Bloomberg Update On Glencore PLC, Coal -- Cash Cow -- May 1, 2024

Locator: 47119COAL.

From Bloomberg today:

Coal has become an increasingly dirty word in mining, with more and more investors calling for its demise. Yet, when push comes to shove, some are reluctant to say goodbye.

During the past five years, nearly every major miner has either quit coal or set out a path to its exit because of pressure from shareholders who don’t want to own the most polluting fuel.

The one company that resisted this push was Glencore Plc, the world’s biggest shipper of the fuel. That was until it needed to get a deal done.

In agreeing to buy Teck Resources Ltd.’s coking coal, Glencore said it would split its own company into two: one holding metals such as copper and the other holding coal.

But now it looks increasingly likely that split won’t happen, with some of Glencore’s biggest investors preferring to keep the company together. Why?

If you can ignore the climate-ruining pollution that’s spewed into the air when coal burns, there’s a lot to like about the fuel from a shareholder perspective.

As a high-volume business, it becomes an absolute cash cow when prices rise. Glencore made a staggering $18.6 billion from its coal mines in 2022 as the global energy crisis sent the market skyrocketing.

The outlook is also good. As Glencore’s rivals retreated from the fuel, they took with them the deep pockets needed to build new mines. Banks are also unwilling to fund new production.

With demand, especially from Southeast Asia, set to remain strong for years to come, that makes coal very attractive.

And for big investors, making Glencore get rid of coal would cut off their own exposure to the fuel. Many, including BlackRock Inc. — Glencore’s third-biggest holder, have policies that prevent them from owning pure-play coal companies.

Yet, when that business is buried within a miner also producing copper, cobalt and nickel — future-facing commodities essential for the energy transition — it’s fair game.

For those who are coal-curious but blocked from buying pure-play coal, Glencore offers the perfect guise. Some investors want to have their cake and eat it, too.

--Thomas Biesheuvel, Bloomberg News

I get a kick out of this: "... banks are unwilling to fund new production." LOL. If push comes to shove, Glencore will find any number of non-bank entities willing to fund these mines. Maybe some Chinese entrepreneur will buy Glencore. LOL. 

See wiki.