This may be the company you havenever heard of but think Marc Rich and the confusion may disappear. Marc Rich was a high profile target of the ‘AmericanJustice System’ and he got out of Dodge. Considering the vagarities of the esteemed ‘Justice System’ one isdisinclined to place much weight in any allegations from the time andplace. In the end, he somehow magicallygot on Bill Clinton’s leaving office ‘pardon list’. Maybe he paid Bill Clinton’sLewinski legal bill.
The fact is that they are a forceto be reckoned with in the world of physicals and are big enough to make someof those markets. As is
, who likesto play also. China
So here we are. The commodity marketis as hot as it has ever been and perhaps this is been fueled by a world awashin cash. Thus we will get to know a lotabout Glencore so keep it in mind.
Special report: The biggest company you never heard of
On Friday February 25, 2011, 7:52 am EST
The Toronto-listed company had lost 97 percent of its market value overthe previous six months and was running out of cash. Needing to finance itsmining projects in the Democratic Republic of Congo -- a country which has someof the world's richest reserves of copper and cobalt -- Katanga's executiveshad sounded the alarm and made a string of calls for help.
Global credit was drying up, the copper market had fallen 70 percent injust five months, and
-- still struggling to recover from a civil war that killed some five millionpeople - was the last place an investor wanted to be. Congo
One company, though, was interested. Executives in the wealthy Swiss
, working in the wood-panelledconference rooms in Glencore International's white metallic headquarters, didtheir sums and were prepared to make a deal. Their terms were simple. village of Baar
They wanted control.
For about $500 million in a convertible loan and rights issue,
agreed to issue more than a billion new shares and hand what would become astake of 74 percent to Glencore, the world's biggest commodities trading group.Today, with copper prices regularly setting records above $10,000 a tone, Katanga 'sstock market value is nearly $3.2 billion. Katanga
Katangahave helped turn Glencore into 'stop-grossing company and earned it comparisons with investment banking giantGoldman Sachs. Switzerland
In the world of physical trading -- buying, transporting and sellingthe basic stuff the world needs -- Glencore is omnipresent and controversial,just as Goldman is in banking. Bigger than Nestle, Novartis and UBS in terms ofrevenues, Glencore's network of 2,000 traders, lawyers, accountants and otherstaff in 40 countries gives it real-time market and political intelligence oneverything from oil markets in Central Asia to what sugar's doing in southeastAsia. Young, arrogant, and often brilliant, its staff dominate their market.The firm's top executives have forged alliances with Russian oligarchs andwell-connected African mining magnates. Like Goldman, Glencore uses itsconsiderable heft to extract the best possible terms in every deal it does.
Some might add that Glencore also fits the description that RollingStone magazine gave to Goldman: "a great vampire squid wrapped around theface of humanity".
Sometime in the coming weeks, Glencore is likely to announce itsInitial Public Offering. The firm currently operates as a privately heldpartnership, with staff sharing the profits according to a performance-basedincentives scheme. Sources familiar with Glencore's plans say it may list 20percent of the company, possibly split between the
LondonStock Exchange and Hong Kong. Such a listingcould yield up to $16 billion and value the firm at as much as $60 billion.
Fueled by the lofty prices in many of the raw materials that Glencorebuys, mines, ships and sells, the float would be among the biggest in
's history. It couldlaunch the firm onto the FTSE 100 index alongside resource giants such as BHPBilliton, Rio Tinto, and Royal Dutch Shell and from there into the pensionfunds and investment portfolios of millions of people who know virtuallynothing about the secretive giant. It would also represent a huge payday forinvestment banks -- perhaps $300 to $400 million, according to estimates byFreeman & Co., a mergers and acquisitions consultancy. London
At the same time, it would force a company that for four decades hasthrived outside the limelight to reveal some of its secrets. Can it withstandbecoming a household name? Does it risk losing its prized traders? GivenGlencore's impeccable timing in deals, is an IPO a certain sign that we'vereached the top of the commodities cycle?
"Their knowledge of the flow of commodities around the world istruly frightening," says an outsider who has worked closely with seniorGlencore officials and who, like most people interviewed by Reuters for thisreport, declined to be identified speaking about the company for fear it couldjeopardize sensitive business relationships. Glencore executives declined tocomment on the record, though the company did issue a statement about itscurrent disclosure policy.
UNDER THE RADAR
Nestling in a lakeside village in
's low-tax canton ofZug, Glencore's starkly modern headquarters reflect a culture where tradingaggression is coupled with public discretion. In front of the building a simpleconcrete sculpture -- a sphere spinning atop a pyramid -- hints at Glencore'sglobal reach. Inside, the hushed hallways are adorned with modern art, theoffices eerily quiet. Switzerland
"Glencore is looked on as guys screaming into telephones, but it'smore the dull old business of logistics," says a mining industry source,describing hours spent on the phone and organizing trade-related paperwork."Glencore trading floors are more akin to DHL offices than GoldmanSachs."
Yet within the commodities and mining sectors, Glencore is regardedwith a mix of admiration and fear. "It's an incredibly performance-basedculture -- investment banking times three, probably," says a secondoutsider.
Glencore's client list is a roster of the world's largest firmsincluding BP, Total, Exxon Mobil, ConocoPhilips, Chevron, Vale, Rio Tinto,ArcelorMittal and Sony, as well as the national oil companies of Iran, Mexicoand Brazil and public utilities in Spain, France, China, Taiwan and Japan.
Physical commodities traders, like Glencore and its main rivals Vitol,Trafigura and Cargill, make their money finding customers for raw materials andselling them at a mark-up, using complex hedges to reduce the risk of badweather, market swings, piracy or regime change.
Unlike Chicago traders who scream out bets on the future prices oforange juice or pork bellies, physical commodity traders negotiate prices andarrange shipments of cargo quietly, keeping their positions well hidden fromothers.
"It's modern financial engineering meshed with an old-fashionedcommodity trading house," said John Kilduff, a partner at the hedge fundAgain Capital LLC in
."It's amazing how this formula has flown under the radar for so long, asthe profits and growth of these firms has been astounding." New York
Glencore's profit after tax topped $4.75 billion in 2008, not far offits best year ever, 2007, when profit ran to around $5.19 billion. Even in thegruesome market of 2009, it raked in more than $2.72 billion.
Performance is rewarded on a scale that would turn even Wall Streetgreen, with bonuses for star traders running into the tens of millions.Glencore's 500 partners and key staff are sitting on a book value of $20billion.
The secret, says the second outsider, is the traders' incredible focus."I don't recall talking to any of these guys -- and I've spent a lot oftime with them -- about anything other than business," he told Reuters."I have no idea what sort of family life these guys have. This iseverything."
Employees are hired young and expected to make a career at the group,where they are known as either "thinkers" -- bright number-cruncherswho design the company's complex financial deals -- or "soldiers",the hard-driven traders who fight to win the transactions.
The company's 10 division managers are aged 37 to 52 and remain largelyanonymous outside Glencore's business circles. "They're really brightguys, they are really focused, they play to win every day," says a miningexecutive in
North America. Or as the secondoutsider puts it: "They look like kids, really -- but they are incrediblyimpressive individuals."
Nobody more so than Chief Executive Ivan Glasenberg, a leanpublicity-shy operator whose sport is race-walking. Glasenberg, 54, grew up in
South Africa and has been a champion walker forboth South Africa and . Eachmorning he runs or swims, often with colleagues. "The thing about Ivan, hecan fly in and meet presidents of countries but he also talks to the guy on thetrading floor," said Jim Cochrane, chief commercial officer and executivedirector of the Kazakh mining group ENRC. Israel
After earning an MBA at the
Universityof Southern California in 1983,Glasenberg was hired by Glencore as a coal trader in . He does not sufferfools and has a fiery temper, but is also intensely charming and has a sharpmemory for details about people, according to people who know him. Despitebeing a billionaire in charge of thousands of staff, "this is a guy thatpicks up his own phone," the second outsider said. South Africa
THE MARC RICH LEGACY
Glencore likes to promote from within and build a kind of closed,self-sustaining network of senior traders, a culture encouraged by thecompany's founder Marc Rich. Not that Glencore likes to mention Rich, a figureso notorious that he's not even mentioned in the official history on Glencore'swebsite.
Rich escaped Nazi Europe as a seven year old, and grew up in the
.He launched the trading group which would become Glencore under his own name in1974. United States
Rich was a sensation in commodity circles -- he is credited by somewith the invention of the spot market for crude oil -- but by 1983 U.S.authorities had charged him with evading taxes and selling oil to Iran duringthe 1979-81 hostage crisis and Rich fled to Switzerland where he lived as afugitive for 17 years.
Rich has always insisted he did nothing illegal and he was officiallypardoned by Bill
on the President's last day in the White House in January 2001. Among those wholobbied on his behalf were Israeli political heavyweights Ehud Barak and ShimonPeres, according to "The King of Oil", a book about Rich byjournalist Daniel Ammann. In the book -- written after interviews with Rich -the trader admits supplying oil to apartheid Clinton South Africa, bribing officials in countries such as Nigeria and assisting 'sintelligence agency. In the time of the Shah, Rich says, he engineered a dealfor a secret pipeline through which Mossad, Israel Irancould pump oil to . Israel
"(Rich) was faster and more aggressive than his competitors,"Ammann told Reuters last year. "He was able to recognize trends and seizeopportunities before other traders. And he went where others feared to tread --geographically and morally. Trust and loyalty are very important to him. In manydeals he wouldn't rely on contracts but on the idea that 'my word is mybond'."
Living as a fugitive put a strain on Rich, but according to Ammann, itwas a business blunder in 1992 that paved the way for the power struggle thatended his connection with the trading house he had founded. Rich spent morethan $1 billion trying in vain to control the zinc market. His bid failed andwith $172 million in losses, the firm was close to collapse. Rich wasultimately forced to sell out to his management and hand over control to aformer metals trader, the German Willy Strothotte.
The forced sale, in 1994, netted Rich a reported $480 million. Hepicked up an extra $120 million when the firm was revalued and he learned itsnew owners had broken their side of the deal by secretly selling on around 20percent of the stock. Fifteen years ago, then, his majority stake in thecompany translated into about $600 million. Today the company is worth $60billion, according to Liberum Capital.
The company was reborn under Strothotte as Glencore. It has never saidwhere the name comes from but some have speculated it might be an amalgam ofthe first two letters of the words "global, energy, commodities andresources".
The firm continued to trade, make money -- and occasionally become implicatedin controversial dealings. It was one of dozens accused of paying kickbacks to
in 2005 bya commission that probed the United Nation's Oil for Food program. But whileDutch-based rival Vitol was fined $17.5 million after pleading guilty, a preliminaryjudicial investigation into Glencore by Iraq 's attorney-generalfound a "lack of culpable information". Glencore maintained that ifany payments were made by agents it did not know or approve of them. Switzerland
The impulse to seize opportunities that others don't see, or decide toavoid, lives on. Could a flotation shed unwanted light on the business methodsthat have so far stayed under the radar?
A SIGNATURE DEAL
Glencore's Christmas swoop on Katanga Mining was something of asignature deal for the firm, proof that it can use its role as the tradingworld's biggest middleman to its advantage. The company is always on the prowlfor opportunities to sell producers' output. But it also likes to set things upso that when markets tumble, it's ready to buy those same producers outright.
Katanga had just the right combination of elements: relationships builtover time, a project in need of funds and an exclusive marketing agreement, andthe scope for equity participation. The losers, in this case, would be thecompany's minority shareholders, most of whose holdings were diluted by over800 percent.
The acquisition was the culmination of 18 months of deal-making in
, wherethe first freely elected government in four decades had embarked on a sweepingreview of mining licenses granted by previous regimes. Congo
Congo'ssoutheast copper belt had battled for two years to rebuild what had once been Africa's richest copper mines, but were now littered withrusted hulks. In 2007, when markets had been riding high on cheap credit andcommodity prices boomed, Katangahad been the subject of a $1.4 billion hostile takeover bid by a company led byformer cricketer Phil Edmonds. It had the potential to become the world's biggestproducer of cobalt -- used in batteries, jet turbines and electroplating. England
As the credit crisis began to bite, metals prices tanked and riskycompanies around the world found it ever tougher to raise finance.
Where others saw risks, though, Glencore scented opportunity. In June2007, Glencore and partner Dan Gertler, an Israeli mining magnate, paid 300million pounds for a quarter-stake in mining company Nikanor, which was seekingto revive derelict copper mines next to
's. That deal gave Glencoreexclusive rights to sell all Nikanor's output -- an "offtake"agreement. Katanga
Offtake deals are common in risky projects like mining, where banks arereluctant to lend because of uncertainty about how they will be repaid. Anofftake ensures a miner has customers before it starts digging, and provides aguaranteed source of raw materials to a trader, which can also act as securityif the trader provides finance.
By investing in Nikanor, Glencore consolidated a powerful partnership:half of the stake it bought was on behalf of a trust linked to Gertler, an old
hand who industry sources say has close ties to government officials includingPresident Joseph Kabila. Congo
The trading company was ready to oblige. In October it agreed to a10-year offtake deal and a loan of $150 million that could be converted into
shares.Just one month later, Katanga and its neighbor Nikanor merged, giving Glencore 8.5 percent of the enlargedfirm. Katanga
In June 2008, with the global financial crisis deepening,
Chief Executive Art Ditto resigned for "personal reasons". Glencore,exercising a clause from its earlier Nikanor purchase, appointed a caretakerchief executive. It was then that Katanga embarked on itsincreasingly desperate search for new funds. Katanga
Issuing a statement that said it was "in serious financialdifficulty",
struck its deal with Glencore, which added $100 million plus outstanding interestto its earlier loan, to give a total of $265 million. The Swiss trading firmsubsequently sold on about a quarter of the loans to RP Capital, a hedge fundalso linked to Gertler. Then in a linked deal that closed in July 2009, Katanga 's debtburden was slashed by swapping the loans for shares alongside a $250 millionrights issue. Most of that equity, too, went to Glencore. Katanga
Now Glencore had a mining complex with the potential to be
Africa's biggest copper producer. To approve thearrangement, Katanga hadused stock exchange rules that exempt companies in financial distress from ashareholder vote. That left most of Toronto 's minority shareholdingsfacing a virtual wipeout from the heavy dilution, a measure they voted throughin a subsequent shareholders' meeting. Katanga
"Everybody got taken down. There were a couple of savvy guys whogot out early, but most people got taken for a ride. It's a sad story,"said analyst Cailey Barker with Numis Securities in
had little choice but to accept Glencore's terms since it was probably a coupleof weeks away from bankruptcy. "The only person that was left wasGlencore," Barker said. "They said we'll get involved, but we'll takeour pound of flesh." Katanga
This sort of deal -- with the right to convert debt into equity in thetail -- has proved pivotal to Glencore as it has built up its mining assets.Analyst Michael Rawlinson at Liberum Capital, who was previously an investmentbanker for JP Morgan Cazenove and has worked on deals in
for Nikanor, says the factGlencore was on the spot is key. Congo
"If you're someone like
Rio(Tinto) or Anglo (American), often in these early-stage places you have noreason to be there, you haven't got any assets there," he says. "Butif you're Glencore, you source concentrate and product from these places, youhave trading relationships. They're on the ground first, so they see theseopportunities first."
Glencore is constantly cutting similar deals, some of the biggest ofwhich it already has in place with its Swiss neighbor and close affiliateXstrata. In the space of two weeks recently, Glencore agreed offtake deals with
London Mining for its Sierra Leone iron ore production and Mwana Africa for nickeloutput in .The deals often come with, or are followed by, a financing arrangement: U.S.PolyMet Mining Corp, for instance sealed an arrangement in January thatinvolves Glencore buying shares with the right to convert the company's debtinto equity. Zimbabwe
A NECESSARY EVIL
People familiar with the IPO planning say Glencore's top managers haveyet to give a final sign-off to a float, though Citigroup, Morgan Stanley andCredit Suisse are all working on the potential transaction. The earliestpossible date for a launch would be April, after first-quarter results arecompiled.
It's inevitable that the timing will attract attention.
"It's almost guaranteed that when they decide to list, everyonewill say they're calling the top of metals market," says analyst TomGidley-Kitchin at Charles Stanley in
."Like Goldman, people will ask, 'Why are they selling now?'" London
As one mining industry source puts it: "We all know that Glencorenever leaves any crumbs on the table."
Like Goldman, which floated in 1999, Glencore wants the permanentcapital that comes with a listing. In a private partnership, payouts todeparting partners shrink the capital base, but public companies' equityremains intact even if the shares change hands at dizzying speeds.
Raising public capital would help Glencore pay out any retiring employees,whose compensation is now set to be disbursed over five years from the firm's$20 billion book value.
New equity would also reassure the big credit rating agencies, whichrate Glencore debt a notch or two above "junk". The more flexiblecapital structure that comes with a listing should also allow it to make reallymeaty acquisitions.
It has long been Glasenberg's ambition to merge Glencore withLondon-listed Xstrata, industry sources say. The companies are already so closethat the Financial Times' influential Lex column has dubbed them the"Tweedledum and Tweedledee" of their industry. Glencore owns 34.4percent of Xstrata stock, they share a chairman, Willy Strothoffe; andXstrata's assets could, in a stroke, fill the gaps in Glencore's portfolio tocreate a mining and trading powerhouse.
But when speculation surfaced last year around a Glencore-Xstratamerger, Xstrata shareholders opposed it, arguing a valuation for Glencoreshould be set by market forces, not agreed to behind closed doors. "It'svery difficult to value Glencore because you just don't know enough about it.That's why most investors would prefer an IPO -- which will give you morevisibility," one of the top 10 biggest institutional investors in Xstratatold Reuters last year.
Perhaps to force things to a head, Glencore in December 2009 set theclock ticking on a change in its set-up by issuing a convertible bond. A yearafter picking up Katanga, the firm sold $2.2 billion in bonds that can convertinto shares to a select band of investors, including energy-focused privateequity firm First Reserve, Singaporean sovereign wealth fund GIC, China's ZijinMining Group, financier Nathaniel Rothschild plus U.S. fund managers BlackRock,Fidelity and Capital Group.
The convertibles pay a staid interest rate of 5 percent a year untilthey mature in 2014, but carry extra incentives for Glencore to transformitself. If by December 2012 Glencore has not floated or merged with anothercompany, bondholders can sell their bonds back to Glencore at a price whichwould give investors an annualized return of 20 percent -- in line with thesort of returns you might expect from equities. This payment could take placefrom mid-2013, though Glencore will not be penalized if markets turn lower andan IPO is not attractive.
Industry sources expect merger talks to begin about six months afterthe IPO. If Glencore and Xstrata do not combine forces, the two could end upcompeting for mining assets. That would heighten the increasingly tense relationshipbetween their brash, strong-willed South African CEOs: Glasenberg and Xstrata'sMick Davis.
"You would expect any dialogue between them to be very robust -both of them have black-and-white views on value," says an industry sourcewho knows both men.
Beyond Xstrata, Glencore's ambitions could soar. As a blue-chip name itwould be able to compete against BHP Billiton and
RioTinto for some of the biggest deals around.
One recent rumor, according to Liberum's Rawlinson, is that Glencoremight make a play for Kazakh miner ENRC, a London-listed FTSE-100 company witha market value of $21 billion -- too big to swallow now, but feasible onceGlencore could issue shares as payment. Other majors would likely regard ENRC,which focuses on emerging nations including
, as too risky. Congo
"I don't think any other firm would dare look at them, butGlencore would," said Rawlinson. "They know how to deal with
Congo, they know how to deal with oligarchs andthey already operate in .So, there's a perfect example of how they'll do stuff that other peoplewon't." Kazakhstan
HANDCUFFS AND RISKS
But a listing would also bring a host of issues to grapple with. Forone thing, Glencore will have to reassure investors that its prized traderswon't just cash in and take off. People in the industry point out that traderswho have accumulated large fortunes without any public attention may prefer tokeep working in a private environment -- perhaps at a competitor, or a tradinghouse they set up themselves.
"I think there could be serious concerns about what happens whenthe very senior management receives shares," says Jonathan Pitkanen, headof investment grade research at fund manager Threadneedle. "I would expectthat key individuals would have to enter into some form of golden handcuffs sothey are tied to that business for an extended period of time."
There are other risks in exposing a secretive, agile business to thescrutiny of public ownership.
Glasenberg can be affable to those he knows, but he cherishes his privacyand dreads the day an IPO will force him to step into the limelight, industrysources say.
The firm would also need to appoint independent directors to its board,and would likely search for a chairman with top credentials in financialcircles but no existing links to Glencore. In that light, the company's mostsignificant departure could be Strothotte, 66, who joined in 1977 and ran themetals and minerals division before replacing Rich as CEO in 1993.
"Clearly there's going to be a sea-change once they are publiclylisted, given the requirements of listings first of all, plus the complexitythat you have within Glencore as well," says Pitkanen.
A big part of that would be the requirement to publicly shareinformation that Glencore now gives only to its banks and bond investors.
Currently, "Glencore is a private company and our communicationspolicy with the media reflects this status," the firm said in a statementto Reuters. "Full financial disclosure is made to all of the company'sshareholders, bondholders, banks, rating agencies and other key stakeholders.Glencore publicly discloses aspects of the company's financial performance on asix monthly basis."
Could the glare of a public listing be less dramatic than some fear?Resource groups such as BP, which houses one of the world's biggest oil tradingoperations, have managed to juggle public life without revealing too much aboutexactly what their trading arms are up to. Gidley-Kitchen says that like manybanks, a listed Glencore should also manage to keep most details of its tradercompensation under the radar: "Goldmans and Barclays Capital managed toavoid revealing absolutely everything that they are doing and I would thinkGlencore would be able to do the same."
But that wouldn't stop activists from digging. Gavin Hayman, directorof campaigns at activist group Global Witness, says information disclosed as aresult of an IPO could help environmental and corruption campaigners keep trackof what Glencore is doing in far-flung corners of the globe.
"Trading companies like Glencore are notoriously opaque, even bythe standards of an opaque sector like natural resources. They deal with a partof the chain that is particularly prone to mismanagement, corruption anddiversion," Hayman says. "Hopefully listing will bring moretransparency and allow greater scrutiny of its operations, which is goodnews."
In one example, officials in
believe pollution fromGlencore's Mopani mines is causing acid rain and health problems in an areawhere 5 million people live. The Environmental Council of Zambia has said it is looking into"a number of complaints" regarding pollution from Mopani, but has notpenalized the company for any wrongdoing. Zambia
"Smelting operations release sulphur dioxide and other pollutantswhich have severely affected residents with various skin, eye and respiratorydiseases. Because of mining waste Mufulira has acidic and poisoned water,"Mufulira town clerk Charles Mwandila told Reuters in an interview.
Mopani says it has already significantly improved environmentalperformance since privatization, and is following a clear and agreed plan tomake further progress. "Investment to improve environmental performancehas already amounted to some $300 million with another $150 million ofinvestment planned."
Glencore's huge coal operation in Colombia, Prodeco, was fined a totalof nearly $700,000 in 2009 for several environmental violations, includingwaste disposal without a permit and producing coal without an environmentalmanagement plan. Xstrata had to pay the fines during its temporary ownership in2009, but said the violations occurred before it took over. Prodeco said theviolations themselves took place years earlier, before it acquired and ran thenetwork of mines. Xstrata, like many major mining groups, has experience inmeeting demands for tough green standards and says it put in place anenvironmental management system at Prodeco before handing the mines back toGlencore in early 2010.
,the current government has tried to reduce the role played by middle men suchas Glencore with state oil company Petroecuador, says Fernando Villavicencio, aQuito-based oil sector analyst. "Glencore has not been transparent in itsbusiness in Ecuador," Ecuador said. The company "had been a favorite of almost all the democraticgovernments of Villavicencio .It won almost all the contracts it competed for. They signed contracts withapparently low differentials, only to renegotiate the contracts in the middleof their terms, arguing that their costs had risen. Petroecuador usually wentalong with it." Ecuador
Tenders such as those in
are public and subject toextensions and negotiations which are expressly written into contracts,according to Glencore. Ecuador
WHO WON'T BUY?
To ready it for public life, Glencore is preparing a sustainabilityreport to bring it into line with mining majors and using Finsbury, a publicrelations firm whose clients include Royal Dutch Shell and
RioTinto, for strategic advice. Former Shell spokesman Simon Buerk has been takenon to reinforce in-house communications.
But no matter what Glencore does, some investors will steer clear.
Mike Fox, head of UK equities at Co-Operative Asset Management and themanager of two sustainable funds, says ethical investing can embrace thenatural resources sector -- his funds have stakes in BG Group, the natural gasproducer, and Lonmin, whose platinum is used in catalytic converters - but thatit would be difficult to hold shares in many oil and mining companies:"Sustainable investors will always have an issue with the very fundamentalnature of these businesses," he says.
Glencore's size alone, though, would mean scores of pension funds thattrack the FTSE index buy the stock. It would also pick up automatic demand fromtracker funds that mimic the index or the wider FTSE All-Share. A Swiss bankerwith knowledge of the plans puts it simply: "All the funds will have toparticipate."
Glencore's arrival in the FTSE would intensify the
exchange's shift into natural resourcefirms. Fox says the increasing domination by a single sector is a "bigheadache" for smaller British investors who want a diversified portfolio."It concerns me as much from a financial perspective as a moralperspective," he says. "Customers will not expect that when theyinvest in a mainstream London growth fund that a third of their money will end up in commodities." UK
While commodities remain hot, though, that's unlikely to change. AsGlencore ponders a float,
Mining is reaping the benefit of the surging markets and its wealthy, powerfulowner. After losing $108 million in 2009, it posted an annual profit of $265million in 2010. Katanga
(Additional reporting by Kylie MacLellan and Karen Norton in London,Jason Rhodes and Martin de Sa'Pinto in Zurich, David Sheppard and Joe Giannonein New York, Santiago Silva in Quito and Chris Mfula in Lusaka; Editing by SaraLedwith and Simon Robinson)