Glencore buys out Cerrejon coal mine, boosts emissions cut target

Quantum Commodity Intelligence - Swiss-based trading house Glencore has acquired 100% of the Colombia-based Cerrejón coal mine by buying out its two joint partners, the company said in a press release issued on Monday, while it made more aggressive commitments to its total emissions reduction targets.

The company bought out the joint venture partners, BHP and Anglo American, to acquire their respective 33.3% stakes in the coal mine at a total price of $588 million on an effective date of December 31, 2020.

"We have reviewed the impact of owning 100% of Cerrejón and are confident our climate commitments will not be compromised by this partner buy-out," Glencore said in the press release.

The company said the alternative would have been to either sell these shares to new partners which would have "compromised the sustainable operating philosophy" of the mine and could extend the current concession.

At the same time, Glencore selling its stake in Cerrejón "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".

"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," Ivan Glasenberg, CEO of Glencore, said.

The company added that it reviewed its planned fossil fuel production and committed to more aggressive cuts to its total emission targets, as part of the announcement of the buy-out.

Glencore introduced a new short-term reduction target of 15% reduction below 2019 levels by 2026 while it upped its medium-term total emissions reduction target from 40% to 50% under 2019 levels by 2035.

Based on the expected performance, current forward coal prices and including a closure of the mine during the first half of 2022, Glencore expects its investment to be paid back in less than two years.

"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," Glencore said in the press release.

Coal production at the mine is expected to decline materially from 2030.

The transaction is subject to various regulatory approvals.