Glencore has decided not to separate its coal division, a plan initially announced after acquiring assets from Teck Resources. The decision came after consulting shareholders, with over 95% favouring retaining the coal and carbon steel materials business to enhance cash generation.
The abandonment of the plan came as Glencore reported underlying profits of US$6.3B for the first half, matching analysts’ forecasts, and revenues of US$117B, as reported by the Financial Times.
Glencore stated that numerous shareholders had expressed scepticism on the scale of a potential MetalsCo (the remaining business) valuation uplift arising from a demerger and did not see separation as ESG positive given the wide support for its latest Climate Action Transition Plan (CATP), including its responsible thermal coal decline strategy, and the belief in the important role that steelmaking coal is expected to play in supporting the infrastructure needed for the energy transition.
“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.” Kalidas Madhavpeddi, chair of Glencore, said on Wednesday.
Analysts were not surprised by this move, as investors had been advocating for continued coal mining due to its strong cash flow. Glencore, a major producer and exporter of thermal coal, expects to produce between 98Mt and 106Mt this year.
Despite the pressure to reduce emissions, Glencore plans to run down its thermal coal mines by the mid-2040s, aiming for significant emission reductions by 2026 and 2035. The decision reflects the ongoing dilemma for fossil fuel companies balancing profit and environmental responsibilities.
Currently, coal still supplies just over a third of global electricity generation despite remaining one of the most carbon-intensive fossil fuel. While coal is being gradually replaced in most countries for power generation, it will continue to play a crucial role in iron and steel production until newer technologies are available.
