recent market prices than were available in the World Energy Model 2021, and higher longer-term prices than in each of the IEA’s
climate scenarios reflecting our assessment of the supply and demand outlook and the industry cost structure.
Cash-generating unit
US$ million
Thermal Australia
Thermal South
Africa
Cerrejon
Total thermal
coal
Oil E&P
Base case assumptions in life of mine plan:
– LOM saleable tonnes (Glencore consolidated)
(million tonnes)/ (million bbls)
1,100
340
74
44
– projected year when 50% LOM tonnage /
reserves depleted
2029
2029
2026
2029
2024
– projected year when 80% LOM tonnage /
reserves depleted
2038
2034
2029
2037
2027
– long-term price (Newcastle FOB / API4 FOB /
API2 CIF) ($/t) / (Brent oil price) ($/bbl) (real terms)
83
83
67
60
– discount rate applied (ranges represent opencut
/ underground)
6.8-7.4%
9.3-9.8%
8.6%
11.5%
Benchmark prices over LOM in selected scenarios
($/t, $/bbl):
2020 - '30 - '50
2020 - '30 - '50
2020 - '30 - '50
2022 - '30
– IEA STEPS
64 - 72 - 63
72 - 72 - 65
61 - 76 - 70
85 - 80
– IEA APS
64 - 68 -55
72 - 66 - 55
61 - 75 - 63
85 - 70
– IEA SDS
64 - 61 - 55
72 -61 -55
61 - 67 - 63
85 - 58
– IEA NZE
64 - 52 - 42
72 - 49 - 42
61 - 60 - 50
85 - 38
– CDS
n.a.
n.a.
n.a.
n.a.
Carrying value of non-current capital employed as
at 31 December 2021
7,742
2,286
567
10,595
419
Illustrative impairment arising:
– IEA STEPS
3,400
1,200
62
4,700
–
– IEA APS
4,400
1,600
81
6,100
–
– IEA SDS
6,000
1,900
230
8,100
–
– IEA NZE
7,000
2,286
340
9,600
–
– CDS
7,742
2,286
567
10,595
419
$151 million of the Oil E&P non-current capital employed relates to Chad upstream oil operations in the “held for sale” classification,
shown in note 16.
Glencore Annual Report 2021154
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021154
Notes to the financial statements continued
1. Accounting policies continued
No impairment is projected for Oil E&P in any of the IEA’s scenarios. Glencore’s central price case for Oil E&P is $60/bbl, hence no
adverse impact in the STEPS and APS scenarios which assume higher prices throughout. For the more aggressive price reductions
envisaged in the SDS and NZE scenarios ($58/bbl and $38/bbl, respectively, by 2030, such prices having been adjusted to real terms
2021), we assumed $85/bbl in 2022, reducing by $10/bbl each year until the noted long-term price in each scenario was reached.
Since 80% of extraction is expected by 2027, the impact of the lower prices on the balance is not projected to result in an
impairment.
Other fossil fuel related capital employed NPV sensitivities
Cash-generating unit
US$ million
Coking coal
Astron Energy
Coal
marketing
goodwill
Base case assumptions in life of asset plan:
– LOA saleable tonnes (millions) / Refinery steady-state capacity ('000 bbls)
140
100k bopd
n.a.
– projected year when 50% LOA reserves depleted
2028
n.a.
n.a.
– projected year when 80% LOA reserves depleted
2034
n.a.
n.a.
– long-term price (hard coking coal) ($/t) (real terms)
163
n.a.
n.a.
– discount rate applied (ranges represent opencut / underground)
6.8-7.4%
10.6%
n.a.
– price to earnings multiple
12x
Percentage decrease to long-term pricing/PE multiples:
– 25% price / $1/bbl refining margin
1
/ 2x PE (17%) decrease
122
n.a.
10x
– 30% price / $2/bbl refining margin / 4x PE (33%) decrease
114
n.a.
8x
Carrying value of non-current capital employed as at 31 December 2021
1,768
781
1,674
Illustrative impairment arising:
– 25% price decrease across the curve / $1/bbl refining margin
1
/ 2x PE (17%) decrease
130
240
–
– 30% price decrease across the curve / $2/bbl refining margin / 4x PE (33%) decrease
360
500
100
1 The change in refining margin by $1/bbl is considered to be a reasonably possible change in our assumptions for Astron Energy within the next financial year.
(iii) Restoration, rehabilitation and decommissioning costs (note 23)
A provision for future restoration, rehabilitation and decommissioning costs requires estimates and assumptions to be made around
the relevant regulatory framework, the magnitude of the possible disturbance and the timing, extent and costs of the required
closure and rehabilitation activities. Most of these rehabilitation and decommissioning events are expected to take place many years
in the future and the currently estimated requirements and costs that will have to be met when the restoration event occurs are
inherently uncertain and could materially change over time.
In calculating the appropriate provision for the expected restoration, rehabilitation or decommissioning obligations, cost estimates
of the future potential cash outflows based on current studies of the expected rehabilitation activities and timing thereof, are
prepared. These forecasts are then discounted to their present value using a risk-free rate specific to the liability and the currency in
which they are denominated.
Any changes in the expected future costs or risk-free rate are initially reflected in both the provision and the asset and subsequently
in the consolidated statement of income over the remaining economic life of the asset. As the actual future costs can differ from the
estimates due to changes in laws, regulations, technology, costs and timing, the provisions including the estimates and
assumptions contained therein are reviewed regularly by management. A material change in the provision within the next financial
year could arise from changes in risk-free rates. The aggregate effect of changes within the next financial year as a result of revisions
to cost and timing assumptions is not expected to be material.
Climate change sensitivities
As noted above, while it is not a reasonably possible change we expect over the next financial year, global ambitions seeking to drive
quicker decarbonisation, could result in the timing of restoration, rehabilitation and decommissioning costs related to our coal and
oil closure obligations being accelerated. The undiscounted and current carrying value of our closure and monitoring provisions
related to these operations is $3,843 million and $1,996 million, respectively. The weighted average maturity of the relevant closure
provisions is 17 years. To illustrate the effect of accelerating these cash flows, we have presented a three-year and five-year weighted
average acceleration in forecast cash flows of these provisions, which in isolation, would result in an increase to the provision of
$217 million and $350 million, respectively.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 15 5G lencore Annual Report 2021 155
Notes to the financial statements continued
1. Accounting policies continued
Adoption of new and revised standards
In the current year, Glencore has adopted all new and revised IFRS standards that became effective as of 1 January 2021, the changes
being:
(i) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
The amendments introduce a practical expedient for modifications required by the reform, provide an exception that hedge
accounting is not discontinued solely because of the IBOR reform, and introduces disclosures that allow users to understand the
nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as
well as the entity’s progress in transitioning from IBOR’s to alternative benchmark rates, and how the entity is managing this
transition.
These amendments did not have a material impact on the Group.
Revised standards not yet effective
At the date of the authorisation of these consolidated financial statements, the following revised IFRS standards, which are
applicable to Glencore, were issued but not yet effective:
(i) Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) – effective for year ends beginning on or
after 1 January 2022
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that
relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly
to fulfilling contracts. The Group will apply the amendments to contracts for which the Group has not yet fulfilled all its obligations at
the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives will not be restated.
(ii) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) – effective
for year ends beginning on or after 1 January 2023
The amendments specify how companies should account for deferred tax on transactions such as leases and decommissioning
obligations, and clarify that the initial recognition exception does not apply to transactions where both an asset and a liability are
recognised in a single transaction. Accordingly, deferred tax is required to be recognised on such transactions.
(iii) Definition of Accounting Estimates (Amendments to IAS 8) – effective for year ends beginning on or after
1 January 2023
The amendments introduce the definition of accounting estimates and include other amendments to IAS 8 to help entities
distinguish changes in accounting estimates from changes in accounting policies.
(iv) Materiality of Accounting Policy Disclosure (Amendments to IAS 1) – effective for year ends beginning on or after
1 January 2023
The amendments require companies to disclose their material accounting policy information rather than their significant
accounting policies.
No significant changes to presentation or disclosures within these financial statements are expected following the adoption of these
amendments.
Basis of preparation
The financial statements are prepared under the historical cost convention except for certain financial assets, liabilities, marketing
inventories and pension obligations that are measured at revalued amounts or fair values at the end of each reporting period as
explained in the accounting policies below. Historical cost is defined as the amount of cash or cash equivalents paid or the fair value
of the consideration given to acquire them at the time of their acquisition. The principal accounting policies adopted are set out
below.
The Directors have assessed that they have, at the time of approving these financial statements, a reasonable expectation that the
Group has adequate resources to continue in operational existence for the 12 months from the expected date of approval of the 2021
Annual Report and Accounts. Therefore, they continue to adopt the going concern basis of accounting in preparing these financial
statements. The Directors have made this assessment after consideration of the Group’s budgeted cash flows and related
assumptions including appropriate stress testing of the identified uncertainties (being primarily commodity prices and currency
exchange rates) and access to undrawn credit facilities and monitoring of debt maturities. Further information on Glencore’s
objectives, policies and processes for managing its capital and financial risks are detailed in note 27.
All amounts are expressed in millions of United States Dollars, the presentation currency of the Group, unless otherwise stated.
Glencore Annual Report 2021156
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021156
Notes to the financial statements continued
1. Accounting policies continued
Principles of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
and its subsidiaries.
Control is achieved when Glencore is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Specifically, Glencore controls an investee if, and only if, Glencore
has all of the following:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
When Glencore has less than a majority of the voting rights of an investee or similar rights of an investee, it considers all relevant
facts and circumstances in assessing whether it has power over the investee including:
• The size of Glencore’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• Potential voting rights held by Glencore, other vote holders or other parties;
• Rights arising from other contractual arrangements; and
• Any additional facts and circumstances that indicate that Glencore has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above. Consolidation of a subsidiary begins when Glencore obtains control over the
subsidiary and ceases when Glencore loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or
disposed of during the year are included in the consolidated statement of income and other comprehensive income from the date
Glencore gains control until the date when Glencore ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Changes in Glencore’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions with any
difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid
or received being recognised directly in equity and attributed to equity holders of Glencore.
When Glencore loses control of a subsidiary, a gain or loss is recognised in the consolidated statement of income and is calculated as
the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and
(ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.
All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if Glencore had
directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category
of equity as specified/permitted by applicable IFRSs). The fair value of any investment retained in the former subsidiary at the date
when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9, when applicable,
or the cost on the initial recognition of an investment in an associate or a joint venture.
Investments in associates and joint ventures
Associates and joint ventures (together “Associates”) in which Glencore exercises significant influence or joint control are accounted
for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies. Significant influence is presumed if Glencore holds between 20% and
50% of the voting rights, unless evidence exists to the contrary. A joint venture is a joint arrangement whereby the parties that have
joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed
sharing of control over an arrangement, which exists only when decisions about relevant strategic and/or key operating decisions
require unanimous consent of the parties sharing control.
Equity accounting involves Glencore recording its share of the Associate’s net income and equity. Glencore’s interest in an Associate
is initially recorded at cost and is subsequently adjusted for Glencore’s share of changes in net assets of the Associate, less any
impairment in the value of individual investments. Where Glencore transacts with an Associate, unrealised profits and losses are
eliminated to the extent of Glencore’s interest in that Associate.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 157Glencore Annual Report 2021 157
Notes to the financial statements continued
1. Accounting policies continued
Changes in Glencore’s interests in Associates are accounted for as a gain or loss on disposal with any difference between the
amount by which the carrying value of the Associate is adjusted and the fair value of the consideration received being recognised
directly in the consolidated statement of income.
Joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement, have rights to the assets and
obligations for the liabilities relating to the arrangement.
When Glencore undertakes its activities under joint operations, Glencore recognises in relation to its interest in a joint operation:
• Its assets, including its share of any assets held jointly;
• Its liabilities, including its share of any liabilities incurred jointly;
• Its revenue from the sale of its share of the output arising from the joint operation;
• Its share of the revenue from the sale of the output by the joint operation; and
• Its expenses, including its share of any expenses incurred jointly.
The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with
the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
Where Glencore transacts with a joint operation, unrealised profits and losses are eliminated to the extent of Glencore’s interest
in that joint operation.
Other unincorporated arrangements
In some cases, Glencore participates in unincorporated arrangements where it has the rights to its share of the assets and
obligations for its share of the liabilities of the arrangement, rather than a right to the net returns of the arrangement, but does not
share joint control. In such cases, Glencore accounts for its share of the assets, liabilities, revenues and expenses in accordance with
the IFRSs applicable to the particular assets, liabilities, revenues and expenses and obligations for the liabilities relating to the
arrangement, similar to a joint operation noted above.
Business combinations and goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method of accounting. The cost of the
acquisition is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred,
liabilities incurred to the former owners of the acquiree and the equity interests issued in exchange for control of the acquiree. The
identifiable assets, liabilities and contingent liabilities (“identifiable net assets”) are recognised at their fair value at the date of
acquisition. Acquisition related costs are recognised in the consolidated statement of income as incurred.
Where a business combination is achieved in stages, Glencore’s previously held interests in the acquired entity are remeasured to
fair value at the acquisition date (i.e. the date Glencore attains control) and the resulting gain or loss, if any, is recognised in the
consolidated statement of income.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the CGUs that are expected to benefit
from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying
amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro-rata based on the carrying amount of each asset in the unit.
Any impairment loss is recognised directly in profit or loss. An impairment loss recognised for goodwill is not able to be reversed in
subsequent periods.
On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, Glencore reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are
adjusted for additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognised at that date.
Glencore Annual Report 2021158
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021158
Notes to the financial statements continued
1. Accounting policies continued
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net
assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share
of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-
transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in
another IFRS.
Similar procedures are applied in accounting for the purchases of interests in Associates and joint operations. Any goodwill arising
from such purchases is included within the carrying amount of the investment in Associates, but not amortised thereafter. Any
excess of Glencore’s share of the net fair value of the Associate’s identifiable net assets over the cost of the investment is included
in the consolidated statement of income in the period of the purchase.
Non-current assets held for sale and disposal groups
Non-current assets, liabilities and those included in disposal groups are classified as held for sale if their carrying amount will
be recovered principally through a sale transaction rather than through continuing use, they are available for immediate disposal
and the sale is highly probable. Non-current assets, liabilities and those included in disposal groups held for sale are measured at the
lower of their carrying amount or fair value less costs to sell.
Revenue recognition
Revenue is derived principally from the sale of goods (sale of commodities) and in some instances the goods are sold on Cost and
Freight (CFR) or Cost, Insurance and Freight (CIF) Incoterms. When goods are sold on a CFR or CIF basis, the Group is responsible for
providing these services (shipping and insurance) to the customer, sometimes after the date at which Glencore has lost control of
the goods. Revenue is recognised when the performance obligations have been satisfied, which is once control of the goods and/or
services has transferred from Glencore to the buyer. Revenue is measured based on consideration specified in the contract with a
customer and excludes amounts collected on behalf of third parties. The same recognition and presentation principles apply to
revenues arising from physical settlement of forward sale contracts that do not meet the own use exemption.
Revenue related to the sale of goods is recognised when the product is delivered to the destination specified by the customer,
which is typically the vessel on which it is shipped, the destination port or the customer’s premises and the buyer has gained control
through their ability to direct the use of and obtain substantially all the benefits from the asset. Where the sale of goods is
connected with an agreement to repurchase goods at a later date, revenue is recognised when the repurchase terms are at
prevailing market prices, the goods repurchased are readily available in the market, and the buyer gained control of the goods
originally sold to them. As at 31 December 2021, the outstanding repurchase commitments under such agreements were $Nil (2020:
approximately $300 million). Should it be determined that control has not transferred or the buyer does not have the ability to
benefit substantially from ownership of the asset, revenue is not recognised and any proceeds received are accounted for as a
financing arrangement. For certain commodities, the sales price is determined on a provisional basis at the date of sale as the final
selling price is subject to movements in market prices up to the date of final pricing, normally ranging from 30 to 90 days after initial
booking (provisionally priced sales). Revenue on provisionally priced sales is recognised based on the estimated fair value of the total
consideration receivable. The revenue adjustment mechanism embedded within provisionally priced sales arrangements has the
character of a commodity derivative.
Accordingly, the fair value of the final sales price adjustment is re-estimated continuously and changes in fair value are recognised
as an adjustment to revenue. In all cases, fair value is estimated by reference to forward market prices.
Revenue from the sale of material by-products are included within revenue. Where a by-product is not regarded as significant,
revenue may be credited against cost of goods sold.
Revenue related to the provision of shipping and insurance related activities is recognised over time as the service is rendered.
Payments received for future metal (primarily gold and silver) deliveries (prepayments) are accounted for as executory contracts
whereby the prepayment is initially recorded as deferred revenue in the consolidated statement of financial position. The initial
deferred revenue amount is unwound and revenue is recognised in the consolidated statement of income as and when Glencore
physically delivers the metal and loses control of it. Where these prepayments are in excess of one year and contain a significant
financing component, the amount of the deferred revenue is adjusted for the effects of the time value of money. Glencore applies
the practical expedient to not adjust the promised amount of consideration for the effects of time value of money if the period
between delivery and the respective payment is one year or less.
Royalty, interest and dividend income is recognised when the right to receive payment has been established, it is probable that the
economic benefits will flow to Glencore and the amount of income can be measured reliably. Royalty revenue is recognised on an
accruals basis in accordance with the substance of the relevant agreement. Interest income is accrued on a time basis, by reference
to the principal outstanding and the applicable effective interest rate.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 159Glencore Annual Report 2021 159
Notes to the financial statements continued
1. Accounting policies continued
Foreign currency translation
Glencore’s reporting currency and the functional currency of the majority of its operations is the U.S. dollar as this is assessed to be
the principal currency of the economic environment in which it operates.
(i) Foreign currency transactions
Transactions in foreign currencies are converted into the functional currency of each entity using the exchange rate prevailing at the
transaction date. Monetary assets and liabilities outstanding at year-end are converted at year-end rates. Non-monetary items
measured in terms of historical cost are translated using the exchange rate at the date of the transaction. The resulting exchange
differences are recorded in the consolidated statement of income.
(ii) Translation of financial statements
For the purposes of consolidation, assets and liabilities of group companies whose functional currency is in a currency other than the
U.S. dollar are translated into U.S. dollars using year-end exchange rates, while their statements of income are translated using
average rates of exchange for the year. Translation adjustments are included as a separate component of shareholders’ equity and
have no consolidated statement of income impact to the extent that no disposal of the foreign operation has occurred. Where an
intragroup balance is, in substance, part of the Group’s net investment in an entity, exchange gains and losses on that balance are
taken to the currency translation reserve. Cumulative translation differences are recycled from equity and recognised as income or
expense on disposal of the operation to which they relate.
Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the
foreign operation and are translated at the closing rate.
Borrowing costs
Borrowing costs are expensed as incurred except where they relate to the financing of construction or development of qualifying
assets in which case they are capitalised up to the date when the qualifying asset is ready for its intended use.
Employee and retirement benefits
Wages, salaries, bonuses, social security contributions, paid annual and sick leave are accrued in the period in which the associated
services are rendered by the employees of the Group.
Glencore operates various pension schemes in accordance with local requirements and practices of the respective countries. The
annual costs for defined contribution plans that are funded by payments to separate trustee administered funds or insurance
companies equal the contributions that are required under the plans and accounted for as an expense.
For defined benefit retirement plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at the end of each annual reporting period. Remeasurements comprising actuarial gains and
losses, the effect of the asset ceiling (if applicable) and the return on plan assets (excluding interest) are recognised immediately in
the statement of financial position with a charge or credit to other comprehensive income in the period in which they occur.
Remeasurements recognised in other comprehensive income are not reclassified. Past service cost is recognised in profit or loss
when the plan amendment or curtailment occurs, or when the Group recognises related restructuring costs or termination benefits,
if earlier. Gains or losses on settlement of a defined benefit plan are recognised when the settlement occurs. Net interest is
calculated by applying a discount rate to the net defined benefit liability or asset.
Defined benefit costs are split into three categories:
• service costs, which includes current service cost, past service cost and gains and losses on curtailments and settlements;
• net interest expense or income; and
• remeasurements.
The Group recognises service costs within the consolidated statement of income.
Net interest expense or income is recognised within interest expense or income within the consolidated statement of income.
Any past service cost (or the gain or loss on settlement) is calculated by measuring the defined benefit liability (asset) using updated
assumptions and comparing benefits offered and plan assets before and after the plan amendment (or curtailment or settlement)
but ignoring the effect of the asset ceiling (that may arise when the defined benefit plan is in a surplus position). The Group uses the
updated assumptions from this remeasurement to determine current service cost and net interest for the remainder of the
reporting period after the change to the plan. In the case of the net interest for the period post-plan amendment, the net interest is
calculated by multiplying the net defined benefit liability (asset) as remeasured with the discount rate used in the remeasurement
(also taking into account the effect of contributions and benefit payments on the net defined benefit liability (asset)).
The retirement benefit obligation recognised in the consolidated statement of financial position represents the deficit or surplus in
the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits
available in the form of refunds from the plans or reductions in future contributions to the plans.
Glencore Annual Report 2021160
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021160
Notes to the financial statements continued
1. Accounting policies continued
Glencore also provides post-retirement healthcare benefits to certain employees in Canada, South Africa and the United States.
These are accounted for in a similar manner to the defined benefit pension plans, however are unfunded.
Share-based payments
(i) Equity-settled share-based payments
Equity-settled share-based payments are measured at the fair value of the awards based on the market value of the shares at the
grant date. Fair value excludes the effect of non-market-based vesting conditions. The fair value is charged to the consolidated
statement of income and credited to retained earnings on a straight-line basis over the period the estimated awards are expected
to vest.
At each balance sheet date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the
effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the
consolidated statement of income such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to retained earnings.
(ii) Cash-settled share-based payments
For cash-settled share-based payments, a liability is initially recognised at fair value based on the estimated number of awards that
are expected to vest, adjusting for market and non-market-based performance conditions. Subsequently, at each reporting period
until the liability is settled, it is remeasured to fair value with any changes in fair value recognised in the consolidated statement
of income.
Income taxes
Income taxes consist of current and deferred income taxes. Current taxes represent income taxes expected to be payable based on
enacted or substantively enacted tax rates at the period end on expected current taxable income, and any adjustment to tax
payable in respect of previous years. Deferred taxes are recognised for temporary differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income, using
enacted or substantively enacted income tax rates which are expected to be effective at the time of reversal of the underlying
temporary difference. Deferred tax assets and unused tax losses are only recognised to the extent that their recoverability is
probable. Deferred tax assets are reviewed at reporting period end and amended to the extent that it is no longer probable that the
related benefit will be realised. To the extent that a deferred tax asset not previously recognised subsequently fulfils the criteria for
recognition, an asset is then recognised.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same authority and Glencore has both
the right and the intention to settle its current tax assets and liabilities on a net or simultaneous basis. The tax effect of certain
temporary differences is not recognised principally with respect to the initial recognition of an asset or liability (other than those
arising in a business combination or in a manner that initially impacted accounting or taxable profit) and temporary differences
relating to investments in subsidiaries and Associates to the extent that Glencore can control the timing of the reversal of the
temporary difference and it is probable the temporary difference will not reverse in the foreseeable future. Deferred tax is provided
in respect of fair value adjustments on acquisitions. These adjustments may relate to assets such as extraction rights that, in general,
are not eligible for income tax allowances.
Current and deferred tax are recognised as an expense or income in the consolidated statement of income, except when they relate
to items that are recognised outside the consolidated statement of income (whether in other comprehensive income or directly in
equity) or where they arise from the initial accounting for a business combination.
Royalties, extraction taxes and other levies/taxes are treated as taxation arrangements when they have the characteristics of an
income tax, including being imposed and determined in accordance with regulations established by the respective government’s
taxation authority and the amount payable is based on taxable income – rather than physical quantities produced or as a
percentage of revenues – after adjustment for temporary differences. For such arrangements, current and deferred tax is provided
on the same basis as described above for other forms of taxation. Obligations arising from royalty arrangements that do not satisfy
these criteria are recognised as current provisions and included in cost of goods sold.
Glencore assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. Inherent
uncertainties exist in estimates of tax contingencies due to complexities of interpretation and changes in tax laws. For those matters
where it is probable that an adjustment will be made, the Group records its best estimate of these tax liabilities, including related
interest charges, taking into account the range of possible outcomes.
Property, plant and equipment
Property, plant and equipment are stated at cost, being the fair value of the consideration given to acquire or construct the asset,
including directly attributable costs required to bring the asset to the location or to a condition necessary for operation and
the direct cost of dismantling and removing the asset, less accumulated depreciation and any accumulated impairment losses.
Property, plant and equipment are depreciated to their estimated residual value over the estimated useful life of the specific asset
concerned, or the estimated remaining life of the associated mine (LOM), field or lease.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 161Glencore Annual Report 2021 161
Notes to the financial statements continued
1. Accounting policies continued
Depreciation commences when the asset is available for use. The major categories of property, plant and equipment are
depreciated/amortised on a units of production (UOP) and/or straight-line basis as follows:
Buildings
10 – 45 years
Freehold land
not depreciated
Plant and equipment
3 – 30 years/UOP
Right-of-use assets
2 – 30 years
Mineral and petroleum rights
UOP
Deferred mining costs
UOP
(i) Mineral and petroleum rights
Mineral and petroleum reserves, resources and rights (together “Mineral and petroleum rights”) which can be reasonably valued,
are recognised in the assessment of fair values on acquisition. Mineral and petroleum rights for which values cannot be reasonably
determined are not recognised. Exploitable Mineral and petroleum rights are amortised using the UOP basis over the commercially
recoverable reserves and, in certain circumstances, other mineral resources. Mineral resources are included in amortisation
calculations where there is a high degree of confidence that they will be extracted in an economic manner.
(ii) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to costs incurred in the exploration and evaluation of potential mineral and
petroleum resources and includes costs such as exploration and production licences, researching and analysing historical
exploration data, exploratory drilling, trenching, sampling and the costs of pre-feasibility studies. Exploration and evaluation
expenditure for each area of interest, other than that acquired from another entity, is charged to the consolidated statement of
income as incurred except when the expenditure is expected to be recouped from future exploitation or sale of the area of interest
and it is planned to continue with active and significant operations in relation to the area, or at the reporting period end, the activity
has not reached a stage which permits a reasonable assessment of the existence of commercially recoverable reserves, in which
case the expenditure is capitalised. As the intangible component (i.e. licences) represents an insignificant and indistinguishable
portion of the overall expected tangible amount to be incurred and recouped from future exploitation, these costs along with other
capitalised exploration and evaluation expenditure are recorded as a component of property, plant and equipment. Purchased
exploration and evaluation assets are recognised at their fair value at acquisition.
As the capitalised exploration and evaluation expenditure asset is not available for use, it is not depreciated. All capitalised
exploration and evaluation expenditure is monitored for indications of impairment. Where a potential impairment is indicated, an
assessment is performed for each area of interest or at the CGU level. To the extent that capitalised expenditure is not expected to
be recovered it is charged to the consolidated statement of income.
Administration costs that are not directly attributable to a specific exploration area are charged to the consolidated statement of
income. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over
the term of the permit.
Development expenditure
When commercially recoverable reserves are determined and such proposed development receives the appropriate approvals,
capitalised exploration and evaluation expenditure is transferred to construction in progress, a component within the plant and
equipment asset sub-category. All subsequent development expenditure is similarly capitalised, provided commercial viability
conditions continue to be satisfied. Proceeds from the sale of product extracted during the development phase are netted against
development expenditure. Upon completion of development and commencement of production, capitalised development costs
are further transferred, as required, to the appropriate plant and equipment asset category and depreciated using the unit of
production method (UOP) or straight-line basis.
Deferred mining costs
Mainly comprises certain capitalised costs related to underground mining as well as pre-production and in-production stripping
activities as outlined below. Deferred mining costs are amortised using the UOP basis over the life of the ore body to which those
costs relate.
Deferred stripping costs
Stripping costs incurred in the development of a mine (or pit) before production commences are capitalised as part of the cost of
constructing the mine (or pit) and subsequently amortised over the life of the mine (or pit) on a UOP basis.
In-production stripping costs related to accessing an identifiable component of the ore body to realise benefits in the form of
improved access to ore to be mined in the future (stripping activity asset), are capitalised within deferred mining costs provided all
the following conditions are met:
Glencore Annual Report 2021162
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021162
Notes to the financial statements continued
1. Accounting policies continued
(a) it is probable that the future economic benefit associated with the stripping activity will be realised;
(b) the component of the ore body for which access has been improved can be identified; and
(c) the costs relating to the stripping activity associated with the improved access can be reliably measured.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of income as they are
incurred.
The stripping activity asset is subsequently depreciated on a UOP basis over the life of the identified component of the ore body that
became more accessible as a result of the stripping activity and is then stated at cost less accumulated depreciation and any
accumulated impairment losses.
Leases
As lessee, the Group assesses whether a contract contains a lease at inception of the contract. The Group recognises a right-of-use
asset and corresponding lease liability in the statement of financial position for all lease arrangements where it is the lessee, except
for short-term leases with a term of twelve months or less and leases of low value assets. For these leases, the Group recognises the
lease payments as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the future lease payments from the commencement date of the lease.
The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, the asset and
company specific incremental borrowing rates. Lease liabilities are recognised within borrowings on the statement of financial
position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the
lease liability, with a corresponding adjustment to the related right-of-use assets, whenever:
• The lease term changes or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate;
• The lease payments change due to the changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount
rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount
rate at the effective date of modification.
The right-of-use assets are initially recognised on the balance sheet at cost, which comprises the amount of the initial measurement
of the corresponding lease liability, adjusted for any lease payments made at or prior to the commencement date of the lease, any
lease incentive received and any initial direct costs incurred, and expected costs for obligations to dismantle and remove right-of-
use assets when they are no longer used. Right-of-use assets are recognised within property, plant and equipment on the
statement of financial position. Right-of-use assets are depreciated on a straight-line basis from the commencement date of the
lease over the shorter of the useful life of the right-of-use asset or the end of the lease term.
The Group enters into lease arrangements as a lessor with respect to some of its time charter vessels. Leases for which the Group is
an intermediate lessor are classified as finance or operating leases by reference to the right-of-use asset arising from the head lease.
Income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Amounts due from lessees
under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. Finance lease income
is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in
respect of these leases.
Restoration, rehabilitation and decommissioning
Restoration, rehabilitation and decommissioning costs arising from the installation of plant and other site preparation work,
discounted using a risk-free rate specific to the liability and the currency in which they are denominated to their net present value,
are provided for and capitalised at the time such an obligation arises. The costs are charged to the consolidated statement of
income over the life of the operation through depreciation of the asset and the unwinding of the discount on the provision.
Costs for restoration of subsequent site disturbance, which is created on an ongoing basis during production, are provided for at
their net present values and charged to the consolidated statement of income as extraction progresses.
Changes in the estimated timing of the rehabilitation or changes to the estimated future costs are accounted for prospectively by
recognising an adjustment to the rehabilitation liability and a corresponding adjustment to the asset to which it relates, provided
a reduction, if any, in the provision is not greater than the depreciated capitalised cost of the related asset, in which case the
capitalised cost is reduced to Nil and the remaining adjustment recognised in the consolidated statement of income. In the case of
closed sites, changes to estimated costs are recognised immediately in the consolidated statement of income.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 163Glencore Annual Report 2021 163
Notes to the financial statements continued
1. Accounting policies continued
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation (calculated on a straight-line basis over their useful lives) and accumulated impairment losses, if any.
Internally generated intangibles are not capitalised. Instead, the related expenditure is recognised in the consolidated statement of
income in the period in which the expenditure is incurred.
Identifiable intangible assets with a finite life are amortised on a straight-line basis over their expected useful life. The amortisation
method and period are reviewed annually and impairment testing is undertaken when circumstances indicate the carrying amount
may not be recoverable. Other than goodwill which is not amortised, Glencore has no identifiable intangible assets with an
indefinite life.
The major categories of intangibles are amortised on a units of production (UOP) and/or straight-line basis as follows:
Port allocation rights
UOP
Licences, trademarks and software
3 – 20 years
Customer relationships
5 – 9 years
Goodwill impairment testing
For the purpose of impairment testing, goodwill has been allocated to the CGUs, or groups of CGUs, that are expected to benefit
from the synergies of the business combination and which represent the level at which management monitors and manages the
goodwill. In assessing whether an impairment is required, the carrying value of the CGU is compared with its recoverable amount.
The recoverable amount is the higher of its fair value less costs of disposal (FVLCD) and its value in use (VIU). If the recoverable
amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount
of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis of the carrying amount of each asset
in the unit. Any impairment loss for goodwill is recognised directly in the consolidated statement of income. An impairment loss
recognised for goodwill can not be reversed in subsequent periods.
Other investments
Equity investments, other than investments in Associates, are recorded at fair value. Glencore designated investments that are not
held for trading as at fair value through other comprehensive income (FVTOCI). As a result, changes in fair value are recorded in the
consolidated statement of other comprehensive income. Dividends from these investments are recognised in the consolidated
statement of income, unless the dividend represents a recovery of part of the cost of the equity investment. Investments that are
held for trading are subsequently measured at fair value through profit or loss (FVTPL).
Impairment or impairment reversals
Glencore conducts, at least annually, an internal review of asset values which is used as a source of information to assess for any
indications of impairment or impairment reversal. Formal impairment tests are carried out, at least annually, for cash-generating
units containing goodwill and for all other non-current assets, when events or changes in circumstances indicate the carrying value
may not be recoverable.
A formal impairment or reversal test involves determining whether the carrying amounts are in excess (or below, as the case may
be) of their recoverable amounts. An asset’s recoverable amount is determined as the higher of its FVLCD and its VIU. Such reviews
are undertaken on an asset-by-asset basis, except where assets do not generate cash flows independent of other assets, in which
case the review is undertaken at the CGU level.
If the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recorded in the consolidated statement of
income to reflect the asset at the lower amount.
For those assets which were impaired in prior periods, if their recoverable amount exceeds their carrying amount, an impairment
reversal is recorded in the consolidated statement of income to reflect the asset at the higher amount to the extent the increased
carrying amount does not exceed the carrying value of the asset that would have been determined had no impairment previously
been recognised. Goodwill impairments cannot be subsequently reversed.
Glencore Annual Report 2021164
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021164
Notes to the financial statements continued
1. Accounting policies continued
Provisions
Provisions are recognised when Glencore has a present obligation (legal or constructive), as a result of past events, and it is probable
that an outflow of resources embodying economic benefits that can be reliably estimated will be required to settle the liability.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties surrounding the obligation, including interpretation of specific
laws and likelihood of settlement. Where a provision is measured using the cash flow estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Onerous contracts
An onerous contract is considered to exist where Glencore has a contract under which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received from the contract. Present obligations arising
under onerous contracts are recognised and measured as provisions.
Unfavourable contracts
An unfavourable contract is considered to exist when Glencore, in a business combination, acquires a contract under which the
terms of the contract require Glencore to sell or purchase products or services on terms which are economically unfavourable
compared to current market terms at the time of the business combination. Unfavourable contracts are recognised at the present
value of the economic loss and amortised into the statement of income over the term of the contract.
Inventories
The vast majority of inventories attributable to the marketing activities are valued at fair value less costs of disposal with the
remainder valued at the lower of cost or net realisable value, with costs allocated using the first-in-first-out (FIFO) method.
Unrealised gains and losses from changes in fair value are reported in cost of goods sold.
Inventories held by the industrial activities are valued at the lower of cost or net realisable value. Cost is determined using FIFO or
the weighted average method and comprises material costs, labour costs and allocated production related overhead costs. Typically
raw materials and consumables are measured using the FIFO method and work in progress inventories using the weighted
average method. Where the production process results in more than one product being produced (joint products), cost is allocated
between the various products according to the ratio of contribution of these metals to gross sales revenue. Financing and storage
costs related to inventory are expensed as incurred.
Non-current inventories primarily relate to stockpiles which are not expected to be utlised within the normal operating cycle.
Non-financial instruments (physical advances or prepayments)
The Group enters into physical advances and prepayment agreements with certain suppliers and customers. When such advances
and prepayments are primarily settled in cash or another financial asset, they are classified as financial instruments (see below).
When settlement is satisfied primarily through physical delivery or receipt of an underlying product they are classified as non-
financial instruments. Such advances and prepayments are initially recorded at the amount of the cash paid or received and are
subsequently reduced by the relevant contractual volumes of physical deliveries made.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Financial assets are classified as either financial assets at amortised cost, at fair value through other comprehensive income (FVTOCI)
or at fair value through profit or loss (FVTPL) depending upon the business model for managing the financial assets and the nature
of the contractual cash flow characteristics of the financial asset. Financial assets are initially recognised at fair value on the trade
date, including, in the case of instruments not subsequently measured at fair value through profit or loss, directly attributable
transaction costs. Trade receivables with no provisional price features and where there is no significant financing component, are
initially recognised at their transaction price. Subsequently, other investments, provisionally priced trade receivables and derivatives
are carried at fair value and trade receivables that do not contain provisional price features, loans and other receivables are carried at
amortised cost.
Financial liabilities, other than derivatives and those containing provisional price features, are initially recognised at fair value of
consideration received net of transaction costs as appropriate and subsequently carried at amortised cost. Financial liabilities that
contain provisional pricing features (accounted for as embedded derivatives) were designated in their entirety as at FVTPL.
Derivatives are carried at FVTPL.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 165Glencore Annual Report 2021 165
Notes to the financial statements continued
1. Accounting policies continued
Where financial assets and financial liabilities recognised at fair value are managed and reported to key management personnel on
the basis of its net exposure to either market risks or credit risk, fair value of that group of financial assets and financial liabilities is
measured on the basis of the net price that would be received to sell the long position and to transfer the short position for a
particular risk exposure of the specific financial asset or liability being measured. When the group of financial assets and/or financial
liabilities are not presented on a net basis in the statement of financial position, any portfolio level adjustments are allocated to the
individual instruments that make up the group on an appropriate basis.
(i) Impairment of financial assets
A loss allowance for expected credit losses is determined for all financial assets (as well as for issued loan commitments and financial
guarantee contracts), other than those at FVTPL and investments in equity instruments measured at FVTOCI, at the end of each
reporting period. The expected credit loss recognised represents a probability-weighted estimate of credit losses over the expected
life of the financial instrument.
The Group applies the simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the
lifetime expected loss provision. The expected credit losses on these financial assets are estimated using a provision matrix by
reference to past default experience and an equivalent credit rating, adjusted as appropriate for current observable data and
forward-looking information.
For all other financial assets at amortised cost, the Group recognises lifetime expected credit losses when there has been a
significant increase in credit risk since initial recognition, which is determined by:
• A review of overdue amounts;
• Comparing the risk of default at the reporting date and at the date of initial recognition; and
• An assessment of relevant historical and forward-looking quantitative and qualitative information.
For those balances that are beyond 30 days overdue it is presumed to be an indicator of a significant increase in credit risk.
If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-month expected credit loss, which comprises the expected lifetime
loss from the instrument were a default to occur within 12 months of the reporting date.
The Group considers an event of default has materialised and the financial asset is credit impaired when information developed
internally or obtained from external sources indicates that the debtor is unlikely to pay the Group without taking into account any
collateral held by the Group or if the financial asset is more than 90 days past due, unless the Group has reasonable and supportable
information to demonstrate that a more lagging default criterion is more appropriate. The Group writes off a financial asset when
there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery.
(ii) Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises
a collateralised borrowing for the proceeds received.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or have expired.
On derecognition of a financial asset/financial liability in its entirety, the difference between the carrying amount of the financial
asset/financial liability and the sum of the consideration received and receivable/paid and payable is recognised in profit and loss. On
derecognition of equity investments designated and measured at FVTOCI, the cumulative gain or loss recognised in other
comprehensive income is reclassified directly to retained earnings.
Own shares
The cost of purchases of own shares is deducted from equity. Where they are purchased, issued to employees or sold, no gain or loss
is recognised in the consolidated statement of income. Such gains and losses are recognised directly in equity. Any proceeds
received on disposal of the shares or transfers to employees are recognised in equity.
Derivatives and hedging activities
Derivative instruments, which include physical contracts to sell or purchase commodities that do not meet the own use exemption,
are initially recognised at fair value when Glencore becomes a party to the contractual provisions of the instrument and are
subsequently remeasured to fair value at the end of each reporting period. Fair values are determined using quoted market prices,
dealer price quotations or using models and other valuation techniques, the key inputs for which include current market and
contractual prices for the underlying instrument, time to expiry, yield curves, volatility of the underlying instrument and
counterparty risk.
Glencore Annual Report 2021166
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021166
Notes to the financial statements continued
1. Accounting policies continued
Gains and losses on derivative instruments for which hedge accounting is not applied, other than the revenue adjustment
mechanism embedded within provisionally priced sales and mark-to-market movements on physical forward sales contracts, are
recognised in cost of goods sold.
Those derivatives qualifying and designated as hedges are either (i) a Fair Value Hedge of the change in fair value of a recognised
asset or liability or an unrecognised firm commitment, or (ii) a Cash Flow Hedge of the change in cash flows to be received or paid
relating to a recognised asset or liability or a highly probable transaction.
At the inception of the hedge and on an ongoing basis, Glencore documents whether the hedging instrument is effective in
offsetting changes in fair values or cash flows of the hedged item attributable to the hedged risk, which is when the hedging
relationship meets the qualifying hedge effectiveness requirements.
Glencore discontinues hedge accounting when the qualifying criteria for the hedged relationship is no longer met.
A change in the fair value of derivatives designated as a Fair Value Hedge is reflected together with the change in the fair value of
the hedged item in the consolidated statement of income.
A change in the fair value of derivatives designated as a Cash Flow Hedge is initially recognised in the consolidated statement of
comprehensive income and accumulated in the cash flow hedge reserve in shareholders’ equity. The deferred amount is then
released to the consolidated statement of income in the same periods during which the hedged transaction affects the
consolidated statement of income. Hedge ineffectiveness is recorded in the consolidated statement of income when it occurs.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in shareholders’ equity and is recognised in the consolidated statement of
income when the committed or forecast transaction is ultimately recognised in the consolidated statement of income. However, if a
forecast or committed transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is
immediately transferred to the consolidated statement of income.
A derivative may be embedded in a non-derivative “host contract” such as provisionally priced sales and purchases. Such
combinations are known as hybrid instruments. If a hybrid contract contains a host that is a financial asset within the scope of IFRS
9, then the relevant classification and measurement requirements are applied to the entire contract at the date of initial recognition.
Should the host contract not be a financial asset within the scope of IFRS 9, the embedded derivative is separated from the host
contract, if it is not closely related to the host contract, and accounted for as a standalone derivative. Where the embedded
derivative is separated, the host contract is accounted for in accordance with its relevant accounting policy, unless the entire
instrument is designated at FVTPL in accordance with IFRS 9.
Financial guarantee contracts
Financial guarantee contracts are accounted for in accordance with IFRS 9 as financial liabilities. After initial recognition, any such
contracts are subsequently measured at the higher of the amount of the provision for expected credit losses and the amount
initially recognised less any income recognised in accordance with the principles of IFRS 15.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 167Glencore Annual Report 2021 167
Notes to the financial statements continued
2. Segment information
Glencore is organised and operates on a worldwide basis in two core business segments – Marketing activities and Industrial
activities, reflecting the reporting lines and structure used by Glencore’s Management to allocate resources and assess the
performance of Glencore.
The business segments’ contributions to the Group are primarily derived from a) the net margin or premium earned from physical
Marketing activities (net sale and purchase of physical commodities) and the provision of marketing and related value-add services
and b) the net margin earned from Industrial asset activities (resulting from the sale of physical commodities over the cost of
production and/or cost of sales). The marketing related operating segments have been aggregated under the Marketing reportable
segment as their economic characteristics (historic and expected long-term Adjusted EBITDA margins and the nature of the
marketing services provided) are similar. The industrial related operating segments have been aggregated under the Industrial
reportable segment as the core activities (extracting raw material and / or processing it further into saleable product, as required,
and then selling it at prevailing market prices), the exposure to long-term economic risks (price movements, technology, sovereign
and production substitution) and the longer-term average Adjusted EBITDA margins are similar. The economic and operational
characteristics of our coal operating and commercial units are not expected to change in the foreseeable future and continue to be
included within the industrial assets and marketing reporting segments respectively.
Corporate and other: consolidated statement of income amounts represent Group related income and expenses (including share of
Viterra earnings and certain variable bonus charges). Statement of financial position amounts represent Group related balances.
The financial performance of the operating segments is principally evaluated by management with reference to Adjusted
EBIT/EBITDA. Adjusted EBIT is the net result of segmental revenue (revenue including Proportionate adjustments as defined in the
Alternative performance measure section) less cost of goods sold and selling and administrative expenses plus share of income
from associates and joint ventures, dividend income and the attributable share of Adjusted EBIT of relevant material associates and
joint ventures, which are accounted for internally by means of proportionate consolidation, excluding significant items. Adjusted
EBITDA consists of Adjusted EBIT plus depreciation and amortisation, including the related Proportionate adjustments. In addition,
Volcan, while a subsidiary of the Group, is accounted for under the equity method for internal reporting and analysis due to the
relatively low economic ownership held by the Group.
The accounting policies of the operating segments are the same as those described in note 1 with the exception of relevant material
associates, the Collahuasi joint venture and Volcan. Under IAS 28 and IFRS 11, Glencore’s investments in the Antamina copper/zinc
mine (34% owned) and the Cerrejón coal mine (33% owned) are considered to be associates as they are not subject to joint control
and the Collahuasi copper mine (44% owned) is considered to be a joint venture. Associates and joint ventures are required to be
accounted for in Glencore’s financial statements under the equity method. For internal reporting and analysis, Glencore evaluates
the performance of these investments under the proportionate consolidation method, reflecting Glencore’s proportionate share of
the revenues, expenses, assets and liabilities of the investments. For internal reporting and analysis, management evaluates the
performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic ownership in this fully ring-
fenced listed entity, with its stand-alone, independent and separate capital structure. The balances as presented for internal
reporting purposes are reconciled to Glencore’s statutory disclosures in the following tables and/or in the Alternative performance
measures section.
Glencore Annual Report 2021168
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021168
Notes to the financial statements continued
2. Segment information continued
Glencore accounts for intra-segment sales and transfers where applicable as if the sales or transfers were to third parties, i.e. at arm’s
length commercial terms.
2021
Marketing
activities
Industrial
activities
Inter-segment
eliminations
US$ million
Total
Revenue
Metals and minerals
74,727
41,535
(29,915)
86,347
Energy products
107,037
19,269
(4,727)
121,579
Corporate and other
–
6
–
6
Revenue - segmental
181,764
60,810
(34,642)
207,932
Proportionate adjustment – revenue
1
–
(4,181)
–
(4,181)
Revenue – reported measure
181,764
56,629
(34,642)
203,751
Metals and minerals
Adjusted EBITDA
2,588
12,017
–
14,605
Depreciation and amortisation
(94)
(3,485)
–
(3,579)
Proportionate adjustment – depreciation
1
–
(404)
–
(404)
Adjusted EBIT
2,494
8,128
–
10,622
Energy products
Adjusted EBITDA
1,829
5,603
–
7,432
Depreciation and amortisation
(434)
(2,262)
–
(2,696)
Proportionate adjustment – depreciation
1
–
(89)
–
(89)
Adjusted EBIT
1,395
3,252
–
4,647
Corporate and other
Adjusted EBITDA
2
(194)
(520)
–
(714)
Depreciation and amortisation
–
(60)
–
(60)
Adjusted EBIT
(194)
(580)
–
(774)
Total Adjusted EBITDA
4,223
17,100
–
21,323
Total depreciation and amortisation
(528)
(5,807)
–
(6,335)
Total depreciation proportionate adjustment
–
(493)
–
(493)
Total Adjusted EBIT
3,695
10,800
–
14,495
Share of associates' significant items
1,3
(11)
Movement in unrealised inter-segment profit elimination adjustments
4
(549)
Loss on disposals of non-current assets
(607)
Other income/(expense) – net
(1,947)
Impairments
(1,838)
Interest expense – net
(1,140)
Income tax expense
(3,026)
Proportionate adjustment – net finance, impairment and income tax
expense
1
(1,028
)
Income for the year
4,349
1 Refer to APMs section for definition.
2 Marketing activities include $473 million of Glencore’s equity accounted share of Viterra.
3 Share of associates’ significant items comprise Glencore’s share of significant charges relating to impairments and other items booked directly by various associates.
4 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 169Glencore Annual Report 2021 169
Notes to the financial statements continued
2. Segment information continued
2020
Marketing
activities
Industrial
activities
Inter-segment
eliminations
US$ million
Total
Revenue
Metals and minerals
54,847
30,303
(18,859)
66,291
Energy products
69,290
11,145
(1,944)
78,491
Corporate and other
–
5
–
5
Revenue - segmental
124,137
41,453
(20,803)
144,787
Proportionate adjustment – revenue
1
–
(2,449)
–
(2,449)
Revenue – reported measure
124,137
39,004
(20,803)
142,338
Metals and minerals
Adjusted EBITDA
1,768
7,285
–
9,053
Depreciation and amortisation
(101)
(3,868)
–
(3,969)
Proportionate adjustment – depreciation
1
–
(363)
–
(363)
Adjusted EBIT
1,667
3,054
–
4,721
Energy products
Adjusted EBITDA
2,053
1,039
–
3,092
Depreciation and amortisation
(292)
(2,294)
–
(2,586)
Proportionate adjustment – depreciation
1
–
(110)
–
(110)
Adjusted EBIT
1,761
(1,365)
–
396
Corporate and other
Adjusted EBITDA
2
(89)
(496)
–
(585)
Depreciation and amortisation
–
(116)
–
(116)
Adjusted EBIT
(89)
(612)
–
(701)
Total Adjusted EBITDA
3,732
7,828
–
11,560
Total depreciation and amortisation
(393)
(6,278)
–
(6,671)
Total depreciation proportionate adjustment
–
(473)
–
(473)
Total Adjusted EBIT
3,339
1,077
–
4,416
Share of associates' significant items
1,3
(92)
Movement in unrealised inter-segment profit elimination adjustments
4
(760)
Loss on disposals of non-current assets
(36)
Other income/(expense) – net
(173)
Impairments
(5,947)
Interest expense – net
(1,453)
Income tax expense
1,170
Proportionate adjustment – net finance, impairment and income tax
expense
1
(1,071
)
Loss for the year
(3,946)
1 Refer to APMs section for definition.
2 Marketing activities include $211 million of Glencore’s equity accounted share of Viterra.
3 Share of associates’ significant items comprise Glencore’s share of significant charges relating to impairments and other items booked directly by various associates, notably Trevali
($36 million) and HG Storage ($20 million).
4 Represents the required adjustment to eliminate unrealised profit or losses arising on inter-segment transactions, i.e. before ultimate sale to a third party. For Glencore, such
adjustments arise on the sale of product, in the ordinary course of business, from its Industrial to Marketing operations. Management assesses segment performance prior to any such
adjustments, as if the sales were to third parties.
Glencore Annual Report 2021170
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021170
Notes to the financial statements continued
2. Segment information continued
2021
Marketing
activities
Industrial
activities
Corporate
and other
US$ million
Total
Current assets
38,080
15,134
–
53,214
Current liabilities
(33,553)
(7,288)
–
(40,841)
Allocatable current capital employed
4,527
7,846
–
12,373
Property, plant and equipment
961
42,198
–
43,159
Intangible assets
5,149
1,086
–
6,235
Investments in associates and other investments
5,565
8,349
–
13,914
Non-current advances and loans
1,943
1,584
–
3,527
Inventories
5
657
–
662
Allocatable non-current capital employed
13,623
53,874
–
67,497
Other assets
1
6,799
6,799
Other liabilities
2
(49,752)
(49,752)
Total net assets
18,150
61,720
(42,953)
36,917
Capital expenditure
Metals and minerals
145
3,573
–
3,718
Energy products
656
819
–
1,475
Corporate and other
–
31
–
31
Capital expenditure - segmental
801
4,423
–
5,224
Proportionate adjustment – capital expenditure
3
–
(516)
–
(516)
Capital expenditure - reported measure
4
801
3,907
–
4,708
2020
Marketing
activities
Industrial
activities
Corporate
and other
US$ million
Total
Current assets
27,273
13,395
–
40,668
Current liabilities
(23,906)
(7,098)
–
(31,004)
Allocatable current capital employed
3,367
6,297
–
9,664
Property, plant and equipment
978
46,132
–
47,110
Intangible assets
5,188
1,279
–
6,467
Investments in associates and other investments
5,708
8,425
–
14,133
Non-current advances and loans
1,733
1,309
–
3,042
Inventories
–
678
–
678
Allocatable non-current capital employed
13,607
57,823
–
71,430
Other assets
1
5,902
5,902
Other liabilities
2
(52,594)
(52,594)
Total net assets
16,974
64,120
(46,692)
34,402
Capital expenditure
Metals and minerals
68
3,023
–
3,091
Energy products
420
1,031
–
1,451
Corporate and other
–
28
–
28
Capital expenditure - segmental
488
4,082
–
4,570
Proportionate adjustment – capital expenditure
3
–
(426)
–
(426)
Capital expenditure – reported measure
4
488
3,656
–
4,144
1 Other assets include non-current financial assets, deferred tax assets, cash and cash equivalents and assets held for sale.
2 Other liabilities include borrowings, non-current deferred income, deferred tax liabilities, non-current provisions, non-current post-retirement and other employee benefits, non-
current financial liabilities and liabilities held for sale.
3 Refer to APMs section for definition.
4 Includes $1,006 million (2020: $575 million), comprising $648 million (2020: $415 million) in Marketing activities and $358 million (2020: $160 million) in Industrial activities, of ‘right-of-use
assets’ capitalised in accordance with IFRS 16 – Leases.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 171G lencore Annual Report 2021 171
Notes to the financial statements continued
2. Segment information continued
Geographical information
US$ million
2021
2020
Revenue from third parties
1
The Americas
37,930
25,762
Europe
64,284
42,682
Asia
86,576
60,360
Africa
9,991
6,701
Oceania
4,970
6,833
203,751
142,338
Non-current assets
2
The Americas
16,963
17,347
Europe
11,152
11,051
Asia
4,683
4,802
Africa
12,389
13,798
Oceania
17,163
19,657
62,350
66,655
1 Revenue by geographical destination is based on the country of incorporation of the sales counterparty, however this may not necessarily be the country of the counterparty’s
ultimate parent and/or final destination of product.
2 Non-current assets are non-current assets excluding other investments, advances and loans, other financial assets and deferred tax assets. Non-current assets comprise assets in
Australia of $16,714 million (2020: $18,047 million), in Peru of $7,243 million (2020: $7,271 million) and the DRC of $6,555 million (2020: $6,849 million).
3. Revenue
US$ million
2021
2020
Sale of commodities
201,113
139,486
Freight, storage and other services
2,638
2,852
Total
203,751
142,338
Revenue is derived principally from the sale of commodities, recognised once control of the goods has transferred from Glencore to
the buyer. Revenue from sale of commodities includes $710 million (2020: $1,217 million) of mark-to-market related adjustments on
provisionally priced sales arrangements. Revenue derived from freight, storage and other services is recognised over time as the
service is rendered. Revenue is measured based on consideration specified in the contract with the customer and is presented net
of amounts prepaid as incentives and/or rebates paid to customers, and excludes amounts collected on behalf of third parties. This is
consistent with the revenue information disclosed for each reportable segment (see note 2).
4. Loss on disposals of non-current assets
US$ million
Notes
2021
2020
Derecognition of non-controlling interest on disposal of Mopani
26
(1,022)
–
Gain on sale of Chemoil Terminals
26
110
–
Net gain on sale of other investments/operations
98
9
Gain/(loss) on disposal of property, plant and equipment
207
(45)
Total
(607)
(36)
Disposal of Mopani
On 31 March 2021, Glencore completed the disposal of its 90% interest in Mopani to ZCCM Investments Holdings plc. The net loss on
disposal reflects the derecognition to the statement of income of the previously recognised book value of the non-controlling
interest equity balance, which largely related to the non-controlling interests’ share of historical impairments and losses, and net
liabilities in Mopani (see note 26).
Disposal of Chemoil Terminals
On 17 December 2021, Glencore completed the disposal of its 100% interest in Chemoil Terminals LLC, which owns the Long Beach
and Carson oil products storage terminals in California, resulting in a gain of $110 million (see note 26).
Glencore Annual Report 2021172
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021172
Notes to the financial statements continued
5. Other income/(expense) – net
US$ million
Notes
2021
2020
Net changes in mark-to-market valuations on investments
64
438
Release of unfavourable contract provision
22
122
–
Total other income
186
438
Net foreign exchange losses
(187)
(192)
Legal and regulatory proceedings
(1,640)
(113)
Closed site rehabilitation costs
(177)
(80)
Closure and severance costs
–
(214)
Other expenses – net
(129)
(12)
Total other expenses
(2,133)
(611)
Total other (expense)/income - net
(1,947)
(173)
Together with foreign exchange movements and mark-to-market movements on investments, other net income/(expense)
includes other items that, due to their nature and variable financial impact or infrequency of the events giving rise to these items,
are reported separately from operating segment results.
Net changes in mark-to-market valuations on investments
Primarily relates to movements on interests in investments (see note 11), the ARM Coal non-discretionary dividend obligation (see
note 29) and deferred consideration related to Mototolo stake sale in 2018 (see notes 12 and 14), all carried at fair value.
Legal and regulatory proceedings
Comprises various investigations (legal, expert and compliance) related costs and a provision for the on-going investigations of
$1,584 million (2020: $95 million)(see notes 23 and 32).
In 2020, a dispute with the Strategic Fuel Fund Association of South Africa was settled, resulting in an expense of $18 million.
Closed site rehabilitation costs
Comprises movements in restoration, rehabilitation and decommissioning estimates related to sites that are no longer operational
(see note 23).
Closure and severance related costs
In 2020, closure and severance related costs were primarily incurred in respect of the suspension of operations at Prodeco coal in
Colombia ($147 million), the Aguilar zinc mine in Argentina ($43 million) and the Lydenburg chrome smelter in South Africa
($24 million).
6. Interest income/(expense) – net
US$ million
Notes
2021
2020
Bank deposits and other financial assets
110
101
Accretion on certain advances repayable with product
12
90
–
Loans to associates
8
19
Interest income
208
120
Capital market notes
(733)
(889)
Revolving credit facilities
(55)
(102)
Post-retirement employee benefits
24
(23)
(26)
Deferred income
22
(115)
(127)
Lease liabilities
9
(98)
(96)
Restoration and rehabilitation
23
(153)
(144)
Other provisions
23
(33)
(45)
Bank loans
(93)
(98)
Less: capitalised interest
9
33
33
Other interest
(78)
(79)
Interest expense
(1,348)
(1,573)
Total interest income/(expense) - net
(1,140)
(1,453)
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 173G lencore Annual Report 2021 173
Notes to the financial statements continued
7. Impairments
US$ million
Notes
2021
2020
Property, plant and equipment and intangible assets
9/10
(1,452)
(5,508)
Investments
11
(333)
(96)
Advances and loans - current and non-current
12/14
98
(343)
VAT receivable - non-current
(151)
–
Total impairments
1
(1,838)
(5,947)
1 Impairments recognised during the year are allocated to Glencore’s operating segments as follows: Marketing activities $270 million (2020: $228 million) and Industrial activities
$1,568 million (2020: $5,719 million).
As part of a regular portfolio review, Glencore carries out an assessment of whether there are indicators of cash-generating unit
(CGU) or asset impairments or whether a previously recorded impairment may no longer be required.
The recoverable amounts of the property, plant and equipment and intangible assets were measured based on fair value less costs
of disposal (FVLCD), or in certain cases value in use (VIU). In particular, market pressures relating to investments in Coal mining
operations has impacted the availability of an active market for acquiring such operations, and thus the recoverable amounts of our
Coal CGUs have been measured using a VIU approach. The FVLCD or VIU of all CGUs are determined by discounted cash flow
techniques based on the most recent approved financial budgets, underpinned and supported by the life of asset plans of the
respective operations. The valuation models use a combination of internal sources and those inputs available to a market
participant, which comprise the most recent reserve and resource estimates, relevant cost assumptions and where possible, market
forecasts of commodity price and foreign exchange rate assumptions, discounted using operation specific post-tax real discount
rates (unless otherwise indicated) ranging from 6.7% – 15.5% (2020: 6.1% – 13.5%). The valuations generally remain most sensitive to
price and a deterioration / improvement in the pricing outlook may result in additional impairments/reversals. The determination of
FVLCD used Level 3 valuation techniques for both years. In providing sensitivity analysis (and particularly on commodity price
assumptions), a 10% change, representing a typical deviation parameter common in the industry, has been provided. Where a
higher percentage is reasonably possible on an operational assumption, that has been clearly identified.
As a result of the regular impairment assessment, the following significant impairment charges were recognised:
2021
Property, plant and equipment and intangible assets
• In H1 2021, Koniambo incurred failures at its power plant and suffered a slag leak in line 2 of its metallurgical plant, resulting in a
suspension of production. Extensive investigation into the cause of the leak ensued, following which it was determined to target
lower throughput, revise certain grade and process recovery assumptions and increase the frequency of major maintenance
shut-downs, with the intention of delivering more sustainable long-term operations. These revised changes in volume and cost
assumptions and the emergence of higher discounts on non-battery application nickel relative to the LME nickel benchmark
price, resulted in a reduction of Koniambo’s estimated recoverable value (Industrial activities segment) to $550 million and an
impairment of $1,170 million. The valuation assumed a long-term realised nickel price of approximately $13,700/t and an operation
specific discount rate of 9.8%. Further revisions to the operating plans are possible. A 10% reduction in either the long-term
realised nickel price or life of mine production could result in the remaining carrying value being fully impaired. A 10% increase in
variable operating costs could result in an additional impairment of $170 million. Conversely, a 10% increase in the long-term
realised nickel price could result in an impairment reversal of $450 million.
• The balance of the impairment charges on property, plant and equipment (none of which were individually material) relate to
specific assets where utilisation is no longer required or to projects no longer progressed due to changes in production and
development plans. As a result, the full carrying amount of these assets/projects was impaired, with $282 million recognised in our
Industrial activities segment.
Investments
Primarily comprises an impairment charge of $331 million in respect of our 49% investment in HG Storage (Marketing activities
segment), to an estimated recoverable value of $189 million following a review of the carrying value against valuation benchmarks.
The valuation of this investment is not considered to be a significant source of estimation uncertainty as no change in assumptions
reasonably possible within the next 12 months would materially affect the carrying value. 2020 primarily comprised an impairment
charge in respect of our investment in Century Aluminum ($73 million).
Advances and loans – current and non-current
In 2021, impairment reversals on advances and loans of $98 million (none of which were individually material) were recognised
following an improvement in the underlying financial condition of various counterparties, with $63 million recognised in our
Marketing activities segment and $35 million recognised in our Industrial activities segment. Of the total $98 million of impairment
reversals, $67 million relate to financial assets and $31 million relate to non-financial assets.
VAT receivable – non-current
As a result of continued challenge and non-performance by certain government authorities in settling long outstanding VAT claims,
an impairment charge of $151 million was recognised in our Industrial activities segment.
Glencore Annual Report 2021174
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021174
Notes to the financial statements continued
7. Impairments continued
2020
Property, plant and equipment and intangible assets
• Volcan is a listed zinc / silver mining entity in Peru, in which the Group acquired a 63% controlling (23% economic) interest at the
end of 2017 (Industrial activities segment). The operations primarily comprise two cash-generating units (Yauli and Chungar) and
at the time of the acquisition, approximately one third of the value was ascribed to realising the future potential of various projects
/ resources. Due to the impact Covid-19 had on the long-term outlook of the global economy a review of the life of mine plan and
related expansion projects was carried out in Q2 2020.
It was determined that the related risk / confidence levels in deploying capital to longer-term greenfield projects and the
probability of approving development and realisation of these projects had reduced. This, along with the shift in long-term zinc
pricing, led to an impairment of $2,347 million (and related deferred tax obligations of $716 million were released) to its estimated
recoverable value of $1,503 million. The valuation assumed a long-term zinc and silver price of $2,400/t and $20.00/lb, respectively
and an operation specific discount rate of 9.2%. As at 31 December 2020, had the zinc and silver price assumptions fallen by 10%
(across the curve), a further impairment of $450 million would have been recognised. A 10% reduction in estimated annual
production over the life of mine would have resulted in an additional impairment of $540 million.
• As a result of persistent operational challenges, further technical analysis resulting in a reduced life of mine forecast, delays in key
development projects and cost increases owing to inflation, tax and other regulatory pressures, a decision was made, in Q2 2020,
to place the Mopani copper operations in Zambia (Industrial activities segment) on care and maintenance subject to government
approval. As a consequence of the operational, technical and cost factors, the Mopani operations were impaired by $1,041 million,
to their estimated recoverable value of $861 million, including tax receivables. In January 2021, an agreement was reached to sell
Mopani to ZCCM (see note 16).
• During H1 2020, pressure on the API 2 European coal market (primary price reference market for our Colombian coal operations)
increased as European economies continue to shift to a decarbonised environment, exacerbated by the significant drop in oil and
gas prices (supply and demand factors). A review of Prodeco’s operations determined that, in addition to a deteriorating market
environment, there were increasing challenges with respect to obtaining several key approvals from government agencies and
other key stakeholders. In Q2 2020, an application was therefore made to place Prodeco operations on extended care and
maintenance until these conditions improve. In Q4, the application was rejected and it was subsequently decided to relinquish
the mining licenses.
Consequently, the full carrying value of the mining operations related to such licenses ($835 million) (Industrial activities segment)
were fully impaired (property, plant and equipment - $789 million and non-current advances and loans - $46 million).
• As noted above, oil prices were significantly impacted by demand destruction from Covid-19 and the lack of timely effective
supply response from OPEC+ and the longer term outlook for oil prices also deteriorated due to updated expectations
surrounding decarbonisation. In addition, Covid-19 disrupted and restricted international mobility, which had a particularly
significant impact on our workforce arrangements in Chad, resulting in these fields being placed on care and maintenance in
March. As a result, in Q2 2020, the Chad oil operations (Industrial activities segment) were impaired by $673 million to their
estimated recoverable amount of $145 million. The valuation remained sensitive to Covid-19 related disruptions on international
mobility and a timely restart of the operations in a safe and economic manner. Should such restart have been prolonged for an
extended period of time, an additional future impairment could have resulted.
• In June 2020, it was determined to keep the Lydenburg chrome smelter (Industrial activities segment) on care and maintenance.
This decision reflected the challenging operating and market environment across the South African ferrochrome industry,
including unsustainably increasing electricity tariffs / supply interruption and other sources of real cost inflation. These macro
factors outweigh the significant efforts made over the past years to make the operation more competitive, rendering its
estimated fair value as negative. As a result, the entire carrying value of the Lydenburg smelter ($116 million) was impaired.
• The global macro-economic impact of Covid-19 on refined petroleum product demand and resulting global refinery overcapacity
had a negative effect on refining margins. As a result, Astron (Industrial activities segment) lowered its long term through-the-
cycle outlook on refining margins by approximately 30% and the Astron oil refinery was impaired by $480 million to its estimated
recoverable amount of $1,015 million, including its related downstream supply business. The operation specific discount rate used
in the valuation was a pre-tax nominal discount rate of 12.3%. The valuation remained most sensitive to refining margins and a
deterioration in these assumptions could have resulted in additional impairments. As at 31 December 2020, had the margin
assumptions fallen by $1/bbl (across the curve), a further $243 million of impairment would have been recognised. Had the
discount rate increased by 1%, a further $88 million of impairment would have been recognised.
• The balance of the impairment charges on property, plant and equipment (none of which were individually material) relate to
specific assets where utilisation is no longer required or to projects no longer progressed due to changes in production and
development plans. As a result, the full carrying amount of these assets/projects was impaired, with $62 million recognised in our
Industrial activities segment.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 175Glencore Annual Report 2021 175
Notes to the financial statements continued
7. Impairments continued
Advances and loans – current and non-current
In 2020, loans of $103 million were impaired in full due to financial difficulties faced by one of the Group’s associates (Marketing
activities segment). The balance of the impairment charges on advances and loans classified as non-financial instruments (none of
which were individually material) were recognised in our Marketing activities segment ($125 million) and our Industrial activities
segment ($115 million), following the restructuring of certain loans and physical advances due to various non-performance factors.
8. Income taxes
Income taxes consist of the following:
US$ million
2021
2020
Current income tax expense
(2,923)
(931)
Adjustments in respect of prior year current income tax
158
88
Deferred income tax (expense)/credit
(92)
2,005
Adjustments in respect of prior year deferred income tax
(169)
8
Total tax (expense)/credit reported in the statement of income
(3,026)
1,170
Deferred income tax (expense)/credit recognised directly in other comprehensive income
(67)
6
Total tax (expense)/credit recognised directly in other comprehensive income
(67)
6
The effective Group tax rate is different from the statutory Swiss income tax rate applicable to the Company for the
following reasons:
US$ million
2021
2020
Income/(loss) before income taxes
7,375
(5,116)
Less: Share of income from associates and joint ventures
(2,618)
(444)
Parent Company’s and subsidiaries’ income/(loss) before income tax and attribution
4,757
(5,560)
Income tax (expense)/credit calculated at the Swiss income tax rate of 12% (2020: 12%)
(571)
667
Tax effects of:
Different tax rates from the standard Swiss income tax rate
(1,486)
1,572
Tax-exempt income ($207 million (2020: $206 million) from recurring items
232
210
and $25 million (2020: $4 million) from non-recurring items)
Items not tax deductible ($987 million (2020: $589 million) from recurring items
(1,365)
(869)
and $378 million (2020: $280 million) from non-recurring items)
Foreign exchange fluctuations
52
(76)
Changes in tax rates
15
(9)
Utilisation and changes in recognition of tax losses and temporary differences
101
(249)
Tax losses not recognised
15
(169)
Adjustments in respect of prior years
(11)
96
Other
(8)
(3)
Income tax (expense)/credit
(3,026)
1,170
The non-tax deductible items of $1,365 million (2020: $869 million) primarily relate to financing costs, impairments and various other
expenses.
The impact of tax-exempt income of $232 million (2020: $210 million) primarily relates to non-taxable intra-group dividends, income
that is not effectively connected to the taxable jurisdiction, and various other items.
The tax impact of foreign exchange fluctuations relates to the foreign currency movements on deferred tax balances where the
underlying tax balances are denominated in a currency different to the functional currency determined for accounting purposes.
Glencore Annual Report 2021176
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021176
Notes to the financial statements continued
8. Income taxes continued
Deferred taxes
Deferred taxes as at 31 December 2021 and 2020 are attributable to the items in the table below:
US$ million
2021
Recognised in
the statement
of income
Recognised in
other
comprehensive
income
Business
combination
and disposal of
subsidiaries
Foreign
currency
exchange
movements
Other
2020
Deferred tax assets
1
Tax losses carried forward
1,418
(532)
–
–
–
(1)
1,951
Other
361
115
(10)
–
(2)
(43)
301
Total
1,779
(417)
(10)
–
(2)
(44)
2,252
Deferred tax liabilities
1
Depreciation and amortisation
(4,156)
(150)
–
19
98
–
(4,123)
Mark-to-market valuations
(127)
7
(6)
–
–
–
(128)
Other
(186)
299
(51)
–
(3)
39
(470)
Total
(4,469)
156
(57)
19
95
39
(4,721)
Total Deferred tax - net
(2,690)
(261)
(67)
19
93
(5)
(2,469)
US$ million
2020
Recognised in
the statement
of income
Recognised in
other
comprehensive
income
Business
combination
and disposal of
subsidiaries
Foreign
currency
exchange
movements
Other
2019
Deferred tax assets
1
Tax losses carried forward
1,951
741
–
–
(2)
–
1,212
Other
301
33
3
–
(13)
13
265
Total
2,252
774
3
–
(15)
13
1,477
Deferred tax liabilities
1
Depreciation and amortisation
(4,123)
1,550
–
–
75
(68)
(5,680)
Mark-to-market valuations
(128)
(56)
–
–
(1)
–
(71)
Other
(470)
(255)
3
–
3
122
(343)
Total
(4,721)
1,239
3
–
77
54
(6,094)
Total Deferred tax - net
(2,469)
2,013
6
–
62
67
(4,617)
1 Asset and liability positions in the same category reflect the impact of tax assets and liabilities arising in local tax jurisdictions that cannot be offset against tax assets and liabilities
arising in other tax jurisdictions.
Deferred tax assets are net of $287 million (2020: $579 million) of uncertain tax liabilities related to tax estimation and judgement
uncertainties with respect to various open tax disputes discussed below.
Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is
probable. As at 31 December 2021, $2,016 million (2020: $2,998 million) of deferred tax assets related to available loss carry forwards
have been brought to account, of which $1,418 million (2020: $1,951 million) are disclosed as deferred tax assets with the remaining
balance being offset against deferred tax liabilities arising in the same tax entity. This balance is primarily comprised of:
• $629 million (2020: $843 million) in entities domiciled in the DRC;
• $482 million (2020: $658 million) in entities domiciled in Switzerland; and
• $238 million (2020: $365 million) in entities domiciled in the U.S.
In evaluating whether it is probable that taxable profits will be earned in future accounting periods prior to any tax loss expiry as may
be the case, all available evidence was considered, including approved budgets, forecasts and business plans and, in certain cases,
analysis of historical operating results. These forecasts are consistent with those prepared and used internally for business planning
and impairment testing purposes. Following this evaluation, it was determined there would be sufficient taxable income generated
to realise the benefit of the deferred tax assets. With the exception of the deferred tax assets raised in respect of the Group’s DRC
operations (see below), no reasonably possible change in any of the key assumptions would result in a material reduction in forecast
headroom of tax profits so that the recognised deferred tax asset would not be realised.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 177Glencore Annual Report 2021 177
Notes to the financial statements continued
8. Income taxes continued
The recognised losses carried forward in the DRC primarily relate to historical development, ramp-up and financing related costs at
KCC. The losses carried forward have an unlimited carry forward period, but are subject to annual utilisation limitation. Following
KCC’s successful ramp-up of its operations to near name plate capacity, deferred taxation assets have been recognised for the full
estimated available tax losses at 31 December 2021 as sufficient future taxable profits are expected to fully utilise the recognised carry
forward tax losses. In recognising these deferred tax assets, consideration was given to the range of possible outcomes to determine
the expected value of the tax losses available for future offset, including to what extent previously incurred tax losses would be
available to offset future taxable profits. Any adverse challenge by the DRC tax authorities could materially impact the currently
recognised tax losses and could result in a reversal of part or all of the recognised deferred tax assets.
The recognised losses carried forward in Switzerland primarily relate to non-recurring events. Based on the core business activities
conducted in Switzerland and taxable income forecasts going forward, sufficient taxable profits are expected to fully utilise the
recognised tax losses prior to expiration.
The recognised losses carried forward in the U.S. primarily relate to non-recurring events in 2011 and have a carry forward period of
20 years. The U.S. entities comprise our core U.S. marketing activities and based on taxable income forecasts going forward,
sufficient taxable profits are expected to fully utilise the recognised tax losses prior to expiration.
Income tax receivable / payable
US$ million
2021
2020
Income tax receivable
364
444
Income tax payable
(1,785)
(927)
Net income tax payable
(1,421)
(483)
Income tax judgements and uncertain tax liabilities
Glencore assesses its liabilities and contingencies for all tax years open to audit based upon the latest information available. Inherent
uncertainties exist in estimates of tax contingencies due to complexities of interpretation and changes in tax laws. For those matters
where it is probable that an adjustment will be made, the Group records its reasoned estimate of these tax liabilities, including
related interest charges. These current open tax matters are spread across numerous jurisdictions and consist primarily of legacy
transfer pricing matters that have been open for a number of years and may take several more years to resolve. In recognising a
provision for these taxation exposures, consideration was given to the range of possible outcomes to determine the Group’s best
estimate of the amount to provide. As at 31 December 2021, the Group has recognised $880 million (2020: $1,189 million) of uncertain
tax liabilities related to possible adverse outcomes of these open matters, of which, $287 million (2020: $579 million) has been
recognised net of deferred tax assets, with the balance of $593 million (2020: $610 million) recognised as an income tax payable. The
change in the total uncertain tax position during the year reflects the outcome of certain settlements and court rulings.
UK Tax Audit
In previous periods, HMRC have issued formal transfer pricing, unallowable purposes and diverted profits tax assessments for the
2008-2018 tax years, amounting to $837 million. The Group has appealed against, and continues to vigorously contest, these
assessments, following, over the years, various legal opinions received and detailed analysis conducted, supporting its positions and
policies applied. Therefore, the Group has not fully provided for the amount assessed. The matter is now proceeding through the
Mutual Agreement Process, pursuant to article 24 of the Switzerland – United Kingdom Income Tax Treaty 1977. Management does
not anticipate a significant risk of material changes in estimates in this matter over the following 12 months.
DRC Tax Audit
As a matter of course, various tax authorities in the DRC issue draft assessments adjusting revenue and denying costs and other
items, along with customs related claims for alleged non-compliance or incorrect coding on certain filings. Upon receipt of such
draft assessments, the Group engages with the tax authorities to defend its filing positions. As at 31 December 2021, there are various
ongoing technical discussions, the ultimate outcome of which remains uncertain, and therefore there remains a risk that the
outcome could materially impact the recognised balances within the next financial year. It is impractical to provide further
sensitivity estimates of potential downside variances.
Glencore Annual Report 2021178
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021178
Notes to the financial statements continued
8. Income taxes continued
Available gross tax losses
Available gross tax losses carried forward and deductible temporary differences, for which no deferred tax assets have been
recognised in the consolidated financial statements, are detailed below and will expire as follows:
US$ million
2021
2020
1 year
1,024
1,155
2 years
425
496
3 years
41
530
Thereafter
11,095
11,099
Unlimited
10,335
8,366
Total
22,920
21,646
As at 31 December 2021, unremitted earnings of $50,116 million (2020: $56,677 million) have been retained by subsidiaries for
reinvestment. No provision is made for income taxes.
9. Property, plant and equipment
2021
US$ million
Notes
Freehold land
and buildings
Plant and
equipment
Right-of-use
assets
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
Total
Gross carrying amount:
1 January 2021
6,576
44,514
2,576
30,495
1,974
17,462
103,597
Disposal of subsidiaries
26
(100)
(352)
(12)
(132)
–
(101)
(697)
Additions
114
2,936
1,006
75
–
566
4,697
Disposals
(73)
(668)
(301)
(50)
–
(171)
(1,263)
Effect of foreign currency
exchange movements
(18
)
(250)
(17)
(211
)
–
(47
)
(543
)
Reclassification to held for sale
16
(86)
(760)
(207)
(783)
(1,320)
(2,576)
(5,732)
Other movements
1
441
(840)
3
625
11
419
659
31 December 2021
6,854
44,580
3,048
30,019
665
15,552
100,718
Accumulated depreciation and
impairment:
1 January 2021
2,626
25,438
1,004
14,838
1,884
10,697
56,487
Disposal of subsidiaries
26
(36)
(260)
(5)
(126)
–
(92)
(519)
Disposals
(9)
(600)
(213)
(48)
–
(171)
(1,041)
Depreciation
341
2,553
639
1,354
–
1,293
6,180
Impairment
7
16
902
3
495
–
36
1,452
Effect of foreign currency
exchange movements
(5
)
(118)
(6)
(74
)
–
(13
)
(216
)
Reclassification to held for sale
16
(31)
(524)
(80)
(651)
(1,317)
(2,246)
(4,849)
Other movements
1
38
(30)
1
(11)
10
57
65
31 December 2021
2,940
27,361
1,343
15,777
577
9,561
57,559
Net book value 31 December 2021
3,914
17,219
1,705
14,242
88
5,991
43,159
1 Primarily consists of increases in rehabilitation costs of $634 million and reclassifications within the various property, plant and equipment headings.
Plant and equipment includes expenditure for construction in progress of $3,387 million (2020: $3,247 million). Mineral and
petroleum rights include biological assets of $24 million (2020: $19 million). Depreciation expenses included in cost of goods sold are
$6,128 million (2020: $6,385 million) and in selling and administrative expenses, $52 million (2020: $74 million).
During 2021, $33 million (2020: $33 million) of interest was capitalised. With the exception of project specific borrowings, the rate
used to determine the amount of borrowing costs eligible for capitalisation was 3% (2020: 3%).
As at 31 December 2021, with the exception of leases, no property, plant or equipment was pledged as security for borrowings (2020:
$Nil).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 179Glencore Annual Report 2021 179
Notes to the financial statements continued
9. Property, plant and equipment continued
2020
US$ million
Notes
Freehold land
and buildings
Plant and
equipment
Right-of-use
assets
Mineral and
petroleum
rights
Exploration
and
evaluation
Deferred
mining costs
Total
Gross carrying amount:
1 January 2020
6,211
46,065
2,313
30,763
2,248
17,629
105,229
Disposal of subsidiaries
26
(35)
(321)
(16)
(24)
–
(233)
(629)
Additions
32
2,746
575
58
–
721
4,132
Disposals
(28)
(1,260)
(265)
(42)
(274)
(90)
(1,959)
Effect of foreign currency
exchange movements
(13
)
(121)
(2)
(114
)
–
(1
)
(251
)
Reclassification to held for sale
16
(111)
(1,833)
–
(692)
–
(1,002)
(3,638)
Reclassification from held for sale
16
176
36
1
16
1
8
238
Other movements
1
344
(798)
(30)
530
(1)
430
475
31 December 2020
6,576
44,514
2,576
30,495
1,974
17,462
103,597
Accumulated depreciation and
impairment:
1 January 2020
2,017
24,646
633
11,060
2,158
9,358
49,872
Disposal of subsidiaries
26
(35)
(321)
(3)
(24)
–
(234)
(617)
Disposals
(22)
(1,173)
(135)
(29)
(274)
(88)
(1,721)
Depreciation
375
2,680
519
1,363
–
1,522
6,459
Impairment
7
278
1,120
–
2,860
–
992
5,250
Effect of foreign currency
exchange movements
–
(14)
1
(9
)
–
6
(16
)
Reclassification to held for sale
16
(89)
(1,405)
–
(461)
–
(938)
(2,893)
Reclassification from held for sale
16
27
–
–
14
1
–
42
Other movements
1
75
(95)
(11)
64
(1)
79
111
31 December 2020
2,626
25,438
1,004
14,838
1,884
10,697
56,487
Net book value 31 December 2020
3,950
19,076
1,572
15,657
90
6,765
47,110
1 Primarily consists of increases in rehabilitation costs of $399 million and reclassifications within the various property, plant and equipment headings.
Leases
The Group leases various assets including land and buildings and plant and equipment. As at 31 December 2021, the net book value
of recognised right-of use assets relating to land and buildings was $450 million (2020: $519 million) and plant and equipment
$1,255 million (2020: $1,053 million). The depreciation charge for the period relating to those assets was $89 million (2020: $101 million)
and $550 million (2020: $418 million), respectively.
Disclosure of amounts recognised as lease liabilities in the statement of financial position and cash outflows for leases in the year are
included within note 21 and their maturity analysis within note 27.
Amounts recognised in the statement of income are detailed below:
US$ million
2021
2020
Depreciation on right-of-use assets
(639)
(519)
Interest expense on lease liabilities
(98)
(96)
Expense relating to short-term leases
(493)
(863)
Expense relating to low-value leases
(3)
(4)
Expense relating to variable lease payments not included in the measurement of the lease
liability
(5
)
(3
)
Income from subleasing right-of-use assets
304
349
Total
(934)
(1,136)
At 31 December 2021, the Group is committed to $209 million of short-term lease payments and $56 million related to capitalised
leases not yet commenced.
Glencore Annual Report 2021180
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021180
Notes to the financial statements continued
10. Intangible assets
2021
US$ million
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Customer
relationships
and other
Total
Cost:
1 January 2021
13,293
1,312
585
693
15,883
Additions
–
–
4
7
11
Disposals
–
–
(33)
(3)
(36)
Effect of foreign currency exchange movements
–
(109)
(6)
(12)
(127)
Reclassification to held for sale
16
–
–
(19)
(5)
(24)
Other movements
–
–
30
(11)
19
31 December 2021
13,293
1,203
561
669
15,726
Accumulated amortisation and impairment:
1 January 2021
8,293
247
342
534
9,416
Disposals
–
–
(22)
(3)
(25)
Amortisation expense
1
–
89
37
29
155
Effect of foreign currency exchange movements
–
(28)
(2)
(5)
(35)
Reclassification to held for sale
16
–
–
(16)
(4)
(20)
Other movements
–
–
2
(2)
–
31 December 2021
8,293
308
341
549
9,491
Net book value 31 December 2021
5,000
895
220
120
6,235
1 Recognised in cost of goods sold.
2020
US$ million
Notes
Goodwill
Port allocation
rights
Licences,
trademarks
and software
Customer
relationships
and other
Total
Cost:
1 January 2020
13,293
1,374
596
720
15,983
Additions
–
–
5
7
12
Disposals
–
–
(16)
(9)
(25)
Effect of foreign currency exchange movements
–
(62)
(18)
(41)
(121)
Other movements
–
–
18
16
34
31 December 2020
13,293
1,312
585
693
15,883
Accumulated amortisation and impairment:
1 January 2020
8,293
198
315
171
8,977
Disposals
–
–
(16)
(9)
(25)
Amortisation expense
1
–
52
44
116
212
Impairment
7
–
–
5
253
258
Effect of foreign currency exchange movements
–
(3)
(1)
(7)
(11)
Other movements
–
–
(5)
10
5
31 December 2020
8,293
247
342
534
9,416
Net book value 31 December 2020
5,000
1,065
243
159
6,467
1 Recognised in cost of goods sold.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 181Glencore Annual Report 2021 181
Notes to the financial statements continued
10. Intangible assets continued
Goodwill
The carrying amount of goodwill has been allocated to cash-generating units (CGUs), or groups of CGUs as follows:
US$ million
2021
2020
Metals and minerals marketing business
3,326
3,326
Coal marketing business
1,674
1,674
Total
5,000
5,000
Metals and minerals and coal marketing businesses
Goodwill of $3,326 million and $1,674 million was recognised in connection with previous business combinations and was allocated
to the metals and minerals marketing and coal marketing CGUs respectively, based on the annual synergies expected to accrue to
the respective marketing departments as a result of increased volumes, blending opportunities and freight and logistics arbitrage
opportunities.
Port allocation rights
Port allocation rights represent contractual entitlements to export certain amounts of coal on an annual basis from Richards Bay
Coal Terminal in South Africa recognised as part of previous business combinations. The rights are amortised on a units of
productions basis.
Licences, trademarks and software
Intangibles related to internally developed technology and patents were recognised in previous business combinations and are
amortised over the estimated economic life of the technology which ranges between 3 – 20 years.
Customer relationships
Customer relationships mainly represent intangible assets related to long-standing customer relationships recognised in previous
business combinations. These intangible assets are being amortised on a straight-line basis over their estimated economic life
which ranges between 5 – 9 years.
Goodwill impairment testing
Given the nature of each CGU’s activities, information on its fair value is usually difficult to obtain unless negotiations with potential
purchasers or similar transactions are taking place. Consequently:
• The recoverable amount for each of the marketing CGUs is determined by reference to the FVLCD which utilises a price to
earnings multiple approach based on the 2022 approved financial budget which includes factors such as marketing volumes
handled and operating, interest and income tax charges, generally based on past experience. The price to earnings multiple of 12
times (2020: 15 times) is derived from observable market data for broadly comparable businesses; and
• Glencore believes that no reasonably possible changes in any of the above key assumptions would cause the recoverable amount
to fall below the carrying value of the CGU over the next 12 months. The determination of FVLCD for each of the marketing CGUs
used Level 3 valuation techniques in both years.
Glencore Annual Report 2021182
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021182
Notes to the financial statements continued
11. Investments in associates, joint ventures and other investments
Investments in associates and joint ventures
US$ million
Notes
2021
2020
1 January
12,400
12,984
Additions
53
102
Disposals
(2)
(14)
Share of income from associates and joint ventures
2,618
444
Share of other comprehensive loss from associates and joint ventures
(58)
(14)
Impairments
7
(333)
(96)
Dividends received
(2,375)
(1,015)
Reclassification to held for sale
16
(11)
–
Other movements
2
9
31 December
12,294
12,400
Of which:
Investments in associates
5,567
6,038
Investments in joint ventures
6,727
6,362
As at 31 December 2021, the carrying value of our listed associates is $406 million (2020: $508 million), mainly comprising Century
Aluminum and PT CITA, which have carrying values of $165 million (2020: $261 million) and $177 million (2020: $170 million),
respectively. The fair value of our listed associates, using published price quotations (a Level 1 fair value measurement) is $967 million
(2020: $737 million). As at 31 December 2021, Glencore’s investment in Century Aluminum was pledged under a loan facility, with
proceeds received and recognised in current borrowings of $120 million (2020: $100 million)(see note 21).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 183Glencore Annual Report 2021 183
Notes to the financial statements continued
11. Investments in associates, joint ventures and other investments continued
2021 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
US$ million
Cerrejón
Antamina
Total
material
associates
Collahuasi
Viterra
Total
material
joint
ventures
Total
material
associates
and
joint
ventures
Non-current assets
2,033
5,288
7,321
5,398
6,118
11,516
18,837
Current assets
1,030
1,607
2,637
1,913
13,399
15,312
17,949
Non-current liabilities
(690)
(1,875)
(2,565)
(1,758)
(5,031)
(6,789)
(9,354)
Current liabilities
(509)
(973)
(1,482)
(994)
(9,682)
(10,676)
(12,158)
The above assets and liabilities include the following:
Cash and cash equivalents
511
134
645
354
472
826
1,471
Current financial liabilities
1
(27)
(45)
(72)
(21)
(4,516)
(4,537)
(4,609)
Non-current financial liabilities
1
(14)
(847)
(861)
(402)
(4,409)
(4,811)
(5,672)
Net assets 31 December 2021
1,864
4,047
5,911
4,559
4,804
9,363
15,274
Glencore's ownership interest
33.3%
33.8%
44.0%
49.9%
Acquisition fair value and other adjustments
(54)
1,756
1,702
1,059
1,265
2,324
4,026
Carrying value
567
3,124
3,691
3,065
3,662
6,727
10,418
1 Financial liabilities exclude trade, other payables and provisions.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’ and
joint ventures’ relevant figures for the year ended 31 December 2021 including group adjustments relating to alignment of
accounting policies or fair value adjustments, is set out below.
US$ million
Cerrejón
Antamina
Total
material
associates
Collahuasi
Viterra
Total
material
joint
ventures
Total
material
associates
and
joint
ventures
Revenue
2,317
5,307
7,624
5,906
39,704
45,610
53,234
Income for the year
636
1,992
2,628
2,777
947
3,724
6,352
Other comprehensive (loss)/income
–
–
–
(13)
(94)
(107)
(107)
Total comprehensive income
636
1,992
2,628
2,764
853
3,617
6,245
Glencore's share of dividends paid
240
749
989
1,144
150
1,294
2,283
The above income for the year includes the following:
Depreciation and amortisation
(267)
(919)
(1,186)
(653)
(776)
(1,429)
(2,615)
Interest income
1
–
–
–
66
55
121
121
Interest expense
2
(18)
(38)
(56)
(13)
(229)
(242)
(298)
Income tax expense
(435)
(1,241)
(1,676)
(1,470)
(282)
(1,752)
(3,428)
1 Includes foreign exchange gains and other income of $114 million.
2 Includes foreign exchange losses and other expenses of $58 million.
Glencore Annual Report 2021184
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021184
Notes to the financial statements continued
11. Investments in associates, joint ventures and other investments continued
2020 Details of material associates and joint ventures
Summarised financial information in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’
and joint ventures’ relevant figures, is set out below.
US$ million
Cerrejón
Antamina
Total
material
associates
Collahuasi
Viterra
Total
material
joint
ventures
Total
material
associates
and
joint
ventures
Non-current assets
2,302
4,755
7,057
5,141
5,846
10,987
18,044
Current assets
455
1,584
2,039
1,407
10,529
11,936
13,975
Non-current liabilities
(707)
(1,538)
(2,245)
(1,380)
(3,057)
(4,437)
(6,682)
Current liabilities
(102)
(698)
(800)
(845)
(9,041)
(9,886)
(10,686)
The above assets and liabilities include the following:
Cash and cash equivalents
99
91
190
99
327
426
616
Current financial liabilities
1
(20)
(53)
(73)
(288)
(4,351)
(4,639)
(4,712)
Non-current financial liabilities
1
(15)
(476)
(491)
(100)
(2,547)
(2,647)
(3,138)
Net assets 31 December 2020
1,948
4,103
6,051
4,323
4,277
8,600
14,651
Glencore's ownership interest
33.3%
33.8%
44.0%
49.9%
Acquisition fair value and other adjustments
(54)
1,813
1,759
1,089
1,237
2,326
4,085
Carrying value
595
3,200
3,795
2,991
3,371
6,362
10,157
1 Financial liabilities exclude trade, other payables and provisions.
Summarised profit and loss in respect of Glencore’s associates and joint ventures, reflecting 100% of the underlying associates’ and
joint ventures’ relevant figures for the year ended 31 December 2020, including group adjustments relating to alignment of
accounting policies or fair value adjustments, is set out below.
US$ million
Cerrejón Antamina
Total
material
associates
Collahuasi Viterra
Total
material
joint
ventures
Total
material
associates
and
joint
ventures
Revenue
626
3,126
3,752
3,936
28,342
32,278
36,030
(Loss)/income for the year
(1,613)
794
(819)
1,414
414
1,828
1,009
Other comprehensive loss
–
–
–
(19)
4
(15)
(15)
Total comprehensive (loss)/income
(1,613)
794
(819)
1,395
418
1,813
994
Glencore's share of dividends paid
11
363
374
598
–
598
972
The above (loss)/income for the year includes the following:
Depreciation and amortisation
(329)
(843)
(1,172)
(659)
(548)
(1,207)
(2,379)
Interest income
1
–
–
–
2
13
15
15
Interest expense
2
(21)
(51)
(72)
(71)
(176)
(247)
(319)
Impairment, net of tax
3
(1,969)
–
(1,969)
–
–
–
(1,969)
Income tax credit/(expense)
692
(553)
139
(815)
(143)
(958)
(819)
1 Includes foreign exchange gains and other income of $4 million.
2 Includes foreign exchange losses of $87 million.
3 Glencore’s attributable share of impairment relating to Cerrejón amounts to $445 million, net of taxes of $211 million.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 185Glencore Annual Report 2021 185
Notes to the financial statements continued
11. Investments in associates, joint ventures and other investments continued
Aggregate information of associates that are not individually material:
US$ million
2021
2020
The Group's share of income/(loss)
38
(120)
The Group's share of other comprehensive loss
(5)
(8)
The Group's share of total comprehensive income/(loss)
33
(128)
Aggregate carrying value of the Group's interests
1,876
2,243
The amount of corporate guarantees in favour of associates and joint ventures as at 31 December 2021 was $611 million (2020:
$560 million). No amounts have been claimed or provided as at 31 December 2021. Glencore’s share of joint ventures’ capital
commitments amounts to $213 million (2020: $105 million).
Refer to note 36 for further details of the Group’s principal associates and joint ventures.
Other investments
US$ million
2021
2020
Fair value through other comprehensive income
1
EN+ GROUP PLC
789
701
PAO NK Russneft
2
50
309
Yancoal
160
164
OSJC Rosneft
485
357
Other
136
116
1,620
1,647
Fair value through profit and loss
Century Aluminum Company cash-settled equity swaps
3
–
49
Champion Iron Ore Limited share warrants
3
–
37
–
86
Total
1,620
1,733
1 Fair value through other comprehensive income includes net acquisitions of $25 million (2020: $12 million net disposals) for the period.
2 In December 2021, Glencore agreed to the sale of its interest in PAO NK Russneft. Completion of the sale is conditional on receipt of certain regulatory approvals and is expected to
occur in H1 2022. Glencore’s investment in PAO NK Russneft is pledged under a loan facility issued to OAO NK Russneft.
3 During the year, the swaps settled and the warrants were exercised.
During the year, dividend income from equity investments designated as at fair value through other comprehensive income
amounted to $23 million (2020: $32 million).
Glencore Annual Report 2021186
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021186
Notes to the financial statements continued
12. Advances and loans
US$ million
Notes
2021
2020
Financial assets at amortised cost
Loans to associates
128
246
Other non-current receivables and loans
519
600
Rehabilitation trust fund
148
148
Financial assets at fair value through profit and loss
Other non-current receivables and loans
28
28
102
Deferred consideration
28
135
302
Non-financial instruments
Pension surpluses
24
125
40
Advances repayable with product
1
1,673
1,334
Land rights prepayment
150
150
Other tax and related non-current receivables
2
621
120
Total
3,527
3,042
1 Net of $1,074 million (2020: $1,534 million) provided by various banks, the repayment terms of which are contingent upon and connected to the future delivery of contractual
production.
2 As a result of continued challenge and non-performance by certain government authorities in settling long outstanding VAT claims, certain VAT receivable balances amounting to
$646 million were reclassified to non-current during the period (see note 7).
Financial assets at amortised cost
Loans to associates
Loans to associates generally bear interest at applicable floating market rates plus a premium.
Other non-current receivables and loans
Other non-current receivables and loans comprise the following:
US$ million
2021
2020
Secured financing arrangements
511
585
Other
8
15
Total
519
600
Various financing facilities, generally marketing related and secured against certain assets and/or payable from the future sale of
production of the counterparty. The non-current receivables and loans are interest-bearing and on average are to be repaid over a
three-year period.
Rehabilitation trust fund
Glencore makes contributions to controlled funds established to meet the costs of its restoration and rehabilitation liabilities,
primarily in South Africa. These funds are not available for the general purposes of the Group, and there is no present obligation to
make any further contributions.
Loss allowances of financial assets at amortised cost
The Group determines the expected credit loss of loans to associates and other non-current receivables and loans (at amortised
cost) based on different scenarios of probability of default and expected loss applicable to each of the material underlying balances.
Expected credit losses for these assets are measured as either 12-month expected credit losses, taking into account prior experience
regarding probability of default adjusted for forward looking information, or as lifetime expected credit losses (when there is
significant increase in credit risk or the asset is credit-impaired). The movement in loss allowance for financial assets classified at
amortised cost is detailed below:
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 187Glencore Annual Report 2021 187
Notes to the financial statements continued
12. Advances and loans continued
US$ million
Loans to
associates
Other non-
current
receivables and
loans
2021
Loans to
associates
Other non-
current
receivables and
loans
2020
Gross carrying value 31 December
190
773
963
308
940
1,248
Of which:
12-month expected credit losses
31
529
560
156
626
782
Lifetime expected credit losses (credit
impaired)
159
244
403
152
314
466
Loss allowances
1 January
62
340
402
31
355
386
Released during the period
1
–
(28)
(28)
–
–
–
Charged during the period
1
–
15
15
31
33
64
Utilised during the period
–
(48)
(48)
–
(48)
(48)
Reclassifications
–
(25)
(25)
–
–
–
31 December
62
254
316
62
340
402
Of which:
12-month expected credit losses
–
14
14
–
37
37
Lifetime expected credit losses (credit
impaired)
62
240
302
62
303
365
Net carrying value 31 December
128
519
647
246
600
846
1 $22 million (2020: $45 million impairment) recognised as a reversal of impairment (see note 7) and the balancing charge of $9 million (2020: $19 million) recognised in cost of goods
sold.
Financial assets at fair value through profit and loss
Other non-current receivables and loans
During 2021, fair value movements of positive $35 million were recognised (2020: negative $18 million)(see note 7). Fair value was
determined using a Level 3 discounted cash flow model technique, with the key unobservable inputs being a discount rate specific
to the operation of 12% and a repayment profile dependent upon the underlying business plans and forecasts over the next 6 years.
The valuation is sensitive to the timing of the underlying cash flows and could result in a $5 million reduction of fair value if the
repayment schedule is extended by an additional 4 years.
Deferred consideration
In 2021, fair value movements of net positive $39 million (2020: $379 million) were recognised (see note 5).
Non-financial instruments
Advances repayable with product
US$ million
2021
2020
Counterparty
Mopani transaction debt
881
–
Société Nationale d'Electricité (SNEL) power advances
304
312
Chad State National Oil Company
293
347
Société Nationale des Pétroles du Congo
129
156
Other
1
66
519
Total
1,673
1,334
1 Comprises no individually material items.
Mopani
On 31 March 2021, Glencore completed the disposal of its 90% interest in Mopani to ZCCM Investments Holdings plc, the holder of
the remaining 10% interest in Mopani, in exchange for $1 and the rights to offtake copper and other metals from Mopani until $1.5
billion of existing intercompany debt (the “transaction debt”) has been repaid to Glencore. The transaction debt attracts interest at a
floating benchmark rate plus 3%. The repayment of the transaction debt is in substance based on Glencore receiving physical
product deliveries from Mopani through its offtake rights and retaining defined percentages of Mopani’s annual gross revenues
until the transaction debt is fully repaid. On the date of completion, the fair value of the transaction debt was determined to be $838
million (see note 26). As at 31 December 2021, $904 million of debt is outstanding, of which $881 million is due after 12 months and is
presented above and $23 million is due within 12 months and is included in Accounts receivable.
Glencore Annual Report 2021188
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021188
Notes to the financial statements continued
12. Advances and loans continued
SNEL power advances
In early 2012, a joint agreement with Société Nationale d’Électricité (SNEL), the Democratic Republic of the Congo’s (DRC) national
electricity utility, was signed whereby Glencore’s operations would contribute $375 million to a major electricity infrastructure
refurbishment programme, including transmission and distribution systems. This facilitated a progressive increase in power
availability to 450 megawatts by the end of Q1 2020. Funding commenced in the second quarter of 2012 and completed Q4 2021.
The loans are being repaid via discounts on electricity purchases.
Chad State National Oil Company
Glencore has provided a net $321 million (2020: $359 million) to the Chad State National Oil Company (SHT) to be repaid through
future oil deliveries over ten years. As at 31 December 2021, the advance is net of $604 million (2020: $714 million) provided by a
syndicate of lenders, the repayment terms of which are contingent upon and connected to the receipt of oil due from SHT under
the prepayment. Of the net amount advanced, $293 million (2020: $347 million) is receivable after 12 months and is presented within
Other non-current receivables and loans and $31 million (2020: $12 million) is due within 12 months and included within Accounts
receivable.
Société Nationale des Pétroles du Congo (SNPC)
Glencore has provided a net $156 million (2020: $156 million) to SNPC repayable through future oil deliveries over five years. As at 31
December 2021, the advance is net of $498 million (2020: $498 million) provided by the lenders, the repayment terms of which are
contingent upon and connected to the future receipt of oil contractually due from SNPC. Of the net amount advanced, $129 million
(2020: $156 million) is due after 12 months and is presented within Other long-term receivables and loans and $27 million (2020: $Nil)
is due within 12 months and included within Accounts receivable.
Land rights prepayment
In 2019, Kamoto Copper Company (“KCC”) entered into an agreement with La Générale des Carrières et des Mines (“Gécamines”),
Glencore’s 25% joint venture partner in KCC, to acquire from Gécamines a comprehensive land package covering areas adjacent to
KCC’s existing mining concessions for $250 million. The package includes multiple blocks for construction of a new long-term
tailings facility and the possible exploitation of additional resources that will enhance KCC’s ability to more efficiently operate its
mines, facilities and other key infrastructure requirements.
In addition to the above consideration, the agreement includes the following key additional undertakings:
• obligations on KCC to remove tailings (estimated at circa 15m dmt), currently in a sub-section of these areas, to another suitable
location;
• contingent obligations to pay “Pas de Porte” payments to Gécamines if KCC declares a JORC compliant reserve or otherwise
elects to mine any resources in the Resource Areas; and
• a new royalty to Gécamines of 2.5% of net sales from the acquired land areas if KCC elects to mine any resources in such areas.
In August 2020, KCC advanced $150 million to Gécamines as an agreed prepayment of the consideration due. If the closing
conditions as prescribed in the agreement are not fulfilled, Glencore has the right to accrue interest on the prepaid amount,
terminate the agreement and, if funds are not returned, offset against future amounts owing to Gécamines. The balance of the
consideration is due 5 days after the respective closing conditions of each area to be transferred are satisfied.
13. Inventories
Current inventory
Inventories of $28,434 million (2020: $22,852 million) comprise $16,073 million (2020: $12,260 million) of inventories carried at fair value
less costs of disposal and $12,361 million (2020: $10,592 million) valued at the lower of cost or net realisable value. The amount of
inventories and related ancillary costs recognised as an expense during the period was $177,704 million (2020: $124,037 million).
Fair value of inventories is a Level 2 fair value measurement (see note 29) using observable market prices obtained from exchanges,
traded reference indices or market survey services adjusted for relevant location and quality differentials. There are no significant
unobservable inputs in the fair value measurement of such inventories.
Glencore has a number of dedicated financing facilities, which finance a portion of its inventories. In each case, the inventory has not
been derecognised as the Group has not transferred control. The proceeds received are recognised as current borrowings (see note
21). As at 31 December 2021, the total amount of inventory pledged under such facilities was $17 million (2020: $804 million). The
proceeds received and recognised as current borrowings were $2 million (2020: $679 million) and $80 million (2020: $80 million) as
non-current borrowings.
Non-current inventory
$662 million (2020: $678 million) of inventories valued at lower of cost or net realisable value are not expected to be utilised or sold
within the normal operating cycle and are therefore classified as non-current inventory.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 189Glencore Annual Report 2021 189
Notes to the financial statements continued
14. Accounts receivable
US$ million
Notes
2021
2020
Financial assets at amortised cost
Trade receivables
4,943
3,360
Margin calls paid
5,914
3,692
Receivables from associates
413
288
Other receivables
1
402
356
Financial assets at fair value through profit and loss
Trade receivables containing provisional pricing features
28
5,267
4,459
Finance lease receivable
28
2
9
Other receivables
28
79
–
Deferred consideration
28
175
130
Non-financial instruments
Advances repayable with product
2
876
922
Other tax and related receivables
1,422
1,938
Total
19,493
15,154
1 Includes current portion of non-current loans receivable of $296 million (2020: $241 million).
2 Includes advances, net of $409 million (2020: $298 million) provided by banks, the repayment terms of which are contingent upon and connected to the future delivery of contractual
production over the next 12 months.
The average credit period on sales of goods is 16 days (2020: 24 days). The carrying value of trade receivables approximates fair value.
The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, using the
lifetime expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to
past default experience and credit rating, adjusted as appropriate for current observable data. Expected credit loss provisions are
recognised in cost of goods sold and during the period, $11 million (2020: credit of $3 million) of such losses were recognised. The
following table details the risk profile of trade receivables based on the Group’s provision matrix.
US$ million
Trade receivables – days past due
As at 31 December 2021
Not past due
<30
31 – 60
61 – 90
>90
Total
Gross carrying amount
4,034
287
157
152
337
4,967
Expected credit loss rate
0.27%
0.55%
0.82%
1.10%
2.33%
Lifetime expected credit loss
(11)
(2)
(1)
(2)
(8)
(24)
Total
4,023
285
156
150
329
4,943
US$ million
Trade receivables – days past due
As at 31 December 2020
Not past due
<30
31 – 60
61 – 90
>90
Total
Gross carrying amount
2,941
224
44
21
143
3,373
Expected credit loss rate
0.27%
0.54%
0.82%
1.09%
2.31%
Lifetime expected credit loss
(8)
(1)
(1)
–
(3)
(13)
Total
2,933
223
43
21
140
3,360
The Group determines the expected credit loss of receivables from associates and other receivables (at amortised cost) based on
different scenarios of probability of default and expected loss applicable to each of the material underlying balances. Expected credit
losses for these assets are measured as either 12-month expected credit losses, taking into account prior experience regarding
probability of default adjusted for forward looking information, or as lifetime expected credit losses (when there is significant
increase in credit risk or the asset is credit-impaired). The movement in allowance for credit loss relating to receivables from
associates and other receivables is detailed below:
Glencore Annual Report 2021190
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021190
Notes to the financial statements continued
14. Accounts receivable continued
US$ million
Receivables
from associates
Other
receivables
2021
Receivables
from associates
Other
receivables
2020
Gross carrying value 31 December
529
531
1,060
410
488
898
Of which:
12-Month expected credit losses
391
387
778
271
357
628
Lifetime expected credit losses (credit
impaired)
138
144
282
139
131
270
Allowance for credit loss
1 January
122
132
254
10
79
89
Released during the period
1
–
(10)
(10)
(1)
(3)
(4)
Charged during the period
1
3
30
33
103
62
165
Utilised during the period
–
(48)
(48)
–
(6)
(6)
Effect of foreign currency exchange
movements
(9)
–
(9)
10
–
10
Reclassifications
–
25
25
–
–
–
31 December
116
129
245
122
132
254
Of which:
12-Month expected credit losses
–
23
23
–
51
51
Lifetime expected credit losses (credit
impaired)
116
106
222
122
81
203
Net carrying value 31 December
413
402
815
288
356
644
1 $7 million (2020: $123 million impairment) recognised as a reversal of impairment (see note 7) and the balancing $30 million (2020: $38 million) net charge recognised in cost of goods
sold
Glencore has a number of dedicated financing facilities, which finance a portion of its receivables. The receivables have not been
derecognised, as the Group retains the principal risks and rewards of ownership. The proceeds received are recognised as current
borrowings (see note 21). As at 31 December 2021, the total amount of trade receivables pledged was $Nil (2020: $693 million) and
proceeds received and classified as current borrowings amounted to $Nil (2020: $567 million).
15. Cash and cash equivalents
US$ million
2021
2020
Bank and cash on hand
2,403
1,387
Deposits and treasury bills
838
111
Total
3,241
1,498
Cash and cash equivalents comprise cash held at bank, cash in hand and short-term bank deposits with an original maturity of
three months or less. The carrying amount of these assets approximates their fair value.
As at 31 December 2021, $547 million (2020: $82 million) was restricted, including $477 million (2020: $Nil) held in on-shore accounts
in our DRC operations, currently available to effect payment to on-shore counterparts only.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 191Glencore Annual Report 2021 191
Notes to the financial statements continued
16. Assets and liabilities held for sale
The carrying value of the assets and liabilities classified as held for sale are detailed below:
2021
2020
US$ million
Ernest Henry
Bolivia
Access World
E&P Chad
Total
Total
Mopani
Non-current assets
Property, plant and equipment
311
161
171
240
883
745
Intangible assets
–
2
2
–
4
–
Investments
–
–
11
–
11
–
Advances and loans
–
–
10
–
10
5
Deferred tax assets
30
10
4
–
44
–
341
173
198
240
952
750
Current assets
Inventories
16
36
–
22
74
187
Accounts receivable
26
82
93
14
215
106
Income tax receivable
–
–
1
–
1
–
Prepaid expenses
2
–
10
–
12
3
Cash and cash equivalents
1
21
45
–
67
–
45
139
149
36
369
296
Total assets held for sale
386
312
347
276
1,321
1,046
Non-current liabilities
Borrowings
–
(3)
(111)
–
(114)
–
Deferred income
(138)
–
–
–
(138)
–
Deferred tax liabilities
–
(4)
(1)
(4)
(9)
–
Provisions
(74)
(29)
(1)
(85)
(189)
(54)
Post-retirement and other employee benefits
(1)
(17)
(1)
–
(19)
(10)
(213)
(53)
(114)
(89)
(469)
(64)
Current liabilities
Borrowings
–
(7)
(17)
–
(24)
(26)
Accounts payable
(32)
(55)
(95)
(6)
(188)
(58)
Deferred income
(53)
–
–
–
(53)
–
Provisions
(1)
(35)
(3)
–
(39)
(24)
Income tax payable
–
(14)
(1)
–
(15)
(13)
(86)
(111)
(116)
(6)
(319)
(121)
Total liabilities held for sale
(299)
(164)
(230)
(95)
(788)
(185)
Non-controlling interest
–
–
(2)
–
(2)
–
Total net assets held for sale
87
148
115
181
531
861
Ernest Henry
In November 2021, Glencore agreed to dispose of its 100% interest in Ernest Henry Mining Pty Ltd, a copper-gold mine in
Queensland, Australia for AUD $1 billion (c.US$720 million), comprising AUD $800 million on closing and the balance (AUD $200
million) due 12 months post closing. The transaction closed in January 2022 and a gain on disposal of some $630 million is expected.
Bolivia
In October 2021, Glencore agreed to sell its Bolivian zinc assets (Sinchi Wayra and Illapa), to Santacruz Silver Mining Ltd, for
approximately $110 million and a 1.5% NSR royalty over the life of the mines. $20 million is due on completion with the balance (c.$90
million) due over the following 4 years. The transaction is expected to close in H1 2022.
Access World
At 31 December 2021, Glencore was in advanced negotiations with a prospective buyer to dispose of its 100% interest in the Access
World Group, a global metals and softs commodities storage and logistics group, for $180 million. The share purchase agreement
was subsequently signed on 31 January 2022, completion of the sale is conditional on receipt of certain regulatory approvals, which is
expected to occur in 2022.
E&P Chad
In August 2021, Glencore agreed to dispose 100% of its Chad upstream oil operations to Perenco S.A.. Completion of the sale is
conditional on receipt of certain regulatory approvals, which is expected to occur in H1 2022.
Glencore Annual Report 2021192
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021192
Notes to the financial statements continued
16. Assets and liabilities held for sale continued
Mopani
In March 2021, Glencore completed the sale of its controlling interest in Mopani to the minority shareholder, ZCCM Investments
Holding plc (ZCCM) for $1, leaving $1.5 billion of Glencore loans outstanding, where the pace and size of repayment instalments is
linked to Mopani’s future production and copper prices (see notes 12 and 26).
17. Share capital and reserves
Number
of ordinary
shares
(thousand)
Share capital
(US$ million)
Share
premium
(US$ million)
Authorised:
31 December 2021 and 2020 Ordinary shares with a par value of $0.01 each
50,000,000
Issued and fully paid up:
1 January 2020 and 31 December 2020
14,586,200
146
45,794
Distributions paid (see note 19)
–
–
(2,115)
31 December 2021
14,586,200
146
43,679
Treasury Shares
Trust Shares
Total
Number
of shares
(thousand)
Own
shares
(US$ million)
Number
of shares
(thousand)
Own
shares
(US$ million)
Number
of shares
(thousand)
Own
shares
(US$ million)
Own shares:
1 January 2020
1,261,887
(4,801)
129,992
(636)
1,391,879
(5,437)
Own shares disposed during the year
–
–
(26,991)
133
(26,991)
133
31 December 2020
1,261,887
(4,801)
103,001
(503)
1,364,888
(5,304)
1 January 2021
1,261,887
(4,801)
103,001
(503)
1,364,888
(5,304)
Own shares purchased during the year
128,501
(616)
32,000
(130)
160,501
(746)
Own shares disposed during the year
–
–
(35,788)
173
(35,788)
173
31 December 2021
1,390,388
(5,417)
99,213
(460)
1,489,601
(5,877)
Own shares
Own shares comprise shares acquired under the Company’s share buy-back programmes (“Treasury Shares”) and shares of
Glencore plc held by Group employee benefit trusts (“the Trusts”) to satisfy the potential future settlement of the Group’s employee
stock plans (“Trust Shares”).
The Trusts also coordinate the funding and manage the delivery of Trust Shares and free share awards under certain of Glencore’s
share plans. The Trust Shares have been acquired by either stock market purchases or share issues from the Company. The Trusts
may hold an aggregate of Trust Shares up to 5% of the issued share capital of the Company at any one time and are permitted to sell
them. The Trusts have waived the right to receive distributions from the Trust Shares that they hold. Costs relating to the
administration of the Trusts are expensed in the period in which they are incurred.
In August 2021, Glencore announced a $650 million share buy-back programme to be completed by February 2022, effected in
accordance with the terms of the authority granted by shareholders at the 2021 Annual General Meeting. As at 31 December 2021,
$616 million of shares have been purchased.
As at 31 December 2021: 1,489,601,292 shares (2020: 1,364,888,033 shares), including 1,390,388,731 Treasury Shares, equivalent to 10.21%
(2020: 9.36%) of the issued share capital were held at a cost of $5,877 million (2020: $5,304 million) and market value of $7,559 million
(2020: $4,341 million).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 193Glencore Annual Report 2021 193
Notes to the financial statements continued
17. Share capital and reserves continued
Other reserves
US$ million
Foreign
currency
translation
reserve
Cash flow
hedge reserve
Net
unrealised
gain/(loss)
Net ownership
changes in
subsidiaries
Total
1 January 2021
(2,832)
(147)
(266)
(2,603)
(5,848)
Exchange loss on translation of foreign operations
(66)
–
–
–
(66)
Gain on cash flow hedges, net of tax
–
23
–
–
23
Loss on equity investments accounted for at fair value
through other comprehensive income, net of tax
–
–
(52
)
–
(52
)
Change in ownership interest in subsidiaries (see note 34)
–
–
–
(6)
(6)
Loss due to changes in credit risk on financial liabilities
accounted for at fair value through profit and loss
–
–
(7
)
–
(7
)
Reclassifications
–
–
25
–
25
31 December 2021
(2,898)
(124)
(300)
(2,609)
(5,931)
1 January 2020
(2,665)
(97)
364
(2,573)
(4,971)
Exchange gain on translation of foreign operations
(167)
–
–
–
(167)
Loss on cash flow hedges, net of tax
–
(50)
–
–
(50)
Loss on equity investments accounted for at fair value
through other comprehensive income, net of tax
–
–
(631
)
–
(631
)
Change in ownership interest in subsidiaries (see note 34)
–
–
–
(31)
(31)
Gain due to changes in credit risk on financial liabilities
accounted for at fair value through profit and loss
–
–
19
–
19
Reclassifications
–
–
(18)
1
(17)
31 December 2020
(2,832)
(147)
(266)
(2,603)
(5,848)
The translation adjustment reserve is used to capture the cumulative impact of foreign currency translation adjustments arising
from the Group’s non-USD denominated functional currency subsidiaries.
The cash flow hedge reserve is used to accumulate the gains and losses from the effective portion of hedging instruments
contained within hedge relationships until the hedged item impacts profit or loss. Cost of hedging is recorded within the cash flow
hedge reserve due to its immaterial amount.
The net unrealised gain/loss reserve is used to accumulate the gains and losses associated with the remeasurement of the Group’s
investments carried at FVTOCI and changes in credit risk on financial liabilities measured at FVTPL.
The net ownership changes in subsidiaries reserve is used to capture equity movements arising from changes in the Group’s
ownership in its subsidiaries.
Glencore Annual Report 2021194
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021194
Notes to the financial statements continued
18. Earnings per share
US$ million
2021
2020
Income/(loss) attributable to equity holders of the Parent for basic earnings per share
4,974
(1,903)
Weighted average number of shares for the purposes of basic earnings per share (thousand)
13,204,101
13,216,886
Effect of dilution:
Equity-settled share-based payments (thousand)
1
132,503
139,989
Weighted average number of shares for the purposes of diluted earnings per share (thousand)
13,336,604
13,216,886
Basic earnings/(loss) per share (US$)
0.38
(0.14)
Diluted earnings/(loss) per share (US$)
0.37
(0.14)
Headline earnings:
Headline earnings is a Johannesburg Stock Exchange (JSE) defined performance measure. The calculation of basic and diluted
earnings per share, based on headline earnings as determined by the requirements of the Circular 1/2021 as issued by the
South African Institute of Chartered Accountants (SAICA), is reconciled using the following data:
US$ million
2021
2020
Income/(loss) attributable to equity holders of the Parent for basic earnings per share
4,974
(1,903)
Net loss on disposals
2
652
36
Net credit/(expense) on disposals – tax
75
(11)
Impairments
3
1,906
6,693
Impairments – non-controlling interest
(689)
(1,596)
Impairments – tax
(34)
(1,214)
Headline and diluted earnings for the year
6,884
2,005
Headline earnings per share (US$)
0.52
0.15
Diluted headline earnings per share (US$)
0.52
0.15
1 These equity-settled share-based payments could potentially dilute basic earnings per share in the future, but did not impact diluted loss per share in 2020 because they were anti-
dilutive.
2 See note 4.
3 Comprises impairments of property, plant and equipment, investments, advances and loans, VAT receivable (see note 7) and Glencore’s share of impairments booked directly by
associates (see note 2).
19. Distributions
US$ million
2021
2020
Paid during the year:
First tranche distribution - $0.06 per ordinary share (2020: $Nil)
794
–
Second tranche and additional distribution - $0.10 per ordinary share (2020: $Nil)
1,321
–
Total
2,115
–
The proposed distribution in respect of the year ended 31 December 2021 of $0.26 per ordinary share amounting to some $3.4 billion
is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial
statements. These distributions declared are expected to be paid equally ($0.13 each) in May 2022 and September 2022.
In 2020, it was determined that no distribution would be made.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 195Glencore Annual Report 2021 195
Notes to the financial statements continued
20. Share-based payments
US$ million
Number of
awards
granted
(thousands)
Fair value at
grant date
(US$ million)
Number
of awards
outstanding
2021
(thousands)
Number
of awards
outstanding
2020
(thousands)
Expense
recognised
2021
(US$ million)
Expense
recognised
2020
(US$ million)
Deferred awards
2018 Series
12,891
65
3,535
4,316
–
–
2019 Series
10,791
37
667
7,914
–
–
2020 Series
45,798
85
31,538
45,798
(2)
85
2021 Series
20,565
91
20,565
–
90
–
90,045
56,305
58,028
88
85
Performance share awards
2015 Series
79,787
109
–
9,509
2
–
2016 Series
23,984
84
–
–
–
3
2017 Series
19,750
95
400
5,965
1
10
2018 Series
28,499
104
9,823
18,396
12
29
2019 Series
29,705
90
18,504
28,330
23
55
2020 Series
33,583
104
31,466
19,761
55
–
2021 Series
16,005
76
16,005
–
8
–
231,313
76,198
81,961
101
97
Total
321,358
132,503
139,989
189
182
Between 2011-2021 deferred awards were made under the Company’s Deferred Bonus Plan and performance share awards were
made under the Company’s Performance Share Plan. In May 2021 the Company introduced a single Incentive Plan which replaced
both of these plans and under which both deferred awards and performance share awards continue to be made.
Deferred awards
Under a deferred award the payment of a portion of a participant’s annual bonus is deferred for a period of one to seven years as an
award of either ordinary shares (a ‘‘Bonus Share Award’’) or cash. Awards vest over a specified period, subject to continued
employment and forfeiture for malus events. The Bonus Share Awards may be satisfied, at Glencore’s option, in shares by the issue
of new ordinary shares, by the transfer of ordinary shares held in treasury or by the transfer of ordinary shares purchased in the
market or in cash, with a value equal to the market value of the award at settlement, including distributions paid between award
and settling. Glencore currently intends to settle all Bonus Share Awards in shares. The associated expense is recorded in the
statement of income/loss as part of the expense for performance bonuses. The fair value at grant date is determined as the monthly
volume-weighted average share price (VWAP) of Glencore plc prior to the respective award date.
Performance Share awards
Performance share awards vest in annual tranches over a specified period, subject to continued employment and forfeiture for
malus events. At grant date, each award is equivalent to one ordinary share of Glencore. Awards vest in one, two and three tranches
on 31 January or 30 June of the years following the year of grant, as may be the case. The fair value of the awards is determined by
reference to the monthly volume-weighted average share price (VWAP) of Glencore plc prior to the respective award date. The
awards may be satisfied, at Glencore’s option, in shares by the issue of new ordinary shares, by the transfer of ordinary shares held in
treasury or by the transfer of ordinary shares purchased in the market or in cash, with a value equal to the market value of the award
at vesting, including distributions paid between award and vesting. Glencore currently intends to settle these awards in shares. The
fair value at grant date is determined with respect to the monthly volume-weighted average share price (VWAP) of Glencore plc
prior to the respective award date.
Share-based awards assumed in previous business combinations
Total options
outstanding
(thousands)
Weighted
average
exercise
price (GBP)
1 January 2021
71,667
4.25
Lapsed
(27,130)
4.80
Exercised
–
–
31 December 2021
44,537
3.91
1 January 2020
102,623
3.98
Lapsed
(30,956)
3.38
Exercised
–
–
31 December 2020
71,667
4.25
Glencore Annual Report 2021196
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021196
Notes to the financial statements continued
20. Share-based payments continued
As at 31 December 2021, a total of 44,536,755 options (2020: 71,667,011 options) were outstanding and exercisable, having an exercise
price of GBP3.91 (2020: GBP3.91 to GBP4.80) and a weighted average exercise price of GBP3.91 (2020: GBP4.25). Since the share price
leading up to the expiry date of 17 February 2022 was above the exercise price, all of these options were exercised. Glencore settled
these awards by the transfer of ordinary shares held as Trust Shares.
21. Borrowings
US$ million
Notes
2021
2020
Non-current borrowings
Capital market notes
22,376
22,353
Committed syndicated revolving credit facilities
2,543
4,766
Lease liabilities
1,093
1,008
Other bank loans
799
1,100
Total non-current borrowings
26,811
29,227
Current borrowings
Secured inventory/receivables/other facilities
11/13/14
122
1,346
U.S. commercial paper
1,764
1,090
Capital market notes
2,884
2,018
Lease liabilities
525
513
Other bank loans
1
2,535
3,285
Total current borrowings
7,830
8,252
Total borrowings
34,641
37,479
1 Comprises various uncommitted bilateral bank credit facilities and other financings and is net of $Nil million (2020: $135 million) of funds advanced by the Group under a netting
arrangement with a bank and a subsidiary.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 197Glencore Annual Report 2021 197
Notes to the financial statements continued
21. Borrowings continued
Changes in liabilities arising from financing activities
Liabilities arising from financing activities are those for which cash flows are classified in the Group's consolidated cash flow
statement as cash flows from financing activities. The table below details changes in the Group's liabilities arising from financing
activities, including both cash and non-cash changes.
2021
US$ million
Borrowings
excluding
lease
liabilities
Lease
liabilities
Total
borrowings
Cross currency
and interest
rate swaps and
net margins
1
Total liabilities
arising from
financing
activities
1 January 2021
35,958
1,521
37,479
91
37,570
Cash related movements
2
Proceeds from issuance of capital market notes
4,877
–
4,877
–
4,877
Repayment of capital market notes
(2,807)
–
(2,807)
–
(2,807)
Repurchase of capital market notes
(125)
–
(125)
–
(125)
Repayment of revolving credit facilities
(2,244)
–
(2,244)
–
(2,244)
Proceeds from other non-current borrowings
231
–
231
–
231
Repayment of other non-current borrowings
(493)
–
(493)
–
(493)
Repayment of lease liabilities
–
(634)
(634)
–
(634)
Margin payments in respect of financing related hedging
activities
–
–
–
(970)
(970)
Proceeds from U.S. commercial papers
675
–
675
–
675
Repayment of current borrowings
(2,016)
–
(2,016)
–
(2,016)
(1,902)
(634)
(2,536)
(970)
(3,506)
Non-cash related movements
Borrowings (disposed of)/acquired in business combinations
3
(1)
(7)
(8)
–
(8)
Borrowings reclassified to held for sale
4
–
(138)
(138)
–
(138)
Fair value adjustment to fair value hedged borrowings
(499)
–
(499)
–
(499)
Fair value movement of hedging derivatives
–
–
–
902
902
Foreign exchange movements
(599)
(45)
(644)
–
(644)
Change in lease liabilities
–
922
922
–
922
Interest on convertible bonds
21
–
21
–
21
Other movements
45
(1)
44
–
44
(1,033)
731
(302)
902
600
31 December 2021
33,023
1,618
34,641
23
34,664
1 The currency and interest rate swaps are reported on the balance sheet within the headings ‘Other financial assets’ and ‘Other financial liabilities’ (see note 27) and margin calls
paid/received within accounts receivable/payable (see notes 14 and 25).
2 See consolidated statement of cash flows.
3 See note 26.
4 See note 16.
Glencore Annual Report 2021198
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021198
Notes to the financial statements continued
21. Borrowings continued
2020
US$ million
Borrowings
excluding
lease
liabilities
Lease
liabilities
Total
borrowings
Cross currency
and interest
rate swaps and
net margins
1
Total liabilities
arising from
financing
activities
1 January 2020
35,401
1,642
37,043
199
37,242
Cash related movements
2
Proceeds from issuance of capital market notes
3,362
–
3,362
–
3,362
Repayment of capital market notes
(4,017)
–
(4,017)
–
(4,017)
Repurchase of capital market notes
(72)
–
(72)
–
(72)
Repayment of revolving credit facilities
(870)
–
(870)
–
(870)
Proceeds from other non-current borrowings
392
–
392
–
392
Repayment of other non-current borrowings
(44)
–
(44)
–
(44)
Repayment of lease liabilities
–
(560)
(560)
–
(560)
Margin receipts in respect of financing related hedging
activities
–
–
–
1,040
1,040
Proceeds from U.S. commercial papers
415
–
415
–
415
Proceeds from current borrowings
217
–
217
–
217
(617)
(560)
(1,177)
1,040
(137)
Non-cash related movements
Borrowings (disposed of)/acquired in business combinations
3
–
(13)
(13)
–
(13)
Borrowings reclassified to held for sale
4
(26)
–
(26)
–
(26)
Fair value adjustment to fair value hedged borrowings
344
–
344
–
344
Fair value movement of hedging derivatives
–
–
–
(1,148)
(1,148)
Foreign exchange movements
792
20
812
–
812
Change in lease liabilities
–
435
435
–
435
Interest on convertible bonds
20
–
20
–
20
Other movements
44
(3)
41
–
41
1,174
439
1,613
(1,148)
465
31 December 2020
35,958
1,521
37,479
91
37,570
1 The currency and interest rate swaps are reported on the balance sheet within the headings ‘Other financial assets’ and ‘Other financial liabilities’ (see note 27) and margin calls
paid/received within accounts receivable/payable (see notes 14 and 25).
2 See consolidated statement of cash flows.
3 See note 26.
4 See note 16.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 199Glencore Annual Report 2021 19 9
Notes to the financial statements continued
21. Borrowings continued
Capital Market Notes
US$ million
Maturity
2021
2020
Euro 700 million 1.625% coupon bonds
Jan 2022
–
865
Euro 1,000 million 1.875% coupon bonds
Sep 2023
1,136
1,219
Euro 400 million 3.70% coupon bonds
Oct 2023
467
520
Euro 600 million 0.625% coupon bonds
Sep 2024
682
732
Euro 750 million 1.75% coupon bonds
Mar 2025
862
951
Euro 500 million 3.75% coupon bonds
Apr 2026
598
680
Euro 500 million 1.50% coupon bonds
Oct 2026
566
632
Euro 950 million 1.125% coupon bonds
Mar 2028
1,079
1,159
Euro 600 million 0.75% coupon bonds
Mar 2029
653
–
Euro 500 million 0.75% coupon bonds
Mar 2033
526
–
Eurobonds
6,569
6,758
JPY 10 billion 1.075% coupon bonds
May 2022
–
97
GBP 500 million 6.00% coupon bonds
Apr 2022
–
685
GBP 500 million 3.125% coupon bonds
Mar 2026
677
724
Sterling bonds
677
1,409
CHF 175 million 1.25% coupon bonds
Oct 2024
194
202
CHF 250 million 0.35% coupon bonds
Sep 2025
274
283
CHF 225 million 1.00% coupon bonds
Mar 2027
248
256
CHF 150 million 0.50% coupon bonds
Sep 2028
160
–
Swiss Franc bonds
876
741
US$ 600 million 5.375% coupon bonds
Feb 2022
–
535
US$ 250 million LIBOR plus 1.65% coupon bonds
May 2022
–
250
US$ 1,000 million 4.25% coupon bonds
Oct 2022
–
1,002
US$ 500 million 3.00% coupon bonds
Oct 2022
–
461
US$ 1,500 million 4.125% coupon bonds
May 2023
1,538
1,580
US$ 1,000 million 4.125% coupon bonds
Mar 2024
970
969
US$ 1,000 million 4.625% coupon bonds
Apr 2024
1,029
1,069
US$ 625 million non-dilutive convertible bonds
Mar 2025
552
532
US$ 500 million 4.00% coupon bonds
Apr 2025
510
531
US$ 1,000 million 1.625% coupon bonds
Sep 2025
994
992
US$ 475 million 4.375% coupon bonds
Feb 2026
469
–
US$ 600 million 1.625% coupon bonds
Apr 2026
587
–
US$ 1,000 million 4.00% coupon bonds
Mar 2027
1,043
1,103
US$ 50 million 4.00% coupon bonds
Mar 2027
50
50
US$ 500 million 3.875% coupon bonds
Oct 2027
522
553
US$ 750 million 4.875% coupon bonds
Mar 2029
811
864
US$ 1,000 million 2.50% coupon bonds
Sep 2030
992
991
US$ 600 million 2.85% coupon bonds
Apr 2031
598
–
US$ 600 million 2.65% coupon bonds
Sep 2031
745
–
US$ 250 million 6.20% coupon bonds
Jun 2035
269
270
US$ 500 million 6.90% coupon bonds
Nov 2037
582
586
US$ 500 million 6.00% coupon bonds
Nov 2041
536
537
US$ 500 million 5.55% coupon bonds
Oct 2042
473
473
US$ 500 million 3.875% coupon bonds
Apr 2051
496
–
US$ 500 million 3.375% coupon bonds
Sep 2051
488
–
US$ bonds
14,254
13,348
Total non-current bonds
22,376
22,353
Glencore Annual Report 2021200
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021200
Notes to the financial statements continued
21. Borrowings continued
US$ million
Maturity
2021
2020
GBP 500 million 6.00% coupon bonds
Apr 2022
677
–
JPY 10 billion 1.075% coupon bonds
May 2022
87
–
Euro 600 million 2.75% coupon bonds
Apr 2021
–
724
CHF 250 million 2.25% coupon bonds
May 2021
–
284
US$ 1,000 million 4.95% coupon bonds
Nov 2021
–
1,010
US$ 600 million 5.375% coupon bonds
Feb 2022
410
–
US$ 250 million LIBOR plus 1.65% coupon bonds
May 2022
250
–
US$ 1,000 million 4.25% coupon bonds
Oct 2022
999
–
US$ 500 million 3.00% coupon bonds
Oct 2022
461
–
Total current bonds
2,884
2,018
2021 Bond activities
• In February 2021, issued:
– 5 year $475 million, 4.375% coupon bond (Volcan)
• In March 2021, issued:
– 8 year EUR600 million, 0.75% coupon bond
– 12 year EUR500 million, 1.25% coupon bond
• In April 2021, issued:
– 5 year $600 million, 1.625% coupon bond
– 10 year $600 million, 2.85% coupon bond
– 30 year $500 million, 3.875% coupon bond
• In September 2021, issued:
– 7 year CHF150 million, 0.5% coupon bond
– 10 year $750 million, 2.625% coupon bond
– 30 year $500 million, 3.375% coupon bond
2020 Bond activities
• In September 2020, issued:
– 7.5 year EUR 850 million, 1.125% coupon bond
– 5.5 year CHF 225 million, 1.00% coupon bond
– 5 year $1,000 million, 1.625% coupon bond
– 10 year $1,000 million, 2.50% coupon bond
• In December 2020, issued 7.5 year EUR 100 million, 1.125% coupon bond
Committed syndicated revolving credit facilities
In March 2021, Glencore extended its revolving credit facilities. The margins on these facilities remained unchanged, namely US$
LIBOR plus 40bps flat for the one-year, and US$ LIBOR plus 27.5bps, subject to a ratings grid, for the medium term. During the
period, certain amounts were voluntarily cancelled, determined as being in excess of the Group’s liquidity headroom requirements.
As at 31 December 2021, the facilities comprise:
• a $6,572 million one year revolving credit facility with a one-year borrower’s term-out option (to May 2023);
• a $450 million medium-term revolving credit facility (to May 2025); and
• a $4,200 million medium-term revolving credit facility (to May 2026).
As in previous years, these committed unsecured facilities contain no financial covenants, no rating triggers, no material adverse
change clauses and no external factor clauses.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 201Glencore Annual Report 2021 201
Notes to the financial statements continued
21. Borrowings continued
Secured facilities
US$ million
Maturity
1
Interest
2021
2020
Syndicated committed metals
inventory/receivables facilities
2
Nov 2024
3.2%
82
81
Syndicated uncommitted metals and oil
inventory/receivables facilities
–
1,245
Other secured facilities
Apr 2022
US$ LIBOR + 72 bps
120
100
Total
202
1,426
Current
122
1,346
Non-current
80
80
1 Uncommitted facilities are re-drawn several times until actual expiry of the facility contract.
2 Comprises various facilities. The maturity and interest detail represent the weighted average of the various debt balances outstanding at year end.
Glencore Annual Report 2021202
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021202
Notes to the financial statements continued
22. Deferred income
US$ million
Notes
Unfavourable
contracts
Prepayments
Total
1 January 2021
529
3,131
3,660
Additions
–
1,336
1,336
Accretion in the year
–
115
115
Revenue recognised in the year
(70)
(1,066)
(1,136)
Released in the year
5
(122)
–
(122)
Reclassification to held for sale
16
–
(191)
(191)
Effect of foreign currency exchange difference
(1)
–
(1)
31 December 2021
336
3,325
3,661
Current
56
1,517
1,573
Non-current
280
1,808
2,088
1 January 2020
609
2,619
3,228
Additions
–
1,047
1,047
Accretion in the year
–
127
127
Revenue recognised in the year
(66)
(663)
(729)
Effect of foreign currency exchange difference
(14)
1
(13)
31 December 2020
529
3,131
3,660
Current
79
991
1,070
Non-current
450
2,140
2,590
Unfavourable contracts
In several business combinations, Glencore recognised liabilities related to various assumed contractual agreements to deliver
tonnes of coal over various periods ending until 2032 at fixed prices lower than the prevailing market prices on the respective
acquisition dates.
These amounts are released to revenue as the underlying commodities are delivered to the buyers over the life of the contracts at
rates consistent with the extrapolated forward price curves at the time of the acquisitions.
During the year, certain contractual terms were renegotiated and related unfavourable contract provisions in the amount of
$122 million were released (see note 5).
Prepayments
Prepayments comprise various short to long-term product supply agreements whereby an upfront prepayment is received in
exchange for the future delivery of a specific product, such as gold, silver or cobalt. The arrangements are accounted for as executory
contracts whereby the advance payment is recorded as deferred revenue. The revenue from the advance payment is recognised as
the specific product identified in the contract is delivered consistent with the implied forward price curve at the time of the
transaction and an accretion expense, representing the time value of the upfront deposit, is also recognised.
Prepayments predominantly comprise:
• Life of mine arrangements - long-term streaming agreements for the future delivery of gold and/or silver produced over the life of
mine from our Antamina and Antapaccay operations. In addition to the upfront payment received, for product delivered from the
Antamina and Antapaccay operations, Glencore receives an ongoing amount equal to 20% of the spot silver and gold price. Once
certain delivery thresholds have been met at Antapaccay, the ongoing cash payment increases to 30% of the spot gold and silver
prices. As at 31 December 2021, post Ernest Henry being reclassified to ‘held for sale’, $1,068 million (2020: $1,391 million) of product
delivery obligations remain, of which $35 million (2020: $118 million) are due within 12 months.
• Silver supply arrangement – Various silver prepayment arrangements for the future delivery of an average of 14 million ounces of
silver per annum, over a remaining 4 year period. As at 31 December 2021, $784 million (2020: $841 million) of product delivery
obligations remain, of which $408 million (2020: $292 million) are due within 12 months.
• Palladium supply arrangement – Various palladium prepayment arrangements for the future delivery of an average of 37
thousand ounces of palladium per annum, over a remaining 4 year period. As at 31 December 2021, $141 million (2020:
$200 million) of product delivery obligations remain, of which $58 million (2020: $63 million) are due within 12 months.
• Gold supply arrangement – Various gold supply arrangements for the future delivery of 518 thousand ounces (2020: 228 thousand
ounces) of gold over a 1-year period. As at 31 December 2021, $765 million (2020: $360 million) of product delivery obligations
remain, which are due within 12 months.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 203Glencore Annual Report 2021 203
Notes to the financial statements continued
22. Deferred income continued
• Cobalt supply arrangement – In March 2019, Glencore signed a six year cobal prepayment arrangement in exchange for an
upfront advance payment of $100 million. Under the terms of the arrangement, Glencore is required to deliver an average of 1,621
metric tons of cobalt per annum, over a four year period starting 2021. As at 31 December 2021, $94 million (2020: $100 million) of
product delivery obligations remain, of which $26 million (2020: $5 million) are due within 12 months.
• Iron ore supply arrangement – In November 2021, Glencore signed a 18 month iron ore prepayment arrangement in exchange for
an upfront advance payment of $200 million. Under the terms of the arrangement, Glencore is required to deliver an average of
3,600,000 metric tons of iron ore per annum. As at 31 December 2021, $200 million (2020: $Nil) of product delivery obligations
remain of which, $117 million (2020: $Nil) are due within 12 months.
23. Provisions
US$ million
Notes
Rehabilitation
costs
Onerous
contracts
Legal
investigations
Other
provisions
Total
1 January 2021
5,182
535
–
746
6,463
Utilised
(190)
(122)
–
(276)
(588)
Released
(14)
(103)
–
(31)
(148)
Accretion
153
31
–
2
186
Disposal of subsidiaries
26
(67)
–
–
(10)
(77)
Additions
918
116
1,500
137
2,671
Reclassification to held for sale
16
(191)
–
–
(37)
(228)
Effect of foreign currency exchange
movements
(60
)
(2
)
–
(7
)
(69
)
31 December 2021
5,731
455
1,500
524
8,210
Current
337
109
1,500
147
2,093
Non-current
5,394
346
–
377
6,117
1 January 2020
4,847
595
–
633
6,075
Utilised
(189)
(124)
–
(37)
(350)
Released
–
(174)
–
(42)
(216)
Accretion
144
40
–
4
188
Disposal of subsidiaries
26
(208)
–
–
(15)
(223)
Additions
614
200
–
247
1,061
Reclassification to held for sale
16
(54)
–
–
(24)
(78)
Reclassification from held for sale
16
45
–
–
7
52
Effect of foreign currency exchange
movements
(17
)
(2
)
–
(27
)
(46
)
31 December 2020
5,182
535
–
746
6,463
Current
297
143
–
253
693
Non-current
4,885
392
–
493
5,770
Rehabilitation costs
Rehabilitation provision represents the accrued costs required to provide adequate restoration and rehabilitation upon the
completion of production activities. These amounts will be settled when rehabilitation is undertaken, generally at the end of a
project’s life, which ranges from two to in excess of 50 years with an average for all sites, weighted by closure provision, of some 23
years (2020: 23 years).
As at 31 December 2021, the discount rate applied in calculating the restoration and rehabilitation provision is a pre-tax risk free rate
specific to the liability and the currency in which they are denominated as follows: US dollar 1.5% (2020: 1.6%), South African rand
3.75% (2020: 3.6%), Australian dollar 2.0% (2020: 2.3%), Canadian dollar 1.5% (2020: 1.7%), and Chilean peso 2.5% (2020: 2.6%).
The sensitivity of the rehabilitation costs provision to changes in the discount rate assumptions as at 31 December 2021, assuming
that all other assumptions are held constant, is set out below:
Glencore Annual Report 2021204
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021204
Notes to the financial statements continued
23. Provisions continued
Discount rate
US$ million
Increase 0.5%
Decrease 0.5%
Decrease/(increase) in overall rehabilitation provision
416
(484)
(Decrease)/increase in property, plant and equipment
(352)
409
Net increase/(decrease) in statement of income
64
(75)
Effect in the following year
Decrease/(increase) in depreciation expense
15
(18)
(Increase)/decrease in interest expense
(6)
8
Net increase/(decrease) in statement of income
9
(10)
Onerous contracts
Onerous contracts represent liabilities related to contractual take or pay commitments for securing coal logistics capacity and LNG
re-gasification capacity at fixed prices and quantities higher than the acquisition date forecasted usage and prevailing market price.
The provision is released to costs of goods sold as the underlying commitments are incurred.
Investigations by regulatory and enforcement authorities
The Group is subject to a number of investigations by regulatory and enforcement authorities including:
• The United States Department of Justice is investigating the Group with respect to compliance with various criminal statutes,
including the Foreign Corrupt Practices Act, United States money laundering statutes and fraud statutes related to the Group’s
business in certain overseas jurisdictions.
• The United States Commodity Futures Trading Commission ("CFTC") is investigating whether the Group may have violated
certain provisions of the Commodity Exchange Act and/or CFTC Regulations including through corrupt practices in connection
with commodities trading.
• The United Kingdom Serious Fraud Office is investigating the Group in respect of suspicions of bribery in the conduct of business
of the Group.
• The Brazilian authorities are investigating the Group in relation to “Operation Car Wash”, which relates to bribery allegations
concerning Petrobras.
• The Office of the Attorney General of Switzerland (“OAG”) is investigating Glencore International AG for failure to have the
organisational measures in place to prevent alleged corruption.
The Board has appointed a committee, the Investigations Committee (“the Committee”), to oversee the response to the
investigations on behalf of the Board. The Committee has engaged external legal counsel and forensic experts to assist in
responding to the various investigations and to perform additional investigations at the request of the Committee covering various
aspects of the Group’s business. The Group continues to cooperate fully with the above authorities.
The Group has also been notified by the Dutch authorities of a criminal investigation into Glencore International AG related to
potential corruption pertaining to the DRC and is in contact with the Dutch authorities in respect of this investigation. The scope of
the investigation is similar to that of the OAG investigation. The Dutch authorities are coordinating their investigation with the OAG
and we would expect any possible resolution to avoid duplicative penalties for the same conduct.
While the Committee cannot forecast with certainty the cost, extent, timing or terms of the outcomes of the investigations, the
Committee presently expects to resolve the U.S., UK and Brazilian investigations in 2022. Accordingly, and based on the Company’s
current information and understanding, the Group has raised a provision as at 31 December 2021 in the amount of $1,500 million
representing the Committee’s current best estimate of the costs to resolve these investigations (included in other expenses, see
note 5). As the investigations are still ongoing and their ultimate outcome remains uncertain, there remains a significant risk that
the final outcome could materially impact the recognised balance within the next financial year. It is impractical to provide further
sensitivity estimates of potential downside variances.
The timing and outcome of the OAG and Dutch investigations remains uncertain – see note 32.
Other
Other comprises provisions for possible demurrage, mine concession and construction related claims. This balance comprises no
individually material provisions.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 205Glencore Annual Report 2021 205
Notes to the financial statements continued
24. Personnel costs and employee benefits
US$ million
Notes
Post-retirement
employee
benefits
Other
employee
entitlements
Total
1 January 2021
980
181
1,161
Utilised
(84)
(9)
(93)
Released
(1)
(7)
(8)
Accretion
23
–
23
Additions
151
14
165
Actuarial (gain)/loss
(284)
–
(284)
Reclassification to held for sale
16
–
(19)
(19)
Effect of foreign currency exchange movements
(3)
(3)
(6)
31 December 2021
782
157
939
1 January 2020
958
228
1,186
Utilised
(106)
(71)
(177)
Accretion
26
–
26
Disposal of subsidiaries
26
–
(9)
(9)
Additions
74
38
112
Actuarial loss/(gain)
20
–
20
Reclassification to held for sale
16
–
(10)
(10)
Effect of foreign currency exchange movements
8
5
13
31 December 2020
980
181
1,161
The provision for post-retirement employee benefits includes pension plan liabilities of $352 million (2020: $504 million) and post-
retirement medical plan liabilities of $430 million (2020: $476 million).
The other employee entitlements provision represents the value of governed employee entitlements due to employees upon their
termination of employment. The associated expenditure will occur in a pattern consistent with when employees choose to exercise
their entitlements.
Total personnel costs, which include salaries, wages, social security, other personnel costs and share-based payments, incurred for
the years ended 31 December 2021 and 2020, were $6,012 million and $5,403 million, respectively. Personnel costs related to
consolidated industrial subsidiaries of $4,188 million (2020: $3,944 million) are included in cost of goods sold. Other personnel costs,
including deferred bonus and performance share plans, are included in selling and administrative expenses.
The Company and certain subsidiaries sponsor various pension schemes in accordance with local regulations and practices.
Eligibility for participation in the various plans is either based on completion of a specified period of continuous service, or date of
hire. Among these schemes are defined contribution plans as well as defined benefit plans.
Defined contribution plans
Glencore’s contributions under these plans amounted to $173 million in 2021 (2020: $122 million).
Post-retirement medical plans
The Company participates in a number of post-retirement medical plans, principally in Canada, which provide coverage for
prescription drugs, medical, dental, hospital and life insurance to eligible retirees. Almost all of the post-retirement medical plans in
the Group are unfunded.
Glencore Annual Report 2021206
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021206
Notes to the financial statements continued
24. Personnel costs and employee benefits continued
Defined benefit pension plans
The Company operates defined benefit plans in various countries, the main locations being Canada, Switzerland, UK and the U.S..
Approximately 64% of the present value of the pension obligations accrued relates to the defined benefit plans in Canada, which are
pension plans that provide benefits to members in the form of a guaranteed level of pension payable for life. Contributions to the
Canadian plans are made to meet or exceed minimum funding requirements based on provincial statutory requirements and
associated federal taxation rules.
The majority of benefit payments are from trustee-administered funds; however, there are also a number of unfunded plans where
Glencore meets the benefit payments as they fall due. Plan assets held in trusts are governed by local regulations and practices in
each country. Responsibility for governance of the plans – overseeing all aspects of the plans including investment decisions and
contribution schedules – lies with Glencore. Glencore has set up committees to assist in the management of the plans and has also
appointed experienced, independent professional experts such as investment managers, actuaries, custodians, and trustees.
The movement in the defined benefit pension and post-retirement medical plans over the year is as follows:
Defined benefit pension plans
US$ million
Notes
Post-retirement
medical plans
Present value
of defined
benefit
obligation
Fair value
of plan
assets
Net liability
for defined
benefit
pension plans
1 January 2021
476
3,138
(2,674)
464
Current service cost
7
62
–
62
Past service cost - plan amendments
(6)
–
–
–
Settlement of pension plan disposal
–
(137)
138
1
Interest expense/(income)
18
64
(59)
5
Total expense/(income) recognised in consolidated
statement
of income
19
(11)
79
68
Gain on plan assets, excluding amounts included
in interest expense - net
–
–
(46)
(46)
Gain from change in demographic assumptions
–
(12)
–
(12)
Gain from change in financial assumptions
(37)
(188)
–
(188)
(Gain)/loss from actuarial experience
(4)
3
–
3
Actuarial (gains)/losses recognised in consolidated
statement of comprehensive income
(41)
(197)
(46)
(243)
Employer contributions
–
–
(63)
(63)
Employee contributions
–
1
(1)
–
Benefits paid directly by the Company
(22)
(8)
8
–
Benefits paid from plan assets
–
(165)
166
1
Net cash (outflow)/inflow
(22)
(172)
110
(62)
Exchange differences
(2)
2
(2)
–
31 December 2021
430
2,760
(2,533)
227
Of which:
Pension surpluses
12
–
(125)
Pension deficits
430
352
The actual return on plan assets in respect of defined benefit pension plans amounted to a gain of $107 million (2020: $273 million),
comprising interest income and the re-measurement of plan assets.
During the next financial year, the Group expects to make a contribution of $84 million in respect of the defined benefit pension and
post-retirement medical plans across all countries, including current service costs and contributions required by pension legislation.
Contributions over the next five years for the Canadian plans only, based on the most recently filed actuarial reports, approximate
$117 million. Future funding requirements and contributions are reviewed and adjusted on an annual basis.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 207Glencore Annual Report 2021 207
Notes to the financial statements continued
24. Personnel costs and employee benefits continued
Defined benefit pension plans
US$ million
Notes
Post-retirement
medical plans
Present value
of defined
benefit
obligation
Fair value
of plan
assets
Net liability
for defined
benefit
pension plans
1 January 2020
512
2,951
(2,547)
404
Current service cost
8
59
–
59
Past service cost - plan amendments
–
2
–
2
Settlement of pension plan disposal
–
(41)
48
7
Interest expense/(income)
19
75
(68)
7
Total expense/(income) recognised in consolidated
statement
of income
27
95
(20)
75
Gain on plan assets, excluding amounts included
in interest expense - net
–
–
(150)
(150)
Gain from change in demographic assumptions
(75)
(3)
–
(3)
Loss from change in financial assumptions
28
211
–
211
Loss from actuarial experience
4
5
–
5
Actuarial losses/(gains) recognised in consolidated
statement of comprehensive income
(43)
213
(150)
63
Employer contributions
–
–
(83)
(83)
Employee contributions
–
1
(1)
–
Benefits paid directly by the Company
(23)
(8)
8
–
Benefits paid from plan assets
–
(174)
174
–
Net cash (outflow)/inflow
(23)
(181)
98
(83)
Exchange differences
3
60
(55)
5
31 December 2020
476
3,138
(2,674)
464
Of which:
Pension surpluses
12
–
(40)
Pension deficits
476
504
The defined benefit obligation accrued in Canada represents the majority for the Company. The breakdown below provides details
of the Canadian plans for both the statement of financial position and the weighted average duration of the defined benefit
obligation as at 31 December 2021 and 2020. The net liability of any of the Group’s defined benefit plans outside of Canada as at
31 December 2021 does not exceed $70 million (2020: $92 million).
Glencore Annual Report 2021208
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021208
Notes to the financial statements continued
24. Personnel costs and employee benefits continued
2021
US$ million
Canada
Other
Total
Post-retirement medical plans
Present value of defined benefit obligation
379
51
430
of which: amounts owing to active members
123
11
134
of which: amounts owing to pensioners
256
40
296
Defined benefit pension plans
Present value of defined benefit obligation
1,753
1,007
2,760
of which: amounts owing to active members
434
484
918
of which: amounts owing to non-active members
25
167
192
of which: amounts owing to pensioners
1,294
356
1,650
Fair value of plan assets
(1,772)
(761)
(2,533)
Net defined benefit liability(asset) at 31 December 2021
(19)
246
227
Of which:
Pension surpluses
(115)
(10)
(125)
Pension deficits
96
256
352
Weighted average duration of defined benefit obligation - years
13
15
13
2020
US$ million
Canada
Other
Total
Post-retirement medical plans
Present value of defined benefit obligation
415
61
476
of which: amounts owing to active members
142
11
153
of which: amounts owing to pensioners
273
50
323
Defined benefit pension plans
Present value of defined benefit obligation
2,041
1,097
3,138
of which: amounts owing to active members
501
533
1,034
of which: amounts owing to non-active members
37
192
229
of which: amounts owing to pensioners
1,503
372
1,875
Fair value of plan assets
(1,917)
(757)
(2,674)
Net defined benefit liability at 31 December 2020
124
340
464
Of which:
Pension surpluses
(38)
(2)
(40)
Pension deficits
162
342
504
Weighted average duration of defined benefit obligation - years
13
16
14
Estimated future benefit payments of the Canadian plans, which reflect expected future services but exclude plan expenses, up
until 2031 are as follows:
US$ million
Post-retirement
medical plans
Defined benefit
pension plans
Total
2022
19
99
118
2023
19
98
117
2024
19
98
117
2025
19
135
154
2026
19
95
114
2027-2031
92
470
562
Total
187
995
1,182
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 20 9Glencore Annual Report 2021 209
Notes to the financial statements continued
24. Personnel costs and employee benefits continued
The plan assets consist of the following:
2021
2020
Active market
Non-active
market
Active market
Non-active
market
Cash and short-term investments
40
–
24
21
Fixed income
823
195
844
213
Equities
851
–
979
–
Other
416
208
393
200
Total
2,130
403
2,240
434
The fair value of plan assets includes none of Glencore’s own financial instruments and no property occupied by or other assets used
by Glencore. For many of the plans, representing a large portion of the global plan assets, asset-liability matching strategies are in
place, where the fixed-income assets are invested broadly in alignment with the duration of the plan liabilities, and the proportion
allocated to fixed-income assets is raised when the plan funding level increases. The asset mix for each plan reflects the nature,
expected changes in, and size of the liabilities and the assessment of long-term economic conditions, market risk, expected
investment returns as considered during a formal asset mix study, including sensitivity analysis and/or scenario analysis, conducted
periodically for the plans.
Through its defined benefit plans, Glencore is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets
underperform this yield, this will create a deficit. The funded plans hold a significant proportion of equities, which are expected to
outperform bonds in the long term while contributing volatility and risk in the short term. Glencore believes that due to the long-
term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of Glencore’s long-term strategy
to manage the plans efficiently.
Change in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in
the value of the plans’ bond holdings.
Inflation risk: Some of the plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities, although,
in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation.
Life expectancy: The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans’ liability.
Salary increases: Some of the plans’ benefit obligations related to active members are linked to their salaries. Higher salary increases
will therefore tend to lead to higher plan liabilities.
The principal weighted-average actuarial assumptions used were as follows:
Post-retirement medical plans
Defined benefit pension plans
2021
2020
2021
2020
Discount rate
4.1%
3.6%
2.7%
2.2%
Future salary increases
–
–
2.6%
2.6%
Future pension increases
–
–
0.5%
0.4%
Ultimate medical cost trend rate
4.6%
4.6%
–
–
Mortality assumptions are based on the latest available standard mortality tables for the individual countries concerned. As at
31 December 2021, these tables imply expected future life expectancy, for employees aged 65, 16 to 23 years for males (2020: 16 to 23)
and 20 to 25 years for females (2020: 20 to 25). The assumptions for each country are reviewed regularly and are adjusted where
necessary to reflect changes in fund experience and actuarial recommendations.
Glencore Annual Report 2021210
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021210
Notes to the financial statements continued
24. Personnel costs and employee benefits continued
The sensitivity of the defined benefit obligation to changes in principal assumptions as at 31 December 2021 is set out below,
assuming that all other assumptions are held constant and the effect of interrelationships is excluded.
Increase/(decrease) in pension obligation
US$ million
Post-retirement
medical plans
Defined benefit
pension plans
Total
Discount rate
Increase by 50 basis points
(28)
(170)
(198)
Decrease by 50 basis points
32
186
218
Rate of future salary increase
Increase by 100 basis points
–
34
34
Decrease by 100 basis points
–
(33)
(33)
Rate of future pension benefit increase
Increase by 100 basis points
–
56
56
Decrease by 100 basis points
–
(46)
(46)
Medical cost trend rate
Increase by 100 basis points
51
–
51
Decrease by 100 basis points
(41)
–
(41)
Life expectancy
Increase in longevity by one year
12
69
81
25. Accounts payable
US$ million
Notes
2021
2020
Financial liabilities at amortised cost
Trade payables
10,397
8,021
Margin calls received
729
1,033
Associated companies
1,124
1,209
Other payables and accrued liabilities
889
850
Financial liabilities at fair value through profit and loss
Trade payables containing provisional pricing features
28
13,806
11,264
Non-financial instruments
Advances settled in product
459
289
Other payables and accrued liabilities
1,460
994
Other tax and related payables
449
378
Total
29,313
24,038
Trade payables are obligations to pay for goods and services. Trade payables typically have maturities up to 90 days depending on
the type of material and the geographic area in which the purchase transaction occurs and the agreed terms. As at 31 December
2021, Nil (2020: 10%) of total trade payables of $24,203 million (2020: $19,285 million) include liabilities under supplier financing
arrangements with maturities beyond 91 days (refer to note 1 for critical judgements associated with classification of liabilities which
contain a financing element). The carrying value of trade payables approximates fair value.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 211Glencore Annual Report 2021 211
Notes to the financial statements continued
26. Acquisition and disposal of subsidiaries and other entities
2021 & 2020 Acquisitions
In 2021 and 2020, there were no material acquisitions.
2021 Disposals
The carrying value of the assets and liabilities over which control was lost and consideration receivable from the 2021 disposals are
detailed below:
US$ million
Mopani
1
Chemoil
Terminals
Others
Total
Non-current assets
Property, plant and equipment
748
158
20
926
Advances and loans
5
–
–
5
753
158
20
931
Current assets
Inventories
168
–
–
168
Accounts receivable
99
3
14
116
Prepaid expenses
3
–
–
3
Cash and cash equivalents
–
10
10
20
270
13
24
307
Non-current liabilities
Non-current borrowings
–
(6)
–
(6)
Deferred tax liabilities
–
(18)
(1)
(19)
Non-current provisions
(55)
–
(61)
(116)
Post-retirement and other employee benefits
(9)
–
–
(9)
(64)
(24)
(62)
(150)
Current liabilities
Borrowings
–
(1)
(1)
(2)
Accounts payable
(81)
(8)
–
(89)
Provisions
(23)
–
(16)
(39)
Income tax payable
(12)
–
–
(12)
(116)
(9)
(17)
(142)
Carrying value of net assets disposed
843
138
(35)
946
Cash and cash equivalents received
–
(248)
(24)
(272)
Future consideration
(838)
–
–
(838)
Net loss/(gain) on disposal before non-controlling interest
5
(110)
(59)
(164)
Derecognition of non-controlling interest
1,017
–
–
1,017
Net loss/(gain) on disposal after non-controlling interest
1,022
(110)
(59)
853
Cash and cash equivalents received
–
248
24
272
Less: cash and cash equivalents disposed
–
(10)
(10)
(20)
Net cash received/(used) in disposal
–
238
14
252
1 As at 31 December 2020, total assets and liabilities were presented as current assets and liabilities “held for sale“ (see note 16).
Mopani
On 31 March 2021, Glencore completed the disposal of its 90% interest in Mopani to ZCCM Investments Holdings plc, the holder of
the remaining 10% interest in Mopani, in exchange for $1 and the rights to offtake copper and other metals from Mopani until
$1.5 billion of existing intercompany debt (the “transaction debt”) has been repaid to Glencore. The repayment of the transaction
debt is based on Glencore receiving physical commodities from Mopani through its offtake rights and applying fixed percentages of
annual gross revenues generated from the sale of such commodities against the transaction debt until it is fully repaid. As Glencore
is no longer able to unilaterally direct the key strategic, operating and capital decisions of Mopani, it was deemed to have disposed
of its controlling interest at the fair value of the transaction debt on the date of completion, being $838 million. Fair value was
determined using a discounted cash flow model of the projected amount and timing of metal volumes received from Mopani
under the offtake rights and market forecasts of commodity prices, discounted using an asset specific discount rate of 11.4%.
The net loss on disposal reflects the derecognition to the statement of income of the previously recognised book value of the non-
controlling interest equity balance, which largely related to the non-controlling interests’ share of historical impairments and losses,
and resulting net liabilities in Mopani.
Chemoil Terminals
On 17 December 2021, Glencore completed the disposal of its 100% interest in Chemoil Terminals LLC, which owns the Long Beach
and Carson oil products storage terminals in California, for a consideration of $248 million.
Glencore Annual Report 2021212
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021212
Notes to the financial statements continued
26. Acquisition and disposal of subsidiaries and other entities continued
2020 Disposals
In 2020, Glencore disposed of its controlling interest in Minera Alumbrera Limited. The carrying value of the assets and liabilities over
which control was lost and the net cash used in the disposal are detailed below:
US$ million
Alumbrera
Non-current assets
Property, plant and equipment
12
12
Current assets
Inventories
2
Accounts receivable
14
Cash and cash equivalents
222
238
Non-controlling interest
2
Non-current liabilities
Provisions
(182)
(182)
Current liabilities
Borrowings
(13)
Accounts payable
(9)
Provisions
(50)
(72)
Carrying value of net assets disposed
(2)
Net gain on disposal
(2)
Cash and cash equivalents received
–
Less: cash and cash equivalents disposed
(222)
Net cash used in disposal
(222)
Minera Alumbrera Limited
In December 2020, Glencore disposed of its 50% interest in Minera Alumbrera Limited, a copper-gold operation in Argentina, in
return for a 24.99% interest in Minera Agua Rica Alumbrera Limited. Glencore is no longer able to unilaterally direct the key strategic,
operating and capital decisions of Minera Alumbrera Limited and was deemed to have disposed of its controlling interest at fair
value. The difference to the net carrying value was recognised through the statement of income, with Glencore subsequently
accounting for its share in Minera Agua Rica Alumbrera Limited using the equity method in accordance with IAS 28.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 213Glencore Annual Report 2021 213
Notes to the financial statements continued
27. Financial and capital risk management
Financial risks arising in the normal course of business from Glencore’s operations comprise market risk (including commodity price
risk, interest rate risk and currency risk), credit risk (including performance risk) and liquidity risk. It is Glencore’s policy and practice
to identify and, where appropriate and practical, actively manage such risks (for management of “margin” risk within Glencore’s
extensive and diversified industrial portfolio, refer net present value at risk below) to support its objectives in managing its capital
and future financial security and flexibility. Glencore’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to protect its financial security and flexibility by using derivative financial instruments where possible to
substantially hedge these financial risks. Glencore’s finance and risk professionals, working in coordination with the commodity
departments, monitor, manage and report regularly to senior management and the Board of Directors on the approach and
effectiveness in managing financial risks along with the financial exposures facing the Group.
Glencore’s objectives in managing its “capital attributable to equity holders” include preserving its overall financial health and
strength for the benefit of all stakeholders, maintaining an optimal capital structure in order to provide a high degree of financial
flexibility at an attractive cost of capital and safeguarding its ability to continue as a going concern, while generating sustainable
long-term profitability. Central to meeting these objectives is maintaining an investment grade credit rating status. Glencore’s
current credit ratings are Baa1 (stable) from Moody’s and BBB+ (stable) from S&P.
Distribution policy and other capital management initiatives
Glencore’s base cash distribution policy comprises two components: (1) a fixed $1 billion component and (2) a variable element
representing 25% of free cash flow generated by our industrial assets during the proceding year. Distributions are expected to be
formally declared by the Board annually (with the preliminary full-year results). Distributions, when declared, will be settled equally in
May and September of the year they are declared in. In addition, reflecting the Group’s through the cycle Net debt objective of
c.$10 billion, and consideration of the cyclical nature of the industry and other relevant factors, the Board could declare additional
distributions to be included with the distribution confirmed with respect to the prior year, consider top-up distributions during the
year and/or initiate or continue share buy-back programmes. Notwithstanding that the cash distribution is declared and paid in U.S.
dollars, shareholders will be able to elect to receive their distribution payments in Pounds Sterling, Euros or Swiss Francs based on
the exchange rates in effect around the date of payment. Shareholders on the JSE will receive their distributions in South African
Rand.
Commodity price risk
Glencore is exposed to price movements for the inventory it holds and the products it produces which are not held to meet priced
forward contract obligations and forward priced purchase or sale contracts. Glencore manages a significant portion of this exposure
through futures and options transactions on worldwide commodity exchanges or in over the counter (OTC) markets, to the extent
available. Commodity price risk management activities are considered an integral part of Glencore’s physical commodity marketing
activities and the related assets and liabilities are included in other financial assets from and other financial liabilities to derivative
counterparties, including clearing brokers and exchanges. Whilst it is Glencore’s policy to substantially hedge its commodity price
risks, there remains the possibility that the hedging instruments chosen may not always provide effective mitigation of the
underlying price risk. The hedging instruments available to the marketing businesses may differ in specific characteristics to the risk
exposure to be hedged, resulting in an ongoing and unavoidable basis risk exposure. Residual basis risk exposures represent a key
focus point for Glencore’s commodity department teams who actively engage in the management of such.
Value at risk
One of the tools used by Glencore to monitor and limit its primary market risk exposure, principally commodity price risk related to
its physical marketing activities, is a value at risk (VaR) computation. VaR is a risk measurement technique which estimates a
threshold for potential loss that could occur on risk positions as a result of movements in risk factors over a specified time horizon,
given a specific level of confidence and based on a specific price history. The VaR methodology is a statistically defined, probability-
based approach that takes into account market volatilities, as well as risk diversification by recognising offsetting positions and
correlations between commodities and markets. In this way, risks can be measured consistently across markets and commodities
and risk measures can be aggregated to derive a single risk value.
Glencore uses a VaR approach based on Monte Carlo simulations computed at a 95% confidence level and utilising a weighted data
history for a one-day time horizon. Glencore’s Board has set a consolidated VaR limit (one day 95% confidence level) of $150 million
(2020: $100 million) representing less than 0.4% of total equity, which the Board reviews annually. Given 2021’s elevated implied
market volatilities, together with statistically higher commodity correlations and the nature / extent (e.g. increased size and tenor of
LNG business) of transaction volumes, the Board approved an increase in the VaR limit in H2 2021, initially to $130 million on a
temporary basis and then to $150 million going forward, with effect from 1 January 2022.
Position sheets are regularly distributed and monitored and daily Monte Carlo simulations are applied to the various business
groups’ net marketing positions to determine potential losses.
Glencore Annual Report 2021214
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021214
Notes to the financial statements continued
27. Financial and capital risk management continued
Market risk VaR (one-day 95% confidence level) ranges and year-end positions were as follows:
US$ million
2021
2020
Year-end position
72
33
Average during the year
54
39
High during the year
126
102
Low during the year
27
14
VaR does not purport to represent actual gains or losses in fair value in earnings to be incurred by Glencore, nor does Glencore claim
that these VaR results are indicative of future market movements or representative of any actual impact on its future results. VaR
should always be viewed in the context of its limitations; notably, the use of historical data as a proxy for estimating future events,
market illiquidity risks and tail risks. Glencore recognises these limitations, and thus complements and continuously refines its VaR
analysis by analysing forward looking stress scenarios, benchmarking against an alternative VaR computation based on historical
simulations and back testing calculated VaR against the hypothetical portfolio returns arising in the next business day.
Glencore’s VaR computation currently covers its business in the key base metals (including aluminium, nickel, zinc, copper and
lead), coal, iron ore and oil/natural gas/LNG and assesses the open priced positions which are subject to price risk, including
inventories of these commodities. Due to the lack of a liquid terminal market, Glencore does not include a VaR calculation for
products such as alumina, molybdenum, freight and some risk associated with metals’ concentrates as it does not consider the
nature of these markets to be suited to this type of analysis. Alternative measures are used to monitor exposures related to these
products.
Net present value at risk
Glencore’s future cash flows related to its forecast Industrial production activities are also exposed to commodity price movements.
Glencore manages this exposure through a combination of portfolio diversification, occasional shorter-term hedging via futures and
options transactions, insurance products and continuous internal monitoring, reporting and quantification of the underlying
operations’ estimated cash flows and valuations.
Interest rate risk
Glencore is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its
assets and liabilities and cash flows. Matching of assets and liabilities is utilised as the dominant method to hedge interest rate risks;
other methods include the use of interest rate swaps and similar derivative instruments with the same critical terms as the
underlying interest rate exposures. See details on swap instruments used below.
Floating rate debt which is predominantly used to fund fast turning working capital (interest is internally charged on the funding of
this working capital) is primarily based on US$ LIBOR plus an appropriate premium. Accordingly, prevailing market interest rates are
continuously factored into transactional pricing and terms.
Assuming the amount of floating rate liabilities at the reporting period end were outstanding for the whole year, interest rates were
50 basis points higher/lower and all other variables held constant, Glencore’s income for the year ended 31 December 2021 would
decrease/increase by $98 million (2020: $112 million).
Interest rate benchmark reform
Whereas initially the UK FCA announced that they would not compel the 20 panel banks to submit into the LIBOR interest rate
setting mechanism by the end of 2021, in November 2020 they issued a revised timetable, with the consequence that overnight, 1, 3
and 6 month USD LIBOR’s will continue to be quoted until 30 June 2023.
To cater for the envisaged transition of interest rate hedging arrangements, which have an accelerated timetable, the Group has
already agreed to align with the ISDA fall-back protocol. Therefore, all existing and new derivative arrangements referencing LIBORs,
will be amended in line with the timelines and announcements made by regulators in the respective currency jurisdiction.
The Group has additionally established a multidisciplinary working group, to prepare and implement a LIBOR transition plan. This
working group is assessing on an ongoing basis the potential impact of LIBOR reform. This transition plan includes updating
policies, systems and processes, in order to anticipate the appropriate changes as and when deemed necessary.
During the year, the Group already also transitioned some of its non-derivative contractual exposures from LIBOR based to
alternative fixed rates. However the Group’s remaining non-derivative LIBOR linked contracts do not yet include adequate and
robust fall-back provisions for cessation of the referenced benchmark interest rate.
The Group continues to monitor the market and the output from various industry groups managing the transition to new
benchmark interest rates, and will look to implement a new benchmark, which is expected to be based broadly around the US
Secured Overnight Financing Ratee (SOFR), or at the very least, implement robust fall-back language for different instruments and
LIBORs, when appropriate.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 215Glencore Annual Report 2021 215
Notes to the financial statements continued
27. Financial and capital risk management continued
The following table sets out the hedging relationships as at 31 December 2021, which include IBOR benchmarks and are yet to be
transitioned to risk-free rate benchmarks.
Carrying amount
Notional
Assets
Liabilities
Interest rate
benchmark
Hedged item
Hedge relationship
US$ million
Hedging instruments
Interest rate swaps
4,950
224
(11)
LIBOR
US$ bonds
Fair value hedge
Cross-currency interest rate swaps
4,792
110
(284)
LIBOR
EMTN
Fair value hedge
Basis swaps
9,142
3
–
LIBOR
US$ bonds/EMTN
Fair value hedge
Non-derivative financial liabilites
–
–
–
Committed syndicated revolving
credit facilities
1
–
–
(2,543)
LIBOR
Secured facilities
1
–
–
(120)
LIBOR
1 See note 21.
Currency risk
The U.S. dollar is the predominant functional currency of the Group. Currency risk is the risk of loss from movements in exchange
rates related to transactions and balances in currencies other than the U.S. dollar. Such transactions include operating expenditure,
capital expenditure and to a lesser extent purchases and sales in currencies other than the functional currency. Purchases or sales of
commodities concluded in currencies other than the functional currency, apart from certain limited domestic sales at industrial
operations which act as a hedge against local operating costs, are ordinarily economically hedged through forward exchange
contracts. Consequently, foreign exchange movements against the U.S. dollar on recognised transactions would have an immaterial
financial impact. Glencore enters into currency hedging transactions with leading financial institutions.
Glencore’s debt related payments (both principal and interest) are primarily denominated in or swapped using hedging
instruments into U.S. dollars. Glencore’s operating expenses, being a small portion of its revenue base, are incurred in a mix of
currencies of which the U.S. dollar, Swiss Franc, Pound Sterling, Canadian dollar, Australian dollar, Euro, Kazakhstan Tenge,
Colombian Peso and South African Rand are the predominant currencies.
Glencore has issued Euro, Swiss Franc, Sterling and Yen denominated bonds (see note 21). Cross currency swaps were concluded to
hedge the currency risk on the principal and related interest payments of these bonds. These contracts were designated as fair
value or cash flow hedges of the associated foreign currency risks. The critical terms of these swap contracts and their
corresponding hedged items are matched and the Group expects a highly effective hedging relationship with the swap contracts
and the value of the corresponding hedged items to change systematically in opposite direction in response to movements in the
underlying exchange rates. The corresponding fair value and notional amounts of these derivatives is as follows:
Notional amounts
Average FX
rates
Carrying amount
Assets
(Note 29)
Carrying amount
Liabilities
(Note 29)
Average
maturity
1
US$ million
2021
2020
2021
2020
2021
2020
2021
2020
Cross currency swap agreements
Cash flow hedges - currency risk
Eurobonds
2,907
2,907
1.14
1.14
3
164
42
–
2025
Sterling bonds
798
798
1.60
1.60
–
–
129
126
2022
Swiss franc bonds
504
504
1.06
1.06
12
16
–
–
2026
Fair value hedges - currency and interest
rate risk
Eurobonds
3,947
4,323
1.22
1.27
67
232
285
120
2027
Yen bonds
81
81
0.01
0.01
5
16
–
–
2022
Sterling bonds
663
663
1.33
1.33
33
81
–
–
2026
Swiss franc bonds
347
440
1.07
1.04
11
48
5
–
2026
9,247
9,716
131
557
461
246
Interest rate swap agreements
Fair value hedges - interest rate risk
US$ bonds
6,450
5,250
–
–
272
525
12
4
2026
15,697
14,966
403
1,082
473
250
1 Refer to note 21 for details.
Glencore Annual Report 2021216
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021216
Notes to the financial statements continued
27. Financial and capital risk management continued
The gross liquidity risk relating to the above cross currency swaps entered into for the purposes of hedging foreign currency and
interest rate risks arising from the Group’s non-U.S. dollar denominated bonds is presented below. The amounts reflect the expected
gross settlement of the U.S. dollar pay leg of these swaps. The inflows from the related foreign currency receive leg of these swaps
are not presented in the below table, but would approximate the foreign currency equivalent of the US dollar pay leg. Counterparty
settlement date risk related to these swaps is limited, as the Group has entered into margining arrangements for both the outflow
and inflow legs of the swap.
US$ million
After 5 years
Due 3 - 5 years
Due 2 - 3 years
Due 1 - 2 years
Due 0 - 1 year
Total
2021
3,088
3,242
1,034
1,895
1,109
10,368
2020
3,381
2,123
1,823
1,970
1,305
10,602
The carrying amounts of the fair value hedged items are as follows:
Carrying amount of the
hedged item
(Note 21)
Of which,
accumulated
amount of fair value
hedge adjustments
US$ million
2021
2020
2021
2020
Foreign exchange and interest rate risk
Eurobonds
3,672
4,372
(255)
56
Yen bonds
87
97
5
16
Swiss franc bonds
354
486
38
45
Sterling bonds
677
724
22
64
US$ bonds
6,638
5,702
226
489
11,428
11,381
36
670
Credit risk
Credit risk arises from the possibility that counterparties may not be able to settle obligations due to Glencore within their agreed
payment terms. Financial assets which potentially expose Glencore to credit risk consist principally of cash and cash equivalents,
receivables and advances, derivative instruments and non-current advances and loans. Glencore’s credit management process
includes the assessment, monitoring and reporting of counterparty exposure on a regular basis. Glencore’s cash and cash
equivalents are placed overnight with a diverse group of highly credit rated financial institutions. Margin calls paid are similarly held
with credit rated financial institutions. Glencore determines these instruments to have low credit risk at the reporting date. Credit
risk with respect to receivables and advances is mitigated by the large number of customers comprising Glencore’s customer base,
their diversity across various industries and geographical areas, as well as Glencore’s policy to mitigate these risks through letters of
credit, netting, collateral and insurance arrangements where appropriate. Additionally, it is Glencore’s policy that transactions and
activities in trade related financial instruments be concluded under master netting agreements or long form confirmations to
enable offsetting of balances due to/from a common counterparty in the event of default by the counterparty. Glencore actively and
continuously monitors the credit quality of its counterparties through internal reviews and a credit scoring process, which includes,
where available, public credit ratings. Balances with counterparties not having a public investment grade or equivalent internal
rating are typically enhanced to investment grade through the extensive use of credit enhancement products, such as letters of
credit or insurance products. Glencore has a diverse customer base, with no customer representing more than 4.7% (2020: 5.1%) of its
trade receivables (on a gross basis taking into account credit enhancements) or accounting for more than 3.6% of its revenues over
the year ended 31 December 2021 (2020: 3.1%)(see notes 3 and 14).
The maximum exposure to credit risk (including performance risk – see below), without considering netting agreements or without
taking account of any collateral held or other credit enhancements, is equal to the carrying amount of Glencore’s financial assets
(see note 28) and physically-settled advances (see notes 12 and 14).
Management information used to monitor credit risk indicates that the prima facie risk profile % categories of financial assets which
are subject to review for impairment under IFRS 9, is as set out below. Total balance for those assets as at 31 December 2021 is
$10,765 million (2020: $6,828 million) (see notes 12, 14 and 15).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 217Glencore Annual Report 2021 217
Notes to the financial statements continued
27. Financial and capital risk management continued
in %
2021
2020
AAA to AA-
8
10
A+ to A-
59
47
BBB+ to BBB-
11
23
BB+ to BB-
3
2
B+ to B-
8
8
CCC+ and below
11
10
Movements in credit losses for accounts receivable and advances and loans are shown in notes 12 and 14.
Performance risk
Performance risk (part of the broader credit risk subject matter, discussed above) is inherent in contracts, with agreements in the
future, to physically purchase or sell commodities with fixed price attributes, and arises from the possibility that counterparties may
not be willing or able to meet their future contractual physical sale or purchase obligations to/from Glencore. Glencore undertakes
the assessment, monitoring and reporting of performance risk within its overall credit management process. Glencore’s market
breadth, diversified supplier and customer base as well as the standard pricing mechanism in the vast majority of Glencore’s
commodity portfolio which does not fix the primary commodity price beyond three months, ensure that performance risk is
adequately mitigated. The commodity industry has trended towards shorter term fixed price contract periods, in part to mitigate
against such potential performance risk, but also due to the continuous development of transparent and liquid spot commodity
markets, with their associated derivative products and indexes.
Liquidity risk
Liquidity risk is the risk that Glencore is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis,
to borrow funds in the market on an unsecured or secured basis at an acceptable price to fund actual or proposed commitments.
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and availability of adequate
committed funding facilities. Glencore has set itself an internal minimum liquidity target to maintain at all times, including via
available committed undrawn credit facilities, of $3 billion (2020: $3 billion), which has purposely been substantially exceeded in
recent years, accounting for the more volatile market backdrop. Glencore’s credit profile, diversified funding sources and committed
credit facilities, ensure that sufficient liquid funds are maintained to meet its liquidity requirements. As part of its liquidity
management, Glencore closely monitors and plans for its future capital expenditure, working capital needs and proposed
investments, as well as credit facility refinancing/extension requirements, well ahead of time (see notes 1, 12, 21, 22 and 25).
As at 31 December 2021, Glencore had available committed undrawn credit facilities and cash amounting to $10,296 million (2020:
$10,259 million), refer to Other reconciliations section. The maturity profile of Glencore’s financial liabilities based on the contractual
terms is as follows:
2021
US$ million
After 5 years
Due 3 - 5 years
Due 2 - 3 years
Due 1 - 2 years
Due 0 - 1 year
Total
Borrowings excluding lease liabilities, fair value
hedge
adjustments and other non-hedged
items
10,310
6,365
3,014
6,106
7,496
33,291
Expected future interest payments
3,219
861
547
716
830
6,173
Lease liabilities - undiscounted
730
257
209
345
596
2,137
Accounts payable
–
–
–
–
26,945
26,945
Other financial liabilities
195
131
21
32
5,850
6,229
Total
14,454
7,614
3,791
7,199
41,717
74,775
Current assets
57,776
57,776
2020
US$ million
After 5 years
Due 3 - 5 years
Due 2 - 3 years
Due 1 - 2 years
Due 0 - 1 year
Total
Borrowings excluding lease liabilities, fair value
hedge adjustments and other non
-hedged
items
8,473
6,306
3,536
9,215
7,814
35,344
Expected future interest payments
2,415
782
550
690
846
5,283
Lease liabilities - undiscounted
592
209
209
378
593
1,981
Accounts payable
–
–
–
–
22,377
22,377
Other financial liabilities
381
52
31
53
4,200
4,717
Total
11,861
7,349
4,326
10,336
35,830
69,702
Current assets
43,212
43,212
Glencore Annual Report 2021218
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021218
Notes to the financial statements continued
28. Financial instruments
Fair value of financial instruments
The following tables present the carrying values and fair values of Glencore’s financial instruments. Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (most advantageous) market at the
measurement date under current market conditions. Where available, market values have been used to determine fair values.
When market values are not available, fair values have been calculated by discounting expected cash flows at prevailing market
interest and exchange rates. The estimated fair values have been determined using market information and appropriate valuation
methodologies, but are not necessarily indicative of the amounts that Glencore could realise in the normal course of business.
The financial assets and liabilities are presented by class in the tables below at their carrying values, which generally approximate
the fair values with the exception of $33,023 million (2020: $35,958 million) of borrowings, the fair value of which at 31 December 2021
was $34,169 million (2020: $37,150 million) based on observable market prices applied only to the listed portion of the borrowing
portfolio (a Level 2 fair value measurement).
2021
Amortised
cost
FVTPL
1
FVTOCI
2
Total
US$ million
Assets
Other investments (see note 29)
–
–
1,620
1,620
Non-current other financial assets (see note 29)
–
458
–
458
Advances and loans (see note 12)
795
163
–
958
Accounts receivable (see note 14)
11,672
5,523
–
17,195
Other financial assets (see note 29)
–
4,636
–
4,636
Cash and cash equivalents (see note 15)
3,241
–
–
3,241
Total financial assets
15,708
10,780
1,620
28,108
Liabilities
Borrowings (see note 21)
34,641
–
–
34,641
Non-current other financial liabilities (see note 29)
87
623
–
710
Accounts payable (see note 25)
13,139
13,806
–
26,945
Other financial liabilities (see note 29)
–
6,077
–
6,077
Total financial liabilities
47,867
20,506
–
68,373
1 FVTPL – Fair value through profit and loss.
2 FVTOCI – Fair value through other comprehensive income.
2020
Amortised
cost
FVTPL
1
FVTOCI
2
Total
US$ million
Assets
Other investments (see note 29)
–
86
1,647
1,733
Non-current other financial assets (see note 29)
–
1,106
–
1,106
Advances and loans (see note 12)
994
404
–
1,398
Accounts receivable (see note 14)
7,696
4,598
–
12,294
Other financial assets (see note 29)
–
1,998
–
1,998
Cash and cash equivalents (see note 15)
1,498
–
–
1,498
Total financial assets
10,188
8,192
1,647
20,027
Liabilities
Borrowings (see note 21)
37,479
–
–
37,479
Non-current other financial liabilities (see note 29)
100
588
–
688
Accounts payable (see note 25)
11,113
11,264
–
22,377
Other financial liabilities (see note 29)
–
4,276
–
4,276
Total financial liabilities
48,692
16,128
–
64,820
1 FVTPL – Fair value through profit and loss.
2 FVTOCI – Fair value through other comprehensive income.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 219Glencore Annual Report 2021 219
Notes to the financial statements continued
28. Financial instruments continued
Offsetting of financial assets and liabilities
In accordance with IAS 32 the Group reports financial assets and liabilities on a net basis in the consolidated statement of financial
position only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or
to realise the asset and settle the liability simultaneously. The financial assets and liabilities subject to offsetting, enforceable master
netting and similar agreements as at 31 December 2021 and 2020 were as follows:
Amounts
not subject
to netting
agreements
Total as
presented
in the
consolidated
statement
of financial
position
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
2021
Gross
amount
Amounts
offset
Net
amount
Financial
instruments
Financial
collateral
Net
amount
US$ million
Derivative assets
1
19,327
(17,846)
1,481
(437)
(315)
729
3,613
5,094
Derivative liabilities
1
(22,166)
17,846
(4,320)
437
3,522
(361)
(2,467)
(6,787)
1 Presented within current and non-current other financial assets and other financial liabilities.
Amounts
not subject
to netting
agreements
Total as
presented
in the
consolidated
statement
of financial
position
Amounts eligible for set off
under netting agreements
Related amounts not set off
under netting agreements
2020
Gross
amount
Amounts
offset
Net
amount
Financial
instruments
Financial
collateral
Net
amount
US$ million
Derivative assets
1
11,575
(9,678)
1,897
(246)
(925)
726
1,207
3,104
Derivative liabilities
1
(12,941)
9,678
(3,263)
246
2,389
(628)
(1,701)
(4,964)
1 Presented within current and non-current other financial assets and other financial liabilities.
For the financial assets and liabilities subject to enforceable master netting or similar arrangements above, each agreement
between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities in the ordinary
course of business. Where practical reasons may prevent net settlement, financial assets and liabilities may be settled on a gross
basis, however, each party to the master netting or similar agreement will have the option to settle all such amounts on a net basis
in the event of default of the other party. Per the terms of each agreement, an event of default includes failure by a party to make
payment when due, failure by a party to perform any obligation required by the agreement (other than payment) if such failure is
not remedied within periods of 30 to 60 days after notice of such failure is given to the party or bankruptcy.
29. Fair value measurements
Fair values are primarily determined using quoted market prices or standard pricing models using observable market inputs where
available and are presented to reflect the expected gross future cash in/outflows. Glencore classifies the fair values of its financial
instruments into a three level hierarchy based on the degree of the source and observability of the inputs that are used to derive the
fair value of the financial asset or liability as follows:
Level 1
Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that Glencore can assess at the
measurem
ent date; or
Level 2
Inputs other than quoted inputs included in Level 1 that are observable for the assets or liabilities, either directly or
indirectly
; or
Level 3
Unobservable inputs for the assets or liabilities, requiring Glencore to make market-based assumptions.
Level 1 classifications primarily include futures with a tenor of less than one year and options that are exchange traded, whereas
Level 2 classifications primarily include futures with a tenor greater than one year, over the counter options, swaps and physical
forward transactions which derive their fair value primarily from exchange quotes and readily observable broker quotes. Level 3
classifications primarily include physical forward transactions which derive their fair value predominantly from models that use
broker quotes and applicable market-based estimates surrounding location, quality and credit differentials and financial liabilities
linked to the fair value of certain mining operations. In circumstances where Glencore cannot verify fair value with observable
market inputs (Level 3 fair values), it is possible that a different valuation model could produce a materially different estimate of fair
value.
Glencore Annual Report 2021220
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021220
Notes to the financial statements continued
29. Fair value measurements continued
It is Glencore’s policy that transactions and activities in trade related financial instruments be concluded under master netting
agreements or long form confirmations to enable balances due to/from a common counterparty to be offset in the event of default,
insolvency or bankruptcy by the counterparty.
The following tables show the fair values of the derivative financial instruments including trade related financial and physical
forward purchase and sale commitments by type of contract and non-current other financial assets and liabilities as at 31 December
2021 and 2020. Other assets and liabilities which are measured at fair value on a recurring basis are marketing inventories, other
investments, cash and cash equivalents. There are no non-recurring fair value measurements.
Financial assets
2021
US$ million
Level 1
Level 2
Level 3
Total
Financial assets
Accounts receivable (see note 14)
–
5,269
175
5,444
Deferred consideration (see note 12)
–
–
135
135
Other investments (see note 11)
1,536
84
–
1,620
Financial assets
1,536
5,353
310
7,199
Other financial assets
Commodity related contracts
Futures
180
118
–
298
Options
133
31
–
164
Swaps
256
254
40
550
Physical forwards
–
2,878
646
3,524
Financial contracts
Cross currency swaps
–
5
–
5
Foreign currency and interest rate contracts
–
95
–
95
Current other financial assets (see note 28)
569
3,381
686
4,636
Non-current other financial assets
Cross currency swaps
–
125
–
125
Foreign currency and interest rate contracts
–
272
–
272
Purchased call options over Glencore shares
1
–
61
–
61
Non-current other financial assets (see note 28)
–
458
–
458
Total
2,105
9,192
996
12,293
2020
US$ million
Level 1
Level 2
Level 3
Total
Financial assets
Accounts receivable (see note 14)
–
4,468
130
4,598
Deferred consideration (see note 12)
–
–
302
302
Other investments (see note 11)
1,691
42
–
1,733
Financial assets
1,691
4,510
432
6,633
Other financial assets
Commodity related contracts
Futures
107
75
–
182
Options
19
13
–
32
Swaps
142
249
–
391
Physical forwards
–
916
258
1,174
Financial contracts
Cross currency swaps
–
219
–
219
Current other financial assets (see note 28)
268
1,472
258
1,998
Non-current other financial assets
Cross currency swaps
–
529
–
529
Foreign currency and interest rate contracts
–
569
–
569
Purchased call options over Glencore shares
1
–
8
–
8
Non-current other financial assets (see note 28)
–
1,106
–
1,106
Total
1,959
7,088
690
9,737
1 Call options over the Company’s shares in relation to conversion rights of the $500 million non-dilutive convertible bond, due in 2025.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 221Glencore Annual Report 2021 221
Notes to the financial statements continued
29. Fair value measurements continued
Financial liabilities
2021
US$ million
Level 1
Level 2
Level 3
Total
Financial liabilities
Accounts payable (see note 25)
–
13,806
–
13,806
Current financial liabilities
–
13,806
–
13,806
Other financial liabilities
Commodity related contracts
Futures
1,993
344
–
2,337
Options
52
92
–
144
Swaps
999
175
–
1,174
Physical forwards
–
1,872
235
2,107
Financial contracts
Cross currency swaps
–
227
–
227
Foreign currency and interest rate contracts
–
88
–
88
Current other financial liabilities (see note 28)
3,044
2,798
235
6,077
Non-current other financial liabilities
Cross currency swaps
–
331
–
331
Foreign currency and interest rate contracts
–
12
–
12
Non-discretionary dividend obligation
1
–
–
148
148
Option over non-controlling interest in Ale
–
–
22
22
Deferred consideration
–
–
49
49
Embedded call options over Glencore shares
2
–
61
–
61
Non-current other financial liabilities (see note 28)
–
404
219
623
Total
3,044
17,008
454
20,506
2020
US$ million
Level 1
Level 2
Level 3
Total
Financial liabilities
Accounts payable (see note 25)
–
11,264
–
11,264
Current financial liabilities
–
11,264
–
11,264
Other financial liabilities
Commodity related contracts
Futures
2,652
264
–
2,916
Options
29
14
–
43
Swaps
228
224
–
452
Physical forwards
–
537
252
789
Financial contracts
Cross currency swaps
–
76
–
76
Current other financial liabilities (see note 28)
2,909
1,115
252
4,276
Non-current other financial liabilities
Cross currency swaps
–
171
–
171
Foreign currency and interest rate contracts
–
181
–
181
Non-discretionary dividend obligation
1
–
–
150
150
Option over non-controlling interest in Ale
–
–
22
22
Deferred consideration
–
–
56
56
Embedded call options over Glencore shares
2
–
8
–
8
Non-current other financial liabilities (see note 28)
–
360
228
588
Total
2,909
12,739
480
16,128
1 A ZAR denominated derivative liability payable to ARM Coal, a partner in one of the Group’s principal coal joint operations based in South Africa. The liability arises from ARM Coal’s
rights as an investor to a share of agreed free cash flows from certain coal operations in South Africa and is valued based on those cash flows using a risk-adjusted discount rate. The
derivative liability is settled over the life of those operations (modelled mine life of 11 years as at 31 December 2021) and has no fixed repayment date and is not cancellable within 12
months.
2 Embedded call option bifurcated from the 2025 convertible bond.
Glencore Annual Report 2021222
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021222
Notes to the financial statements continued
29. Fair value measurements continued
The following table shows the net changes in fair value of Level 3 other financial assets and other financial liabilities:
US$ million
Accounts
Receivable
Physical
forwards
Swaps
Other
Total
Level 3
1 January 2021
130
6
–
74
210
Total gain recognised in revenue
–
117
337
–
454
Total gain/(loss) recognised in cost of goods sold
–
389
(297)
–
92
Non-discretionary dividend obligation
–
–
–
2
2
Fair value movement of deferred consideration
186
–
–
(160)
26
Realised
(141)
(101)
–
–
(242)
31 December 2021
175
411
40
(84)
542
1 January 2020
37
109
–
(211)
(65)
Total gain recognised in revenue
–
1
–
–
1
Total loss recognised in cost of goods sold
–
(63)
–
–
(63)
Non-discretionary dividend obligation
–
–
–
11
11
Option over non-controlling interest
–
–
–
14
14
Fair value movement of deferred consideration
133
–
–
260
393
Realised
(40)
(41)
–
–
(81)
31 December 2020
130
6
–
74
210
During the year, no amounts were transferred between Level 1 and Level 2 of the fair value hierarchy and no amounts were
transferred into or out of Level 3 of the fair value hierarchy for either other financial assets or other financial liabilities.
Fair value of financial assets / financial liabilities
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
Futures, options and swaps classified as Level 1 financial assets and liabilities are measured using quoted prices in an active market.
Accounts receivable and payables, and certain futures, options, swaps, physical forwards, cross currency swaps, foreign currency and
interest rate contracts classified as Level 2 financial assets and liabilities are measured using discounted cash flow models. Key
inputs include observable quoted prices sourced from exchanges or traded reference indices in active markets for identical assets or
liabilities. Prices are adjusted by a discount rate which captures the time value of money and counterparty credit considerations, as
required.
Call options over Glencore shares classified as Level 2 financial assets and liabilities are measured using an option pricing model. Key
inputs include the current price of Glencore shares, strike price, maturity date of the underlying convertible debt security, risk-free
rate and volatility.
The following table provides information on the valuation techniques and inputs used to determine the fair value of Level 3 financial
assets and financial liabilities.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 223Glencore Annual Report 2021 223
Notes to the financial statements continued
29. Fair value measurements continued
US$ million
2021
2020
Swaps – Level 3
Assets
40
–
Liabilities
–
–
Valuation techniques and key inputs:
Discounted cash flow model
Significant and other unobservable inputs:
- Long term commodity prices
The significant unobservable inputs represent the long-term commodity prices to which the
valuation remains sensitive to. A 10% increase/decrease in commodity
price assumptions
would result in a $4 million adjustment to the current carrying value.
Physical Forwards – Level 3
Assets
646
258
Liabilities
(235)
(252)
Valuation techniques and key inputs:
Discounted cash flow model
Significant and other unobservable inputs:
Valuation of the Group’s commodity physical forward contracts categorised within
this level is based on observable market prices that are adjusted by unobservable differentials,
as required, including:
– Quality;
– Geographic location;
– Local supply & demand;
– Customer requirements; and
– Counterparty credit considerations.
These unobservable inputs generally represent 1%–30% of the overall value of the instruments.
The valuation prices are applied
consistently to value physical forward sale and purchase
contracts, and changing a particular input to reasonably possible alternative assumptions does
not result in a material change in the underlying value of the portfolio.
Deferred consideration (Mototolo) – Level 3
Assets
282
391
Liabilities
–
–
Valuation techniques and key inputs:
Discounted cash flow model
Significant and other unobservable inputs:
– Long-term forecast commodity prices;
– Discount rates using weighted average cost
of capital methodology;
The significant unobservable inputs represent the long-term forecast commodity prices to
which the valuation remains sensitive to. A 10% increase/decrease in commodity price
assumptions would result in a $27 million adjustment to the current carrying value.
Deferred consideration (Orion) – Level 3
Assets
28
41
Liabilities
–
–
Valuation techniques and key inputs:
Discounted cash flow model
Significant and other unobservable inputs:
– Estimated production plan;
– Long-term forecast commodity prices;
– Discount rates using weighted average cost
of capital methodology;
The significant unobservable inputs represent the long-term forecast commodity prices to
which the valuation remains sensitive to. A 10%
increase/decrease in gold price would result in
no adjustment to the current carrying value of the asset, while a 10% decrease in gold price
would result in a $9 million negative adjustment
Glencore Annual Report 2021224
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021224
Notes to the financial statements continued
29. Fair value measurements continued
US$ million
2021
2020
Non-discretionary dividend obligation – Level 3
Assets
–
–
Liabilities
(148)
(150)
Valuation
techniques:
Discounted cash flow model
Significant and
other unobservable
inputs:
– Long-term forecast commodity prices;
– Discount rates using weighted average cost of capital methodology;
– Production models;
– Operating costs; and
– Capital expenditures.
The resultant liability is essentially a discounted cash flow
valuation of the underlying mining operation.
Increases/decreases in forecast commodity prices will result in an increase/decrease to the value of the liability though
this will be partially offset by associated increases/decreases in the assumed production levels, operating costs and capital
expenditures, which are inherently linked to forecast commodity prices. The significant unobservable inputs represent
the long
-term forecast commodity prices to which the valuation remains sensitive to. A 10% increase/decrease in
commodity price assumptions would result in an $94 million adjustment to the current carrying value.
Option over non-controlling interest in Ale – Level 3
Assets
–
–
Liabilities
(22)
(22)
Valuation
techniques and key
inputs:
Discounted cash flow model
Significant
unobservable
inputs:
The resultant liability is the value of the remaining minority stake in the subsidiary, measured as the higher value of the
acquisition date valuation of the shares, and a discounted future earnings based v
aluation. The valuation is additionally
sensitive to movement in the spot exchange rates between the Brazilian Real and US Dollar.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 225Glencore Annual Report 2021 225
Notes to the financial statements continued
30. Auditor’s remuneration
US$ million
2021
2020
Remuneration in respect of the audit of Glencore's consolidated financial statements
3
3
Other audit fees, primarily in respect of audits of accounts of subsidiaries
19
19
Audit-related assurance services
1
3
2
Total audit and related assurance fees
25
24
Transaction services
–
1
Taxation compliance services
–
1
Other taxation advisory services
–
1
Other assurance services
2
1
1
Total non-audit fees
1
4
Total professional fees
26
28
1 Audit-related assurance services primarily related to interim reviews of the Group’s half-year accounts as well as bond issuances and comfort letters.
2 Other assurance services primarily comprises assurance in respect of certain aspects of the Group’s sustainability reporting.
31. Future commitments
Capital expenditure for the acquisition of property, plant and equipment is generally funded through the cash flow generated by
the respective industrial entities. As at 31 December 2021, $1,111 million (2020: $859 million), of which 86% (2020: 87%) relates to
expenditure to be incurred over the next year, was contractually committed for the acquisition of property, plant and equipment.
Certain of Glencore’s exploration tenements and licences require it to spend a minimum amount per year on development
activities, a significant portion of which would have been incurred in the ordinary course of operations. As at 31 December 2021,
$118 million (2020: $128 million) of such development expenditures are to be incurred, of which 27% (2020: 27%) are for commitments
to be settled over the next year.
As part of Glencore’s ordinary sourcing and procurement of physical commodities and other ordinary marketing obligations, the
selling party may request that a financial institution act as either a) the paying party upon the delivery of product and qualifying
documents through the issuance of a letter of credit or b) the guarantor by way of issuing a bank guarantee accepting responsibility
for Glencore’s contractual obligations. Similarly, Glencore is required to post rehabilitation and pension guarantees in respect of
some of these future, primarily industrial, long-term obligations. As at 31 December 2021, $8,965 million (2020: $6,334 million) of
procurement and $4,353 million (2020: $4,138 million) of rehabilitation and pension commitments have been issued on behalf of
Glencore, which will generally be settled simultaneously with the payment for such commodity and rehabilitation and pension
obligations.
Astron related commitments
As part of the regulatory approval process relating to the acquisition of a 75% shareholding in Astron Energy, Glencore and Astron
Energy entered into certain commitments (subject to variation for good cause) with the South Africa Competition Tribunal and the
South African Economic Development Department. These commitments include investment expenditure of up to ZAR 6.5 billion
($410 million) over the period to 2024 so as to debottleneck and improve the performance of the Cape Town oil refinery, contribute
to the rebranding of certain retail sites and establish a development fund to support small and black-owned businesses in Astron
Energy’s value chain.
Cerrejon acquisition commitments
In June 2021, Glencore entered into agreements to acquire the remaining 66.67% interest in the Cerrejón joint venture that it does
not own. The transaction closed in January 2022, refer to note 35. The purchase price consideration of $588 million was based on an
economic effective date of 31 December 2020 then being subject to purchase price adjustments calculated at closing. After taking
into account the dividends generated during 2021, together with certain other adjustments, the completion cash payment by
Glencore amounted to $101 million.
Glencore Annual Report 2021226
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021226
Notes to the financial statements continued
32. Contingent liabilities
There were no corporate guarantees in favour of third parties as at 31 December 2021 (2020: None), except those disclosed in note 11.
The Group is subject to various legal and regulatory proceedings as detailed below. These contingent liabilities are reviewed on a
regular basis and where appropriate an estimate is made of the potential financial impact on the Group. As at 31 December 2021 and
2020, it was not feasible to make such an assessment.
Legal and regulatory proceedings
Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, a provision is recognised when Glencore has a present
obligation (legal or constructive), as a result of a past event, and it is probable that an outflow of resources embodying economic
benefits, that can be reliably estimated, will be required to settle the liability. A contingent liability is a possible obligation that arises
from a past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of Glencore. If it is not clear whether there is a present obligation, a past event is deemed to give
rise to a present obligation if, taking account of all available evidence, it is more likely than not that a present obligation exists at the
end of the reporting period. When a present obligation arises but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient
reliability, a contingent liability is disclosed.
Investigations by regulatory and enforcement authorities
As described in note 23 the Group is subject to various legal and regulatory proceedings and as at December 2021 a provision for
certain of these matters of $1,500 million has been recognised.
At 31 December 2021, taking account of all available evidence, the Committee concluded that, with respect only to the OAG and
Dutch investigations, it is not probable that a present obligation existed at the end of the reporting period. In addition, the timing
and amount, if any, of the possible financial effects (such as fines, penalties or damages, which could be material) or other
consequences, including external costs, from the OAG and Dutch investigations and any change in their scope are not currently
possible to predict or estimate.
In addition to any pending investigations as described, other authorities may commence investigations or bring proceedings
against the Group in connection with the matters under investigation and the Group may be the subject of legal claims brought by
other parties in connection with these matters, including class action suits. Taking into account all available evidence, the
Committee does not consider it probable that a present obligation existed in relation to these potential additional investigations or
claims as at the balance sheet date, and the amount of any financial effects, which could be material, is not currently possible to
predict or estimate.
Other legal proceedings
Other claims and unresolved disputes are pending against Glencore. However, based on the Group’s current assessment of these
matters any future individually material financial obligations are considered to be remote.
Environmental contingencies
Glencore’s operations are subject to various environmental laws and regulations. Glencore is not aware of any material non-
compliance with those laws and regulations. Glencore accrues for environmental contingencies when such contingencies are
probable and reasonably estimable. Such accruals are adjusted as new information develops or circumstances change. Recoveries
of environmental remediation costs from insurance companies and other parties are recorded as assets when the recoveries are
virtually certain. At this time, Glencore is unaware of any material environmental incidents at its locations. Any potential liability
arising from environmental incidents in the ordinary course of the Group’s business would not usually be expected to have a
material adverse effect on its consolidated income, financial position or cash flows.
33. Related party transactions
In the normal course of business, Glencore enters into various arm’s length transactions with related parties, including fixed price
commitments to sell and to purchase commodities, forward sale and purchase contracts, agency agreements and management
service agreements. Outstanding balances at period end are unsecured and settlement occurs in cash (see notes 12, 14 and 25).
There have been no guarantees provided or received for any related party receivables or payables.
All transactions between Glencore and its subsidiaries are eliminated on consolidation along with any unrealised profits and losses
between its subsidiaries, associates and joint ventures. In 2021, sales and purchases with associates and joint ventures amounted to
$3,828 million (2020: $2,710 million) and $6,469 million (2020: $5,033 million) respectively.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 227Glencore Annual Report 2021 227
Notes to the financial statements continued
33. Related party transactions continued
Remuneration of key management personnel
Glencore’s key management personnel are the members of the Board of Directors, CEO, CFO, General Counsel and Head of the
Industrial activities segment. The remuneration of Directors and other members of key management personnel recognised in the
consolidated statement of income including salaries and other current employee benefits amounted to $27 million (2020:
$19 million). Amounts expensed relating to long-term benefits or share-based payments to key management personnel amounted
to $1 million (2020: $Nil). Further details on remuneration of Directors are set out in the Directors’ remuneration report on page 101.
34. Principal subsidiaries with material non-controlling interests
Non-controlling interest is comprised of the following:
US$ million
2021
2020
Volcan
(106)
(136)
Kazzinc
1,368
1,362
Koniambo
(5,180)
(4,098)
Kamoto Copper Company (KCC)
474
232
Mopani
1
–
(1,009)
Other
2
430
414
Total
(3,014)
(3,235)
1 See note 26.
2 Other comprises various subsidiaries in which no individual balance attributable to non-controlling interests is material.
Glencore Annual Report 2021228
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021228
Notes to the financial statements continued
34. Principal subsidiaries with material non-controlling interests continued
Summarised financial information in respect of Glencore’s subsidiaries that have material non-controlling interest as at
31 December 2021 and 2020, reflecting 100% of the underlying subsidiary’s relevant figures, is set out below.
US$ million
Mopani
1
Kazzinc
Koniambo
KCC
Volcan
31 December 2021
Non-current assets
–
4,210
434
5,266
1,796
Current assets
–
1,515
461
1,135
400
Total assets
–
5,725
895
6,401
2,196
Non-current liabilities
–
721
13,822
9,313
980
Current liabilities
–
480
104
804
789
Total liabilities
–
1,201
13,926
10,117
1,769
Net assets
–
4,524
(13,031)
(3,716)
427
Equity attributable to owners of the Company
–
3,156
(7,851)
(4,190)
533
Non-controlling interest
–
1,368
(5,180)
474
(106)
Non-controlling interest %
0.0%
30.3%
51.0%
25.0%
76.7%
2021
Revenue
125
3,502
242
3,899
981
Expenses
(1,155)
(2,940)
(2,364)
(2,820)
(941)
Net (loss)/profit for the year
(1,030)
562
(2,122)
1,079
40
(Loss)/profit attributable to owners of the Company
(1,027)
392
(1,040)
837
9
(Loss)/profit attributable to non-controlling interests
(3)
170
(1,082)
242
31
Total comprehensive (loss)/income for the year
(1,030)
562
(2,122)
1,079
40
Dividends paid to non-controlling interests
–
(150)
–
–
–
Net cash inflow/(outflow) from operating activities
56
837
(165)
1,708
318
Net cash outflow from investing activities
(4)
(318)
(13)
(301)
(174)
Net cash (outflow)/inflow from financing activities
(26)
(394)
193
(1,294)
(28)
Total net cash inflow
26
125
15
113
116
1 See note 26.
US$ million
Mopani
Kazzinc
Koniambo
KCC
Volcan
31 December 2020
Non-current assets
–
4,407
1,594
5,194
1,793
Current assets
1,083
1,167
307
1,668
293
Total assets
1,083
5,574
1,901
6,862
2,086
Non-current liabilities
4,601
737
12,719
9,983
1,350
Current liabilities
197
333
91
1,566
348
Total liabilities
4,798
1,070
12,810
11,549
1,698
Net assets
(3,715)
4,504
(10,909)
(4,687)
388
Equity attributable to owners of the Company
(2,706)
3,142
(6,811)
(4,919)
524
Non-controlling interest
(1,009)
1,362
(4,098)
232
(136)
Non-controlling interest %
26.9%
30.3%
51.0%
25.0%
76.7%
2020
Revenue
731
3,032
239
2,431
547
Expenses
(1,649)
(2,418)
(1,201)
(2,080)
(2,307)
Net (loss)/profit for the year
(918)
614
(962)
351
(1,760)
(Loss)/profit attributable to owners of the Company
(616)
428
(471)
256
(413)
(Loss)/profit attributable to non-controlling interests
(302)
186
(491)
95
(1,347)
Total comprehensive (loss)/income for the year
(918)
614
(962)
351
(1,760)
Dividends paid to non-controlling interests
–
(120)
–
–
–
Net cash (outflow)/inflow from operating activities
(19)
1,010
(194)
144
129
Net cash outflow from investing activities
(84)
(388)
(36)
(472)
(117)
Net cash inflow/(outflow) from financing activities
103
(597)
233
146
67
Total net cash inflow/(outflow)
–
25
3
(182)
79
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 229Glencore Annual Report 2021 229
Notes to the financial statements continued
35. Subsequent events
• On 11 January 2022, the Group completed the acquisition of the remaining 66.67% interest in Cerrejon that it did not own. The
purchase price consideration of $588 million was based on an economic effective date of 31 December 2020. After taking into
account the dividends generated during 2021, together with certain other adjustments, the completion cash payment made by
Glencore amounted to $101 million.
The acquisition increases Glencore’s total ownership to 100% providing it with the ability to exercise control. As a result, effective
the acquisition date, Glencore will fully consolidate Cerrejon which as at 31 December 2021 reported assets and liabilities of:
US$ million
Cerrejón
Non-current assets
2,033
Current assets
1,030
Non-current liabilities
(690)
Current liabilities
(509)
The above assets and liabilities include the following:
Cash and cash equivalents
511
Current financial liabilities
1
(27)
Non-current financial liabilities
1
(14)
Net assets 31 December 2021
1,864
1 Financial liabilities exclude trade, other payables and provisions.
Due to the timing of the transaction, management is in the preliminary stages of determining fair values of the assets and
liabilities acquired and the associated accounting for the acquisition. Certain disclosures in terms of IFRS 3 relating to the business
combination such as the estimated fair value of net assets acquired have not been presented. Notwithstanding these
circumstances, should the above book value of net assets approximate fair value and, adjusting for the consideration paid and the
31 December 2021 carrying value of our 33.33% interest (see note 11), a gain on acquisition of some $1.2 billion could result.
• In February 2022, the Russian government commenced a war against the people of Ukraine, resulting in a humanitarian crisis and
significant disruption to financial and commodity markets. A number of countries, including, the United States of America,
European Union, Switzerland and United Kingdom imposed a series of sanctions against the Russian government, various
companies, and certain individuals. Glencore complies with all sanctions applicable to our business activities. As noted in our
announcement on 1 March 2022, we have no operational footprint in Russia and our trading exposure is not material. We are
reviewing all our business activities in the country including our equity stakes in En+ and Rosneft – refer note 11. As at close of
trading on 28 February 2022, the fair value of these equity investments was $645 million and $183 million respectively. On 3 March
2022, both companies were suspended from trading on the London Stock Exchange.
Glencore Annual Report 2021230
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021230
Notes to the financial statements continued
36. Principal operating, finance and industrial subsidiaries and investments
Country of
incorporation
% interest
2021
% interest
2020
Main activity
Principal subsidiaries
Industrial activities
Cobar Management Pty Limited
Australia
100.0
100.0
Copper production
Compania Minera Lomas Bayas
Chile
100.0
100.0
Copper production
Complejo Metalurgico Altonorte S.A.
Chile
100.0
100.0
Copper production
Compania Minera Antapaccay S.A.
Peru
100.0
100.0
Copper production
Pasar Group
Philippines
78.2
78.2
Copper production
Glencore Recycling Inc
USA
100.0
100.0
Copper production
Mopani Copper Mines plc
Zambia
–
73.1
Copper production
Polymet Mining Corp.
Canada
71.4
71.6
Copper production
Kamoto Copper Company SA
1
DRC
75.0
75.0
Copper/Cobalt production
Mutanda Group
DRC
100.0
100.0
Copper/Cobalt production
Mount Isa Mines Limited
Australia
100.0
100.0
Copper/Zinc/Lead production
Kazzinc Ltd
Kazakhstan
69.7
69.7
Copper/Zinc/Lead production
Zhairemsky GOK JSC
Kazakhstan
69.7
69.7
Copper/Zinc/Lead production
Altyntau Kokshetau JSC
Kazakhstan
69.7
69.7
Gold production
African Carbon Producers (Pty) Ltd
South Africa
100.0
100.0
Char production
African Fine Carbon (Pty) Ltd
South Africa
100.0
100.0
Char production
Char Technology (Pty) Ltd
South Africa
100.0
100.0
Char production
Sphere Minerals Limited
Australia
100.0
100.0
Iron Ore exploration
Britannia Refined Metals Limited
UK
100.0
100.0
Lead production
Access World Group
Switzerland
100.0
100.0
Logistics services
Murrin Murrin Operations Pty Limited
Australia
100.0
100.0
Nickel production
Koniambo Nickel S.A.S.
2
New Caledonia
49.0
49.0
Nickel production
Glencore Nikkelverk AS
Norway
100.0
100.0
Nickel production
McArthur River Mining Pty Ltd
Australia
100.0
100.0
Zinc production
Nordenhamer Zinkhütte GmbH
Germany
100.0
100.0
Zinc production
Asturiana de Zinc S.A.U
Spain
100.0
100.0
Zinc production
Volcan Companja Minera S.A.A.
3
Peru
23.3
23.3
Zinc production
AR Zinc Group
Argentina
–
100.0
Zinc/Lead production
Portovesme S.r.L.
Italy
100.0
100.0
Zinc/Lead production
Empresa Minera Los Quenuales S.A.
Peru
97.6
97.6
Zinc/Lead production
Sinchi Wayra Group
Bolivia
100.0
100.0
Zinc/Tin production
1 Refer to note 34.
2 The Group has control of Koniambo Nickel S.A.S. as a result of the ability to direct the key activities of the operation and to appoint key management personnel provided by the terms
of the financing arrangements underlying the Koniambo project.
3 The Group has control of Volcan Compania Minera S.A.A. as a result of the ability to control the entity through the voting of its 63.0% of the voting shares (Class A); the economic interest
is diluted by the outstanding non-voting shares (Class B).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 231Glencore Annual Report 2021 231
Notes to the financial statements continued
36. Principal operating, finance and industrial subsidiaries and investments continued
Country of
incorporation
% interest
2021
% interest
2020
Main activity
Industrial activities
Oakbridge Pty Limited
Australia
98.2
83.0
Coal production
Rolleston Coal Holdings Pty Limited
Australia
100.0
100.0
Coal production
Mangoola Coal Operations Pty Limited
Australia
100.0
100.0
Coal production
Mt Owen Pty Limited
Australia
100.0
100.0
Coal production
NC Coal Company Pty Limited
Australia
100.0
100.0
Coal production
Ravensworth Operations Pty Ltd
Australia
100.0
100.0
Coal production
Ulan Coal Mines Ltd
Australia
100.0
100.0
Coal production
Prodeco group
Colombia
100.0
100.0
Coal production
Izimbiwa Coal (Pty) Ltd
4
South Africa
50.0
49.9
Coal production
Umcebo Mining (Pty) Ltd
5
South Africa
48.7
48.7
Coal production
Tavistock Collieries (Pty) Ltd
South Africa
100.0
100.0
Coal production
Glencore Exploration Cameroon Ltd
Bermuda
100.0
100.0
Oil production
Glencore Exploration (EG) Ltd
Bermuda
100.0
100.0
Oil production
Petrochad (Mangara) Limited
Bermuda
100.0
100.0
Oil exploration/production
Astron Energy (Pty) Ltd
South Africa
72.0
75.0
Oil refining / distribution
Astron Energy Botswana (Pty) Ltd
Botswana
100.0
100.0
Oil distribution
Marketing activities and other operating and finance
Xstrata Limited
UK
100.0
100.0
Holding
Glencore Australia Investment Holdings Pty Ltd
Australia
100.0
100.0
Holding
Glencore Operations Australia Pty Limited
Australia
100.0
100.0
Holding
Glencore Queensland Limited
Australia
100.0
100.0
Holding
Glencore Investment Pty Ltd
Australia
100.0
100.0
Holding
Glencore Australia Holdings Pty Ltd
Australia
100.0
100.0
Finance
Glencore Finance (Bermuda) Ltd
Bermuda
100.0
100.0
Finance
Alesat Combustiveis S.A.
Brazil
88.0
88.0
Oil distribution
Topley Corporation
B.V.I.
100.0
100.0
Ship owner
Glencore Finance (Europe) Limited
Jersey
100.0
100.0
Finance
Glencore Capital Finance DAC
Ireland
100.0
100.0
Finance
Finges Investment B.V.
Netherlands
100.0
100.0
Finance
Glencore (Schweiz) AG
Switzerland
100.0
100.0
Finance
Glencore Group Funding Limited
UAE
100.0
100.0
Finance
Glencore Funding LLC
USA
100.0
100.0
Finance
Glencore Australia Oil Pty Limited
Australia
100.0
100.0
Operating
Glencore Canada Corporation
Canada
100.0
100.0
Operating
Glencore Singapore Pte Ltd
Singapore
100.0
100.0
Operating
ST Shipping & Transport Pte Ltd
Singapore
100.0
100.0
Operating
Glencore AG
Switzerland
100.0
100.0
Operating
Glencore International AG
Switzerland
100.0
100.0
Operating
Glencore Commodities Ltd
UK
100.0
100.0
Operating
Glencore Energy UK Ltd
UK
100.0
100.0
Operating
Glencore UK Ltd
UK
100.0
100.0
Operating
4 Glencore has the ability to exercise control over Izimbiwa through the ability to direct the key activities of the operations and to appoint key management personnel provided by the
terms of the shareholder’s agreement.
5 Although Glencore holds less than 50% of the voting rights, it has the ability to exercise control over Umcebo as a result of shareholder agreements which provide Glencore the ability
to control the Board of Directors.
Glencore Annual Report 2021232
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021232
Notes to the financial statements continued
36. Principal operating, finance and industrial subsidiaries and investments contin ued
Country of
incorporation
% interest
2021
% interest
2020 Main activity
Principal joint ventures
6
Viterra Group
Jersey
49.9
49.9
Agriculture business
Clermont Coal Joint Venture
Australia
37.1
37.1
Coal production
BaseCore Metals LP
Canada
50.0
50.0
Copper production
Compania Minera Dona Ines de Collahuasi
Chile
44.0
44.0
Copper production
El Aouj Joint Venture
Mauritania
50.0
50.0
Iron Ore production
Principal joint operation and other unincorporated
arrangement
7
Bulga Joint Venture
Australia
85.9
72.6
Coal production
Cumnock Joint Venture
Australia
90.0
90.0
Coal production
Hail Creek Joint Venture
Australia
84.7
84.7
Coal production
Hunter Valley Operations Joint Venture
Australia
49.0
49.0
Coal production
Liddell Joint Venture
Australia
67.5
67.5
Coal production
Oaky Creek Coal Joint Venture
Australia
55.0
55.0
Coal production
United Wambo Joint Venture
Australia
47.5
47.5
Coal production
ARM Coal (Pty) Ltd
South Africa
49.0
49.0
Coal production
Goedgevonden Joint Venture
South Africa
74.0
74.0
Coal production
Ernest Henry Mining Pty Ltd
Australia
70.0
70.0
Copper production
Glencore Merafe Pooling and Sharing Joint Venture
South Africa
79.5
79.5
Ferroalloys production
Rhovan Pooling and Sharing Joint Venture
South Africa
74.0
74.0
Vanadium production
6 The principal joint arrangements are accounted for as joint ventures as the shareholder agreements do not provide the Group the ability to solely control the entities.
7 Classified as joint operations under IFRS 11, as these joint arrangements convey a direct right to a share of the underlying operations’ assets, liabilities, revenues and expenses. The Hail
Creek interest is an ‘other unincorporated arrangement’ accounted for similar to a joint operation.
Country of
incorporation
% interest
2021
% interest
2020
Main activity
Principal associates
Carbones del Cerrejon LLC
Colombia
33.3
33.3
Coal production
Port Kembla Coal Terminal Limited
Australia
16.4
13.9
Coal terminal
Newcastle Coal Shippers Pty Ltd
Australia
50.2
35.7
Coal terminal
Wiggins Island Coal Export Terminal
Australia
25.0
25.0
Coal terminal
Richards Bay Coal Terminal Company Limited
South Africa
19.3
19.3
Coal terminal
Century Aluminum Company
8
USA
46.4
47.0
Aluminium production
PT CITA Mineral Investindo Tbk
Indonesia
31.7
30.2
Alumina production
HG Storage International Limited
Jersey
49.0
49.0
Oil storage
Noranda Income Fund
Canada
25.0
25.0
Zinc production
Trevali Mining Corporation
Canada
26.3
26.3
Zinc production
Compania Minera Antamina S.A.
Peru
33.8
33.8
Zinc/Copper production
Recylex S.A.
France
29.8
29.8
Zinc/Lead production
Minera Agua Rica Alumbrera Limited
Argentina
25.0
25.0
Copper production
8 Represents the Group’s economic interest in Century, comprising 42.9% (2020: 42.9%) voting interest and 3.4% non-voting interest (2020: 4%). Century is publicly traded on NASDAQ
under the symbol CENX.
Country of
incorporation
% interest
2021
% interest
2020
Main activity
Other investments
EN+ GROUP IPJSC
Russia
10.6
10.6
Aluminium production
PAO NK RussNeft
9
Russia
25.0
25.0
Oil production
9 In December 2021, Glencore agreed to the sale of its interest in PAO NK Russneft. Completion of the sale is conditional on receipt of certain regulatory approvals and is expected to
occur in H1 2022.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 233Glencore Annual Report 2021 233
Alternative performance measures
Alternative performance measures are denoted by the symbol ◊
When assessing and discussing the Group’s reported financial performance, financial position and cash flows, Glencore makes
reference to Alternative performance measures (APMs), which are not defined or specified under the requirements of IFRS, but are
derived from the financial statements prepared in accordance with IFRS. The APMs are consistent with how business performance
is measured and reported within the internal management reporting to the Board and management and assist in providing
meaningful analysis of the Group’s results both internally and externally in discussions with the financial analyst and investment
community.
The Group uses APMs to aid the comparability of information between reporting periods and segments and to aid the
understanding of the activity taking place across the Group by adjusting for items that are of an infrequent nature and by
aggregating or disaggregating (notably in the case of relevant material associates and joint ventures accounted for on an equity
basis) certain IFRS measures. APMs are also used to approximate the underlying operating cash flow generation of the operations
(Adjusted EBITDA).
Investments in the extractive industry are typically significant and the initial spend generally occurs over several years, “upfront”,
prior to the operations generating cash. As a result, the investments are sometimes made with partners and an assessment to
approximate the operating cash flow generation/pay-back of the investment (Adjusted EBITDA) is required. Against this backdrop,
the key APMs used by Glencore are Adjusted EBITDA, Net funding/Net debt and the disaggregation of the equivalent key APMs of
our relevant material associates and joint ventures (“Proportionate adjustment”) to enable a consistent evaluation of the financial
performance and returns attributable to the Group.
Adjusted EBITDA is a useful approximation of the operating cash flow generation by eliminating depreciation and amortisation
adjustments. Adjusted EBITDA is not a direct measure of our liquidity, which is shown by our cash flow statement and needs to be
considered in the context of our financial commitments.
Proportionate adjustments are useful to enable a consistent evaluation of the financial performance and returns available to the
Group, irrespective of the differing accounting treatments required to account for our minority/joint ownership interests of our
relevant material investments.
Net funding is an aggregation of IFRS measures (Borrowings less cash and cash equivalents) and Net debt is Net funding less
Readily marketable inventories and provides a measure of our financial leverage and, through Net debt to Adjusted EBITDA
relationships, provides an indication of relative financial strength and flexibility.
APMs used by Glencore may not be comparable with similarly titled measures and disclosures by other companies. APMs have
limitations as an analytical tool, and a user of the financial statements should not consider these measures in isolation from, or as a
substitute for, analysis of the Group’s results of operations; and they may not be indicative of the Group’s historical operating results,
nor are they meant to be a projection or forecast of its future results.
Listed below are the definitions and reconciliations to the underlying IFRS measures of the various APMs used by the Group.
Proportionate adjustment
For internal reporting and analysis, management evaluates the performance of Antamina copper/zinc mine (34% owned), Cerrejón
coal mine (33% owned) and Collahuasi copper mine (44% owned) under the proportionate consolidation method reflecting
Glencore’s proportionate share of the revenues, expenses, assets and liabilities of these investments.
Although Glencore has a voting interest in Volcan of 63%, its total economic interest is only 23.3%. For internal reporting and analysis,
management evaluates the performance of Volcan under the equity method, reflecting the Group’s relatively low 23.3% economic
ownership in this fully ring-fenced listed entity, with its stand-alone, independent and separate capital structure. The impact is that
we reflect 23.3% of Volcan’s net income in the Group’s Adjusted EBIT/EBITDA and its consolidated results are excluded from all other
APM’s, including production data.
The Viterra joint venture is a stand-alone group with a fully independent capital structure, governance and credit profile, supporting
a global business, across many geographies, products and activities. Glencore’s management evaluates this investment’s financial
performance on a net return basis, as opposed to an Adjusted EBITDA basis and thus, the financial results of Viterra are presented
on a basis consistent with its underlying IFRS treatment (equity accounting).
See reconciliation of revenue and relevant material associates’ and joint ventures’ Adjusted EBIT to “Share of net income from
associates and joint ventures” below.
Glencore Annual Report 2021234
Strategic Report | Corporate Governance
Glencore Annual Report 2021234
| Financial Statements | Additional Information
Alternative performance measures continued
APMs derived from the statement of income
Revenue
Revenue represents revenue by segment (see note 2 of the financial statements), as reported on the face of the statement
of income plus the relevant Proportionate adjustments. See reconciliation table below.
US$ million
2021
2020
Revenue – Marketing activities
181,764
124,137
Revenue – Industrial activities
60,810
41,453
Intersegment eliminations
(34,642)
(20,803)
Revenue - segmental
207,932
144,787
Proportionate adjustment material associates and joint ventures – revenue
(5,162)
(2,996)
Proportionate adjustment Volcan – revenue
981
547
Revenue – reported measure
203,751
142,338
Share of income from material associates and joint ventures
US$ million
2021
2020
Associates’ and joint ventures’ Adjusted EBITDA
4,001
2,061
Depreciation and amortisation
(687)
(683)
Associates’ and joint ventures’ Adjusted EBIT
3,314
1,378
Impairment, net of tax
1
–
(445)
Net finance costs
4
(56)
Income tax expense
(1,211)
(524)
(1,207)
(1,025)
Share of income from relevant material associates and joint ventures
2,107
353
Share of income from other associates and joint ventures
511
91
Share of income from associates and joint ventures
2
2,618
444
1 In 2020, Industrial activities segment comprised an impairment of $445 million, net of taxes of $211 million, relating to Cerrejón, resulting from lower API2 coal price assumptions and
reduced production estimates, including updated mine-life approval expectations.
2 Comprises share in earnings of $492 million (2020: $197 million) from Marketing activities and share in earnings of $2,126 million (2020: $247 million) from Industrial activities.
Adjusted EBIT/EBITDA
Adjusted EBIT/EBITDA provide insight into our overall business performance (a combination of cost management, seizing market
opportunities and growth), and are the corresponding flow drivers towards our objective of achieving industry-leading returns.
Adjusted EBIT is the net result of revenue less cost of goods sold and selling and administrative expenses, plus share of income from
associates and joint ventures, dividend income and the attributable share of Adjusted EBIT of relevant material associates and joint
ventures, which are accounted for internally by means of proportionate consolidation, excluding Significant items, see below.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 235Glencore Annual Report 2021 235
Alternative performance measures continued
Adjusted EBITDA consists of Adjusted EBIT plus depreciation and amortisation, including the related Proportionate adjustments.
See reconciliation table below.
US$ million
2021
2020
Reported measures
Revenue
203,751
142,338
Cost of goods sold
(191,370)
(138,640)
Selling and administrative expenses
(2,115)
(1,681)
Share of income from associates and joint ventures
2,618
444
Dividend income
23
32
12,907
2,493
Adjustments to reported measures
Share of associates’ significant items
11
92
Movement in unrealised inter-segment profit elimination
549
760
Proportionate adjustment material associates and joint ventures – net
finance, impairment and income tax expense
1,207
1,025
Proportionate adjustment Volcan – net finance, income tax expense
and non-controlling interests
(179
)
46
Adjusted EBIT
14,495
4,416
Depreciation and amortisation
6,335
6,671
Proportionate adjustment material associates and joint ventures –
depreciation
687
683
Proportionate adjustment Volcan - depreciation
(194)
(210)
Adjusted EBITDA
21,323
11,560
Significant items
Significant items of income and expense which, due to their variable financial impact or the expected infrequency of the events
giving rise to them, are separated for internal reporting and analysis of Glencore’s results to aid in an understanding and
comparative basis of the underlying financial performance. Refer to reconciliation below.
Reconciliation of net significant items 2021
US$ million
Gross
significant
charges
Non-
controlling
interests’ share
Significant
items tax
Equity
holders’ share
Share of Associates' significant items
1
(11)
–
–
(11)
Movement in unrealised inter-segment profit elimination
1
(549)
–
77
(472)
Loss on disposals of non-current assets
2
(607)
–
(23)
(630)
Other expense – net
3
(1,947)
(4)
(6)
(1,957)
Tax significant items in their own right
4
–
–
56
56
(3,114)
(4)
104
(3,014)
Impairments attributable to equity holders
Impairments
5
(1,838)
668
33
(1,137)
(1,838)
668
33
(1,137)
Total significant items
(4,952)
664
137
(4,151)
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 Relates to foreign exchange fluctuations ($52 million) and tax losses not recognised ($15 million) less adjustments in respect of prior years ($11 million), see note 8 of the financial
statements.
5 See note 7 of the financial statements.
Glencore Annual Report 2021236
Strategic Report | Corporate Governance
Glencore Annual Report 2021236
| Financial Statements | Additional Information
Alternative performance measures continued
Reconciliation of net significant items 2020
US$ million
Gross
significant
charges
Non-
controlling
interests’ share
Significant
items tax
Equity
holders’ share
Share of Associates' significant items
1
(92)
–
–
(92)
Movement in unrealised inter-segment profit elimination
1
(760)
–
80
(680)
Loss on disposals of non-current assets
2
(36)
–
–
(36)
Other expense – net
3
(173)
(12)
(69)
(254)
Tax significant items in their own right
4
–
–
479
479
(1,061)
(12)
490
(583)
Impairments attributable to equity holders
Impairments
5
(3,600)
350
270
(2,980)
Impairment Volcan
5
(2,347)
1,251
716
(380)
Impairments - net, related to material associates and joint ventures
6
(445)
–
–
(445)
(6,392)
1,601
986
(3,805)
Total significant items
(7,453)
1,589
1,476
(4,388)
1 See note 2 of the financial statements.
2 See note 4 of the financial statements.
3 See note 5 of the financial statements.
4 Tax expenses related to certain recognition of tax adjustments ($724 million), offset by tax expenses related to foreign exchange fluctuations ($76 million) and tax losses not recognised
($169 million), see note 8 of the financial statements.
5 See note 7 of the financial statements.
6 See Proportionate adjustment reconciliation above.
Net income attributable to equity shareholder pre-significant items
Net income attributable to equity shareholders pre-significant items is a measure of our ability to generate shareholder returns.
The calculation of tax items to be excluded from Net income, includes the tax effect of significant items and significant tax items
themselves. Refer to reconciliation below.
US$ million
2021
2020
Income/(loss) attributable to equity holders of the Parent
4,974
(1,903)
Significant items
4,151
4,388
Income attributable to equity holders of the Parent pre-significant items
9,125
2,485
APMs derived from the statement of financial position
Net funding/Net debt and Net debt to Adjusted EBITDA
Net funding/debt demonstrates how our debt is being managed and is an important factor in ensuring we maintain investment
grade credit rating status and a competitive cost of capital. Net funding is defined as total current and non-current borrowings less
cash and cash equivalents and related Proportionate adjustments. Net debt is defined as Net funding less readily marketable
inventories and related Proportionate adjustments. Consistent with the general approach in relation to our internal reporting and
evaluation of Volcan, its consolidated net debt has also been adjusted to reflect the Group’s relatively low 23.3% economic ownership
(compared to its 63% voting interest) in this still fully ring-fenced listed entity, with its standalone, independent and separate capital
structure. Furthermore, the relationship of Net debt to Adjusted EBITDA provides an indication of financial flexibility. See
reconciliation table below.
Readily marketable inventories (RMI)
RMI comprising the core inventories which underpin and facilitate Glencore’s marketing activities, represent inventories, that in
Glencore’s assessment, are readily convertible into cash in the short term due to their liquid nature, widely available markets and the
fact that price risk is primarily covered either by a forward physical sale or hedge transaction. Glencore regularly assesses the
composition of these inventories and their applicability, relevance and availability to the marketing activities. As at 31 December 2021,
$24,795 million (2020: $19,584 million) of inventories were considered readily marketable. This comprises $16,073 million (2020:
$12,260 million) of inventories carried at fair value less costs of disposal and $8,722 million (2020: $7,324 million) carried at the lower of
cost or net realisable value. Total readily marketable inventories includes $125 million (2020: $128 million) related to the relevant
material associates and joint ventures (see note 2) presented under the proportionate consolidation method, comprising inventory
carried at lower of cost or net realisable value. Given the highly liquid nature of these inventories, which represent a significant share
of current assets, the Group believes it is appropriate to consider them together with cash equivalents in analysing Group net debt
levels and computing certain debt coverage ratios and credit trends.
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 237Glencore Annual Report 2021 237
Alternative performance measures continued
Net funding/net debt at 31 December 2021
US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Non-current borrowings
26,811
467
(485)
26,793
Current borrowings
7,830
29
(434)
7,425
Total borrowings
34,641
496
(919)
34,218
Less: cash and cash equivalents
(3,241)
(371)
231
(3,381)
Net funding
31,400
125
(688)
30,837
Less: Readily marketable inventories
(24,670)
(125)
–
(24,795)
Net debt
6,730
–
(688)
6,042
Adjusted EBITDA
21,323
Net debt to Adjusted EBITDA
0.28
Net funding/net debt at 31 December 2020
US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Non-current borrowings
29,227
210
(889)
28,548
Current borrowings
8,252
151
(33)
8,370
Total borrowings
37,479
361
(922)
36,918
Less: cash and cash equivalents
(1,498)
(107)
115
(1,490)
Net funding
35,981
254
(807)
35,428
Less: Readily marketable inventories
(19,456)
(128)
–
(19,584)
Net debt
16,525
126
(807)
15,844
Adjusted EBITDA
11,560
Net debt to Adjusted EBITDA
1.37
Capital expenditure (“Capex”)
Capital expenditure is expenditure capitalised as property, plant and equipment. For internal reporting and analysis, Capex includes
related Proportionate adjustments. See reconciliation table below.
US$ million
2021
2020
Capital expenditure – Marketing activities
801
488
Capital expenditure – Industrial activities
4,423
4,082
Capital expenditure - segmental
5,224
4,570
Proportionate adjustment material associates and joint ventures – capital expenditure
(713)
(543)
Proportionate adjustment Volcan – capital expenditure
197
117
Capital expenditure – reported measure
4,708
4,144
Glencore Annual Report 2021238
Strategic Report | Corporate Governance
Glencore Annual Report 2021238
| Financial Statements | Additional Information
Alternative performance measures continued
APMs derived from the statement of cash flows
Net purchase and sale of property, plant and equipment
Net purchase and sale of property, plant and equipment is cash purchase of property, plant and equipment, net of proceeds from
sale of property, plant and equipment. For internal reporting and analysis, Net purchase and sale of property, plant and equipment
includes proportionate adjustments. See reconciliation table below.
2021 US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Purchase of property, plant and equipment
(3,618)
(695)
174
(4,139)
Proceeds from sale of property, plant and equipment
342
3
(8)
337
Net purchase and sale of property, plant and equipment
(3,276)
(692)
166
(3,802)
2020 US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Purchase of property, plant and equipment
(3,569)
(513)
105
(3,977)
Proceeds from sale of property, plant and equipment
52
4
–
56
Net purchase and sale of property, plant and equipment
(3,517)
(509)
105
(3,921)
Funds from operations (FFO) and FFO to Net debt
FFO is a measure that reflects our ability to generate cash for investment, debt servicing and returns to shareholders. It comprises
cash provided by operating activities before working capital changes, less tax and net interest payments plus dividends received
and related Proportionate adjustments. Furthermore, the relationship of FFO to net debt is an indication of our financial flexibility
and strength. See reconciliation table below.
2021
2021 US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Cash generated by operating activities before working capital changes,
interest and tax
16,725
–
–
16,725
Addback EBITDA of relevant material associates and joint ventures
–
4,001
(382)
3,619
Adjusted cash generated by operating activities before working capital
changes, interest and tax
16,725
4,001
(382)
20,344
Income taxes paid
(1,837)
(855)
16
(2,676)
Interest received
100
–
(1)
99
Interest paid
(1,003)
(9)
60
(952)
Dividends received from associates and joint ventures
2,375
(2,133)
–
242
Funds from operations (FFO)
16,360
1,004
(307)
17,057
Net debt
6,042
FFO to net debt
282.3%
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 239Glencore Annual Report 2021 239
Alternative performance measures continued
2020 US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Cash generated by operating activities before working capital changes,
interest and tax
8,568
–
–
8,568
Addback EBITDA of relevant material associates and joint ventures
–
2,061
(131)
1,930
Non-cash adjustments included within EBITDA
–
15
–
15
Adjusted cash generated by operating activities before working capital
changes, interest and tax
8,568
2,076
(131)
10,513
Income taxes paid
(820)
(383)
14
(1,189)
Interest received
100
1
(1)
100
Interest paid
(1,174)
(12)
44
(1,142)
Dividends received from associates and joint ventures
1,015
(972)
–
43
Funds from operations (FFO)
7,689
710
(74)
8,325
Net debt
15,844
FFO to net debt
52.5%
Glencore Annual Report 2021240
Strategic Report | Corporate Governance
Glencore Annual Report 2021240
| Financial Statements | Additional Information
Other reconciliations
Available committed liquidity
1
US$ million
2021
2020
Cash and cash equivalents – reported
3,241
1,498
Proportionate adjustment – cash and cash equivalents
140
(8)
Headline committed syndicated revolving credit facilities
11,222
14,625
Amount drawn under syndicated revolving credit facilities
(2,543)
(4,766)
Amounts drawn under U.S. commercial paper programme
(1,764)
(1,090)
Total
10,296
10,259
1 Presented on an adjusted measured basis.
Cash flow related adjustments 2021
US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Funds from operations (FFO)
16,360
1,004
(307)
17,057
Working capital changes
(5,125)
(179)
15
(5,289)
Net cash received from disposal of subsidiaries
252
–
–
252
Purchase of investments
(86)
–
–
(86)
Proceeds from sale of investments
194
–
–
194
Purchase of property, plant and equipment
(3,618)
(695)
174
(4,139)
Proceeds from sale of property, plant and equipment
342
3
(8)
337
Margin payments in respect of financing related hedging activities
(970)
–
–
(970)
Proceeds received on acquisition of non-controlling interests in subsidiaries
10
–
–
10
Return of capital/distributions to non-controlling interests
(163)
–
–
(163)
Purchase of own shares
(746)
–
–
(746)
Distributions paid to equity holders of the Parent
(2,115)
–
–
(2,115)
Cash movement in net funding
4,335
133
(126)
4,342
Cash flow related adjustments 2020
US$ million
Reported
measure
Proportionate
adjustment
material
associates and
joint ventures
Proportionate
adjustment
Volcan
Adjusted
measure
Funds from operations (FFO)
7,689
710
(74)
8,325
Working capital changes
(4,010)
(314)
6
(4,318)
Net cash received from disposal of subsidiaries
(222)
–
–
(222)
Purchase of investments
(122)
–
–
(122)
Proceeds from sale of investments
135
–
–
135
Purchase of property, plant and equipment
(3,569)
(513)
105
(3,977)
Proceeds from sale of property, plant and equipment
52
4
–
56
Margin receipt in respect of financing related hedging activities
1,040
–
–
1,040
Proceeds paid on acquisition of non-controlling interests in subsidiaries
(56)
–
–
(56)
Return of capital/distributions to non-controlling interests
(127)
–
–
(127)
Cash movement in net funding
810
(113)
37
734
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 241Glencore Annual Report 2021 241
Other reconciliations continued
Applicable tax rate
The applicable tax rate represents the effective tax rate which is computed based on the income tax expense, pre-significant items
and related Proportionate adjustments, divided by the earnings before tax, pre-significant items and related Proportionate
adjustments. See reconciliation table below.
Reconciliation of tax expense 2021
US$ million
Total
Adjusted EBIT, pre-significant items
14,495
Net finance costs
(1,140)
Adjustments for:
Net finance costs from material associates and joint ventures
4
Proportional adjustment and net finance costs - Volcan
55
Share of income from other associates pre-significant items
(522)
Profit on a proportionate consolidation basis before tax and pre-significant items
12,892
Income tax expense, pre-significant items
(3,163)
Adjustments for:
Tax expense from material associates and joint ventures
(1,211)
Tax expense from Volcan
54
Tax expense on a proportionate consolidation basis
(4,320)
Applicable tax rate
33.5%
US$ million
Pre-significant
tax expense
Significant
items tax
1
Total
tax expense
Tax expense/(income) on a proportionate consolidation basis
4,320
(137)
4,183
Adjustment in respect of material associates and joint ventures – tax
(1,211)
–
(1,211)
Adjustment in respect of Volcan – tax
54
–
54
Tax expense/(income) on the basis of the income statement
3,163
(137)
3,026
1 See table above.
Reconciliation of tax expense 2020
US$ million
Total
Adjusted EBIT, pre-significant items
4,416
Net finance costs
(1,453)
Adjustments for:
Net finance costs from material associates and joint ventures
(56)
Proportional adjustment and net finance costs - Volcan
84
Share of income from other associates pre-significant items
(183)
Profit on a proportionate consolidation basis before tax and pre-significant items
2,808
Income tax expense, pre-significant items
(306)
Adjustments for:
Tax expense from material associates and joint ventures
(524)
Tax credit from Volcan
(3)
Tax expense on a proportionate consolidation basis
(833)
Applicable tax rate
29.7%
US$ million
Pre-
significant
tax expense
Significant
items tax
1
Total
tax expense
Tax expense/(credit) on a proportionate consolidation basis
833
(971)
(138)
Adjustment in respect of material associates and joint ventures – tax
(524)
211
(313)
Adjustment in respect of Volcan – tax
(3)
(716)
(719)
Tax expense/(credit) on the basis of the income statement
306
(1,476)
(1,170)
1 See table above.
Glencore Annual Report 2021242
Strategic Report | Corporate Governance
Glencore Annual Report 2021242
| Financial Statements | Additional Information
Production by quarter – Q4 2020 to Q4 2021
Metals and minerals
Production from own sources – Total
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
YTD 21 vs
YTD 20
%
Change
Q4 21 vs
Q4 20
%
Copper
kt
323.4
301.2
296.8
297.5
300.2
1,195.7
1,258.1
(5)
(7)
Cobalt
kt
5.8
6.8
8.0
8.6
7.9
31.3
27.4
14
36
Zinc
kt
310.3
282.6
299.2
274.0
262.0
1,117.8
1,170.4
(4)
(16)
Lead
kt
65.1
55.3
61.7
56.4
48.9
222.3
259.4
(14)
(25)
Nickel
kt
28.4
25.2
22.5
23.4
31.2
102.3
110.2
(7)
10
Gold
koz
261
224
199
170
216
809
916
(12)
(17)
Silver
koz
9,546
7,761
8,223
7,810
7,725
31,519
32,766
(4)
(19)
Ferrochrome
kt
378
399
374
298
397
1,468
1,029
43
5
Coal
mt
22.7
24.5
24.2
27.6
27.0
103.3
106.2
(3)
19
Oil (entitlement interest basis)
kbbl
584
1,071
1,486
1,588
1,129
5,274
3,944
34
93
Production from own sources – Copper assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
African Copper (Katanga, Mutanda, Mopani)
Katanga
Copper metal
kt
68.8
64.3
67.3
71.8
61.0
264.4
270.7
(2)
(11)
Cobalt
2
kt
5.0
5.8
6.1
6.9
5.0
23.8
23.9
–
–
Mutanda
Copper metal
kt
–
–
–
–
6.3
6.3
–
–
n.m.
Cobalt
2
kt
–
–
1.1
1.0
1.8
3.9
–
–
n.m.
Mopani
Copper metal
kt
10.3
6.5
–
–
–
6.5
30.3
(79)
(100)
Total Copper metal
kt
79.1
70.8
67.3
71.8
67.3
277.2
301.0
(8)
(15)
Total Cobalt
2
kt
5.0
5.8
7.2
7.9
6.8
27.7
23.9
16
36
Collahuasi
3
Copper in concentrates
kt
59.2
71.7
74.2
65.3
66.0
277.2
276.8
–
11
Silver in concentrates
koz
893
1,081
1,170
978
990
4,219
3,961
7
11
Gold in concentrates
koz
9
10
12
11
12
45
53
(15)
33
Antamina
4
Copper in concentrates
kt
40.7
35.8
37.4
38.1
38.7
150.0
127.7
17
(5)
Zinc in concentrates
kt
44.9
38.0
42.2
38.9
34.6
153.7
142.4
8
(23)
Silver in concentrates
koz
2,017
1,577
1,558
1,548
1,452
6,135
5,535
11
(28)
Other South America (Antapaccay, Lomas Bayas)
Antapaccay
Copper in concentrates
kt
51.5
43.5
40.5
41.3
45.5
170.8
185.6
(8)
(12)
Gold in concentrates
koz
32
28
24
16
22
90
90
–
(31)
Silver in concentrates
koz
355
327
303
336
416
1,382
1,298
6
17
Lomas Bayas
Copper metal
kt
18.0
15.8
16.4
15.6
16.5
64.3
74.1
(13)
(8)
Total Copper metal
kt
18.0
15.8
16.4
15.6
16.5
64.3
74.1
(13)
(8)
Total Copper in concentrates
kt
51.5
43.5
40.5
41.3
45.5
170.8
185.6
(8)
(12)
Total Gold in concentrates
and in doré
koz
32
28
24
16
22
90
90
–
(31)
Total Silver in concentrates
and in doré
koz
355
327
303
336
416
1,382
1,298
6
17
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 243Glencore Annual Report 2021 243
Production by quarter – Q4 2020 to Q4 2021 continued
Metals and minerals
Production from own sources – Copper assets
1
continued
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Australia (Ernest Henry, Cobar)
5
Ernest Henry
Copper metal
kt
12.0
11.0
10.9
12.2
10.7
44.8
49.2
(9)
(11)
Gold
koz
25
18
21
10
15
64
93
(31)
(40)
Silver
koz
48
53
46
51
45
195
198
(2)
(6)
Cobar
Copper in concentrates
kt
12.7
8.9
10.3
9.5
11.8
40.5
46.2
(12)
(7)
Silver in concentrates
koz
144
95
111
117
136
459
516
(11)
(6)
Total Copper metal
kt
12.0
11.0
10.9
12.2
10.7
44.8
49.2
(9)
(11)
Total Copper in concentrates
kt
12.7
8.9
10.3
9.5
11.8
40.5
46.2
(12)
(7)
Total Gold
koz
25
18
21
10
15
64
93
(31)
(40)
Total Silver
koz
192
148
157
168
181
654
714
(8)
(6)
Total Copper department
Copper
kt
273.2
257.5
257.0
253.8
256.5
1,024.8
1,060.6
(3)
(6)
Cobalt
kt
5.0
5.8
7.2
7.9
6.8
27.7
23.9
16
36
Zinc
kt
44.9
38.0
42.2
38.9
34.6
153.7
142.4
8
(23)
Gold
koz
66
56
57
37
49
199
236
(16)
(26)
Silver
koz
3,457
3,133
3,188
3,030
3,039
12,390
11,508
8
(12)
Glencore Annual Report 2021244
Strategic Report | Corporate Governance
Glencore Annual Report 2021244
| Financial Statements | Additional Information
Production by quarter – Q4 2020 to Q4 2021 continued
Metals and minerals
Production from own sources – Zinc assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Kazzinc
Zinc metal
kt
38.7
37.8
33.2
34.2
42.7
147.9
167.5
(12)
10
Lead metal
kt
7.6
4.3
4.9
5.7
4.9
19.8
25.6
(23)
(36)
Copper metal
6
kt
8.9
8.7
4.9
4.7
7.3
25.6
37.0
(31)
(18)
Gold
koz
190
164
139
129
163
595
659
(10)
(14)
Silver
koz
1,714
816
485
640
980
2,921
4,712
(38)
(43)
Kazzinc – total production including third party feed
Zinc metal
kt
75.2
76.2
70.6
68.2
76.4
291.4
298.2
(2)
2
Lead metal
kt
30.1
28.7
26.4
27.1
28.9
111.1
125.0
(11)
(4)
Copper metal
kt
14.7
15.2
11.0
10.1
15.9
52.2
60.7
(14)
8
Gold
koz
294
233
211
212
269
925
965
(4)
(9)
Silver
koz
6,399
5,759
5,132
5,185
6,378
22,454
22,140
1
–
Australia (Mount Isa, McArthur River)
5
Mount Isa
Zinc in concentrates
kt
88.2
85.0
86.4
82.8
75.6
329.8
354.2
(7)
(14)
Copper metal
kt
21.9
19.9
20.7
25.9
25.0
91.5
89.6
2
14
Lead in concentrates
kt
38.9
36.2
39.4
32.8
24.5
132.9
161.9
(18)
(37)
Silver
koz
178
116
115
159
235
625
557
12
32
Silver in concentrates
koz
1,295
1,176
1,427
1,246
869
4,718
5,790
(19)
(33)
Mount Isa, Townsville – total production including third party feed
Copper metal
kt
54.5
54.2
55.5
65.2
51.9
226.8
217.2
4
(5)
Gold
koz
41
41
43
35
42
161
158
2
2
Silver
koz
372
323
366
440
700
1,829
1,417
29
88
McArthur River
Zinc in concentrates
kt
76.4
63.5
74.2
69.9
72.0
279.6
279.3
–
(6)
Lead in concentrates
kt
15.0
10.9
14.2
14.4
15.7
55.2
54.9
1
5
Silver in concentrates
koz
487
270
471
460
602
1,803
1,614
12
24
Total Zinc in concentrates
kt
164.6
148.5
160.6
152.7
147.6
609.4
633.5
(4)
(10)
Total Copper
kt
21.9
19.9
20.7
25.9
25.0
91.5
89.6
2
14
Total Lead in concentrates
kt
53.9
47.1
53.6
47.2
40.2
188.1
216.8
(13)
(25)
Total Silver
koz
178.0
116
115
159
235
625
557
12
32
Total Silver in concentrates
koz
1,782
1,446
1,898
1,706
1,471
6,521
7,404
(12)
(17)
North America (Matagami, Kidd)
Matagami
Zinc in concentrates
kt
13.5
14.1
11.0
12.3
10.0
47.4
52.2
(9)
(26)
Copper in concentrates
kt
1.9
1.6
1.6
2.2
1.7
7.1
6.7
6
(11)
Kidd
Zinc in concentrates
kt
12.7
12.3
15.8
9.9
10.7
48.7
62.5
(22)
(16)
Copper in concentrates
kt
9.5
7.6
6.8
5.7
3.1
23.2
34.0
(32)
(67)
Silver in concentrates
koz
517
362
405
309
307
1,383
2,125
(35)
(41)
Total Zinc in concentrates
kt
26.2
26.4
26.8
22.2
20.7
96.1
114.7
(16)
(21)
Total Copper in concentrates
kt
11.4
9.2
8.4
7.9
4.8
30.3
40.7
(26)
(58)
Total Silver in concentrates
koz
517
362
405
309
307
1,383
2,125
(35)
(41)
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 245Glencore Annual Report 2021 245
Production by quarter – Q4 2020 to Q4 2021 continued
Metals and minerals
Production from own sources – Zinc assets
1
continued
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Other Zinc: South America (Argentina, Bolivia, Peru)
7
Zinc in concentrates
kt
35.9
31.9
36.4
26.0
16.4
110.7
112.3
(1)
(54)
Lead in concentrates
kt
3.6
3.9
3.2
3.5
3.8
14.4
17.0
(15)
6
Copper in concentrates
kt
0.5
0.5
0.4
0.3
0.5
1.7
1.6
6
–
Silver in concentrates
koz
1,832
1,809
2,051
1,889
1,634
7,383
6,121
21
(11)
Total Zinc department
Zinc
kt
265.4
244.6
257.0
235.1
227.4
964.1
1,028.0
(6)
(14)
Lead
kt
65.1
55.3
61.7
56.4
48.9
222.3
259.4
(14)
(25)
Copper
kt
42.7
38.3
34.4
38.8
37.6
149.1
168.9
(12)
(12)
Gold
koz
190
164
139
129
163
595
659
(10)
(14)
Silver
koz
6,023
4,549
4,954
4,703
4,627
18,833
20,919
(10)
(23)
Glencore Annual Report 2021246
Strategic Report | Corporate Governance
Glencore Annual Report 2021246
| Financial Statements | Additional Information
Production by quarter – Q4 2020 to Q4 2021 continued
Metals and minerals
Production from own sources – Nickel assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Integrated Nickel Operations (Sudbury, Raglan, Nikkelverk)
Nickel metal
kt
15.1
14.2
13.7
12.8
14.3
55.0
56.5
(3)
(5)
Nickel in concentrates
kt
0.2
0.1
–
0.1
–
0.2
0.4
(50)
(100)
Copper metal
kt
3.8
3.4
3.2
3.2
3.7
13.5
13.5
–
(3)
Copper in concentrates
kt
3.7
2.0
2.2
1.7
2.4
8.3
15.1
(45)
(35)
Cobalt metal
kt
0.2
0.4
0.2
0.2
0.3
1.1
0.6
83
50
Gold
koz
5
4
3
4
4
15
21
(29)
(20)
Silver
koz
66
79
81
77
59
296
339
(13)
(11)
Platinum
koz
10
10
6
8
9
33
40
(18)
(10)
Palladium
koz
23
21
18
21
23
83
101
(18)
–
Rhodium
koz
1
1
1
1
1
4
4
–
–
Nickel metal
kt
23.5
22.6
22.8
24.0
21.8
91.2
92.1
(1)
(7)
Nickel in concentrates
kt
0.1
0.1
0.1
–
0.1
0.3
0.4
(25)
–
Copper metal
kt
5.5
4.9
4.9
5.1
5.2
20.1
20.5
(2)
(5)
Copper in concentrates
kt
2.9
2.8
3.2
1.8
2.5
10.3
17.6
(41)
(14)
Cobalt metal
kt
1.2
1.0
1.0
1.0
1.0
4.0
4.4
(9)
(17)
Gold
koz
8
7
8
6
8
29
36
(19)
–
Silver
koz
89
132
137
121
121
511
545
(6)
36
Platinum
koz
16
22
14
17
20
73
72
1
25
Palladium
koz
48
58
47
57
58
220
238
(8)
21
Rhodium
koz
1
1
1
1
1
4
5
(20)
–
Murrin Murrin
Total Nickel metal
kt
9.1
7.5
5.6
7.4
9.6
30.1
36.4
(17)
5
Total Cobalt metal
kt
0.6
0.6
0.6
0.5
0.8
2.5
2.9
(14)
33
Murrin Murrin – total production including third party feed
Total Nickel metal
kt
9.8
8.2
6.1
8.4
11.0
33.7
40.8
(17)
12
Total Cobalt metal
kt
0.7
0.7
0.6
0.6
0.9
2.8
3.3
(15)
29
Koniambo
Nickel in ferronickel
kt
4.0
3.4
3.2
3.1
7.3
17.0
16.9
1
83
Total Nickel department
Nickel
kt
28.4
25.2
22.5
23.4
31.2
102.3
110.2
(7)
10
Copper
kt
7.5
5.4
5.4
4.9
6.1
21.8
28.6
(24)
(19)
Cobalt
kt
0.8
1.0
0.8
0.7
1.1
3.6
3.5
3
38
Gold
koz
5
4
3
4
4
15
21
(29)
(20)
Silver
koz
66
79
81
77
59
296
339
(13)
(11)
Platinum
koz
10
10
6
8
9
33
40
(18)
(10)
Palladium
koz
23
21
18
21
23
83
101
(18)
–
Rhodium
koz
1
1
1
1
1
4
4
–
–
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 247Glencore Annual Report 2021 247
Production by quarter – Q4 2020 to Q4 2021 continued
Energy products
Production from own sources – Coal assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Australian coking coal
mt
2.0
2.4
1.7
2.5
2.5
9.1
7.6
20
25
Australian semi-soft coal
mt
1.0
1.2
1.4
0.9
1.0
4.5
4.6
(2)
–
Australian thermal coal (export)
mt
12.8
12.0
13.0
15.5
15.4
55.9
55.7
–
20
Australian thermal coal (domestic)
mt
1.5
1.4
1.2
1.6
1.8
6.0
6.4
(6)
20
South African thermal coal (export)
mt
3.3
4.0
3.7
3.9
3.1
14.7
14.8
(1)
(6)
South African thermal coal (domestic)
mt
1.8
1.7
1.4
1.2
1.0
5.3
9.2
(42)
(44)
Cerrejón
9
mt
0.3
1.8
1.8
2.0
2.2
7.8
4.1
90
633
Prodeco
mt
–
–
–
–
–
–
3.8
(100)
n.m.
Total Coal department
mt
22.7
24.5
24.2
27.6
27.0
103.3
106.2
(3)
19
Oil assets
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Glencore entitlement interest basis
Equatorial Guinea
kboe
345
784
1,245
1,294
818
4,141
1,960
111
137
Chad
kbbl
–
–
–
–
–
–
1,112
(100)
n.m.
Cameroon
kbbl
239
287
241
294
311
1,133
872
30
30
Total Oil department
kboe
584
1,071
1,486
1,588
1,129
5,274
3,944
34
93
Gross basis
Equatorial Guinea
kboe
1,871
3,777
6,041
6,233
4,086
20,137
10,435
93
118
Chad
kbbl
–
–
–
–
–
–
1,521
(100)
n.m.
Cameroon
kbbl
693
708
699
729
730
2,866
2,528
13
5
Total Oil department
kboe
2,564
4,485
6,740
6,962
4,816
23,003
14,484
59
88
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis except for joint ventures, where the Group’s attributable share of production is included.
2 Cobalt contained in concentrates and hydroxides.
3 The Group’s pro-rata share of Collahuasi production (44%).
4 The Group’s pro-rata share of Antamina production (33.75%).
5 Mount Isa copper operations (including Townsville) previously recorded under copper department moved to zinc department.
6 Copper metal includes copper contained in copper concentrates and blister.
7 South American production excludes Volcan Compania Minera.
8 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
9 The Group’s pro-rata share of Cerrejón production (33.3%).
Production by quarter – Q4 2020 to Q4 2021 continued
Metals and minerals
Production from own sources – Ferroalloys assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Ferrochrome
8
kt
378
399
374
298
397
1,468
1,029
43
5
Vanadium pentoxide
mlb
5.9
5.5
5.5
4.2
5.3
20.5
19.5
5
(10)
Total production – Custom metallurgical assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Copper (Altonorte, Pasar, Horne, CCR)
Copper metal
kt
116.0
127.2
127.6
121.5
114.3
490.6
482.6
2
(1)
Copper anode
kt
134.4
126.7
109.5
94.4
123.4
454.0
490.1
(7)
(8)
Zinc (Portovesme, San Juan de Nieva, Nordenham, Northfleet)
Zinc metal
kt
203.6
202.6
195.8
206.7
195.5
800.6
787.2
2
(4)
Lead metal
kt
45.8
49.9
52.3
62.3
80.4
244.9
198.0
24
76
Glencore Annual Report 2021248
Strategic Report | Corporate Governance
Glencore Annual Report 2021248
| Financial Statements | Additional Information
Production by quarter – Q4 2020 to Q4 2021 continued
Energy products
Production from own sources – Coal assets
1
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Australian coking coal
mt
2.0
2.4
1.7
2.5
2.5
9.1
7.6
20
25
Australian semi-soft coal
mt
1.0
1.2
1.4
0.9
1.0
4.5
4.6
(2)
–
Australian thermal coal (export)
mt
12.8
12.0
13.0
15.5
15.4
55.9
55.7
–
20
Australian thermal coal (domestic)
mt
1.5
1.4
1.2
1.6
1.8
6.0
6.4
(6)
20
South African thermal coal (export)
mt
3.3
4.0
3.7
3.9
3.1
14.7
14.8
(1)
(6)
South African thermal coal (domestic)
mt
1.8
1.7
1.4
1.2
1.0
5.3
9.2
(42)
(44)
Cerrejón
9
mt
0.3
1.8
1.8
2.0
2.2
7.8
4.1
90
633
Prodeco
mt
–
–
–
–
–
–
3.8
(100)
n.m.
Total Coal department
mt
22.7
24.5
24.2
27.6
27.0
103.3
106.2
(3)
19
Oil assets
Q4
2020
Q1
2021
Q2
2021
Q3
2021
Q4
2021
2021
2020
Change
2021 vs
2020
%
Change
Q4 21 vs
Q4 20
%
Glencore entitlement interest basis
Equatorial Guinea
kboe
345
784
1,245
1,294
818
4,141
1,960
111
137
Chad
kbbl
–
–
–
–
–
–
1,112
(100)
n.m.
Cameroon
kbbl
239
287
241
294
311
1,133
872
30
30
Total Oil department
kboe
584
1,071
1,486
1,588
1,129
5,274
3,944
34
93
Gross basis
Equatorial Guinea
kboe
1,871
3,777
6,041
6,233
4,086
20,137
10,435
93
118
Chad
kbbl
–
–
–
–
–
–
1,521
(100)
n.m.
Cameroon
kbbl
693
708
699
729
730
2,866
2,528
13
5
Total Oil department
kboe
2,564
4,485
6,740
6,962
4,816
23,003
14,484
59
88
1 Controlled industrial assets and joint ventures only. Production is on a 100% basis except for joint ventures, where the Group’s attributable share of production is included.
2 Cobalt contained in concentrates and hydroxides.
3 The Group’s pro-rata share of Collahuasi production (44%).
4 The Group’s pro-rata share of Antamina production (33.75%).
5 Mount Isa copper operations (including Townsville) previously recorded under copper department moved to zinc department.
6 Copper metal includes copper contained in copper concentrates and blister.
7 South American production excludes Volcan Compania Minera.
8 The Group’s attributable 79.5% share of the Glencore-Merafe Chrome Venture.
9 The Group’s pro-rata share of Cerrejón production (33.3%).
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Glencore Annual Report 2021 249Glencore Annual Report 2021 249
The resource and reserve data in the following tables comprise summary extracts of the Glencore Resources and Reserves report as at
31 December 2021, as published on the Glencore website on 2 February 2022. The Glencore Resources and Reserves report was
publicly reported, as appropriate for individual components, in accordance with the 2012 edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code), the 2016 edition of the South African Code for
Reporting of Mineral Resources and Mineral Reserves (SAMREC), the Canadian Institute of Mining, Metallurgy and Petroleum (CIM)
Standards on Mineral Resources and Reserves (2014 edition) and the Petroleum Resources Management System (PRMS) for reporting
of oil and natural gas reserves and resources.
Data is reported as at 31 December 2021, unless otherwise noted. For comparison purposes, data for 2020 has been included. Metric
units are used throughout, and all data is presented on a 100% asset basis with the exception of Oil assets which are shown on a
working interest basis. All tonnage information has been rounded to reflect the relative uncertainty in the estimates; there may
therefore be small differences in the totals.
Metals and minerals: Copper
Copper mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
African copper
Katanga
(Mt)
–
–
269
290
269
290
76
99
Copper (%)
–
–
4.71
4.73
4.71
4.73
1.70
1.56
Cobalt (%)
–
–
0.56
0.55
0.56
0.55
0.50
0.47
Mutanda
(Mt)
371
368
97
96
468
464
17
17
Copper (%)
1.39
1.39
0.96
0.97
1.31
1.31
0.72
0.72
Cobalt (%)
0.55
0.55
0.44
0.44
0.53
0.53
0.53
0.54
Collahuasi
(Mt)
883
876
4,713
4,729
5,695
5,605
4,811
4,898
Copper (%)
0.79
0.79
0.79
0.8
0.79
0.80
0.73
0.73
Molybdenum
(%)
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
Antamina
(Mt)
306
329
619
642
925
971
1,260
1,272
Copper (%)
0.83
0.82
0.88
0.89
0.87
0.86
1.00
1.01
Zinc (%)
0.61
0.64
0.73
0.72
0.69
0.69
0.57
0.58
Silver (g/t)
10
9
11
12
11
11
11
11
Molybdenum
(%)
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.01
Other South America
(Mt)
556
509
2,231
2,131
2,787
2,639
1,072
654
Copper (%)
0.42
0.44
0.38
0.39
0.39
0.41
0.27
0.29
Gold (g/t)
0.04
0.04
0.04
0.04
0.04
0.04
0.01
0.01
Silver (g/t)
0.8
0.8
0.8
0.8
0.8
0.8
0.1
0.1
Cobar
(Mt)
3.9
4.5
3.5
3.4
7.4
7.9
4.0
3.8
Copper (%)
5.74
5.77
4.92
5.14
5.36
5.50
5.41
5.66
Silver (g/t)
24
25
20
21
22.0
23.0
20
22
Other projects
1
(Mt)
852
853
2,309
2,319
3,161
3,171
3,180
3,023
(El Pachon, West Wall,
Polymet)
Copper (%) 0.51 0.51 0.45 0.45 0.47 0.47 0.39 0.39
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 2 February 2022.
Resources and reserves
Glencore Annual Report 2021250
Strategic Report | Corporate Governance | Financial Statements | Additional Information
Copper ore reserves
Proved Ore Reserves
Probable Ore Reserves
Total Ore Reserves
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
African copper
Katanga
(Mt)
–
–
128
143
128
143
Copper (%) – – 3.86 3.66 3.86 3.66
Cobalt (%)
–
–
0.51
0.49
0.51
0.49
Mutanda
(Mt)
52
48
81
82
134
130
Copper (%)
1.43
1.36
1.64
1.59
1.52
1.15
Cobalt (%)
0.64
0.62
0.78
0.75
0.70
0.70
Collahuasi
(Mt) 476 491 3,691 3,685 4,167 4,176
Copper (%)
1.00
1.01
0.77
0.78
0.80
0.80
Molybdenum (%)
0.02
0.02
0.02
0.02
0.02
0.02
Antamina
(Mt)
186
206
150
176
336
382
Copper (%) 0.92 0.90 0.98 0.92 0.94 0.91
Zinc (%)
0.66
0.77
1.01
1.06
0.81
0.91
Silver (g/t)
9
9
11
10
10
9
Molybdenum (%)
0.03
0.03
0.02
0.02
0.03
0.02
Other South America
(Mt)
352
328
454
510
806
838
Copper (%)
0.50
0.41
0.35
0.34
0.37
0.37
Gold (g/t)
0.04
0.05
0.05
0.04
0.05
0.04
Silver (g/t)
0.6
0.7
0.7
0.6
0.7
0.6
Australia (Cobar)
(Mt)
4.2
4.9
2.6
2.8
6.8
7.7
Copper (%)
4.00
3.95
3.60
3.65
3.80
3.84
Silver (g/t)
16.4
16.3
14.1
15.0
15.6
15.8
Other projects
1
(Mt)
157
157
106
106
264
264
(El Pachon, West Wall,
Polymet)
Copper (%)
0.29 0.29 0.29 0.29 0.29 0.29
1 The above listed Copper projects also include other metallic content, as noted in the Resources and Reserves report published on 2 February 2022.
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021 251
| Financial Statements | Additional Information
Zinc mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
Kazzinc
Kazzinc Polymetallic
(Mt)
94
111
113
123
208
234
166
172
Zinc (%) 2.7 2.8 1.3 1.4 2.0 2.0 2.0 2.2
Lead (%)
0.9
0.9
0.4
0.4
0.6
0.6
1.2
1.2
Copper (%) 0.3 0.3 0.2 0.2 0.3 0.3 0.3 0.3
Silver (g/t)
18
18
13
13
15
15
21
21
Gold (g/t)
1.2
1.1
1.0
1.0
1.1
1.0
0.8
0.8
Kazzinc Gold (Vasilkovskoye)
(Mt) 64 73 53 53 117 126 2.0 2.0
Gold (g/t)
1.9
1.9
2.1
2.1
2.0
2.0
1.7
1.8
Australia
Mount Isa – Zinc bearing
(Mt)
83
85
310
310
393
395
286
290
Zinc (%) 9.1 9.2 6.3 6.3 6.9 6.9 5 5
Lead (%)
4.0
4.1
3.4
3.4
3.5
3.6
2
3
Silver (g/t)
77
78
67
67
69
69
48
48
Mount Isa
– Copper bearing (Mt) 58 57 110 111 166 169 12 12
Copper (%)
2.1
2.1
1.6
1.6
1.8
1.8
1.5
1.5
McArthur River
(Mt)
103
106
49
57
152
162
–
–
Zinc (%) 9.7 9.5 10.5 10.2 9.9 9.7 – –
Lead (%)
4.2
4.1
5.0
4.8
4.5
4.4
–
–
Silver (g/t)
42
40
53
52
46
45
–
–
Mount Margaret
(Mt)
5
5
8
8
13
13
0.5
0.5
Copper (%)
0.6
0.6
0.8
0.8
0.7
0.7
0.9
0.9
Gold (g/t)
0.2
0.2
0.2
0.2
0.2
0.2
0.3
0.3
North America
Zinc North America
(Mt)
21
21
41
33
62
54
73
77
Zinc (%)
4.0
4.3
4.4
4.6
4.2
4.4
3.5
4.1
Lead (%)
0.5
0.5
0.5
0.6
0.5
0.6
0.4
0.8
Copper (%)
1.4
1.4
0.8
0.6
1.0
0.9
0.6
0.7
Silver (g/t)
46
46
100
114
81
88
102
124
Gold (g/t) 0.4 0.4 0.3 0.3 0.3 0.4 0.2 0.2
Copper North America
(Mt)
75
75
255
255
330
330
120
120
Copper (%)
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
Gold (g/t) 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Volcan
Lead/zinc/silver deposits
(Mt)
25
26
75
115
99
141
146
215
Zinc (%)
5.9
5.3
4.4
3.6
4.8
3.9
4.5
4.4
Lead (%) 1.5 1.5 1.2 1.1 1.3 1.1 1.4 1.5
Silver (g/t)
87
84
87
82
87
82
85
83
Copper deposits
(Mt)
18.4
18.4
34.3
34.3
53
53
148
148
Gold (g/t) – – – – – – 0.2 0.2
Copper (%)
0.5
0.5
0.5
0.5
0.5
0.5
0.4
0.4
Other Zinc
(Mt)
12.0
13.0
19
21
30
35
74
75
Zinc (%)
5.6
5.5
4.2
4.1
4.7
4.3
6.6
6.3
Lead (%) 1.1 1.6 1.1 1.6 1.1 1.5 1.2 1.2
Copper (%)
0.3
0.3
0.3
0.3
0.3
0.3
0.1
0.1
Silver (g/t)
132
129
134
125
133
124
84
83
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021252
| Financial Statements | Additional Information
Zinc ore reserves
Proved Ore Reserves Probable Ore Reserves Total Ore Reserves
Name of operation
Commodity 2021 2020 2021 2020 2021 2020
Kazzinc
Kazzinc Polymetallic
(Mt)
70
68
15.1
23.8
85
92
Zinc (%)
3.4
3.5
3.1
3.5
3.3
3.5
Lead (%)
1.0
1.0
0.3
0.6
0.9
0.9
Copper (%)
0.1
0.2
0.4
0.3
0.2
0.2
Silver (g/t)
17
18
14
15
16
17
Gold (g/t)
0.7
0.6
1.3
0.8
0.8
0.7
Kazzinc Gold (Vasilkovskoye)
(Mt)
35
43
36
36
71
79
Gold (g/t)
2.0
2.0
1.8
1.8
1.9
1.9
Australia
Mount Isa
– Zinc bearing (Mt) 22 26
47 46 68 72
Zinc (%)
8.0
7.8
7.1
6.9
7.5
7.3
Lead (%)
3.6
3.9
3.5
3.5
3.6
3.7
Silver (g/t) 66 72
62 64 63 67
Mount Isa – Copper bearing
(Mt)
5.9
9.5
17
17
23
27
Copper (%)
2.3
2.3
2.0
1.9
2.0
2.1
McArthur River
(Mt) 71 74
20.0 12.7 91 87
Zinc (%)
9.1
9.4
7.8
7.8
8.8
9.2
Lead (%)
4.1
4.3
4.0
3.8
4.1
4.2
Silver (g/t) 41 43
42 39 41 42
North America
(Mt) 2.3 4.5
1.5 1.7 4 6
Zinc (%) 3.13 4.04
4.5 4.0 3.6 4.0
Copper (%)
1.74
1.67
1.7
1.6
1.7
1.6
Silver (g/t)
41
41
43
38
42
40
Gold (g/t)
0.09
0.20
–
–
0.1
0.1
Volcan
(Mt) 6 7
17 21 24 28
Zinc (%)
6.0
4.3
4.1
4.6
4.6
4.6
Lead (%)
1.1
1.1
0.9
1.1
1.0
1.1
Silver (g/t)
82
80
81
91
81
88
Other Zinc
(Mt) 3.4 3.6
9.5 9.0 12.8 13.0
Zinc (%)
6.0
5.6
2.9
2.8
3.6
3.5
Lead (%)
1.0
1.4
0.7
1.0
0.8
1.1
Copper (%)
0.1
0.2
0.2
0.2
0.2
0.2
Silver (g/t) 136 151
104 113 110 122
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021 253
| Financial Statements | Additional Information
Nickel mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
INO
(Mt)
9.1
9.6
42.8
36.7
51.9
46.2
47
49
Nickel (%)
2.43
2.59
2.50
2.55
2.49
2.55
1.4
1.6
Copper (%) 0.81 0.85 1.79 1.95 1.61 1.72 1.9 1.8
Cobalt (%)
0.05
0.06
0.05
0.06
0.05
0.06
0.03
0.03
Platinum (g/t) 0.73 0.73 0.93 0.92 0.89 0.88 0.8 0.8
Palladium (g/t)
1.46
1.47
1.61
1.59
1.58
1.57
1.3
1.4
Murrin Murrin
(Mt)
139.7
144.1
52.2
74.6
192.0
218.8
9
17
Nickel (%)
1.02
1.00
0.98
1.00
1.01
1.00
1.0
0.9
Cobalt (%) 0.088 0.074 0.070 0.084 0.083 0.077 0.06 0.07
Koniambo
(Mt)
11.0
11.5
43.8
44.0
54.8
55.5
84
84
Nickel (%)
2.47
2.47
2.41
2.41
2.42
2.42
2.5
2.5
Nickel ore reserves
Proved Ore Reserves Probable Ore Reserves Total Ore Reserves
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
INO
(Mt)
7.60
8.30
21.20
19.90
28.8
28.2
Nickel (%)
2.01
1.93
2.07
2.33
2.06
2.21
Copper (%) 0.68
0.67 0.90 0.95 0.84 0.87
Cobalt (%)
0.05
0.04
0.04
0.06
0.05
0.05
Platinum (g/t) 0.62
0.57 0.48 0.53 0.52 0.54
Palladium (g/t)
1.22
1.05
0.78
0.95
0.90
0.99
Murrin Murrin
(Mt)
59.5
103.0
9.0
33.9
68.5
136.8
Nickel (%)
1.09
1.02
1.07
1.04
1.09
1.03
Cobalt (%) 0.113
0.081 0.091 0.109 0.110 0.088
Koniambo
(Mt) 11.0
11.0 26.0 26.0 37.0 37.2
Nickel (%)
2.23
2.23
2.19
2.17
2.20
2.20
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021254
| Financial Statements | Additional Information
Ferroalloys mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
Western Chrome Mines
Western Chrome Mines
(Mt)
60.000
58.347
64.42
58.55
124.42
116.89
93.3
101.4
Cr
2
O
3
(%) 42.05 42.05 41.5 41.4 41.8 41.7 42 42
Tailings
(Mt)
–
–
–
–
–
–
3.1
2.9
Cr
2
O
3
(%)
–
–
–
–
–
–
18
17
Eastern Chrome Mines
Eastern Chrome Mines
(Mt)
68.813
72.017
43.98
44.73
112.80
116.76
181.3
180.7
Cr
2
O
3
(%) 39.99 41.36 40.1 40.2 40.0 40.9 39 39
Tailings
(Mt)
–
–
–
–
–
–
4.9
4.9
Cr
2
O
3
(%)
–
–
–
–
–
–
20
20
Vanadium
(Mt) 51.662 49.754 33.49 35.56 85.15 85.31 91 93
V
2
O
5
(%)
0.47
0.47
0.5
0.5
0.5
0.5
0.5
0.5
Manganese
(Mt)
26.229
27.186
19.55
19.55
45.78
46.74
3
3
Mn (%) 37.56 37.24 36.4 36.5 37.1 36.9 36 36
Ferroalloys ore reserves
Proved Ore Reserves Probable Ore Reserves Total Ore Reserves
Name of operation
Commodity 2021 2020 2021 2020 2021 2020
Western Chrome Mines
(Mt)
10.249
10.418
1.97
3.13
12.22
13.56
Cr
2
O
3
(%)
30.41
30.23
28.3
29.0
30.1
29.9
Eastern Chrome Mines
(Mt) 23.147 27.701 5.08 4.43 28.22 32.13
Cr
2
O
3
(%)
34.39
33.55
32.7
33.8
34.1
33.6
Vanadium
(Mt)
19.993
22.223
8.18
9.45
28.17
31.67
V
2
O
5
(%)
0.46
0.47
0.43
0.43
0.5
0.5
Manganese
(Mt)
20.490
21.650
5.66
4.10
26.15
25.75
Mn (%)
36.27
36.34
35.9
35.9
36.2
36.3
Metals and minerals: Aluminium/Alumina
Alumina mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
Aurukun
(Mt)
96
96
331
352
427
448
3
4
Al
2
O
3
(%)
53.5
53.3
49.9
49.7
50.7
50.5
49.4
48.8
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021 255
| Financial Statements | Additional Information
Iron ore mineral resources
Measured Mineral
Resources
Indicated Mineral
Resources
Measured and
Indicated Resources
Inferred
Mineral Resources
Name of operation
Commodity
2021
2020
2021
2020
2021
2020
2021
2020
El Aouj Mining Company S.A.
(Mt)
470
470
1,435
1,435
1,905
1,905
2,520
2,520
Iron (%)
36
36
36
36
36
36
35
35
Sphere Mauritania S.A.
(Mt)
215
215
190
190
405
405
251
251
(Askaf)
Iron (%)
36
36
35
35
36
36
35
35
Sphere Lebtheinia S.A.
(Mt)
–
–
2,180
2,180
2,180
2,180
560
560
Iron (%)
–
–
32
32
32
32
32
32
Jumelles Limited
(Mt) 2,300 2,300 2,500 2,500 4,800
4,800 2,100 2,100
(Zanaga)
Iron (%)
34
34
30
30
32
32
31
31
Iron ore reserves
Proved Ore Reserves Probable Ore Reserves Total Ore Reserves
Name of operation
Commodity 2021 2020 2021 2020 2021 2020
El Aouj Mining Company S.A.
(Mt)
380
380
551
551
931
931
Iron (%)
35
35
35
35
35
35
Jumelles Limited
(Mt) 770 770 1,290 1,290
2,070 2,070
(Zanaga)
Iron (%)
37
37
32
32
34
34
Energy products: Coal
Coal resources
Measured
Coal Resources
Indicated
Coal Resources
Inferred
Coal Resources
Name of operation
Commodity 2021 2020 2021 2020 2021 2020
Australia
New South Wales
Coking/Thermal Coal (Mt) 3,570 3,671 3,653 3,644 7,491 7,591
Queensland
Coking/Thermal Coal (Mt)
3,986
3,852
5,247
5,203
9,220
9,000
South Africa
Thermal Coal (Mt)
2,256
2,314
837
839
344
344
Prodeco
Thermal Coal (Mt)
–
190
–
155
–
60
Cerrejón
Thermal Coal (Mt) 3,250 3,300 1,250 1,250 600 600
Canada projects
(Suska, Sukunka)
Coking/Thermal Coal (Mt) 45 45 113 113 130 130
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021256
| Financial Statements | Additional Information
Coal reserves
Coal Reserves
Marketable
Coal Reserves
Total Marketable
Coal Reserves Proved Probable Proved Probable
Name of operation
Commodity 2021 2021 2021 2021 2021 2020
Australia
New South Wales
Coking/Thermal Coal (Mt)
1,079
579
784
414
1,214
1,266
Queensland
Coking/Thermal Coal (Mt) 326 184 298 151 452 528
South Africa
Thermal Coal (Mt)
522
236
334
129
463
508
Prodeco
Thermal Coal (Mt) – – – – – –
Cerrejón
Thermal Coal (Mt)
200
130
190
120
320
350
Energy products: Oil
Net reserves (Proven and Probable)
1
Working Interest Basis
Equatorial Guinea Chad Cameroon Total
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Combined
mmboe
31 December 2020
11
152
97
–
4
–
112
152
138
Revisions
1 32 – – – –
1
32
7
Production
(2)
(20)
–
–
(1)
–
(3)
(20)
(6)
31 December 2021
10
164
97
–
3
–
110
164
139
Net contingent resources (2C)
1
Working Interest Basis
Equatorial Guinea Chad Cameroon Total
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Oil mmbbl Gas bcf
Combined
mmboe
31 December 2020
26
434
61
–
2
–
89
434
164
31 December 2021
27
310
–
–
–
–
27
310
80
1 “Net” reserves or resources are equivalent to Glencore’s working interest in the asset/property.
Resources and reserves continued
Strategic Report | Corporate Governance
Glencore Annual Report 2021 257
| Financial Statements | Additional Information
Headquarters
Baarermattstrasse 3
P.O. Box 1363
CH-6341 Baar
Switzerland
Registered office
13 Castle Street
St Helier, Jersey
JE1 1ES
Channel Islands
The Company has a primary listing on
the London Stock Exchange (LSE)
and a secondary listing on the
Johannesburg Stock Exchange (JSE).
Our website contains further
information on our business and for
shareholders including as to share
transfer and distributions: glencore.
com/investors/shareholder-centre
Share registrars
Jersey (for London listing)
Computershare Investor Services
(Jersey) Limited
13 Castle Street
St Helier, Jersey
JE1 1ES
Channel Islands
Tel: +44 (0) 370 707 4040
Johannesburg
Computershare Investor Services
(Pty) Ltd
Rosebank Towers,
15 Biermann Avenue,
Rosebank, 2196,
South Africa
Tel: +27 (0) 11 370 5000
Enquiries
Corporate Services
Glencore plc
Baarermattstrasse 3
P.O. Box 1363
CH-6341 Baar
Switzerland
Tel: +41 41 709 2000
Fax: +41 41 709 3000
Email: info@glencore.com
Shareholder Information
Glencore plc is registered in Jersey, is
headquartered in Switzerland and has
operations around the world.
Strategic Report | Corporate Governance
Glencore Annual Report 2021258
| Financial Statements | Additional Information
Important notice concerning this report
including forward looking statements
This document contains statements that are, or may be
deemed to be, “forward looking statements” which are
prospective in nature. These forward looking statements may
be identified by the use of forward looking terminology, or the
negative thereof such as “outlook”, “plans”, “expects” or “does
not expect”, “is expected”, “continues”, “assumes”, “is subject
to”, “budget”, “scheduled”, “estimates”, “aims”, “forecasts”,
“risks”, “intends”, “positioned”, “predicts”, “anticipates” or “does
not anticipate”, or “believes”, or variations of such words or
comparable terminology and phrases or statements that
certain actions, events or results “may”, “could”, “should”, “shall”,
“would”, “might” or “will” be taken, occur or be achieved.
Forward-looking statements are not based on historical facts,
but rather on current predictions, expectations, beliefs,
opinions, plans, objectives, goals, intentions and projections
about future events, results of operations, prospects, financial
condition and discussions of strategy.
By their nature, forward-looking statements involve known
and unknown risks and uncertainties, many of which are
beyond Glencore’s control. Forward looking statements are not
guarantees of future performance and may and often do differ
materially from actual results. Important factors that could
cause these uncertainties include, but are not limited to, those
disclosed in the Risk Management section of this report.
For example, our future revenues from our assets, projects or
mines will be based, in part, on the market price of the
commodity products produced, which may vary significantly
from current levels. These may materially affect the timing and
feasibility of particular developments. Other factors include
(without limitation) the ability to produce and transport
products profitably, demand for our products, changes to the
assumptions regarding the recoverable value of our tangible
and intangible assets, the effect of foreign currency exchange
rates on market prices and operating costs, and actions by
governmental authorities, such as changes in taxation or
regulation, and political uncertainty.
Neither Glencore nor any of its associates or directors, officers
or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or
implied in any forward- looking statements in this document
will actually occur. You are cautioned not to place undue
reliance on these forward-looking statements which only
speak as of the date of this document.
Except as required by applicable regulations or by law,
Glencore is not under any obligation and Glencore and its
affiliates expressly disclaim any intention, obligation or
undertaking, to update or revise any forward looking
statements, whether as a result of new information, future
events or otherwise. This document shall not, under any
circumstances, create any implication that there has been no
change in the business or affairs of Glencore since the date of
this document or that the information contained herein is
correct as at any time subsequent to its date.
No statement in this document is intended as a profit forecast
or a profit estimate and past performance cannot be relied on
as a guide to future performance. This document does not
constitute or form part of any offer or invitation to sell or issue,
or any solicitation of any offer to purchase or subscribe for any
securities.
The companies in which Glencore plc directly and indirectly
has an interest are separate and distinct legal entities. In this
document, “Glencore”, “Glencore group” and “Group” are used
for convenience only where references are made to Glencore
plc and its subsidiaries in general. These collective expressions
are used for ease of reference only and do not imply any other
relationship between the companies. Likewise, the words “we”,
“us” and “our” are also used to refer collectively to members of
the Group or to those who work for them. These expressions
are also used where no useful purpose is served by identifying
the particular company or companies.
Strategic Report | Corporate Governance
Glencore Annual Report 2021 259
| Financial Statements | Additional Information
260
Glencore Annual Report 2021
Independent auditor’s reasonable assurance report on the compliance of Glencore plc’s
European Single Electronic Format (ESEF) prepared Annual Financial Report with the European
Single Electronic Format Regulatory Technical Standard (“ESEF RTS”) as required by the Financial
Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R to the
Members of Glencore plc
Report on compliance with the requirements for iXBRL mark up (“tagging”) of consolidated
financial statements included in the ESEF-prepared Annual Financial Report
We have undertaken a reasonable assurance engagement on the iXBRL mark up of the consolidated financial statements for
the year ended 31 December 2021 of Glencore plc (the “company”) included in the ESEF-prepared Annual Financial Report
prepared by the company.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2021 of the company included in the
ESEF-prepared Annual Financial Report, are marked up, in all material respects, in compliance with the ESEF RTS.
The directors’ responsibility for the ESEF-prepared Annual Financial Report prepared in
compliance with the ESEF RTS
The directors are responsible for preparing the ESEF-prepared Annual Financial Report. This responsibility includes:
• the selection and application of appropriate iXBRL tags using judgement where necessary;
• ensuring consistency between digitised information and the consolidated financial statements presented in human-
readable format; and
• the design, implementation and maintenance of internal control relevant to the application of the ESEF RTS.
Our independence and quality control
We have complied with the independence and other ethical requirements of Financial Reporting Council’s (the “FRC’s”)
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We apply International Standard on Quality Control 1 and, accordingly, maintain a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements, professional standards and
applicable legal and regulatory requirements.
Our responsibility
Our responsibility is to express an opinion on whether the electronic mark up of consolidated financial statements complies
in all material respects with the ESEF RTS based on the evidence we have obtained. We conducted our reasonable assurance
engagement in accordance with International Standard on Assurance Engagements (UK) 3000, Assurance Engagements
Other than Audits or Reviews of Historical Financial Information (“ISAE (UK) 3000”) issued by the FRC.
A reasonable assurance engagement in accordance with ISAE (UK) 3000 involves performing procedures to obtain
reasonable assurance about the compliance of the mark up of the consolidated financial statements with the ESEF RTS. The
nature, timing and extent of procedures selected depend on the practitioner's judgement, including the assessment of the
risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. Our reasonable
assurance engagement consisted primarily of:
• obtaining an understanding of the ESEF RTS mark up process, including internal control over the mark up process relevant
to the engagement;
• reconciling the marked up data with the audited consolidated financial statements of the company dated 31 December
2021;
• evaluating the appropriateness of the company’s mark up of the consolidated financial statements using the XBRL mark-
up language;
• evaluating the appropriateness of the company’s use of iXBRL elements selected from a permitted taxonomy and the
creation of extension elements where no suitable element in the permitted taxonomy has been identified; and
• evaluating the use of anchoring in relation to the extension elements.
In this report we do not express an audit opinion, review conclusion or any other assurance conclusion on the consolidated
financial statements. Our audit opinion relating to the consolidated financial statements of the company for the year ended
31 December 2021 is set out in our Independent Auditor’s Report dated 15 March 2022.
Glencore Annual Report 2021
261
Independent auditor’s reasonable assurance report on the compliance of Glencore plc’s
European Single Electronic Format (ESEF) prepared Annual Financial Report continued
Use of our report
Our report is made solely to the company’s members, as a body, in accordance with ISAE (UK) 3000. Our work has been
undertaken so that we might state to the company those matters we are required to state to them in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our work, this report, or for the conclusions we have formed.
Geoffrey Pinnock, CA (SA)
for and on behalf of Deloitte LLP
Recognised Auditor
London, UK
16 March 2022
This report is printed on Heaven 42 and Print
Speed Offset both of which is made from FSC®
certified and other controlled material.
Printed sustainably in the UK by Pureprint, a
Carbon Neutral company with FSC® Chain of
custody and an ISO 14001-certified environmental
management system recycling over 100% of all
drywaste.
Designed and produced by Brunswick Creative
www.brunswickgroup.com
Glencore plc
Baarermattstrasse 3
CH-6340 Baar
Switzerland
info@glencore.com