Glencore Plc Unsp/Adr

Good morning, good afternoon. Thank you for joining us. Welcome to our half-year 2023 financial results. Presenting today will be Gary Nagel and Stephen Kalman. And I'll hand over to Gary to commence the call.

Thanks, Martin. Good morning to all of you or those who are dialing in from other parts of the world. Good afternoon, good evening. As Martin said, I'm joined here by Steve. Peter Fraser is also with us on the industrial side if there's any questions on that. But I think let's kick off straight into the presentation. And if we go to slide four, as we normally do on our financial scorecard, looking at the first half, a real solid set of results for the first half of the year. It's very easy to be a bit caught up in some of the negative variances that we see on that slide, given the tremendous year we had in 2022 with extremely high energy prices huge arbitrage opportunities, huge volatility. But if you look at the results as a whole for 2023 versus some of our history, and if we exclude 2022, it's the best first half we've had in the last 10 years. Of course, as we know, 2022 was an exceptional year because of the circumstances of the year. But this has been a very solid and, in fact, record-breaking first half of the year. So drilling down into some of the numbers, and Steve will obviously get into more detail on that later, we've achieved an adjusted EBITDA for the year of $9.4 billion, $7.4 billion of that coming out of our industrial asset business. And on the marketing side, an adjusted marketing EBIT of $1.8 billion. As we've said, that's annualizing above the top end of our range. We normally guide a range of 2.2 to 3.2 billion for the year. We've guided that we would exceed the top end of our range and guided between 3.5 and 4 billion for the full year. So we're nicely on track to meet that guidance for the full year and a very solid and strong set of results on the marketing side of $1.8 billion. The business remains highly cash generative. And during the first half of the year, the cash generated by operating activities was just short of $8.5 billion, which has allowed us to return additional cash to our shareholders. So today we're announcing a $2.2 billion top-up shareholder return. That's broken up between $1 billion in cash dividends and $1.2 billion in share buyback. Steve will take you through the details of how we calculate that versus our formulaic capital returns policy. There's a slide on that later in the presentation. But when we add that to the existing returns that we've already announced for 2023, that gives us $9.3 billion that we're returning back to shareholders for 2023. So a really strong and solid set of results to be able to repay our shareholders, provide them good returns on their investment, and in a very strong business. Moving on to slide five. where we have our ESG scorecard. On the environmental side, and starting there during the course of the year, the early part of the year, we published updates on our progress in three main areas, that being climate, water, and nature. And those who haven't seen those reports or haven't been able to review them in detail, I encourage you to have a look at our 2022 climate report, which is a standalone report, as well as our 2022 sustainability report, we really drill down into the details on those three major areas as well as other areas of our business and provides real transparency on how we approach our ESG and in particular environmental side of our business. On the social side, our first and primary goal every day that we go to work and we wake up every morning is to keep

keep our people safe.

Our primary goal is zero harm in this business. It's with a heavy heart that we have to report that we've lost one of our colleagues this year and that just encourages us to double down on our efforts to continue to improve our safety and strive for zero fatalities and zero harm in our business. This year we've also published our payments to government report. You would have seen that earlier in the year where we paid a little over $12 billion of taxes, royalties, and levies to governments around the world. That's up from $7.6 billion in the previous year, obviously on the back of the record profits we made in 2022. On the governance side, under our agreement with the DOJ, we've had two independent compliance monitors appointed. They've started, work is going well, and we're collaborating very well with the monitors, and we look forward to a very constructive and positive outcome through this monitorship period. At the end of last week, we also disclosed against principle 15 of the global industry standard on tailings management, as well as our overall conformance to the GISTM for our extreme and very high consequence dams. Those dams were independently assured by third-party assurance, and we continue to work on our full tailings dam disclosure with the remainder of the tailings dam disclosure to be in compliance or to be disclosed by 2025 as required under the GISTN. And with that, I'll turn it over to Steve on the financial performance.

Thanks, Gary, and good morning, good evening to all those on the call today. Thank you for joining. Over the next few slides, I'll walk you through the financial performance for the first half, expectations for second half as well, culminating in the free cash flow generation at spot prices, which we update periodically throughout the year. We'll run through the balance sheet and our capital management initiatives and update as we've walked through the balance sheet. So various moving parts. both in the P&L and in the balance sheets, which we'll get through in the following slides. Many of these slides would look very familiar to those who've been following us for a while. On page seven, these are just some headline financial figures. Gary had spoken to most of these, and they'll all be covered later on in detail on the various slides. But at a high level, most of the headline with EBITDA, both industrial and marketing, roughly half of H1 2022s record performance, where conditions both in the marketing and the industrial, particularly in the energy complex, were certainly exceptional. As we work our way through to that business having generated both large amounts of cash flow last year as well as this year, and both on a lag effect, we've already at the half in the first half of the year had made $5.2 billion in shareholder distributions and buybacks. By the end of the year, which we'll see later on given the second half base distributions as well as the top ups that we've announced today. We will exceed over $10 billion in shareholder distributions and buybacks during the course of this particular year. Our net debt is still down at a very comfortable low level at $1.5 billion, which is an outturn for the first half. That's with those shareholder distributions as well as we'll see later on in the bridge of the of the net debt position, there's been a big catch-up on some taxes paid in respect of the 2002's record earnings, where in some countries you pay on some provisional basis throughout the year, and once one's finalized the tax returns, there is the final settlement in the following period, which has happened particularly in Australia and Colombia, which we'd flagged earlier in the year when we'd made our dividend distribution in respect of the 2022 year as well. If we work over on page eight, The next few slides will cover industrial business before we move on to marketing. Very much a summary on page 8. We'll get to the detailed waterfall on the 9, and then there's some commodity-specific slides later on as well. But the reduction down to $7.4 billion from $15 billion. As we'll see later on, the reduction was very much driven by lower commodity prices, and in particular, the lower coal earnings. which was the reason why it's exact opposite of last year's increase from the 2021 year. We went positives, particularly on the energy, both industrially as well as marketing. We've also seen, which is notable across many of our businesses in the industrial side, there has been the inflationary impact for us was mostly felt during this six months rather than throughout last year, as the lack of particularly energy prices, both coal, oil, electricity, the full inputs commodity link that we're feeding through the entire economic chain. It takes time for it to work through in terms of contractors, in terms of freight, in terms of parts and pricing. So it was notwithstanding that we had the price increases last year, there's a lag effect in terms of when it ultimately works through in terms of your own costs within a business. So you've seen some increases generally across the board in most of our business industrially, but we are now peaking. And we expect to have moderating cost and I'll run through the variances. And with some volume benefits, we expect first off and second off, our unit costs will improve throughout the rest of the year and into a spot illustrative basis as well, which we'll talk on some of the variances later on. In the metals and minerals business, there was a decline to $3.1 billion. Cobalt pricing in particular, we did call it out in our production report last year as well as having... impacted particularly the African copper business. It's a byproduct. Metal price itself, which we gave some of the comparisons period on period, was down 59%. What we sell is an intermediate product, both from our Mutanda and KCC operation, producing a cobalt hydroxide. Its mechanical market dynamics is a function of a payability between buyer and seller payability relative to the metal pricing. That itself reflected weakness in that particular part of the market segment, such that our realizations for cobalt hydroxide were even more than the 60% reduction that we saw in metal prices as well. If you look through the financial report, you'll see just in our copper business, which declined 1.2 billion period on period of that 2.8 within metals, African copper business itself was 0.8 of that, having reduced from 987 million at the first of 2022 to just $172 million, and we'll see that on the copper chart as it follows. So that's a drop of $0.8 billion. And the hydroxide pricing period on period was more than 70% down, with payabilities averaging between 75% and 80% through the first half of 2022 to roughly 60% for this particular period. And mathematically, if you just looked at the cobalt impact isolated of itself in our copper earnings, We produced 19,000 tons of cobalt in the first half of 2022. We've had a reduction in the realized pricing of that product of around $19 per pound, which itself is an $800 million variance. So cobalt as a byproduct of our copper business was particularly impactful, both in payability and metal pricing has bounced off some lows in Q2. We have updated our cost structures and our earnings at spot pricing through the last week or so. That itself is helping some of the cost structure improving and some of the spot illustrative cash flow generation of EBITDA of that business as we see today. We still see the long-term fundamentals of Cobalt being attractive. We see synchronized demand ultimately both in EV and non-EV propelling that business positively in terms of demand. There is a period currently of both demand and supply factors, which is leading to an oversupply. It's a buildup in inventories, but it is something that we expect to be largely a short to medium-term impact with positive fundamentals for their business long-term as well. In terms of volumes on the metals, we will have a better second half over first half performance. That's the expectations. across all of our key metals business, whether it's copper, whether it's nickel, whether it's zinc, anywhere between sort of 50 to 55% compared to 45% mix or so in the first half of the business. We'll see it in each of the individual commodity sheets later on as well in all the businesses. Coal costs on the energy industrial dropped from 9.5 to 4.7 billion, really a function of lower prices, particularly in coal. which dropped $4.4 billion, and also our small non-operated upstream E&P business itself, which produces both oil and gas in West Africa. It itself dropped $400 million between the two periods. If we move into page 9, you can see the aggregate waterfall bridge for our overall industrial business having declined from $15 billion down to $7.4 billion. The big bar is, of course, the price reductions that we saw, contributing $5.7 billion of that reduction. Within that, $4.1 billion of that energy, so the biggest contributor there. Within the $4.1 billion, as I said before, coal was $3.7 billion on pricing. The E&P business was $0.4. And then within our metals, we had contributions. There was $1.6. Copper business, which is both copper and cobalt, had $0.7 billion. This is the price impact that we do, the absolute prices, less any costs that are directly linked to those revenues as well. So commodity-linked royalties that may go up or down relative to commodity prices would also go into a price variance category as we have. Copper was 0.7, zinc business 0.5, and then nickel business 0.4. And that you can see bottom left, we've seen price reductions average period on period. In the Newcastle benchmark, dropped 36%. Even more profound was API 4s and API 2s, around 50%. Copper, 11%, was more modest compared to zinc at 26%. And cobalt on the metal, as I said earlier, 59%. But realization's even substantially higher for our particular business as well. In terms of volume, there was a 1.3 billion negative impact. Energy of that was 0.6, and that was primarily in coal. And we're calling out Cerrojon as... A major contributor within that was down 6% period-on-period production, around 600,000 tons. There was both weather and blockade, community blockade-related impacts during the course of the year. It is a very high-margin operation, so the loss of tons, particularly out of that business, has an impact across a volume variance. Within the metal side, 0.7 billion. 0.2 was in copper. Most notably, Kaluasi was 10% lower period on period. We expect a decent catch-up in H2 on Kaluasi as well as the copper business generally. Within the zinc business itself was 0.2. We had weather impacts, particularly in Australia. Again, second half should be better, both in the zinc and copper output, particularly out of northwest Queensland that saw particular flooding and weather-related impacts in Q1 this year. And the nickel business itself was 0.2. And again, we had an I&O variance period-to-period due to the lag effect of the lengthy strike at Raglan, which meant we were ultimately producing final product with more third-party inputs than our own production during the period. Again, we expect a big tick-up in own-source nickel production period-on-period. That entire volume variance of $1.3 billion, by the end of the year, we expect to neutralize it. and finish flat, potentially slightly positive. So there is a big second half and first half improvement that we see volume-wise within industrial. On the cost side of the business, to some extent, you'd look at cost and FX as a combined cost impacts. There's some negative correlations between US dollar strength and some of the movements in pricing in some local currencies, particularly in places like South Africa. When we had a negative 1.1 increase across our cost business, energy was 0.4 of that, and metals was 0.7, with positive currency benefits of 0.2 in Australia and 0.2 in South Africa, making up that 0.4, with the RAND being 18% weaker, Australian dollar being 6% weaker. Across all the inflation and cost variance, as I said, we're calling for a moderation in both inflation impact as well as the denominator effect for us of better volumes as we go forward, both H2 to H1, and in a spot illustrative sense that we expect the cost variance to not move as it moves through the year. So that should have peaked out and should not continue to be a negative factor within the industrial contribution. If we then move into our overall businesses themselves, copper on page 10, this business contributed 2.1 billion EBITDA for the half, We have all of our spot illustrative analysis with the details on page 24, which you can refer to later on when you look at the presentations. But you can see on the right-hand side that business on spot illustrative basis macros of last week and cost structure today at 121 is generating just over $5 billion of EBITDA. The actual production itself was a small reduction, 4%. Again, consistent with our expectations around peer-on-peer movements and contributions from Kaloasis and Antamina. The cobalt pricing, as I mentioned before, was particularly impactful, as well as other byproducts, but we're calling out cobalt specifically for the particular copper business, but they also produce vast amounts of zinc as well coming out of the Antamina business. So you've seen a cost structure at the bottom in the middle, having moved from 80 cents a pound in 2022 for the first half to 145. And byproducts itself, with that increase of the 65 cents, byproducts was itself a lower credit, i.e. an increase in net cost of 45 cents, where it was just a reduction of 60 cents per pound this year, compared to 105 in the 2020. So there was, aside from the byproducts, there was a 20 cents increase in the gross effect. Part of that's inflation. Part of that is just the denominator effect. So both do with now second half increases in volumes that we expect in Kaloasi, Lomas Pais, and Antipokai, as well as cobalt hydroxide pricing having bottomed in Q2. It's up 10% to 15% partially in metals pricing as well as the hydroxide pricing. Our spot pricing in copper business is currently around 120, which you'll see us finishing at 132. So we're averaging between 145 and 121. So we'll see a pickup in H2 performance and a business that today is generating a little over $5 billion, and it has been a solid operating performance during a particular period. If we go to Zinc on page 11, it contributed $600 million EBITDA for the year and around $1.1 billion of spot illustrative free cash flow. Its production was down 10%, primarily to do with some disposals of the smaller Zinc portfolio that we We're working on and progressing throughout 2022, both in Bolivia, Peru, some closure, some lost units through the closure of Metagamy, a small operation in Canada, which had been running for a while as well. What's worth noting out just in terms of geography of accounting, given we had expensed or we'd recorded an impairment at the Mount Isaac copper business, And you'll see the nickel business, Conny Amber itself, that were taken down to zero. Effective this year, we're now effectively expensing all capex as well. So it's running through the OPEX because having determined the value long-term of that business to be towards zero, to be just capitalizing and impairing at the same time makes no sense. So we're just expensing all that. And within the MICO, the Manizer Corporation itself, there was 46 million of capex that has been expensed during this particular period itself, having a cost impact of 6.4. The flip side, of course, is that will reduce the reported capex. It's cash flow neutral as it works through the system as well. So we had there for the first half, we were 42 cents cost structure. On a full year basis, we expect to be around 35 cents. And we've got the volume benefits of scaling up second half, the first half performance. We've got continued ramp of the JIRM. and the recovery from Mount Isa from the weather impacts. So the H1, H2 split in zinc is around 46%, 54%, with the movement towards 35 cents for 2023. That's roughly the spot illustrative cost structure. Also in the mid-30s, generating a $1.2 billion EBITDA in that business as well, but performing reasonably fine. On the nickel business, this would be an area that it's a business that is struggling at the moment. As much the Conneamber itself, I'll talk to itself, but just the nickel business generally in terms of margins through a price that had dropped in LME terms, the price had dropped 13%. Realization, you can see in the top right for this overall business, in fact, dropped 23% to 953. Our Australian and Canadian business are selling product broadly in line with LME prices. Our ferro-nickel business, Conneamber product, is a ferro-nickel business. It's largely competing with the NPI out of Indonesia, where the discounts relative to LME, which is just a calculated expression at a point in time, has increased tremendously, where it used to be the likes of $500, $1,000 a ton. It's now in the many thousands of dollars a ton in terms of the realization. So that'll continue for as long as that product is largely competing in an oversupplied and a competitive cost structure its its margin environment is is quite tricky and it's manifested across the overall portfolio as a larger discount to To the LME price by virtue of their product that we have within within the Connie Amber business again as I mentioned we are Expensing capex at Connie Amber, which was 32 million dollars having a 31 cents impact across the business this will be a large recovery in volumes and period on period across all of our particular business. INO, as I said, to do with the Raglan strike, it should pick up 10,000 tons of nickel, H2 over H1, and then across Marin as well as Conneamber, we should have another 5,000 to 10,000 better H2 over H1 performance as well. That has a large impact in the unitary derived cost, which is improving from 973 to 850, and then even its spot is around 820. Still not a business that's able to generate much, but it is something that would move from a break-even EBITDA during the first half performance to a spot illustrative of around $300 million. And within that $300 million, you've got a business around Canada and Australia that's in the $400 to $500 with Connie Amber, even at these prices, and expectations of producing annualized in the 30,000 tons of nickel would still be not quite break even, it would be loss making in this at 100 to 150 million or so. So that is something that we're very focused and the whole industry and the French state around what is the future sustainable model look like for nickel production within New Caledonia, but given the structure of the market and the cost structure of those particular businesses as well. Turn on page 13, we got coal business, which contributed 4.5 billion for the first half. And on a spot illustrative basis, it generates $6.8 billion. That's fully loaded to latest cost structures, latest pricing. That's with Newcastle average forward 12 months forward around $150, with a portfolio effect generating of $22, generating a $130 net price across all of our 110 million tonnes. with a cost structure at $68.5. So that generates 6.8 within our coal business. There has been a cost, at least during recent periods, where we averaged 77 in the first half of 2023. There was some impacts of higher logistics relative to previous expectations, particularly in South Africa. Trucking, V-railing is much more expensive. We've had the impact of the increased Colombian royalties come through. as well as some of the lag effect, as I mentioned earlier on, on freight explosives and contractor costs as well. We will have the lower pricing, unfortunately, also lowers costs as well, because we do have royalties in all the operations, particularly Australia and Colombia, which is linked to the revenue that we generate in that business. And as we've marked the whole book to the 152 Newcastle or so, on a spot basis, that's taken ourselves down to 68.5 of cost, and a margin of 62, which is still a very healthy business, having that outturn of 6.8 billion. We'll see the spot analysis later on. On page 14, we can see the marketing earnings for the year of 1.8 billion, of course, overshadowed by first half of 2022's performance of 3.7 billion. That was in the immediate aftermath of the of the Russian-Ukraine war, the initial disturbance and dislocations and recalibration and chaos, frankly, across all the energy markets there, and prices and volatility that we saw. So we've seen a return to earth to some extent, still very good earnings at 1.8 billion, 1 billion in the energy, 0.8 billion in the marketing. You can see in the graph or chart in the middle of the bottom, those are half-year numbers, so if you annualize let's say 2 billion energy, 1.6 in metals. By any historical standards, those would still be respectable and good earnings and tracking towards slightly beating the top end of our range in the 3.5 to $4 billion. If we go across to balance sheets on page 15, a lot of words on 15, so maybe we'll shortly get to page 16 and 17 with some easier charts and bridges in our net debt evolution. and how we've thought about the capital returns. But a few bullet points on page 15, liquidity committed, liquidity of the business around 13 billion, still very strong and same as the start of the year, notwithstanding all the cash disbursements that we've done during the year. We've refinanced all of our core borrowing facilities as well. There was a materially higher taxes paid. As I said earlier on, that's the lag effect of settlement of the final income taxes in respect of the 2022 year. most notably for Australia, 1.8 in Columbia. You would see on page 29 of the financial statements where you see in the balance sheet you've got the income tax payable. It has sort of declined exactly by that amount, $2.7 billion from $4.7 to $2 billion. And given the materiality, particularly of the Australian final settlement, which we knew was due clearly when we leased our full year results in February, we said this is a commitment, really like an M&A, that was a debt-like obligation that was appropriate to reserve or to take into account when we did our distributional top-up declaration back in February this year. So we called out already a payment of $1.8 billion that we knew was due in Australia. That's exactly how the final settlement worked out. We didn't adjust for Columbia at the time because we were just focusing on the most material one, $1.8 billion, and just making an appropriate adjustment in respect of taxes. So there was the 2.7 billion settlement. It's now all back to kind of normal in the tax liabilities that should largely follow in the year of generation as well. It was just to do with the extreme earnings contribution that we saw in 2022 that we finally settled all our tax liabilities during this first half of this year. We've had a return of working capital, 2.2 billion net in the non-RMI, and a 1.4 reduction, RMI itself. I'll speak to that on the next page as well. And as Gary had mentioned earlier on, the total shareholder returns at the bottom, $9.3 billion, given the 2.2 top-up, roughly a 70-30 split between cash and buybacks. On page 16, just to follow through the net debt, at the beginning of the year, largely flat at 0.1. The FFO, which is after-tax, which... reflects the $2.7 billion of taxes that was paid in respect of 2022 during this particular period. So that's a lag effect that's captured there. One should add that back in terms of doing any comparisons of FFO for any reasonable year-on-year comparisons. The net capex, $2.5 billion. There'll be a slide later on. It's spending at a lower rate than what we expect for the full year, but that was the net capex after a small amount of... disposals as well. The investments on M&A, that was largely the 0.6 billion inflow, largely the receipt of the cash portion in respect to the cobalt sale. Non-RMI, we generated 2.2 billion. Within that, it's important to look at what's the marketing components and maybe the non-marketing components. This was a big area that was focused in previous periods as a build-up in working capital where the marketing business was was discussed and highlighted as having consumed about $5 billion in non-RMI working capital during 2022. But this year, working through that $2.2 billion, we had a marketing inflow of $3.2 billion. That was the initial margins, $2.1 billion. As we discussed last year, that had built up to $4.1 billion net margin calls initial during the course of 2022. It's back to two, which is a more normal level for us, so that's effectively fully reversed. We had some build-up last year in the physical forward part of our business. That's where we have to wait for the cash realization of longer-term fixed-price contracts, particularly in our natural gas business with the reduction in pricing there. It was a reduction of $1.1 billion. So that $3.2 billion can be considered as part of that $5 billion of the marketing build-up last year, which has come back, so almost two-thirds of that. And the remaining amount may come back at some point, but it's a bit more structural in terms of our mix of businesses across terms of trade, classic receivables and payables, where we've called out the loss of Russian supply, particularly last year's loss of having built up $1.5 billion. That's clearly still the case today. So that's not necessarily flagging that there'll be material further releases of working capital. We also had a 0.2 reduction in non-RMI inventories out of industrial businesses. the likes of Astron having built up some inventories ahead of their restart, and some consumer builds and some of the other businesses. So we've got 0.2 back there. Then, of course, we settled the last of the DOJ resolution payments, which we paid in February of the 0.5, and then there was reductions in deferred income of 0.9, which is from time to time we do sales of non-core byproducts out of our industrial assets to physical buy universes, primarily gold and silvers out of smelters, actions is in that particular area. Distributions of buyback, 5.2, and other is mainly leases to get to 1.5 billion, which I said is still a very low level for this particular year and gives us capacity to invest in the business, to return cash to shareholders and the likes as well, which we've been quite busy in that front as well. On page 17, you can see how we've thought about the top-up returns as well, so starting at 1.5 billion. We've still got our second tranche of the announced $5.6 billion cash amount at the beginning of the year. That's $0.22 that we paid in September. The final 0.2 of the $1.5 billion buyback that was announced was completed in July. We've got $1.3 billion of announced transactions, which we expect to close in this hot, and Gary will speak to some of those later on. That leaves $4.2 billion. What we'd effectively reserved or allowed for, and put a placeholder around potential M&A. And clearly putting a name on it, there is the particular tech situation where we announced that we'd put in an offer, cash for tech's coal business back in June. That itself, if it was to consummate, would be material cash-funded acquisition. And as part of appropriately rethinking the business and steering it towards its eventual outcomes, which said itself that that transaction was to materialize. We would look to then spin off that larger coal business as soon as possible once the business had reached its target leverage levels expected to be within 12 and 24 months. And the non-coal business would be brought down to a leverage level of no more than five billion. So this is an attempt to start thinking about finding the right balance between Sheldon Returns today, and rewarding shareholders and positioning for potential outcomes. Now, of course, if nothing eventuates from that particular situation, that $2 billion immediately comes back to shareholders or as soon as practical. Now, of course, we can wait till February. We can do out-of-cycle potential increases to PIVX or the like, but that's not going away. It's in the business and it's been reserved for a particular situation. We felt that was an appropriate balance as we built back up towards the $10 billion. of putting down $2 billion and just limiting the peak of what balance sheet net debt may be at a particular point in time, where we historically said we wouldn't go to more than $10 to $16 billion as well to facilitate M&A and then delever appropriately as well. That's left $2.2 billion top-up, which Gary had mentioned before. We've allocated that between additional cash of... of $1 billion, which is $0.08, which will take the cash payment then to $0.30 next month, as well as incremental buyback, $1.2 billion at $0.10. In terms of capex, nothing particularly on page 18 to highlight. It's as we were largely, so we're keeping 23 to 225 capex as it was earlier this year, $5.6 billion per annum. which at the time was felt that it was going to be $6 billion in 2023. We now are calling for a 2023 CapEx of around $5.5 billion. So there is a slower spend in this particular year that will ultimately get caught up. We'll come again towards the end of the year when we do investor updates and just recalibrate exactly where we expect CapEx over the next two or three years. We think a reasonable guidance to allow for the next three years is averaging $5.5 $5.6 billion. Just before I head back to Gary, just a final recap on slide 24, where we show details of our free cash flow at spot generation as well. We showed the avatar of $17.4 billion split between the various businesses, copper, zinc, nickel, and coal. The other categories are oil, ferro, small alley business, and SG&A coming out to 0.8%. Marketing, $3.4 billion. Conservative relative to historical performance, we've pitched that at around $3 billion EBIT. Of course, we've been way above that in recent years, plus some of the depreciation getting to $17.4. Cash taxes interest and other is net interest of $1.3 billion. That's at funded debt of $28 billion max at around a 5.7 average cost of finance with taxes at 3.1. And of course, on the CapEx side, 5.5 billion industrial and 100 million in marketing for a 7.3. That's declined from a 10.6 billion number, which is where we were guiding to or highlighting at the end of February. That's been a function of declines in prices, particularly in the coal part of the business as well, which itself is still a good margin, $62 for a 6.8 billion. So that's the cash flow of the business, still very healthy. still very strong, still able to invest, return to shareholders and just manage a solid business. And with that, I'll hand back to Gary just to conclude and wrap up.

Thanks, Steve. Before we get to our final slide, I mean, maybe just following on Steve's theme of capital returns, capital allocation, I'll just touch on three of our M&A activities that we've concluded in the first half of 2023. which you're aware of, but I'll touch on them quickly now. In the Illumina box-out space, we announced an acquisition of a 30% equity stake in the Norte and a 45% stake in the MRN box-out mine, both in Brazil from North Hydro. Total consideration on closing, which we expect sometime probably Q4 of this year, is in the region of $700 million. And that gives us a stake in a tier one long life asset. This is one of the largest and lowest cost alumina refineries ex-China. The MRN deposit, terrific resource base and terrific quality and gives us exposure to also lower quartile carbon product, which helps us service our customers, particularly in the Atlantic market. So a very good asset for our portfolio, fits nicely into our aluminum, alumina box-up trading business, and something, as I said, that we should close in the fourth quarter of this year. On the copper side, recently we announced the acquisition of a little over 56% stake in the Mara Copper Project in Argentina. We bought that from Pan American Silver. a brownfield copper project that we already owned the remaining 44% of. So this brings us up to 100% sole owner and operator of this project. It's a terrific brownfield project, very low capital intensity. It's a life of nearly 30 years. It will be a top 25 producer for the first 10 years of its life. It will produce at least 200,000 tons of copper. And a project that we're very excited about, as I said, brownfields, so much lower risk, much lower capital, much faster to market. And we'll bring that to market as we see the market needs those tons. I think the world is starting to recognize the shortage of copper coming in the next few years. And this will be one of the first projects that's able to feed into that copper demand. But before we bring this on, we certainly want to see higher copper prices. announcement that you would have seen, more on the smaller end of town, but more cleaning up the PolyMet structure, PolyMet-listed company, where we owned around 82% of that company. We're taking out the other 18%, and we've made a cash offer to shareholders, and that's subject to approval from those shareholders and the courts and various other closing conditions. That will take us to 100% of the PolyMet project. or the Polymex company, which is in a 50-50 joint venture with Tex Massava project, which we now call the greater project, is the new range project. A very good also brownfield project that will produce copper and nickel right in the United States. Critical minerals right there where it's needed. So something very exciting for the future and allocate capital to that as required going forward. So if we move on to slide 21, I guess we just try to capture the key elements of our business on one slide. At Glencore, we're a major critical minerals portfolio. We have all the right minerals for a decarbonizing future. Very large copper producer, nickel, cobalt, growing in the aluminum and luminous space, as you would have seen, and zinc, sometimes the forgotten commodity of decarbonization, but absolutely critical in the decarbonization journey. And focusing a little bit more on our Copper portfolio, we're a leading copper producer, a million tons of copper production, and a very exciting part of our business is our portfolio of mainly brownfield projects, one very large greenfield project, but mainly brownfield projects, and we did touch on the Myra project, which could add up to another million tons of copper into our portfolio. which we will bring on as the world needs it and as the price environment is welcoming for those additional times into the markets. We also continue to grow our recycling business and we promote circularity. We've invested in recycling over the last couple years and we'll continue to invest in that, both organically and inorganically. We already produce significant amounts of metals through our recycling business and it really gives us an added advantage when we visit our customers being able to offer third-party material, our own material, and recycled material. And not only is it the responsible thing to do, but when you look at where the world is going and the requirements under law and the requirements of what our customers need to be able to provide that recycled material is really beneficial to our business, and we expect to see that business grow further in the years ahead. In the interim, as the world decarbonizes, And we do recognize that the world needs to decarbonize as quickly as possible, but it's not achieving some of its goals in the short term. And the world does need energy to progress and to grow and to take people out of poverty. We are supplying the energy needs of today, and we do that through our coal business. But at the same time, we responsibly run down that coal business to ensure that we achieve our net zero ambition. by 2050 in our company. And then lastly, our marketing business, where we source the materials that our customers need. This is a best-in-class marketing business that year-in, year-out delivers terrific returns. We've always had our range of 3.2 billion EBIT that we've delivered to our shareholders. The last three years, we've achieved above the top end of the range, which has been a great achievement for us. And we continue to work on that business to be able to supply the commodities that our customers need and provide the returns to our shareholders. So overall, that gives us a very responsive and very highly cash-generative business model. Steve touched on the numbers, but just to reiterate them here, a spot illustrative EBITDA and pre-cash flow of $17.4 billion and $7.3 billion, respectively. And with that, we'll conclude the presentation and hand it over to Q&A.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Once again, that is star 1 and 1 to ask a question. We will now go to your first question. And your first question comes from the line of Liam Fitzpatrick from Deutsche Bank. Please go ahead.

Good morning, Gary and Steve. Just two questions on the EVR bid and your coal strategy. Firstly, can you confirm if the cash proposal that you submitted back in June is at least as high as the $8.2 billion that was offered as part of the original merger? And linked to that, would you be willing to partner on the deal with other companies who may want a minority stake in EVR? And then secondly, if you're not successful in this approach, where does that leave your call strategy? Will you look at other acquisitions and will the aim still to be to eventually demerge the business or something else? And one final one just on the operations on Connie Ambo. That seems to drive a lot of the a big part of the miss versus versus our numbers, at least today. What sort of solutions are you looking at for that asset and when could things actually start to happen? Could it be in the next six to 12 months or could it take longer? Thank you.

Good morning, Liam. Thanks for the questions. I'm unfortunately going to have to disappoint you on your first few questions on the price and the partners on the EVR. I can't comment on those particular issues, so we're just going to have to leave it there. I'll move on, rather, onto your second question around the coal business and what happens if we're not successful. I mean, nothing really changes in the sense that we have a world-class coal business, mostly steam coal, some coking coal in our business across Colombia, South Africa, and Australia, as you well know, and our commitment to responsibly run down that business. We've always said that we will listen to our shareholders, which we continue to do, and we've said that business If the majority of our shareholders want to see us spin that out, we would spin that out. The most recent consultation with our shareholders has been that if we are not successful in acquiring EVR, we would keep that business within Glencore. However, we continue to consult with our shareholders. Ultimately, it's their capital that we deploy and we hear at their pleasure. So if they would like us to change strategy and spin out our cold visit, we'll do that at the time. But at this stage, the feedback from our shareholders is that if we are not successful in acquiring EVR, the coal business would remain within Glencore. With respect to Connie Ambo, I agree, very disappointing. In fact, disappointing in the sense that production-wise, even the last three months have been very good, and a real shout-out to our management on the island who've done a terrific job. but Steve mentioned the nickel market, which has not been in favor of Conneambo, given it's a fair nickel producer. We've worked very closely with the French government. The media has reported on a report that the French government have put out. I assume you may have seen that. They ultimately have recognized that all three nickel processing facilities on the island have challenges and a solution is needed. We absolutely agree that a solution is needed. From our perspective, all options are on the table. It's right up on the top of our agenda. We're working very closely and collaboratively with the French state and our local partners on island, and we hope to have a solution on the way forward for Connie Ambo as soon as possible.

Thanks, Kerry. Just very briefly coming back to the coal strategy. So if EVR doesn't happen for whatever reason, was this just a one-off exceptional opportunity, or do you think there are other other assets out there that could kind of improve the business and open up a demerger further down the line?

I mean, in all our commodities, there are terrific assets out there. Now, this is an opportunity that came up because of a particular circumstance. So we're not out there chasing assets simply because we think Are they nice to buy or whatever it may be? This was a particular opportunity that came up. Of course, we'll only allocate capital to assets to buy, provided they meet our very strict capital allocation framework in terms of returns, in terms of jurisdiction, in terms of commodity. So it's very difficult to speculate on what may be out there that meets that capital allocation framework and that would fit within our portfolio. So I'm not trying to be purposely evasive, but you can't point to another asset and say, well, if we don't buy this, we'll buy that. This was a particular opportunity that's come up, and we're engaging on that.

Thank you. Thank you. We will now go to the next question. And your next question comes from the line of Jason Fairclough, Bank of America. Please go ahead.

Good morning, everybody. Thanks for the presentation, Gary, Steve. Just two quick ones for me. First one's on resource nationalism. So last year, we had a negative surprise from Queensland on the coal royalty, and obviously some chatter now coming through about higher royalties in New South Wales. So just wondering on your thoughts here, how you're engaging with policymakers. Second would be on MARA. So you've bought in 100% from partners who perhaps didn't want to execute. I guess from here, would you now consider syndicating this project to bring the MPB forward and use somebody else's balance sheet for the CapEx?

Morning, Jason. Thanks for the question. Look, I mean, resource nationalism has always been a concern for us, and particularly what we saw in Queensland. You've mentioned New South Wales. we continue and we are engaging with the New South Wales government as we attempt and we do engage with governments around the world around any signs of resource nationalism or change of fiscal conditions. We obviously would like a fair discussion and transparent discussion around not only a one-year scenario around commodity prices, but history, future forecasts, investment certainty and the like. So we continue to engage with all governments around the world on our business. With respect to Mara, no decision has been made around syndicating. I mean, as I said, this is a low capital intensity business. So, you know, and we have a very strong balance sheet, as Steve has outlined in the financial presentation. So there's no real need to syndicate out any part of this. Of course, we're always We work well with partners, and if it's something we choose to do at the time, we could do that, but there's no need to syndicate anything out on MARA.

Well, just as operator, we can sort of get our own sort of hands across the sort of asset and make it our own planned property, optimize feasibility. It's sort of been a joint venture. It's been non-Glencore operated sort of historically, so there's a degree of work still to be done to put sort of Glencore's overall overall stamp on this asset and optimize it should the transaction close. It hasn't closed yet, so we're still going to need some work to do there.

And just to follow up, if I could, guys, on Mara, any kind of indicative timeline to final investment decision and first metal?

I mean, there's no indicative timeline because, I mean, we have our own timelines in terms of how long it'll take to... investment decision. But an investment decision will only be made when we believe that the market is there for these tons. This is not something that we're going to rush to market. The market is below $8,500 of copper now. We see copper projects ramping up around the world. We certainly don't want to bring copper units into a market that may have additional excess supply. So we're not sitting on our hands. We're working on the project. We are de-risking the project as we are with all our projects. um but we're not going to sit here and put a a date out there um in anticipation of perhaps demand being there we want to see real demand for copper we want to see higher copper prices and that's where we'll bring that to market okay thanks both thank you we'll now go to your next question and your next question comes from the line of

Daniele Tiglomera from Credit Suisse, please go ahead.

Hi there, morning, and thanks for the question. On the additional 2 billion reserve for M&A, how should we interpret this? Is it an indication of how likely it is you think the EVR transaction will go through? And assuming it's not successful, the UVR transaction isn't successful, what would cause you to add that back into consideration for additional returns? Or would you just keep that $2 billion in the back pocket? That's the first question for me.

Yeah, thanks, Jenny. I mean, if that transaction was to not transpire, it would automatically and mechanically come down to shareholders at the first opportunity. So there's no general reservation. We've never done it. This was just something that is a, sort of a live process, and it's a material process. And we put an announcement out in June as to what our, the fact that we had made an offer. So it was circumstantial to the sort of nature size and just where we are in that sort of transaction deliberations that are currently in change. So it will, if there was an announcement at some point that says that that's been sort of unsuccessful, that will just get released and it will flow back into It will automatically come through in February, and I guess we'd have the opportunity to access it earlier if it was appropriate through some other top-up or buybacks that was sensible at the time. So there's no reservation or some other M&A situation that's being thought about in the context of having a placeholder always there. There's no M&A budget. There's no war chest. This is just around that particular situation at the moment as being appropriate for some balance sheet management sort of now and into the more immediate future should that be successful.

Very clear. Thank you. And just another question on the balance sheet. So just given your previous comments, Steve, we should not be expecting a further reduction in non-RMI working capital in the second half. Is that correct?

You should not be. Yeah, I think it's, I mean, it can happen and there's still obviously working capital sort of in the balance sheet, but the easy, the low hanging fruit has reversed out with the with the sort of more normalization in valuations on our physical contracts, volatility levels, margining, trading levels. So the sort of low-hanging fruit is clearly back. There is other areas to do with mix of business and other opportunities that could well happen that some of the remaining largely just normal receivables, payables, mix of business. But I think for now, I think the sort of direction of travel should be a further release, but there's probably some bias towards, if anything, if there's going to be some movement, it's likely to be a smaller release rather than investment. I'm not saying that some of that release here is at risk of getting clawed back in the absence of a return to the highly volatile and high-price environment, which we would welcome. I mean, both in industrial and marketing business, this was always one of those questionings we'd get, when do you expect working capital and how much, and it's sort of careful what you wish for, because I would have preferred to have still been stuck in 2022's sort of environment, both in pricing and general opportunity-rich environment that we were at. So I would say certainly don't have a number in there. There's some bias towards further release, but the easy stuff's done.

Very clear, thanks. And just lastly from me, Is 3 to 4 billion now the right range for marketing? Because notwithstanding 2022, that's about where the business has been.

We're not quite ready to sort of formally raise the guidance. I think the world is still tricky, still geopolitics, still sort of a slightly above average opportunity set, but it is more normalizing. Let's see where the next six months and maybe into 2024 as to how that progresses as to whether we settle in in the threes or whether there is some reversion to a number more in the twos. So I think during the course of 2024 would be an opportunity for us to finally sort of get off our sort of holding pattern and understand that maybe sort of a bit of a sort of a non-committal position, but I think during 24 we'd be able to, through into first half next year, to properly reconfirm whether it has stepped up higher or whether it's appropriate.

Great, thank you. Thank you. We'll now go to your next question. And your question comes from the line of Alan Gabriel Morgan-Stanley. Please go ahead.

Yes, good morning. Two questions from my side. So firstly, Steve, the question is for you. The coal costs were historically very much price-linked or correlated, where they would fall sharply as prices correct. Is it fair to assume that this no longer is the case with the royalty structures in both Colombia and Queensland and potentially New South Wales? And how real is the risk of these new royalties in New South Wales being introduced? That's my first question.

It is still very sensitive to royalties. I don't know if that was your question to say that it's much more sensitive to royalties given the changes that have been made both in Colombia and particularly Queensland. So it will, and that's why you've had costs move between sort of 82 is where we finished in 2022, moving to a spot of 68. That's almost 90% would be due to royalties, give or take some other some other inputs into the business, whether in contractors, freight, inflation. So it still is a factor, and that 82 cost, I think it peaked even higher when we were running spot scenarios in the middle of last year. But if we assume now that prices are more in people's... expectations long-term, or at least the real froth has come out of the business. We're running Newcastle 150. It's still elevated, but not nearly the level that it was last year. It's been rebased significantly downwards. There's still some royalty that's baked into that number. If prices came down, it would still come down a bit. I don't know if that answers your question properly, Alan.

Yes, well, I guess my question was more if costs were a bit stickier now with the new royalty structures in place, i.e. if we go back to a price environment of two or three years ago, will costs go back there or will we stay around where we are today or in the 60s? That was my question more.

Well, they certainly will come down a bit, but the big sort of almost – I don't want to say windfall elements necessarily, but there is sliding scales such that they are much more punitive the higher you go. They step up from 15%, 20%, up to 40% in the case of Queensland. So there is a big sliding scale as you move higher, but you would have to reach the absolute lowest of those bands. for prices to not be influenced still by those royalties, and we're still not at the lowest bands in any of the particular Columbia and Queensland. So there still is a degree of cost elasticity that we will, if prices lower our costs, they're not sticking, they can easily come down another $3, $4, $5 on the cost to royalties.

Thank you. That's very clear. And the second question is on the capex guidance. So you're now expensing certain previously capitalized items at Konyambo and Mount Isa, and yet you have kept your capex guidance unchanged for the next three years. With the disclaimer, you're going to have a look at it at the year end. Is that an implicit capex increase, or will we have to assume that your capex will come down by a commensurate amount that is being capitalized and now expensed?

Thank you. That's a good question, because we're having our cake and eating it on that one. in that it was not material enough to consider in the overall whether there is an increase or a decrease because we are through the major planning cycles now to do with life of mines, optimizations, budgets, timing, project sanctioning. So the 5.6 per annum is a reasonable placeholder. We'll come back at the end of the year. I mean, like for like, maybe you can say it should be less by maybe $100 million to do with its expensing, but then our cost structures are being burdened with that cost. But it wasn't material enough to do too much forensics now, given that geography will come back at the end of the year. Thank you.

Thank you. We'll now go to our next question. And the question comes from the line of Alon Olsha from Bloomberg Intelligence. Please go ahead.

Hi, good morning. Thanks very much for taking my question. So just firstly on Cobalt, you've outlined that the market's been pretty weak, both on price and payabilities. Notwithstanding the long-term outlook, which continues to look relatively positive, do you see kind of light at the end of the tunnel in the near term in terms of Prices firming, volatility reducing, and payability is reaching an acceptable level. And related to that, if that doesn't happen, you've indicated before you wouldn't be shy to necessarily step into the market to support pricing and provide some equilibrium. So would you be willing to do that if that happens?

Morning, Alon. Thanks for your question. I think, I mean, you did say a positive outlook for Cobalt going forward, and you've seen, you're absolutely right, we've seen the lows, we're off the lows, and Cobalt pricing is even up a little bit in the last couple months. So not bad, but certainly not where we think it is. There's still a surplus in the market. We do believe it'll take some time for that surplus to come out the market. EV use of Cobalt is incredibly strong, and forecast remains very good for that. Aerospace and defense also very strong. It's more weak, being weaker on the sort of home use consumer goods, our phones, all those sorts of things. But that's starting to pick up slowly as well now, particularly in China. We've also seen on the supply side additional supply coming onto the market, Kisanfu coming on. We've seen all the additional cobalt coming out of HPAL in Indonesia. So you've had a supply-demand imbalance over the last few months, and that results in the lower prices. But that's starting to work itself out the system, and prices, as I say, have recovered, and we do foresee a recovery in the future. still excess stocks on surface and the market isn't quite yet in balance. So to your second question around us taking action, yes, it is something we've done before and it is something that we will consider in the future. We're not yet to sell our cobalt at a loss or supply material into an oversupplied market. We are a large producer of cobalt and to the extent that we believe it makes sense for us to to take some action and a supply side response, we would certainly do that.

Which could be both in the lower production and or stockpiling for a period of time or a mix or a combination thereof.

Okay, great. Thanks. That's very clear. And just another question on Mara. You said that's a project you're not willing to pull the trigger on quite yet, given where the price is. But are you able to give an indication of... Kind of the metrics for the project feasibility, previous feasibility work suggested kind of capex around just under $2.4 billion. What do you think about that number? Is that likely to rise? Could you give us your latest sense of cash costs for that operation? And just related to your comment around not necessarily pulling the trigger quite yet, I mean, given this looks to be a pretty low-cost, low-risk project, which would generate a good return in this market, what's preventing you from pulling the trigger now, given that it could take three years or three, four years for this material to come to market?

I think, look, I mean, it's all one question there. Yes, it is a low capital intensity project. we're obviously with recent inflation and recent changes in various commodity prices and inputs, we're reworking our capital estimates. But, you know, so we're not going to put out a guidance or an estimate now. We don't know that yet. Yeah, we haven't even closed on the transaction. But it certainly is a low capital intensity. And if you look at it versus some of the other potential projects that could come on in the world, this is significantly lower from a capital intensity perspective. And that's why we're very excited about the project. It is brownfields. And it is quite significant in terms of volume, 200,000 tons of copper in the first 10 years. It's nearly a 30-year life. Cash costs, likewise, towards the low end of the production scale, so a very exciting project. If we did bring it on now, and as Steve rightly said, we're going to close on the transaction, so difficult to do anything until we close the transaction. And if we did bring it on now based on our current capital estimates and cost estimates, yes, we would make a good return on it. But we like to make great returns on our assets. And given where we see the world going and the copper shortfall in the future, we'd rather feed those copper tons into a stronger copper market where we see prices in excess of $10,000 a ton of copper. That's where we think we'll get the best returns on our investment for our shareholders. It's a finite life. It may be a nearly 30-year life, but we want to make a lot of money for every one of those 30 years and not put tons into the market, which in itself could oversupply a market or keep prices, you know, sort of, or inhibit prices, which impact existing portfolios. So it's about timing and getting it right, ensuring the world gets the copper it needs when the world needs that copper. And that's our responsible way of bringing this asset onto the market to bring that copper into the world as it needs it. But our responsible way of working for our shareholders is to ensure we do that at the best possible return for our shareholders.

Okay, understood. Thanks very much.

Thank you. We will now go to our next question. And the next question comes from the line of Miles Alsop from UBS. Please go ahead.

Great. Thank you. Maybe first question for Steve on working capital. Because in the past, I think we had talked around $6 billion of the working capital build would reverse over time. Is that still the way we should think about this over the medium term? Or is it actually more of a structural build in terms working capital that we saw last year.

Thanks, Miles. I don't know exactly where your six comes from, but we sort of articulated on the marketing component of that movements last year. There were a lot of different geographic places of where it may have shown up in the cash flows as a working capital movement, but it wasn't directed towards investment or balance sheet. It was paying out the likes of the resolution settlements on the On the investigations, it was paying various other VATs and payroll accruals and the likes as well. So the marketing component, we'd pointed towards about a $5 billion, and we grouped that up between the three buckets of initial margin, physical forwards, and normal receivables payables, which the latter was the 1.5, which we noted as being more structural to do with loss of Russian supply in the terms of trade that we're able to command historically So 3.5 billion was, if you like, the ones that we said were cyclical, should come back in the ordering course of business, and 3.2 of that 3.5, being those two components, has now reversed. So that was just that passage of time. The 1.5 was potentially a bit stickier, which to the earlier point, if someone raised to say, well, what should we think about as a potential future sort of release? Yes, that 1.5 still on the balance sheet, it's working for us. It's generating returns, cost of finance, hurdle rates. It's all factored into our terms of trade. Our marketing performance has been strong. Return on equity is good. It's recovering its interest and then some. So it's not dead capital. It's just a different mix of business that's orientated towards having moved away from non-Russian business historically. So of that five, 3.2 has come back, 1.8, so maybe yes, there's a few hundred million which still could be a release passage of time, automatic, that's still as of a point in time, but we're starting to get into less material amounts to think about and to be responding to on a six-monthly basis. We should have, yes, we can have cycles of working capital during periods that can go up or down a billion dollars, depending on margin calls, depending on other factors, and we would explain what they are, but the big movement of last year in marketing and the sort of reversal of the material nature has already occurred this year.

Okay. Maybe on the M&A front as well, I know you can't talk about tech as a live transaction, but more generally, obviously we've had both Samara Transaction, Polymat, I mean, both seem like they're more tidying up the portfolio and opportunistic, but how should we, do you see more opportunities coming through apart from tech or Alinorte obviously was another move. Is this the new Glencore as such that we're pivoting a little bit more towards gross again over cash returns? Which commodities do you feel are underrepresented in the portfolio in terms of where the growth could be going forward?

Miles, I don't think you can say it's the new Glencore. I mean, Glencore M&A has been in the DNA of this company for many, many years. But we've also been very strict on capital allocation and ensuring that we allocate capital towards assets that are correct for our portfolio and provide the right returns for us. In the instance of the various M&A that we've undertaken over the last period of time, we've These have happened because we've had the opportunity to do that. We've had a terrific relationship with North Kedro. This opportunity came up because they wanted to divest some stake. This was not a public tender, public market sale. This is through a very close marketing relationship and working relationship with a terrific company and something that we were able to capitalize on. Mara, something similar. We bought out Newmont Stake first and now we've bought out Pan American Silver Stake. We were already a shareholder in that project. And it's something that a project we're very excited about. It perhaps didn't fit the portfolios specifically for Newmont and for Pan American. And it was an opportunity for us to be able to consolidate those stakes. So those have been very good. Polymetry has been a shareholder for some time. And taking out the minorities probably makes a lot of sense. And obviously, with Tech Missile, the project next door, putting those two together made a lot of sense. So it's not that we're out there with a new way of approaching M&A. This is still the way we've always approached M&A, which is looking for the right value, right returns, right commodities for our company, and we continue to do that.

Okay. One very last question on whole price outlook. Obviously, prices have held up still pretty well. you know, what would stop coal prices from falling back below 100 bucks over the next sort of two, three years? Do you think, you know, the prices are now pretty well bedded at this sort of level? Or, you know, why won't we go back to where we were two, three years ago?

Look, I mean, it's very difficult to predict. No one's got a crystal ball, Miles. But, you know, coal is so dependent on the supply-demand and what happens. Now, we've seen so many different things happen in the world. You've seen Indonesian supply increase significantly. You've seen imports in China have grown significantly. Chinese are still building coal-fired power stations. India continues to grow imports. So both on the demand and the supply side. On the supply side, what does give us some comfort that and particularly high quality which is where we play remember Indonesia produces mostly the lower quality our mines generally produce high quality coal steam coal we're not seeing any new capital allocated to new high quality steam coal mines so and you know mines are finite resources we've closed three mines in the last few years and we continue to close a number of mines going forward under our responsible rundown strategy so We've seen that it's very difficult on the supplier response side and high quality. You don't see new supplier plans coming into the market. And then the demand side, demand still remains very good. As I say, China, okay, mostly low quality, but that's taking most of Indonesia. But we have seen, even Europe, last year imported over 85 million tons of coal. This year we expect them to also import high quality coal. Middle East, Southeast Asia continue to take coal. It still is the cheapest, form of base load power for, and particularly in developing nations. And if you don't have supply side responses and the demand is still there, there's no reason to think that coal prices, particularly for the high quality, need to fall any further.

Okay, thank you.

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Chris from Jefferies. Please go ahead.

Hey guys, good morning. Thanks for taking my question. Actually, I have two questions. So first on the two DOJ monitors, Gary, I think you said that that was going well. What exactly are the DOJ monitors doing? What's their involvement in the day-to-day business and how might their involvement impact the way the marketing business actually operates? And the second question on call strategy, can you explain the rationale between why it makes more sense to list the coal business, demerge it and list it if you do an EVR deal, and then it doesn't make sense potentially to demerge coal if you don't do an EVR deal. I would have thought Glencore Coal on its own is smaller, smaller float, maybe easier to list in that regard. So it's just not really clear to me why listing Glencore Coal as a standalone Might not make sense. I understand that you've been consistent with the point about it depends on Cheryl's feedback, and Cheryl doesn't want you to keep that business, but I'm not sure why it makes more sense to list the combined coal business and not Glencore Coal on its own. Thank you.

No problem, Chris. Morning. Hi. So just quickly on the DOJ and the monitors, they started here in June. Their involvement is to assess our compliance program and our obligations that we've made, or commitments, excuse me, that we've made to the DOJ, but largely around assessing the effectiveness of our compliance program and assessing our culture. It's something that, and I've said before, I in fact think it's quite good to have the monitors here. I'm very proud of the compliance program that we've implemented in this company and it's been implemented over many, many years and we continue to grow it and strengthen it over many years. So having the monitors here is in fact a positive because we have a terrific set of professionals who are going to try poke holes in it and look to see if there's any weaknesses so we can strengthen it. We're very proud of it. As I've said before, I think it's the gold standard. So it's fine. The involvement around marketing that you asked around or the ability to impact marketing I think is limited in the sense that our marketing department operates in full compliance and conformity with our compliance program. And as Steve pointed out over the last three years, we've performed above the top end of our guidance range. So I don't see any impact on our marketing business. Our marketing business is very strong and works in line with our compliance program. In terms of the cold strategy, the way we look at it is this. We've always said that if our shareholders want us to spin out our cold business, we would spin out our cold business. And I'm just talking Glencoe stand-alone. Our most recent consultation, the overwhelming majority of our shareholders were very supportive of keeping our coal business within Glencore and following our responsible rundown strategy. We have also consulted with our shareholders around a potential spin-out if we are successful in acquiring Tex coal business, and there is an appreciation from our shareholders that When you put our world-class coal business together with Tech's very, very good met coal business, you actually get an even bigger, better coal business. And the ability for that business to, in fact, trade at a better multiple to even Glencore's standalone coal business is certainly there. There's a value creation by putting a met coal business out of Canada together with our steam and met coal business in Australia and our steam coal businesses in Colombia and South Africa. So you do get a bigger, better coal business. Despite the fact that our coal business standalone is a world-class coal business, you do get even a bigger and better coal business. So standalone, we believe that business, and we have no issue around size. We believe the New York market would be able to swallow that up very quickly. The demand for stock in a standalone business like that, particularly the amount of cash flow that it would generate, is substantial. So our shareholders are supportive of this value accretive spin-out if we are successful acquiring tech's Metco business. If not, we're very happy to keep our world-class steam coal and Metco business within Glencore. But of course, we continue to consult with our shareholders, and if at any stage the majority of our shareholders feel that it's better to spin that out, we would do that too.

So in that case, would you think that in the event that you do a deal with EBR, the valuation uplift that you would get on that combination would be dependent upon a demerger? In other words, you wouldn't get that value creation within Glencore if you kept coal? Because if we think about, you know, unless the market is totally misvaluing coal within tech versus the way it values coal within Glencore, I would have thought that that valuation capture happens whether you keep coal or spin it off. So I'm just trying to understand what the – why there's a better arbitrage in terms of valuation on a merger or demerger than there is on a demerger as a standalone without doing any of your ideal. Does that make sense when I ask that question?

I think so. I mean, maybe I'll answer and then tell me if I've answered your question. If you look at Glencoe and the valuation of Glencoe trades, and I even talk about what we trade, we don't believe we trade, we're not getting true full value for our coal business. There's no question we don't believe we're getting true value for our coal business. Even as a spin-out, if we spun out our coal business and the way the market's valuing standalone coal businesses, and you can look at the likes of Whitehaven, New Hope, and the likes in Australia, even the market we don't believe is valuing those correctly. So just spinning out our coal business by itself, we don't believe it's going to create any value for our shareholders in the sense that on a see-through basis it's not providing the true value within Glencore or if it was standalone. However, when we take a tech business and we put it with our business, Now we have something that is more geographically diverse. It is more product diverse. It really becomes the best, biggest, greatest coal company in the world. Cash generative through the cycle, met coal, steam coal, as I say, four different continents. So we believe that that would, in fact, achieve a better rating or re-rating versus just a standalone Glencore coal company being spun out. And we believe that is something that is value accreted for our shareholders and I'd like to see.

Great, thank you.

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Sylvain Brunet from BNP Paribas. Please go ahead.

Good morning, Gary and Steve, and thanks for the call. Two questions for me on the portfolio, please. The first one on Viterra-Bungi, if you could perhaps talk to your commitment in the long term to the 15% stake you would end up with in Bungi. And the second one is on Lithium. You announced this joint marketing initiative with Eramet out of their project in Argentina. If Glencore is keen to develop a marketing presence in lithium, would you say this could involve some backward integration in assets as well, eventually, if and when opportunities arise? Thank you.

Morning, Sylvain. On the bacteria, Bungi, look, we'll get a 15, in fact, it will probably be higher than a 15% stake with the Bungi bar back. And we have no commitments around what we will do that 15% stake. I mean, we will own a terrific share in a terrific agri-company that is across the whole spectrum in terms of origination, supply, and the likes. Boogie is a terrific company, Batera is terrific, and the two together really is world class. So we're very proud to be shareholders in that company, and we've made no decisions or we have no plans around the shareholding that we will have in that joint company. With respect to lithium, yes, we went into a marketing arrangement with Aramex in Argentina. We had a number of marketing arrangements and a flow of lithium through our books, largely through our recycling business. It's a growing business. It's a profitable business. Our customers are pleased with the fact that we can supply them all the critical minerals that they require, whether they be nickel, cobalt, copper, lithium, whether it be recycled, whether it be primary trade material. We have all of those in our book. For us to backward integrate into operating assets and owning assets, it's unlikely that we would get into lithium. It's not something we like very much in terms of the abundance of the material and how much of it is sort of within hands of operators who can increase supply for the benefit of what they produce, which may be batteries or whatever it may be, and rather not a supply-constrained commodity. So not something that we like and there's no intention at this stage to look at any sort of equity investments or operations of mines.

Okay, thank you.

Thank you. We will now go to our next question. And your next question comes from the line of Ian Russo from Barclays. Please go ahead.

Thank you. Good morning. Just a question on Xyrem. It would be great if you can give us an update just how the ramp-up's progressing. And I see in the release you talk about that you've delayed processing own material in favor of the third party. Maybe just provide a bit of details around that, please. And then secondly, just a follow-up on Cobalt. Your guidance you've given in February, I think, has volumes for next year, wrapping up to 60,000 tons. I mean, do you think, given what you've said about the market dynamics, that that is still an appropriate sort of target for production for next year? Thank you.

I'll let Peter talk on GIREM, and then I think Steve can take the guidance on cobalt.

Just very briefly. Hi, Ian. Just very briefly on GIREM. The remediation project is progressing at a steady pace. And we've recently commissioned parts of the plant that needed repairing, and that's now operating. The ramp-up continues through the second half. And in fact, our mill throughput rate goes from 56% of design capacity in the first half to around 75% of design capacity in the second half. And early in the new year, we should be running at the 5 million ton span of throughput rates.

Thanks. Third parties, Peter?

Well, that's always... It favors us at the moment to do that in terms of where the markets are, the products that we're producing at the moment. So it favors us to take in some of these third-party products and then sell on some of the concentrates to other parties. So there's always a balance in all of those issues where we're looking for maximum value.

Thank you. You know, Sam, Cobalt treats... Longer-term guidance, it is stale. I would say a cautionary approach towards that. It will be lower as we rerun and recalibrate different plans across the whole cobalt sphere that we have at the moment. That will come down further to Gary's comments and I think Alon's comments earlier on around just managing through this period of oversupply. We will It will be less, but we're in the middle of that whole process to determine lease-based case production, stock management, stock movements, if you like, around Cobalt. So, yes, it's going to be lower. We'll come back to you in a few months.

Thanks. Maybe just follow up. Have you stockpiled any in the first half, or did you sell around 22 that you produced?

We have stockpiled some, which also affects, obviously,

like the cost somewhat and in terms of expectations for the full year this production versus sales what can you give us any guidance there not specific guidance in other than sales will be less than production okay all right I'll leave it at that thank you thank you we will now take our last question for today

And your last question comes from the line of Daniel Major from UBS. Please go ahead.

Hi there. Thanks so much. Three questions. The first one, just back to Mara in Argentina. Can you give us any indication on assurances around capital controls that you have around the project yet, or is it too early to tell on that? That's the first question. The second one, just on your alumina-aluminium strategy, we've had the Alunorte acquisition, also I suppose indirect acquisition of Gemalco through Century. Are you looking to acquire more assets here, and is this a focus more on the bauxite and alumina, or are you looking more upstream into aluminium smelting as well? I'll start with those two things.

Daniel, hi. Thanks. Look, I'm here, Illumina strategy or Boxart aluminum strategy. This was, as I said, an opportunity that came up to invest in a tier one world-class long life asset. We've been trading aluminum, Illumina, Boxart for many, many years very successfully and having an equity stake in this tier one low cost and low carbon asset certainly helps us in our marketing business. I don't think you should expect us to be looking to do any large M&A in the aluminum box art space. This was something that is, as we said, it's about a $700 million check. And certainly the IRRs are very good on that business, and it will supplement our marketing business. Of course, it doesn't mean that we're not aware or alive or open to additional opportunities within that space, but I don't think you should think that we're going out there aggressively looking to buy bigger assets in that area. We're very comfortable with what we've bought, and it supplements our existing marketing business. On MARA and capital controls, I mean, it's a bit too early to talk, but certainly when we do eventually get to the stage of approving that project, we'll have world-class capital controls, we'll have a world-class project team managing that project to ensure that we keep to budget, keep to timetable, but certainly way too early to preempt any of that now.

Okay, thanks. And if I could just squeeze one last one in. Since you've changed your distribution strategy with your $10 billion net debt target, there's been, I guess, consistent one-off adjustments, whether it's DOJ, M&A, etc. When we look at your $2 billion provision for M&A that you've put in now, obviously this is related to a specific transaction, but Is there a threshold on size of potential M&A deals in the future that would cause you to continue to hold capital back? Is there a threshold number or size of deal?

This has certainly met that threshold. So we know what's in in terms of sort of material, where we've been historically. I mean, some of those discussions like the sort of Albinorte was brewing for a while and there was There was a lot of work and engagement there for a while and was sort of in the working behind the scenes. That certainly was not something that there was a small enough of core size. So you've got some sort of bookends there. So it would have to be sort of multiple billions for us to be thinking that some reservation was appropriate. It's always easier to do it when there's a live situation with... with some sort of market knowledge. If there's things that we're working on, we would have to think very, very sort of carefully as to whether that was appropriate. But in any event, we've sort of got these guardrails around the business with its sort of 10 debt cap, we've always said, would take it maximum to 16. If there was opportunities within M&A world, this is certainly something that is sort of testing that for the first time. There hasn't been anything near the size in terms of sort of materiality. We've been more working M&A in the few billion here or there, whether it's sort of buying or selling. This was quite sort of a specific situation that sort of materialized through M&A. through engagement with tech during the course of this particular six months. So it would be something in a very high sort of dollar range that was more in the public sort of domain as to whether that was appropriate that we could sort of engage with and get and have these discussions as to whether and board deliberations that that was appropriate. So I don't know exactly where the number is, but obviously basis this transaction was appropriate and it's not like we've reserved the full amount. We've sort of taken a balanced, measured approach towards allocating some capital towards a potential transaction. It would need to be material. This clearly is. Other transactions that are a billion or two or three is sort of not material. Maybe at some point, I don't know where that cutoff is. It probably needs to be tested at some point.

Very good. Thank you.

Thank you. That concludes the Q&A session. And I will now hand the call back to Gary Nagel, CEO, for closing remarks.

I guess just a thank you to everybody who joined the call. In summary, a very robust, very cash-generative, very strong business in all the right commodities, the critical minerals for the future, the energy needs of today, a growing recycling business and a top-class marketing business. and terrific shareholder returns for our shareholders. So with that, I'd like to say thank you and any other further follow-up, Martin's available for you. Thanks very much.