By Thomas Biesheuvel
December 3, 2021 - Glencore Plc’s new chief executive officer defended the company’s sprawling coal business after it emerged this week that an activist investor was pushing for an exit from the dirtiest fuel.
Gary Nagle, who stepped into the top job at the end of June, said it was in the best interests of both the company and the planet for Glencore to run down the mines over the next 30 years. The company’s biggest investors agree with the strategy, he said.
Image courtesy of Glencore
Investors and the biggest mining companies have been grappling for years over who should own the world’s coal mines and some of Glencore’s rivals have already gotten out of the business because of pressure from shareholders. But more recently there has been a growing pushback from some climate activists and investors who are worried that the assets would actually produce more coal for longer under new owners.
However, activist hedge fund Bluebell Capital Partners asked Glencore last month to separate its thermal coal business, which it said has become a barrier to investment.
“We believe the rundown strategy is the right one both for our business and the world,” Nagle said Thursday during his first investor day as CEO. “We don’t have any major investors asking us to spin off coal. They are saying the spinoff scenario is the wrong scenario.”
The company is still prepared to exit the business if a majority of its shareholders asked for it, he said.
Glencore is the world’s biggest thermal-coal shipper and its billionaire former boss Ivan Glasenberg — who remains its second-biggest shareholder — has been a firm advocate of the business. Glencore is poised to report record profits for the year and pay bumper dividends, driven in large part by a surge in coal prices.
“We believe the right strategy is keep it and run it down responsibly rather than leaving it to someone who might not be in the public market, to someone pro coal who might want to exploit every ton in the ground,” Nagle said.
Glencore shares dropped as much as 6.3% on Thursday, underperforming other big miners. Investors may have been disappointed that the company failed to provide any more detail about potential shareholder returns, other than saying that the dividend will be “very healthy.”