Glencore To Announce Decision on Potential Coal Demerger Next Week

Glencore expects to announce next week its decision on whether it would spin off its coal and carbon steel materials business, the mining and commodity trading giant said on Tuesday.

Earlier this month, after receiving the final regulatory approval for the acquisition of Elk Valley Resources (EVR), the coal business of Teck Resources, Glencore said that “we will shortly commence a consultation process to assess shareholder views regarding the potential demerger of the combined coal and carbon steel materials business.”  

In Glencore’s half-year production report published today, Glencore’s chief executive officer Gary Nagle said “As announced earlier this month, post the acquisition of EVR, we are now in the process of consulting with shareholders to assess their views regarding the potential demerger of our coal and carbon steel materials business.”

“We expect to be able to announce the outcome of such engagement and the decision of the Board regarding the potential demerger alongside our interim results next week,” Nagle added.

According to analysts at Jefferies, Glencore is unlikely to spin off its coal business.

In a note from Jefferies cited by The Wall Street Journal, analysts Christopher LaFemina and Patricia Hove wrote “We believe a coal demerger is highly unlikely, and we believe the acquisition… will prove to be a significant positive for Glencore as this is the world’s highest quality metallurgical coal business by a fairly wide margin.”  

In the production report, Glencore revised up its steelmaking coal production guidance for 2024 to between 19 million and 21 million tons, up from between 7 million to 9 million tons previously, thanks to the inclusion of 12 million tons of expected coal production volumes from the newly-acquired EVR in the second half of the year. In the energy coal business, the expected H2/H1 uplift would come mainly from Glencore’s Australian assets, reflecting longwall changes, improved equipment availability, and reduced strip ratios, the mining and commodity trading giant said.   

By Charles Kennedy for Oilprice.com

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