New CEO to lead greener Glencore
Mining and trading company ’ s coal chief Gary Nagel will spearhead plan to achieve net zero emissions by 2050
With extensive expertise in coal, Glencore’s incoming CEO, Gary Nagle, will be tasked with leading the diversified mining and trading company to a carbonneutral future. On Friday Glencore ’ s long-standing CEO, Ivan Glasenberg, announced his exit in the first half of 2021.
With extensive expertise in coal, Glencore’s incoming CEO Gary Nagle will be tasked with leading the diversified mining and trading company to a carbonneutral future.
At an investor update on Friday, Glencore’s long-standing CEO, SA-born billionaire Ivan Glasenberg, announced his exit as CEO in the first half of 2021, with Nagle as his successor.
Nagle, also a South African, joined Glencore in 2000 as part of the coal business development team in Switzerland. He then became CEO of the group’s Prodeco coal operation in Colombia, and between 2013 and 2018 was head of Glencore’s SA alloy assets before moving on to head up the company’s global coal industrial business based in Australia.
News of Glasenberg’s departure after 18 years as Glencore CEO only partially stole the show on Friday, when the company also presented an ambitious plan to reduce its carbon emissions by 40% by 2035 and to further achieve net zero emissions by 2050 — targets Nagle will have to deliver on.
The 2050 emissions reduction target is “by far the most progressive” among the diversified miners, UBS analyst Myles Allsop noted at the update.
The reduction target stands not only for Glencore scope 1 and scope 2 emissions, which relate to those emissions that emanate directly from company operations and then from its suppliers. The 40% target is also for Glencore’s scope 3 emissions
— those emissions generated by customers when they use the company ’ s products.
A total of 92% of Glencore’s carbon footprint relates to scope 3, the bulk of which is associated with coal.
As such, the group’s reduction targets will largely be achieved through depleting its thermal coal assets over this time. Other initiatives such as energy efficiency and carbon capture and storage — in which it is investing “big money” — will also help Glencore to meets its net zero emissions target.
Glasenberg said Glencore was uniquely positioned among its peers to target such ambitious reduction plans and to ultimately help the world to decarbonise.
“Coal is not a large part of our portfolio today. It represents about 5% of our revenue, 10% of our ebitda [earnings before interest, taxes, depreciation, and amortisation], and as it depletes itself, we can grow ourselves in these other metals that the world needs for its renewable future,” he said.
“It ’ s clear, the world is going to require a lot more of the commodities we produce … We ’ ve got coal, copper, cobalt, zinc, nickel,” Glasenberg said, noting that the group has “great, longlife” assets in these commodities, many of which produce in the lowest cost quartile.
Glencore forecasts global demand for these metals will double and triple in some instances by 2050. “Demand for these metals is going to be huge,” said Glasenberg. He said Glencore would be a better custodian of its coal assets in responsibly depleting them and reducing emissions over time, rather than simply selling them on.
For the time being, CFO Steve Kalmin said the group experienced no effect on its financing because it remains invested in coal. “The banks engage constructively and they see what we do as sensible.”
Nor should they, said Glasenberg, considering that it forms such a small part of the group’s portfolio.
However, “if shareholders believe otherwise and they just say this commodity does not sit in the Glencore portfolio of assets, and this tarnishes us and affects the multiples we trade at and shareholders believe it is a better route to sell it off or spin it out or create a pure coal company, I am sure Gary [ Nagle] would follow that path and I support him in anything that creates value for shareholders,” said Glasenberg.
“As I’ll be sitting on the outside as a large shareholder — if he can create value for me, I’m all for it.”
In a note, Christopher LaFemina, equity analyst at Jeffries, said the market continues to underappreciate the importance of Glencore and other mining companies in the energy transition “as potential shortages of mined commodities is a major risk to this transition”. He said Jeffries believes a demerger of coal will happen, but only after Nagle takes over as CEO.