Massive Win for Glencore Investors – Coal is Here to Stay
GLENCORE’S BIG COAL MOVE – No Spin-Off!
Glencore has decided to scrap its plans to separate its coal division. Initially announced after acquiring assets from Teck Resources last year, this move comes after nearly two-thirds of shareholders voiced their opposition.
Last November, Glencore had planned to merge Teck’s steelmaking coal business with its own coal assets and then spin off the combined unit. However, after consulting shareholders, over 95% preferred to keep the coal and carbon steel materials business together, believing it would boost the company’s cash flow.
This decision wasn’t unexpected for analysts, as investors had been pushing Glencore to keep mining coal. The Swiss company is one of the largest producers and exporters of thermal coal, aiming to produce between 98 million and 106 million tonnes this year.
Bank of America analysts highlighted that investors appreciate the strong cash flow from coal, especially when it’s used for capital returns and buybacks.
This move underscores the dilemma for fossil fuel companies. They face pressure to reduce emissions but giving up coal means losing significant profits. Glencore had previously planned to phase out its thermal coal mines by the mid-2040s, closing at least 12 by 2035.
Despite this, Glencore’s Climate Action Transition Plan aims to reduce carbon dioxide emissions from its industrial assets by 15% from 2019 levels by the end of 2026 and by 50% by 2035.
For many, Glencore’s deep ties to coal made a complete exit seem unlikely. Ivan Glasenberg, the company’s CEO for two decades, emphasized the ongoing demand for coal, particularly in Asia.
Glencore remains committed to responsibly managing its thermal coal operations over time. Yet, CEO Gary Nagle hinted that the company might consider buying more steelmaking coal assets if the price and quality are right.
Glencore, listed on the London Stock Exchange as LON: GLEN,
On the back of this news, Glencore’s stock has risen by 2.8%, closing at 404.20 GBP as of 7 August 2024, reflecting investor confidence in the company’s strategic decision.
