Glencore PLC (LON:GLEN) will take full control of the Cerrejón thermal coal mine in Colombia after agreeing to buy out the respective 33% stakes held by joint venture partners BHP Group PLC (LON:BHP) and Anglo American PLC (LON:AAL) for US$588mln in total.
Glencore was forced to make a decision on the mine after its joint venture partners announced plans to sell their interests.
Anglo American, which is set to receive US$294mln in cash for its share, said the sale marked its exit from thermal coal operations.
Thermal coal is used to generate about 40% of the world’s electricity, but power generation from coal is very carbon dioxide intensive, making it a significant contributor to climate change.
Glencore said it carefully considered how best to respond to the sale notices by its joint venture partners “in a manner which reflects our commitment to achieve the goals of the Paris Agreement and acknowledging our obligation to act as a responsible steward of assets.”
"Glencore has been involved with Cerrejón for more than 20 years,” said chief executive Ivan Glasenberg. “We know the asset well and believe that we are the most responsible steward for Cerrejón at this stage of its lifecycle.”
"Disposing of fossil fuel assets and making them someone else's issue is not the solution and it won't reduce absolute emissions,” he said.
Glencore said it had reviewed the impact of owning 100% of Cerrejón and was confident that its climate commitments will not be compromised by this partner buy-out.
“We have further reviewed our planned fossil fuel production profile and are now able to commit to more aggressive total emission reduction targets,” it said.
It will increase its medium-term absolute total emissions reduction target from 40% to 50% by 2035 and introduced a new short-term reduction target of 15% by 2026. Both targets are based on 2019 levels.
Based on expected operating performance and current forward coal price and assuming the transaction closes during the first half of 2022, Glencore expects the cash generated by the operation to reduce the effective aggregate cash consideration to approximately US$230mln, making the estimated investment payback period less than two years from closing.