Nagle stands behind Glencore coal strategy with fuel set to drive EBITDA in 2022

Gary Nagle, CEO, Glencore

GLENCORE boss Gary Nagle was unmoved by suggestions the group ought to spin off its coal assets saying cash generated from the mines would be allocated to producing metals critical for decarbonisation such as more copper.

“We are running down the assets in terms of our commitment to ESG targets. The more money we make out of coal will be put into growing battery metals faster,” he said today in response to analyst questions.

Nagle has previously argued that selling coal mines wouldn’t guarantee a reduction in global thermal coal output as new owners of assets would seek to replenish their reserves. Glencore has promised to have no thermal coal production by 2050.

Nagle’s comments follow renewed efforts by activist investor Bluebell Capital Partners to persuade Glencore to spin off the coal mines.

According to a report by Reuters, the London-based Bluebell proposed a new structure for Glencore’s coal assets in which it could spin off them out whilst retaining control over their management.

In the letter dated January 24, London-based Bluebell proposed the adoption of A and B shares for a separated thermal coal company.

A 125% increase in thermal coal prices (ex-Newcastle) last year resulted in total coal earnings before interest, tax, depreciation and amortisation (EBITDA) comprising 25% of group EBITDA compared to 10% of total last year. Glencore also produces coking or metallurgical coal.

An even higher contribution of coal to Glencore’s profitability is expected this year. Based on a spot margin of $82,50/t (2021:$50,60/t) coal will contribute $10bn in EBITDA making it the largest EBITDA generator ahead of copper at an estimated $9bn. Total EBITDA was estimated to be $26.5bn at current spot prices.

Glencore produced 103 million tons (Mt) of coal (including metallurgical coal) last year compared to 106Mt in 2020. Of the 2021 production, 89.7Mt was thermal coal which was lower than the 94Mt in 2020 financial.

Last year, 94% of Glencore shareholders voted in favour of the group’s strategy for thermal coal at an annual general meeting. Nagle said previously that holding coal assets was the better option that asset sales such as those conducted by rivals South32 and BHP, of the spin-off of coal by Anglo American.