Glencore doles out $7.1bn to shareholders in coal-fuelled profits

Glencore will return more than $7 billion to shareholders in dividends and buybacks after the commodities giant reported another big gain driven by its coal and trading divisions. While the company and its rivals have been positioning themselves to take advantage of rising demand for metals linked to the energy transition, such as copper for wiring and nickel for batteries, their profits last year were overwhelmingly driven by mining. and trade in fossil fuels.

The main earnings of Glencore rose 60% to a record $34.1 billion, of which more than half, $17.9 billion, came from coal production. This was reported by the company in a statement on Wednesday, February 15. The commodity trading unit posted $6.4 billion in core profit, also its highest ever.

Glencore has been one of the biggest beneficiaries of the chaos in commodity markets caused by the Russian invasion of Ukraine. The company’s decision to keep mining coal while its rivals exit has paid off, as the dirtiest fuel hit a record high last year, while its expanding trading business has benefited from wild price swings and dislocations in energy markets around the world.

“Unprecedented developments in the global energy markets were important drivers for our industrial and marketing businesses,” Chief Executive Officer Gary Nagle said in the statement. “Demand for many of our staples is likely to remain healthy as supply constraints persist and inventories remain relatively low.”

With the debt hovering around zero, Glencore said it will make a record payment to shareholders of a $5.1 billion dividend, an additional $500 million payment and a $1.5 billion buyback.

Glencore will eventually stop mining coal

Glencore is the first of the big diversified miners to post 2022 earnings. While other producers are also making big profits, Glencore’s huge coal exposure sets it apart. That’s a change from previous years, when the company generally lagged behind mega-miners BHP Group and Rio Tinto Group because it doesn’t produce iron ore.

Now, Glencore has the advantage. Coal prices were at record levels for much of last year as utilities cut imports from Russia due to the war in Ukraine, shrinking the amount of supply available, while rising coal prices natural gas increased the demand for other energy sources.

the earnings of Glencore from coal were closing in on group-wide profits of $21.3bn a year earlier, and have put it on track to overtake Rio Tinto as the world’s second most profitable miner.

Still, the company has come under increasing pressure from some investors to detail its plans to eventually stop mining coal when its current deposits are depleted. It began a consultation process last year after enough shareholders voted against its climate plan.

pending investigations

While Glencore is generating record profits and shareholder returns, recent years have been marred by a series of investigations that came to a head last year when the company admitted to bribery and market manipulation and said it will pay around of US$1.5 billion to reach an agreement with the United States, the United Kingdom and Brazil.

There are still two pending investigations into the company: one in Switzerland and one in the Netherlands, related to “potential DRC-related corruption,” the company said.

Glencore it also continues efforts to simplify its business: it has already sold several smaller or less profitable assets in recent years, and has now begun a process to sell its stake in Peruvian zinc miner Volcan Cia. Minera.

With information from Bloomberg.