Glencore PLC (LON:GLEN) has received a subpoena from US authorities to hand over documents relating to an investigation into money laundering.
Shares in the mining giant plummeted 12% to 306p following the news.
The US Department of Justice has asked subsidiary Glencore Ltd for the documents and records for the probe into the company’s compliance with the US Foreign Corrupt Practices Act and US money laundering laws.
The Foreign Corrupt Practices Act makes it illegal for companies to bribe government officials to win or retain business.
"Glencore is reviewing the subpoena and will provide further information in due course as appropriate,” the miner said.
READ: Glencore up as DRC state miner drops legal proceedings to dissolve copper, cobalt joint venture with Katanga
Glencore said the documents relate to its business in Nigeria, the Democratic Republic of Congo (DRC) and Venezuela from 2007 to present.
Last year, the company paid US$308.1mln to the DRC and US$94.3mln to Nigeria for crude oil purchased from state-owned companies, according to its report on payments to governments.
Investors likely to proceed with caution, says analyst
“The subpoena drives more uncertainty into the Glencore investment case, which we find compelling from a valuation perspective, but increasingly challenged from a headline risk perspective,” RBC Capital Markets said.
“There is not enough detail in the release to understand exactly what the investigation holds, however with the subpoena covering multiple countries, this would indicate that there is a relatively thorough investigation at hand.”
RBC said the Foreign Corrupt Practices Act could result in sanctions, fines and penalties up to US$25mln or twice the gain or loss caused by the violation, along with imprisonment.
Following recent challenges in the DRC, RBC believes the investigation is likely to provide “another reason for investors to proceed with caution”.
RBC remains bullish on Glencore
But RBC left its rating on the stock at ‘outperform’, saying Glencore will use all legal means to defend itself and that there are no formal charges yet.
“Much like the Rio Tinto SFO investigation, this is likely to feel less acute in due course than today’s initial share price reaction (down 8% at the time of writing), but we concede this might take some time to occur with what has been a wave of challenges facing the company,” RBC said.
RBC said the stock is “very inexpensive” versus peers and continues to prefer “the relative commodity mix over what we see as a volatile coming six months for the sector”.
READ: Glencore to resume royalties to Gertler in spite of sanctions
Glencore also facing UK probe
Glencore is also reportedly facing a possible bribery investigation by the UK's Serious Fraud Investigation over its work with Dan Gertler, an Israeli billionaire and close friend of Congo President Joseph Kabila.
In December, the US imposed sanctions against Gertler on claims he corruptly used his friendship with Kabila to build his fortune.
Despite the sanctions, Glencore announced in June that it had settled its dispute with Gertler in the DRC by agreeing to pay mining royalties in a currency other than US dollars.
READ: Glencore to resume royalties to Gertler in spite of sanctions
Gertler’s Ventora Development Sasu wanted US$695mln in unpaid and future royalties from Glencore’s subsidiary Mutanda Mining and US$2.28bn from Glencore subsidiary Kamoto Copper Co (KCC).
Glencore said in April that Ventora accused KCC of breaching an agreement by refusing to make royalty payments because Gertler was under US sanctions.