Glencore snaps up BHP, Anglo stakes in Colombian coal mine
Diversified miner Glencore will become the sole owner of the Cerrejon thermal coal mine in Colombia by buying out partners BHP and Anglo American, boosting its coal assets at a time when others are looking to exit the sector.
Glencore said on Monday it expects to pay $230 million for
the combined 66% stake owned by BHP Group and Anglo when the deal completes in
the first half of 2022. It sees production volumes at the mine declining
materially by 2030.
Mining companies have been reviewing their ownership of
thermal coal assets as they transition out of polluting fossil fuels to meet
emissions targets and shift towards sustainable investments.
But global demand for coal is expected to jump 4.5% in 2021,
after a record pandemic-led drop last year. An increase in coal-fired power
generation in Asia, where many countries including China are still building new
capacity, accounts for three-quarters of the rebound, the International Energy
Agency (IEA) said recently.
Over the last 12 months, coal has outperformed other
commodities including oil, copper and iron ore. Thermal coal futures on the
Zhengzhou Commodity Exchange hit an all-time high of 944.20 yuan ($146.19) a
tonne on May 12, having surged 159% from a two-year low in mid-April 2020.
(Graphic: Coal outperforms copper, oil and iron ore over past 12 months.
Glencore said owning 100% of Cerrejon would not compromise
its climate commitments. It plans to become a net-zero emission company by 2050
and has set a goal of managing the depletion of its coal mines by the
mid-2040s, rather than selling them.
"The disposal of Glencore's current stake in the mine
would not be consistent with our stated commitment to a responsible managed
decline of our coal portfolio, nor would it result in a genuine reduction of
absolute greenhouse gas emissions," Glencore said in a statement.
The company wants to increase its medium-term absolute total
emissions reduction target to 50% from 40% by 2035 compared to 2019 levels and
said it will introduce a new short-term reduction target of 15% by 2026.
"For this to be achieved we would presume that this
will mean lower production than previously from its existing portfolio,"
RBC Capital Markets analysts said in a note.
BHP, the world's largest listed miner, is looking to reduce
operational greenhouse gas (GHG) emissions by at least 30% by 2030 vs 2020,
while Anglo American wants to reduce GHG emissions by 30% by 2030 compared to
2016 and achieve net zero by 2040.
BHP is also looking to offload its coal assets in Australia,
while Anglo spun off its coal portfolio in South Africa earlier this month.
Cerrejon, where current mining concessions are due to expire
in 2034, is an integrated mining and transportation complex in Colombia's La
Guajira province, in the northeastern part of the country, which includes an
open-pit mine, a 150-km (93-mile) railway line and a Caribbean port.
"This is good news for Colombia because with this
transaction ... Glencore is demonstrating the investor confidence that exists
in Colombia's mining sector, and also guarantees investment and employment in
the province of La Guajira," Colombia's Mines and Energy Minister Diego
Mesa told Reuters in a video message.
Production at Cerrejon reached 25.8 million tonnes in 2019,
before falling to 12.4 million tonnes in 2020, due to the pandemic and a
three-month strike which paralysed operations.
Glencore's share price was down 1.3% by 1402 GMT, in line
with the rest of the mining sector, having risen almost 35% this year to
outperform both BHP and Anglo.
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