Swiss commodities giant Glencore announced Wednesday that it had decided against spinning off its coal business for now after consulting shareholders who view the polluting fossil fuel as a cash-generating activity.
Glencore completed its takeover of the steelmaking coal unit of Teck Resources in July following a protracted battle over the business with the Canadian company.
The Swiss mining and commodities trading group had considered merging the newly acquired business, Elk Valley Resources, with its own coal activities and spinning it off.
But Glencore said that after consulting its shareholders, most expressed a preference for retaining the coal and carbon steel materials business.
“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,” chairman Kalidas Madhavpeddi said.
“The expected cash generative capacity of the coal and carbon steel materials business significantly enhances the quality of our portfolio,” Madhavpeddi added in a statement.
The company said shareholders preferred to keep the coal business “primarily on the basis that retention should enhance Glencore’s cash generating capacity to fund opportunities in our transition metals portfolio” such as copper.
They also concluded that it would “accelerate and optimise the return of excess cash flows to shareholders”.
Oil, gas and coal companies are under pressure to transition away from fossil fuels, the biggest contributor to climate change.
While Glencore’s Australian rival Rio Tinto and British group Anglo American are exiting coal, the Swiss company has a “managed decline” strategy to ensure a “responsible” phase out its coal operations.
Glencore said Wednesday that while it has decided to keep coal, its board “preserves the option to consider a demerger of all or part of this business in the future if circumstances change”.
Separately, Glencore posted a $233-million loss for the first half of the year, after earning $4.6 billion over the same period last year, as commodity prices fell, “particularly thermal coal”.
