Glencore Is the Devil on Mining’s Shoulder – by David Fickling (Bloomberg News – December 12, 2017)

The mining industry these days resembles that old cartoon about a person torn between prudence and temptation.

On one shoulder, a white-clad angel is whispering about the virtues of capital discipline, shareholder value and generous dividends. On the other sits Glencore Plc Chief Executive Officer Ivan Glasenberg, clad in red and promising to buy or build everything in sight.

The reason for that contrast was laid out clearly at the start of a Glencore investor presentation Tuesday. Uniquely among its peers, Glencore derives a substantial slice of its earnings from trading commodities, rather than producing them. When mining is weak, marketing can take up the slack, and vice versa, as this company chart shows:

Another way of thinking about this is that whereas BHP Billiton Ltd., Rio Tinto Group and Vale SA all saw a gap of more than $20 billion between their record-high and record-low earnings half-years over the past decade, just $3 billion separated Glencore’s peak and trough.

In an industry that’s been characterized by boom and bust since the first gold rush, trading has kept Glasenberg’s income on a steady path. As any bond investor knows, consistency has its virtues.

For the rest of this article: