Tech: Market may hold Glencore to tighter coal deadline even if bid fails

The planet is safe in my hands — I’m a Swiss-based commodities trader. That would appear to be the message from Glencore boss Gary Nagle. His plan to expand the polluting coal division, which he has promised to divest, only adds to the cognitive dissonance.

For months, Glencore has been trying to persuade Canadian Tech Resources to make an acquisition. On Monday, the Swiss mining and trading giant proposed an alternative: a cash acquisition of Elk Valley, Tech’s coking coal unit. This will almost halve Glencore’s coal EBITDA. This will be the second purchase of coal assets by the group in two years.

This news may not sit well with all shareholders. Witness investor unease with Nagel over Glencore’s climate change goals. Nearly 30 percent of votes at the annual meeting this year were against it, 6 percentage points more than in 2022. This is a substantial negative minority report.

This may explain why Nagel is pledging to divest all of Glencore’s coal assets within two years, much earlier than expected. Coal still generates about half of Glencore’s EBITDA. Mixing coal of tech increases that dominance. The group’s interpretation of St. Augustine’s is: “Make me good, Lord, but not until 2025.”

Investors will enjoy a temporary jump in cash flow. But valuations of coal diversified miners remain a drag. Shareholders didn’t ask for Tech’s independent restructuring plan because Black Stuff would have funded the copper and zinc divisions.

UBS believes that the demerger of Glencore Coal will result in an EBITDA multiple of around 6-7 times for the core metals business. This is much higher than the fourfold estimate for the entire group.

In February, Nippon Steel agreed to buy one-tenth of Teck’s coal unit, valuing the business at $8.2 billion, with Glencore placing a similar value on it, while Teck’s own fairness opinion valued the EVR at $9 billion. Which was almost three times that of 2024. Ebitda.

Tech’s hard-nosed chair emeritus, Norman Keville, can certainly wait patiently for suitors. Mining investor Pierre Lassonde is among potential rival bidders

When Keville tried to mount public pressure on Glencore earlier this year, they bluffed him. An alternative dialect for elk alone may be established in the same way. This signals a growing desperation to strike a deal within Glencore. Investors and campaigners can now expect the company to give up coal in two years, regardless of Tech’s outcome.