Glencore (LON: GLEN) has abandoned its plans to separate its coal division after significant opposition from investors. The Swiss mining giant announced the decision following extensive shareholder consultations, revealing that nearly two-thirds of eligible voting shares favored retaining the coal and carbon steel materials business.
Investor Support for Coal Retention
The move to keep its coal unit comes after Glencore acquired assets from Teck Resources last year. Initially, the company planned to merge Teck’s steelmaking coal business with its own coal assets and subsequently demerge the combined entity. However, over 95% of shareholders expressed a preference for retaining the coal unit, citing its potential to enhance cash flow and support growth in other metals.
Analysts were not surprised by Glencore’s reversal, noting that investors have long valued the strong cash flow generated by coal. Bank of America analysts highlighted that investors appreciate the substantial profits from coal, especially when channeled towards capital returns and buybacks. This sentiment underscores the ongoing dilemma for fossil fuel companies: balancing pressure to reduce emissions with the desire to maintain profitability.
Despite the decision to retain its coal operations, Glencore remains committed to its Climate Action Transition Plan (CATP) for 2024-2026. The company aims to achieve a 15% reduction in carbon dioxide equivalent emissions from its industrial assets by 2026 and a 50% reduction by 2035. Glencore has previously stated its intention to wind down its thermal coal mines by the mid-2040s, closing at least 12 mines by 2035.
Glencore’s CEO for two decades, Ivan Glasenberg, built the company’s foundation on coal, frequently emphasizing the strong demand from Asia. The decision to retain the coal division aligns with the company’s historical focus and investor preferences.
Reactions and Future Plans
The decision to retain the coal operations has drawn mixed reactions. Sebastian Rötters, energy and coal campaigns coordinator at German NGO Urgewald, supported the move, urging Glencore to wind down its coal mines responsibly in line with the International Energy Agency’s (IEA) Net Zero scenario. Simon Nicholas from the Institute for Energy Economics and Financial Analysis agreed, noting that a coal spin-off could lead to increased production by less regulated pure-play coal miners.
However, other stakeholders, like Juan Pablo Gutiérrez, a Colombian social leader, criticized the decision. Gutiérrez emphasized that Glencore should close its mines and address its social and environmental responsibilities, particularly for indigenous communities affected by coal mining.
Despite these criticisms, Glencore has pledged to oversee the responsible decline of its thermal coal operations. CEO Gary Nagle also hinted at the possibility of acquiring more steelmaking coal assets if they meet specific criteria regarding price, quality, and location.
Glencore’s strategic decision highlights the complex challenges facing fossil fuel companies. Balancing investor demands, environmental commitments, and social responsibilities will continue to shape the company’s operations in the coming years.
Source: Mining.com
