By Nick Toscano
Australia’s biggest coal exporter, Glencore, has dumped a plan to spin off its coal mines amid a significant shift in shareholder attitudes over whether global resources heavyweights should sell or retain their assets producing the most-polluting fossil fuel.
Swiss-based Glencore, which operates 15 coal mines in NSW and Queensland, has been in talks with its investors to canvass views on the future of the company’s polluting, yet highly profitable coal division.
Glencore says it has canvassed its shareholders for views on the future of its involvement in coal.
The company on Wednesday said it had consulted more than two-thirds of its shareholders, and found the overwhelming majority had a “clear preference for retention”. The main reasons, Glencore said, were that keeping coal would boost the company’s cash-generation capacity to fund its shift to metals important to the green energy transition, such as copper, as well as increase shareholder returns.
“The board believes retention offers the lowest-risk pathway to create value for Glencore shareholders today,” Glencore chair Kalidas Madhavpeddi said.
“The expected cash-generative capacity of the coal and carbon steel materials business significantly enhances the quality of our portfolio, by commodity and geography, and broadens our ability to fund our strong portfolio of copper growth options as well as accelerate shareholder returns.”
Other top miners, including Australia’s BHP and Rio Tinto, have been divesting or announcing closures of their coal assets, while a growing number of lenders, insurers and shareholders have pledged not to make new investments in the sector, citing questions about its future demand and concerns over global warming.
Glencore has instead sought to position itself as a responsible owner of coal mines, promising to manage the assets’ decline instead of “making them someone else’s problem” or selling them to new buyers who may choose to expand output and emissions.
Coal mining is one of the most lucrative divisions for Glencore’s diversified and far-flung global resource business, having recently driven record dividends. However, the company has faced intensifying scrutiny from shareholders who are increasingly concerned about their financial and ethical exposure to risks caused by contributing to climate change.
Glencore chief executive Gary Nagle last year unveiled a proposal to split off the coal division into a new company to be listed in New York. Following that announcement, the feedback Glencore received was that “shareholder preferences may have evolved”, the company said.
“Many shareholders were no longer supportive of a demerger, in many cases due to evolving views on ESG [environmental social and governance issues],” Glencore said. Shareholders also cited increased support for Glencore’s climate strategy of a responsible decline of its thermal coal business, the company said.
Glencore has pledged to run down its thermal coal mines by the mid-2040s and has a goal for net-zero emissions by 2050.
The decision on Wednesday to retain its coal business means Glencore will hold on to its network of coal mines in Australia producing thermal coal, which is burned to generate electricity, and metallurgical coal that supplies the global steel-making industry.
Sebastian Rötters, a campaigner at German environmental group Urgewald, said it was a good decision for Glencore not to proceed with the coal demerger.
“Glencore should keep its coal mines and wind them down in line with the International Energy Agency’s net-zero scenario, providing a just transition for coal workers and affected communities,” Rötters said.
“This includes, of course, no more coal mine expansions and no new mines.”
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