Billionaire boss Ivan Glasenberg makes one last coal deal in final days at Glencore

[NEW YORK] Glencore Plc will buy out two rivals in a giant Colombian coal mine, expanding its production of the most-polluting fuel as prices soar, despite continued global efforts to reduce usage.

In what's likely to be the final deal announced by outgoing Chief Executive Officer Ivan Glasenberg, Glencore agreed to buy stakes owned by BHP Group and Anglo American Plc in the Cerrejon thermal coal mine for about US$588 million, subject to purchase price adjustments.

The sale completes Anglo's retreat from thermal coal and extends similar efforts by BHP, amid investor pressure. However, Glencore has committed to run its coal mines for another 30 years, potentially allowing it to profit as rivals retreat. It's already the biggest shipper of the fuel, and gaining full control of Cerrejon gives the company even more exposure just as prices trade at the highest level in years, buoyed by strong demand as the global economy rebounds.

As Anglo and BHP looked to sell, Glencore was always seen as the most likely buyer for the mine. The joint-venture agreement contains multiple change-of-ownership caveats that made it difficult for new partners to buy in.

Under Mr Glasenberg, a former coal trader, the company has been a staunch defender of the fuel, saying it's essential to providing affordable and reliable power in developing countries. Glencore also said it's the best positioned to responsibly manage their decline. Mr Glasenberg is set to be succeeded as CEO by Gary Nagle, who previously ran the company's coal business, at the end of this month.

That bet has paid off this year, as Glencore benefits from soaring prices for coal, which is being driven higher by a combination of spiking demand and output constraints around the world. Still, adding more production risks increasing scrutiny on Glencore's sprawling coal operations as global efforts to cut back on the fuel continue.

In a concession to investors concerned about the company's latest coal investment, Glencore said it's now planning to cut its emissions by 50 per cent through 2035, from an earlier goal of 40 per cent. It is currently the only major miner with a goal to be carbon neutral by 2050.

The company had already committed to cap its coal production at about 145 million tons a year and has also set out a pathway to stop producing the fuel by around 2050. The Cerrejon deal still allows it to meet both those criteria, Glencore said.

The company also said it's the best option to run a troubled mine that is only expected to last for another decade, as other possible buyers may be less responsible.

"We know the asset well and believe that we are the most responsible steward for Cerrejon at this stage of its lifecycle," Mr Glasenberg said in the statement. "Disposing of fossil fuel assets and making them someone else's issue is not the solution and it won't reduce absolute emissions." For Anglo, the deal marks its end as a thermal coal producer, having spun off its South African assets earlier this month. The new miner, Thungela Resources, traded at a lower-than-expected valuation in its first days as a public company. However, the shares have since rallied about 70 per cent in Johannesburg from the initial close, signalling firming investor appetite as coal prices jump.

The cash generated before the Cerrejon deal closes mean it will pay an effective cash amount of around US$230 million, Glencore said.

BLOOMBERG