Earnings Transcript for GLNCY - Q4 Fiscal Year 2021

Martin Fewings: Good morning and welcome to Glencore's 2021 Financial Results. Presenting today will be Gary Nagle, CEO, and Steven Kalmin, CFO. Gary, would you like to join us please?

Gary Nagle: Thanks, Martin. Morning to everybody who's come in person and all those who are attending online, in the WebEx. Great to once again be able to do this in person. And we'll kick off on a summary of highlights of 2021 results. 2021 was a terrific year for the company. We've printed a record adjusted EBITDA of $21.3 billion, a record marketing performance in our Marketing and Trading business, an EBIT of $3.7 billion and our Industrial business, a $17.1 billion adjusted EBITDA. All of those records across our business. As a result of the terrific results that we have, our net debt is now significantly below our capital of 10 billion down to 6 billion. And as a result, we've been able to announce a $4 billion distribution back to shareholders that will be made up of cash of 3.45 billion and a buyback of 550 million. So what's driven these terrific results? Well, on the industrial side, we've really seen strong demand across the world, as we've seen countries emerge from COVID. And we've seen a constrained supply environment, partly COVID driven, partly regulatory driven, partly geopolitically driven. And on top of that, we have very low inventories across the world and across all the inventory -- across all commodities. So it's really resulted in very strong margins across our business. And when we look at our business and our competitiveness in terms of our cost base, the margins are incredibly strong and have provided terrific results for us. On the marketing side, as I said, 2022 is a record results for our business. And the strong trading performances in fact, continuing into 2022. The market conditions remain favorable, we see dislocations in the market, we see arbitrage opportunities, and going forward, we continue to see those opportunities and fortunately for 2021, a terrific result, and hopefully a good one in 2022 as well. On the ESG side, just turning to our scorecard, we have a sector-leading climate change strategy. During the course of 2021, we in fact improved on that strategy. Going into the year, we never had a short-term target for Scope 1, 2 and 3 emissions reductions. We've now introduced that into our climate change strategy. So we've said now by 2026 we will be down 15% across Scope, 1, 2, and 3 emissions. We've also increased our targets for our medium-term target of 2035, where we've now increased it from a -- used to be a 40% reduction, now 50% reduction off our 2019 base year. And our net-zero ambitions for 2050 remains. On our social side, and unfortunately, it's very difficult to report. But we have had four fatalities in our business during 2021, and that is 4 too many. We continue to work very hard, day and night Peter and his team putting significant efforts into our SafeWork program. We've revised our SafeWork program, SafeWork 2, it's being rolled out. We are seeing some excellent results, but so far, not good enough. We are not there. We do believe in zero harm in our business, and we do believe we can get there. Diversity and inclusion and our strategy around that was launched during the year, and continues on previous efforts done around our business on diversity inclusion. And it's a key theme for me as CEO and for the Management Team. And in fact, we have a Task Force setup of which I lead to ensure we drive that through our business. On the governance side, and I've spoken about this before, we have a best-in-class ethics and compliance program. I truly believe it is, and it's not something that we -- that is just a standing still product, we continue to work on a day-in, day-out to continue improve our business and ensure we're a responsible and ethical operator. As announced this morning, we also expect to resolve the U.S., U.K. and Brazilian investigations during the course of 2022. And we've recorded a provision for these costs in our accounts. I'll now hand over to Steve on the financial details.

Steven Kalmin: Good morning, everyone here. Physically, it's nice to join you again after a couple of years, of doing these things virtually. I think by now some of our slides and presentation in the flow is very familiar to many. We obviously had our Investor Update in early December and from a financial perspective, I think this is clearly in terms of record territory, but also just clean good performances across the board, both in the P&L, the balance sheet, the cash flow application, the financial statements more broadly. I know Gary’s covered many of these highlight points, of course, EBITDA up 84% to 21.3. We'll show the components in later slides. Translating into equity-free cash flow $13 billion, that's the key number ultimately, within any business. That's what drives your debt reduction in capacity to make distributions and payouts to one’s shareholders. And these testament to whatever return on equity that can be generated in these businesses. And that's flowed through down to net debt getting through to six below the 10 that we spoke about at the Investor Day in December. And allows for -- facilitates both the base distribution that would have been paid regardless. But once the base distribution is covered, we show the formulas of how we've calculated that, later on the billion plus 25% that leaves that surplus to determine what additional distribution that we may look to make. If we look on the industrial side today, clearly the biggest part of the business, not to diminish the huge contribution to the marketing's clearly done as well. But across both metals and energy, we've seen a performance up a 118% to 17.1. The real kicker from H1 into H2 was in the coal business. We'll share some metrics later on. You can see in the energy products just on the coal sales went from $0.9 billion in the first half, $4.3 billion in the second half to give a full-year results of $5.2 billion and annualizing it obviously, high levels at the moment, even on a conservative forward, Newcastle coal deck that we give as well. So $17.1 billion, good contributions across the board, of course, commodity prices, we'll see the industrial bridge on the next slide as well. You can see we've just show in the split H1, H2 was 6.6, 10.5 in H2 and just industrials annualizing conservative assumptions in terms of least revenue on the coal side at $23.5 billion. So there's -- as we pick up into 2022, we've got a higher 12% annualized tailwind even going into 2022 at current macros. If we do look at what the industrial bridge looks like, obviously the main bar is the price bar, $11.1 billion, broad-based contribution across metals was 6.2 of that with the copper business 3.7, both copper and cobalt contributing meaningfully there. Zinc was 1.1, our business there. And 0.7 each from the Nickel and the Ferro business. Ferro itself is almost into a podium position; they had a great result from our South African business during the year, both in production and margins. And the energy business was 4.9, coal, 4.5. What gets lost often in the numbers, and it is a smaller part of our business. But we did see a meaningful turnaround just in the oil industrial business as well, where we have some upstream, and some of the refining capacity of business we have done in South Africa. It was a meaningful turnaround also from 2020 to 2021. We've highlighted some of the price increases averaged year-on-year on coal

Gary Nagle: Thanks Steve. After that set of results, I think, just to sum up our business in a picture

Q - Alain Gabriel: Good morning. This is Alain Gabriel from Morgan Stanley. I have two questions. First one is on the looming settlement with the DOJ. Does this looming settlement unshackle you to change your capital allocation strategy going forward, or perhaps increase your risk tolerance along acquisition lines, for instance. That's the first question.

Gary Nagle: I don't -- they are not related. Our capital allocation framework is very strict. It's remained in place for a period of time and will remain in place. We will make smart capital allocation when we have the opportunity. And we will make sure it's accretive for our business, and it's unrelated to any regulatory settlement.

Alain Gabriel: Thanks. And the second question is for Steve. For the purposes of capital returns calculations, do you still make the adjustment for your net debt for marketing leases.

Steven Kalmin: At the current level of marketing leases? No. But we would need to leave the scope that if marketing leases for some reason was to materially increase, that under normal scenarios, this is just OpEx dressed up as CapEx. So if there was -- Alex is over here on the oil side, if we had to embark on bigger leases around the LNG business, which has some storage or some shipping these things in the number was not 1 billion, which is where it is at the moment, which in the scheme of things, not particularly material. But let's say that number was 3 billion, maybe that would be appropriate to rethink again and to pull back up. So at the moment and that's why I'm not giving you a -- but at the moment it's small enough that I'm not sort of making adjustments for it, but I think it's appropriate if it was to get bigger that you should make adjustments for it.

Alain Gabriel: Thank you.

Liam Fitzpatrick: Good morning. Liam Fitzpatrick from Deutsche Bank. Firstly, on the settlement, some sub-questions, I guess. First of all, how much confidence is there in the 1.5 billion figures? Secondly, can you clarify which investigations are not included in this? And finally, in terms of what you know about the terms, will there be any impact on the trading business moving forward in terms of how you operate and so on? And second question, just on Agri, is that included within that set of 14 assets, which were up for sale? And can you outline some of the options that you are thinking about for that business? Thank you.

Gary Nagle: So the 1.5, Liam, is our best estimate right now. And it includes the -- our best estimate for the U.S. All the investigations in the U.S. the U.K. and Brazil. It excludes the Dutch and the Swiss investigations. Will it impact our trading business? Our trading business hasn't really been impacted by this anyway, by the investigation so far, and I don't see why it should. Once we settle this, we want to put a line under this investigation, move forward and continue to do good business like we have been doing. With respect to Viterra, not going to comment on whether it's included in those 13 or 14 assets, but what I can say is that we don't believe Viterra is accurately reflected in the value of the Glencore share price. So we are looking at ideas around Viterra to be able to provide that see-through value in our share price for our shareholders.

Martin Fewings: Danielle.

Danielle Chigumira: Thanks. Danielle Chigumira from Credit Suisse. Firstly, on the Bluebell suggestions of a coal spin-off, it seems to inherently accept that you're the best operators of the asset, so you should maintain governance of those assets and run them down overtime. And are you seeing that opinion being reflected in the broader investor base as in an involving acceptance that selling coal assets doesn't do anything for sustainability. That's the first question.

Gary Nagle: Hi, Danielle. Yes. I mean, Larry Fink himself says that in his letter that he sent out three or four weeks ago. So absolutely. And we've had a number of shareholders call us and express their support for our strategy. And it's reflected in our strategy that we put to the shareholders to a vote at the AGM last year, where we got close to 95% approval, and the continual engagement with our shareholders, certainly supports that strategy.

Danielle Chigumira: Thanks, that's very clear. And in terms of growing the recycling business, do you have a target or an ambition for how much of the marketing business or industrial business that should represent over time in the long term.

Gary Nagle: No, we don't have a target. We just believe it's an opportunity to grow. We see legislation coming in Europe, and potentially in the U.S., where that will legislate how much recycle material needs to go into manufacturing within those territories. And we believe is a great opportunity, particularly given our footprint within those A, industrial footprint with the smelters and the likes that we have in Europe and the relationships we have, the ability to supply from our operations, the raw materials. So it's not a target, but we believe it's an area that we can grow in in this business, and it's the right area to grow in too.

Danielle Chigumira: Thank you.

Martin Fewings: Ian.

Ian Rossouw: Hi, it's Ian Rossouw from Barclays. Just a question on the operational side, maybe for Peter or Gary can start. Could you maybe just give some details on Zhairem there. I know you've mentioned there has been challenges on the ramp up. Maybe just give us a -- an indication of your confidence in meeting the guidance for zinc for this year, and then maybe Koniambo as well. You said it's a nice EU. What's the sort of thinking around timing there for ramp-up or other decisions or alternative options?

Gary Nagle: Yeah, on Xyrem. I mean we've given our guidance. We're standing by our guidance. It is a project -- it's a terrific project, but it has some challenges within some of the state of the material. The -- a lot more fine than we thought it would be. We did have some challenges in terms of the ramp up. As you know, we had a fire at the plant and we had some significant COVID restrictions. We've been able to get back in on the ground. We have engineers at the plants. We reworking parts of the -- parts of the construct and parts of the engineering design. So Peter believes that it's either -- of course it's achievable always put out there, but there are some challenges that's still ahead. But we do see improvements coming every day. On Koniambo. Koniambo, as I said, it's had a good fourth quarter of last year. And in fact, at a very good January as well, it started raining there in February, so this month, perhaps not as good. But that's expected with a rainy season, but it hasn't performed over time, as you know. And having one quarter of good performance, or four months of good performance, is not good enough for us. We want steady stable operation that provide sustained cash flow, positive returns for us. And if it doesn't, we will look at other options. So at the same time as working on that asset and ensuring we improve it and get it to a steady-state, we all looking at other options for it.

Ian Rossouw: Thanks. And then just a second question, maybe for Steve, on the $1.5 billion provision, you were saying you're expected to settle sometime this year. Will that then therefore impact your thinking around cash returns. Will you make an adjustment for that expected settlement for the second half?

Steven Kalmin: Obviously, depending timing, when and how, it would be something we would have to ultimately to come out of the coffers and that will eat into the equity cash flow the business generates, so it will clearly come at the expense of that exact amount of distributions that would otherwise float. So whether the timing impacts in August or towards the end of the year, we will have to be, obviously, mindful of it at some point. But ultimately it's going to be whether -- I mean whatever the cycle is that will come at the expense of whatever distributions amount, otherwise have been payable.

Ian Rossouw: Okay. You aren't preempted you will then maybe -- rather the impact if it's in the second half it would -- after August, it might impact the February number instead of August.

Steven Kalmin: Well yeah, and we'll obviously, we'll know more in August than what we know now and we'll see -- we'll do what's appropriate.

Ian Rossouw: Okay. Thanks.

Martin Fewings: Patrick.

Patrick Mann: Hi, good morning. It's Patrick Mann from Bank of America. I will take the bait, Steve. Is 2.2 to 3.2, still the right number to think about for the marketing business? And what's driven the outperformance these past couple of years? Thanks.

Steven Kalmin: I think it is the right range still. I think we need to -- let's get through -- let's see what -- potential tightening cycles, let's see what impacts that might have on economic activity and the likes as we go through. We've had to -- I don't think in terms of volatilities, in terms of some geopolitics, in terms of trade flows, I don't think we've seen anything in the last two years that can compare historically over the previous 6, 8, 9 years. And our business is growing. That's the other point. That we are adding elements. Cobalt's bigger, some of the diversification in the energy side, LNG, power, carbon, various things that Gary obviously, mentioned. So I think, it's probably, let's see through another year. Let's see '22, and see if it's appropriate. But it's nice to be -- all the questions over the last ten years, I, when are you going to be at the top end of the range because we were bouncing around the middle, in two-twos and of two-twos and two-fours. It's nice to be able to be there and even exceed, that. And be thinking about the range being a bit conservative, it's a nice position to be in, I think let's just keep the range for now and go from there.

Martin Fewings: Operator, can we please take some calls from the line please?

Operator: This question is from Chris Ager from Société Generale. Please go ahead.

Chris Ager: Thank you. Just a genuine take on the market, you've seen that semi ban on Indonesian exports on coal, and we see China trying to dig a bit more. What is your take on it? Do you see we are going to see some ongoing shortages on the coal side, especially in China?

Gary Nagle: Certainly, you see it already. I mean, new cost of coal prices is close to $300. And the Chinese economy seems to be coming back. Let's see what happens after the Olympics. But generally across Asia, you're seeing significant demand for power, as economies recover from the COVID impact. And with that, the competing fuel is energy, which is also processing at significant premiums to the equivalent of coal. So the demand for coal remains strong, the supply side has been impacted from, not only the Indonesian ban, but we see nobody building new coal mines because of the difficulty to raise funding and to get approvals for coal mines. We, ourselves are closing our coal mines, responsibly running it down. So there's a supply side constraint, which continue whether it's the short-term things like the Indonesian ban or longer-term non-investment in coal mines or new coal mines. And demand looks strong both in China and the rest of the Asian region.

Chris Ager: Thanks. And on ate [Indiscernible] in these energy issues that you're facing or all are facing in Europe in term of cost, so potential shortages in China. Do you think this will continue to interfere with production at smelters in the next quarter?

Gary Nagle: Most likely, yes. Power prices are very strong, very volatile. We won't run operations which are cash-negative. It makes no sense. We've been forced to curtail our smelters in -- or the operation of our smelters in Europe as a result. And with continued high-power prices, we'll continue to do that.

Chris Ager: So you got to know, [Indiscernible] yet on when you may be able to accelerate production again?

Gary Nagle: We watch it very carefully. Of course, we have a power desk here that provides us their views on where they see the power market going. But at this stage, we've got no plans to bring back that production.

Chris Ager: Stunning. Thank you.

Martin Fewings: Next caller, please.

Operator: Thank you for your question. The next question from Chris LaFemina from Jefferies. Please go ahead.

Chris Lafemina: Hey, thanks for taking my question. Just a follow-up on the $1.5 billion provision. So you didn't mention in the -- at least I didn't see any release in the release any commentary regarding the potential for the DOJ to require a corporate monitor. At Glencore, I think last October, the DOJ, changed its guidance regarding corporate monitors and I'm wondering if we should expect it to be a corporate monitor in-store the Glencore and if that's the case, to the question regarding how it might impact your marketing business, what might change if there is a monitor installed at Glencore? And is that something that has negotiable between you and the DOJ? Thanks.

Gary Nagle: We can't speculate on that. All we can say is, we've put our best foot forward in terms of what we expect the provision to be, and we've advised that we expect to complete those three investigation geographies during the course of 2022, but we can't speculate on anything further than that.

Chris Lafemina: Okay. Thank you.

Martin Fewings: Our next caller, please.

Operator: Thank you for the question. The next question from Dominic O'Kane from JPMorgan Please go ahead. Your line is open.

Dominic O'Kane: Thanks for taking my question. I've got three initial questions or quite linked. So Gary, with 27 assets under review, could you maybe just talk to us a little bit how you see the long-term industrial strategy? Specifically, how you want to grow this business over the next five to ten years? Secondly, on Viterra, you mentioned that -- well, Viterra in the context of growing the business broadly, would you consider increasing your stake in Viterra here? And then final question. As you mentioned, Viterra being undervalued, we could probably make the same argument for coal, specifically given where coal prices are. Is there any reason why Glencore wouldn't undertake a settlement this year? A benchmark settlement with utilities? And could you maybe remind us the contract mix by percentage you selling the contract versus spot?

Gary Nagle: Okay. On the sales processes, as I said, we're not going to give running commentary on each sales process, but where we going as a business and on the industrial side, these assets that are up for sale or potential sale or being reviewed, these are assets which are sub scale. They don't really move the needle significantly within Glencore. They take up management time, they bring search and risks that don't come with the kind of reward that we want. It's just a simplification of the portfolio. It doesn't really change what we are as a business or who we are as a business, it just helps management focus and management attention, on the right assets at the right time. So we shouldn't get caught up in the detail of what these potential 27 assets maybe or what that would do to the business, because that would not find the [Indiscernible] change the business. What we will continue to do is invest in our own business. As we said before, more than 80% of our CapEx in 2021 went into the metals business, our de - carbonization business, so as to speak, and we'll continue to do that. We have significant amounts of brownfield opportunities within the key industrial assets, or the key industrial minerals required for de - carbonization. We have great brownfield projects in copper. We have nickel brownfield projects, we have cobalt brownfield projects, and those are the areas that we're going to focus on to grow the business. We'll only bring on those projects and those additional tons when the market needs those turns. We certainly don't want to bring them on too early. We don't want to be the result of a market correcting as a result of our turns. So we do have those projects and that's certainly where we can grow organically within our business. As I spoke earlier, recycling is also an area that we can grow in, and we looking to grow in. We've become more than just a monitor, we've become a bit of an urban monitor, because today we're able to harness our marketing network, harness our existing infrastructure through smelters, our supply contracts that we have in place, and use that to build a recycling business overtime. And now how big that is overtime, who knows? But it is an area of growth for us and an area of responsible growth. Your second question was on Viterra, would we go beyond our current holding in Viterra? I don't think so. We would not, we got very happy with our partners. We work very well with them, we're very comfortable. Viterra is an independently managed business, and we're quite happy with our stake as it is. What was the third question, Steve?

Steven Kalmin: Coal prices.

Gary Nagle: Coal prices.

Steven Kalmin: But the contract and --

Gary Nagle: Yes, I don't -- do you know the exact split of contract for the spot. The negotiation with the Japanese utility is, as you know, it's a Japanese financial year contract, so it runs April through March. Negotiations haven't yet started, but obviously, we will be talking to our partners in Japan to set that benchmark. We have two sets of pricing. There's the bigger set that comes now and then the smallest set that happens in October. I don't have the exact tonnage. We can come back to it. I don't know if you know them off the top of your head, Steve?

Steven Kalmin: Certainly not as material as it once was. I think, the -- certainly the rolling spot indexes are much more relevant than necessarily -- of course we -- last year's was a little over $100. It's looking a bargain, and stuff like that. So that's a lag, even on current coal earnings, of course, when that rolls forward in whatever tons that that means, you'll reset that at high levels, of course, as we go forward, but it's not as material as it once was. Everyone used to hang on to what that big settlement was that used to come through it's now, it's just not as material. And I don't think giving those numbers -- exact mix is also not an exact science, it depends what supply and demand is at the time.

Martin Fewings: Okay, thanks. Our next caller, please.

Operator: The next question is from Sylvain Brunet from BNP Paribas. Please go ahead.

Sylvain Brunet: Good morning, gentlemen and congrats on the numbers. Two questions for me, please. The first one is in Chile. Given the new government's soon in place, could you remind us perhaps of your tax stability agreements and also whether any of the uncertainty at the moment has already delayed any of the year decisions -- investment decisions, I'm thinking Collahuasi. Or if it was still early days anyway. And my second question is on marketing. When you talk about growth, interested to get a sense of the underlying growth, you still able to achieve in the business. And whether that is like on some -- some geography or some particular commodities when you -- where you still see potential to grow. And if you could quantify that versus -- I don't know GDP growth or something. Thank you.

Steven Kalmin: On the tax stability, do you want to talk the tax stability. I mean, all of our operations have varying degrees of stability still in place, obviously Collahuasi is the big one. I think it's -- Peter, you may -- three to four years still. But irrespective, I mean, obviously there's some stability and north not stability in the country, and [Indiscernible] moving through it. It's a phase now to work out how to chart the course going forward between government, between the industry, and that'll, obviously, still going to take a lot of time. We were not ready today to pull trigger on any massive Chilean expansion. There's a lot of technical work that's going on at Collahuasi and other operations. Ultimately, it will be a factor in terms of what economically did make sense, in terms of that particular regime, and what projects and how you scope it up and scale it up. So that will be relevant across the whole industry, whether it's ourselves and anyone else as to what the investment landscape looked like, and what returns, and way to spend one’s marginal dollar. So that's needs clarity clearly at some point because the world needs more copper and there are clearly deposits there in varying degrees and grades. So we'll see how that plays out. In terms of marketing growth, we have fairly mature businesses in many of our commodities. I mean, I would say in the -- it probably is in the sort of natural gas power carbon areas are now within the historically more of the liquid side of the old business. You'll see, certainly, a mixed change over many years. Just as a function of market mix as well as country. So that business for us is -- has good growth potential clearly in some of those -- some of those other areas.

Gary Nagle: energy is an area that we're going to certainly grow in. We've already grown in, and you've seen us announce a number of projects, so a number of partnerships. So that's an area of growth within our marketing business, and obviously we're not going to grow for the sake of growth, we're going to grow to make margin. And clearly with the demand for battery metals, we certainly see growth in our nickel marketing business, in our copper marketing business, in our cobalt marketing business. And to an extent also zinc, aluminum becoming a lot more interesting these days, obviously process very good, but aluminum being a [Indiscernible] amount of aluminum being used in the automotive industry because of the locks. The lock nature of the metal and the heavy batteries. So another area for growth. So what are those which are the commodities that we are strong in, that we are already marketing, we see potential for good growth.

Sylvain Brunet: Great, thank you.

Operator: Okay, back in the room, Jack?

Jack O'Brien: Thank you. It's Jack O'Brien from Goldman Sachs. First question. You've talked quite a lot about various commodities being in deficits at the moment. Your own CapEx still includes fairly limited gross CapEx. Can you confirm looking forward, that you won't be tempted to invest in new greenfield. I know you've talked about various brownfield opportunities, but from your perspective, should we be rolling out that larger gross CapEx on top?

Gary Nagle: Yes. We are not bringing on any tons into this market, whether Brownfield, Greenfield or otherwise, unless the market really needs it. And we need to see sustained periods and that's not six months. We need to see sustained periods of market deficits and good process that in centralized responsibly bringing tons into the market that down to road margins, but supply into a growing demand. So don't expect big CapEx on Greenfield projects, wherever it may be for some time.

Jack O'Brien: That's very clear. Thank you. And second, you talked obviously a lot about portfolio simplification. M&A spec is starting to do the rounds in the market again. How would you think about opportunistically adding to your portfolio, given some of the interesting growth opportunities in various commodities?

Gary Nagle: We've got a very strict capital allocation framework and policy, and we follow that. We are opportunistic when it comes to things as you mentioned, and our focus is on our coal portfolio and what we know, we want to grow. Of course, commodity prices are good and we got to make sure we don't get ahead of ourselves and start spending money when sort of bet at prices, which may not be sustainable for long periods of time. But we are open to M&A, we would look at opportunities if the right opportunity came up and we were of the view that was very accretive and strategically right for our business.

Jack O'Brien: And just one final point of clarification. As business throws off more free cash during the first half and you get the interims and there should be another distribution, how are you thinking about that balance between the buyback and the special at this juncture.

Steven Kalmin: I think, that's also something that we would -- you go and talk with 100 investors, you'll get 175 different answers on this. So it's another opportunity in the next 3 three weeks, to -- when we do engage much more and seek varying views. I think, a combination is always sensible. You tend to just thread it down the middle in terms of those things. Of course, we'd look at what market outlook was. We'd look at our own views on value. We would ordinarily have had a bias, and we've spoken about that, of just paying out the cash and let our shareholders decide what they wanted to do to reinvest. They can treat it as a quasi-buyback budget, putting that money back. And it has the same economic impact ultimately on the equity story. But we'll need to obviously come back in August and think about -- we were limited now in what we could do buyback. You saw, if we were $5 billion, we might have done another billion five, or something, in terms of buyback. That was getting up to ten. We don't want to immediately within two months of setting that policy stray from it. I think, it makes sense. So I think, it's going to be another balance. If our share price was nine pounds in August, I might not be chasing that with buybacks. So let's see where we're at. Let's see where we're at in August.

Martin Fewings: Efrain, please.

Ephrem Ravi: Three questions. Firstly, on coal. Can you dis-aggregate that $8 per ton increase in cost, into how much of it is royalties linked to the price, versus a mix effect that, obviously, you're consolidating around 100%? How much of that is that contributing to that big increase? Because I'm trying to just get a sense as to what your normalized coal cost should be, once the surprises normalize on the other side. Second question, on -- this is a bit of counting the chickens before they hatch, but the recycling business, would that more fit under marketing or under industrial because I assume there will be a lot of collecting batteries from the customers and then supplying metals back, so it's a close loop. So in a sense, it fits it in more with the marketing side rather than the industrial side, I would have thought, but again, just wanted your thoughts on how you think about that business. And partly on the comment that you made on Viterra, the cash distributions going straight back to shareholders, just want to clarify that. Assuming net debt is below $10 billion, it's not that any cash from Viterra go straight back into shareholders irrespective of the net debt level.

Steven Kalmin: Your first -- your response is just assumption, correct? That's below 10. So once you're below 10, any cash mechanically comes back. It's not just a dividend from Viterra, it's the sale of these -- any of these -- some of these processes, clearly, that have gone -- that are going on as well. The increase in the coal, I think, I went through those numbers is closer to $6, with increased 21, 3 of which was the royalty linked. 2 was the energy resetting to where we are at the moment in terms of diesel and prices generally and a dollar was just general inflation across the coal portfolio. Obviously, these things go in waves, but 3 of that 6 would revert back to other levels if prices were to say average last year’s prices and new costs, which is $137, hopefully they stay $175 and above and we'd it's fantastic having $60. The Cerrejon impact was worked into the numbers from last year, at 53 out number. So we've already brought that in. We'll just obviously have the full-year Cerrejon impact that will come in in August and just obviously look at that number. I

Gary Nagle: think recycling, I mean, I think I'll take that one. The recycling business is -- when we report our businesses and we report sort of distinct business profit percentage in terms of Industrial and Marketing, that's not how we operate in practice. Marketing works hand-in-hand with industrial and likewise. So there is a continuation -- well, that's always been the model of our business, and it will continue into how we build a recycling business. You're absolutely right. Marketing will have a key part in terms of sourcing the recycled material, collecting the recycle material, redistributing and selling the product. But in terms of processing it, potentially through like we do now, in our Horne smelter in Sudbury, in nickel VAC, and potentially re-purposing other assets that we have that will be done by industrial. But that's not to people who don't talk to each other. These are two people who sit right next to each other in the office and work hand-in-hand. That's the model that we have, and that's how we can grow this business using the expertise on both sides.

Martin Fewings: Thanks. Myles, please.

Myles Allsop: Thanks. Maybe just first question on Katanga. Obviously, you had a softer fourth-quarter, the weakest we've seen in a couple of years because of power issues. Is this something we need to worry about that there may be more recurring or is it one-off and we'll be back to the 300 million tons run right?

Gary Nagle: Structure we've been 300 million tons.

Myles Allsop: Fast in terms --

Steven Kalmin: Problem solved.

Gary Nagle: A few more tons with the price had dropped. Now, we did have some power issues, that wasn't the only issue we did have a number of other issues. And you do see intermittent power issues in the DRC. We're working closely with the power provider and the government, to ensure that we do have stable supply. Yes, power does go and we do have issues, but we are working to stabilize that issue.

Myles Allsop: But it's not going to be like the bad old days for Katanga where power was massively impacting production each quarter?

Gary Nagle: I don't believe it will be.

Myles Allsop: Maybe just on Cerrejón as well. Could you -- now you've got full control of the asset. Do you see operational synergies, some marketing synergies and how should we think about Cerrejón production over the next two, three years?

Gary Nagle: Cerrejón production will remain flat. We've said as part of the commitment to bottle component of that climate change commitment, buying out the partners, we will not increase the production at Cerrejón. That was the risk of allowing our formal partners to set it to other parties that would've wanted to increase production, that wanted to extend the life of Cerrejón. So we certainly won't be increasing production at Cerrejón, will remain flat and then run that business down until the end of its -- the lease laugh which is in the early 2030s, and then we'll hand it back to the government. So certainly, don't expect any increases in production. In terms of synergies, or so as to speak, well, we do believe there are improvements in terms of mining, where we can save costs, where we can do things slightly better, and improve the margins within the business. And on the marketing side, we certainly believe that we can add additional value on the marketing side, given the portfolio approach that we have in our business, given the ability to arbitrage, move cargoes around the world within our marketing business. Having the additional Cerrejon tons in our book, does give us an opportunity to create additional margin for ourselves.

Myles Allsop: And then, finally, on Viterra again, and the Gavilon transaction. Could you give us a sense of what multiple that is, what multiple using [Indiscernible] so trading -- as an Agri trading business should be trading at and how much hidden value there is. Is this the transformational deal that gives Viterra the life of its own potentially in the markets?

Gary Nagle: Steve can talk on the multiple, but this is certain transformational for Viterra. It's been a -- it is a terrific business. It has global reach, a global network, and was clearly missing one piece in the puzzle, which was the North American, particularly the U.S. market. And Gavilon certainty fills that. Now, it does punch above its weight. It's certainly up there with the ABCDs. And we see it as a real player within that Agri -market, so a critical transaction for that business. And it is a transformational deal for Viterra.

Steven Kalmin: And I think [Indiscernible] multiples that approach it, we expect to get some good IRRs on that business, post some synergies. Obviously, you got to get in there and you got to rewire the flaws in the business and also look at what you want to keep and maybe what's non-core also within that that you would need to do. So in terms of overall return standalone good, what it does to the overall business itself in terms of its ultimate multiple that it would be able to achieve in whatever scenario that made would be improved by the combination with this business in terms of geographic coverage, diversification scale, all those factors that you would attribute in that business. So clearly transformational important, and financially relevant of course.

Myles Allsop: One very last question, which is kind of came back to Danielle was asking earlier on coal. Is it now -- if you look at your spot numbers here, coal EBITDAR is going to be over 30% of the group? Do you think that could be an issue with shareholders? I mean, potential shareholders. And now as a victim of its own success that suddenly it is a lot more material within Glencore.

Steven Kalmin: What's the long-term coal prices, Myles?

Myles Allsop: Do you know.

Gary Nagle: No. I don't think it will be because our strategy isn't around percentage of profits. Our strategies are to responsibly run down this coal business. And that's what shareholders want to see. They want to see that medium to long-term, and short-term for that matter, you are being a responsible operator. We are putting our money where our mouth is, which is saying yes, we will run down this business. We are shutting 3 mines in the next 3 years. We are not keeping those mines open because prices are good. We are shutting them down. And we'll continue to do that. So whatever percentage of the earnings it is, doesn't really matter to shareholders. They want to see that we committing to our ESG commitments, our climate commitment, and that's what we're doing. And then, what do we do great, the markets are good, we're going to make a lot of cash flow out of it. We're taking that cash flow, and we're either going to give it back to shareholders, or invest it in restocking businesses, copper businesses, nickel businesses, which are the backbone for the de - carbonization of the world. So in fact, the more money we make out of it, the better it is long term because that will bring on more copper. It will bring on more cobalt, it will bring on more nickel, and it will grow a recycling business, which is going to be critical for the de -carbonized world.

Steven Kalmin: Whereas a standalone coal business would invest that -- those cash flows in coal. Gray coal, as you'll see in other companies.

Martin Fewings: With that, I'll hand back over to Gary to close out.

Gary Nagle: Not much more to add to that other than to say we're committed to a very good 2022. We started the year well. We're committed to a safe operation, a fatality-free operation. We're committed -- we've made our climate change commitment. It's setting stone. We will keep to that commitment and we look forward to a safe, a responsible, and successful 2022. Thank you all for joining us.