Fair value loss on investments in Russian entities as a result of Russia Ukraine war

Glencore plc – Half year report – 30 June 2022

Industry: mining


1 Movements in Fair value through other comprehensive income for the period comprise negative changes in fair value of $1,274 million relating to Russian investments (see below), net of positive changes in fair value of $135 million (2021: negative changes of $52 million) relating to other investments and net acquisitions of $159 million (2021: $25 million).

Dividend income from equity investments designated as at fair value through other comprehensive income amounted to $43 million for the period ended 30 June 2022 (2021: $6 million).

Investments in EN+ and Rosneft

In February 2022, the Russian government commenced a war against the people of Ukraine, resulting in a humanitarian crisis and significant disruption to financial and commodity markets. A number of countries including, the United States of America, European Union, Switzerland and United Kingdom imposed a series of sanctions against the Russian government, various companies, and certain individuals. In response to these sanctions, Russia implemented a number of counter-sanctions including restrictions on the divestment from Russian assets by foreign investors.

Glencore owns equity stakes in EN+ (10.6%) and Rosneft (0.57%), listed on the London Stock Exchange and Moscow Stock Exchange. On 3 March 2022, EN+ was suspended from trading on the London Stock Exchange and Rosneft stopped trading on the Moscow exchange. On 24 March, Rosneft resumed trading; however, Glencore is not able to sell its Rosneft shares on the Moscow Stock Exchange and is unable to ascribe probabilities to possible outcomes of any potential exit process.

IFRS defines fair value as the price that would be received to sell an asset or paid to transfer a liablity in an orderly transaction between market participants at the measurement date. Further, an entity should take into account the characteristics of the asset or liability if market participants would take those into account when pricing the asset or liability, where such characteristics would include restrictions on the sale or use of the asset. Under current market conditions, given the restrictions noted above, the quoted share prices for both investments are not deemed to be reliable evidence of fair value and thus it was determined that it is no longer appropriate to classify these investments as Level 1 financial instruments in accordance with IFRS, but rather as Level 3 financial instruments. In valuing these investments as a Level 3 investment. Glencore concluded that there is no realistic way to exit these stakes in the current environment and considered that the measure of fair value is subject to high measurement uncertainty. Both equity interests were written down to $Nil on the basis that their fair value is not materially different to $Nil given the valuation a market participant would ascribe to a hypothetical transfer reflecting their inability to access the market. The corresponding negative mark-to-market adjustments was recognised in other comprehensive income.