Swiss mining investors demand disclosure of energy transition strategy ahead of annual conference
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Leslie Hook
Released May 24, 2023•Last updated 3 days ago•Read for 6 minutes
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Glencore CLPis bracing for a heated debate over its highly profitable coal mining company when it meets with shareholders this week, as the company grapples with pressure to address climate change.
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At Glencore, coal is gaining momentum as pressure mounts on climate plans back to the movie
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A growing number of shareholders are backing a resolution asking the company to explain what is happening.Production of thermal coal– the largest of all companies outside of China and India – is climate compliant.
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Legal & General Investment Management (LGIM), Allianz SE, Scottish Widows, Man Group PLC and HSBC Asset Management have supported the move in recent days, as have proxy advisers Glass Lewis & Co. and Institutional Shareholder Services (ISS).
The annual meeting this Friday will be marked by the hostile takeover bid of Glencore by the Canadian in the amount of US$ 23 billionTeck Resources Ltd.raised new questions about whether the Swiss miner could spin off its own coal company.
The division is highly profitable, accounting for 53% of profits last year, but is seen as a drag on Glencore's overall valuation due to the climate risks involved.
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Glencore has proposed buying Teck and then splitting the merged company into a separate publicly traded coal company and an independent metals company – assuming that more value could be created that way.
"This deal, to me, represents an interesting starting point for Glencore, who have previously stated that they want to keep coal in their portfolio but reduce assets," said Tal Lomnitzer, senior investment manager at asset manager Janus Henderson. Group PLC. , one of the shareholders of Glencore. "Whether that deal (with Teck) goes through or not, the likelihood that they will crack coal has increased."
Glencore's coal resources extend from Australia to South Africa and Colombia, and the company primarily produces thermal coal for burning in power plants. With an annual production of 110 million tonnes of fossil fuels, the company is the world's largest producer of thermal coal outside of China and India.
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The Zug-based Swiss mining and trading company also owns an extensive network of metal mines and industrial plants, including battery recycling, aluminum smelting, and copper and cobalt mining. Its Commodity Trading division ships commodities around the world and trades products ranging from crude oil to carbon; The division accounted for one-fifth of consolidated profit last year.
Glencore says it is focused on growing its metals business and producing materials such as copper, cobalt and nickel, which are critical to the company.energy transition. Recent investments in this area include deals such as a $1.1 billion aluminum contract with Norsk Hydro ASA and plans to build Europe's largest battery recycling plant on the Italian island of Sardinia. The company also plans to double its copper production.
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The coal strategy, on the other hand, foresees the responsible dismantling of existing coal mines until the end of their useful life, with the aim of closing 12 of them between 2019 and 2035. According to current forecasts, the group will continue to extract coal after 2040.
However, some shareholders have called for a spin-off of Glencore's coal division as early as 2021 due to climate risks and the very different growth trajectories of the coal and metals businesses.
"If you look at the structure of Glencore, there's a lot of value in it," said Chris LaFemina, an analyst at Jefferies Financial Group Inc. “The coal business seems to be weighing on the valuation of the whole company.” Even the miner's nearly 50% stake in Viterra, an agricultural trading company, is undervalued, he adds.
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Glencore CEO Gary Nagle, who was involved in running the company's coal business before taking over two years ago, said shareholders currently want the coal business to remain with the company. But if that position changed, he added, he would follow suit.
"If there was strong shareholder support for divestment, we would do it," Nagle told investors in April.
Glencore has committed to reducing its emissions – direct and indirect – by 15% by 2026 and by 50% by 2035 compared to the base year of 2019. However, no specific emissions reduction targets have been set. Coal mining is the largest source of Scope 3 emissions, or indirect emissions.
At Friday's AGM, the Coal Policy Disclosure Resolution will highlight all of these issues.
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The resolution requires Glencore to disclose how its projected thermal coal production aligns with the Paris Agreement target of limiting global warming to 1.5°C and to detail how its investment plans in the company align with those projections.
"This resolution is extremely important for assessing transition risks," said Naomi Hogan, strategic project manager for the Australasian Center for Corporate Responsibility, who coordinated the resolution. "Both now and for everything that happens after - for current and future shareholders."
This decision is extremely important to assess the transition risk
Naomi Hogan
The resolution does not provide for Glencore to divest its coal business.
Glencore opposed the motion, arguing that it attempts to influence strategy, that it is up to the board, and that it is unclear.
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LGIM, the UK's largest wealth manager and an early advocate of the resolution, said it was disappointed with Glencore's response to the resolution. Glencore held an hour-long meeting with supporters of the measure in March.
"We were hoping that this engagement would start a little earlier and that there would be constructive follow-up," said Dror Elkayam, ESG analyst at LGIM. "This is a shareholder decision, but we want to work with the company... It will take more than a conversation."
While the requested disclosures do not differ materially from those already disclosed by Glencore, the proxy consultants indicated that additional information would be helpful in assessing future climate actions.
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"The requested disclosures will help shareholders assess the company's 2024 climate plan," wrote Glass Lewis in a recent research note. In its report, the ISS also recommended voting in favor of the resolution, which also rated Glencore's carbon risk as "high".
The ACCR resolution is unlikely to receive the necessary 50% vote to be binding, as Glencore's largest shareholders are expected to side with management. However, the measure could still trigger a mandatory consultation process if more than 20% of shareholders vote against management and in favor of the resolution.
Such an outcome would mirror last year's AGM, where 24% of shareholders voted against Glencore's climate plan, triggering a consultation process.
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The company consulted its "major shareholders" and formally entered into talks with about 85 percent of shareholders, but some smaller shareholders said they were excluded.
Giuseppe Bivona, chief investment officer at Bluebell Capital Partners Ltd., said his company had not once been contacted, despite its direct criticism of Glencore's climate plans and its calls for a coal split.
“A refusal to speak to the most outspoken shareholder is usually a message of scorn to all dissenting shareholders,” said Bivona.
As Glencore makes its way through the AGM, questions over the future of its coal business will linger long after Friday's vote.
The hostile bid for Teck could also be revived in the coming weeks. Teck's board declined to attend the deal talks, but Glencore has indicated it will consider approaching shareholders directly with an improved offer.
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LaFemina, an analyst at Jefferies, believes big changes are coming. "Obviously they are considering a major restructuring: you merge with Teck, you spin coal, you go public with Viterra," he said, referring to the farming group.
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With environmental, social and governance issues becoming an increasingly important factor, he believed that coal phase-out could happen sooner rather than later. "The longer you wait," said LaFemina, "the harder it gets."
© 2023 The Financial Times Ltd
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This week in flyers
FAQs
What is Glencore climate resolution? ›
The resolution calls on the mining giant to explain how its thermal coal production plans align with limiting global temperatures rises to 1.5C. As well as its plans to expand coal, the company has been lobbying against effective regulation of the coal industry.
Does Glencore supply coal? ›Connect With Us. Suppliers who wish to work with us are invited to view the opportunities we have available through our Coal and Ferroalloys supplier portals.
How many coal mines does Glencore have? ›Glencore is Australia's largest coal producer, with 17 mining operations across New South Wales and Queensland. Our coal is exported from Abbot Point, Dalrymple Bay, Wiggins Island and RG Tanna coal terminals in Queensland, and from the port of Newcastle in New South Wales.
How is coal retrieved? ›Coal miners use two primary methods to remove coal
In surface mining, large machines remove the topsoil and layers of rock known as overburden to expose coal seams. Mountaintop removal is a form of surface mining where the tops of mountains are removed to access coal seams.
Stock Price Forecast
The 1 analysts offering 12-month price forecasts for Glencore PLC have a median target of 13.60, with a high estimate of 13.60 and a low estimate of 13.60. The median estimate represents a +33.20% increase from the last price of 10.21.
Glencore had said in a statement dated May 3 that it opposed the shareholder motion because it risked undermining the board's responsibility for its climate strategy, given existing disclosures. Opposition to its climate progress passing the 20% threshold constitutes material dissent among shareholders.
Who is the biggest supplier of coal? ›Globally, China is the greatest producer of coal by a considerable margin. In 2021, China accounted for over 50 percent of the coal production worldwide. In comparison, the second largest coal producer, Indonesia, had a global share of just nine percent.
What are the plans for Glencore coal? ›Glencore is planning to manage down its coal mining operations with the intention to close “at least 12 coal mines” by 2035. It is targeting a 50% reduction in total carbon emissions (including Scope 3 emissions) by that date.
Who is the biggest coal mine producer in the world? ›| Rank | Company | Country |
|---|---|---|
| 1 | BHP | Australia |
| 2 | Rio Tinto | Australia |
| 3 | China Shenhua Energy | China |
| 4 | Anglo American plc | United Kingdom |
United States of America – 250.2 billion tonnes
The North Antelope Rochelle coal mine operated by Peabody Energy in the Powder River Basin of Wyoming is the world's biggest coal mine by reserves.
What is the biggest open coal mine in the world? ›
...
North Antelope Rochelle Mine.
| Location | |
|---|---|
| North Antelope Rochelle Mine Location in Wyoming | |
| State | Wyoming |
| Country | United States |
| Coordinates | 43°33′32″N 105°17′18″W |
Kennecott's Bingham Canyon Mine is the largest artificially made excavation in the world, and is visible to the naked eye from an orbiting space shuttle. Employing some 2,000 workers, 450,000 short tons (400,000 long tons; 410,000 t) of material are removed from the mine daily.
What percentage of the world's electricity comes from coal? ›Total primary energy supply by region, 1971 and 2019
Coal remained the dominant fuel for power generation in 2019, reaching 37% of global electricity production, 10% points ahead of renewables.
Because coal takes millions of years to develop and there is a limited amount of it, it is a nonrenewable resource. The conditions that would eventually create coal began to develop about 300 million years ago, during the Carboniferous period.
How much coal is left in the world? ›World Coal Reserves
The world has proven reserves equivalent to 133.1 times its annual consumption. This means it has about 133 years of coal left (at current consumption levels and excluding unproven reserves).
Glencore provides Tesla with up to 6,000 tons of cobalt a year to build lithium-ion batteries at its factories in Shanghai, China and Berlin, Germany.
Is Glencore a buy or hold? ›Glencore PLC's analyst rating consensus is a Strong Buy. This is based on the ratings of 12 Wall Streets Analysts.
What are Glencore weaknesses? ›- Threat of governments policies and pressure from NGOs in various countries.
- Price competitiveness from local players.
- Threat of being tagged as an anti social and environment harming organization.
As a global producer and marketer of commodities, we are uniquely diversified by geography, products and activities. Integrating our marketing and industrial business sets us apart from our competitors to create a unique culture and helps us generate value.
Who owns Glencore coal? ›| Type | Public limited company |
|---|---|
| Total assets | US$132.583 billion (2022) |
| Total equity | US$45.219 billion (2022) |
| Owner | Ivan Glasenberg (9.52%) Qatar Holding LLC (8.22%) Aristotelis Mistakidis (3.10%) |
| Number of employees | 135,000 (2023) |
What is Glencore approach to sustainability? ›
Sustainability framework
We focus our approach through four pillars: health, safety, environment, and community and human rights.
The largest coal mining company in the U.S. is Peabody Energy, with a revenue of $4.89 billion. As of 2022, the U.S. coal mining industry has a market size of $30.9 billion.
What is the best coal in the world? ›Hard coal refers to anthracite, which has the highest density and least volatile matter among all forms of coal. In the past it was the main fuel for locomotives and today is used primarily for metallurgy.
Who buys the most US coal? ›| Million short tons | Percentage of total coal exports | |
|---|---|---|
| Total, all countries | 84.77 | |
| Top five destination countries | ||
| India | 15.46 | 18.2% |
| The Netherlands | 11.84 | 14.0% |
Glencore's share price surged in 2022, as the company made a record profit amid soaring energy prices and the war in Ukraine. The stock has fallen from its January highs, however, as the price of coal — alongside demand — falls.
What is the growth strategy of Glencore? ›To sustainably grow total shareholder returns while maintaining a strong investment grade rating and acting as a responsible operator. Our values reflect our purpose, our priorities and the beliefs by which we conduct ourselves.
What is Glencore coal mission statement? ›Glencore is committed to advancing everyday life by supplying the commodities needed to develop, sustain and improve the world around us. It's why we come to work and it's what we do.
What is 93% of coal in the US used to produce? ›In 2017, coal provided 30% of the electricity consumed across the country, and 93% of coal consumed in the United States was used to generate electricity.
What is the largest coal producing region in the US? ›Coal is mainly found in three regions: the Appalachian coal region, the Interior coal region, and the Western coal region (includes the Powder River Basin). The two largest coal mines in the United States are the North Antelope Rochelle and Black Thunder mines in Wyoming.
How much coal is left in the US? ›Based on U.S. coal production in 2021, of about 0.577 billion short tons, the recoverable coal reserves would last about 435 years, and recoverable reserves at producing mines would last about 21 years.
Does the US have the largest coal reserves? ›
A coal mine in Wyoming, United States. The country has the world's largest coal reserves.
What is the largest underground coal mine in the United States? ›The Black Thunder Coal Mine is a surface coal mine in the U.S. state of Wyoming, located in the Powder River Basin which contains one of the largest deposits of coal in the world.
Where is the deepest coal mine in the United States? ›Bailey Mine in Pennsylvania, United States, was the largest underground coal-producing mine in the North America region, producing approximately 10.7 million tonnes of coal and an estimated 14.29 million metric tons per annum (mmtpa) of Run-of-Mine (ROM) in 2021.
What was the worst coal mine in the US? ›The Monongah mining disaster of Monongah, West Virginia occurred on December 6, 1907, and has been described as "the worst mining disaster in American history." 362 miners were killed. The explosion occurred in Fairmont Coal Company's No. 6 and No.
Where is the largest open pit mine in the US? ›The Bingham Canyon copper mine in Utah is the world's largest human-made excavation. Like most large open-pit mines, Bingham's walls are terraced to reduce landslide risk and enable heavy equipment to reach mineral-bearing rock.
What is the richest mine in the US? ›The five largest gold mines, i.e., Carlin Mine, Cortez Mine, Turquoise Ridge Mine, Turquoise Ridge Mine, and Long Canyon Project, cumulatively produced approximately 3,399.8 thousand ounces of gold, 53.40 mmtpa of ROM in 2021.
What is the safest mine in the world? ›Oyu Tolgoi, in the South Gobi region of Mongolia, is one of the largest known copper and gold deposits in the world. It is also one of the most modern, safe and sustainable operations in the world.
Where is the largest mine in the US? ›The Goldstrike in northeast Nevada is the largest gold mine in North America. The mine complex, (including the Betze-Post-Screamer open-pit, and Meikle and Rodeo underground mines) is owned and operated by the world's largest gold mining company, Barrick Gold.
When was the last coal plant built in the US? ›The last large (greater than 100 MW) coal-fired power plant built in the United States was the 932 MW Sandy Creek Energy Station in Texas, which came online in 2013. As of September 2022, developers have not reported any plans to build new U.S. coal-fired capacity in the future.
What is the best source of electricity in the world? ›Nuclear Power is the Most Reliable Energy Source and It's Not Even Close.
Which country generates the most electricity? ›
China is the world's largest electricity producing country, followed by the United States and India.
How many years of oil is left in the US? ›Oil Reserves in the United States
The United States has proven reserves equivalent to 4.9 times its annual consumption. This means that, without imports, there would be about 5 years of oil left (at current consumption levels and excluding unproven reserves).
World Oil Reserves
The world has proven reserves equivalent to 46.6 times its annual consumption levels. This means it has about 47 years of oil left (at current consumption levels and excluding unproven reserves).
Venezuela is currently the country with the largest proven oil reserves in the world, with an estimated 300 billion barrels of oil. However, despite having such significant oil reserves, Venezuela has been struggling to exploit its oil resources fully.
What country currently has the most coal left in the ground? ›As of January 2020, the United States has the largest recoverable coal reserves with an estimated 252 billion short tons of coal remaining, according to the U.S. Energy Information Administration.
What is the future of coal in the United States? ›We expect 6% less U.S. coal-fired generation in 2022 than in 2021, according to our latest Short-Term Energy Outlook (STEO). Although coal-fired generation declined each year between 2014 and 2020, it rose 16% in 2021 as a result of increased electricity demand and higher natural gas prices following the pandemic.
Are we ever going to run out of coal? ›According to the World Coal Association, there are an estimated 1.1 trillion tonnes of coal reserves across the world. At our current rates of production and consumption, there is enough coal to last us 150 years. By around 2168, coal will be no more (unless we discover new deposits which push that date back).
What is the goal of Glencore carbon? ›Our Purpose
To responsibly source the commodities that advance everyday life. To become a net zero total emissions business by 2050.
Glencore was ordered by a federal judge in New York to pay $700 million (R13 billion) as a criminal punishment for a global bribery scheme orchestrated by the Swiss-based commodities trading and mining giant. US District Judge Lorna G.
What is Glencore purpose statement? ›Glencore is committed to advancing everyday life by supplying the commodities needed to develop, sustain and improve the world around us. It's why we come to work and it's what we do.
What are the 4 pillars of Glencore? ›
The strategy organises our activities into four core pillars: health; safety; environment; and community & human rights.
What is the Glencore controversy? ›Glencore pleaded guilty in June this year to seven counts of bribery, after an SFO investigation exposed that it had paid bribes to maximise its oil trading profits in five African countries.
What is the target for climate change? ›To limit global warming to 1.5°C, greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030.
What is Glencore main commodity? ›We are a leading supplier of alumina and aluminium – and also market iron ore worldwide.
Does BlackRock own Glencore? ›The company's largest shareholder is Qatar Holding LLC, with ownership of 9.2%. Ivan Glasenberg is the second largest shareholder owning 9.2% of common stock, and BlackRock, Inc. holds about 6.7% of the company stock.
What are the core values of Glencore coal? ›Underpinning our business culture are our values of safety, entrepreneurialism, simplicity, openness and responsibility.
Does Glencore have debt? ›You can click the graphic below for the historical numbers, but it shows that Glencore had US$28.0b of debt in December 2022, down from US$33.1b, one year before. On the flip side, it has US$1.99b in cash leading to net debt of about US$26.0b.