ANGLO American plc is selling its shareholding in the Cerrejón mine in Colombia to diversified mining giant Glencore, marking the final step in its transition from thermal coal assets.
Anglo, which previously told the market that it planned to exit thermal coal production by 2024, said yesterday that Glencore had agreed to acquire its 33.3 percent stake in Cerrejón for $294 million (R4.2 billion).
Anglo American chief executive Mark Cutifani said the agreement marked the last stage of the transition from thermal coal operations.
“During that transition, we have sought to balance the expectations of our wide range of different stakeholders as we have divested our portfolio of thermal coal operations, in each case choosing the exit option most appropriate for the asset and its distinct local and broader circumstances,” said Cutifani.
Anglo spun off its South African thermal coal division into Thungela Resources to improve its valuation amid a coal-averse investment environment. Thungela listed on the JSE and in London earlier this month.
Cerrejón is a joint venture between Anglo, Glencore and BHP, with each owning 33.3 percent of the asset.
Glencore said it had agreed to acquire both Anglo and BHP’s shareholding in the joint venture for $588m, giving it full control of the operation.
Glencore chief executive Ivan Glasenberg said given that Glencore had been involved with Cerrejón for more than 20 years, it was the most responsible steward for Cerrejón at this stage of its life cycle.
“Disposing of fossil fuel assets and making them someone else’s issue is not the solution and it won’t reduce absolute emissions,” Glasenberg said.
Glencore said the transactions were subject to various regulatory approvals and were inter-conditional on each other.
“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,” said Glencore.
It said the alternative was one or more new joint venture partners acquiring these shares and compromising the sustainable operating philosophy of Cerrejón, and extending production beyond the current mining concessions.
“Equally, a disposal of Glencore’s current stake in the mine would not be consistent with our stated commitment to a responsible managed decline of our coal portfolio, nor would it result in a genuine reduction of absolute greenhouse gas emissions,” said Glencore. It committed to reducing emissions at the operation.
“We have reviewed the impact of owning 100 percent of Cerrejón and are confident our climate commitments will not be compromised by this partner buyout,” said Glencore.
It said it had further reviewed its planned fossil fuel production profile and committed to increase its medium-term absolute total emissions reduction target (Scope 1+2+3) from 40 percent to 50 percent by 2035 on 2019 levels, and it also committed to introduce a new short-term reduction target of 15 percent by 2026 on 2019 levels.
“Our focus remains on our total emissions footprint, including our Scope 3 emissions, which is critical in order to achieve the goals of the Paris Agreement,” said Glencore.
The group said based on expected operating performance and current forward coal prices, assuming a closing during the first half of 2022, it predicted the cash generated by the operation to reduce the effective aggregate cash consideration to around $230m, making the estimated investment payback period less than two years from closing.