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Glencore is buying the interests of its partners in one of the world’s largest open-pit thermal coal mines, the latest deal in an industry that is being transformed by pressure from banks and investors.
Under the agreement, the London-based commodity and commodity trader has agreed to acquire 66.6% of Cerrejón in Colombia, which it no longer owns in Anglo American and BHP for $ 294 million each in cash. Glencore expects to recoup its investment less than two years after completing the acquisition.
The agreement marked the last change of ownership in the thermal coal industry, and came as the price of fossil fuel has reached its highest level in a decade in the face of strong Asian demand and a lack of investment in new supply.
Glencore also said Monday that it aimed to reduce its total emissions by 50 percent in 2035 from 2019 levels, up from a previous target of 40 percent, and that it aimed to reduce it by 15 percent in 2026, which full ownership of Cerrejón has been reflected again.
Great miners arrive under increasing pressure of investors and banks to divest their coal mines and align their businesses with the goals of the Paris climate agreement. Thermal coal is burned in power plants to generate electricity, a process responsible for 30% of global carbon dioxide emissions.
Anglo American has broken down its South African coal assets into a listed company in Johannesburg and London. The Cerrejón agreement will complete its exit from coal. BHP is examine offers for its Australian thermal coal business.
However, Ivan Glasenberg, Glencore’s long-time CEO he dismissed the divestment of coal as useless, saying there were no environmental benefits if investors pressured miners to sell or split coal mines.
He argued that the company, the world’s largest exporter of thermal coal, was better off running through the mines and using them as a source of cash to expand production of raw materials such as nickel, copper and cobalt that will be needed as the world moves to cleaner forms of energy.
As such, Glencore decided to buy the interests of Anglo and BHP when they announced their intention to divest this year. By the time the deal closes in the second half of next year, the provisionally generated cash could reduce the purchase price to $ 230 million, according to Glencore.
“Removing fossil fuel assets and turning them into someone else’s problem is not the solution and will not reduce absolute emissions,” Glasenberg said. “We are confident that we can manage the decline of our fossil fuel portfolio in a responsible manner that is also consistent with the achievement of the goals of the Paris Agreement, as evidenced by our strengthened overall emissions reduction targets.” .
The deal effectively replaces the lost tonnage when Glencore decided to produce naphthalene at Prodeco, another Colombian coal mine.
Glencore committed in 2019 limiting coal production to about 150 million tonnes a year under pressure from large investors. The expansion of the coal business was largely ruled out, although Glencore said it would buy joint venture partners where it had the first right to refuse its holdings.
The Cerrejón agreement will increase Glencore’s thermal coal production by around 125 million tonnes this year, from the first target of 110 million.
Glencore plans to meet its emission reduction targets by depleting its coal assets over time and moving to renewable energy and clean fuels in the mines.
The acquisition also comes as Glasenberg prepares to retire later this month. It is being succeeded by Gary Nagle, the former head of Glencore’s coal business.
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