Glencore said it had received a subpoena from the U.S. Department of Justice dated July 2 requesting documents for its Congo business over compliance with the U.S. Foreign Corrupt Practices Act and rules against money laundering.
The Switzerland-based company, which said documents for Venezuela and Nigeria were also requested, provided few details, although it said it would cooperate with the authorities.
News of the subpoena led to the biggest one-day drop in the firm's share price for two years. Glencore is now down about 20 percent so far this year, trading around 314 pence on Thursday.
By comparison, shares in London-listed mining rivals Rio Tinto, Anglo American and BHP are up between 2 and 9 percent.
Glencore declined to comment when asked about the impact on the share price from the subpoena issue.
GRAPHIC - Glencore versus mining peers:
Operations in Venezuela and Nigeria are relatively small, but Congo accounts for 26 percent of Glencore's net present value, the second biggest contributor behind Australia, according to BMO Capital Markets.
NPV is the difference between the present or discounted value of cash inflows and outflows over future years and is used as a measure of the profitability of investment in a project.
GRAPHIC - Glencore NPV: https://reut.rs/2NAkgpW
Congo also contributes $2 billion to Glencore's annual core earnings or EBITDA (earnings before interest, tax, depreciation and amortisation), or about 14 percent.
Jefferies analyst Christopher LaFemina said the United States had a reputation for imposing hefty fines on companies found to have violated its laws in dealings abroad, although he said Glencore had not faced any charges.
"Until this matter is resolved, investors are likely to assume Glencore will have to pay a large fine, and Glencore's cost of capital will increase," he said.
Adding to concerns, Britain's Serious Fraud Office (SFO) is preparing to open a formal investigation into Glencore's activities in Congo, Bloomberg reported in May.
The SFO says it will not comment on the issue. Glencore declined to comment.
"Until some clarity is provided around the potential U.S./UK government investigations, it is difficult to see the company fully recovering from relative underperformance," said Investec analyst Hunter Hillcoat.
After releasing news of the U.S. subpoena, Glencore announced a buyback to bolster its share price, offering a brief bounce. But its shares are now back near their one-year low.
The buyback would still leave Glencore trailing Rio in terms of shareholder returns, according to the BMO estimate. But it would be ahead of Anglo American and BHP.
GRAPHIC - Shareholder returns from miners:
The U.S. investigation could be related to Glencore's settling of a mining row with Israeli billionaire Dan Gertler, who has been under U.S. sanctions since last year, some analysts say. The firm agreed to pay royalties in euros.
"Investors are more sensitive to these things these days," said one institutional investor in Glencore, asking not to be identified. "Some will say maybe this is the start of something and it might get worse before it gets better."
Gertler's Ventora Development Sasu had been seeking $695 million in unpaid and future royalties from Mutanda Mining and $2.28 billion from Kamoto Copper Co (KCC), both subsidiaries of Glencore. The Swiss firm disputes the amounts.
The probes are not expected to lead to production cutbacks, but analysts see risks from Glencore's exposure to Congo.
Glencore mines about a quarter of the world's cobalt, with most of its output coming from Congo. The metal is a key ingredient for batteries that power electric vehicles.
The company plans to ramp up total production of cobalt, mostly from the Katanga and Mutanda mines, to 39,000 tonnes in 2018 and 65,000 tonnes in 2019, the company said in December.
The miner also produced 1.3 million tonnes in copper in 2017, amounting to about 5 percent of world supplies. About 15 percent of Glencore's copper output comes from Congo.
GRAPHIC - Glencore versus world cobalt output:
(Reporting by Zandi Shabalala; Editing by Pratima Desai and Edmund Blair)
By Zandi Shabalala