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The Secretive Commodities Giant Glencore (GLEN.L)

Updated on August 31, 2012

Glencore International AG (stock codes: GLEN.L and 805.hk) is a secretive but an extremely powerful commodities giant with headquarter in Switzerland. Glencore directly or indirectly employs more than 55K people globally across 40 countries.

According to the latest information from Reuters, Glencore is now the world's biggest diversified commodities trader. The scope and scale of Glencore's operations are very remarkable: they mine, refine, supply and trade. This commodities giant is in fact dominating the supply chain of many major commodities.

Glencore is actually more than only a commodities trader, it also owns quite a number of publicly listed companies including 34% stakes in Xstrata, the world's 4th largest copper mining giant. Though Glencore drills no oil on its own, it does handle the supply of around 3% of daily oil consumption for the entire world. Despite this important role in global commodities supply chain, until recently the Swiss-based Glencore remained secretive.

In late May 2011, it launched an IPO (initial public offering) of up to 20% of its shares, to raise $10 billion in London and Hong Kong, valuing the secretive commodities giant at around $60 billion. Citigroup, Morgan Stanley and Credit Suisse were the joint global coordinators for the IPO. There are many famous cornerstone investors for this Glencore's IPO, namely Abu Dhabi state-owned Aabar, BlackRock Fund, Bain Capital, Credit Suisse, Fidelity Investment Fund, UBS, Zijin Mining and also the Singapore sovereign fund GIC etc.

This IPO does create a huge amount of wealth for Glencore's original owners as each of its directors will be worth around $167 million. Glencore's existing CEO Ivan Glasenberg seems to be the top winner as he holds 15.8% of Glencore (1.1 billion shares) with a net worth of around $9.5 billion. Listing on a stock exchange also signals that, for the first time in its 37 years history, Glencore's global operations can be scrutinized by investors and regulators.

While there has been much discussions over concerns whether Glencore's IPO can mark the top of the current commodities boom, on 1 June 2011, the European Investment Bank (EIB) announced to halt all new loans to Glencore over concerns about its corporate governance. Mopani Copper Mining, a Zambian subsidiary of the secretive commodities giant Glencore, has been accused of tax evasion and also of causing serious pollution. Although Glencore has already denied the allegations, the European Investment Bank (EIB) still believes their concerns over Glencore's corporate governance are serious and has declined any further financing support to Glencore or its subsidiaries. We expect, as the increased scrutiny for the secretive commodities giant after IPO listing, Glencore's stock price will have to be volatile from time to time.

Do you want to know more about our full stock analysis (by our independent calculations) of Glencore? If yes, please feel free to read this article: Stock Analysis of Commodity Trader Glencore for more details. Want to fully understand and know more about the risks associated with this secretive commodities giant? You may also read this article: Glencore (GLEN.L) Carries More Risks Than You May Expect.

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