Glencore to acquire JV partners’ shares in the Cerrejón mine

Baar, Switzerland – Following notices from its joint venture partners, BHP and Anglo American, offering to sell their entire shares in the Cerrejón mine in Colombia, Glencore has reached agreement with each of them on substantially the same terms to acquire their respective 33.3% interests.

The transaction has an economic effective date of 31 December 2020, with an aggregate purchase consideration of c. US$588M then being subject to purchase price adjustments calculated at closing. Based on expected operating performance and current forward coal prices, assuming a closing during H1 2022, Glencore anticipates the cash generated by the operation to reduce the effective aggregate cash consideration to approximately US$230M, making the estimated investment payback period less than 2 years from closing.

The transactions are subject to various regulatory approvals and are inter-conditional on each other.

Glencore carefully considered how best to respond to the sale notices in a manner which reflects its commitment to achieve the goals of the Paris Agreement and acknowledging our obligation to act as a responsible steward of assets.

Based on its long-term relationship with Cerrejón and knowledge of the asset, Glencore strongly believes 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 its coal portfolio. Production volumes are expected to decline materially from 2030.

The alternative is one or more new JV 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 its stated commitment to a responsible managed decline of our coal portfolio, nor would it result in a genuine reduction of absolute greenhouse gas emissions.

Glencore has reviewed the impact of owning 100% of Cerrejón and is confident our climate commitments will not be compromised by this partner buy-out. It has further reviewed its planned fossil fuel production profile and is now able to commit to more aggressive total emission reduction targets as follows:

• it will increase our medium-term absolute total emissions reduction target (Scope 1+2+3) from 40% to 50% by 2035 on 2019 levels; and
• it will introduce a new short-term reduction target of 15% by 2026 on 2019 levels.

Its focus remains on our total emissions footprint, including its scope 3 emissions, which is critical in order to achieve the goals of the Paris Agreement.

Glencore will continue to prioritise capital allocation towards commodities essential for the transition to a low carbon economy.

Ivan Glasenberg, CEO of Glencore, said: “Glencore has been involved with Cerrejón for more than 20 years. 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.

“We are confident we can manage the decline of our fossil fuel portfolio in a responsible manner that is also consistent with meeting the goals of the Paris Agreement, as demonstrated by our strengthened total emission reduction targets.”