Glencore has abandoned plans to spin off its coal business following backing from most of its investors.
More than 95% of the miner’s shareholders voted in favour of retaining the business, due to the profitability of the fossil fuel, the company said in a statement.
Chairman Kalidas Madhavpeddi said: “Following extensive consultation with our shareholders, whose views were very clear, and our own analysis, the board believes retention offers the lowest risk pathway to create value for Glencore shareholders today.
“The expected cash generative capacity of the coal and carbon steel materials business significantly enhances the quality of our portfolio, by commodity and geography.”
This was reiterated by chief executive Gary Nagle during Glencore’s results call: “There certainly has been an area of a lot of debate and discussion over the many months that have preceded this and since we acquired EVR [Elk Valley Resources], but we’ve seen a significant change in shareholders’ appetite for holding on to these.
“Shareholders have recognised that holding these assets in Glencore in responsible operator hands is probably more ESG [environmental, social, and governance] positive and more favourable than spinning these out into its own stand-alone,” he added.
This follows the company completing a deal to buy the majority of Teck Resources’ steelmaking coal business, Elk Valley Resources, last month, with plans to add even more steelmaking coal capacity possibly on the horizon.
“We’re always open to M&A [mergers and acquisitions]. It’s part of our DNA,” Nagle said, although he declined to confirm whether this would involve Anglo American’s Australian steelmaking coal assets, which are on the market.
Glencore reported underlying profit of $6.3bn for the first half, down 33% year on year, with its industrial Ebitda down 39% at $4.5bn.
Nagle indicated the lower industrial earnings were mainly driven by a $2.7bn lower contribution from its coal operations, owing to the substantial declines in key thermal pricing coal pricing benchmarks.
“We’ve seen coal prices come down quite significantly from the extreme benchmark pricing that we saw in 2022 and 2023,” Nagle said.
“That seems to have normalised more into 2024. Although we saw very strong prices on Newcastle [futures] which have picked up since the half year.”
The average price of power-generating coal in Australia’s Newcastle, a key hub in the Asia-Pacific region, is currently at $150 per tonne.
In March, prices were at $131 per tonne — 30% lower compared with March 2023 ($187 per tonne) and almost 70% lower compared with March 2022 ($314 per tonne).
