The planet is safe in my hands – I am a commodities trader based in Switzerland. That seems to be the message from Glencore’s president, Gary Nagle. His plan to expand the polluting coal division he promised to get rid of only adds to the cognitive dissonance.
For months now, Glencore has been trying to get Canada’s Teck Resources to agree to the acquisition. On Monday, the Swiss mining and trading giant proposed an alternative: a cash takeover of Teck’s coke unit, Elk Valley. This would expand Glencore’s coal interest and tax interest rate by nearly half. This will be the second purchase of coal assets by the group in two years.
This news may not suit all shareholders. Watch Investor Concern with Nagle about Glencore’s climate change targets. This year about 30 percent of the vote at the annual meeting was against this, up 6 percentage points from 2022. That’s a big negative minority report.
This may explain why Nagle promised to dispose of all of Glencore’s coal assets within two years, much earlier than expected. Coal still generates about half of Glencore’s profits. The addition of Charcoal Tech increases that dominance. The group’s paraphrase of Saint Augustine is: “Make me good, Lord, but not until the year 2025.”
Investors will enjoy the temporary surge in cash flow. But coal continues to be a drag on the valuation of various miners. Shareholders said no to Teck’s independent restructuring plan because the black matter would have funded its copper and zinc divisions.
UBS believes that spinning off Glencore Coal would leave the base metals business with a valuation of around 6-7 times EBITDA. This is much higher than the four times estimated for the entire group.
In February, Nippon Steel agreed to buy a tenth of Tech’s coal unit, valuing the company at $8.2 billion, Glencore put the same value on it, while Tech’s equity opinion valued EVR at up to $9 billion, about Three times as expected in 2024. Ibtda.
No doubt Teck’s titular stalwart chair, Norman Kievil, is patiently awaiting suitors. Mining sector investor Pierre Lassonde is among the potential contenders
Keviel angered Glencore when it tried to pressure him earlier this year. Alternative bidding for Elk alone may falter in the same manner. What he points to is increasing desperation within Glencore for a deal. Investors and activists may now expect the company to give up coal within two years, whatever the outcome for Teck.
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