Home / Companies / News /  Glencore faces call from activist to sell coal assets

An activist investor has called on Glencore PLC to sell its thermal- coal business, pressuring the commodities giant to join other big miners in ditching the fuel.

Glencore is the last of the world’s large miners to retain a presence in thermal coal, a currently lucrative business but one seen by some as harmful to the environment. The company has said it plans to run down its thermal- coal operations by 2050 but remains committed meanwhile to the fuel, which analysts at Bernstein expect to generate 17% of earnings this year.

The activist, Bluebell Capital Partners, sent a letter to Switzerland-based Glencore earlier this month asking the company to separate its coal business, dispose of non core assets and improve its governance. The measures, which also include the sale of Viterra, Glencore’s agricultural business, could help boost the company’s share price, Bluebell said.

“They have clearly a long tail of assets and we are asking this company to be fully focused on what they are good at," which is future facing metals such as cobalt and copper, Giuseppe Bivona, a partner at the London-based fund, said in an interview Tuesday.

The fund said that Glencore’s coal exposure means that many investors can’t buy into the company, dragging its stock valuation to lower levels than its peers. Mr. Bivona said that valuing Glencore’s mining activities, without coal, means that it trades at a discount of around 30% relative to peers that have disposed of the fossil fuel.

Rio Tinto Ltd., Anglo American PLC and BHP Group Ltd. have all in recent years either disposed of their thermal-coal assets or promised to do so. Those moves have come as some big investors, including Norges Bank and BlackRock, have said they wouldn’t invest in any company with a large exposure to the fossil fuel.

While Bluebell has less firepower than some activist funds, the firm has had success with some campaigns, including at France’s Danone SA earlier this year. It currently has 200 million euros (equivalent to $227 million) under management in 10 different companies, Mr. Bivona said.

Glencore’s new chief executive, Gary Nagle, has already promised to simplify the company and has started selling noncore assets, ditching a number of smaller mines. The company has also said that it is also looking at its options for its 50% stake in Viterra, a Canadian agricultural business.

Mr. Bivona said that this process needs to be more aggressive.

“Closing a few plants when you have 150 mining and production assets" isn’t enough, he said. Mr. Bivona added that Bluebell estimates that 14 of Glencore’s assets are responsible for 90% of the company’s earnings before interest, taxes, depreciation, and amortization.

In response to Bluebell’s demands, Glencore defended its strategy. “We are confident that our business model is uniquely placed to produce, recycle, and market the materials needed to decarbonize energy, whilst reducing our own emissions and delivering value for stakeholders," a Glencore spokesman said.

Bluebell’s letter to Glencore was earlier reported by the Financial Times newspaper.

More recently, some fund managers have questioned the policy of large miners exiting coal for environmental reasons, given their assets sometimes end up in the hands of companies that want to expand production, rather than run it down.

Danielle Chigumira, an analyst at Bernstein, doesn’t believe that Glencore should dump its coal assets.

“Coal is a hefty chunk of Glencore’s value; so the method of exit is important and I don’t see how they could achieve it without destroying some value," she said.


This story has been published from a wire agency feed without modifications to the text

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
Get alerts on WhatsApp
My ReadsRedeem a Gift CardLogout