Zurich Despite criticism from shareholders, Glencore boss Gary Nagle is sticking to the coal business for the time being. At the presentation of his strategy on Thursday, the CEO of the Swiss raw materials group, who took office in June, announced that he wanted to expand coal production by up to 20 percent by 2022. Glencore wants to increase coal production from the current 104 million tons to a maximum of 126 million tons. Coal production is expected to remain constant from 2023 – before Glencore gradually shuts down business.
However, he was open to reconsider the decision in the future: If the majority of the shareholders want to spin off the coal business, the company will listen to its shareholders, he assured. The increase in coal production is solely due to the acquisition of 100 percent of the shares in the Cerrejón open-cast coal mine in Colombia, Nagle continued. The purchase of the stake in the mine, in which Glencore already held a third, was the last deal from Nagle’s predecessor Ivan Glasenberg.
Nagle said this is a “responsible way” of running the coal business. If Glencore were to sell its mines to an investor who might want to expand coal production over the long term, Glencore’s emissions would decrease, but global emissions would increase. Nagle added on Thursday that Glencore regularly checks which mine holdings still fit into the portfolio. A good dozen projects are currently being reviewed. The group wants to reduce its production in a total of three coal mines by 2023. The company wants to operate in a climate-neutral manner by 2050.
For one group of investors, however, this change is not going fast enough. Earlier this week, activist investor Bluebell Capital Partners issued a letter asking Nagle to split off the coal business and reduce the complexity of the mining portfolio. First the “Financial Times” reported on the Bluebell initiative. With a clear focus on industrial metals, Glencore could raise its share price by 40 to 45 percent, the investor said.
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The decision to stick to the coal business was not well received on the stock market either: After the start of the Investors Day, the price of Glencore temporarily fell by five percent to around 350 pence.
Glencore is keeping the option of acquisitions open
In fact, broad-based commodity groups such as Glencore or Rio Tinto have recently lost their attractiveness with investors. Marco Schächtle, portfolio manager at the Swiss asset manager Konwave and responsible for a commodity fund with a focus on metals for the energy transition, says: “We primarily rely on specialized companies.” in many cases are still dependent on raw materials such as iron ore or coal, which have little to do with the energy transition ”.
At Glencore, too, the metals business for the energy transition should ensure growth and profitability: copper production is likely to decline slightly in the next five years – mainly because Glencore is parting with a copper mine in Colombia, which had caused problems for the group. In view of the sharp rise in prices, margins in the copper business are also likely to rise.
For the battery metal cobalt, Glencore is expanding its production by almost 40 percent to 48,000 tons. The group thus controls around a third of the total market. The company also plans to significantly expand the production of the metal nickel required in electric car batteries.
Glencore wants to push net debt below ten billion dollars. The company plans to distribute additional funds to shareholders in the form of share buybacks. At the same time, Glencore reserves the right to raise the debt to $ 16 billion in order to cope with a possible takeover.
More: Will the cobalt shortage be as bad as the chip crisis? There is a threat of new bottlenecks in battery metals