Glencore says it will get out of coal but its acquisitions in the mining market have made huge profits for investors and now it plans US flotation for its coal business
Swiss-based mining and commodity trader Glencore has become the latest company to snub the London Stock Exchange to spin off and list its coal business in New York.
The FTSE 100 mining giant has announced it will acquire a majority stake in the steelmaking coal business of Canada-based Teck Resources for $6.9bn, bringing an end to months of negotiations.
Glencore has never disguised its continued interest in coal, which has proved a great money spinner. Former chief executive Ivan Glasenberg argued it was far better that Glencore, with better extraction standards, was responsible for depleting dirty-fuel assets than to follow the Anglo-American example of spinning them out to another, less-monitored entity.
Th Financial Times said: “Vacuum cleaners sanitise by collecting debris. In recent years, Glencore has hoovered up coal assets other mining groups wanted to cleanse themselves of. The Swiss group committed to getting out of coal even as it accumulated cheap assets and banked the cash flows. The strategy has made lots of money for investors.”
Successor Gary Nagle has gone one better by spending $6.9bn to take a 77% share of Canada-based Teck Resources’ metallurgical coal assets.
In an analysis of the sale Alex Brummer at Thisismoney.co.uk writes: “Someone in the world needs to make virgin steel, which is why Japan’s Nippon Steel is hanging onto to a 20 per cent stake.” The new move sets the stage for a break-up of Glencore, which is proposing to split off the newly combined coal businesses into a standalone entity.
“The demerger is expected to happen within 24 months of the Teck deal closing, assuming it is approved by shareholders.
“But in a blow to the City, bosses on Tuesday (November 14) reiterated plans to list the combined coal business in New York rather than London – with secondary listings also going elsewhere, to Toronto and Johannesburg.
“The remaining Glencore group, which will focus on the ‘transition metals’ used in electric cars and other green technologies, will remain listed in London.”
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