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Glencore to acquire stakes in Cerrejon coal mine

June 28, 2021

Glencore will become the sole owner of the Cerrejon thermal coal mine in Colombia through the buyout of partners BHP and Anglo American.

In a statement, Glencore said “Based on our long-term relationship with Cerrejón and knowledge of the asset, we strongly believe that acquiring full ownership is the right decision and the progressive expiry of the current mining concessions by 2034 is in line with our commitment to a responsible managed decline of our coal portfolio. Production volumes are expected to decline materially from 2030.”

Glencore expects to pay $230 million for the combined 66 percent stake owned by BHP Group and Anglo American when the deal completes in the first half of 2022.

Reuters reported that 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 toward sustainable investments.

But global demand for coal is expected to jump 4.5 percent 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 ($146.19) a tonne on May 12, having surged 159 percent from a two-year low in mid-April 2020.

Glencore said it still 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.

“Glencore has been involved with Cerrejón for more than 20 years. We know the asset well and believe that we are the most responsible steward for Cerrejón at this stage of its lifecycle,” said Glencore CEO, Ivan Glasenberg. “Disposing of fossil fuel assets and making them someone else’s issue is not the solution and it won’t reduce absolute emissions. We are confident we can manage the decline of our fossil fuel portfolio in a responsible manner that is also consistent with meeting the goals of the Paris Agreement, as demonstrated by our strengthened total emission reduction targets.”

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

BHP, the world’s largest listed miner, is looking to reduce operational greenhouse gas (GHG) emissions by at least 30 percent by 2030 vs 2020, while Anglo American wants to reduce GHG emissions by 30 percent 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 openpit mine, a 150-km (93-mile) railway line and a Caribbean port.

“This is good news for Colombia because with this transaction ... Glencore is demonstrating the investor confidence that exists in Colombia's mining sector, and also guarantees investment and employment in the province of La Guajira,” Colombia’s Mines and Energy Minister Diego Mesa told Reuters in a video message.

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

 

 

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