Glencore Drags Down FTSE as Miner Issued Subpoena

Mining stock Glencore has fallen 11% in early morning trading as the US Department of Justice issues a subpoena in connection with money laundering

Emma Wall 3 July, 2018 | 9:05AM
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Glencore (GLEN) shares have fallen 11% in the first hour of trading following news that the US Department of Justice has issued a subpoena to the mining firm in connection with money laundering. The FTSE 100 fell 42 points from 7,595 to 7,553 on the news, but has subsequently recovered slightly.

It is reported that the requested documents relate to Glencore’s business in Nigeria, Venezuela and the Democratic Republic of Congo. The subpoena has been issued under the Foreign Corrupt Practices Act.

The natural resources company has released the following statement:

“Glencore Ltd, a subsidiary of Glencore plc, has received a subpoena dated 2 July, 2018 from the US Department of Justice to produce documents and other records with respect to compliance with the Foreign Corrupt Practices Act and United States money laundering statutes. The requested documents relate to the Glencore Group’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present.

Glencore is reviewing the subpoena and will provide further information in due course as appropriate.”

This is the second consecutive day of losses for Glencore, with miners dragging on the FTSE 100 yesterday following weaker-than-expected Chinese manufacturing data and a stronger dollar weighing on commodity prices.

Earlier this month, Morningstar analysts raised the fair value estimate for no-moat-rated Glencore to £2.50 from £2.20 per share, reflecting stronger near-term commodity prices, particularly for coal and copper. However, even taking into consideration this morning’s share price slump, analysts consider the stock to be significantly overvalued at £3.12 a share.

Glencore is one of the world’s largest commodity traders, active in markets for metals and minerals, energy products and agricultural goods. The firm's marketing business provides sourcing, logistics, transportation, storage, and financing services to commodity producers and consumers around the globe.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Glencore PLC403.20 GBX1.03Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar