Glencore shares dive as African troubles escalate dramatically
The subpoena relates to its operations in Nigeria, DRC and Venezuela
03 July 2018 - 10:02 Thomas Biesheuvel and Katie Linsell
London — Glencore tumbled the most in two years as its African troubles escalated dramatically, after US authorities demanded documents relating to possible corruption and money laundering.
The world’s biggest commodity trader said on Tuesday that it has been subpoenaed by the US Department of Justice to produce documents on its compliance with the Foreign Corrupt Practices Act and US money laundering statutes.
The documents relate to the company’s business in Nigeria, the Democratic Republic of Congo and Venezuela, from 2007 to the present.
The shares plunged as much as 11%.
It has been a tumultuous year for Glencore, mostly due to challenges linked to its business in the Congo, where it operates giant copper and cobalt mines.
The Swiss commodities trader and miner is already facing the possibility of a bribery investigation by UK prosecutors over its work with Dan Gertler, an Israeli billionaire and close friend of Congo President Joseph Kabila, people familiar with the situation said in May.
Glencore said it was reviewing the subpoena and would provide further information in due course as appropriate.
The shares dropped to their lowest since July 2017 and were down 10% by 9.06am in London.
On the JSE, the shares were down 12.54% at R56 at 10.22am - their lowest point since August 2017.
“Given the flow of negative news we’ve had through the course of this year, the knee jerk reaction is worse than it otherwise might have been,” Investec Securities analyst Hunter Hillcoat said.
“The DOJ fines can be big, but to wipe out 10% of the market cap would be bigger than any fine I can recall.”
Last month, the company’s problems seemed to be easing as it headed off two of its biggest challenges in the DRC.
Faced with the risk of losing control of its mines, Glencore bowed to the demands from two entities with close government ties — the state-run mining company Gecamines and Gertler, who is the subject of US sanctions.
Glencore’s bonds also slumped on the news. The company’s à500m of notes due April 2026 led the decline, falling 3c on the euro to 108c, the biggest drop in more than two years, according to data compiled by Bloomberg.
Bloomberg