Glencore plc (GLEN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Glencore Interim Results 2022 Webcast and Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, the 4th of August 2022. I would now like to hand the conference over to Mr. Martin Fewings, Head of Investor Relations. Please go ahead, sir.

Good morning. Thank you for joining our half year 2022 results call. I'm joined today by our CEO, Gary Nagle; and our CFO, Steven Kalmin. I will now hand the call over to Gary.

Hi. Good morning. And for those who aren't in Europe or in South Africa, good afternoon, good evening, wherever it is in the world you are. Thanks for joining us. We'll move straight into the presentation and start off with our 2022 half year scorecard. As you will have noted from our release this morning, on the financial side, a record half year result for our group and adjusted EBITDA print of just short of $19 billion. On the Industrial side, that's $15 billion with the largest proportion coming from coal; and a record in our Marketing business within an adjusted EBIT of $3.7 billion, as we foreshadowed a few weeks ago in our release. On the balance sheet side, net debt down to just $2.3 billion at the end of June, allowing us to return significant amounts of money to our shareholders. And we are declaring today a top-up shareholder return of $4.5 billion. That's made up of $3 billion in buybacks and $1.45 billion in cash returns to our shareholders. And that is consistent with our capital returns policy that we've outlined in previous presentations and that you'll find at the back of this presentation. That $4.5 billion return to shareholders brings our total 2022 return to shareholders to $8.5 billion, which is an exceptional achievement. On the Industrial side, as I mentioned, the real standout this time around has been coal. You'll remember a year ago, the first half of last year, coal's earnings were less than $1 billion. But with the energy crisis and the requirements the world need for stable baseload energy, coal prices have surged. We've also obviously taken over the remaining share of Cerrejón in the early part of January this year, and that's helped underpin this big increase in adjusted EBITDA for our Industrial business. Obviously, on the negative side, we do see some headwinds on the inflationary side, as all our peers do and as the market does, and we continue our processes and programs to try to contain those costs. But certainly, there are some headwinds on the inflationary side in our mining and processing business. EBITDA margins have remained very healthy with metals EBITDA margins remaining consistent year-on-year. And our coal margins, obviously with the higher coal price, have been exceptionally strong. On the Marketing side, a record performance for the first half. And in fact, as we've mentioned earlier, this is a -- we've exceeded our full 12-months guided range of $2.2 billion to $3.2 billion EBIT with a $3.7 billion achievement in the first 6 months of this year. And really, it's underpinned by exceptionally strong energy trading performance across the board, which has contributed this strong performance. Moving over to our ESG scorecard. On the environmental side, we are taking significant steps in progressing our decarbonization pathway. Just some examples, we have locked in a number of renewable purchase power agreements, 2 significant ones, one for Antapaccay and a second one at our Kazakhstan operations, which will greatly reduce our Scope 2 emissions in our business. We've also entered into a multiyear supply collaboration with General Motors for cobalt, assisting them in their transition to growing in electric vehicle fleet business. And as we also announced earlier in the half, we've partnered with Li-Cycle, which is a recycling company promoting the circularity in battery raw material supply chains. And that, we believe, is a large step in our continued growth in our recycling business. On the social side, we are very upset to report that we've had 2 fatalities year-to-date. These fatalities, we believe, are preventable. And it is our job and our responsibility to eliminate all fatalities in our business. And we continue to work every day and ensure it's our #1 priority within this business to eliminate all harm, not just fatalities, but all harm in this business, and it's work that will continue nonstop. On the governance side, earlier this year, we announced the fact that we have resolved our investigations by the Department of Justice, the U.K. SFO and the Brazilian authorities. That was announced in April this year. And if you look at that in the context of who we are as a company, our strength is not just because of our results. The foundation of our lasting success has been the culture and our people and the way we operate as a company. It's important to understand from our perspective as a Board and as a management team that this kind of conduct has no place in Glencore today. We will learn from this conduct, and we'll improve this business going forward. Ethics, compliance and sustainability must be the forefront of every decision we make in this company, and they will be. And I've been clear with the management team and with all our employees around the world that we make that a cornerstone of our business. We have a world-class Ethics and Compliance Programme, and I truly believe it's world-class. And this is something that promotes good business, but stops dead in its tracks any idea of something that is unacceptable in our business. We have put this behind us. We move forward as a transparent and responsible and ethical operator. And we hope to be able to provide continued great returns to our shareholders and all our stakeholders on the basis of being this responsible and ethical operator. With that, I'll turn it over to Steve to talk through the financial performance for the first half.

Thank you, Gary, and good morning and evening, good afternoon to all those on the call that are joining us this morning as well. Now Gary covered some of the highlights. If we look at Page 7, and the financial metrics are all comprehensively dealt with in subsequent slides. But as Gary noted, very strong headline EBITDA number at $18.9 billion, clearly a half year record and not too far off a full year record which we delivered last year at $21.3 billion for full year 2021. We'll cover Industrial and Marketing specifically in some other slides later on as well. Net income, underlying operations at $10.8 billion, with a more than tripling of that figure from $3.2 billion in first half 2021. It's obviously a greater percentage given fixed depreciation amounts largely on the base of a smaller number in 2021, so the percentage, obviously, larger. The reported statutory net income for the business, $12.1 billion, reflects that there were some -- a handful of significant reported gains and disposal of assets or acquisitions of assets during that period. And we've had some positive P&L developments, if you like, below the line. The equity free cash flow pre-working capital and other allocations to stakeholders, $13.2 billion for the period, that was in line with full year 2021, which was $13 billion. And we'll run through the bridge on net debt evolution in subsequent slides as well, with net debt finishing the period of $2.3 billion and allowing for the $4.5 billion of top-up distributions, which Gary discussed. On Slide 8, you can see the Industrial increased 127%, up to $15 billion. We'll see a waterfall bridge on the next slide as well. The large primary factor comprising the increase was a lift in coal industrial earnings by $8 billion from $0.9 billion for first half 2021 to $8.9 billion for the particular period. Pricing was a large contributor, but also the acquisition of Cerrejón on a like-for-like basis added significant returns for the business relative to the prior period. Cerrejón itself, if you look through the financials, it contributed a little over $2 billion of EBITDA for the first half of 2022 to being just $86 million for 2021. When we add 1/3 of that particular asset, coal prices were significantly lower through 2020 and even into first half 2021. The uplift from now owning 100% of Cerrejón compared to having owned 1/3 for this particular period half was $1.4 billion. That contributed to the overall business and the Energy Industrial business as well. Bottom right, you can see the contribution from our 2 large components in both Energy and Metals. Metals largely flat during the period. We did see some higher average period-on-period prices, but we've seen the impact of both higher prices or higher costs as well as lower reduction, particularly Katanga, which was noted in the production report last week. And Gary will refer to it a little bit later on in the slides. That's going through a reduced production profile as we manage both geotechnical safety and other parameters and restore that business up to its potential over time as well. It was 36,000 tonnes lower on copper production period-on-period. We've also had various portfolio disposals over the year, some of which impacted the period-on-period, particularly Ernest Henry and some smaller zinc assets in South America, notably, Bolivia. The overall EBITDA margins in metals at 43% stable with coal 66%, contributing to the 54% overall Industrial portfolio. If we look at that bridge on Page 9 between $6.6 billion and $15.5 billion, the largest bar, of course, is the pricing at $8.3 billion period-on-period. Of that $8.3 billion, Energy, $7.2 billion; and Metals, $1.1 billion. Within Energy, $6.8 billion was coal; $0.4 billion is in our oil and gas upstream business, although a relatively small business within Glencore, not necessarily a growing business, but being managed well around some West Africa non-operated properties that we have at the moment, more exposed currently to gas than oil. We had a pickup of $0.4 billion, and I think that would have been a bright spot also across some of the Industrial contributions as that business delivered $0.6 billion of EBITDA for the 6 months in upstream E&P. On the Metals within the $1.1 billion price variance, nickel was the largest contributor at $0.5 billion; ferroalloys in South Africa at $0.2 billion; only a small bump in zinc at $0.2 billion, notwithstanding a high zinc price, the byproducts actually provided tailwinds for that -- headwinds for that business. Silver price, which is a large -- we're a very large producer, byproducts price period-on-period was actually down 15% in silver. Lead and gold was relatively flattish, which are also important byproduct contributors to that business as well. On the volume side, net-net, we're at plus 3 -- plus $0.3 billion period-on-period, which is Metals down around $1 billion and Energy up $1.3 billion, all on account of Cerrejón, which I mentioned in the previous slide. The Metals contraction in volume, Katanga was the largest period-on-period contributor, Ernest Henry and some of the zinc assets in South America with those disposals has also mechanically led to some volume variances across that variance. Cost at $0.6 billion, which we'll look at some of the cost variances later on. We are expecting that to expand as a negative cost variances before ultimately stabilizing. And seeing where we are in terms of cost inflation, predominantly energy-linked, largely uncontrollable, we are a beneficiary clearly through the price impact of energy and commodities generally, so somewhat naturally hedged. But within the $0.6 billion, we were negative $0.3 billion in coal and $0.3 billion in metals during this particular period. But some of that inflation is intensifying more in the business, and you'll see our mark-to-market of all oil, energy and byproduct pricing as we work through Kazzinc. The Metals was almost half of that $0.3 billion. Of all our assets, it's in outsized cost pressures. Early on, particularly in labor, there was, you would recall, some protest earlier on in Kazakhstan around inflation, around energy prices. Part of the resolution there was all hands on deck, government, industry and the likes significantly increasing wages in country, potentially on expectation also of declining purchasing power through currency that ultimately hasn't presented itself. But Katanga has actually held up relatively strong given energy markets within Kazakhstan as well. So that has had an outsized impact over in our Kazzinc business, and you'll see that within the zinc results as well. We've had a little bit of cost relief overall through a stronger U.S. dollar, a weaker Australian dollar and South African rand with Australian dollar contributing about half that number. We should get a little bit more relief on that through the second half of the year. If we look at page -- the next few slides, we've got some individual pages on our large businesses. If we look at copper to begin with, production down 15% period-on-period. I think that's been well chronicled around Ernest Henry disposal. Katanga, Collahuasi itself through sequencing had some low production period-on-period as it does happens from time to time through its overall business. It's a large business in the particular pit areas. So that was slightly down also period-on-period, which is a negative contributor for this particular period. Provisional pricing within copper, it's the most exposed provisional pricing. You'd see it in your broader coverage universe, particularly through Q2, where we had a sharp and quite quick contraction in prices. You do give away quite a bit in provisional pricing as those sales adjust through the QP periods as well. Overall realized price was down 8% period-on-period. You can see it on the top graph, $3.93 against $4.25, notwithstanding that average LME headline was up 7%. The base period was a beneficiary of provisional pricing. It can go either way. We saw increases starting in early Q2 last year increasing through H2 2021. That was a, period-on-period, quite a material impact on the copper operating performance and EBITDA contribution. The half year was $3.3 billion, 14% down in EBITDA from the prior period. Just dwelling on costs a bit, and I'll make reference to -- these are backward-looking historical costs at the bottom. You can see 2019, 2021 and first half 2022. Later on in the presentation, we provide our customary illustrative mark-to-market of costs and spot illustrative free cash flows at current macros. The cost in copper, as you can see up to the right, we've adjusted that up to $0.93 a pound. And we're hopeful that that's a high watermark. We've certainly picked a tough period from which to mark-to-market costs. We've looked at -- and also against when we updated results back in February 2022, we were guiding full year around $0.41 a pound. What's happened between February and August, oil price assumptions, it's a big user of diesel across the business and all the indirect-linked energy prices. We were using $109 a barrel in these assumptions compared to $85 back in February. On Page 31, you can see our various assumptions well. And for our copper business, cobalt has had a huge impact financially in a mark-to-market sense. It's been the strong commodity early in the year, and it's been the weakest commodity of late through the last 2 or 3 months. Back in February, spot pricing for metal was at $0.344 a pound at a 90% payability for hydroxide out of the DRC. For purpose of current cost calculations where byproducts of cobalt feeds into our cost calculations, metals reduced to $0.253 per pound and using a 65% payability. Net-net, that's a realization of $0.1644 today against $0.3096. So nearly a 50% reduction in the cobalt realizations that manifests through that $0.93. Again, hopefully, these are levels in both cobalt pricing, energy price assumptions, and even Katanga production has been re-rated to $0.93, down to the $2.20 annualized at Katanga as well where we took the production down 50,000 tonnes a year. So hopefully, conservative now in the copper business and set for a recalibration going forward and the business. And of course, spot pricing, as we cut it in the last few days, it will also reflect the current macros and current positioning with respect to China and recessionary fees and the likes as well. On an annualized basis, $5.1 billion for copper as we stand at the moment for current costs and current year's production. In the zinc business on Page 11, you can see production down 17% as well, reflecting disposals of our Bolivian business down in South America during the period. And particularly in Australia, we've seen impacts around COVID-19 impacts, absenteeism, particularly in Mount Isa and generally within Australia with that operation. Operationally is -- and productivity is not keeping up with where we would hope and expect. The zinc business, more than any other business for us, is most impacted by percentage increases in energy and power. In particular, we have our smelting operations throughout Europe power prices. As we -- as everyone is aware, in Europe, generally, gas-linked -- electricity-linked is making it very challenging in those operations. We do report specifically the EBITDAs out of our European smelting operations. It was businesses previously in sort of $300 million, would have been a comfortable contribution for that business. It's barely covering itself at the moment and was a key contributor to suspending one of the lines in Italy that we did towards the end of last year in Portovesme's zinc line. We've also had higher diesel costs clearly across the portfolio in our zinc business. And Kazakhstan itself was earlier to the inflationary impacts than many of our other business, particularly in labor, which I mentioned earlier on. We've also had some byproduct impacts in our zinc business as well through a phase of lower gold production coming out of Kazakhstan and lower copper as well out of the declining Maleevsky underground operation in Kazakhstan. The Zhairem business, when we hope to have that up and running and ramped through the course of 2023, is the key catalyzer to both reducing unit cost, improving performance and cash flow contribution from the zinc business, which Gary will talk a little bit about that later on as well. So the zinc business, again, relative -- in terms of cost, we're now up to $0.29 on a mark-to-market basis, generating $2 billion on a spot basis for our zinc business as well. Again, this hopefully high watermark around running very high energy prices. Low byproduct prices across silver, gold, lead and the likes as well, which are all materially down against our February 2022 guidance. And also back in February '22, we were assuming that Zhairem was going to perform better in 2022. That's now looking more like a 2023 story. Nickel business on Page 20 -- on Page 12, has performed pretty well this year, production up 21%. Koniambo has now been operating on 2 lines through the course of first half 2022. It generated around 13,000 tonnes of nickel against 6,600 in the prior period. And Murrin itself has increased 4,000 tonnes period-on-period. You recall there was a large -- its large maintenance shut that it does every sort of 3 to 4 years or so, down for 5, 6 weeks, that was in the first half 2021. The business itself in terms of cost, it's not immune as well, high energy and consumable costs, particularly in Australia where Murrin itself, for example, is a big sulfur buyer through its asset consumption. Prices very high, have come off recently, so maybe we are seeing some of those prices getting -- having peaked and starting to liberate some costs going forward as individual markets. It's a market-by-market story, are resolving supply and demand dynamics. There are nickel-linked bonus payments and the likes, particularly in INO. We had higher prices on nickel period-on-period, up 56%. As you can see on the top right, that did also passively flow through to higher nickel cost during the particular period. Just to call out, and it's in the report as well, we've had an industrial action at Raglan since the end of May. That is still not resolved. We're waiting to see the ultimate effect of that. And clearly, some downside risk across our full year estimated nickel production, which we'll update at the next production report. On a spot basis, fully illustrative, this business is around $1.4 billion basis current macros. Page 13, we have coal, clearly, the star of the show for this period. It's been lower down on the podium. The podium has changed a lot in the last particular period, but nice to -- this business performing well during this period and having it stay in the sun. Production headline was actually up 14% purely on account of the Cerrejón acquisition, going 33% to 100% effective January 2022. Like-for-like basis, if we had owned 100% the previous year, overall production volumes were, in fact, down coal, and that's obviously the start of a long journey to decline that business ultimately to net zero, as we've said, 50% by '35 and 15% by 2026. It's the most exposed business to revenue-linked revenue, coal-linked revenue royalties in our various jurisdictions. So $75 cost outcome or outturn as we had in first half 2022 is pleasing, frankly, because it reflects the very high prices. And the royalty is ultimately going to various local and federal governments that we deal with around our 3 operating jurisdictions as well. This was a business that we updated costs and portfolio adjustments just before the period end, and we've come in well within those range as well. We have flagged as well the recent flooding events in New South Wales. They were very extensive. The rail corridor was down for close to 2 weeks. We're assessing the potential impacts or likely impacts on exports, on mining, on the performance of the full coal supply chain and would look to update as soon as we can no later than the Q3 production report around where we expect to land for a full year on coal. In terms of the overall business, as Gary mentioned earlier on, $8.9 billion EBITDA for the year. On a spot illustrative using a Newcastle forward average 12-month $352, we're a little over $20 billion of EBITDA on that business. Obviously, the higher you push, the higher Newcastle goes up, portfolio mix adjustments will go up accordingly. It'd be nice if all of our tonnes were delivering into that market. That's not the reality. We have a good market share in that market, but there's all the different qualities, lower CVs, different markets, different jurisdictions that we operate. There's coking coal also feeding in there, which is under a bit of pressure, and various domestic tonnages both in Australia as well as South Africa. So that's $20 billion, which does support a second half performance in coal. That should be at least broadly consistent with where we are for the first year at sort of $9 billion, which all accounts is a very strong performance as well. If you look at Marketing on Page 14, not much to speak about this other than the fact it was an excellent period just for half, $3.7 billion. We flagged this just before the period. But we expect it to be above $3.2 billion top end of our normal annualized range. Energy was the main contributor -- the only contributor, frankly, of getting us over that benchmark as opposed to being in our normal ranges, if you like, for all the obvious reasons around tight markets, dislocation, extreme volatility. Across all, it was a, obviously, a period within which to perform well, but pleasing that the team managed through what was still a very risky period, a challenging period, one that there were obstacles to have avoided. It wasn't without us challenging that results clearly in this business being able to perform as it is. And well done to the team, obviously, in that regard. In the Metals and minerals at $1 billion, slightly weaker than 2021, which itself was a relatively good period at $1 billion. If you look at the graph, $1 billion for a half year historically would have been a good result. It is a good result. Somewhat weaker towards the end of the period, particularly China is -- our Metals business more exposed to China than the Energy business. The in and out of lockdowns, weaker industrial activity clearly would have an impact on that business, also premiums in some markets towards the end of the period. Cobalt, as I mentioned earlier on, heavily exposed to China generally as well. If we look at Page 15, getting into the balance sheet part of the business, very strong liquidity position. Even after our investments in working capital of 12.4 -- $12.5 billion, that's very closely managed and monitored within the business around lines and liquidity and maturity profiles. We've seen net debt and net funding decline, respectively, by $3.7 billion, $2.9 billion to their various levels. I'm sure you're all waiting for the working capital slide. We've seen a $0.9 billion in RMI. That shouldn't be a large surprise given prices. That does reflect energy being higher, metals being lower, but overall relatively contained. At $0.9 billion, I think there'd be expectations that, that would have come in potentially a bit higher. The $7.8 billion in non-RMI, not all of that is classic working capital. Some of it, depending, is more even OpEx in nature. It depends how it gets accounted for and reported on our balance sheet, and I'll look at that page later on. Mechanically, we just reinforced the shareholder return framework that we will, at times during the year, first half, second half, look to analyze where we are in net debt and return the balance sheet back to its pro forma $10 billion net debt after adjustments for debt like, of course, we have to account for the, you'll see later on, for the legal expenses or legal settlement not yet paid in the first half as well as the second half distribution, which is coming through. So if we jump to Page 16, that's obviously a key slide, and we've got the wagon wheel. And -- but just following net debt from $6 billion to $2.3 billion, funds from operation, very strong headline, good EBITDA, good containment across the other cash components in interest and tax. The net CapEx, although obviously much higher tax payments with these higher prices, governments are the biggest shareholder in our business. At the end of the day, higher prices, they're all getting well compensated within all of our jurisdictions that we operate. Net CapEx at $2 billion, somewhat lagging still where our full year expectations are. I'll get to that later on. Investments generated a bit of cash during the year, most notably Ernest Henry. The working capital, $7.8 billion, will get to non-RMI. And distributions and buybacks was $2.2 billion completed during the first half. So let's follow through the -- and I'll make commentaries as I go through on what I would expect to release in working capital, both in the short term and the medium term, what's clearly relevant over there. The $0.3 billion, if we just talk at government investigations, this is really geography as to where it appears in our financial statements. It's effectively raised the provision as of 31st of December. And now as we settle those payments, it comes as a reduction in working capital as opposed to if we were settling without any raise. That would just come through as an operating expense or just a P&L item. So it's really just a function of the fact that we created a provisional liability that mechanically, any payments thereof is seen as a reduction in working capital. So that is not a -- any payments thereof is seen as a reduction in working capital. So that is not an investment. It's really more OpEx in nature. If you look at the deferred income, those close followers of our balance sheet would know that we do have balances, particularly, there's a big physical buyer universe for our noncore byproducts, effectively gold and silver. These are precious metals that we produce in Kazakhstan. And in Canada, in particular, we have large processing facilities and the like. There is markets out there over a shorter 1, 2, 3 periods where we have some incoming interest in doing customer prepays. So these are prepays, they tend to happen in H2 of each year. We look at the amount that's appropriate. Whether the terms make sense for the business, they then amortize over the following year or 2, and then we look each year as to whether we want to take on some more prepays in that particular business. A lot of this tends to roll. So we've seen a reduction of $0.7 billion here. It's within our purview clearly to see what we want to do in H2 and how much we want to neutralize and reverse in terms of that movement. I'm assuming, and you can keep tally of the various numbers, but I'm assuming at least 50% of that would reverse and come back in the second half of the year. So if you're keeping tally, that's sort of $0.4 billion. The $1.8 billion in other, it's just what did neatly fit in any of the other particular buckets. The largest component of that is where the opposite of what I just mentioned. We actually prepay ourselves for future product, which settles against us. So we get physical delivery of that future product, which clears out that potential, that particular prepayment. That increased by around $600 million, $700 million during the period. This is all short term. And that's across -- we have iron ore in that, we have aluminum, we have some other commodities that occurs. These are attractive commercial business for Glencore that we have as well. All of that point -- $0.6 billion is this is the short-term prepayment. That's -- it's a linear amortization. So that $0.6 billion will all come back by June 2023. So at least 50% of that, so put another $0.3 billion, would reverse back and amortize back in the second half of the year. We've also had some buildup in some VAT in different particularly industrial assets. This tend to be slower often in terms of recovery. I'm not going to promise any return back in VAT, but that's on the balance sheet, and we keep working on those. The other amount that again is more OpEx in nature, but it does come through as working capital, is settlement of various prior period bonus pool accruals and the likes. We have our Marketing businesses performed well in 2021. That creates a certain bonus pool that we have that's linked to those earnings, and it does get settled through the next 6 months of the year. That's also within this particular geography and category. It's not a typical working capital amount, but it does mechanically work through this amount. If we look at then the next 3 interesting categories, all very marketing-related and all effectively related to energy marketing. Increase -- keep going anticlockwise, we've got increase in initial margining requirements. This is us posting cash just to be in the commodities game and space. You need to manage risk. You need to manage -- we need to effect -- effective hedging, derivatives, futures, swaps and strategies around our physical Marketing business. This is how we can obviously produce good risk-adjusted returns and ensure that this is a business that derives its earnings from the physical attributes and is -- can be reduced to a nonspeculative business. We need to be in these markets. We operate at multiple exchanges. We operate through brokers. And margin calls -- initial margin calls was a factor always. We were at $1.9 billion. It's become a massive factor, and it's been well publicized through media, canvassing from companies to, if you like, support the overall creditworthiness, the counterpart performance, the exposure, the overall functioning of the system. In terms of derivatives, we've seen nickel markets, we've seen gas markets, we've seen everything very heavily in the media in the last 6 months. The response from regulators, exchanges themselves just to secure the overall system, which makes -- increases barriers to entry, reduces liquidity. It becomes a space really for only big, financially well-resourced players to be able to function at the level that they would like is that they materially increased the initial margins, which all players have to put down upfront irrespective of whether you have any mark-to-market on -- even before you put a trade on, you need to put down these initial margins. They have their own formulas. They need their 99% confidences that in extreme stress scenarios that they run, that if you have any counterpart defaults through their broker clients, that the system can settle all of its trades and that it continues to function as well. So those increased tremendously during the period, and we increased $2 billion in margins. Of course, an example which I think is quite good just to give on this call, just in the last week in June, we were issued at 9 a.m. or 8 a.m. one morning in a particular contract on the ICE, Intercontinental Exchange, with a particular broker around new rules and new scenarios that they reassess from time to time. They said, Glencore, you need to put up an extra $400 million in 1 day with one batch of trades with one broker in one particular market. That's the extent of what we've seen in this particular environment. Now of the $2 billion increase, around $1 billion was LNG; $0.5 billion, coal; $0.5 billion, metals. We're looking at many ways now to optimize and see how we can do netting, look at different structures that can materially decrease our initial margining that cash is in the business. It's parked with these brokers. It hasn't gone away. It's temporary. It's going to come back in some way, shape or form. We have a target to bring back and we're working on and have some line of sight around being able to mitigate at least around 40% of that number. It's a target that we would see towards the end of the year, which would bring back $0.8 billion of that $2 billion increase. That would still leave us with heavy investment, if you like, in initial margining and thus highlight the barriers to entry. And everything we're looking here in working capital, primarily energy-related, should be seen in the context of our performance during this period. So this has certainly had a very strong commensurate return. And shareholders have been rewarded for having had to fund and invest in some of this working capital. We now need to see how it's going to wind back and what's a bit more sticky than others. If we look at the change in our net trade receivables and payables, that's a function -- that's classic receivables. We sell a cargo, discharge, and the customer has 10 days, 20 days, 30 days, whatever terms are offered within that particular contract. We'll also -- we have our suppliers, and we'll get our normal payment terms and how that gets settled within the normal -- within a working capital cycle. We have seen an almost full reduction and contraction in Russian suppliers. We've seized, obviously, any new business in accordance with our various announcements that we made over the period. We previously did obtain higher-than-average payment terms from our Russian suppliers. So if you think ones that would be familiar, Rusal, Rosneft, these were counterparts in aluminum and oil we would have dealt with historically. They would have fed through and contributed a higher average payables settlement date compared to the average. That business has fallen away. It's either been replaced with other business. Or if it hasn't been replaced, we've lost some of that working capital float, and that number is $1.5 billion. Around the edges, we are looking at how we can potentially optimize our overall cycle of receivables and payables. That's something that I would park as being, for now, as more in the structural camp around where our mix of business is today, and that's not coming back anytime soon. The other one that will come back 100%, and it's purely a timing issue, $1.5 billion, this is the increase in our net physical forward commodity contracts. So if we take on -- this is primarily -- it's longer-term contracts. Most of our business is short term, and the physical forward contracts wouldn't be particularly large. We do have some in the energy space, particularly LNG as we've been growing into that -- evolving into that business. It is more highlighted with some longer-term supply and sales agreements. We announced a few -- a year or 2 ago that we've taken on a large long-term supply from Cheniere. We've got a handful of other long-term supply agreements. We've got a customer base. There's no pricing that's been fixed, but there's various elements of that -- of these contracts that does get worked up upfront. It needs to be risk management over time. It might be geographic sourcing where you're buying at, it might be liquefaction. In coal, there's some elements of fixed pricing that you'll have for short periods of time. We'll then go into the derivative markets and manage that risk to an acceptable level within our VaR and optimize around that. We're then paying margining on the derivatives. But on our physical forward, if they go in the money as this had, this is just increase that is all unmargined and sitting on our balance sheet. The amortization on that $1.5 billion is broadly 1/3 for the rest of 2022. It's about 1/3 in '23 and about 1/3 in '24. So we can comfortably put down $0.5 billion of that, all things being equal, this is markets -- markets are changing. But in terms of the runoff and the performance of this business, we'd be looking at, at least sort of $0.5 billion to come back in the second half of 2022 and then another $0.5 billion in '23 and '24. Now adding all those elements that I said, you will get to around $2 billion. That's the amount that we'd have higher degrees of confidence around coming back in H2 2022. And we then mechanically go back into our distribution in February 2023 when we report back on where our net debt is and the recalibration of buybacks and base distributions that we'll look to deploy back in February [ 2002 ]. So that's a sense of where the buckets are. That's where I'm sort of putting a marker out there as to where base -- all things being equal, based on where we stand at the moment, I'd expect to obviously come back. Had those factors already been with us 3 months ago and we could have actioned them through to 30 June, we would have been able to declare a $6.5 billion distribution today. We're at $4.5 billion obviously because where working capital is and confident in a quick release, at least in that component thereof, and we move forward in the working capital. In terms of Page 17 then, that's just the mechanic buildup to our $4.5 billion top-up that we announced today from $2.3 billion net debt. There's the second tranche to be paid September next year. That will be now topped up with the extra $0.11 a share. So instead of $1.7 billion, we'll be making a $3.2 billion cash payment now in September. The settlements, which there's a range of court due dates through to the end of the year to resolve and finalize the payments, we've still got $1.2 billion left as our provision. We think the provision remains sound. We paid $300 million. There's still to go that needs to be accounted for within this waterfall. Some small minority provisions of distributions out of assets where we don't have 100%. We've collected the cash. But in assets like Katanga, like Kazzinc, for example, we have minority interest in those businesses and they received dividends out the side door, if you like, and the front door. That needs to be paid because we don't own 100% of those assets. And then all of which leads to a $4.5 billion top-up. The $3 billion buyback equates to $0.23 a share. In aggregate, buybacks, free cash for the year is around 43% buyback, cash 57%, represents around 4.2%, 4.3% of the outstanding shares at the moment. So that will have quite a significant contraction in share count over the next 6 months as we deploy that buyback. Page 18 is as we were on the CapEx, nothing really to report here. No change to guidance expectations for the year, still at $5.4 billion full year. We're tracking significantly below that at the half year. That is often the case. That tends to be weighted more H2 over H1. Somehow, that's a statistical outcome and still comfortable with that for the year. We'll obviously update full year guidance for the outer years when we come and have our investor update in December as well. But we're just restating where we're at. And for now, we're comfortable with those CapEx. Nothing -- there's no further information that would make us stray from those particular assumptions. There's a few slides just on the guidance and spot illustrative. I think I've covered it all in previous slides. We'll just jump straight to 22, which shows that spot illustrative $32.3 billion of EBITDA contributing down to an $18 billion of free cash flow, still incredibly strong. Coal maintaining at the $20 billion, that's with Newcastle, [ $350 ] average forward. And the portfolio adjustments cost higher because of inflation as well as royalties. And it's a mark-to-market of all of our other businesses, copper, zinc, nickel and the likes. Marketing back to middle of the range. At reduced tonnages in copper and zinc, we'll obviously look in end of the year to roll these forward into '23 once we've been through our longer-term planning and budget cycles, which will be more fresh and telling us the time. In a go-forward basis, we'll be able to show what -- particularly in the volume sense, how we can look to recover some in copper and zinc, obviously, in particular. And also, hopefully, by then, some of the very heavy inflationary pressures would have abated somewhat since then, and we can get back to lower cost than what we have at the moment. So anyway, that's sort of where it is. Still very strong, August well for continued strong cash generation during the business, continued deleveraging through H2 and continued delivery of strong shareholder returns in H2 basis, full year 2022 results and the top-ups that we'd look to deploy at that point. So with that, I will close it out. Quite a bit of numbers, quite a bit of information, so you take it all in. Hand back to Gary for the -- close it out.

Thanks, Steve. So yes, as Steve says, a lot of numbers. All of them all very positive, great returns to shareholders and consistent with our capital returns policy, terrific results in our Industrial business, terrific results in our Marketing business. Turning on to Slide 24, you will have seen this slide before, a real snapshot of our business model and where we are. A big Industrial business, world-class assets providing the commodities needed for today and for the future. We have a coal business, which provides the transition fuel as we decarbonize in this world to allow countries and the world to decarbonize and still maintain reliable baseload energy. We also have a terrific set of future-facing metals operations around the world. Very large copper, very large cobalt, very large zinc, very large nickel producer around -- global business around the world, providing the solutions that the world needs. And associated with that, a world-class Marketing business with a record result for the first half of the year. And again, this providing -- not only taking opportunities and arbitrage opportunities from the dislocations in the market, but providing a service to the world and to customers who require certainty of supply of whatever commodities they require as the world moves forward. And a result of that, a business that levers largely off our Industrial business, but also as a stand-alone provides significant value to our shareholders. And associated with those businesses and totally interlinked to them is our carbon solutions business, which is a real service provider to many customers who require the commodities that we supply through our Marketing and Industrial business, but with a carbon solution. And we're able to provide that full solution to our customers as we go. And a newer part of our business being our recycling business, as we go forward in the circular economy and the importance of it and the need to ensure that we recycle and provide the commodities needed today and into the future, that those don't only come from primary sources and that we do contribute towards a circular economy, and we do give back using the commodities that have already been mined historically. So that provides our business in a snapshot. Going forward, looking at our priorities for 2022, first and foremost, as I mentioned earlier in the presentation, is safety. I did mention earlier, we've had 2 fatalities year-to-date, and it's something that is very difficult to accept as a management team. It's very difficult to accept by our operational management. I know everybody in this company is personally affected when we have an incident like this. And it's something that we will continue to work at because we believe wholeheartedly that this business can be a fatality-free business and will be a fatality-free business. On the climate side, we're progressing very well along our pathway that we've illustrated in previous presentations. Our operational footprint, we spend a lot of time decarbonizing our Scope 1 and 2 emissions. We spoke earlier in the presentation about some of the renewable PPAs that we have entered into. And there's a number of initiatives along the marginal abatement cost curve that our operational team are working on and implementing as we speak, which are not only carbon reduction projects, but they're also optimization projects for our business. Our Scope 3 emissions, we're managing that largely through the rundown, a responsible rundown of our coal business that is consistent with the Paris-aligned 1.5-degree scenario. And we are committed to that responsible rundown, and we won't deviate off that path. We prioritize our CapEx towards our future-facing metals and not towards our fossil fuels business. At the same time, we don't only look inside the fence, but we look outside of the fence. And our supply chains are critical, ensuring that our suppliers and the commodities and inputs that we buy into our business likewise have their carbon footprints not only monitored, but reduced as we go forward to ensure that our footprint within the world is reduced going forward. We support all sorts of technologies within the decarbonization drive. We are putting our own money towards carbon abatement through the CTSCo project in Australia, which is progressing along. And we hope to have that part of the plant up and running in the next few years. And with all of that, we follow a very transparent approach. We ensure that details are provided to our stakeholders to ensure they understand that this journey towards decarbonization is absolutely clear and transparent for our shareholders, to understand that we are committed to it, and we'll achieve our targets and goals. On the operational side, we have a number of efficiency and discipline projects underway, and we are committed to operational excellence and good cost and project governance and management. A number of challenges, of course, as any mining company does have a number of challenges. We've mentioned earlier some of them or Steve mentioned a number of them earlier. Koniambo, our New Caledonia nickel operations, which is trying to show some green shoots, not doing too badly. In fact, the last 6 months have been the best 6-months performance probably over the last 2 or 3 years. And we are seeing significant improvements in the operational efficiency of that business. And with the continued hard work from our nickel team, we expect to see continued improvements and a continued contribution towards the bottom line within this business. The Zhairem ramp-up, that again has been a challenge for us. We've had a number of issues around Zhairem. Whether it be COVID or fire-related issues or equipment reliability issues, all of those are at hand. All of those have plans in place to mitigate the issues that we have. And within 9 to 12 months, we feel we can have that plant up and running at nameplate capacity. Mutanda, the -- the restart of the Mutanda copper/cobalt project, that ramp-up is underway. And we would expect going forward to see good results coming out of that project, and obviously, the financial results of that being reflected in future earnings. And lastly, Katanga, Steve also mentioned that, some of the geotechnical issues that we've had at Katanga and associated geology issues and bits and pieces here and there. But again, a project in hand where the operational team are hard at work and have a full understanding of what the issues are, have plans in place to mitigate and to fix and to change certain processes. And we look forward to that business coming back strong in the coming period and providing the kind of returns that we'd expect from that business. On the financial side, Steve has gone through really the financial numbers. So really, where we are on the balance sheet side, we committed to a very strong BBB or Baa credit rating through the cycle. And we believe, with our net debt targets and our capital returns policy and the earnings potential of this business, that, that is something that certainly is a given. Shareholders' returns, we will follow our shareholder return policy as we have in this half. We'll continue to be consistent and abide by that, and we look forward to providing additional returns back to shareholders. So with that, we'll end the presentation. It has been a little bit longer than normal, but given some of the numbers and some of the results, we thought it would be better to take you through some more of the detail. And now we'll turn it back to the operator for Q&A.

[Operator Instructions] The first question from Alain Gabriel from Morgan Stanley.

I have 2 questions from my side. The first one is the business has been exceptionally cash-generative, and market prices of mining assets have pulled back quite a bit. Are you seeing any tempting opportunities emerge that could potentially lure you back into M&A to continue to expand your footprint in some commodities the market sees as future-facing? That's my first question.

Yes. On the M&A side, there aren't many opportunities. Of course, given our operational footprint and our marketing footprint, we are in tune with many of the operations around the world. And where opportunities do come up, we're often first to see those, whether it be because of where we operate or because of the relationships and joint ventures and partnerships that we have with many producers around the world. So the short answer is there are limited opportunities, but that window is never closed.

And my second question is on your asset sales program, which has continued to progress throughout the first half, but the slide in your presentation is no longer there. Does this signal that the pace of asset sales would slow from here? And how confident are you in closing the sale of Cobar in the second half? And then are we any closer to a decision on the future of Viterra in the Glencore portfolio?

I think I flagged it in the previous presentation that we'd stop reporting on it. I mean we've made significant progress through the first 9 -- or through the last 6 months of last year and the first few months of this year, significant progress in terms of slimming down the portfolio. It doesn't mean the work has stopped, and there's still a bit of work to be done. But we've got through the ramp of it and most of it is done. And there's a bit more to do, and we said we wouldn't give a running commentary. So a little bit more to go, but everything needs to be looked at on its own light in terms of whether it makes sense within our portfolio, whether it's core or not, whether it's subscale or not. But for all intents and purposes, most of it is done. There's bits and pieces still to be done, and we'll report on those as and when required to the market. With respect to Cobar, we have a signed agreement with the purchaser, and there's not much else we can comment on that transaction. And Viterra, our position hasn't changed on Viterra either. It's a terrific business. It's had an excellent first half, and our position remains as we've articulated previously on Viterra.

We are now going to take our next question, it's from the line of Liam Fitzpatrick from Deutsche Bank.

Two questions. One on costs and then one on kind of working capital and the shareholder return. On the cost front, it's obviously an incredible set of numbers, but the market is surprised by the implied H2 unit costs for copper and zinc, which I know you touched on in your comments. But if we look at Katanga and Kazzinc, can you give any kind of color on what sort of operational turnaround and cost reduction we could be seeing over the next 6 to 12 months? That's the first question. And then in terms of what you're guiding on us today, so it's a free cash flow number of $18 billion, divided in 2, that's $9 billion per half. And then you've told us $2 billion of working capital reduction, so that's an $11 billion free cash flow in H2 if everything stays the same. So is that the right way to interpret it? And is that kind of where the February distribution announcement is headed?

Yes, Liam, I'll take the second one first. So yes, obviously, I mean, mechanically, if that's the free cash flow that obviously generates, that's on a annualized basis. I think halving it is reasonable. That's sort of unconstrained by any pricing or the like. So that would -- now coal business has some -- which could be -- it could be either things lock in or it could be above or below that particular market. So it is a reasonable projection. You take the working capital, yes. So mechanically, so we've reloaded on a pro forma up to 10, so we'll get to, if you generate that cash and you certainly have your $2 billion that I've articulated out there that I would say is a good assumption for now, then you -- then yes, 9 plus 2, you finished at $2 billion net cash in Feb. Mechanically, you'd have the base distribution, which would be the first waterfall, if you like. So we'd look back at the $1 billion plus 25% of Industrial, that will be a large number as well given Industrial is very strong this year. And then the balance to take it back up to 10, that's exactly right. In terms of Katanga and Kazzinc, I mean the one thing we've obviously run now, and we've tried to just run it mark-to-market as true as we can because we take the price, we want to make sure we're not double dipping here in terms of the overall cash flow contribution as well. So we're not -- we're certainly beneficiary of higher prices, particularly in the energy side, but we're also going to reflect that through all the costs. So that was with crude at the $109. We're big diesel, it feeds through into all the consumables as well. Price increases have been -- we're running looking at some other numbers the other day, then that's not -- it will have a weighting across the business, but across our addressable energy world prices against base periods are up close to 60%. And that's if you take the different categories of our -- that's electricity, diesel, reductants, utilities and the likes. Our consumables is up 25% as a blend of addressable, and that's all the parts, equipments, explosives, grinding media, sulfur, asset purchases, chemicals and the like, freight and haulage services, you've got the energy impact, that has a blend of 10%. Now we've taken all these through our numbers on a sort of expected full year basis as contracts roll forward. It reflects some labor contemporary adjustments. Kazzinc was early on. So that's obviously embedded in those particular costs. So yes, these are focused assets clearly from a -- cost has been high. A lot of it is passive. A lot of it is commodity-linked. What we can control and really work on, get the divider right, that will have a meaningful impact. So if you see the Zhairem, you see more tonnes, you see better operating performance, we get Katanga back up. We've got obviously [ 220 ] already. H2 picks up from H1, Zhairem coming back, the various projects in place, as Gary said, to deliver that operation back to its potential, also Katanga, that has a massive impact in operational leverage as well as unit cost reduction. Nothing we do about the cobalt price in the meantime. These things, we're just going to have to see how that works out over time. But there's plenty of focus on it, Liam. We just wanted to call it as we see it at the moment. Hopefully, it's sort of peak inflation and peak -- sort of peak commodity byproduct at low levels that we've sort of hit a spot that we can contract these costs from now on.

If I could briefly follow up. Just on Katanga, do you have a kind of sense or can you say now like when you expect production to get back up towards that kind of [ 280-plus ] type copper annual level?

Peter Freyberg here. We're working steadily through that. As you will have seen from our production report that although we've had some geotechnical issues and some more processing issues, we are constrained somewhat by access to land, and this is an issue that we're working through with our partner in the country. And to some extent, our ability to get back to those levels is constrained by that. I will go on to say though that the geotechnical issues was something we identified in the first half. We have very sophisticated satellite monitoring and radar monitoring within the pits. We identified some anomalies, stood back, and that's why we saw the reduction in production as a result of that because we were taking the precautionary approach and making sure that safety came first. We've not done further analysis on what is quite a complex geology. And we're back mining, knowing that the situation is safe having made some adjustments. So from an operational point of view, we're going well at the moment. And those sort of increases that Steve talked about can be achieved. But looking a little bit further out, we do need to resolve some of these land access issues.

We are now taking our next question, the question is from Chris LaFemina from Jefferies.

I just wanted to follow up with Steve, some of your comments around cost inflation, which is obviously not just happening at Glencore, it's happening industry-wide. So we're seeing very dynamic cost curves in some commodity markets, iron ore, aluminum, you've seen capacity taken offline pretty substantially actually due to rising costs. We haven't really seen that in the base metals or at least in copper yet. And it looks like copper is probably the one commodity where we're seeing the most cost inflation, especially in the upper half of the cost curve. So if we look back to 2015, 2016, I think you took capacity offline in copper in a weaker price environment. But again, cost curves have been very dynamic since then, and I'm wondering at what point would you consider reducing supply in response to prices. Are we getting close to that point now? Are we still, you think, well above where the cost curve is today? And that's the first question.

Chris, look, the cost curve is dynamic. You're absolutely right. I still don't believe we -- as Glencore, we're set on the very low end of the cost curve, but we're here to maximize margins. And we would not hesitate to remove tonnes from the market where we believe a market is oversupplied and that the margins we are achieving on our product is not an acceptable return. Of course, we do see these cost curve impact, but we're also seeing supply/demand issues. I mean the Chinese are coming back and starting to buy, which is nice to see. We've also seen supply misses across the board. It's not only us who's missed on the supply side. We've seen large producers across South America have missed and the likes. So on that side, the supply/demand for copper doesn't look all that bad right now. Many people were saying it's going to be heavily oversupplied this year. And because of various issues, it's quite a balanced market. So I don't think we're at a position yet where we would consider taking tonnes out of the market, but it's not something that we're scared to do if we see prices fall back again as a result of an oversupply in the market.

And sorry, just a second unrelated question regarding Marketing. This is your third year in a row now where you've been well above the high end of the guidance range. And I understand that a large part of that is due to market dislocations, which, especially this year, is a result of the war, but also you've gained market share in commodity trading. And I'm wondering how you think about that long-term guidance range. I mean, should we be thinking about the top half of the range as being maybe kind of the real range going forward or potentially even something above the top half of that range? Or should we expect this in a more normalized environment to go back to somewhere in the middle of that $2.2 billion to $3.2 billion?

Chris, this is something we've almost got to get back to a normal environment and test it again because this is somewhat sort of theoretical. There's so many different factors, circumstances, different flows, different market participants. I obviously spoke earlier on, on the -- just the barriers to entry, I think, are getting higher. That's helpful. So I think we almost need to get to what would be a normal environment and actually see how we perform in that environment again and compare that against previous periods and then see if there's a genuine re-rating potential positively that I think the markets sort of -- we get a lot of questions on here. And I think I don't want to preemptively say, yes, we're there. I think let's continue performing well during these markets, which have offered dynamism and volatility and the likes this year, last year, as you said, sort of 3 years in a row. And I don't know what normal looks like. I don't think anyone knows what normal looks like, but we'll know what it looks like almost when we're faced with it. And then we'll see whether there's scope to bring it back up at that stage. But people will make their own calls themselves around where they see market developments, where they think competition might be, where they see our performance. We're putting more and more data points out there, which I think is very useful in this particular area. That business has shown great diversity. Also, we've got the difference between metals and the energy side. I mean I would -- and this is sort of me thinking almost aloud, but I'm happy to think aloud on the call is that, ultimately, I mean, Viterra itself was a big -- was a very solid contributor during the period. At 100%, it was over 1 -- it was $1.1 billion just for 6 months. Our net income at 49.9% was $284 million. I would think at some stage, Gary alluded to, I mean if that asset was ever not part of plc, I would hope that we could monetize and that would be a great reward for shareholders, obviously, at the time. And it's a fantastic business, and it would flow back to shareholders. And even with sort of without that Viterra that we'd be able to then stay at the $2.2 billion, $3.2 billion. So at the moment, it's included in that. I would hope sort of pro forma, we can say we can do it without it. So that's kind of the roundabout way of saying, I think an upgrade is going to be coming, and that's the way I think about it.

The next question from Ian Rossouw from Barclays.

First question, just on your indicative or illustrative spot EBITDA, where you highlight that Marketing EBITDA at $3 billion for the full year. Obviously, that's compared to $7.8 billion for the first half. I mean you did say you expect Marketing performance to sort of normalize in the second half, but that seems quite drastic given the volatility in energy markets continued. And I guess that's not consistent with your guidance that not all of the marketing-related working capital is coming back. So I just wanted to get a sense of whether that's just being conservative or not. And then secondly, just on Zhairem, it's something I've been asking every 6 months, but it seems like there's still a lot of issues and the delay seems to be pushed back every 6 months. Could you maybe just provide some details there?

Thanks, Ian. I'll take the first one, and probably Peter Freyberg will jump in on the second one. The spot illustrative that we do is never a forecast. There's not a forecast for '22. This is a 12 months -- this is sort of an unhinged forget what happened in the first half. This is just saying what can this business do on a 12-month basis. Assuming production that was at '22 levels, costs were reset to market in terms of where we are and then running spot prices through. That's why it's spot illustrative as opposed to anything that was trying to anticipate or reflect anything in 2022. So we will always resort back to just the middle of the range here in terms of Marketing for the purpose of this, irrespective of, obviously, half 2. The first half was great. Second half, we said, currently, expect more normal conditions. July, for example, was more normal, a decent contribution, but more normal. If we'd obviously -- for whatever reason, July had been another continuation at that sort of level, I don't think we would have said we expect more normal. We would have come up with some wording that was slightly different as well. So yes, second half, more normal. We're getting into Northern Hemisphere winter. Who knows what that may throw up as well? But obviously, the markets, I think, already somewhat prepared for that. It's priced towards that. Volatilities and everything somewhat sort of reflects the ability for things to get potentially sort of challenged and is anticipating and is prepared for it in some way, shape or form. So that's all this is trying to do. Don't think of it as any reflection on H2 or whatever the case. It was going to be middle of the runway here. On Zhairem, Peter?

Ian, just a very positive history on Zhairem. We obviously had some difficulties during the construction period. And as you'd be aware, we had a fire about 18 months ago and then a very difficult commissioning and finalization of the construction period due to COVID restrictions in Kazakhstan. So the real commissioning started last year in 2021. And during that period, we had difficulty getting people in there. About 6, 7 months ago, we did manage to get a team in there to assist the people on the ground at Zhairem. We've identified a number of bottlenecks in the plant that are constraining the ramp-up. We are developing and have developed engineering solutions for most of them, and the work is progressing very well. Unfortunately, the only thing that's really holding us back now from implementing those solutions are the complexities around the fact that a lot of equipment and supplies historically have come through Russia, and that is quite a complex issue for us now. But we do have the solutions, and we're systematically working on those bottlenecks and do see this plant being resolved sort of towards the middle of next year.

We are going now to take our next question, the question from Jason Fairclough from BofA.

Two questions for me. One on coal and, I guess, another one on Marketing. First, on coal, the world seems to be short of energy. All of a sudden, you're printing money in coal. So I guess, how do you think about your plans to shrink the output of the coal business? What would it take for you to delay the ramp-down and ultimately make investments to give the world the energy it needs in the short term? Secondly, just on Marketing, I mean, $3.7 billion in EBIT is huge, more than double the top end that you normally guide to. How should we think about the drivers of that? Was it deploying more capital? Was it taking more risk? Or was it just a unique one-off opportunity that knocked on the door and so you took it?

Okay, the coal one first. We will not divert from our plan to reduce and responsibly run down our coal business. It's -- we've made a commitment to our stakeholders. We've made a commitment to the world. It's right for the world, and we'll continue down that path. It's not negotiable. I mean in an extreme event that all the governments of the world come together and say, we're putting a pause on climate change and we need energy security and please produce more coal, yes, we would. But I mean I think that's very unlikely to happen. We have made a commitment, and we'll keep to our commitments. That's what we do. We are true by our word. On the Marketing side, it's not a matter of risk-taking, no. I mean we're present in all parts of the market at all parts at all times and in all the energy products. And given the dislocations in the market and the arbitrage, the arbitrage opportunities became much bigger. This is not flat price risk-taking. This is not sort of punting on the market. This is the fact that we are present in the market around all these markets, whether they be import terminals, whether it be export terminals, whether they be producers, whether they be buyers, whatever, whether it be storage, whatever it may be. We have products at all times. And we are able to maximize on that position both from an Industrial side and the Marketing side, having the third-party traded units within our book that as these dislocations come up, we are able to feed our units into them and take those arbitrage opportunities. This is not about a matter of punting and risk-taking.

I mean, Jason, some of the -- not even the sort of price indicators that you would be seeing on screens that belies the underlying premiums, discounts and short-term desire for, if you wanted LNG, coal delivered XYZ, you had base pricing you may see on screens, but you had premiums that were, in some cases, 50x or something their sort of historical averages. You might have -- in coal, historically, some premiums might have been $2 to $3 on certain cargoes, whereas the market was competing with other energy sources because of scarcity, because of other things. You might have had premiums for periods of time where we're triple digits. So you had some incredibly sort of bizarre and off-the-charts structures around your sort of differentials, which is where we play a lot in these sort of markets between origins, between qualities for over what time periods, depending on the prompt availability where you are on the curve in these things. So it was the presentation of unheard of, and unprecedented is the word that's been used unprecedented amount of times, but we really had these sort of times during the first half of the year.

Could I maybe just follow up on that? So you've increased your value at risk limit a couple of times now. Is that it? Or could we actually see the value at risk limit continue to get increased?

I mean during the sort of early days of volatility spikes and the likes and correlations also because it all feeds down into a statistically generated one number that we can report, you could have been -- you could have had an unchanged position completely from day A to B. And just running statistics and correlations through your reported VaR, it could have been [ 120 ] on Tuesday and [ 375 ] on Wednesday. So it's a very statistically generated number without any change in risk appetite or change in positioning or change in underlying limits that may have been true. I would have thought there's not a participant, a market participant, whether in our commodity world, whether you're in financial world, whether you're in banking world, that wouldn't have had security, commodity VaR situations back then where one either would have been recognizing that VaR at that time was meaningless, frankly. You had to be a strong-enough company to be able to manage the volatility. But the actual number itself and for us, we've noted that there was a suspension. It was just -- it was silly to operate with a limit. It was meaningless. So either we could have said the limit increases to some nonsense level, frankly, which wouldn't have been an appropriate sign. We said we just -- it's sort of application or we could have reported breaches for 35 days in a row. That would have been the other alternative, which is also meaningless. So for a period of time, there were very regular catch-ups, as you would expect, amongst risk amongst our Board and the likes because they are overseers of key risks and decisions around both from a market and a credit perspective. So we were just running -- we actually de-risk things. We were -- the opportunity set was much richer than our appetite to seize on that. We were trying to really hunker down and manage the risk than necessarily manage for P&L at the time. That was the focus even at the time, notwithstanding what you're seeing in terms of reported results. So we needed to get to the other end, see where things settle down. The 150 was obviously suspended. We're now running at a board 200 level. Things have normalized somewhat. That will still be something we say, is that now embedded at 200, a, the business is bigger; b, you have correlations and volatilities change meaningfully for that to be appropriate? More likely, we can go back to 150. I think that's an appropriate level for Glencore.

We are now taking our next question, the question is from Dominic O'Kane from JPMorgan.

I've got 2 questions. The first one is on Russia. Could you maybe just clarify what your current operational stance is in Russia? So are you lifting tonnes at all in Russia? And how will that evolve going forward? And in addition to that, given the constrained activities in Russia, can you maybe quantify the impact on marketing in terms of previous volume contracts you would have with Rosneft or Rusal, for example? Can we put a number on your change of direction on Russia? My second question is on the coal market broadly. Given the tightness in the coal market, have you seen any change in behavior amongst your customers, particularly around how you're contracting sales and pricing? And I just wonder if I could just maybe ask for your assessment and your outlook for the coal market on a 6- to 12-month view from here.