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Ivan Glasenberg moves through his world like a phantom. Almost nothing is known about the CEO of Glencore International AG, other than that he is a South African-born accountant who learned the art of commodities trading from the notorious Marc Rich and went on to make Glencore the world's most successful trader of energy, metals and agricultural products.

His style, however, is famous. Ask anyone who knows him, or knows of him, to describe the man and you will typically hear "ultracompetitive" or "highly aggressive." Indeed, his only known public interview, given a decade ago to the magazine of University of Southern California's Marshall business school, where he earned an MBA in 1983, highlights his urge to win.

The magazine said that Mr. Glasenberg became the race-walking champion of both South Africa and Israel in his youth. In 1984, he was bound for the Olympics in Los Angeles, but couldn't compete for South Africa because it was bounced from the games - punishment for its apartheid policies. Not to be sidelined, he appealed to Israel and missed landing on the team only because of a technicality related to his Israeli nationality.

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Today he is 53 and runs for an hour every day in Zug, the low-tax Swiss canton south of Zurich favoured by the discreetly rich. That's where Glencore is based and where Mr. Glasenberg plans to leverage his own competitive instincts, and those of the 480 partners who own the company, into a new animal.

He plans to do so by delivering Glencore to the stock market, through an initial public offering or a merger with Xstrata PLC, the Anglo-Swiss mining company that trades in London and is owned 34.4 per cent by Glencore. With Glencore at its side, Xstrata in 2006 triggered a sweeping overhaul of Canada's mining industry with its hostile purchase of Falconbridge, breaking up the latter's merger with Inco, which in turn fell prey to Brazil's Vale SA. Several smaller Canadian mining companies got swept up in the consolidation craze.

The groundwork for a public listing is already in place. In December, Glencore sold a $2.2-billion (U.S.), five-year bond to a group of high-profile investors, among them First Reserve, BlackRock (which owns 6 per cent of Xstrata) and GIC, the Singaporean sovereign wealth fund. The bond is convertible into Glencore equity upon an IPO or merger and gives Glencore an implied value of $35-billion, though some analysts estimate its worth at $50-billion or more. The company said the bond is "part of an overall strategy to move Glencore toward the public equity markets."

Whether Glencore takes the IPO or merger route, the company's cherished privacy will all but vanish. But it seems a small price to pay for the transformation of Glencore, giving the company the potential to become an overnight mining super-major with super-sized ambitions and a currency to pay for them. Last year, Xstrata, led by fellow South African Mick Davis, tried to buy Anglo American PLC in a no-premium deal and was told to take a hike. The next offer could well be launched by the new Glencore-Xstrata, which would have a market value of about $90-billion, more than 50-per-cent greater than Anglo's, and would come with an executive team that would feel at home in a pool of great white sharks.

Will Mr. Davis buy into Mr. Glasenberg's dream of creating a colossus with more than enough firepower to compete with the Big Four of the global mining industry - BHP Billiton, Rio Tinto, Vale and Anglo? And if he does, would the new company be setting itself up for an epic culture clash?

Michael Komesaroff, a former Rio Tinto executive who owns Australia's Urandaline Investments, thinks it could. "The culture of a trading company is very different from the culture of a mining company," he said. "The traders are paid huge bonuses, not the mining side. How do you merge those two models? I'm not sure they are compatible."

Assets and trading

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Glencore's traders are the dark princes of the commodities trading business. They don't give interviews, even though Glencore discloses more and more financial information as it creeps toward a public listing.

Mr. Glasenberg declined to comment for this story. Still, his intentions are broadly known because he regularly talks to credit analysts and the investors who buy Glencore bonds, and sits on the boards of several public companies. He is a director of Xstrata, Minara Resources, the Australian nickel producer that is 71-per-cent owned by Glencore, and Rusal, the newly listed Russian aluminum giant controlled by Oleg Derispaska. Glencore owns about 9 per cent of Rusal.

But public companies are not part of his career development, for he emerged from the ultrasecretive global trading web spun by Marc Rich.

Mr. Rich, who was born in Belgium and holds Spanish nationality, was the most wanted fugitive in U.S. history until his pardon by Bill Clinton on his last day in the White House in 2001. He made fortunes from trading oil and other commodities, though pushed his luck as far as the U.S. Justice Department was concerned.

Trained at Phillips Bros. (later Philbro) in the 1960s, he and his partner, Pincus (Pinky) Green, struck out on their own in the mid-1970s and created Marc Rich + Co. in Zug. According to an investigation done by BusinessWeek magazine in 2005, Mr. Rich was known as "El Matador" for his ruthless style. He pioneered "combat trading" - nailing the trading rights to commodities from pariah states or countries in turmoil.

Marc Rich + Co. traded with Iran during the hostage crisis, South Africa during apartheid and Libya and Cuba during the U.S. trade embargoes. In 1983, he was indicted by U.S. federal prosecutor Rudy Giuliani (later New York mayor) for racketeering, tax evasion, making false statements and trading with the enemy - Iran. His companies pleaded guilty to some charges and paid $200-million in fines, taxes and other penalties. But the Justice Department called off the posse only after Mr. Clinton interceded.

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Mr. Rich, who is 75 and lives in Switzerland, appears to have left the commodities game. But his former partners and employees are everywhere, trading commodities in businesses they launched after Mr. Rich sold his company 17 years ago.

The biggest of them all is Glencore, the name given to the business formed by the management buyout of Mr. Rich's trading operations. Even back then it was a force in commodities, with more than $20-billion a year in revenues.

Mr. Glasenberg and Willy Strothotte, who is now chairman of both Glencore and Xstrata, were two of the Rich boys who joined the buyout. At the time, Mr. Glasenberg was head of the coal operations. By 2002, he had replaced Mr. Strothotte as Glencore's CEO and expanded the company's size, reach and profits. By 2008, it had revenues of $152.2-billion, well more than double those of BHP Billiton, the world's biggest mining company. Revenues last year sank to $106-billion and profit fell 43 per cent to $2.7-billion. "Ivan Glasenberg is an extremely smart, driven guy," said the CEO of a large mining company. "They have been a powerhouse for years and years."

Glencore makes money in two main ways. The first is from its collection of mining, smelting and refining assets, among them Toronto-listed Katanga Mining Ltd., a copper producer in the Democratic Republic of Congo. Like any mining company, it digs the stuff out of the ground and sells it on the commodities market. This is the most volatile side of the business, because of the cyclical nature of prices.

The other side, which the outside world knows little about, is the high-volume, low-margin marketing and trading business. (Each side contributes roughly 50 per cent of earnings.) Glencore will sign a contract to, say, buy Australian coal for delivery to European power plants. The profit comes from what it calls "value-added" services, such as transporting the coal in the 170 ships it leases or owns, insuring the cargo and storing it in warehouses. Any price risk is hedged. Glencore also does some unhedged commodity trading.

Financing mine development, or working-capital needs, is a big part of its strategy. In exchange for the financing, it receives the rights to market the commodity. Glencore's competitive edge, according to people who know the company, is its long experience, diversity of services and intimate knowledge of supply, demand and pricing, thanks to its vast network. It has some 2,000 employees in 40 countries.

Under Mr. Glasenberg and Mr. Strothotte, Glencore made headlines a few times for the wrong reasons. In 2001, the United Nations Security Council reported that Glencore had bought one million barrels of Iraqi crude destined for the United States, allegedly paying some $3.2-million in surcharges to Saddam Hussein's regime for the privilege. Glencore denied paying the surcharges or any inappropriate dealings with Iraq outside the oil-for-food program.

Glencore now seems extra wary about political risk. A few months ago, it ceased supplying gasoline to Iran to avoid running afoul of U.S. fuel sanctions against the country. As it gears up for a public listing, Glencore knows it has to temper its natural inclination to trade anything, anywhere, at any time.

Why go public?

Theories abound as to why Glencore wants to jeopardize its cherished secrecy by going public. Why is it willing to ditch a model that has worked so brilliantly for so long?

Some consultants and mining executives suspect Glencore's brain trust believes the company's glory days are behind it, as marketing rights to commodities become harder to obtain, and they want to secure a listing while the valuation is still high. A decade ago, China was not a big player on the global commodities market. Now Glencore has to compete with well-financed Chinese companies that are locking up supplies in the developing world. "This may be the 'greater fool theory' at work," said a mining company director who knows some top commodity traders. "You're dealing with a very, very shrewd trader in Ivan."

There may be less cynical reasons for Glencore's plan to go public.

People close to Glencore say changing the capital structure is all about positioning the company to grow in the belief that the best is yet to come for commodity prices. With access to the public equity markets, Glencore would have greater ability to buy big working mines, smelters and refineries. When you own a mine, you own the marketing rights to its output.

Glencore is said to believe that merging with Xstrata makes good financial sense. While Glencore already controls the marketing rights to a lot of Xstrata's production, including nickel and cobalt, its relationship with the mining company comes at considerable cost. To maintain its 34.4-per-cent ownership level, Glencore has had to spend billions buying into Xstrata rights issues over the last decade. Last year, when the credit crisis was hurting Glencore, it had to sell its Prodeco coal mining operation to Xstrata for $2-billion to avoid jeopardizing its liquidity reserves and credit rating (it cleverly insisted on an option to buy it back for $2.25-billion, probably far less than it's worth). It also needed the cash to avoid diluting its Xstrata stake.

Another reason for a stock market listing: To give Glencore's partners the ability to sell their equity.

When the latest generation of partners retires, they will want to get out with their bounty. At the moment, paying partners requires depleting working capital or selling assets. To preserve its equity base of about $16.7-billion, Glencore's partners early last year agreed to freeze the majority of equity payouts until 2012. With a stock market listing, the monetization of the partners' equity would be much easier - cash would not be walking out the door, giving Glencore a greater ability to buy fixed assets.

People close to Glencore say Mr. Glasenberg would prefer a merger with Xstrata over an IPO. The "intermarriage," as analyst Luc Pez of Paris-based Oddo Securities wrote in February, would create a formidable commodities player, ranking it third worldwide, measured by market value. The enlarged company would be the leading producer of zinc, copper and steam coal. It would have a window on to the Russian market, through the Rusal stake, and a global marketing network.

While the merger idea might be compelling to Glencore, Xstrata's Mr. Davis is apparently yet to be convinced. Xstrata won't comment, other than to say "there are no formal negotiations" between the two companies, though there certainly have been informal talks.

Mr. Pez thinks that Glencore's "opacity" and the difficulties in valuing its trading and marketing businesses would make any merger "tricky," all the more so because Mr. Davis would avoid any deal that jeopardizes value creation or credit ratings. An executive who knows Mr. Davis and Mr. Glasenberg highlights another potential complication - a leadership battle. "They're both very competitive," he said. "Who'd run it? Ivan isn't one to play second fiddle to Mick, or Mick to Ivan."

If a merger is not doable, an IPO seems the default strategy. There may be another option - a sale of some or all of the company to Chinese interests. Mining executives said Chinese resource companies would pay big for Glencore's global presence, contacts and trading expertise. Last year China Investment Corp. paid $856-million for a 15-per-cent stake in Noble Group, the successful Glencore rival that trades on the Singapore exchange.

Glencore isn't saying when it will change. No deal seems imminent - RBC Dominion Securities analyst Miriam Hehir expects a stock market listing in 2011 or 2012 - though it could come earlier. Mr. Glasenberg is nothing if not opportunistic. The turnaround in both commodity prices and Glencore's profits, driven by surging demand in China and India and the global recovery, could convince the partners to flip the switch later this year.

But change is certain, because capital and liquidity demands require the company to tap into the public markets, or possibly find an exceedingly wealthy investor, if it wants to grow. Some sort of deal has to happen by 2014. The owners of the Glencore convertible bonds agreed to accept merely average yields on the condition the bonds can convert to Glencore shares "upon a qualifying initial public offering" or similar value-adding event by that year.

Marc Rich probably would disapprove of a deal that would jeopardize the secrecy that underpinned Glencore's success. But the old rogue would be proud that the trading operation he launched almost four decades ago could be on the verge of super-major mining status.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More

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