REG - Glencore PLC - Retention of coal+carbon steel materials business

GlencoreAnnouncement

07/08/2024 07:00

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RNS Number : 4491Z  Glencore PLC  07 August 2024

 

 

Glencore plc

7 August 2024

Baar, Switzerland

 

Retention of the coal and carbon steel materials business

 

Following completion of the acquisition of a 77% interest in Elk Valley
Resources (EVR) on 11 July 2024, we have undertaken a consultation process to
assess shareholder views regarding retaining or demerging the coal and carbon
steel materials business.

Shareholders representing an estimated two-thirds of eligible voting shares
were consulted for their views.  Over 95% of shareholders that specifically
expressed a preference for retention or demerger supported the retention of
the coal and carbon steel materials business, primarily on the basis that
retention should enhance Glencore's cash generating capacity to fund
opportunities in our transition metals portfolio, such as our copper growth
project pipeline, as well as accelerate and optimise the return of excess cash
flows to shareholders.

Numerous shareholders also expressed scepticism on the scale of a potential
MetalsCo (the remaining business) valuation uplift arising from a demerger and
did not see separation as ESG positive given the wide support for our latest
Climate Action Transition Plan (CATP), including our responsible thermal coal
decline strategy, and the belief in the important role that steelmaking coal
is expected to play in supporting the infrastructure needed for the energy
transition.

Some shareholders also abstained from offering a specific preference,
principally advising that consideration of a demerger is a strategic decision
for the Board.

The outcome of this consultation process and the Group's own analysis have led
the Board to conclude that, between the options of retaining or demerging,
considering both risk and opportunity scenarios, retention of the coal and
carbon steel materials business currently provides the optimal pathway for
demonstrable and realisable value creation for Glencore shareholders.

Kalidas Madhavpeddi, Chair, Glencore, commented:

"Following extensive consultation with our shareholders, whose views were very
clear, and our own analysis, the Board believes retention offers the lowest
risk pathway to create value for Glencore shareholders today. The expected
cash generative capacity of the coal and carbon steel materials business
significantly enhances the quality of our portfolio, by commodity and
geography, and broadens our ability to fund our strong portfolio of copper
growth options as well as accelerate shareholder returns."

The Board also notes that in line with our 2024-2026 CATP, recently approved
by more than 90% of voting shareholders, Glencore will continue to oversee the
responsible decline of its thermal coal operations over time. Glencore will
also assess how best to integrate the EVR assets into our climate transition
strategy, having regard to our ICA commitment to develop and adopt a climate
transition strategy for EVR, and recognising that the transition away from
steelmaking coal for steel production will be slower than thermal coal.

 

With the decision to retain the coal and carbon steel materials business, the
previous Net debt cap shaping our shareholder returns framework is immediately
reset at around $10bn, excluding marketing related lease liabilities, along
with our continued commitment to minimum strong BBB/Baa ratings.

While the decision has been taken to retain this business today, the Board
preserves the option to consider a demerger of all or part of this business in
the future if circumstances change.

 

Background information on coal demerger

 

It has always been our view that the question of whether to demerge our coal
business is one for our shareholders, not only because shareholder approval
for a demerger is legally required, but more importantly because investment in
coal is often a question of investment preference, requiring the ongoing
gathering of shareholder views.

In our announcement in November 2023 of the agreed acquisition of a 77%
interest in Elk Valley Resources (EVR), Glencore stated that its intention was
to demerge the coal and carbon steel materials business. This was based on
positive feedback that Glencore had received following its initial approach to
Teck in early 2023 in which Glencore had first proposed the demerger of the
combined coal and steel materials business in the context of that acquisition.

Following the November announcement, Glencore started to receive feedback that
shareholder preferences may have evolved and that many shareholders were no
longer supportive of a demerger, in many cases due to evolving views on ESG,
increased support for Glencore's climate strategy of a responsible decline of
its thermal coal business and the recognition, which also drove Glencore's
acquisition of EVR, of the difference between steelmaking coal and thermal
coal.

 

Accordingly, Glencore decided that it would make sense following closing of
the EVR transaction to run a formal consultation to assess current shareholder
views regarding retaining or demerging the coal and carbon steel materials
business.

 

For further information please contact:

 Investors
 Martin Fewings     t: +41 41 709 28 80  m: +41 79 737 56 42  martin.fewings@glencore.com
 Media
 Charles Watenphul  t: +41 41 709 24 62  m: +41 79 904 33 20  charles.watenphul@glencore.com

 

www.glencore.com

Glencore LEI: 2138002658CPO9NBH955

 

This announcement contains inside information. The person responsible for
making this announcement is John Burton, Company Secretary.

 

 

 

 

Notes for Editors
Glencore is one of the world's largest global diversified natural resource
companies and a major producer and marketer of more than 60 commodities that
advance everyday life. Through a network of assets, customers and suppliers
that spans the globe, we produce, process, recycle, source, market and
distribute the commodities that support decarbonisation while meeting the
energy needs of today.

With over 150,000 employees and contractors and a strong footprint in over 35
countries in both established and emerging regions for natural resources, our
marketing and industrial activities are supported by a global network of more
than 50 offices.

Glencore's customers are industrial consumers, such as those in the
automotive, steel, power generation, battery manufacturing and oil sectors. We
also provide financing, logistics and other services to producers and
consumers of commodities.

Glencore is proud to be a member of the Voluntary Principles on Security and
Human Rights and the International Council on Mining and Metals. We are an
active participant in the Extractive Industries Transparency Initiative.

We will support the global effort to achieve the goals of the Paris Agreement
through our efforts to decarbonise our own operational footprint. We believe
that we should take a holistic approach and have considered our commitment
through the lens of our global industrial emissions. Against a restated 2019
baseline, we are targeting to reduce our Scope 1, 2 and 3 industrial emissions
by 15% by the end of 2026, 25% by the end of 2030, 50% by the end of 2035 and
we have an ambition to achieve net zero industrial emissions by the end of
2050, subject to a supportive policy environment. For more information see our
2024-2026 Climate Action Transition Plan and the About our emissions
calculation and reporting section in our 2023 Annual Report, available on our
website at glencore.com/publications.

 

 

 

 

Important Information

This material does not purport to contain all of the information you may wish
to consider. For further important information, including in connection with
forward-looking statements and other cautionary information, refer to the
Important notice section of Glencore's 2024 Half Year Report, which is
available at glencore.com/publications. By their nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements to differ
materially from any future event, results, performance, achievements or other
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in this document is intended as any kind of forecast (including, without
limitation, a profit forecast or a profit estimate), guarantee or prediction
of future events or performance and past performance cannot be relied on as a
guide to future performance. Glencore cautions readers against reliance on any
forward-looking statements contained in this document. Except as required by
applicable regulations or by law, Glencore is not under any obligation, and
Glencore and its affiliates expressly disclaim any intention, obligation or
undertaking, to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. This document shall
not, under any circumstances, create any implication that there has been no
change in the business or affairs of Glencore since the date of this document
or that the information contained herein is correct as at any time subsequent
to its date. This document does not constitute or form part of any offer or
invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for any securities.

Other information

The companies in which Glencore plc directly and indirectly has an interest
are separate and distinct legal entities. In this document, "Glencore",
"Glencore group" and "Group" are used for convenience only where references
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work for them. These expressions are also used where no useful purpose is
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