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High-flying Glencore locks in renewable power, prioritises future-facing metals

Glencore results covered by Mining Weekly’s Martin Creamer. Video: Darlene Creamer.

4th August 2022

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweeky.com) – Diversified miner and marketer Glencore is taking steps to progress its decarbonisation pathway, CEO Gary Nagle said on Thursday, when the London- and Johannesburg-listed company delivered exceptionally strong financial results in the six months to June 30.

The steps include locking in a number of renewable power purchase agreements (PPAs) to reduce the Scope 1 and 2 emissions in its business and managing down its Scope 3 emissions largely through the rundown of its coal business. (Also watch attached Creamer Media video.)

Glencore is prioritising capital expenditure towards future-facing metals and not its fossil fuels business. It has a certificated renewable PPA for Antapaccay copper mine in Peru's Cuzco region, extended renewable hydropower arrangements in Kazakhstan, and is progressing renewable energy plans at its ferroalloys business in South Africa.

“At the same time, we don't only look inside the fence but we look outside and our supply chains are critical in ensuring that our suppliers and the commodities and inputs that we buy into our business likewise have the carbon footprints not only monitored but reduced as we go forward to ensure that our footprint within the world is reduced,” Nagle told the results presentation covered by Mining Weekly.

“We support all sorts of technologies within the decarbonisation drive. We are putting our own money towards carbon abatement,” said Nagle, who reiterated that there would be no deviation from the path of responsibly running down coal.

On the recycling front, Glencore is partnering circularity within battery raw material supply chains.

The group’s record half-year result had adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of just short of $19-billion.

A top shareholder return of $4.5-billion was made with $3-billion in share buybacks and $1.45-billion in cash returns, lifting total 2022 shareholder returns to $8.5-billion.

Nagle emphasised that global macroeconomic and geopolitical events during the half created extraordinary energy market dislocation, volatility, risk, and supply disruption, underpinning the $10.3-billion, 119% increase in group adjusted Ebitda. Marketing adjusted Ebit more than doubled to $3.7-billion, with energy products the standout, while Industrial adjusted Ebitda increased $8.4-billion to $15-billion period-on-period.

Commenting on the half-year results, Barclays analysts stated in a note: “Glencore remains our top pick given its catalyst rich investment case, strong free cash flow and return potential which should ramp up meaningfully over the next 12 months.”

Deutsche Bank reiterated its buy rating, and Jefferies pointed out that the record half-year Ebitda of  $18.9-billion compares with Glencore's full-year Ebitda of $21.3-billion of 2021, which was itself a record year.

Credit Suisse research bulletin analysts highlighted Glencore's marketing Ebitda as being 10% above consensus, while JP Morgan Cazenove spoke of Glencore’s first-half performance being “exceptionally strong”.

Looking ahead, tightening financial conditions and a deteriorating macroeconomic environment are presenting some second-half uncertainty for commodity markets.

On having commodities needed for today and the future, Nagle said: “We have a coal business which provides the transition fuel as we decarbonise in this world, to allow countries and the world to decarbonise and still maintain reliable baseload energy.

“We also have a terrific set of future-facing metals operations around the world, very large copper, very large cobalt, very large zinc, very large nickel production, providing the solutions that the world needs.”

Moreover, the marketing business is being presented with arbitrage opportunities from the dislocations in the market.

Despite the higher working capital build, cash generated reduced net funding to $28-billion and net debt to $2.3-billion from prior period levels of $30.8-billion and $6-billion respectively. 

Edited by Creamer Media Reporter

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