Gary Nagle, CEO of $61 billion Swiss mining giant Glencore, has announced a significant shift in the company's strategy. The plan to spin off its coal business through a New York IPO has been abandoned, with the possibility of re-listing the entire company in the US now on the table.
This decision comes just a month after Glencore acquired a majority stake in Teck Resources' steelmaking coal unit, expanding its coal portfolio. The retention of the coal business is supported by compelling financial reasons:
- Projected EBITDA contribution of 34% ($6 billion) in 2024
- Cash generation for investments in copper mines
- Responsible management of coal assets
Glencore, founded in 1974 and headquartered in Baar, Switzerland, has faced valuation challenges in London due to its coal exposure. The company currently trades at 3.9 times its expected 2024 EBITDA, lower than competitors like Rio Tinto, BHP, and Anglo American.
A potential move to New York could offer several advantages:
- Higher valuations for coal-heavy companies
- More coal-friendly investors (US investors have invested $770 billion in coal companies compared to $118 billion by European investors)
- Potential $28 billion valuation for the coal division alone
Despite these potential benefits, Nagle stated that Glencore is "comfortable" maintaining its London listing. However, the company remains open to other options if circumstances change.
"Following extensive consultation with our shareholders, whose views were very clear, and our own analysis, the board believes retention offers the lowest risk pathway to create value for Glencore shareholders today."
The decision to retain the coal business has received overwhelming support from Glencore's European investors. This shift in sentiment reflects a changing perspective on the role of fossil fuels in energy supplies over the past year.
Glencore, operating in over 35 countries, reported an EBITDA of $6.3 billion for the first half of 2024, a 33% decrease from the previous year. Despite this decline, the company's shares rose 0.91% to 396.75 pence on August 7, 2024.
As one of the world's largest commodity trading companies, Glencore continues to navigate the complex landscape of sustainability concerns and market demands. The company has committed to reducing its carbon emissions by 40% by 2035, while maintaining its significant presence in the coal industry.
This strategic decision by Nagle, who took over as CEO in 2021, demonstrates Glencore's adaptability in a rapidly changing global energy market. As the company moves forward, it will need to balance its coal operations with increasing investments in green transition metals like copper and cobalt, crucial for electric vehicle batteries.