Glencore plc (OTCPK:GLCNF) Second Quarter 2022 Earnings Conference Call August 4, 2022 3:00 a. m. m. ET
Participating companies
Martin Fewings – Head, Investor Relations
Gary Nagle – Executive Director
Steven Kalmin – Chief Financial Officer
Peter Freyberg – Head, Industrial Assets
Conference Call Participants
Alain Gabriel-Morgan Stanley
Liam Fitzpatrick – Deutsche Bank
Ian Rossouw – Barclays
Jason Fairclough – BofA
Dominic O’Kane – JPMorgan
Danielle Chigumira – Credit Suisse
Myles Allsop-UBS
Sylvain Brunet – Exane Paribas
Tyler Broda – RBC Capital Markets
Operator
Ladies and gentlemen, thank you for being here and welcome to the webcast of the provisional effects and the 2022 Glencore telephone convention. [Operator Instructions] I will have to tell you that this convention was recorded today, August 4, 2022. I would now like to entrust the convention to Mr. Martin Fewings, Head of Investor Relations. Continue, sir.
Martin Fewings
Hello. Thank you for participating in our call for the 2022 half-yearly results. With me are our CEO, Gary Nagle, and our CFO, Steven Kalmin. Now I’ll pass the call on to Gary.
Gary Nagle
Hello, hello and those who are not in Europe or South Africa, good afternoon, good afternoon, wherever you are in the world. Thank you for joining us. We’ll jump right into the presentation and start with our 2022 half-year dashboard.
As you will have noticed in our press this morning, on the monetary side, a record half-year result for our organization and an adjusted EBITDA of just under $19 billion. On the trade side, this represents $15 billion, the largest share coming from coal and a record in our marketing activities, at an adjusted EBIT of $3. 7 billion, as we announced a few weeks ago in our pressArray.
On the balance sheet side, net debt fell to just $2. 3 billion at the end of June, allowing us to return significant amounts to our shareholders and we now report an additional return for shareholders of $4. 5 billion. This is comprised of $3 billion in bailouts and $1. 45 billion in cashback for our shareholders. And this is in line with our capital return policy that we have defined in previous presentations and that you will find at the end of this presentation. This $4. 5 billion return to shareholders brings our overall return to shareholders for 2022 to $8. 5 billion, which is an exceptional achievement.
On the commercial side, as I mentioned, the real asset this time was coal. You’ll remember that a year ago, in the early part of last year, coal revenues were less than $1 billion, but with the electricity crisis and the demands of the world, we want solid baseload power. Coal costs have risen. We also assumed the remaining percentage of cerrejón at the beginning of January this year, which helped this strong build-up in adjusted EBITDA from our commercial business. Obviously, on the downside, we see headwinds on the inflation side, like all our peers and like the market, and we are proceeding with our processes and systems to try to involve those costs, however, there are headwinds on the inflationary aspect in our extraction and processing activities. EBITDA margins remained very healthy, with steel EBITDA margins remaining consistent year-over-year. And our margins on coal, obviously, with the increase in coal costs, have been exceptionally strong.
On the marketing side, record functionality for the first part of the year. And in fact, as we discussed above, this is one: it surpassed our full guided diversity of $2. 2 billion to $3. 2 billion EBIT with an achievement of $3. 7 billion in the first 6 months of this year. And really, it’s based on exceptionally strong energy trading functionality in all areas, which contributed to this robust functionality.
Moving on to our ESG dashboard, from an environmental perspective, we are taking steps to advance our decarbonization trajectory. Just a few examples. We have entered into a number of renewable energy procurement agreements, 2Array one for Antapaccay and a time for our operations in Kazakhstan, which will particularly reduce our Scope 2 emissions in our company. We have also initiated a multi-year sourcing collaboration with General Motors for cobalt, assisting them in the transition to expanding the electric vehicle fleet business. And as we also announced earlier in the semester, we have partnered with Li-Cycle, a recycling company that promotes circularity in raw battery curtain supply chains and believes it is a step in the continued expansion of our recycling business.
On a social level, we are very disappointed to announce that we have had 2 deaths since the beginning of the year. We believe that those deaths are preventable, and it is our task and our duty to eliminate all deaths in our corporate, and we continue to work every day and make sure that our number one priority within this company is to eliminate all damage, not only deaths, but also all evils in this business and this is a task that will continue non-stop.
On the governance side, earlier this year we announced that we had resolved our investigations through the Department of Justice, the UK SFO and Brazilian authorities. This was announced in April this year. And if you look at it in the context of who we are as a company, our strength is rarely due to our results. The foundation of our sustainable good fortune has been the culture and our workers in the way we operate as a company. It is vital to perceive from our attitude as a board of directors and as a control team that this type of conduct has no position in Glencore today. We will be informed of this conduct and activity in the future.
Today, compliance and sustainability will have to be at the forefront of each and every resolution we make in this business, and they will be. And I have been transparent with control and with all our workers around the world who made it the cornerstone of our business. We have a world-class ethics and compliance program and it is in fact world-class. And it’s anything that promotes smart business, but prevents indebtedness from chasing any concept of anything that is unacceptable in our business. We leave that behind. We are moving forward as a transparent, culpable and moral operator, and we hope to be able to deliver fair and ongoing returns to our shareholders and all our stakeholders on the basis, on the basis of being that culpable and moral operatorArray
With that, I turn to Steve to communicate about the monetary functionality of the first part of the year.
Steven Kalmin
Thank you, Gary and hello and good evening. Good morning to everyone who is on the call and joined us this morning as well. Gary has covered some of the highlights if we take a look at page 7 and monetary measures are covered exhaustively in the following slides. But as Gary pointed out, a very much forged an overall EBITDA of $18. 9 billion, obviously a half-year record and not too much of the all-year record, which we delivered last year at $21. 3 billion for 2021. We’ll cover the industry and marketing in particular in some of the other slides later as well.
Net source of revenue, underlying operations at $10. 8 million with more than triple that figure of $3. 2 billion in the first of 2021, this is a clearly higher percentage given the constant amounts of depreciation largely on the basis of a smaller number in 2021, so the percentage, noticeably higher. The reported statutory net revenue stream for the company of $12. 1 billion reflects that there have been a handful of significant gains and asset disposals or acquisitions in this era and we have had positive developments from P
Loose capital of pre-funded capital and other stakeholder allocations amounted to $13. 2 billion for the era, which corresponds to the year 2021, which was $13 billion. And we’re moving on to also go over the bridge over the evolution of net debt on the next slide, with net debt ending the $2. 3 billion era and allowing for the $4. 5 billion in additional distributions, which Gary talked about.
On slide 8, you can see that the industry has grown 127% to $15 billion. We’ll also see a cascading bridge on the next slide. from $900 million for the first part of 2021 to $8900 million for the era in question. Prices contributed specifically, but the acquisition of Cerrejón on a comparable basis also generated significant returns for the company compared to the past era. Looking through, it contributed just over $2 billion in EBITDA for the first part from 22 to just $86 million for 2021 when we loaded a third of this specific asset, coal costs specifically decreased until 2020 and even the first part of 2021. The building on Cerrejón’s one hundred percent property over a third party’s property for that was specific $1. 4 billion. This contributed to the overall business and the Industrial Energy business as well.
On the back right, you can see the contribution of our two main parts in Energy and Metals. Metals largely solid throughout the era. We saw higher average costs from one era to the next, but we saw the effect of higher costs or higher costs, as well as the reduction, especially in Katanga, which was noted in the production report last week, and Gary will refer to it. . a little further down the slides. This requires a reduced production profile as we manage geotechnical protection and other parameters and also repair this business to its prospective over time. It was 36,000 tons under copper production era after era. We also had several portfolio divestments during the year, some of which have an effect on the time, namely Ernest Henry and similar zinc assets in South America, namely Bolivia. Overall EBITDA margins in metals were solid at 43% with coal at 66%, contributing to the overall commercial portfolio of 54%.
If we take a look at this bridge on page nine between $6. 6 billion and $15. 5 billion, the maximum vital bar, of course, is the value of $8. 3 billion from one era to the next, of that $8. 3 billion, energy, $7. 2 billion and metals, $1. 1 million. Within energy, $6. 8 billion was coal, $0. 4 billion in our upstream oil and fuel business, it’s a relatively small corporation within Glencore, not necessarily growing, we run some undeveloped homes in West Africa well that we have right now, lately more exposed to fuel than oil. We had a recovery of $0. 4 billion and I think that would also have been a plus point for some of the business contributions as this business generated $0. 6 billion in EBITDA for the 6 months of E.
In metals in the hole of value of 1. 1, nickel was the main contributor to 0. 5 ferroalloys in South Africa 0. 2. Only a small increase in zinc to 0. 2, despite the maximum value of zinc, the by-products provided favorable winds to those headwinds for this advertising money value, which is large, we are a very large producer, by-products, values during the time – it was decreased by 15% in silver. Lead and gold were relatively stable, which are also vital by-products involved in this activity.
On the volume, net-net side, we’re at plus 3, plus 0. 3 from one era to the next, meaning metals were down about $1 billion and energy was up $1. 3 billion, all thanks to Cerrejón, which I analyzed on the previous slide. , the contraction of metals in volume, Katanga the largest contributor of one era to the next Ernest Henry and some of the zinc assets in South America with those divestments also mechanically led to gold spreads in this spread.
The charges at $0. 6 billion that we’ll look at later, some of the charge variations, we expect to expand as negative charge gaps sooner even though everything stabilizes. And see where we are in terms of charge inflation, more commonly similar to power, largely uncontrollable. Evidently, we are reaping benefits from the influence of energy charges and raw fabrics in general, so they are somehow covered naturally. during that specific period. But some of that inflation is intensifying further in the company and we see that our valuation of the market price of all oil power and intermediate product costs while working with Kazzinc of the Metals accounted for almost a portion of that $300 million. of all our assets. It’s an excessive precaution at first, especially after, there were, you will remember, previous protests in Kazakhstan around inflation, around energy charges.
As part of the resolution, everyone was on deck, the government, industry and others, particularly raising wages in the country, potentially also expecting a decrease in purchasing power thanks to a currency that in the end did not appear, Kazakh Katanga truly resisted with relative strength given also the force markets in Kazakhstan. Therefore, this has had an oversized effect on our Kazzinc business, and is also seen in the effects of zinc. , a weaker Australian dollar and a South African rand, with the Australian dollar contributing a share of that figure. We deserve to feel a little more relief from this at this time of year.
If we take a look at the page, the following slides, we have individual pages about our giant companies. If we take a look at copper, to begin with, production has fallen by 15% from one era to the next. I think ernest Henry’s eliminación. de was well informed. Katanga, Collahuasi himself, thanks to sequencing, has experienced a low production from one era to another, as happens from time to time in all his activities. It is a wonderful corporate in the specific spaces of the pits. Therefore, there is also a slight drop from one era to the next, which contributes negatively to that specific era.
Provisional values within copper are the maximums exposed to provisional values. You’d see it in your broader policy universe, especially in the current quarter, where we had a sharp and fairly immediate contraction in values. It gives quite a few provisional values, because those sales are also adjusted during QP eras. The overall learned value was reduced by 8% from one era to the next. You can see it on the chart at the sensitive high of 393 versus 425, although the average SCI inventory has increased 7%. The base era benefited from provisional prices. It can happen either way. We saw increases from the beginning of the current quarter to the current part of 2021. This had a significant effect from generation to generation on copper’s operational functionality and contribution to EBITDA. The portion of the year was $3. 3 billion, a 14% minimum in EBITDA compared to the past era.
Just dig a little deeper into the prices and I’ll refer to them – those are old retrospective prices at the bottom. You can see 2019-2021 in the first part of 2022. Later in the presentation, we provide our same price assessment above. in market value and illustrative loose money for existing macros.
The cost according to the cost, as you can see on the right, we have adjusted it up to $0. 93 per pound. And we hope it will be a highlight. In fact, we have selected a complicated constant period to evaluate prices at market values. We looked at and in comparison when we updated the effects in February 2022, we were guiding the total year around $0. 41 per pound what happened between February and August. , the assumptions of oil value. It is a large user of diesel throughout the company and all energy values indirectly similar. We were spending $109 a barrel on those assumptions, compared to $85 on February on page 31, so you can see our other assumptions. And for our business, cobalt has had a massive effect on the direction of market valuation, it is the most powerful crude draco at the beginning of the year. And this is the weakest product of the end. of the last 2 or 3 months.
In February, the spot price for steel was $0. 344 per pound with 90% ability to pay for hydroxide outside the DRC. For purposes of existing charge calculations, where cobalt by-products are incorporated into our charge calculations, steels are discounted to a consistent $0. 253 per pound and use a 65% load capacity. Net-net is an achievement of 16. 44 today vs. 30. 96, an almost 50% relief in cobalt realizations manifesting through this $0. 93. Again, those are degrees in cobalt values, energy value assumptions, and even Katanga production has redirected from 93 to 220 annualized in Katanga as well, where we reduced production, 50,000 tons consistent with the year. So conservative now in the co-consistent with the business and in a position to recalibrate in the long term and in the business. And of course the spot values, as we’ve been cutting them for the last few days, will also reflect the macros and the existing positioning versus China and recession rates etc on an annualized basis, 5. 1 billion. dollars to copconsistent with how we are. currently for existing quotas and production for non-unusual use.
In the zinc business on page 11, you can also see a 17% drop in production, reflecting the divestments of our Bolivian business in South America during the period. And especially in Australia, we’ve noticed effects around the effects of COVID-19, absenteeism, especially in Mount Isa and sometimes in Australia with this operation. Operationally, this is the case, and productivity is not up to what we expected and expected.
The zinc business, more than any other activity for us, is the maximum affected through the percentage increases in power and electrical power, in particular, we have our fusion operations in Europe, the costs of electric power because we, as you all know, in Europe, sometimes similar to electric power makes those operations very difficult. In particular, we report the EBITDA of our European foundry operations. It was like before, some kind of $300 million would have been a comfortable contribution to this company. It’s being covered slightly at the moment and it was a key factor in the suspension of one of the lines in Italy that we did late last year on the Portovesme zinc line.
We also had higher diesel prices across our entire zinc business portfolio, and Kazakhstan itself experienced inflationary effects earlier than many of our other activities, specifically in the labour sector, which I mentioned earlier. We have also had side effects on our zinc business as well as through a phase of declining Kazakhstan’s gold production and decreasing copper production, as well as decreasing melevsky underground mining in Kazakhstan, Zhairem’s business, when we expect it to be operational and accelerated in 2023, it is the key enabler to reduce unit cost, gaining better functionality and contributing to the zinc business, which Gary will also talk about later.
So the zinc business, again, is relative: in terms of cost, we are now at $0. 29 on a market cost basis, generating $2 billion on a single basis for our zinc business also, again, this watermark hopefully exceeds very much maximum energy values. No value of by-products of silver, gold, lead, etc. , all of which have particularly declined since our February 2022 forecast. And also on February 22, we assumed that Zhairem will perform better in 2022. Now it looks more like a 2023 story.
The nickel business, page 20 – page 12, has performed well this year, with production increasing by 21%. Koniambo has now operated on 2 lines in the first part. It generated about 13,000 tons of nickel compared to 6. 6% in the last era. And Murrin himself exceeded four thousand tons from one era to the next. Don’t forget there was a big one, it’s a great closed interview that does all kinds of 3 to four years or so, for 5, 6 weeks. It was in the first part of 2021. La company itself in terms of cost, it is also not immune, to the high costs of energy and consumables, especially in Australia, where Amarin itself, for example, is a large customer of sulfur through its consumption of assets, its higher costs have come to light recently.
So, we’re possibly seeing some of those charges go through, having peaked and starting to release some long-term charges as individual markets. It is a market-by-market story that solves the dynamics of source and demand. banknotes such as nickel and the like, especially in IO. We had higher nickel rates from one era to the next, up to 56%. Nickel charge the era in question. Just to point out, and this is also in the report, we have had a commercial action in Raglan since the end of May. It is not yet resolved. We are looking forward to seeing the final effect of this and clearly, a threat of trouble on our estimated nickel production for the full year, which we will update in the next production report. On a one-off basis, as an indication, this activity is approximately 1. 4 billion existing fundamental macros.
On page 13, we have coal, clearly, the screen star for this era. He went down on the podium, replaced the last specific era a lot, but great – this company works well in this era and makes it stay in the sun. . The name of the production actually increased up to 14% only due to the acquisition of Cerrejón, which increased from 33% to 100% from January 2022. At a constant temperature, if we had kept 100% last year, the overall production volumes were really low . coal, and this is clearly the beginning of a long adventure to decrease this activity to 0 net as we said, 50% to 35% and 15% until 2026.
This is the maximum activity exposed to coal earnings royalties in our various jurisdictions, so the result or the $75 charge we had in the first part of 2022 is good, frankly, because it reflects the higher prices and the royalty is in the end to various local and federal governments that we also deal with in our 3 operating jurisdictions. This is a company whose prices and portfolio changes we updated just before the end of the era and also entered well into diversity. reported on recent flooding in New South Wales. They were very extensive. The railway hall has been inactive for a maximum of 2 weeks. We are assessing the possible or maximum likely effects on mining exports on the functionality of the entire coal supply chain and would seek to update the third quarter production report as soon as possible around where we plan to land for a full year on coal.
In terms of overall business, as Gary mentioned earlier, EBITDA of $8900 million for the year on an illustrative basis employing an average of 12 months ahead of $352 at Newcastle. We are a little over $20 billion in EBITDA in this activity. Obviously, the more it pushes up, the more Newcastle will go, the combined portfolio changes will accumulate accordingly, it would be great if all our tonnes were delivered in this market. This is not the reality. We have a smart market percentage in that market, but there are all the other qualities, the reduced CVs, the other markets, the other jurisdictions in which we operate. Coking coal is also fed there, which is under some stress and inland tonnages, either in Australia and South Africa. They are therefore 20 billion dollars, which supports a functionality at the time part of the year in coal. That deserves to be at least broadly in line with where we are for the first year at a kind of $9 billion, which is generally considered to be a pretty smart functionality as well.
If you look at the marketing on page 14, there’s not much to say about it, other than the fact that it’s a wonderful era for just a portion of $3. 7 billion. We reported this just before the era, which we expect to exceed $3. 2 billion. in the most sensitive of our annualized general range. Energy has been the main contributor, the only contributor, frankly, to make us move beyond that benchmark rather than being in our general ranges, for all the apparent reasons about tight markets. , dislocation, excessive volatility. Overall, it was evidently a time to perform well, but extremely cheerful that the team controlled to overcome what is still a very risky era, a complicated era, an era that there were obstacles to avoid. It is not without the fact that we have assumed demanding situations that have notoriously allowed this corporate to serve as it is and congratulations to the team, notoriously, in this sense.
In metals and minerals, at $1bn, down slightly from 2021, which itself was a relatively smart era at $1bn. If you look at the $1 billion chart for part of the year, historically that would have been a smart result. This is a smart result. A little bit weaker towards the end of the era, especially in China – our Metals business is more exposed to China than the Energy business, lockdowns and deconfinements, weaker trading activity would obviously have an effect on this activity, as well as premiums in some markets towards the end of the era. Cobalt, as I mentioned earlier, is also very exposed to China in general.
If we take a look at page 15, going into the balance sheet component of the business, a very strong liquidity position even after our current capital investments of $12. 5 billion, that’s very close to control and tracking within the company around liquidity lines and adulthood. and profiles. We have noticed that net debt and net investment are minimized respectively, through $3. 7 billion, $2. 9 billion at their levels. I am sure that everyone is waiting for the fall of ordinary capital. We saw an RMI of $900 million. They deserve to come as a great wonder contemplating the prices. This reflects the fact that higher-power metals are weaker, but are generally relatively contained. At 0. 9, I think there would potentially be slightly higher expectations. The $7. 8 billion excluding RMI, all this is not old current capital. Some of them even feature the nature OpEx. Se based on how it is accounted for and reported on our balance sheet and I’ll take a look at that page later.
Mechanically, we’re just strengthening the shareholder framework that we’ll be looking for, at certain times of the year, in the first part of the year, in the current part of the year, to analyze where we’re in net debt and bring the balance sheet back to its $10 billion pro forma net debt after changes in debt like, of course, we have to account for them, you will see later the legal fees or the court settlement, not yet paid in the first part also as the distribution of the semi-annual moment, which is coming.
So if we jump to page 16, that’s evidently a key slide. And we have the wheel of the cart. And yet, right after the net debt of $6 billion to $2. 3 billion, the operating budget, a very counterfeit stock, a smart EBITDA, a smart containment of other parts of the money in interest and taxes. Net CapEx, it is evident that tax bills are much higher with those higher prices. Governments are the largest shareholder of our company. Ultimately, higher prices are well paid in all jurisdictions in which we operate.
CapEx net of $2 billion. A little bit of our expectations for the full year, I’ll come back to this later. The investments generated some cash, especially Ernest Henry. part of the year.
So, let’s stick to our comments as I go through what I hope to release in current capital, whether in the short and medium term. What is obviously applicable there? The $0 billion, if we’re just talking about government investigations, is actually the geography of where it seems in our monetary values that we have a higher provision as of December 31. And now that we’re settling payments, that translates into relief in the hard work of capital rather than if we moved in without and if we went up, that tenant would only provide itself as an operating expense or just as a source of income. So, it’s really just a service of the fact that we’ve created a provisional liability that, mechanically, any payment of it, is regarded as a relief in current capital. So, it is not all payment, it is thought of as a relief in current capital. investment. It’s actually more opEx in nature.
If you take a look at deferred income, those who stick very closely to our balance sheet will know that we have balances, specifically. There is a vast universe of physical buyers for our non-essential by-products, in fact gold and silver. These are valuable metals that we produce in Kazakhstan. And in Canada, in particular, we have giant processing services, etc. There are markets of one, two, 3 shorter periods, in which we have some interest in making prepaid visitors. Those are prepaid. They usually occur at the time part of each year. We take a look at the right amount, if the terms make business sense. They then pay for the next 1 or 2 years, and then we check each year if we need more prepayments in that specific business. Many of them have a tendency to roll. So we’ve noticed a $700 million relief here. Obviously it is up to us to see what we need to do in H2 and to what extent we need to neutralize and oppose this movement.
I suppose, and you can count the other numbers, however, I guess at least 50% of that would be contrary and would come back in the current part of the year. So if you factor in that $0. 4 billion type. The other $1. 8 billion is just what has perfect compatibility with one of the other specific cubes. The maximum vital detail of this is the opposite of what I just mentioned. In fact, we are paying upfront for the product in the long run, which puts us at a disadvantage. we get the physical delivery of this product in the long term, which gets rid of this potential, this specific prepayment. That’s higher through about $600 million, $700 million over the period. All this is short-term.
And it’s in the other aspect: we have iron ore to the extent that we have aluminum, we have other commodities happening. These are attractive businesses for Glencore that we also have. All of this $600 million is short-term prepayments. It is a depreciation in a straight line. So $600 million will come back through June 2023. So at least 50% of that, so another $0300 million would oppose and pay for themselves in the current part of the year. We have also had some accumulation of VAT on other commercial assets, namely . This has a tendency to be slower in terms of recovery. I’m not going to promise a VAT refund, but it’s on the balance sheet, and we’re still working on that.
The other amount that is more opEx in nature, however, is presented as a current capital arrangement of bond accumulations from past and similar periods. Our marketing activities went well in 2021. This creates a secure set of bonuses that we have, which is connected to that income, and this is settled over the next 6 months of the year. It is also part of this category and geography components. This is not a typical amount of current capital, but it works mechanically thanks to this amount.
If we then take a look at the following 3 attractive categories, they are very similar to marketing and all similar to power marketing. Continuous accumulation counterclockwise, we have an accumulation in the initial margin requirements. We are the ones who deposit cash just to be in the game and the space of raw fabrics. You have to manage the risks. You want to manage: We want to leave hedging derivatives, futures, swaps and effective methods around our physical marketing business. This is how we can clearly produce smart risk-adjusted returns and make sure this is a company that gets its source of revenue. of physical attributes and can be reduced to a non-speculative enterprise.
We want to be provided in the markets. We work on various exchanges. We work through corridors. And the margin calls, the initial margin calls have been a factor. We were at $1. 9 billion. It has become a massive factor, and has been widely publicized, asking corporations to, if they wish, help the overall solvency, the functionality of the counterparty, the exposure, the general functioning of the system. In terms of derivatives, we’ve noticed the nickel markets, we’ve noticed the fuel markets. We have noticed everything very strongly in the media over the last 6 months.
The reaction of regulators is exchanged only to secure the entire formula, so Creek increases barriers to entry, reduces liquidity. It becomes an area so that only big players with monetary resources can function at the point they would like, is that they have particularly higher initial margins that all players will have to present, whether or not you have a logo – to market – even before starting a transaction, you will need to deposit those initial margins. They have their own formula. They want their 99% confidence that in the over-tension scenarios they execute, if you have counterparty defaults through your broker clients, the formula can settle all your trades and also continues to work. we have over $2 billion in [indistinguishable].
An example, which I think is smart enough to give on this call. Just in the last week of June, we won at nine or eight in the morning a specific contract on the ice on Continental Exchange with a specific broker about new regulations and scenarios that they reevaluate from time to time. They said, Glencore, you want to set up an additional $400 million in 1 day with a batch of transactions with a broker in a specific market. That’s the extent of what we’ve noticed in this specific setting. Now, from the increase of $2 billion, about $1 billion of LNG, $500 million of coal, $500 million of metals. We are now looking at many tactics to optimize and see how we can carry out the payment through searching on other structures that can specifically decrease our initial margin since the cash is in the company. It’s parked with those corridors. It has not disappeared. It is a transience to return in one way or another.
We have a purpose to bring back, and we’re moving forward and we have a safe line of sight so we can mitigate at least about 40% of that number. That’s a goal we’d see at the end of the year, which would be to bring in $800 million of that $2 billion increase. That would still leave us with a big investment, so to speak, an upfront margin and highlights the barriers to entry. And everything we are here in ordinary capital, more commonly similar to energy, wishes to be noticed in the context of our functionality during this period. So it surely had a very high proportional return, and shareholders were rewarded for having to finance and invest in some of that current capital. Now we have to see how it will turn out back and what is a little stickier than the others.
If we take a look at the evolution of our industry net receivables and payables, it’s a service like: it’s old receivables. We sell a load, we unload, and the visitor has 10 days, 20 days, 30 days, whatever terms are laid out in that specific contract. We’ll also have our vendors, and we’ll get our general terms of payment and how it will be settled generally, in an ongoing capital cycle. We have seen an almost general easing in the contraction of Russian suppliers, notably we have entered any new business in accordance with our announcements that we have made during the period. We used to get above average payment terms from our Russian suppliers. So if you think about the familiar ones, Rusal, Rosneft, the aluminum and oil equivalents. We would have treated historically, they would have fed and contributed to a higher than average average debt settlement date, this activity decreased. It has been replaced through other activities, or if it hasn’t been replaced, we have lost some of that working capital. This figure is 1,500 million dollars. At the edges, we’re looking at how we can potentially optimize our overall cycle, accounts receivable and accounts payable. That’s all I’d bet is more in the structural field around our business mix today, and it’s not coming back any time soon.
The other one that will return to one hundred percent and is purely a $1. 5 billion time factor is an accumulation in our net physical commodity futures. So if we settle, basically, those are longer-term contracts. of our business is short-term and physical futures would not be especially important. We have something in the energy picture, in specific LNG that is emerging in this area. It stands out more with some longer-term supply and sale agreements. We announced a few, a year or two ago, that we took a giant long-term source from Cheniere. We have other long-term source agreements. We have a clientele.
No value has been established, but there are elements of that, of those contracts that are worked on from the beginning. It will need to be a threat control query over time. It can be a geographic source where you buy, it can be a liquefaction. In coal, there are elements of safe constant prices that you will have for short periods of time. We will then move on to the derivatives markets and manage this threat at an appropriate point in our VAR and optimize around it. then pay a margin on derivatives. But on our physical chart, if they go into cash like they did, it’s just a no-margin accumulation and it’s on our balance sheet.
The amortization of this $1500 million is generally the third for the rest of 2022. It is approximately the third in 23 and the third in 24. Therefore, we can comfortably deposit $500 million, all other things being equal, it is a conversion market. But in terms of tiebreaker and functionality of this company, we would have at least a kind of $500 million to come back in the current part of 2022, and then another $500 million in 23 and 24.
If you load all those things I said, you’ll get about $2 billion. This is the amount by which we would have a greater degree of confidence as we regress in the current part of 2022. And then we go back to our distribution in February 2023 when we report on our net debt and the recalibration of key bailouts and distributions that we will seek to implement in February 2002.
So it’s a concept of where the cubes are. That’s kind of a marker there as to where all things are based when we’re right now. Obviously I hope to return. If those points had already existed 3 months ago, and if we had implemented them until June 30, we may have reported a $6. 5 billion distribution today. in a rapid release, at least in this component, and we are advancing in ordinary capital.
In terms of page 17, that’s just the mechanical buildup of our $4. 5 billion supplement that we announced today starting at $2. 3 billion of net debt as a momentary tranche to be paid off in September next year. This will now be supplemented by the additional $11 consistent with participation. So instead of $1. 7 billion, we will make a $3. 2 billion coin payment now in September. Settlements, for which there are a series of lawsuits until the end of the year to finalize payments. We still have $1. 2 billion left as a provision. We believe that the provision remains valid. We’ve paid $300 million that hasn’t yet been accounted for in this cascade, some small minority provisions for distributions on assets where we don’t have a hundred percent consistency. They returned the coins to us. But in assets like Katanga, like Kazzinc, for example, we have a minority stake in those corporations and they get dividends through the side door, so to speak, through the front door that needs to be paid because we don’t own any. one hundred consistent with those assets.
And then all of this leads to another $4. 5 billion. The $3 billion buyback equates to $0. 23 per share. Overall, redemptions, the money available for the year is about 43% buyback, 57% money accounts for about 4. 2%, 4. 3% of outstanding shares lately. Therefore, this will lead to a significant contraction in the number of shares over the next 6 months as we launch this purchase.
Page 18 is as we were in the CapEx, there is nothing really to report here. There is no replacement in the third-class forecast for the year, still at $5. 4 billion in a full year. We’re way below that in the semester. This is the case that tends to be weighted more H2 to H1 in one way or another, it is a statistical result. We also come to take stock of our investors in December, but we’re just rephrasing where we are. And for now, we can with those CapEx, nothing, there is no other data that allows those specific hypotheses.
There are some slides on tips and one-off illustrations. I think I covered everything in the previous slides. We’re going to continue to the 22nd, which shows that $32. 3 billion in EBITDA illustrates this point, contributing to a $18 billion loss of money. Always incredibly strong. Coal remains at $20 billion, i. e. with an advance average of $350 in Newcastle and portfolio adjustments, a higher charge due to inflation and royalties, and is a market value valuation of all our other activities, copper, zinc. , nickel and likes it, returning to the mid-range market.
With reduced tonnages of copper and zinc, we will look notoriously at the end of the year to bring them to 23 once we have gone through our longer-term processing plans and budget cycles, which will be colder and tell us the time when in the long term we will be able to visualize what, especially in terms of volume, how we can seek to recover it in copper and zinc. Obviously, in particular, and also, via then, some of the very strong inflationary pressures will go away and have diminished a bit since then, and we will be able to lower prices again from what we have now. So anyway, that’s what’s happening. Still very forged, August is smart for the continuation of the strong generation of money during the activity, the continuation of deleveraging throughout the H2 and the continuation of the production of fixed assets for shareholders in the H2, the effects of the year 2022 and the complements that we would seek to implement at that time.
So with that, I’m going to do it. Lots of numbers, lots of information. Therefore, you get everything back from Gary for the closing.
Gary Nagle
So, as Steve says, a lot of numbers. All very positive, returns for shareholders and in line with our return on capital policy, effects on our business activity, effects on our marketing activity.
Let’s move on to slide 24. You already noticed the slide, a genuine sample of our business style and where we are from. A giant trading company, world-class assets that offer the obligatory amenities for and for the future. As we decarbonise the world to enable countries and the world to decarbonise while maintaining reliable baseload power, we also have a formidable set of forward-thinking steel operations around the world. A very large copper manufacturer, a very giant cobalt, a very giant zinc, a very giant nickel manufacturer around a global industry around the world, offering the answers the world needs.
Coupled with this, a world-class marketing company with a record result during the first part of the year time and again, this not only provides opportunities and opportunities for arbitrage of market dislocations, but offers a service to global consumers and demands certainty of supply. all the products they want as the world progresses. And, therefore, a company that benefits greatly from our business activity, but also as an independent company, offers a significant price to our shareholders. And relevant with those activities and completely similar to them. , is our Carbon Solutions business, which is a genuine source of services for many consumers who want the uncooked fabrics we source through our markets and business activities, but with a carbon solution, and we must provide this complete solution to our consumers on the go. .
And a new component of our business is our recycling business. As we move forward in the circular economy and its importance and the desire to ensure that we recycle and source the mandatory products today and in the future, these not only come from the number one of the resources and we make a contribution to a circular economy, and we return raw fabrics that have already been extracted historically. This gives our company an overview.
Going forward, let’s take a look at our priorities for 2022. First of all, as I mentioned earlier in the presentation, it’s security. I mentioned earlier, we’ve had two deaths since the beginning of the year, and that’s all that’s very difficult to settle for a control team. This is very complicated to settle for our operational control. I know that everyone in this company is personally affected when we have an incident like this, and this is something we will continue to work on. because wholeheartedly we believe that this corporation can be a corporation without death and it will be a corporation without death.
On the climate side, we are making very smart progress in our adventure that we have illustrated in previous presentations. Our operational footprint, we spend a lot of time decarbonizing our Scope 1 and 2 emissions. We talked at the presentation of some of the renewable PPAs we concluded, and there are a number of projects along the mutual relief charge curve that our operational team is executing and implementing as we speak, which are just carbon relief projects, but they are also optimization projects for our business.
Our scope 3 emissions, we manage them largely through the culpable relief of our coal business, which is in line with the 1. 5 degree situation aligned with Paris, and we are committed to this guilty relief, and we will not deviate from that path. We prioritize our CapEx on our future metals, not our fossil fuel business. At the same time, we are not only on the fence, but we are off the fence, and our supply chains are critical to ensuring that our suppliers and the products and inputs we purchase in our business also have their carbon footprint not only monitored but also reduced as we move forward to ensure that our global footprint is reduced in the future.
We use all kinds of technologies as part of the decarbonisation campaign. We are dedicating our own money to reducing carbon emissions as part of CTSCo’s work in Australia, which is progressing, and we expect this part of the plant to be operational in the coming years. And with all this, we are following a very transparent approach. We ensure that the main points are provided to our stakeholders to ensure that they perceive that this path to decarbonisation is certainly transparent and transparent so that our shareholders perceive that we are committed to it and that we will do so in achieving our goals and objectives.
From an operational standpoint, we have a number of ongoing power and field assignments, and we are committed to operational excellence and governance and management of positions and assignments. A number of challenges, of course, because any mining company has a number of challenges. We discussed some of them before, Steve discussed a number of them before.
Koniambo, our nickel operation in New Caledonia, which is looking to show off some green shoots, isn’t doing too badly. In fact, the last 6 months have probably been the most productive 6 months of the last 2 or 3 years. And we’re seeing significant innovations in the operational power of this business. And with the continuous hard paints of our nickel team, we expect to see continuous innovations and a continuous contribution to the back of this business. The [indiscernible] accumulation which, again, is a challenge for us. We’ve had a number of issues around [indiscernible], whether it’s COVID or similar fire position issues or appliance reliability issues, all of those issues are present. We all have plans in place to mitigate the problems we have. And within nine to 12 months, we estimate to be able to have this plant operational at its nominal capacity. We are, in a way, the restart of the copper-cobalt transfer of Mutanda. This increase is ongoing and we expect to see smart effects from this task. And obviously, the monetary effects of this are reflected in long-term gains.
And finally, Katanga, Steve, discussed that, some of the geotechnical upheavals that we had in Katanga and the related geological disorders and pieces here and there. But again, an ongoing project, where the operations team is working hard and fully understands the issues, has plans to mitigate, correct, and modify certain processes, and we hope this company will come back strongly in the age to come and deliver the kind of performance we expect from this company.
From a financial standpoint, Steve really went through the monetary numbers. So where we’re on the balance sheet side, we’ve committed to getting a very strong BBB or BAA credit score for the cycle, and we believe that with our net debt goals and our return to capital policy and this company’s earnings prospects, that’s all that’s actually a fact. Returns to shareholders. We will monitor the activity of our shareholders as we did during this semester. We will continue to be consistent and respect this, and look to the future to offer more support to shareholders.
This concludes the presentation. It took a little longer than normal, but given some numbers and results, we thought it would be more productive for you in more detail. And now we’ll return it to the operator for questions and answers.
Q&A session
Operator
[Operator Instructions] The first by Alain Gabriel of Morgan Stanley. Continue.
alain gabriel
Yes. Hello. I have two questions. The first is that the company has been exceptionally cash-generating and the market value of mining assets has been significantly reduced. Acquisitions, continue to expand its presence in certain commodities, which the market sees as prospective?That’s my first question.
Gary Nagle
On the M&A side, there aren’t many opportunities. Of course, given our operational and marketing footprint, we agree with many operations around the world. And when opportunities arise, we’re the first to see them, either because of where we operate or because of the relationships, joint ventures, and partnerships we have with many manufacturers around the world. So, the short answer is that there are limited opportunities, this window never closes.
alain gabriel
My query at the moment is about your asset sale program, which continued to progress during the first part of the year, but the slide in your presentation is no longer there. Does this mean that the speed of asset sales would slow down from here?And how confident are you on the final sale of cobalt in the current part of the year?So are we closer to a resolution on Viterra’s long-term portfolio?Thank you.
Gary Nagle
I think I pointed out in the previous presentation that we would avoid reporting on this. We’ve made significant progress in the last 1-6 months of last year and the first few months of this year, significant progress in terms of portfolio reduction. This is not to say that the paintings have prevented, and there are still some paintings to be done. But we got through the ramp and the most of it is done. And there’s a little more to do and we said we have a pending review. So there’s still a bit of a way to go, but it all has to be seen on its own to see if it makes sense in our portfolio, if it’s a must-have or not, if it’s undersized or not. But for intentions and objectives the maximum things are done. There are still pieces to be done, and we will report them to the market as needed. As far as Cobalt is concerned, we have entered into an agreement with the buyer and there is not much more we can do regarding this transaction. And Viterra, our position has not replaced Viterra either. It’s a wonderful business. We had a wonderful first half, and our position remains as we explained in the past about Viterra.
alain gabriel
Thank you so
Operator
Thank you for your question. Now we’ll move on to our next question. It’s in the culture of Liam Fitzpatrick of Deutsche Bank. Continue.
Liam Fitzpatrick
Thanks. Hello, Gary and Steven. Two questions. One on prices and the other on current capital and profitability for shareholders. Cost-wise, that’s a surprisingly incredible set of numbers, yet the market is surprised by the implicit H2 unit prices for copper and zinc, which I know you talked about in your comments. But if we take a look at Katanga and Kazzinc, can you give us an idea of what kind of operational change and cargo relief we might see in the next 6 to 12 months?This is the first question. And then, in terms of what’s guiding us today, that’s a loose money figure of $18 billion divided into $9 billion in part. And then he told us a relief of $2 billion in current capital. That’s $11 billion of money lost in the moment part if everything stays the same. So is this the right way to interpret it? And that’s the kind of direction the February cast announcement is taking. Thank you.
Steven Kalmin
Yes, Liam, I’ll take the moment first. So yes, notoriously, I mean mechanically, it’s the flow of loose currency that notoriously generates, it’s on an annualized basis. I think it is moderate to have it. It’s a loose thing of any price or whatever. So it would be: now that the coal sector has it, it may be that things are stalling or they are above or below that specific market. So it’s a moderate projection. You take hard working capital, yes. So mechanically we reload on a proforma up to 10 so let’s get there if you generate those coins and you definitely have your $2 billion I articulated there and I’d say c is a smart guess for now Then nine plus 2, he ended up with $2 billion net coins in February. Mechanically, you have the base mold, which would be the first waterfall, if you like. So we’re back to $1 billion plus 25% of the industry. It will also be a giant number, given that the industry is very strong this year. And then the balance to bring it down to 10. That’s precisely it. As for Katanga and Kazzinc, I mean the one thing that we’ve clearly controlled now, and we’ve tried to handle it as closely as possible because we take the prize, we need to make sure that there’s no double dipping here in terms of the total flow contribution. neither of coins. Therefore, we are not; we actually get higher cost advantages, especially on the energy side, but we’re going to reflect that across costs as well. So it was with crude oil in 10nine, we are big diesels. Also affects all consumables. Price increases have been – we’re looking at other numbers the other day. It’s not – this will have a weighting across the business, yet in our addressable power, global costs compared to baseline periods were up just 60%.
And that is if you take the other categories of ours, ie reductions in diesel electric power, utilities and the like. Our consumables grew 25% as a combination of addressables, and that’s the whole team of parts, explosives, grinding agents, sulfur asset purchases, chemicals, and other similar shipping and transportation facilities, have the power to influence, which has a ten percent mix. Now we’ve factored all of that into our numbers in a kind of full-year forecast as contracts roll out. Reflects some adjustments to fresh paints. Kazzinc was at the beginning. That is clearly integrated into the specific prices. So yes, those are clearly assets targeted by a position that has been high. Much of it is passive. Much of it is related to commodities. Which we can control and really work to get the correct divider that will have a significant effect. So if you see the Zhairem, you’ll see more tons, you’ll see higher performance running. We passed Katanga. Obviously we have 220 already. H2 takes over H1, Zhairem is back, the various projects are in position, as Gary said, to bring this operation back to his perspective in Katanga as well. This has a massive effect on operating leverage and driving down unit prices. In the meantime, we’re not doing anything about the value of cobalt stuff, we’re just passing through to see how it develops over time. But there is a lot of attention on it. Liam, we just wanted to call it what we see it now. I fully expect it to be some sort of spike in inflation and spike in commodity lows through product that gave us a position where we can contract prices now.
Liam Fitzpatrick
Thanks Steven. Je can stay at the top shortly. In Katanga alone, does it make any kind of sense when you now say that you expect production to reach this kind of annual copper point of more than 280 types?
pierre freyberg
Hello. Peter Freyberg here. We work through this. As you may have noted in our production report, although we have had some geotechnical issues and other processing issues, we are somewhat limited in access to land, and this is a factor that we work on with our partner in the field. To some degree, our ability to go back to those degrees is limited by that. I will go on to say that the geotechnical problems were all we knew about in the first half. We have very complicated satellite tracking and radar tracking in the pits. We have known some bleeding anomalies, and that is why we have noticed the relief in production accordingly because we are taking the precautionary technique and making sure that protection comes first. We have not done any further research on what is quite a complex geology and are resuming mining, knowing the scenario is safe, after making some adjustments. So from an optimal standpoint, we’re doing fine right now. And the kind of increase that Steve was talking about can be achieved. But digging a little deeper, we want to address some of those issues of access to land.
Liam Fitzpatrick
Very clear. Thank you.
Operator
Thank you for your Array. Now we will move on to our next Array. He is Chris’s [indistinguishable] from Jefferies.
unidentified analyst
Hello Gary. Hello Steve. Hello. I just wanted to keep up with Steve, some of his comments on tariff inflation, which evidently rarely airs on Glencore, but across the industry. So, we’re seeing very dynamic load curves in some commodity or aluminum markets, you’ve noticed that capacity has been disconnected particularly due to emerging loads. Actually, we haven’t noticed it in base metals or at least copper yet. And it looks like copper is probably the commodity where we’re seeing maximum charge inflation, especially at the top of the charge curve. So if we go back to 2015, 2016, I think it disconnected copper capacity in a decreasing value environment. But again, the load curves have been very dynamic ever since. I wonder when you would cut the source in reaction to the values. Are we still, in your opinion, well above the load curve today?And that’s the first question.
Gary Nagle
Hi Chris, good morning. Look, the load curve is dynamic. Surely you are right. I still don’t believe like Glencore that we are sitting at the low end of the charge curve, however we are here to maximize margins and would not hesitate to take tons off the market where we think there is a surplus. and that the margins we are making on our product are not a proper return. Of course, we see this having an effect on the load curve, but we also see source and call issues. I mean, the Chinese are coming back and starting to buy, which is great to see. We also saw pharmacists offering at all levels. It’s not just us that were lacking on the source side. We have noticed primary manufacturers in South America getting lost and the like. So on that side, copper supply/demand isn’t looking too bad right now. A lot of other people were saying there was going to be a lot of over-booking this year and due to various issues it’s a pretty balanced market. So I don’t think we’re in a position where we would consider pulling tons off the market, but that’s not something we’re afraid to do if we see charges coming back due to over-trading in the market.
unidentified analyst
Sorry, just a momentary inquiry unrelated to market placement. This is the third year in a row that it is well above the most sensitive forecast diversity. as a result of the war, they have also gained a market share in commodity trading. And I wonder what you think of this diversity of long-term orientation. I mean, do we think of the top of that diversity as maybe some kind of genuine diversity in the long run or potentially even something above the most sensitive part of that diversity or do we expect that in a more normalized environment it will come back somewhere in the middle of that $2. 2 billion to $3. 2 billion?Thank you.
Steven Kalmin
Chris, this is something that we almost have to go into a general environment and double check because it’s a bit moot. There are so many other factors, circumstances, other flows, other market position players. I spoke openly about the barriers to entry, I think they are getting better and better. It is useful. So I think we almost have to get to what would be a general environment and look back to see how we behaved in that environment and compare that to past periods and then check in as a genuine positive revaluation outlook that I think the position of market is positioned in a kind of. . . we have a lot of questions here. And I guess I don’t mean preemptively, yes, we are there. I think we’re doing well in those market positions, which have had [indistinguishable] and volatility and such this year, last year, as you said, sort of 3 years in a row. And I don’t know what the generality looks like. I don’t think anyone knows what the generality looks like, but we’re getting to know what it looks like almost when we come face to face with it. And then we’re going through to see if it’s possible to put it back in place at this point, but other people will make a decision for themselves where they see progress in market position where they think the festival could be, where they see our performance. We are putting out more and more knowledge topics, which I think is very useful in that specific area. This activity showed a wonderful diversity and we also have the difference between the metals and the lively side.
I mean I would, and that’s my kind of permissible thinking, but I’m satisfied to think about the call, is that at the end of the day, I mean, Viterra is a very strong contributor during the period. At 100%, it was $1. 1 billion for just 6 months. Our net revenue stream at 49. 9% was $284 million. I think at some point Gary alluded to it, that is, if that asset wasn’t a component of Plc, I hope we can monetize it and it would be high praise for shareholders obviously, at the time, and it’s a company, and it would go back to shareholders at any point without Viterra being able to stay at 2. 2, 3. 2. So, for now, it’s included in that. I hope for some kind of pro forma, we can say that we can do without it. So that’s what I’m saying, I think an update is coming, and that’s how I think about it.
unidentified analyst
Thank you so much. I that
Operator
Thanks for your Array The following is by Ian Rossouw of Barclays.
ian rossow
Hi, guys. First question, just about your indicative or electric EBITDA where you point out that marketing EBITDA is $3 billion for the full year, obviously, that’s compared to $7. 8 billion for the first part of the year. I mean, you said you expected marketing functionality to normalize in the current part of the year, but that sounds pretty drastic given the current volatility in the energy markets. And I guess that’s not consistent with his recommendation that all current marketing-like capital not come back. So I just sought to get an idea of whether it’s just being conservative or not. And then, in a moment, only in Zhairem. This is something I ask every six months, but it turns out that there are still a lot of disorders and the deadline is delayed every 6 months. Could you just provide some main points there? Thank you.
Steven Kalmin
thanks. I’ll take the first and probably Peter Freyberg will interfere at this point. The illustrative spot we do is never a forecast. There is no forecast for ’22. This is a 12 month old baby. It is a kind of unbalanced forgetting of what happened in the first part. This just says what this company can do in 12 months, assuming production was at 22 levels. The prices are reset to the market based on where we are and then we detect the values. That’s why this is a point representation as opposed to anything that was looking to anticipate or reflect something in 2022. So we’re still going to the middle of the middle of diversity here in terms of marketing to this end regardless of course , part two, the first part was excellent, the moment part, we said, lately it is waiting for more general conditions. Julio, for example, was more general, a decent contribution, but more general. If obviously for some reason July had been another continuation at that kind of level, I don’t think we would have said that we expected more generality. We would also have received slightly different income. So yes, part of the moment, more general. We are entering winter in the northern hemisphere. Who knows what it can give too. But obviously, I think the markets are already prepared for that. Value sets against volatilities and all sorts of reflects the ability of things to be potentially contested and anticipates and is prepared for that one way or another. So that’s all you’re looking to do. I don’t think any minds on H2 or anything are going to be half way here. In Zhairem, Peter?
pierre freyberg
Hello Ian. Hello. Just a very positive story about Zhairem, obviously we had some problems in the structure era. And as you know, we had a chimney about 18 months ago and then a very complicated start-up and completion of the structure era due to the COVID restrictions in Kazakhstan. So the real rollout started last year in 2021. And at that point we had trouble getting other people on board. About six months ago, seven months ago, we controlled the creation of a team to help other people on the court in Zhairem. We have known a number of bottlenecks in the plant that restrict startup. We are getting there and have developed engineering answers for most of them and the work is progressing very well. Unfortunately, the only thing that really prevents us from implementing the responses at the moment is the complexity of having many devices and materials traditionally coming from Russia, and that is quite complex for us now. But we have the answers, and we are systematically running through the bottlenecks and seeing that factory resolved by the middle of next year.
ian rossow
It is ok. Thank you, Peter.
Operator
Thanks. Do you have any s. Now we will move on to our next ArrayThe is by Jason Fairclough of BofA. Continue.
Jason Fairclough
Hi, guys. Thank you for this opportunity. Two questions for me. One about coal and I guess one about marketing. First on coal, the world suddenly runs out of power. You print cash on coal. So, I guess, what do you think of plans to cut production in the coal sector?What would you need to stop the slowdown and make investments to meet short-term global energy desires?Second, just for marketing, I mean $3700 million in EBIT is huge, more than double the high-end you normally target. How do we think about the drivers of this?Was he taking more risks, or was it just a unique opportunity that knocked on the door and seized it?Thank you.
Gary Nagle
Hello. Hi Jason. IT’S OKAY. First, charcoal. We will not walk away from our plan to responsibly scale down our coal business. In other words, we committed ourselves to our stakeholders. We are committed to the global. It’s smart for the world, and we will continue to do so. It is not negotiable. I’m talking about an excessive occasion where all the governments of the world come together and say, let’s pause climate substitution and we want energy security and please produce more coal, yes we would. But I mean, I think it’s very unlikely to happen. We made a commitment and we will keep it. This is what we do. We are faithful through our word. In the aspect of placement in the market, it is not about accepting threats, no. I mean we offer in all parts of the market, in all parts, at all times and in all energy products. And given the changes in the market and arbitrage, arbitrage opportunities are much more important. This is not a lump sum threat acceptance. It is not a boat in the market. It’s the fact that we’re supplied in the market around all those markets, whether it’s import terminals, export terminals or producers, whether it’s buyers, whatever, whether it’s storage, whatever. We have products all the time, and we can maximize that position on the business side and on the market positioning side, by having the third-party marketed assemblies in our portfolio that, as dislocations come up, we can push our assemblies into them. and capture those arbitrage opportunities. It’s not about kicking and taking threats.
Steven Kalmin
I mean Jason, some of the kind of value signals you wouldn’t even see on screens that belie the underlying premiums, discounts, and short-term preference that if you were looking at LNG, coal delivered to XYZ, you had a base value you can see on the screens, but it had premiums that were, in some cases, 50x or something close to your kind of old averages. In coal traditionally some premiums might have been $2 to $3 on certain cargoes as the market was competing with other energy resources due to scarcity due to other things you may have only had bonuses for periods of three digits. So he had some incredibly weird and unusual structures around his kind of spreads, that’s where we play a lot in those kinds of markets between origins, between qualities and what timeframes depending on how quickly available you’re in the curve on those things. So it was the introduction of an unprecedented and unprecedented word that was used for an unprecedented period of time. But we had those kinds of moments in the first part of the year.
Jason Fairclough
Thank you Steve. Could you go ahead with that? So, you have increased your threatening price cap several times now. Is that it, or can we simply see that the threatened price cap continues to rise?
Steven Kalmin
I mean early days kind of spikes in volatility and likes and correlations as well because all of that feeds into a statistically generated number that we can report that it may have been: you may have had an absolutely unreplaced position from day A into B and just run stats and correlations through your reported VaR which may have been 120 on Tuesday and 375 on Wednesday. So it’s a very statistically generated number with no replacement in threat appetite or underlying positioning or constraints that might have been true. I have the idea that there is rarely a participant, a market participant, whether it is in our commodity global, whether it is in the monetary global, whether it is in the banking global that would not have had security, VaR conditions on the commodities premiums at the time one would have identified that VaR at the time made no sense, frankly. You had to be a strong enough company to be able to handle the volatility, however the actual number itself and for us, we noticed there was a hold. It was stupid to run with the limit. It did not make sense. So, frankly, we may have said that the cap is reaching an absurd point, which would not have been a proper sign. We said it’s just some kind of app or we’ve just reported violations for 35 days straight, which would have been the other alternative, which also doesn’t make sense. So for a while there has been a very normal catch-up, unsurprisingly, between the threats, between our board of directors and others, because they’re out of the major threats and decisions related to the market and credit outlook. So we were just running, we were taking the threat. We were: the opportunity set was much richer than our appetite to capture it. We were looking to really go back and manage the threat that was necessarily managing the P&L at the time. That was the purpose even back then, despite what you see in terms of reported results. So we had to go to the other extreme, see where things settled. The 150 was dazzlingly suspended. We are now operating at around two hundred points. Things have normalized a bit. It’ll still be all we say is best known in two hundred, a, the company is bigger, b, the correlations and volatilities supersede particularly so this is appropriate. Most likely we can get back to 150. I think that is a suitable point for Glencore.
Jason Fairclough
It is ok. Thank you so much. Enjoy the color.
Operator
Thank you for your matrix. Now we will move on to the next matrix. It’s by Dominic O’Kane of JPMorgan.
Dominic O’Kane
Hello, guys. I have two queries. The first considerations Russia. Could you simply explain what your current operating position is in Russia?So, is it lifting tons in Russia?And most sensiblely, given the restricted activities in Russia, can you quantify the effect on market placement in terms of past volume deals you would have had with Rosneft, for example?Can we quantify its replacement, of course, in Russia? My query at the moment has to do with the coal market in general. Given the tensions in the coal market, have you noticed a change in habit among your customers, especially in terms of how you contract sales and prices?And I wonder if maybe I can ask for your assessment and outlook for the coal market in a period of 6 to 12 months from here.
Gary Nagle
Of course. Hi Dominique, how are you? I believe that on Russia, our position has been articulated in the communiqués that we have published this year. We – any attention or product that has been sanctioned, we do not touch it. unsanctioned, we continue to comply with our obligations, our legal obligations that we will have to take products under them, and we continue to do so. And most of them end until the end of this year. We will not enter into any new contracts with devices of Russian origin unless we have asked the governments involved to do so. So I think you’ll probably answer the first component of your first question. The component of the moment in terms of materiality of the Russian product and marketing, the short answer is irrelevant, obviously, even though everything has this product in this product, it is irrelevant to our ebook as a whole.
Steven Kalmin
That our first day announcement at the time of saying that any operational footprint and marketing activity is irrelevant.
Gary Nagle
About the coal market and the habit of our consumers, I want to say that we are here to help our consumers. And I think we’ve seen a lot of appreciation from our consumers that in times of need, given the gigantic scale of our coal business, whether it’s market placement or industrial, we’ve been able to step in and fill the gap and fill the empty. where they were self-sanctioned or had a power crisis or whatever. So I think it’s more that the visitor habit hasn’t consistently replaced it with se, but more there’s an appreciation from our consumers that we’re able to offer multiple origins, multiple qualities from all over the world within short notice. . times. But, in general, their buying habit remains, and we continue with them and how they work. The outlook for the rest of the year, I mean, it’s hard to say. Of course, the energy markets and the energy crisis seem to continue to be an issue, and we expect high energy costs and that revolves around all kinds of inputs in the energy market. it all depends on how the existing type of power crisis develops. But as things stand, we don’t see this power crisis going away for some time.
Dominic O’Kane
And just in terms of sales composition, is it moderate that almost all of your coal contracts are tied to spot or market prices?
Gary Nagle
Most would be yes. I mean, you saw that we advertise our Japanese benchmark, so it’s a constant value. We have, so there are a few tons that have a constant value, but I mean, it’s a healthy value in the environment anyway, and it runs until March of next year, but most of our tons will be market-related.
Dominic O’Kane
Thank you so
Operator
Thank you for your Array. Now we will move on to our next Array. The following from Danielle Chigumira. Continue.
Danielle Chigumira
A few questions from me. The first, just about marketing, so can you give us more main points about how the energy industry has evolved in the first two months of the current part of the year?So, have you noticed a significant slowdown? And the time is recycling. So, after Li-Cycle’s partnerships, do you think other additions to the recycling portfolio, biological or long-term inbiological, are needed to get to where it needs to be from a strategic standpoint?for this company?
Gary Nagle
Hi Danielle. Thank you for your questions. In the energy trade, a month and 4 days so far, I think it’s probably, we would say a little more normal. During the first month of the current part, we are clearly at the beginning of the part and, as you know, we have not reached the northern hemisphere winter, we have noticed the production of numbers or the OPEC commitments. All sorts of uncertainties and unknowns are yet to come. But for the first 35 days of the moment, I would say we’re in a more normalized energy trading environment. When it comes to recycling, we know that recycling is not only the right thing to do, but it also provides wonderful opportunities for our business given the flow of fabrics that will enter the business. Li-Cycle is, in our opinion, a very smart investment for our company. And we’ll take a look at various other investments over time. We may not be deploying massive capital there at this stage, but there are opportunities that we see emerging and we will evaluate other opportunities and possibly decide to deploy capital when the time is right.
Danielle Chigumira
Very well. Actually, just a security tracking. Obviously, there have been two deaths since the beginning of the year. So there is practically nothing about last year’s 4 deaths. Could you tell us what you’re doing from a protective attitude to that performance??
Gary Nagle
I’ll let Peter answer.
pierre freyberg
Yes. Hello. Hello. Thanks for the question. Safety, as we have mentioned, is obviously our most sensible priority within operations. We run very extensive campaigns in our company to implement our secure jobs in processes, giving us consistent approaches and behaviors to manage protection and threats in the workplace. We measure this all the time. We frequently measure compliance with this, identify gaps, and make sure those gaps are filled. As Gary pointed out, clearly, we are incredibly disappointed with any of the deaths. But we have some successes. We’ve had in our 150 commercial sites, we’ve had 149 that have operated well over 12 months without deaths, which is an achievement we haven’t done in the past. Therefore, we are continually moving towards this purpose from scratch, and we believe that we will do so in achieving it.
Operator
Thank you for your question. Now we will move on to the next question. And this is in line with Myles Allsop. Please continue.
Myles Allsop
Super. Merci. Et perhaps just a quick follow-up on the market, we have this kind of massive dislocation between high CV and low CV coals. Do you think this is sustainable for an extended period of time?, could you just tell us about the idea process between the buyback rather than the dividend and how we expect $11 billion to be distributed in February?Thank you.
Gary Nagle
I’ll answer the coal question, Myles. Yes. there is a genuine dislocation between the upper CV and the lower CV. And that’s because, as you know, Myles, the coal market, there are markets within markets and the type of coal is different. So there is definitely a very tight market in the upper CV carbon market. And some utilities and destinations require the best CV market, this superior CV material can not be replaced for boiler reasons or other reasons, ash disposal reasons and many other reasons, who want to continue to buy from the CV market higher. Therefore, the main CV market remains limited. We continue to see it tight with this energy crisis and emerging LNG prices. So it’s a strong market. In decreasing hp, yes there is, it’s a little less stretched in terms of source demand, but of course there’s still massive demand for low hp coal. So it’s hard to say where those others are going, but we have a tendency to see them bouncing around as the other source and they require dynamics within those markets, within those markets they expand, and how the takeover is required.
Steven Kalmin
Myles, at the time of the query, looks like he’s already invested $11 billion for next year, that’s good. Obviously, there will be a fundamental distribution of coins just below our formula, which will be in coins. And all of the above is available between additional coins or buybacks. What we have said about coin buybacks is that coins or promotions would be favored all other things being equal, but buybacks will play a role where we don’t need it, it’s not just a natural cyclical call. We need to do our diversity of valuation metrics of our own businesses where we see the risk/reward within our own business, running a variety of scenarios and where we think the value of inventory is ultimately exciting in updating those scenarios and how to put a diversity of scenarios in which redemption comes into play in a significant way as lately. At the beginning of the year we were 0. 6 chords, smaller, now 3 billion more impressive. This takes a number of inventories out of the market. It’s around 4. 2%, I’m thinking base values. The numbers coming up could also be clearly significant and would be designed around a full diversity of scenarios that we run and say is the most productive way to invest in buyout capital and at what points and it all comes down to a diversity of scenarios that we’ve run ourselves to see if that’s the most productive course of action rather than giving all shareholders coins to make their own decisions, and frankly, some have a strong preference for it. Thus, it is also about building a balance between different personal tastes, different starters, different conditions among our main shareholders. Like I said, you ask a hundred types of other people or a hundred answers about personal tastes and quantities between them, and you’ll get another 125 answers. I think we balanced all the stakeholders pretty well this year. It’s a 57-43 split this year, potentially assuming we see value. It is not an unreasonable framework for thinking about the future. And again, the thing is, at some point there’s going to be a point where we say, you know the value of the inventory is such that it now reflects the cycles and the commodity curves and the consensus and the various other things that everybody has other reviews. And we’re going to give it all back, and we’re happy to make calls about various things within the company, that’s anything that we’d let the investor base make their calls.
Myles Allsop
Maybe just on coal, of the 120 million tons, what is the average CV content today?And what percentage of the CV above 5800 do you have, is it 50 million or 80 million tons?Can you give us a concept of how does that divide among the other categories today?
Gary Nagle
Oui. Je I mean Myles, I mean, of course, on average, we can average all of this together, and we’re at around 5. 8, 5,850.
Steven Kalmin
I take out the coca.
Gary Nagle
Oui. Et take – you take coke, but I mean probably, if you average everything, that’s not the way to look at it given that you can take a semi-hard coking coal, which is a higher CV is a 6. 6 type and can oscillate between coking coal and thermal coal depending on the direction of the market. The way we combine and combine optimally in the markets that bring us the most. So, I mean, if you put everything together in a big pile of a hundred million tons, yes, we’re probably about 5. 8, 5,850.
Myles Allsop
Thank you so
Operator
Thank you for your Array. Now we will move on to our next Array. It is by Sylvain Brunet by Exane Paribas.
Sylvain Brunet
Hello hello gentlemen. My first question is about Collahuasi. Could you tell us whether the tax debate in Chile is delaying any of your decisions there or not so much?of your consumers in evolved markets decrease any of the orders or do not do they do it at all?Thank you.
Gary Nagle
Sylvain, Chile, we are a big taxpayer in Chile. We are a giant employer in Chile and we are a corporate citizen in Chile. We are, like all of our peers in one aspect of the market, watching very conscientiously and carefully what the government makes the decision to do regarding the charter and tax and royalty reform. We clearly appreciate a solid investment environment. And we’ve had a smart fortune in investing. We believe this is a smart environment to invest in. And we are going to be seeing the progress of the adjustments that are being proposed very conscientiously lately. When it comes to macro hazards and the macro environment, yes, we see adjustments all the time. It is true that Europe is very weak. The United States remains strong, but with signs of weakening. But on the other side of the world, China is starting to show some green shoots. So not everything is moving in the same direction at the same time, and we also see this underlying call to decarbonize tissues, as well as the base charge energy. So it’s very dynamic and there are other drivers in other parts of the world. And as I said, we adapt to what we see change.
Sylvain Brunet
Maybe just a few words about cobalt, Gary, the last user guilty of the value correction, is it transitory according to your reading?Will consumers have a little more visibility into the automotive trend in the latter part of the year?What is your. . .
Gary Nagle
Undoubtedly, many transience workers. I mean, in the end, yes, with the slowdown in China, the lockdowns that we saw in China in the early part of the year, the production of batteries for electric vehicles has been significantly slower. And the call not to be there and the corrected value. But in any kind of consensus view of where electric cars and the battery manufacturer will go in relation to the supply of cobalt, in the long term, now where it is and/or even in the medium term, it does seem like a structural deficit in the cobalt market. So, yes, there are inventories and some weakness in the call at the moment. But we expect the global to back down. And as I said before, the dynamics of decarbonization are not becoming and the expansion of the electric vehicle will be at the appointment. We will see a retreating demand for cobalt and the maximum will likely exceed supply.
Sylvain Brunet
Super. Thank you.
Operator
Thank you for yourArray. We are now here to respond to our lastArray. So, wait. The next one from Tyler Broda. Please continue.
Tyler Broda
Great, thank you very much. Only two queries for me. The first is just a follow-up of cobalt. In terms of debts, how do you expect to see them evolve in the next 12 or 24 months?Is this structural or will it come back once China normalizes a bit?of the high-profile announcements recently from some of the car suppliers related to partnerships, etc. I wonder how he sees the evolution of his strategy on this front. Thanks a lot.
Gary Nagle
Tyler, cobalt, the short answer, yes, we see debts returning to a more normalized diversity as the Chinese ask for them to be reinstated. As I said in the answer to the previous question, the demand in the medium and long term is still very strong. And as inventories decline, demand increases again, and the source struggles to keep up with demand, in fact we see those debts recede. at a more normalized level. What is the question of the moment?Forgive me.
Tyler Broda
Sorry, in OEM policy.
Gary Nagle
The association of OEM components. Yes, I missed it. Well, as I said in our presentation, we signed a collaboration agreement with General Motors as part of their transition to an electric vehicle production fleet. We have long-term supply agreements with Tesla and several other OEMs and ongoing discussions with other OEMs around the world, whether European, American and indeed Asian. So, we continue to build those relationships, those component associations, as we call them. We are not just a supplier. We are a component supplier. We don’t just get cobalt in many cases. We get nickel. We are even discussing with some of our suppliers a possible recycling of batteries at the end of their useful life when the cars return. So, there are a lot of things going on and we have some of the components of societies in place.
Operator
Merci. Je will now return the conference to Gary Nagle for closing remarks.
Gary Nagle
I just need to thank everyone for joining us. I know we’ve spent a little time, however, a whole set of results, a whole set of numbers, and we’ll just express our gratitude for your participation and for all the questions you were asked to call. Thanks a lot.
Operator
This concludes the convention for today. Thank you for participating. Everyone can log out.