REFILE-Glencore cites trade as its 'foremost risk', others rising

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* Risks in focus among investors after Vale dam burst

* Climate risk is high, Glencore capped coal capacity

* New trade barriers could hit demand

By Barbara Lewis

LONDON, March 1 (Reuters) – Miner and trader Glencore
said trade barriers are its “foremost risk”, but
climate, political, legal and other risks had become more
prominent.

Glencore said in its annual report published on Friday that
it was seeking to mitigate these challenges through conservative
spending and strict compliance. It also said in February it
would limit its coal capacity.

Risk is high on the agenda for mining companies after the
Vale dam burst in Brazil provided a stark reminder of
the potential dangers in some parts of the world.

Glencore, which operates in Democratic Republic of Congo and
is the world’s biggest shipper of carbon-intensive seaborne
coal, is viewed by analysts as having a high risk appetite.

While that can drive profits, its share price has
underperformed as the difficulty of mining in countries such as
Congo has risen to the fore and as investors shun coal.

Glencore said trade barriers “could reduce demand for
certain of our commodities or restrict our supplies”.

On market volatility, it also said significant falls,
especially in copper, coal or zinc prices would have “a severe
drag on our financial performance”.

But while commodity price risk is perennial, other concerns
rose last year, especially in Congo, where Glencore mines copper
and cobalt, needed for electric vehicles.

It has said it is waiting for a new government to stabilise
following elections at the end of last year to allow it to try
to negotiate better terms following a new 2018 mining code.

Glencore is also subject to a U.S. Department of Justice
investigation related to its activities in Congo.

Given the challenges, it said spending was at “controllable
levels” to help maintain its strong investment grade rating.

Glencore has also set up an ethics committee and said it was
monitoring climate risk. It regards coal as an opportunity as
well as a risk because its assets are high quality and can
command a premium as demand, especially in Asia, continues.

It also has more exposure than many miners to the copper and
cobalt needed for electrification and electric vehicles.
(Reporting by Barbara Lewis
Editing by Alexander Smith)

(c) Copyright Thomson Reuters 2019. Click For Restrictions – https://agency.reuters.com/en/copyright.html





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