Glencore plc (GLEN) Earnings Call Transcript & Summary

Good morning and welcome. Thank you for joining us for the presentation of our 2022 financial results. I'm joined here today by Gary Nagle, CEO; Steven Kalmin, CFO; and Peter Freyberg, our Head of Assets, so I'll hand it over to Gary.

Thanks, Martin. Good morning. Welcome, to those here in person and all those online. Welcome. Thanks for joining us for our 2022 results presentation. So taking a look at our scorecard for the year; our financial scorecard, as a start. It's been a record year for Glencore. Our adjusted EBITDA for the year is a little over $34 billion, broken down between our industrial assets and our marketing business: on the industrial side, an adjusted EBITDA of $27.3 billion; and on the EBIT side, a record again, for our marketing business, a $6.4 billion EBIT result for the year, really a phenomenal year on the marketing side, double the top end of our range. Equity free cash flow of $24 billion. And we finished the year with net -- with virtually 0 net debt, all of this resulting in us being able to pay generous returns back to our shareholders. We followed our well-publicized and well-established capital returns policy. Steve will take you through it in more detail. There is a slide on it in the pack as well as in the appendix, but we're returning $7.1 billion to our shareholders this year, $1.5 billion in the form of a buyback, and the remainder as a cash dividend to shareholders. On the industrial side, as I said, we generated $27.3 billion of adjusted EBITDA. A large portion of that, and again the breakdown is later in the pack, is a result of higher coal prices and the fact that we were able to bring in now the full Cerrejón operation for the full 2022, where previously we were only 1/3 shareholders of that operation. On the slightly negative side, we have seen some headwinds in terms of cost inflation, but that is across the industry. That is seen across the board, whether it be in energy costs, whether it be processing costs, whether it be labor costs. We have seen those across the board, and all of those are reflected in our outlook period as well. Margins for metals, slightly down of 2021 numbers, but coal, obviously a higher EBITDA margin and reflected in our terrific results of the coal business in 2022. On the marketing side, as we said, a record year, $6.4 billion EBIT. We've seen huge dislocations, huge arbitrage opportunities, huge volatility in the -- particularly in the energy markets. And as a result, we've been able to service our customers; provide our customers with the energy security they need, the minerals they require to be able to navigate a very volatile world. And it's resulted in a very good marketing result for our business. On the ESG side, we've made a lot of progress on the climate side. Peter and his team are working extensively on our marginal abatement cost curve. We've expanded the inventory significantly, a number of projects, a significant number of projects in fact, which are NPV positive at very low assumed carbon prices. He continues to engineer these projects, and we'll be implementing them sequentially across our business as we continue to move in that direction. On our climate change strategy. As you know, we have a sector-leading strategy. We will reduce our scope 1, 2 and 3 emissions. And important is to say scope 3 emissions because many others in the industry are unable to make commitments around scope 3, but off our 2019 base year, as you know, we'll be down 15% by 2026 and, importantly, at least 50% down by 2035. Our business includes a portfolio of critical minerals, and these will be critical in the transition to a green economy. And as we run-down our coal business, we will continue to invest in our critical minerals and provide the minerals and metals needed for the decarbonization of the world's energy grid. We also have a CCS plant in Australia, as you know, CTSCo. That project is advancing. And as the IEA has said in many of its reports, the world needs all technology to be able to meet our ambition of net zero by 2050, of which CCS is one of them, so we're very happy to advise that, that project continues to move. It's a pilot project, a CCS plant at the Millmerran power station. And the EIS is now open for comments, and we'll continue to invest into -- in that project. The other area that we focus on a lot in our business is recycling and the circularity of our minerals. We've invested capital in it during 2022 and we'll continue to invest in 2023. It's profitable for our business, but not only is it profitable. It's the responsible thing to do. The world requires circularity. It requires recycling not only because the world needs those metals and there isn't enough metals in the world from primary sources, but it is the responsible thing to do as we decarbonize and as the world requires these materials. On the social side, we've -- unfortunately lost 4 of our colleagues this year. And this is something that we take incredibly serious. It is the single most important driver of our company. Peter and his team work relentlessly to ensure that we keep our people safe and that we target 0 harm in this company. We haven't achieved that objective, but it is the #1 objective that we have in this company and we will not rest until our people are all safe. We have our SafeWork program that Peter has revitalized. It is something that is dynamic. It's not something that you implement and you say -- you tick a few boxes and say this program is in place. It's dynamic. It's worked on. It's amended. It's changed because we learn every day and we see every day. And things come up every day that are different. And it's a dynamic program which we are seeing huge amounts of improvements across the business, and we'll continue to work on that to keep our people safe. On the governance side, we are committed to be a responsible and ethical operator wherever it is that we operate. During 2022, we settled investigations with the U.S., U.K. and Brazilian authorities. And we continue to work on investigations with the Swiss and the Dutch authorities. During the year also, we had extensive shareholder engagement around our climate strategy. We had a vote -- or AGM vote on our progress report and we had overwhelming support in favor of our climate strategy that we've published. So with that, I'll turn it over to Steve to take you through the financials.

Thanks, Gary. And thanks, for all those that have graced us with your presence here physically and those that are online here and around the world as well. Just to introduce the financial performance. By now, we've got some slides that are very familiar, the look, the feel, the flow of the updates that we do from time to time by department, by industrial, by marketing. Also, relative to the investor update that we did in December only a few weeks ago, there's been no change to any guidance around some of the key production and CapEx numbers over the next 3 years. And we have rolled forward the spot illustrative free cash flow, which we do 3 or 4 times a year. So with that and hopefully, with the delivery of numbers that are broadly as expected -- production results came out of -- sort of a week or so ago. We should be able to move through relatively quickly. Some of the high-level numbers that Gary spoke to earlier on that will be covered more in -- later on but clearly a fantastic financial performance for the group in 2022, aided primarily in the energy sector and being exposed both in industrial and in marketing. Metals was more challenging, both industrial and marketing. That's where we see some upside going forward. And we'll also show that in the spot illustrative number. Earnings, up in the $18 billion, $19 billion. Pretty significant items, there were a few impairments booked. For those that like trawling through the 120-page financial release, you can see where those -- some were in -- they were all effectively in our metals business, with some margin contraction via price, as TC is challenging, and just mine plan updates that we've done as well. And the equity free cash flow, $24 billion. That's obviously a key number from which we can return cash to shareholders. We can invest in the business -- and obviously manages around our net debt position as well. We'll get through all those slides later on. If we look at the industrial, starting with a few slides, as I said, very familiar generally. You can see the yellow charts bottom right. That's where the big increase was '21 to '22. So an overall 59% increase in industrial EBITDA, up to $27.3 billion. The increase was $5.6 billion to $18.6 billion, all in the energy segment, primarily coal. Of that $13 billion increase, $12.7 billion was in coal. We do have a small fledgling E&P business which does generate cash. It does some exposure upstream both in the liquid and the gas side. And that's been contributing and generating cash also for the business itself but clearly materiality drowned out by the coal business. The acquisition of Cerrejón, effective 1 January 2022, had quite a profound impact. And incrementally there was an uptick. I mean just Cerrejón itself at, in terms of our own earnings, $3.6 billion EBITDA for the year compared to $452 million pickup in 2021. Had we still owned 1/3, it would have gone $452 million to $1.2 billion, so there was a $2.4 billion EBITDA presentation just in Cerrejón by virtue of having owned the increased 66% which we've had as well. We'll see on the next slide there'll be a waterfall pricing -- was, by far, the largest variance. Then we'll work through some of the costs and volume variances as well. Within the metals side, again bottom left, you can see in the gray area we're actually down $2.7 billion, from $12 billion to $9.3 billion. When we do show the spot illustrative numbers later on, we are looking to grow the [ industrial metals side ], of course subject to volume and prices as they stand, but we do see a tick-up, basis macros and production performance, for 2023. It shows the strength of being diversified and across both activities, geography, processing, mining, metals and energy as well. Where we did see margin contraction across the metals business in 2023, we did -- that was the business most impacted with higher costs. We saw it across the board, frankly, ultimately mostly macro, commodity linked through energy, diesel power prices, but also process of European power prices were, of course, a mess through most of the first 6 or 9 months of last year. We've had a few volume impacts we've specifically called out. I mean the 2 biggest assets, at least year-on-year. And there's volume. There's cost. There's price variance and all. It was at Katanga. It's been well talked about through the course of 2022. And the outcome for the year was at 220,000 tonnes of copper compared to 264,000 in the previous year. And the net impact [ of ] cost, volume, price at Katanga was a drop of about $1 billion in EBITDA between the -- of that $2.7 billion. The other reduction of any material nature was Mount Isa, which is across multiple assets; integrated business across both the mining of copper, zinc and smelting and production through to final product that it does as well. Isa itself was down about $0.5 billion. There were some noncash impacts as well that does [ land up ] going through the EBITDA line. We did have to take some inventory fair value adjustments through the WIP through the ultimate realization of those products as it goes through the system, so we'll see what impact that, that had on costs as well, but production-wise, at Isa our zinc was 290,000 against 330,000 in the previous year. We've called out Lady Loretta -- and is a high grade. It's been a good cash contributor over the years, but like all good things, some mine in our business, there is an end date on that; and that's looking like '24, early 2025. And the copper business, well, it's an -- sort of an aging business across the copper as well. And we reported 71,000 compared to 92,000 in the previous year. So those were 2 to call out on the mining side. Where was the action in terms of the industrial bridge? So from $17.1 billion out to $27.3 billion. As we've said, the biggest bar clearly is in price. You can see, bottom left, some of the larger contributors was -- at least on a benchmark term, Newcastle was up 163%. The other coal and crude were, of course, up as well; copper, in fact, average down 6%. We'll see an impact later on. Zinc and nickel, on the contrary, were actually up average prices year-on-year. So of the $12.2 billion, $12.5 billion was positive energy, really all in the coal part of the business as well. On the metals side, there was impact negative of $0.3 billion across pricing. The big impacts we saw in the copper business was actually down $1.6 billion. We'll see individual slides later on as well. Average copper prices, provisional pricing, had quite a material impact. And that's based on the sequencing of sales, the timing of the -- timing and frequency and curve of the reductions that we saw in copper prices. Particularly, we saw a weaker Q2 and into early Q3. There was about a $400 million impact there on the copper business. Cobalt also has a pricing variance that's come through the copper business given the byproduct across our African business as well. Started okay on the cobalt side. That's one of the weakest commodities clearly at the moment in terms of both supply and demand factors. Hopefully, this year, we can work through the lows of cobalt to find the bottom and be able to move forward in that particular market. It still is a -- obviously a commodity that has some favorable demand outlook ultimately, but for now it's struggling with a surplus position. Within the volume side, we were net positive for the year, and that was primarily on the energy side; and again primarily Cerrejón, having made the acquisition and acquired the extra 2/3. Overall, like-for-like, our volumes in coal were actually down year-on-year, but we -- net-net, there's a positive volume variance and having generated good margins on what we added and sacrificed less margin than what was ultimately missed in terms of some of the coal variance. Some of the volumes in -- particularly in South Africa may be volumetrically reasonably material but not as impactful on the bottom line in terms of volume contribution. So energy was a positive [ 2.3 ]. It's nice to see a positive volume variance. This is where the sector is struggling. We hope to be able to turn that positive as well as we look for 2023. Metals, we saw some volume impacts. We've been through the copper, zinc impact, zinc in particular, volume-wise. I've spoken about Mount Isa as well, but we've also adjusted the portfolio over the years, so that does manifest itself in some of the volume. If you think about our Bolivian and Peruvian operations, which we've exited entirely from those consolidated controlled smaller businesses that we had, production-wise, we only produced 27,000 tonnes of zinc from those businesses in '23 against 111,000 in the previous period. So that does work its way through the volume line. Those businesses were never material profit contributors, and this sort of works out in the balance between price and volume and cost. And Ernest Henry, as you're aware also from a volume cessation, we sold that 1st of January 2022. The cost variance, negative. It's pleasing to see that because it's compensated by the price. So we'd always won [ big blobs ] off to the price; and if we have to absorb some macro inflationary cost impacts that are fueled by those exact commodity prices, which we saw as well. So it's certainly very positively correlated not in terms of shape, but we'll get to keep most of the upside from producing at the higher prices. Then we will have to absorb through the inflationary pressure that we have as well. On the costs, they were primarily commodity linked, as we put down in some of the commentary there; heavily impacted the coal business. We'll see some cost charts later on -- as well as massive consumers of diesel, fuel, explosives and the likes around large earthmoving open pit-operations; copper assets as well, diesel, big fleets that we have across the business as well; reagents across being both miner and processor. Zinc assets, very exposed to energy and power in Europe, that was a major cost increase in 2022; labor in Kazakhstan as well. That moved quite early in the year in terms of adjusting their cost-of-living adjustments that they have as well. Many of those factors across the costs side of the business, unfortunately, have been moderating lately. And I'm saying unfortunately because the price side of the bar is then also going to give back some as we move forward. And we'll look at the spot illustrative. A little bit of FX benefit as well with about 10% weakening that we saw across each of Aussie dollar, rand and euro in 2023. So quickly as we go through some of the individual pages. And again you'd be very familiar with these slides. Copper, we did see a reduction, 12%. Some of it was portfolio around Ernest Henry. That was about 45,000 tonnes. Very little update from these slides compared to where we were at the December 2022 update. Katanga, in terms of our owned long-term asset, was the one that's reduced production around to 220,000 compared to 260,000-plus in previous years. That has -- it's had a good Q4 production performance. We obviously saw that in our production report. Annualizing, it's sort of higher than that sort of 220,000 level that we're guiding; or 205,000, plus, minus 15,000, that we're guiding, bottom left, in our production for this year. So a fairly steady copper business production. This was an area that long term has enormous portfolio growth optionality both in a brownfield capacity but ultimately in the greenfield capacity. Today's presentation is not going to talk too much to the growth and the portfolio optionality. There are some slides [ that we've rehashed ] back in the presentation as well. The pricing impact, as I mentioned, in terms of putting a $5.7 billion print on the copper business '22, again something that might have been higher. We have called out provisional pricing was about 5% -- and had a 5% impact than would otherwise have been the case on our realized copper price. So we had sort of come in at $3.64, has -- and provisional pricing not been a factor last year, we would have been $0.19 a pound higher. I suspect you'll see this across the industry generally printing. That equates to about $400 a tonne. We're across 900,000 tonnes of production last year [ -- or sales. There's ] about $350 million to $400 million impact just on our copper business from provisional pricing impact. Costs have been ticking up and remain elevated, a, volumetrically to do with Katanga in terms of cost absorptions; but also now increasingly the impact of cobalt that it's having across our costs with the enormous byproduct, a cushion that we normally get. We've seen it both in metal but even more importantly on the hydroxide side which is a commodity that's more impacted by surplus units at the moment. We've seen payabilities finish the year in the 50s compared to having average 84% most of through the first half. So that's led to a progression. You can see the 2021 unit cost of $0.67 up to about $0.80. And we're $0.91 at the moment, of having rerun macros effective 1st of February 2023. At our Investor Day, we were about $0.92, so it's as you were. There's been a slight moderation in costs generally, which would help around diesel and consumables and some of the reagents. As we roll forward into '23, on the right-hand side, you can see we're looking for around $5.9 billion. We've got all the details on Slide 28. So we've got a higher price at $3.90 compared to the average of last year of $3.64 with that provisional pricing impact. Cost has ticked up a bit, primarily on account of cobalt, and we'll see a slight progression there. As we'll go through the year, we will need to -- whether it's Q1 -- whether it's the first quarter production, whether it's the full year results, we will look to be dynamic around managing cobalt production and sales. So we want to see where the market is. We want to see what makes sense in terms of that market, how -- any sort of rebalancing and how quickly that necessarily occurs. We are a decent-sized producer. We certainly don't have to be always continuously price takers. We can obviously have a bit more discipline in that market, to the extent we choose to stockpile a bit in the cobalt side. Ultimately there will be cash realization, but that would potentially impact the $0.91 if we're not selling all that cobalt during the year. That's still being worked upon. In zinc side, we've spoken about the reduction in production. We've seen some portfolio changes in that business. And I've called out Isa as well, ultimately focusing on our industrial mining assets orientated towards large and long-life assets in Kazakhstan and Australia. So that's going to be the Kazzinc business. It's going to be the McArthur River. It's our processing business; and George Fisher itself, a long-life asset that we're looking to obviously improve performance and drive returns from that business over the long term. There were some noncash charges within the zinc business. It was worth calling that out, some adjustments around stock valuations, some onerous contracts, noncash adjustments that does find its way through mechanically into the derivation of that $0.603 cost. Without that, it hasn't clearly cost the business in cash, but it does mechanically work through in $0.60. There was around $300 million. There was a bit of noncash adjustments around Kazzinc business and also in Portovesme when we moved to curtail some of those lines that would otherwise have reduced us to $0.38 a pound pre those noncash impacts. And we're looking for '23 to bring the portfolio down to $0.28, primarily a moderating in energy prices. If you think about the European power price structure, gas, energy and the likes. This is where we see some of the benefits. Yes, you give away [ 0.02 ] somewhere here. And maybe you pick back sort of 0.10, 0.20, 0.30 in the dollar as we go across the portfolio as well. There's also slightly better byproduct prices that we have. Zinc does -- in our zinc business, we produce most of our gold and silver at the margin. Those have also improved in prices both relative to last year; and relative to our guidance that we had in December, which I think was $0.35. So that's now the portfolio is coming in at $0.28. So we finished $1.5 billion. On a spot basis, this business moves to $1.7 billion. I suspect there may be a question on Zhairem later on. I will leave that for Peter to comment, but the same comment has come through that. We expect a continued ramp-up through '23, with steady state by Q4 this year. That does -- that's -- for us is quite a big game changer in terms of both costs and volumes and cash contribution across the zinc business and long-life assets that we have there. Moving on to nickel itself ticking up a bit in production. We saw Koniambo operating on 2 lines for most of the year. It's clearly not at any nameplate capacity but at least a tick-up and pleasing to see performance and better operating performance there at around 25,000 tonnes. It's not sustainable at that level. It's an operation that ultimately would need to be in the 30,000s with a cost structure also that was more competitive. This is another one of those assets where you take [ 0.02 ] in the one hand and you give back a little bit. It is primarily coal fired, so their energy costs and their costs generally exploded in '22, which has led to some of those increases you can see in both ex KNS and post-KNS unit pricing on the bottom right. This is the business that has some of the largest brownfield expansion transformational projects happening in Canada, both in the Raglan territory as well as Onaping Depth, they'll -- being brand-new, fresh, long-term, more robust businesses once they're up and running from the sort of 2025 year. And we'd look to see unit cost again starting to move south and improve across that business. Guidance for '23 is, looking at current pricing, around $1.5 billion, with nickel and prices the way they are at the moment in that particular business. Coal, where most of the action was, clearly, in 2022 and continues to be, in terms of both impact, prices, volatility and leverage to prices, particularly in this business as well. Production-wise, we've spoken about the Cerrejón tick-up, but bad weather did have a large impact across all of our jurisdictions, leading to a like-for-like 9 million reduction in tonnes as well. Very -- higher costs across the board, energy, fuel explosives. Also this is the business most impacted by -- at least in the mechanics of paying royalties, across all of our jurisdictions. That does work its way straight through to our cost structure. We're very happy, I'll be very happy to be at 0.82 or -- $82 cash costs at the moment. $0.67 (sic) [ $67 ], where we are at the moment, in part reflects lower royalties, basis the curve that we've used as well. From a CapEx perspective, it goes without saying, but of course, now bringing in 100% of Cerrejón, as opposed to 33%, just mechanically, we will have -- there was $113 million. And there's just the ongoing -- some inflation on the CapEx and just timing of fleet upgrades and replacements that we have on that business. Of course, the CapEx over time will sort of broadly follow the production decline in the portfolio generally, where Gary spoke to a -- 3 mine closures [ -- or our ports ] generally. We talk about 3 mines that do close in the next sort of year or 2 and at least sort of 12 mines that we'll be closing before our 2035. You'll see that corresponding CapEx come off those businesses as we move forward. We've had to, we were trying to work out when do we cut and draw the numbers on the coal business and the spot illustrative. It is a moving feast. We've cut it off, I think, Martin as of end of Monday or through the course of Tuesday. And we used a Newcastle strip of $202 average. I think it's about that level at the moment. And the team down in Sydney can rerun their numbers sort of on sort of complicated spreadsheets. They look at all of their [ tonnes ]. They look at all of their volumes. They look at all their sort of portfolio variations, qualities between South Africa, Colombia. Of course, you've got met coal itself, which has been more stable across the business. That reduces the portfolio. We've got domestic contracts. We get short. We get long term and so on. And that's why we need to keep fresh-ing up and guiding you guys every -- sort of as frequently as we can, because it's impossible to model the entire coal across pricing, [ fixed curves ] and discounts that we do have as well but, as of now, basis $202 Newcastle strip. We have a portfolio adjustment that's narrowed down to $51, with a $152 realization bottom right, so we're a margin of $84 a tonne, producing a $9.3 billion EBITDA estimate, as we see it basis today's macros, for our 2023 result on coal, basis 110 million tonnes of production, again which is our latest guidance. We'll see the full figures later on across coal. Marketing business at $6.4 billion, a massive increase, of course, in 2022. We're not alone in this market, I think, if you'd see other either independent or the oil companies or market participants clearly being -- having to have managed risk well, having been liquid, having had execution capabilities. It was a market structure that offered opportunity, clearly, through a lot of the dis-es: dislocation, dysfunction, disequilibrium. You throw all into the mix. It was primarily an H1 story, although some of it did took over into H2. So we have that very big yellow bar of $5.2 billion [indiscernible] anything we've done historically. Metals business, $1.6 billion, came off a bit, $0.9 billion, from what was quite a good year in 2021 with the post COVID, the reopening, markets generally moving tighter and premiums higher, but we started to see a softening China lockdowns and tighter managed conditions generally within. And again, as I said on the metals industrial, both on metals marketing as well, this is hopefully where we can see some positive progression as we go from 2022 to 2023. The 2 halves. I mean the first half was $4 billion across energy and metals. We have $3 billion energy, moderated to -- it went from $3 billion to $2.2 billion, still a very good second half. Metals was $1 billion to $0.6 billion, so it was a tougher H2 within the metals business as well. A quick call out to Viterra, which continues to perform very well. Numbers are somewhat -- not hidden, but they sort of work out in the corporate and other. We pick up our 50% share of their net income, which for us was $494 million. And that was 50% of a net income of $1 billion; of an EBITDA, 100%, of $2.6 billion, so a very strong performance. We provided a few details on Page 29, later on, to read in your own time but business performing well, successfully. They've just closed on the Gavilon acquisition towards Q4 last year. Integration is going well, synergies exceeding expectations, so that business has continued to go from strength to strength as well. If we get to some of the more interesting slides but sort of what it all means from the balance sheet and the working capital movements, which I'm sure there's keen interest. Available liquidity of $13 billion, that's very strong, very healthy levels. We could even push that higher. There's obviously no point. At some point, it's just a sort of a carry cost, but that's just sort of mechanically or through the cash generation and the rollover and refinancing facilities we're at $30 billion. As Gary said, we brought our net debt down from $6 billion to basically flat, and we'll look at the bridge on the next slide later on. RMI increased $2.6 billion from -- up to $27.4 billion. That's explained by some price movements and some volume movements across the RMI. On price-wise, the 2 most impactful for us in our businesses was in nickel. We've seen prices start and finish the year 43% higher. And whatever is in our general float and cycle across both metal and some of the other products that we trade across the nickel, there was a step-up in RMI in the nickel business. Oil price is 10% higher, not necessarily carrying more volumes. It doesn't give backwardated curves through most but, of course, just the sheer moving of oil and products at 10% more. And we have seen a lengthening of working capital and trading cycle across inventory generally as people have had to navigate longer trade routes, sort of all the previous Russian either exports, transshipment. If you think business of ours in Kazakhstan moving product in and out, it is taking longer to get metal concentrate from -- than it might otherwise have done in the past. And shipping routes have also changed, so that has at the margin added some volumes that we might ordinarily not have had in a more normal work environment as well. The non-RMI, I'll talk to that on the next page. And then $8.3 billion across other working capital, we've got some slides on that. I don't like the way it shows up in the financials as working capital. A lot of how it gets presented through the cash flow is really OpEx in nature, just the fact that previously we would have raised accruals or provisions. When you ultimately settle them, they go through as working capital reduction, as opposed to just a normal sort of expense or some other sort -- operating cash flow that you might have. And these affect all our legal provisions, all our reductions in bonus accruals or some areas around rehab and all these things. They do land up coming through as a working capital adjustment. That is OpEx. That not -- that's not an asset of the business going forward. The classic working capital around receivables, payables, margining, that is an asset. That is an investment in the future and we do generate returns. And I have tried to split out those 2 different categories as we move forward. A nice net debt-to-adjusted EBITDA of 0.00, which is good, there on the bottom right. So let's move into what's happened in working capital. And we have split it out between H1 and H2. I think that provides some useful insight. And we've sort of got those categories. In the gray, and I'll work through them in turn, are the more classic working capital. That is cash. It is an asset. It's monetizable. It's generating returns for the business. All that on the left is not necessarily in that category, but if we start on the $6 billion net debt on the left-hand side: We've generated FFO, which is you'll say EBITDA less interest and tax and the likes. As it works through: net CapEx of $4.5 billion. Investments generated some cash for us, Ernest Henry and a few other bits and pieces. And then let's get in just quickly non-RMI. There was an increase of $2.5 billion as we report that non-RMI. The biggest component of that, $1.2 billion -- and this is for those more sort of technical in places of financials and accounting and the likes. We have an intersegment adjustment that we have to make in our consolidated statements. When we report to you industrial and marketing, we treat them as third-party sales, so if industrial is selling copper from Collahuasi to Glencore marketing, Collahuasi generates the income. We don't say that, that needs ultimately to be sent to a third party, so we'll obviously present the earnings over there. From a financial perspective, we will need to eliminate that profit because it hasn't ultimately been sold to their third-party smelter, whether they're in India and China or the like. So we'll have this corporate adjustment. We'll say industrial has made X. Marketing is -- has made Y, but we'll have to report a sort of elimination between the segments, so until that final sale has actually happened, there is a negative adjustment that goes through earnings. And we report that and there are some disclosure. That at the time would be a negative P&L significant item [ that we report ] and would be a negative cash flow movement as well because we haven't actually, as Glencore, generated that cash in our system. This year, we did run-down those inventories within our marketing that previously came from industrial, so we actually had a positive sort of accounting adjustment that sort of was a rewrite back up the inventory because the provision reduced that goes into non-RMI. So there was $1.2 billion there. And I think what's quite useful, if you, if we just go quickly to 25 -- I'm not going to [ produce ] on the page, but if you have it in front of you, on Page 25, we do provide the reconciliation exactly going from EBITDA of $34.1 billion to FFO of $28.9 billion. We've got marketing EBITDA. We've got industrial EBITDA. And then we have this positive $1.2 billion [ corporate ]. So we've -- actually have generated that cash during the business because we've now run-down those inventories. It's a timing difference between years in the marketing business when we ultimately sell and liquidate that inventory that was sourced from our own industrial business. So that part of $1.1 billion is within the non-RMI. We're not putting it into RMI to get a credit, nor should it. So it's a sort of a corporate adjustment that happens within that part of the business. We did increase our non-RMI for the balance by circa $1 billion. Where does that happen? And some of that, we'll recycle back in, and we should generate the cash this year. We've called out Astron. There was a $0.3 billion increase in our inventory levels at Astron. As you know, we had the incident a few years ago, and we've been rebuilding and refurbishing that refinery. The restart started towards H4 -- in Q4 last year and it's continuing. Now the refinery is producing product towards sort of capacity levels that we have at the moment. For a period of time, you actually need to run double inventories. You have to rebuild your crude to be able to then ultimately process through the 100,000 barrels a day, but all the while, you've got product that you've imported to satisfy your downstream business and your retail business. So we're actually carrying both product as well as crude within that particular refinery operation. The timing was awkward because it built up through to -- through towards the end of the year. Going forward, that business doesn't need the product. It brings in crude, and that's its inventory. And it processes whatever it needs for its downstream retail operation. Some of that will clearly come back, hopefully most of it, during the course of 2023. And then in the African copper business in Kazzinc, we are just holding more inventories generally around supply chain issues, sort of complexities, Russian corridors, border logistics business as well. We've just had to build up inventories generally to be able to operate in those businesses, but hopefully, that's been overcooked somewhat and we can moderate and bring back some of that non-RMI also that's been -- that's within that business. Then if we look towards our non-RMI working capital $8.3 billion, which is the purple or red -- the red box that we have over there. H1 movement was $6.9 million (sic) [ $6.9 billion ] if we add up all the H1 components, and H2 was $1.4 billion. If we focus just on the right-hand side, that's what I was referring to as the classic working capital. This is the normal, conventional receivables, payable, the margining calls. That increased $5 billion in H1, flat in H2. There was no movement across those 3 categories. So if we look at bottom right, if we start with our increase in our net margining requirements. That was $2.4 billion for the full year, $2 billion increased in H1. I was -- where the hoping or the probability existed that, that may reduce, in fact, it went up $0.4 billion. Our margining was -- initial margining was $2.2 billion, so that's the biggest component of that $2.4 billion. It was $2 billion in H1 and actually increased in H2, so there's been no let-up in exchange requirements and exchanges to brokers. They have continued to function with ultra conservative around their models; looking to avoid systemic risk, their stress tests, to avoid collapse; their VaRs; they're -- everything that they're doing, so in order to transact, there's been no let-up. If anything, things have even tightened up in some of these exchanges as they've closed out their reviews of what happened, the sort of investigations, the postmortems of some of the volatilities and panic that ensued through to H1. I don't see that as particularly concerning, the fact initial margining is where it is. These are massive barriers to entry. They are there. They generate returns, the ability to transact, the ability to fund. The ability to manage those levels creates a degree of bid-offer spread and [ us ] being a sort of a big company game, frankly, in order to transact, in order to put on these sort of derivatives; and is not by all means exclusive. It's not the sole reason, but it definitely contributes towards the returns on the invested capital and the earnings that we're able to generate. To a large extent, smaller players either completely shut out of these markets or have capacity constraints that they need to come to bigger players like ourselves to say, "Help us function here." And part of that, "Help us function," is in the risk management, is in the liquidity, is in being able to manage their own risk by leaning on ourselves as a reliable counterparty, with us not taking any undue credit risk ourselves in that process. So that hasn't moderated. It has to at some point. I don't think it's healthy, frankly, from a consumer and an overall functioning market in terms of efficiency and ultimate cost to consumers and cost to businesses. If we then just move up, in our classic receivables, payables. This is just normal sell a cargo. Get paid 30 days later. Or buy, source aluminum, zinc, nickel, whatever the case may be; and get those various terms. We did call out in H1 we had a $1.5 billion [ billed ]. One of the main reasons was the mix of business; and the loss of Russian supply to us, which was quite large across both metals and energy in the past. We were able to get higher than our average in terms of trade across the Russian business as well. The fact that, that has been removed, you saw that flow to working capital collapse at [ 1.5 ]. The turnout for the year was $1.9 billion, so that receivables, payable did increase by $0.4 billion. What we have called out specifically, again, timing difference around '22, '23 is a specific slow-moving exposure that we do have as well. That's something to a specific -- that's specific counterpart. That's been enhanced and reinforced with classic trade finance instruments that we have. It's a basis upon which we do that business. And we are in the process of [ enforcing ] our trade finance security, if you like, across that particular business; and we'd expect successful resolution of that exposure in 2023. And that's part of why it was a $0.4 billion increase, if you like, during that particular period. And then across our physical forward business, $0.7 billion was the net increase for the year. This was an area where we did have some relief and some release in H2 in our mark to market physically across primarily the LNG book. This is our only business that really is longer term beyond 12 months; low-risk business from both a market and a counterpart, but if you're hedging 2 to 3 years of business, you are locking in some of the sort of arbitrage and margins. And across, be it, U.S., Europe, that may come in. We have import capacity. We have long-term supply agreements U.S. and other origins. You will -- you know you're going to make a margin. You'll have to mark to market that physical and derivatives that we saw as we move through this. There is a timing -- a cash timing mismatch potentially because you're not getting margin on your physical business. You do have to pay on your hedging that did release. Across those 3 categories then, we did see net-net 0, which is good. And that money is on the balance sheet. It is cash. It is an asset. It will come back. It's working for us. It's generating good returns. And January has also started pretty well in the marketing business as well as we look in '23. On the left-hand side, you can see some of that awkward geographic working capital movements, as I said, particularly if you'd look -- legal provision raised the provision $1.5 billion. As you know, last year, we settled $0.3 billion in H1, another $0.6 billion in H2. That $900 million comes through as a working capital movement, as opposed to a significant expense or something. There's still $500 million to go. We have pro forma-d that as part of our shareholder distribution calculation we'll see on the next page. We do have deferred income categories, both where we've received some cash in respect of future physical deliveries. We've also got, at the bottom left, where we ourselves might have prepaid customers for future delivery. These are noncore byproducts, mostly gold and silver, from our industrial assets, where either shorter term we will -- where the markets and the appetite is such that it's attractive to do, we'll get some prepaids from physical consumers that like that product. [ Their ] cost of financing is attractive, and we'll take that money in. It also includes the old streams, the Antamina and Antapaccay streams, that we did in the 2016, '17 period as well. So that came down $1.1 billion. The overall balance sheet aggregate around all these deferred income streams is about $2.3 billion. It came down, $3.3 billion to $2.3 billion. And then we have our various other provisions, which is our own advances that we've made. It's settlements of bonus accruals. It's rehabilitation costs. It's movements in VAT. All of that was another $1.3 billion to -- through those various categories. We've increased our own prepays for product about $0.5 billion, yes, for the year as well. And that's for, every now and again, you'll see an announcement: Glencore, with banks, does a $500 million prepay to CSN for iron ore, sort of as an example. That was a $500 million facility that was recently done. We put -- 10% in that is our own share, so there's $50 million. These things is a key part of the working capital cycle as well that we do. Sometimes it goes up. Sometimes it goes down. If we then look at what does all that mean on Slide 17. So our shareholder -- our top-up framework is very formulaic, at least around the base cash distribution, which comes to $5.1 billion, $0.40 a share; $1 billion from marketing, the fixed amount, 25% of industrial free cash flows. Again, I think, Slide 25 mechanically works through that calculation. Then we work out what's the quantum of any top-up. We start at $0.1 billion. The base distribution, of course, needs to be provided for there. The remaining buyback of last year's announced $3 billion was $2 billion done towards the end of last year. We were still completing that January and February. There's another $1 billion there. That's almost done in the next week or so. The remaining legal provision of the $0.5 billion. And what we've needed to do, and we felt it was appropriate to do as well and just given the materiality, was the lag effect, particularly in Australia, around income taxes in respect of '22 that are due 1st of June 2023. That's the big part of our coal business. We've seen those big earnings as well across that business. We have $1.8 billion to settle. We've paid a lot of installments. The actual tax we're paying in Australia is multiples of that. Something like USD 3.5 billion to USD 4 billion is our taxes that were payable in Australia, and effective '22, there's still $1.8 billion to go. It is debt like, in any sense of the word. And it's cash that we need to reserve, if you like, to settle that particular tax. So that was $1.8 billion, less $400 million. Across the businesses, we have some taxes receivable with prepaid amounts and the like, so it nets out to $1.4 billion. Mechanically that leaves us $2 billion of top-up. And we've allocated that towards $500 million cash on top of the base distribution and an additional $1.5 billion buyback. In aggregate, that's the $7.1 billion Gary spoke about or $0.56 a share. We'll complete that buyback between now and obviously interim results, and we'll see the cash generating during that period. And we'll come back in 6 months time and we'll announce the top-up that we would be doing at that particular point, basis the cash flow that we'll generate over the next 6 months. And you'll see what our -- illustrative profits. No change on the CapEx, [ to where we were ] 5 or 6 weeks ago. We're still $5.6 billion average per annum '23 to '25, same projects, same everything on the CapEx we're still holding. And we went through these slides back in December, so I will skip over. If we then look at the spot illustrative numbers for '23. Our various progression costs, I think, on the individual slides, we've been through all of that. What does that all mean? We're at -- as of now are at $22.6 billion of EBITDA, running macros as of last 24 hours; around $10.6 billion of free cash flow up across metals. So across copper, zinc, nickel, slightly up. Coal is the one that's -- at least against our December '22 update, when we were at $28.7 billion, as opposed to $22.6 billion, coal has gone $16.7 billion and down to $9.3 billion. We're all obviously looking to find the bottom there, but the business is obviously low cost. It's going to generate cash. It has over year in, year out. It's a competitive portfolio. It's delivering into the right market segments, but of course, it's a highly volatile construct that we have at the moment. So $10.6 billion annualized free cash flow. If we stay like that, half of that should come back during the next 6 months. So with that, I'll hand back to Gary -- a lot of appendix slides for your own reading enjoyment. And I'll hand back to Gary to close it out. Thank you.

Thanks, Steve. I mean just one slide really to close it out, where we are. I think Steve has taken you through the details of the financials, but really where we are as a business: Big picture, we have a sector-leading climate ambition, an ambition to be net zero by 2050, with a sector-leading ambition on our -- or targets on our scope 1, 2 and 3 emissions. Our business is very unique within the industry. We're not just a miner. We're not just a trader. We're not just a recycler. We're all of them. We market. We produce. We recycle. We're across the chain. We're in the energy side. We're in the critical minerals side. We're in the carbon side. We're in the solutions business for our customers. And that's something that is very unique across our business, and we do that in the context of helping the world transition in a decarbonized world responsibly and ethically across our business. We have a portfolio of critical minerals. As our coal business runs down, we'll continue to ramp up in various other critical minerals as the market needs it, significant growth prospects in our copper business in particular but also potential growth prospects in nickel as well as cobalt. And we'll bring on those material into the market as the world needs it to decarbonize and supply the minerals of tomorrow while we supply the energy needed of today. Our business model remains flexible. We can adjust as market conditions change, as world's requirement change. And we proved that during the course of 2022 as one of the most volatile and changing environments we've seen for a long time. And our business was incredibly flexible and incredibly adaptive to what was happening in the world. We will be responsible. We will be ethical where we operate, and it's -- underpins the culture of Glencore. Our portfolio includes a large array of large-scale, low-cost, long-life operations; and we continue to invest in those as well as additional operations across our business. And as Steve pointed out, highly cash-generative illustrative spot numbers, EBITDA of $22.6 billion and free cash flow of $10.6 billion. So in a nutshell, a real terrific year for 2022 but the business set up for continual excellent returns across the business going forward. With that, we'll turn it over to you for questions.

Thanks, Gary. Myles?

Myles Allsop, UBS. Maybe a couple of questions. First of all, on coal, could you give us a sense first around the operational issues you've been having in Australia, South Africa and Colombia? Obviously you expect them to recur, just with the guidance you provided back in December. And then maybe a little bit more around the market conditions, where do you think we'll find a floor to the Newcastle price?

Myles, operational challenges. I mean you're always going to have operational challenges in mines and particularly the size of our operations and the geographic spread that we have. Australia, last year, was really [ about the ] weather, significant rain events which we saw across both Queensland and then New South Wales. In fact, new -- Queensland have seen some rain events this year but very limited impact on our business. So I mean the biggest challenge we've had in operation in Australia was around weather. South Africa: As you know, South Africa is struggling on its -- with energy and with the transport network. The particular concern for us has been Transnet and the ability to roll out our material down to Richards Bay. We have supplemented that with some trucking, but it doesn't make up for the shortfall. And obviously it's quite costly, so South Africa's biggest challenge generally has been the transport -- or the transport solution. In Colombia, really it's been a little bit of weather but mainly sort of some community disruptions, but we continue to engage with our communities and our -- and the host municipalities and governments to ensure that we have a smooth operation in Colombia. On the market, look. I mean everybody says, well, the coal price has plummeted. I mean let's take a step back. It's $200 a tonne. Those who have been in the industry for a long time will remember coal at $18 a tonne or $20 a tonne. So okay, at that time, costs weren't $65 or $70, I agree, but $200 a tonne is a terrific number. Market has come off significantly from the highs of $440, $450 in -- I'm talking Newcastle numbers now. Obviously Richards Bay is $140, and API2 $130, but -- so where the market looks. Well, we've seen a year where people were desperate for energy. And we help supply them and give them the comfort that they'd have their energy sources, so stocks didn't build up in Europe. And we all know that Europe had a -- or has had a reasonably mild winter. And gas supply into Europe was higher than people expected, and storage, in fact, higher than people expected, because of the mild winter. We've seen increased utilization of nuclear power in France. We've seen increased utilization of renewables across the whole of Europe. So Europe does have some excess stockpiles and that's resulted in a little bit of downward pressure on European pricing. On the Pacific side, as I said, Australia now, no one is expecting this big reduction in production, let's say, because of the weather, so we've seen a more rebalancing of the market. And as particularly, the real competing fuel for coal is LNG, as LNG prices have come down. And if you compare where LNG prices sit versus coal on a like-for-like value-in-use basis, it's about right. Now does that say it stays at $200 or at $195 or whatever it is today? That's not what we're here to say, but we're saying it is competitive with LNG at current prices and it is a real competitive. If something happens in the LNG market -- there's another fire at Freeport. Or China does come back stronger than expected and starts sucking in more LNG. They -- remember, last year, China was closed for a large portion of the year and LNG prices spiked. There's real potential. What happens to domestic production in China? What happens to domestic prices in Indonesia? So there's many moving parts on that, but we do look at this and say at $200 a tonne it's still a very strong price. And there's a lot of things that can happen in the world. This time last year, there was no war in the Ukraine. Nord Stream was still operating. So things can change in the world. And that's the joy of a bulk commodity business is that you can adjust and adapt, and as I say, we're a very flexible organization. As -- if things -- if prices do come off, we can adjust our business to reflect that, basis what's happening in the market. If prices go up, we adjust differently, so -- but generally right now at $200 a tonne, not a bad number.

Maybe one -- the second question is just on working capital, Steve. How much should we expect to come back over the next 6 months?

I don't mind if nothing comes back in the next 6 months because that will be indicative of probably better marketing returns. So if you think about the sort of return on equity, return on capital, cash flow generation, if we're getting -- I mean if that sticks there; and every year, relative to what an assumption might be, if things work sort of more normal and you can have a recurring hundreds of millions that's coming through into marketing each year, then that would be a pretty attractive proposition for our own balance sheet and shareholders generally. So it's going to unwind, basis sort of the energy volatility; margins; margining, call them, returning as some of those particularly sort of initial margins initially sort of maybe -- sort of if ever sort of normal counterparts returning within marketplace as well. So the fact we are where we are, that's helping the business. I think you will have obviously the LNG side, that $0.7 billion that's still left. If prices are flat, that will just settle in, in the normal course. That will monetize over sort of 12, 18 months. The marginings there are the harder one to call timing-wise because -- I just did it when the exchanges sort of take their -- sort of adjust their modeling because they have these crazy sort of VaR 7x standard deviations. And they look at all the different counterparts and they -- and sort of, overnight, you'll have to place a lot more. That does shut many, as I said, smaller players out of the market. That plays to our strength. Barriers to entries are huge, so I don't mind if it's there. And we can keep coming out here and posting good numbers on marketing and having it back in a tennis match about whether our marketing ranges sort of should be higher. These are sort of more constructive and fruitful discussions than if that was to come back. Some of the non-RMI, of course, some of that will come back. I'd rather position it for let's sort of deliver and wait and see and grab and be thankful for what might come back, but at what cost? So I will just run it flat, and let's see where we go.

Liam?

Liam Fitzpatrick from Deutsche Bank. 2 questions. Firstly, on Viterra, the presentation has got a slide where it says the integration of Gavilon is almost complete, so can you give us an idea of some of the options you're looking at? And could we start to see some movement on those in the next year or 2? And then maybe on the tennis match, Steve, on marketing: It does seem that -- with higher interest rates, volatility, et cetera, that capital requirements are up and earnings power is up. I mean, will there come a point, maybe this year, when you are going to revisit that mid-term guidance? Because it seems way out of whack with what the business is currently doing.

On Viterra, Liam, look. Viterra is a terrific business, and Gavilon is transformational for it. It's really made it truly global in terms of all the geographies it services and operates in. Steve mentioned some of the numbers we show in the pack, over $2.5 billion of EBITDA, $1 billion of net income. And all that, we -- and dividend paid of $400 million. And that's in a period where they spent over $1 billion buying Gavilon and a significant amount investing in the working capital of Gavilon as well. So the fact that they were even able to pay a dividend just is testament to the quality of that business. It's a -- and it's sustainable, strong business for the future and particularly if we go with food supply being critical on everybody's agenda, so what do we do? What are we looking at then? I mean we're in no rush to do something with that business. It's a great business. We can sit here and harvest the cash flows. I don't think, as Glencore, we necessarily get the true benefit of the value of that in our share price. If we do a sum of the parts and you guys will run your models -- I mean our internal models is we don't get the benefit of that. Perhaps it hasn't been that cash generative over the past few years, but that's because it's been investing in its own balance sheet. And it did only pay out, let's call it, a $400 million dividend on a $2.5 billion EBITDA, so the cash flow which does go directly to shareholders is not really being valued, we believe, by the market adequately for the true value of that business, but we certainly wouldn't do anything just for the sake of doing something. But if we have a proposition for that business which allows us to -- allowed the market to get that see-through value what we believe the market is -- what we believe the business is worth, then we would look at that. And there's many things on the table. I mean there's always the backup option of an IPO. I mean we're not progressing on anything around that, but we can do that if we don't believe we're getting the right value. And there are competitors in the market where one could value it against and see where they trade. We can do something with one of our competitors. That's an option as well. Of course, there's antitrust issues ones has to consider, but we could do that. People have suggested we do what Vale are doing on their base metals and sell a small portion of it to set a marker out there for value. That is also possible, where we could sell 10% or 20% of it. All of these will be in conjunction with our Canadian partners, who are key joint venture partners of ours. And we wouldn't do anything without a joint decision with them. And a last option is we can just keep the business, keep harvesting the cash flows, keep paying dividends, keep paying it back to our shareholders until eventually the market does recognize the consistency of those cash flows, the quality of the business and recognize it within our share price. So there's an array of options for us.

Jason -- sorry.

Just on the marketing question. I mean what I've said -- and I'll continue to say it, Liam. And maybe I sound like a broken record. And it's -- and at some point, it's sort of things have moved on around the business given the data points we keep posting around this business. It's that it would still be good to see this business tested in a normal environment again, of which we haven't had one for as long as -- I don't know what a normal environment is, but we've been through such from sort of COVID; into lockdowns; into sort of China on again, off again; through the energy crisis that we saw last year. So these are all generally constructive environments from a commodity merchant and volatility and premiums and the likes as well. So if you go back, and I had that same sort of chart, yes, you've seen these lumpy last 2 or 3 years. There is a longer cycle sort of prior to that where we were in that [ 2.2 sort of to 3.2 ]. I think high working capital, higher interest rates. These are all things which we'd always hinted would see us at the top -- I mean the question historically is when are you going to be in the top half of the range. That was the #1 question, not is your range wrong. Now I'm sort of saying I think we are, all things being equal, where you've got working capital and you've got interest rates where they are. And in fact, for the spot illustrative, I didn't use the midpoint. We used actually $3 billion, not $2.7 billion, because those conditions say that even in a normal environment we'll be top half of range today, whatever normal is. So I am going to keep sort of just being a [ broken telephone ] on this stuff. And hopefully, the marketing business, given strength and barriers to entry -- these are things that have structurally, I think, changed in terms of the market. Maybe we're losing credibility in that range, but that's okay. I'd rather lose credibility there than raise it and then find that we'd sort of pushed it out too early.

Just -- it's Jason Fairclough, Bank of America. A couple maybe related questions. First one is on growth. So if I look at your volumes generally, in the last couple of years, they've been going down. What we're seeing elsewhere in the industry is people are sort of switching back into growth mode. You guys have alluded to some of the organic growth opportunities. Just wondering how you think about inorganic growth potential. And then second question, if I could, would be maybe related. Any comments on the big deliveries of aluminum into warehouses in Asia?

On the M&A, Jason, I mean, this company has always been -- a lot of this company has been built on the back of M&A. And it's part of our DNA and it's something that we're always open to do and on the lookout for. However, we don't do M&A for the sake of M&A. We've got a very strict capital allocation framework. And we know the types of returns we want, the types of geographies we want, the types of commodities we want. And it's unlikely that you'd see us to be sort of the highest bidder in some sort of public process, whatever it may be. We -- sort of our M&A opportunities come through -- largely through our marketing business, through the relationships that we have, the value we add to our customers who often then sort of we take equity interest in, where we perhaps have existing infrastructure nearby that we can then joint venture or do something with a nearby operation on an equity side which makes sense. So inorganic growth has always been on the agenda for this company, but we're not going to do it at all costs and sort of pay over the top for transactions which don't make sense. They have to meet our capital allocation framework.

[indiscernible]?

[indiscernible]. I mean that's just normal deliveries of Russian metal into an aluminum warehouse. There's nothing really more to say. I mean Russian metal is not sanctioned. We have an existing contract which we -- that's a contract that existed before the war and we said we would keep doing -- we have to legally. And Russian metal is being used around the world. And it's nothing, there is nothing abnormal about delivering Russian metal into aluminum warehouse.

Can you just remind us, when does that contract end?

It's a -- it's not only a term. It's a volume contract, so we do expect sometime probably towards the second half of next year.

Alain?

This is Alain Gabriel at Morgan Stanley just asking the inverse of Jason's question on inorganic growth. You do have quite a bit of assets that are locked in to your diverse portfolio that you might -- or you have talked about exploiting, such as either selling a stake or outright sale. Can you give us an update of where we stand on these transactions? If you can think about bringing any minority shareholders into any of these assets to just unlock value in a world where there's a genuine scarcity of these assets.

Are you talking about the growth assets that we have?

Not growth assets. Assets like El Pachon or Alumbrera or...

Yes. I mean those are -- El Pachon is a terrific, I mean, deposit. I mean, the more we look at it, the more we like it. It's bigger. It's better than we thought it would be. It's a great asset. And that will be developed at some stage, I mean, but we're not going to rush into developing it, for a number of reasons. One, at $9,000 copper, we're not developing it. We'll develop it when the world really needs their copper, and we've been quite clear about that. Number two, it's a greenfield operation, so that will be last cab off the rank. And we're not going to develop that where we've got significant brownfield operations and expansions that we can develop first, lower capital, lower risk, no need to rush that in. Ultimately when we do bring El Pachon -- and El Pachon will have to come into the world. The copper -- the world needs that copper and El Pachon will have to come on. How we do that is still to be determined. Could we do what some of the others have done, like Anglo did at Quellaveco, and bring in a partner to derisk and bring in some capital? Sure. That's on the table and we would consider those options.

Sylvain?

Sylvain Brunet with BNP Paribas Exane. Just staying maybe with El Pachon, I think, since you mentioned the feasibility at the CMD, there's been a bunch of events in Latin America, in Indonesia, in Russia even suggesting the vulnerability of supply for copper. Is there a case where you could consider bringing forward or accelerating the preparatory work you're doing? And do you have the resources to do that internally to bring El Pachon sooner?

We are doing work. It's not that we're sitting on our hands. There's a lot of work being done around all our projects, in fact, not just El Pachon but all our other projects. We're doing drilling. We're doing permitting. We're doing consultations. We're doing land acquisitions. We're doing environmental studies. Those continue all the time, so our ability to bring on the assets is not always necessarily dictated by those sorts of things. It's dictated also by the market. Now do understand that, an asset like El Pachon, you don't just decide to bring it on and you have copper the next day. It does take some time, but we want to be comfortable and confident that the market conditions there are right for us to bring those production on. You look at the copper market today. You've got a couple of new assets coming into the market. You've got [ Kamoa ] ramping up. You've got QB2 ramping up. You've got Quellaveco ramping up, so there is copper coming into the market over the next 2, 3 years, additional copper. So for us to say we categorically will go ahead with that project now to bring in the copper -- yes, [ it only comes in ], in the next 2, 3 years. That's a call that we're not ready to make yet because we're not comfortable enough on the tightness of the copper market. We do believe in the long-term future of the copper market, when you look at any of these estimates and where copper demand will go. And the key will be timing that and getting it exactly right, but in the -- while we're timing it, we are doing a lot of work on those projects, so when we are ready to pull the trigger, we will. Now before we do that, as I said to Jason, we're going to bring on some of the quicker, short-dated stuff that can come on earlier, some of the brownfield, as we see strength in the market and as our extra tonnes into the market don't result in prices coming down again. We will feed into the strength rather than oversupply markets.

Gary, maybe another one for you, on the recycling. Could you give us a sense of how much CapEx this represents in the company today? And how much is happening on the ground already in your development?

It's immaterial CapEx. Sort of we spend a bit, yes. [ You spend ] -- and soon we'll make an announcement, $40 million here, $50 million there. I mean this year was a -- 2022, we put the $200 million into Li-Cycle. I mean it is a convertible, so it's CapEx, in a sense, but there is a repayment of that through -- we -- through the repayment of the convertible. And we take equity and do something with that. So it's not big, but it's key in terms of building the network, building the distribution channels, building the R&D. And so it's not going to be big. And it's virtually -- and in fact, it is self-funding because we're spending less capital generally, on a general basis, than EBITDA that, that business produces. So it's sort of virtually a standalone that whatever EBITDA produced -- not even whatever, less EBIT -- it spends on capital less than the EBITDA it produces, so -- and then continues to grow the EBITDA line, so it's a terrific business with huge growth potential and limited risk given our existing infrastructure of smelters and processing facilities around the world, so the return on capital becomes significant.

Great. Maybe just one last one for me, which was on coal CapEx which was increasing quite materially. If you -- year-on-year. If you could unpack that, which portion was the Cerrejón consolidation? And what was inflation? And what was extra investment there?

Yes. I think, I mean, we had on Slide 13, I think it was -- so we increased it by about sort of [ 300 ] or so. $113 million was just mechanically an extra 2/3 of Cerrejón that we now owned during the course of the year. There was -- more than any of our other business, you have -- CapEx is often capitalized OpEx, so all the deferred strip that you do as well. This is workforces. This is diesel. This is moving sections and opening up voids and expanding sort of new areas. Or accounting -- technically, in the sort of old days, you would have just thrown all that stuff into OpEx, whereas now mechanically [ you instead would have said ], "Is there a section of work," which might be hundreds of workers and 150 sort of items of kit, "that are opening up a new area within a Cerrejón?" or opening up a new area in some of the bigger sort of Australian operations, which would be then capitalized and then depreciated over the period. So deferred stripping is actually the biggest component of our coal CapEx given the size and earthmoving operation that we do have. That was subject to the same inflationary impacts of [ exposures ] because you just -- it's all that is going into that pot. And then you're saying, "12 months, I'm going to capitalize this 200 million, 300 million, 400 million, 500 million." So deferred strip -- and it's both in terms of the actual activity that was done and the inflationary impacts of that work would have accounted for, together with some fleet replacements and the likes as well that hits in that 1 particular year. Now there's always questions. If that coal decline, are you going to see that CapEx clearly progress towards 0 ultimately as we bring down; and meet our targets in '26, '35 and the likes? It's not going to be a complete straight line. You will see a -- certainly a sort of a line with a diminishing percent factor over that particular time. Within certain years, it's going to be subject to timing of fleet replacements. Generally, sort of 7 years, you can have [ on some choices, sometimes return ], whether you're buying or leasing. Generally we buy, but sometimes there's tax or other incentives to even lease it. That also affects that number. You will have inflationary. We have seen some moderations and the timing of some asset disclosures. So '22, a little bit anomalous. It will trend towards 0 over time.

Ian?

Ian Rossouw from Barclays. Just following up on 2 questions. Firstly, on Steve, on the working capital, just pushing you on that. I mean, with the collapse in some of the commodity prices, you've seen -- I mean understandably the volatility would not see some of those working capital inflows come through, but just traditional receivables, payables, would you expect some benefit in working capital to come through from that? And if you can put a number on that.

Well, you certainly would through the -- I mean again through those categories. And this is where it's I don't want to go out -- I mean I was hopeful and expecting in terms of some of the initiatives that were happening vis-à-vis exchanges and some of the discussions we were happening that -- back in August, when we had this $2 billion even in initial margining, I said I could see a pathway towards a 40% reduction in that, which would have been $800 million of a potential release. That didn't ultimately transpire, so I'm not going to now sort of give a timetable. At some point, inevitably there will be some contraction in the margining side of the business, which is the biggest component of all the stuff. I don't know exactly where that point it's going to do. As long as it is out there -- that for me is not something that I feel is not working for the business, as I said, in terms of the competitive barriers to entry and the likes. I think it's actually helpful in terms of the relative competitiveness and the strength of some of the bigger players that they have. We would look to, obviously, settle and close out on that slower-moving exposure. I did mention that as well. That's in the receivables, payables. That should bring back. You saw a $1.5 billion in first half. It's gone to $1.9 billion. That certainly should come back, a portion of that, as we don't see the Russian supply coming back anytime soon. And those sort of structures in terms of trade that we have, I think there's a stickier element there. And all of that physical forward, that $0.7 billion, should all come back. That could even turn negative. I mean this can create some float sometimes. It just -- this is not always one way, either exposure or sensitivity or correlation. You could have some of these -- I mean, if we were locking in future margins around locking in an import arbitrage between U.S., Europe, at least on LNG -- if you had a situation where -- [ because it's un-margined on physical and paper ]. I mean, if prices go down from that, we actually generate working capital. It's a bit sort of fake working capital you've generated because it's got to recycle back in, but you will have a mark-to-market liability on the physical side. And you will have generated cash on our marginings, so it can actually go the other way around, depending on prices in the business.

And then just a follow-up on Viterra. Could you give a sense what you see the potential synergies would be for this Gavilon integration and then what the Gavilon contribution would have been pro forma if it was contributing EBITDA for the whole year? And just on your comments around value unlock: What would be a potential time line you have in your mind? It seems like not near term, but what do you have in mind for that?

Ian, there's no particular time line. I mean David is running a great business, and he's done a terrific deal on Gavilon. So there's no time line. I mean it is, sort of for us as management, we're frustrated with the fact that we don't believe we're getting the full credit for such a good business. And sort of -- so there's no particular time line. If the right opportunity comes up tomorrow, we'll pursue it. If it doesn't, then we'll sit on it and harvest the cash and let David continue to grow that business as he's been growing it. Why is Gavilon such a good business? I mean, if you looked at Viterra pre Gavilon, it was dominant in all the big geographies around the world in terms of origination and distribution and storage of agri products, except the north -- or not North America, the United States market; very big in Canada; very big in south -- or pretty big in South America, Australia and Eastern Europe and even Russia and Ukraine, but there was a clear gap in the portfolio, which was the United States market. And the Gavilon assets are premier assets. These were chased. They were wanted by other of our competitors. And it effectively is the last piece in the puzzle and completes that to make it a truly world-class operation. Pro forma-wise, I mean, I don't have the numbers off the top of my head. And I'm not sure, Steve, if we give those or not, but I mean it is a significant contributor to the business.

And then just one on the coal marketing side. There were some stories in the news about the Japanese looking at starting to source lower-quality coal and coal from South Africa and other sources. I mean, do you have any thoughts on that?

Yes. Well, I mean, when Newcastle was up in the 400s and South African coal was in the early 200s, I mean, yes, it's clear that there's a disconnect in terms of pricing. So you've seen now South Africa is $140. Newcastle is $200, so you've got a $60 differential. There's less incentive to do that, but one of the reasons you saw Newcastle come down so quickly from $400 to $200 was those who could. And not everyone can because, many of the Japanese utilities, their boilers are built specifically for Newcastle coal. And they have to take it. Also in some countries you've got trace element restrictions, in particular places like China and Korea, where you can't always take South African coal. It depends which operation it is -- or which utility it is, so it's not as simple that a utility can sit there and say, okay, the arbitrage is 200 -- or the differential is $200 and the freight differential is for $20, so it's an easy $180. They don't do it. They can't do that because of, of course, sort of taking those restrictions, but those who can, yes, they did. And that's one of the reasons why you've seen this closing.

Danielle?

Danielle Chigumira from Credit Suisse. I have a question around critical minerals. So in terms of the strict definition according to EU and the U.S., it's a list of pretty esoteric minerals that Glencore doesn't have huge exposure to, so when you talk about increasing your exposure to critical minerals, are you expecting that list to be expanded? Or are you going to go and build a rare earths mine?

No, we're not going to build a rare earths mine. And we're not going to buy a rare earths mine. Rare earth is not a product that we would invest in. It may be critical -- it is critical, but we focus more on the bulk side. That's where -- we don't see where we can add any value on rare earths. I understand, firstly, it's small volumes. There is not much in terms of blending. It's easy to move around the world because of small volumes. Our business involves areas where we can blend dirty concentrates with clean concentrates, high-CV coal with low-CV coal; and buy in concentrates and use it in our smelters. So those are the types of things where we can add value in terms of critical minerals, and we don't see an area where we can add value on rare earths.

Sure. And a question around the outlook for cobalt hydroxide. So what are your views in terms of the drivers of the significant weakness that we've seen? What are you expecting in terms of an outlook? And you mentioned the decline in payabilities. What are you baking into the cost guidance in terms of payabilities?

Steve can talk on the guidance. I'll just talk generally on the market. I mean the market is weak now. We've seen it in terms of hydroxide pricing and then payables. And that's -- it's not unexpected. You've had -- China closed for effectively a year, if not longer. Now if you look at the cobalt market, it's not all an electric vehicle story. You've got about 1/3 electric vehicles, 1/3 into consumer products and 1/3 into sort of specialty areas. Now electric vehicle has been pretty good. What was last year? About 10 million electric vehicles; going up to 13 million, 13.5 million electric vehicles this year. Not all of them use cobalt. It depends on the chemistry they use, but electric vehicles, we've got no issue with it. Where we saw real weakness on the demand side is on consumer goods, cell phones, iPads, electric toothbrushes, whatever you want to call it; those little bits of cobalt that go into there. The Chinese stopped buying. Many of the world stopped buying. That was particularly weak, so we've seen weak demand. Now we believe now, with China reopening, we will see that coming back. Pent-up savings in China is very high, so we do think demand will come back. With that said, there's an excess or an overhang of inventory within the market. And we'll see Tenke, for example, has big stockpiles. And once they are able to export if they solve their issues with the DRC government, there's that cobalt to come out. We've just recently ramped up some production on Mutanda. Kisanfu is producing. The Indonesian is -- Indonesians are producing as a byproduct of their nickel production, so there's supply. Now where will the -- so short term, cobalt doesn't look that great, to be perfectly honest. It doesn't look that great. And we can always look at various supply responses as, we've done previously. And we very -- and we're not shy to do that, just to pull back production because we don't believe the market needs that material. And it's something that we are considering and can consider, but longer term, the investment thesis for cobalt still looks very, very good. Electric vehicles, if it's only -- it's 13.5 million vehicles this year. You've all got your own models what electric vehicle penetration will be, but if you -- by 2030, 2035, you're up at 50 million, 60 million, 70 million electric vehicles; and a lot of those will have cobalt. The -- just the general economic growth of the world. And the need for cobalt in all other parts of the industry, whether it be consumer goods or specialty, looks very strong. And the supply side is -- as funny as it says now because we're oversupplied, the supply side is totally constrained because most of your cobalt sits in the DRC. And most of it is -- and both DRC and around the world, it's a byproduct, so if you -- it's not that you can just go open up a cobalt mine. And the DRC is challenging, and it's not that you can go and have competition out of -- major competition out of Canada or Australia. Yes, they do produce a little bit as byproducts but not enough to supply that growing demand, so longer term, cobalt, we still believe, is a very strong commodity. We just need to work through this dynamic within the market now of coming off weak demand, and strong supply.

And just there was a point on what we used within our costs. We used to -- for -- so byproducts, we'd cut it all off, basis 1st of February macros, which works through the entire sort of cost. So we were around $12 realized on sort of hydroxide, which is sort of circa [ 20 ] on metal and then in the 50s or so towards [indiscernible].

Okay, time for a couple more. Ephrem?

Just to Danielle's point earlier. There's an increasing trend towards localization of supply chains, U.S. IRA requiring 80% metal locally by 2030, et cetera. Does that play into the strengths of Glencore, or is it a weakness for you? You're seen as the ultimate player on globalization, right? You get the metal from halfway across the world and supply at the cheapest rate. Is localization a long-term threat to your business, or does it kind of create opportunities? And linked to that, to kind of benefit from the localization, are you looking at sort of moonshot projects like Britishvolt? Is that the way to go? Or is it more buying a stake in Vale's $2.5 billion sale to kind of increase your local exposure?

So IRA is net positive for us. We like it. I mean, what does it do? It stimulates demand for electric vehicles. It stimulates demand for decarbonization projects, of which we supply the minerals and metals. Now the IRA can say and do whatever it wants. You aren't going to all of a sudden find cobalt mines in the United States. It's in the DRC. There's nothing they can do about that. And they -- and electric vehicles and Elon Musk and GM and Ford, they all need the cobalt. So you can -- so what the IRA does is it encourages people or encourages companies to produce electric vehicles and encourages people to buy electric vehicles. There's incentives and the likes, but you can't buy a long-range electric vehicle that doesn't have cobalt in it. And there is very little U.S. cobalt, so it has to come now. Maybe what we do is we take our cobalt from the U.S. And we maybe process it in the United States now or in Canada or north -- or in Mexico or somewhere like that where you can get the benefit or some of these IRA benefits. Because it may not be sourced there, but maybe -- it may be processed in a -- either in the United States or a country that the United States has a free trade agreement with. So there's certainly a lot of benefits for that. And remember, when you've got these onshoring or near-sourcing or whatever you want to call it, those creates disconnects in a market as well. So when markets don't operate totally efficiently because you've got these kind of barriers or incentives or changes, that's where we do really well because we can optimize our position around that given our global strength around the world. So we see that as net positive. Your second question was -- sorry.

I mean in terms of how do you get exposure to that local one. I mean like I was taking an example of Britishvolt...

[indiscernible] Britishvolt, we're not buying. Don't worry about Britishvolt. I mean Britishvolt -- our exposure to Britishvolt was immaterial, but because it was a U.K. flagship thing, it seemed to get a lot of press. And it's unfortunate that the business -- I think, if you look at what we did with Britishvolt, it's like we do everything in our -- not everything but some of the areas, in our recycling, in our business, so it was a bit like venture capital for us. Not that we're setting up any venture capital funds, so don't get ahead of yourselves, but a bit like we'll put a little bit of money there. We'll put a little bit of money here and there in every way. Now 7, 8, 9, out of 10, are working. We're doing very well on a lot of our others, whether it be FREYR, whether it be Managem, whether it be Li-Cycle. This one didn't work. It's unfortunate. We want to see gigafactories built. We want to see them grow because that will help decarbonization and it also helps our business. And we believe the U.K. is a good place. It's had a, long history of auto manufacture. There's a lot of knowledge base here. And they've got great infrastructure in terms of the land area and where the Internet connector comes in, so we do hope something does happen with that. And we would be -- encouraging for our business, encouraging because we'll be able to supply materials to the gigafactory there. And we think it's good for the U.K., but I mean Britishvolt is small.

The question was a bit more philosophical in terms of are you going for the VC approach of moonshot. Or is it more like steady-state, proven projects like, for example, Vale's stake...

We won't be buying a stake in Vale's project either. That's for sure. It's not available to us. Eduardo wants to sell it to sort of non-mining companies, and that's up to him. There's a little bit of -- I wouldn't say Britishvolt was moonshot. I mean it was a real prospect, a real project. A gigafactory is not moonshot. This is not new some sort of [ left field ] stuff. There's gigafactories all around the world. The fact that it failed in the U.K. in this particular project was for different reasons, but for us to advance some money to a gigafactory or a project for a gigafactory is not moonshot. It may not even be venture capital in the truest sense of the word because this is proved, tried, tested. The demand is there. We know it's needed and it's going to happen, so it's more investment in relationships, supply chains because it just promotes the development of these kind of projects which is good for our business. So it's less moonshot and more sort of consistent with how we want and how we see the market developing and helping the market develop.

Okay, last question. Tyler?

Tyler Broda from RBC. Gary, you've had your feet under the desk now for a year. You've got record results. You've got a balance sheet with net -- no net debt basically. How do you feel fundamentally about the structure of Glencore, the shape of the company, I guess? Where do you see sort of, over the next sort of 3 to 5 years, where you want to sort of evolve this company, if at all? And then the second question was for Peter. You've been -- had your feet under the desk for a slightly longer period of time. Just out of curiosity: The industry has been going through a really hard time in the last couple of years. From your point of view, what's different now from an operational perspective than where we were, say, 10, 15 years ago? And why? And are those challenges surmountable?

Closer to 2 years for me, but we're not counting...

There's COVID. Sorry.

Still record results.

Still record results 2 years in a row. Look. I mean the business is great. And the business that Ivan handed over was great, so we need to -- we're -- obviously need to be on the front foot evolving as the world changes, but we're not sitting here thinking that the company was weak or the company had gaps or the company had issues or something. It was a terrific company that I took over from Ivan at the time.

He left Cerrejón...

Yes, he left Cerrejón for us, so he's -- so in that sense, the company was in a great position. Now what have we done since then? We've continued to evolve. We continue to invest in our recycle business, which we believe is critical and will be really complementary to this business, but as I said, it's -- you're not going to go see billions of dollars of capital invested in that. These are incremental 10s, 15s, 20s, maybe $100 million in a year or whatever it may be. Which really grows that business is huge flow through our marketing, is -- and sets the business up for something very big in the future. Because your real exponential growth in recycling is only going to come 8, 9, 10, 15 years from now when all these 13 million electric vehicles today start going through the recycling when that is. I mean there's still recycling material today, whether it be e-waste or battery scrap and all those sorts of things. So that's an area that we're focusing on. And we're also obviously sort of continued focus. It was there with Ivan and continue with me as well. There's on safety and to ensure we continue to be safe operators. We'll continue to grow our business. We want to do M&A but in the right areas and very cautiously around our -- or strictly around our capital allocation framework. We'll continue to grow our marketing business and supply our customers with the products they need. We've grown that marketing business in the sense we've now encompassed things like a carbon business, which we've spoken about previously. And that carbon business is an ability, is a revenue generator for us, a P&L generator for us but a service provider to our customers where we can provide them carbon-free product or carbon-free freight or whatever it may be. So we've invested in that part of the business, so the energy business has grown. We've started trade, at the margin, some lithium. Now don't get ahead of yourselves. We're not going ahead and buying big lithium mines or starting getting into lithium in a big way. That's not happening, especially at $80,000 lithium. We're not doing that, but because of our recycling business, we naturally have a lithium position, so why would we not look and trade around that where our customers are talking to us about it, where we supply them cobalt? We supply them nickel. We supply them copper, and they say, "Can you supply lithium?" And we have a source of lithium and our skills around sourcing material and blending material and moving material. Why not apply that to lithium? And so it will be in a small way, a little bit of -- small amounts of working capital applied to that, but it's an ability to grow. So we'll continue to grow the business off the base that we had.

Thanks, Tyler. What's changed over the last few years or 5 or 6 years? I think the confidence -- our view in terms of commodity demand growth going forward has strengthened as it has across the industry. And that really opens up a lot of interesting opportunities for us in terms of how we look at our resource base and our future growth options. Still in line with what Gary was saying earlier on, we need the right signals to develop some of these, but we're certainly looking at our business in a different way in terms of how those growth options might be brought along. At the same time, we're having to contend with challenges in a number of the geographies that we operate, whether it is Peru or Kazakhstan or Chile, where we have seen some social issues coming to the floor over the last couple of years post COVID and to do with inflation and other social issues that have erupted in some of those countries. So that leads us to a place where we would like to grow our business. We're seeing some challenges. And really, at the end of the day, if we can perform and there is increased focus on this by all of our stakeholders, if we can perform in the areas of how we interact with our communities, ESG, safety, that does put us in a good position in terms of how we grow our business going forward. So all of these sort of key drivers are dynamic and it's a matter of keeping up with them.

Thanks, Peter. I'll just hand back to Gary to finish off.

No, I mean a great year for the company. We've still got a lot of work to do around sort of certain areas, particularly safety, but a good year for the company. Commodity market is a little bit weaker, going into this year, than we thought, but there are a lot of good signs in the economy that we see and potential growth opportunities for us and, hopefully, another good year up ahead. So thanks for all your support. And any sort of questions or feedback afterwards, we're always available to you guys. Thanks very much.