Glencore puts faith in ‘miners’ miner’ Freyberg to turn the tide

The Switzerland-based miner and commodity trader has been grappling with a string of issues in the Democratic Republic of Congo, where it operates two copper mines, and in Zambia, where it owns another asset. Glencore

As Glencore’s chief executive Ivan Glasenberg scrambles to reassure investors that a poor first-half set of results will not be repeated, the spotlight has fallen on a veteran coal miner to tame the company’s once swashbuckling culture and put it back on track.

Peter Freyberg, a 60-year-old executive from South Africa who has spent most of his career in coal, will be key to reversing a drop in earnings to their lowest level in three years and positioning the miner to take advantage of growing demand for metals from the shift to electric cars.

It will not be an easy task. Glencore’s prized mines in Africa, which it had hoped would be a cash cow as the move towards electrified transport and batteries boost demand for cobalt, nickel and copper, have stumbled, dragging down the company’s results.

The miner and trading house posted adjusted earnings before interest, tax, depreciation and amortisation — the measure most closely tracked by analysts — of $5.6bn in the half year to June, down by almost a third on the same period last year. Net income, which was hit by a number of writedowns, fell 92 per cent to $226m. The shares, which have fallen 20 per cent since the start of the year, slipped 1 per cent on Wednesday to 229p.

Mr Freyberg, who is known as a “miners’ miner” according to peers, has been tasked with overseeing all of the company’s 150 industrial operations since December, with a mandate to lower costs and improve performance.

“He makes us all feel comfortable,” said Mr Glasenberg, who has placed his faith in Mr Freyberg at a time when some of the close-knit band of traders, who once surrounded the chief executive, have left the company.

Focus on the Congo

Mr Freyberg’s immediate focus will be turning round Glencore’s two key copper and cobalt mines in the Democratic Republic of Congo, which have struggled with lower metal prices, as well as higher taxes under a new mining code brought in by the Congo’s former president Joseph Kabila, last year.

Analysts said the company would need to move fast as the mines were meant to be a key part of the company’s pitch to investors rather than a drag on results.

“The market may start to lose patience as the record at these assets has been poor,” said Christopher LaFemina at Jefferies.

Glencore said the company would shut its Mutanda mine for at least two years from the end of 2019 because of the impact of lower cobalt prices as well as the new mining code.

At the same time Glencore hopes to increase production at its Katanga mine in the country, which has suffered from maintenance and operational problems. More than 40 local miners who had invaded the mining site died in June following the collapse of part of a pit they were working on.

The company’s African copper business, which also includes the Mopani copper mine in neighbouring Zambia, reported a loss of $315m in the first half of the year.

Mr Freyberg said he wanted to turn the division from one set to consume more than $1bn in cash this year, to one generating over $1.6bn in earnings by 2023.

He described his job at Glencore as making sure the company could “deliver what we say we were going to deliver in a reliable fashion”.

Reassure investors

Some analysts believe that Mr Freyberg’s elevation in the company is partly designed to reassure investors unnerved by a number of regulatory investigations into the company, which traditionally has had a reputation for being run by risk-hungry traders rather than engineers.

Last year, Canadian regulators accused Glencore’s Katanga subsidiary of misstating its results and failing to disclose the full extent of its relationship with Dan Gertler, a billionaire businessman sanctioned by the US.

Telis Mistakidis, Glencore’s former head of copper, was fined $1.8m by the Ontario Securities Commission for issuing misleading financial statements, shortly before he left the company.

Glencore also faces a US Department of Justice investigation into its behaviour in numerous developing countries, including the DRC.

Mr Freyberg said on Wednesday that Katanga would be restructured and corporate governance improved and he had sent some of the company’s top mining specialists to the DRC.

There are also plans to build a secure perimeter fence around the sprawling mine to prevent further intrusions from local miners. Glencore also wants to improve its own safety performance after 11 employee deaths at its operations so far in 2019.

“Our safety performance needs to be addressed and addressed very quickly,” Mr Freyberg said.

Paul Gait, an analyst at Bernstein, said Mr Freyberg’s performance would now be critical in proving that Glencore had grown beyond its sharp-elbowed trading roots.

“He’s got the experience,” Mr Gait said. “[But] if they don’t get this right, those who say Glencore is a bunch of traders who don’t know how to run mining assets will be in the ascendancy.”

Copyright The Financial Times Limited 2019