Glencore’s new chief executive has defended the company’s plan to run down its coal mines but said he would be prepared to spin off the business if it became a problem for its biggest shareholders.
Gary Nagle, who took the helm this summer, on Thursday said Glencore’s plan to close all of its coal mines within the next 30 years was the “responsible strategy for both our business and for the world”.
The comments come after Bluebell Capital Partners, a London-based activist fund, this week called on Glencore to divest the coal unit, saying its plans to keep producing the polluting fossil fuel for decades were “morally unacceptable and financially flawed”.
Speaking at the company’s annual strategy update, Nagle said the plan had received 94 per cent shareholder approval at its annual meeting. However, he added, “if they change their mind . . . and say to us they have a different view and they think splitting off the coal assets is the right way to go, then we need to consider it — it’s their capital we are employing in this business.”
Many big investors now think spinning off fossil fuel assets is the wrong thing to do because new owners might seek to increase production and therefore carbon emissions.
Speaking at an industry conference in London this week, Evy Hambro, head of natural resources at fund manager BlackRock, said putting fossil fuel assets into responsible run-off made “complete sense” for some big companies.
Glencore’s biggest shareholders are Qatar’s sovereign wealth fund, former chief executive Ivan Glasenberg and BlackRock. Together with former executives they own more than 30 per cent of the company.
“We do not have any of our major investors asking to spin off coal,” Nagle told journalists later on Thursday. “In fact, they have come to realise . . . that perhaps spin-offs are the wrong scenario.”
Nagle said there was only one big investor — Norway’s sovereign wealth fund — that could not buy its shares because of its “binary threshold on coal”. “We don’t believe we are undervalued to our peers,” he added.
Based on current prices, Glencore expects its coal business to generate more than $6bn of earnings next year when production is set to increase 14 per cent to 121m tonnes after a recent deal to buy out its partners in a Colombian coal mine.
“Seeing them increase volume production of coal . . . is not really a sign of someone committed to fighting climate change,” said Giuseppe Bivona, partner and co-founder of Bluebell, which has not disclosed its take in Glencore. “If anything it confirms the urgency to spin off coal.”
Shares in Glencore, which is also a leading producer of industrial metals such as copper and zinc, fell 4 per cent to 354p after the update as earnings guidance for 2022 fell short of consensus forecasts.
“Some investors may have expected a more aggressive message regarding returns,” said Christopher LaFemina, analyst at Jefferies. Glencore expects to generate adjusted earnings before, interest, tax, depreciation and amortisation of $21.7bn next year.
Addressing another of Bluebell’s complaints, Nagle said Glencore had disposed of seven non-core assets this year, started a sales process for another 10 and put 15 under review, including its near 50 per cent stake in Canadian agribusiness Viterra.
Nagle said Glencore was working “very closely” with its partners in Viterra to “unlock” value. “There are a number of options to do that.”