Call to cut Glencore coal

ONE of Europe’s most aggressive activist hedge funds has renewed its call for Glencore to carve off its thermal coal and grains businesses in a move that would affect a vast number of the commodity conglomerate’s local assets.

Bluebell Capital Partners had originally written to Glencore in November demanding the company spin off the assets, largely located in Australia, with banks and investors increasingly reluctant to engage with coal producers.

Bluebell chief investment officer Giuseppe Bivona accused Glencore of providing a false impression of their environmental commitments, and said making the hedge fund’s proposed changes could lift the company’s share price by 45 per cent.

“Glencore … has the right exposure to all the metals which are key for the energy transition, copper, nickel, cobalt, zinc, and so on and so forth,” Mr Bivona said. “But there is obviously a lot of investors who cannot buy shares in Glencore because they don’t want having exposure to coal.”

Mr Bivona said the company’s plan for its coal business was “a bit rich” because it was reliant on the depletion of existing reserves.

“This is like saying ‘I’m going to mine all of the coal I have and somebody is going to buy all the coal I have until I run out of stock.’ It doesn’t strike me as the most sensible message,” he said.

Glencore is one of Australia’s largest exporters of coal, and operates 17 mines across NSW and Queensland.

Its Viterra grains subsidiary, which Bluebell is also advocating be sold off, became one of the largest local agricultural businesses – operating in South Australia and Victoria – after acquiring the ASX-listed ABB Grain in 2009.

At an investor briefing late last week, Glencore chief executive Gary Nagle said if most shareholders wanted the company to spin off its coal assets, then it would do that.

But 94 per cent of investors had agreed to the current strategy to “responsibly run down the coal business”, he said.

“If they change their minds … then we need to consider it,” he said.

Glencore, which has a number of coal mines in South Africa and another in Colombia, has a target of reducing its total emissions – including Scope 3 – by 15 per cent in the next five years. It has previously argued that selling out of its coal assets will not reduce their associated emissions.

But Mr Bivona, a former Goldman Sachs banker, said owning the mines was depressing the rest of the minerals business by at least 30 per cent.

Glencore’s coal production and export from Australia has surged this year to its highest since 2019.

The company this year also increased its stake in its Colombian coal mine after buying a 33.3 per cent holding owned by BHP for $US294m ($420m).

Several major financiers have begun dropping companies that operate in thermal coal, including the Norwegian sovereign wealth fund, one of the world’s biggest, which in 2020 said it would sell its stake in AGL.

It warned that it might also do the same for its holding in BHP.

Glencore was also struck from the pension fund’s permitted investments at the same time.