UPDATE 1-Glencore highlights trade as 'foremost risk', others growing

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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
(Adds comment, share price)

By Barbara Lewis

LONDON, March 1 (Reuters) – Glencore said trade
barriers are its “foremost risk”, but climate, political, legal
and other potential dangers have become more pressing for the
mining and trading group.

Glencore’s annual report published on Friday said it was
seeking to mitigate its risks through conservative spending and
strict compliance after it 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 in January provided a stark
reminder of the potential dangers.

Campaigning investors welcomed Glencore’s increased
recognition of climate risk and the cap on the most polluting
fossil fuel by the world’s biggest shipper of seaborne coal.

“It’s good to see Glencore finally responding somewhat to
the very real and imminent threat posed by our climate crisis,”
Christian Aid’s Senior Private Sector Advisor said, adding it
was critical Glencore delivered on its commitments.

Glencore, which operates in countries including Democratic
Republic of Congo, is viewed by analysts as having a high risk
appetite. While this can drive profits, its share price has
underperformed its peers as political risk has risen to the fore
and as investors shun coal.

On Friday, Glencore’s share price was 0.5 percent higher by
1333 GMT, adding to gains of nearly 5 percent this year.

Trade barriers, Glencore said, “could reduce demand for
certain of our commodities or restrict our supplies”, while on
market volatility, significant falls, especially in copper, coal
or zinc would have “a severe drag on our financial performance”.

Commodity price risk is perennial, but other concerns rose
last year, especially in Congo, where Glencore mines the copper
and cobalt that are increasingly needed for electric vehicles
and electrification to reduce greenhouse gases.

It has said it is ready to negotiate with the new government
following elections at the end of last year as it and other
miners seek better terms than laid out in a new 2018 mining
code.

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

Faced with the rising risks, Glencore said it was keeping
spending at “controllable levels” to provide a buffer and help
it maintain a strong investment grade credit rating.

It has also set up an ethics committee and is monitoring
climate risk, although it regards coal, which remains in demand
from Asia in particular, as an opportunity as well as a risk
because its assets are high quality and can command a premium.
(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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