Glencore is exploring legal action against the DRC government over a mining code that was signed into law in June. Photo: EPA-EFE
JOHANNESBURG - Glencore, the Switzerland-headquartered commodity company headed by a Johannesburg-born mining magnate, recorded a record-breaking performance in the six months to end June, but the results failed to mask challenges at its profitable Democratic Republic of Congo (DRC) operations.

The group said it was exploring legal action against the DRC government over a mining code that was signed into law in June.

Chief executive Ivan Glasenberg said the law had pushed Glencore’s royalties on gross revenue for copper and cobalt in the country to 3.5percent from 2percent before it was enacted.

Glasenberg said they had tried to negotiate with the authorities to no avail.

“The industry is considering legal action it can take, nothing has progressed on that side. At the moment and against our agreement we are paying this higher royalty,” said Glasenberg.

Among the key changes in the code was the creation of a special 50percent tax on excess profits, defined as profits made when a commodity exceeds by 25percent the price used in the bankable feasibility study. The code also hiked royalties for non-ferrous and base metals and calculated on the gross market value of the products.

Glencore is the world’s No1 cobalt miner, while the DRC is the largest producer of the key component for batteries that power electric vehicles.

Glencore said its adjusted earnings before interest tax, depreciation and amortisation rose to $8.3billion (R111bn), while its adjusted earnings before interest and tax from its marketing division jumped 12percent to $1.5bn.

Debt reduction

The group said it would put emphasis on debt reduction and returning cash to shareholders over deal-making as its profits rocket 23percent. Glencore, however, warned that its looming legal wrangles would be costly.

Last month the US government intensified its corruption probe against the group.

Glencore said law enforcement agencies in the US had subpoenaed documents related to its business in Nigeria, the DRC and Venezuela from 2007.

International watchdog Global Witness in 2014 showed that Glencore enriched controversial Israeli businessperson Dan Gertler, a friend of the president of the DRC, by tens of millions of dollars and protected his interests as it gained control of one of Africa’s biggest copper mines.

The group responded with a $1bn buy back of its share.

Glasenberg on Wednesday refused to comment.

Jordan Weir, a trader at Citadel, said the results were below expectations.

“However, the business, as a whole, performed generally well all round,” Weir said.