Following the completion of the acquisition of a 77% stake in Elk Valley Resources (EVR) on July 11, 2024, we initiated a consultation process to gauge shareholder opinions on whether to retain or demerge the coal and carbon steel materials business.
Shareholders representing approximately two-thirds of eligible voting shares were consulted. Over 95% of those who expressed a preference supported retaining the coal and carbon steel materials business. This preference was primarily based on the belief that retention would enhance Glencore’s cash-generating capacity, enabling us to fund opportunities in our transition metals portfolio, such as our copper growth projects, and to accelerate and optimize the return of excess cash flows to shareholders.
Many shareholders also voiced skepticism about the potential valuation uplift of a MetalsCo (the remaining business) following a demerger. They did not view separation as ESG-positive, given the broad support for our latest Climate Action Transition Plan (CATP), which includes our responsible thermal coal decline strategy, and the recognition of the essential role of steelmaking coal in supporting infrastructure for the energy transition.
Some shareholders chose not to express a specific preference, suggesting that a demerger is a strategic decision best made by the Board.
Based on the consultation results and the Group’s analysis, the Board has determined that retaining the coal and carbon steel materials business offers the most effective path for creating demonstrable and realizable value for Glencore shareholders.
Kalidas Madhavpeddi, Chair of Glencore, commented:
“After extensive consultation with our shareholders, whose views were very clear, and our own analysis, the Board believes that retention provides the lowest-risk pathway to create value for Glencore shareholders today. The cash-generative capacity of the coal and carbon steel materials business significantly enhances our portfolio’s quality by commodity and geography, broadening our ability to fund our strong copper growth options and accelerate shareholder returns.”
The Board also affirms that, in line with our 2024-2026 CATP—recently approved by over 90% of voting shareholders—Glencore will continue to oversee the responsible decline of its thermal coal operations over time. We will also evaluate how to best integrate the EVR assets into our climate transition strategy, considering our ICA commitment to develop and adopt a climate transition strategy for EVR and acknowledging that the transition away from steelmaking coal will be slower than for thermal coal.
With the decision to retain the coal and carbon steel materials business, the previous net debt cap shaping our shareholder returns framework is reset to approximately $10 billion, excluding marketing-related lease liabilities, while maintaining our commitment to a minimum strong BBB/Baa rating.
Although the decision is to retain the business for now, the Board reserves the option to consider a demerger of all or part of this business in the future if circumstances change.
Background on the Coal Demerger
We have always believed that the decision to demerge our coal business should be driven by our shareholders, not only because shareholder approval is legally required but also because investment in coal is often a matter of preference, necessitating ongoing shareholder feedback.
In November 2023, we announced our intention to demerge the coal and carbon steel materials business following our acquisition of a 77% stake in EVR. This intention was based on positive feedback received after our initial approach to Teck in early 2023, where we proposed the demerger in the context of that acquisition.
Following the November announcement, we received feedback indicating that shareholder preferences might have changed. Many shareholders were no longer supportive of a demerger due to evolving views on ESG, increased support for our climate strategy of a responsible decline of thermal coal, and the distinction between steelmaking coal and thermal coal, which influenced our decision to acquire EVR.
Consequently, we decided to conduct a formal consultation after closing the EVR transaction to assess current shareholder views on whether to retain or demerge the coal and carbon steel materials business.
