Glencore PLC (LSE:GLEN)'s decision to retain its coal assets was no surprise to broker Panmure Liberum, given its cash generation and plans to wind it down.
“The pressures of ESG have evolved and investors approve of its plans to wind down the coal business responsibly,” said the broker.
Glencore’s net debt target will return to US$10 billion and the company should be in a position to make top-up payments at the full-year results in February, Panmure added.
Otherwise, Panmure said the marketing business is still going strong with US$1.8 billion EBITDA, with the strength in the metals division offsetting the weakness in energy.
But Russ Mould at AJ Bell was more surprised by the decision to retain its coal assets.
He stated: “The company and a large number of its investors, given this move has followed significant consultation with its shareholder base, clearly still see a place for coal in its portfolio of assets.
“The retention is being sold on the basis it will enhance cash generation and allow the business to invest in its energy transition assets.
“However, whether this will pass muster with institutions which place a strong emphasis on ESG factors and with companies in transition industries looking to secure supply of necessary metals is an open question.”
Mark Crouch, at investment platform eToro, said: “While Glencore slashed their dividend earlier this year to pay down debt and fund acquisitions, investors will see the bigger picture.
“So much so, shareholders unanimously agreed to retail further coal production units, showing their conviction that fossil fuels remain at the heart of Glencore’s future.
“Shareholders will know by now returns on mining investments are sporadic. What matters most however is the long-term trend, which for Glencore, is up.”