Try our mobile app
JSE:BHG JSE:GLN JSE:AGL JSE:AVI JSE:ARH
By Ed Cropley
LONDON (Reuters Breakingviews) - Ivan Glasenberg is leaving Glencore shareholders and green activists with a parting climate conundrum. The South African’s final results-in-charge revealed a collapse in coal EBITDA to just $1.2 billion. Given his new-found climate conscience, Glasenberg should be celebrating. The only snag is that Glencore’s environmental pivot hinges on the black stuff sticking around for years to come.
As with elsewhere in the global economy, Covid-19 put existing trends in mining on fast-forward. As a leading producer, in purely environmental terms, of bad stuff – thermal coal – and good stuff – copper and cobalt – Glencore found itself riding two horses on rapidly diverging paths. Happily, jockey and nags did not part company. A 73% decline in EBITDA from coal and oil was offset by a 31% jump at Glencore’s metals and minerals unit, which produces elements like copper and cobalt that are both crucial to a low-carbon economy. Overall, mining EBITDA was down just 13% at $7.8 billion.
However, such gyrations show the challenge Glasenberg successor Gary Nagle faces in staying in the saddle. Unlike rival Anglo American, which said last month it was selling its South African thermal coal division, Glencore plans to run down its coal mines while ramping up production of copper and cobalt. With some justification, it argues that simply flogging coal mines does nothing to reduce global emissions. Yet if cash flow from the mineral dries up too quickly it could upset the new boss’s delicate green investment equilibrium.
Admittedly, a snap back in coal prices from around $62 a tonne in late November to more than $90 last month suggests that day may be some way off. Glencore is betting that demand for coal from emerging economies like India and China will underpin prices for years to come. But the 2020 price shock has given a glimpse of what might be in store if Beijing and New Delhi suddenly produce big policy shifts.
Since announcing its green blueprint in December, Glencore shares have gained nearly a third, comfortably outperforming rivals like Rio Tinto, and BHP,. That’s a handy leaving present from Glasenberg after a relatively poor showing since he took the company public in May 2011. Since then, Glencore has delivered total annualised returns, including dividends, of minus-3.3%, against nearly 11% from Rio. The profitability of the next decade hinges on how good Nagle is at balancing.
