Ivan Glasenberg. Picture: REUTERS
Ivan Glasenberg. Picture: REUTERS
Image:

London — It’s becoming hard to keep track of all of Glencore’s legal battles in the Democratic Republic of Congo (DRC).

The world’s biggest commodity trader is facing the possibility of a bribery investigation by British prosecutors over its work with Dan Gertler, an Israeli billionaire and close friend of DRC President Joseph Kabila.

That’s on top of other disputes, such as a conflict with Gertler over unpaid royalties. The Swiss trader is also fighting the government over a new mining code that hikes taxes, and is part of a court case with Congo’s state-owned miner Gecamines, which is pushing to dissolve a local operating unit, saying Glencore overburdened it with debt. The Glencore unit says the debt situation is solvable and dissolving the business is premature.

Still, the legal challenges cast a shadow over Glencore and highlight the risks of doing business in the central African nation. In the past 10 years, while other major competitors such as Rio Tinto and BHP Billiton turned away from DRC’s rich resources, unnerved by the difficulty of operating in the country, Glencore’s chief Ivan Glasenberg invested heavily.

With copper and cobalt prices surging on demand for electric car batteries, Glencore is positioned to reap the rewards, but now is being hemmed in by its legal troubles.

Any investigation, if it does proceed, will potentially take years
Tyler Broda
RBC Capital Markets

"Glencore’s more questionable transactions in the DRC with Gertler are coming back to haunt them," said Ben Davis, an analyst at Liberum Capital in London. "No doubt this will cause cheer amongst Glencore’s risk-averse peers, who have been berated by Ivan for misguided investment strategies."

Glencore’s rise to become the world’s biggest cobalt miner and third-largest copper producer is due at least partly to its relationship with Gertler. Ties between Glasenberg and Gertler date back to 2007, and through a series of investments they developed partnerships in the Mutanda and Katanga Mining copper and cobalt operations.

In 2012, Glasenberg said Gertler had been a "supportive" shareholder in Katanga Mining and that his involvement helped attract foreign investment to DRC. At the same time, the relationship brought Glencore unwanted attention as Gertler was caught up in other UK and US bribery investigations.

In 2013, the UK’s Serious Fraud Office opened an investigation into Gertler’s Congolese deals with the then London-listed Kazakh mining company ENRC. Three years later, US hedge fund manager Och-Ziff Capital Management, which funded some of Gertler’s operations in DRC, admitted to having conspired to bribe Congolese officials, including Kabila, with the help of an unidentified Israeli businessman.

Gertler wasn’t charged, but Glencore cut ties shortly after the Och-Ziff settlement, buying out his stakes in their joint ventures in February 2017. Now with the new prospect of a bribery probe, Glencore’s Gertler problem is not going away.

"Any investigation, if it does proceed, will potentially take years," Tyler Broda, an analyst at RBC Capital Markets, said in a note.

The Serious Fraud Office’s probe into ENRC’s involvement with Gertler is still ongoing after six years. Both have consistently denied any wrongdoing and no charges have been brought.

Since Glencore is based in Switzerland, the Serious Fraud Office will have to first show it has jurisdiction because the company’s shares are traded in London. Any final decision on whether to proceed with a formal probe will be up to a committee of Serious Fraud Office senior staff, including interim director Mark Thompson.

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