BY GEORGE HAY

Who replaces Ivan Glasenberg? The internal succession battle at Glencore has investors gripped. The 61-year-old former coal trader, after all, turned the commodities trader into a mining heavyweight. He is still its second-largest shareholder and, since a 2011 listing, its public face. With the group in flux as 2019 dawns, Glasenberg will be tempted to get on the front foot.

Apart from succession, the board has two big challenges. One is handling the consequences of a U.S. Department of Justice probe into whether the group broke anti-bribery and anti-money laundering rules from 2007 onwards in Venezuela, Nigeria and Congo. The other is the company’s steep valuation discount. Putting Glencore’s $7.5 billion of estimated 2019 free cash flow on rivals’ 8 percent yield, the group should be worth $94 billion. After shares dipped by nearly a quarter in 2018, it’s actually worth $51 billion.

Replacing the top man is not straightforward. To date, Glencore’s approach has been Darwinian, with bosses ousted from below when they start fading. The retirement of copper trading boss Telis Mistakidis suggests space will clear for younger executives like nickel trading head Kenny Ives and newly appointed coal mine boss Gary Nagle. Glasenberg says he wants “a 45-year-old” to take the helm. Yet none of that anoints a clear successor.

Glasenberg could stay for another five years, but the recent changes suggest the company feels some pressure. As the U.S. investigation unfolds, the risk is current top managers get ensnared. If the boss feels this might involve him, it makes sense to leave sooner.

Meanwhile, even Glencore loyalists will want a better idea of its future shape before taking over. It won’t be the same group Glasenberg took over in 2002, and parts of the business — assets in troublesome Congo, for example — could yet be sold off, either as part of any future U.S. settlement or to hedge against further regulatory discomfort.

There’s also a chance of even bigger change. At recent valuations Glasenberg could finance a repurchase of all group shares not already held by managers or Qatar with around 3.5 years of free cash flow, Bernstein reckons. Given all the uncertainties, it’s possible that Glencore exits 2019 with a new look, a new boss, or both.

First published Dec. 13, 2018.