Glencore and PolymetOn Friday February 25, 2011, 7:52 am EST
BAAR, SWITZERLAND (Reuters) - OnChristmas Eve 2008, in the depths of the global financial crisis,Katanga Mining accepted a lifeline it could not refuse.
The Toronto-listed company had lost97 percent of its market value over the previous six months and wasrunning out of cash. Needing to finance its mining projects in theDemocratic Republic of Congo -- a country which has some of the world'srichest reserves of copper and cobalt -- Katanga's executives hadsounded the alarm and made a string of calls for help.
Global credit was drying up, thecopper market had fallen 70 percent in just five months, and Congo --still struggling to recover from a civil war that killed some fivemillion people - was the last place an investor wanted to be.
One company, though, was interested.Executives in the wealthy Swiss village of Baar, working in thewood-panelled conference rooms in Glencore International's whitemetallic headquarters, did their sums and were prepared to make a deal.Their terms were simple.
They wanted control.
For about $500 million in aconvertible loan and rights issue, Katanga agreed to issue more than abillion new shares and hand what would become a stake of 74 percent toGlencore, the world's biggest commodities trading group. Today, withcopper prices regularly setting records above $10,000 a tone, Katanga'sstock market value is nearly $3.2 billion.
Deals like Katanga have helped turnGlencore into Switzerland's top-grossing company and earned itcomparisons with investment banking giant Goldman Sachs.
In the world of physical trading --buying, transporting and selling the basic stuff the world needs --Glencore is omnipresent and controversial, just as Goldman is inbanking. Bigger than Nestle, Novartis and UBS in terms of revenues,Glencore's network of 2,000 traders, lawyers, accountants and otherstaff in 40 countries gives it real-time market and politicalintelligence on everything from oil markets in Central Asia to whatsugar's doing in southeast Asia. Young, arrogant, and often brilliant,its staff dominate their market. The firm's top executives have forgedalliances with Russian oligarchs and well-connected African miningmagnates. Like Goldman, Glencore uses its considerable heft to extractthe best possible terms in every deal it does.
Some might add that Glencore alsofits the description that Rolling Stone magazine gave to Goldman: "agreat vampire squid wrapped around the face of humanity".
Sometime in the coming weeks,Glencore is likely to announce its Initial Public Offering. The firmcurrently operates as a privately held partnership, with staff sharingthe profits according to a performance-based incentives scheme. Sourcesfamiliar with Glencore's plans say it may list 20 percent of thecompany, possibly split between the London Stock Exchange and Hong Kong.Such a listing could yield up to $16 billion and value the firm at asmuch as $60 billion.
Fueled by the lofty prices in many ofthe raw materials that Glencore buys, mines, ships and sells, the floatwould be among the biggest in London's history. It could launch thefirm onto the FTSE 100 index alongside resource giants such as BHPBilliton, Rio Tinto, and Royal Dutch Shell and from there into thepension funds and investment portfolios of millions of people who knowvirtually nothing about the secretive giant. It would also represent ahuge payday for investment banks -- perhaps $300 to $400 million,according to estimates by Freeman & Co., a mergers and acquisitionsconsultancy.
At the same time, it would force acompany that for four decades has thrived outside the limelight toreveal some of its secrets. Can it withstand becoming a household name?Does it risk losing its prized traders? Given Glencore's impeccabletiming in deals, is an IPO a certain sign that we've reached the top ofthe commodities cycle?
"Their knowledge of the flow ofcommodities around the world is truly frightening," says an outsider whohas worked closely with senior Glencore officials and who, like mostpeople interviewed by Reuters for this report, declined to be identifiedspeaking about the company for fear it could jeopardize sensitivebusiness relationships. Glencore executives declined to comment on therecord, though the company did issue a statement about its currentdisclosure policy.
UNDER THE RADAR
Nestling in a lakeside village inSwitzerland's low-tax canton of Zug, Glencore's starkly modernheadquarters reflect a culture where trading aggression is coupled withpublic discretion. In front of the building a simple concrete sculpture-- a sphere spinning atop a pyramid -- hints at Glencore's global reach.Inside, the hushed hallways are adorned with modern art, the officeseerily quiet.
"Glencore is looked on as guysscreaming into telephones, but it's more the dull old business oflogistics," says a mining industry source, describing hours spent on thephone and organizing trade-related paperwork. "Glencore trading floorsare more akin to DHL offices than Goldman Sachs."
Yet within the commodities and miningsectors, Glencore is regarded with a mix of admiration and fear. "It'san incredibly performance-based culture -- investment banking timesthree, probably," says a second outsider.
Glencore's client list is a roster ofthe world's largest firms including BP, Total, Exxon Mobil,ConocoPhilips, Chevron, Vale, Rio Tinto, ArcelorMittal and Sony, as wellas the national oil companies of Iran, Mexico and Brazil and publicutilities in Spain, France, China, Taiwan and Japan.
Physical commodities traders, likeGlencore and its main rivals Vitol, Trafigura and Cargill, make theirmoney finding customers for raw materials and selling them at a mark-up,using complex hedges to reduce the risk of bad weather, market swings,piracy or regime change.
Unlike Chicago traders who scream outbets on the future prices of orange juice or pork bellies, physicalcommodity traders negotiate prices and arrange shipments of cargoquietly, keeping their positions well hidden from others.
"It's modern financial engineeringmeshed with an old-fashioned commodity trading house," said JohnKilduff, a partner at the hedge fund Again Capital LLC in New York."It's amazing how this formula has flown under the radar for so long, asthe profits and growth of these firms has been astounding."
Glencore's profit after tax topped$4.75 billion in 2008, not far off its best year ever, 2007, when profitran to around $5.19 billion. Even in the gruesome market of 2009, itraked in more than $2.72 billion.
Performance is rewarded on a scalethat would turn even Wall Street green, with bonuses for star tradersrunning into the tens of millions. Glencore's 500 partners and key staffare sitting on a book value of $20 billion.
The secret, says the second outsider,is the traders' incredible focus. "I don't recall talking to any ofthese guys -- and I've spent a lot of time with them -- about anythingother than business," he told Reuters. "I have no idea what sort offamily life these guys have. This is everything."
Employees are hired young andexpected to make a career at the group, where they are known as either"thinkers" -- bright number-crunchers who design the company's complexfinancial deals -- or "soldiers", the hard-driven traders who fight towin the transactions.
The company's 10 division managersare aged 37 to 52 and remain largely anonymous outside Glencore'sbusiness circles. "They're really bright guys, they are really focused,they play to win every day," says a mining executive in North America.Or as the second outsider puts it: "They look like kids, really -- butthey are incredibly impressive individuals."
Nobody more so than Chief ExecutiveIvan Glasenberg, a lean publicity-shy operator whose sport israce-walking. Glasenberg, 54, grew up in South Africa and has been achampion walker for both South Africa and Israel. Each morning he runsor swims, often with colleagues. "The thing about Ivan, he can fly inand meet presidents of countries but he also talks to the guy on thetrading floor," said Jim Cochrane, chief commercial officer andexecutive director of the Kazakh mining group ENRC.
After earning an MBA at theUniversity of Southern California in 1983, Glasenberg was hired byGlencore as a coal trader in South Africa. He does not suffer fools andhas a fiery temper, but is also intensely charming and has a sharpmemory for details about people, according to people who know him.Despite being a billionaire in charge of thousands of staff, "this is aguy that picks up his own phone," the second outsider said.
THE MARC RICH LEGACY
Glencore likes to promote from withinand build a kind of closed, self-sustaining network of senior traders, aculture encouraged by the company's founder Marc Rich. Not thatGlencore likes to mention Rich, a figure so notorious that he's not evenmentioned in the official history on Glencore's website.
Rich escaped Nazi Europe as a sevenyear old, and grew up in the United States. He launched the tradinggroup which would become Glencore under his own name in 1974.
Rich was a sensation in commoditycircles -- he is credited by some with the invention of the spot marketfor crude oil -- but by 1983 U.S. authorities had charged him withevading taxes and selling oil to Iran during the 1979-81 hostage crisisand Rich fled to Switzerland where he lived as a fugitive for 17 years.
Rich has always insisted he didnothing illegal and he was officially pardoned by Bill Clinton on thePresident's last day in the White House in January 2001. Among those wholobbied on his behalf were Israeli political heavyweights Ehud Barakand Shimon Peres, according to "The King of Oil", a book about Rich byjournalist Daniel Ammann. In the book -- written after interviews withRich - the trader admits supplying oil to apartheid South Africa,bribing officials in countries such as Nigeria and assisting Mossad,Israel's intelligence agency. In the time of the Shah, Rich says, heengineered a deal for a secret pipeline through which Iran could pumpoil to Israel.
"(Rich) was faster and moreaggressive than his competitors," Ammann told Reuters last year. "He wasable to recognize trends and seize opportunities before other traders.And he went where others feared to tread -- geographically and morally.Trust and loyalty are very important to him. In many deals he wouldn'trely on contracts but on the idea that 'my word is my bond'."
Living as a fugitive put a strain onRich, but according to Ammann, it was a business blunder in 1992 thatpaved the way for the power struggle that ended his connection with thetrading house he had founded. Rich spent more than $1 billion trying invain to control the zinc market. His bid failed and with $172 million inlosses, the firm was close to collapse. Rich was ultimately forced tosell out to his management and hand over control to a former metalstrader, the German Willy Strothotte.
The forced sale, in 1994, netted Richa reported $480 million. He picked up an extra $120 million when thefirm was revalued and he learned its new owners had broken their side ofthe deal by secretly selling on around 20 percent of the stock. Fifteenyears ago, then, his majority stake in the company translated intoabout $600 million. Today the company is worth $60 billion, according toLiberum Capital.
The company was reborn underStrothotte as Glencore. It has never said where the name comes from butsome have speculated it might be an amalgam of the first two letters ofthe words "global, energy, commodities and resources".
The firm continued to trade, makemoney -- and occasionally become implicated in controversial dealings.It was one of dozens accused of paying kickbacks to Iraq in 2005 by acommission that probed the United Nation's Oil for Food program. Butwhile Dutch-based rival Vitol was fined $17.5 million after pleadingguilty, a preliminary judicial investigation into Glencore bySwitzerland's attorney-general found a "lack of culpable information".Glencore maintained that if any payments were made by agents it did notknow or approve of them.
The impulse to seize opportunitiesthat others don't see, or decide to avoid, lives on. Could a flotationshed unwanted light on the business methods that have so far stayedunder the radar?
A SIGNATURE DEAL
Glencore's Christmas swoop on KatangaMining was something of a signature deal for the firm, proof that itcan use its role as the trading world's biggest middleman to itsadvantage. The company is always on the prowl for opportunities to sellproducers' output. But it also likes to set things up so that whenmarkets tumble, it's ready to buy those same producers outright.
Katanga had just the rightcombination of elements: relationships built over time, a project inneed of funds and an exclusive marketing agreement, and the scope forequity participation. The losers, in this case, would be the company'sminority shareholders, most of whose holdings were diluted by over 800percent.
The acquisition was the culminationof 18 months of deal-making in Congo, where the first freely electedgovernment in four decades had embarked on a sweeping review of mininglicenses granted by previous regimes.
Workers in Congo's southeast copperbelt had battled for two years to rebuild what had once been Africa'srichest copper mines, but were now littered with rusted hulks. In 2007,when markets had been riding high on cheap credit and commodity pricesboomed, Katanga had been the subject of a $1.4 billion hostile takeoverbid by a company led by former England cricketer Phil Edmonds. It hadthe potential to become the world's biggest producer of cobalt -- usedin batteries, jet turbines and electroplating.
As the credit crisis began to bite,metals prices tanked and risky companies around the world found it evertougher to raise finance.
Where others saw risks, though,Glencore scented opportunity. In June 2007, Glencore and partner DanGertler, an Israeli mining magnate, paid 300 million pounds for aquarter-stake in mining company Nikanor, which was seeking to revivederelict copper mines next to Katanga's. That deal gave Glencoreexclusive rights to sell all Nikanor's output -- an "offtake" agreement.
Offtake deals are common in riskyprojects like mining, where banks are reluctant to lend because ofuncertainty about how they will be repaid. An offtake ensures a minerhas customers before it starts digging, and provides a guaranteed sourceof raw materials to a trader, which can also act as security if thetrader provides finance.
By investing in Nikanor, Glencoreconsolidated a powerful partnership: half of the stake it bought was onbehalf of a trust linked to Gertler, an old Congo hand who industrysources say has close ties to government officials including PresidentJoseph Kabila.
Katanga's mines were just months fromproducing copper and cobalt again. The mining company had spent thesummer of 2007 fighting off a hostile bid from Central African Miningand Exploration Company (CAMEC), headed by Edmonds, the formercricketer. After searching fruitlessly for a "white knight" -- a bigminer willing to pay top dollar to fend off CAMEC -- Katanga turned toGlencore.
The trading company was ready tooblige. In October it agreed to a 10-year offtake deal and a loan of$150 million that could be converted into Katanga shares. Just one monthlater, Katanga and its neighbor Nikanor merged, giving Glencore 8.5percent of the enlarged firm.
In June 2008, with the globalfinancial crisis deepening, Katanga Chief Executive Art Ditto resignedfor "personal reasons". Glencore, exercising a clause from its earlierNikanor purchase, appointed a caretaker chief executive. It was thenthat Katanga embarked on its increasingly desperate search for newfunds.
Issuing a statement that said it was"in serious financial difficulty", Katanga struck its deal withGlencore, which added $100 million plus outstanding interest to itsearlier loan, to give a total of $265 million. The Swiss trading firmsubsequently sold on about a quarter of the loans to RP Capital, a hedgefund also linked to Gertler. Then in a linked deal that closed in July2009, Katanga's debt burden was slashed by swapping the loans for sharesalongside a $250 million rights issue. Most of that equity, too, wentto Glencore.
Now Glencore had a mining complexwith the potential to be Africa's biggest copper producer. To approvethe arrangement, Katanga had used Toronto stock exchange rules thatexempt companies in financial distress from a shareholder vote. Thatleft most of Katanga's minority shareholdings facing a virtual wipeoutfrom the heavy dilution, a measure they voted through in a subsequentshareholders' meeting.
"Everybody got taken down. There werea couple of savvy guys who got out early, but most people got taken fora ride. It's a sad story," said analyst Cailey Barker with NumisSecurities in London.
Barker says Katanga had little choicebut to accept Glencore's terms since it was probably a couple of weeksaway from bankruptcy. "The only person that was left was Glencore,"Barker said. "They said we'll get involved, but we'll take our pound offlesh."
This sort of deal -- with the rightto convert debt into equity in the tail -- has proved pivotal toGlencore as it has built up its mining assets. Analyst Michael Rawlinsonat Liberum Capital, who was previously an investment banker for JPMorgan Cazenove and has worked on deals in Congo for Nikanor, says thefact Glencore was on the spot is key.
"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. "But ifyou're Glencore, you source concentrate and product from these places,you have trading relationships. They're on the ground first, so they seethese opportunities first."
Glencore is constantly cuttingsimilar deals, some of the biggest of which it already has in place withits Swiss neighbor and close affiliate Xstrata. In the space of twoweeks recently, Glencore agreed offtake deals with London Mining for itsSierra Leone iron ore production and Mwana Africa for nickel output inZimbabwe. The deals often come with, or are followed by, a financingarrangement: U.S. PolyMet Mining Corp, for instance sealed anarrangement in January that involves Glencore buying shares with theright to convert the company's debt into equity.
A NECESSARY EVIL
People familiar with the IPO planningsay Glencore's top managers have yet to give a final sign-off to afloat, though Citigroup, Morgan Stanley and Credit Suisse are allworking on the potential transaction. The earliest possible date for alaunch would be April, after first-quarter results are compiled.
It's inevitable that the timing will attract attention.
"It's almost guaranteed that whenthey decide to list, everyone will say they're calling the top of metalsmarket," says analyst Tom Gidley-Kitchin at Charles Stanley in London."Like Goldman, people will ask, 'Why are they selling now?'"
As one mining industry source puts it: "We all know that Glencore never leaves any crumbs on the table."
Like Goldman, which floated in 1999,Glencore wants the permanent capital that comes with a listing. In aprivate partnership, payouts to departing partners shrink the capitalbase, but public companies' equity remains intact even if the shareschange hands at dizzying speeds.
Raising public capital would helpGlencore pay out any retiring employees, whose compensation is now setto be disbursed over five years from the firm's $20 billion book value.
New equity would also reassure thebig credit rating agencies, which rate Glencore debt a notch or twoabove "junk". The more flexible capital structure that comes with alisting should also allow it to make really meaty acquisitions.
It has long been Glasenberg'sambition to merge Glencore with London-listed Xstrata, industry sourcessay. The companies are already so close that the Financial Times'influential Lex column has dubbed them the "Tweedledum and Tweedledee"of their industry. Glencore owns 34.4 percent of Xstrata stock, theyshare a chairman, Willy Strothoffe; and Xstrata's assets could, in astroke, fill the gaps in Glencore's portfolio to create a mining andtrading powerhouse.
But when speculation surfaced lastyear around a Glencore-Xstrata merger, Xstrata shareholders opposed it,arguing a valuation for Glencore should be set by market forces, notagreed to behind closed doors. "It's very difficult to value Glencorebecause you just don't know enough about it. That's why most investorswould prefer an IPO -- which will give you more visibility," one of thetop 10 biggest institutional investors in Xstrata told Reuters lastyear.
Perhaps to force things to a head,Glencore in December 2009 set the clock ticking on a change in itsset-up by issuing a convertible bond. A year after picking up Katanga,the firm sold $2.2 billion in bonds that can convert into shares to aselect band of investors, including energy-focused private equity firmFirst Reserve, Singaporean sovereign wealth fund GIC, China's ZijinMining Group, financier Nathaniel Rothschild plus U.S. fund managersBlackRock, Fidelity and Capital Group.
The convertibles pay a staid interestrate of 5 percent a year until they mature in 2014, but carry extraincentives for Glencore to transform itself. If by December 2012Glencore has not floated or merged with another company, bondholders cansell their bonds back to Glencore at a price which would give investorsan annualized return of 20 percent -- in line with the sort of returnsyou might expect from equities. This payment could take place frommid-2013, though Glencore will not be penalized if markets turn lowerand an IPO is not attractive.
ROBUST DIALOGUE
Industry sources expect merger talksto begin about six months after the IPO. If Glencore and Xstrata do notcombine forces, the two could end up competing for mining assets. Thatwould heighten the increasingly tense relationship between their brash,strong-willed South African CEOs: Glasenberg and Xstrata's Mick Davis.
"You would expect any dialoguebetween them to be very robust - both of them have black-and-white viewson value," says an industry source who knows both men.
Beyond Xstrata, Glencore's ambitionscould soar. As a blue-chip name it would be able to compete against BHPBilliton and Rio Tinto for some of the biggest deals around.
One recent rumor, according toLiberum's Rawlinson, is that Glencore might make a play for Kazakh minerENRC, a London-listed FTSE-100 company with a market value of $21billion -- too big to swallow now, but feasible once Glencore couldissue shares as payment. Other majors would likely regard ENRC, whichfocuses on emerging nations including Congo, as too risky.
"I don't think any other firm woulddare look at them, but Glencore would," said Rawlinson. "They know howto deal with Congo, they know how to deal with oligarchs and theyalready operate in Kazakhstan. So, there's a perfect example of howthey'll do stuff that other people won't."
HANDCUFFS AND RISKS
But a listing would also bring a hostof issues to grapple with. For one thing, Glencore will have toreassure investors that its prized traders won't just cash in and takeoff. People in the industry point out that traders who have accumulatedlarge fortunes without any public attention may prefer to keep workingin a private environment -- perhaps at a competitor, or a trading housethey set up themselves.
"I think there could be seriousconcerns about what happens when the very senior management receivesshares," says Jonathan Pitkanen, head of investment grade research atfund manager Threadneedle. "I would expect that key individuals wouldhave to enter into some form of golden handcuffs so they are tied tothat business for an extended period of time."
There are other risks in exposing a secretive, agile business to the scrutiny of public ownership.
Glasenberg can be affable to those heknows, but he cherishes his privacy and dreads the day an IPO willforce him to step into the limelight, industry sources say.
The firm would also need to appointindependent directors to its board, and would likely search for achairman with top credentials in financial circles but no existing linksto Glencore. In that light, the company's most significant departurecould be Strothotte, 66, who joined in 1977 and ran the metals andminerals division before replacing Rich as CEO in 1993.
"Clearly there's going to be asea-change once they are publicly listed, given the requirements oflistings first of all, plus the complexity that you have within Glencoreas well," says Pitkanen.
A big part of that would be therequirement to publicly share information that Glencore now gives onlyto its banks and bond investors.
Currently, "Glencore is a privatecompany and our communications policy with the media reflects thisstatus," the firm said in a statement to Reuters. "Full financialdisclosure is made to all of the company's shareholders, bondholders,banks, rating agencies and other key stakeholders. Glencore publiclydiscloses aspects of the company's financial performance on a sixmonthly basis."
Could the glare of a public listingbe less dramatic than some fear? Resource groups such as BP, whichhouses one of the world's biggest oil trading operations, have managedto juggle public life without revealing too much about exactly whattheir trading arms are up to. Gidley-Kitchen says that like many banks, alisted 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 wouldthink Glencore would be able to do the same."
ACTIVIST RISKS
But that wouldn't stop activists fromdigging. Gavin Hayman, director of campaigns at activist group GlobalWitness, says information disclosed as a result of an IPO could helpenvironmental and corruption campaigners keep track of what Glencore isdoing in far-flung corners of the globe.
"Trading companies like Glencore arenotoriously opaque, even by the standards of an opaque sector likenatural resources. They deal with a part of the chain that isparticularly prone to mismanagement, corruption and diversion," Haymansays. "Hopefully listing will bring more transparency and allow greaterscrutiny of its operations, which is good news."
In one example, officials in Zambiabelieve pollution from Glencore's Mopani mines is causing acid rain andhealth problems in an area where 5 million people live. TheEnvironmental Council of Zambia has said it is looking into "a number ofcomplaints" regarding pollution from Mopani, but has not penalized thecompany for any wrongdoing.
"Smelting operations release sulphurdioxide and other pollutants which have severely affected residents withvarious skin, eye and respiratory diseases. Because of mining wasteMufulira has acidic and poisoned water," Mufulira town clerk CharlesMwandila told Reuters in an interview.
Mopani says it has alreadysignificantly improved environmental performance since privatization,and is following a clear and agreed plan to make further progress."Investment to improve environmental performance has already amounted tosome $300 million with another $150 million of investment planned."
Glencore's huge coal operation inColombia, Prodeco, was fined a total of nearly $700,000 in 2009 forseveral environmental violations, including waste disposal without apermit and producing coal without an environmental management plan.Xstrata had to pay the fines during its temporary ownership in 2009, butsaid the violations occurred before it took over. Prodeco said theviolations themselves took place years earlier, before it acquired andran the network of mines. Xstrata, like many major mining groups, hasexperience in meeting demands for tough green standards and says it putin place an environmental management system at Prodeco before handingthe mines back to Glencore in early 2010.
In Ecuador, the current governmenthas tried to reduce the role played by middle men such as Glencore withstate oil company Petroecuador, says Fernando Villavicencio, aQuito-based oil sector analyst. "Glencore has not been transparent inits business in Ecuador," Villavicencio said. The company "had been afavorite of almost all the democratic governments of Ecuador. It wonalmost all the contracts it competed for. They signed contracts withapparently low differentials, only to renegotiate the contracts in themiddle of their terms, arguing that their costs had risen. Petroecuadorusually went along with it."
Tenders such as those in Ecuador arepublic and subject to extensions and negotiations which are expresslywritten into contracts, according to Glencore.
WHO WON'T BUY?
To ready it for public life, Glencoreis preparing a sustainability report to bring it into line with miningmajors and using Finsbury, a public relations firm whose clients includeRoyal Dutch Shell and Rio Tinto, for strategic advice. Former Shellspokesman Simon Buerk has been taken on to reinforce in-housecommunications.
But no matter what Glencore does, some investors will steer clear.
Mike Fox, head of UK equities atCo-Operative Asset Management and the manager of two sustainable funds,says ethical investing can embrace the natural resources sector -- hisfunds have stakes in BG Group, the natural gas producer, and Lonmin,whose platinum is used in catalytic converters - but that it would bedifficult to hold shares in many oil and mining companies: "Sustainableinvestors will always have an issue with the very fundamental nature ofthese businesses," he says.
Glencore's size alone, though, wouldmean scores of pension funds that track the FTSE index buy the stock. Itwould also pick up automatic demand from tracker funds that mimic theindex or the wider FTSE All-Share. A Swiss banker with knowledge of theplans puts it simply: "All the funds will have to participate."
Glencore's arrival in the FTSE wouldintensify the London exchange's shift into natural resource firms. Foxsays the increasing domination by a single sector is a "big headache"for smaller British investors who want a diversified portfolio. "Itconcerns me as much from a financial perspective as a moralperspective," he says. "Customers will not expect that when they investin a mainstream UK growth fund that a third of their money will end upin commodities."
While commodities remain hot, though,that's unlikely to change. As Glencore ponders a float, Katanga Miningis reaping the benefit of the surging markets and its wealthy, powerfulowner. After losing $108 million in 2009, it posted an annual profit of$265 million in 2010.
(Additional reporting by KylieMacLellan and Karen Norton in London, Jason Rhodes and Martin deSa'Pinto in Zurich, David Sheppard and Joe Giannone in New York,Santiago Silva in Quito and Chris Mfula in Lusaka; Editing by SaraLedwith and Simon Robinson)