Glencore to hold onto its coal business as shareholders want the cash

By Steve Goldstein

Mining giant Glencore on Wednesday said it was holding onto its coal business after shareholders said they would rather have the unit generate cash to fund mining for greener metals like copper as well as pay dividends.

Glencore (UK:GLEN) had said last month that it was considering its options for demerging the coal and carbon steel materials business after completing its acquisition of 77% of Elk Valley Resources, which operates four steelmaking coal mines.

"It has always been our view that the question of whether to demerge our coal business is one for our shareholders, not only because shareholder approval for a demerger is legally required, but more importantly because investment in coal is often a question of investment preference, requiring the ongoing gathering of shareholder views," said Glencore.

Glencore said shareholders have "evolving views" on environmental, social and governance (ESG) issues as well as increasing support for its climate strategy of a "responsible decline" of the more polluting thermal coal business.

Holding onto the coal business will allow for $15 billion of dividends and stock buybacks in 2024 and 2025, said RBC Capital analyst Marina Calero.

Glencore shares rose 2%, having dropped 15% this year.

The coal news came alongside its first-half results, as it lost $233 million despite 9% revenue growth to $117 billion. Its adjusted earnings before interest, tax, depreciation and amortization of $6.34 billion missed a Visible Alpha compiled analyst estimate of $6.75 billion.

It recorded a $1 billion impairments, mostly on its South African coal operations, but even absent significant items, its profit would've dropped 65% on what it said was a normalizing of conditions after coal and energy prices spiked.

-Steve Goldstein

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08-07-24 0709ET

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