Glencore snaps up BHP, Anglo stakes in Colombian coal mine

By Clara Denina

LONDON (Reuters) -Diversified miner Glencore will become the sole owner of the Cerrejon thermal coal mine in Colombia by buying out partners BHP and Anglo American, boosting its coal assets at a time when others are looking to exit the sector.

Glencore said on Monday it expects to pay $230 million for the combined 66% stake owned by BHP Group and Anglo when the deal completes in the first half of 2022. It sees production volumes at the mine declining materially by 2030.

Mining companies have been reviewing their ownership of thermal coal assets as they transition out of polluting fossil fuels to meet emissions targets and shift towards sustainable investments.

But global demand for coal is expected to jump 4.5% in 2021, after a record pandemic-led drop last year. An increase in coal-fired power generation in Asia, where many countries including China are still building new capacity, accounts for three-quarters of the rebound, the International Energy Agency (IEA) said recently.

Over the last 12 months, coal has outperformed other commodities including oil, copper and iron ore. Thermal coal futures on the Zhengzhou Commodity Exchange hit an all-time high of 944.20 yuan a tonne on May 12, having surged 159% from a two-year low in mid-April 2020.

Glencore said owning 100% of Cerrejon would not compromise its climate commitments. It plans to become a net-zero emission company by 2050 and has set a goal of managing the depletion of its coal mines by the mid-2040s, rather than selling them.

"The disposal of Glencore's current stake in the mine would not be consistent with our stated commitment to a responsible managed decline of our coal portfolio, nor would it result in a genuine reduction of absolute greenhouse gas emissions," Glencore said in a statement.

The company wants to increase its medium-term absolute total emissions reduction target to 50% from 40% by 2035 compared to 2019 levels and said it will introduce a new short-term reduction target of 15% by 2026.

"For this to be achieved we would presume that this will mean lower production than previously from its existing portfolio," RBC Capital Markets analysts said in a note.

BHP, the world's largest listed miner, is looking to reduce operational greenhouse gas (GHG) emissions by at least 30% by 2030 vs 2020, while Anglo American wants to reduce GHG emissions by 30% by 2030 compared to 2016 and achieve net zero by 2040.

BHP is also looking to offload its coal assets in Australia, while Anglo spun off its coal portfolio in South Africa earlier this month.

Cerrejon, where current mining concessions are due to expire in 2034, is an integrated mining and transportation complex in Colombia's La Guajira province, in the northeastern part of the country, which includes an open-pit mine, a 150-km (93-mile) railway line and a Caribbean port.

Production reached 25.8 million tonnes in 2019, before falling to 12.4 million tonnes in 2020, due to the pandemic and a three-month strike which paralysed operations.

Glencore's share price was down 0.9% by 1120 GMT, in line with the rest of the mining sector, having risen almost 35% this year to outperform both BHP and Anglo.

(Reporting by Clara Denina, additional reporting by Pratima Desai, Sonali Paul, Dmitry Zhdannikov, and Tom Daly; editing by Louise Heavens, Kirsten Donovan)

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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