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Glencore announces new CEO and net zero target

Ivan Glasenberg will retire in the first half of 2021 and coal mining boss Gary Nagle will take over
Glencore announces new CEO and net zero target
  • Ivan Glasenberg to retire after almost 20 years as Glencore chief executive
  • Company also announces net zero carbon emissions goal for 2050, including scope 3 emissions from customers
IC TIP: Hold at 239p

Glencore (GLEN) coal boss Gary Nagle will take over from Ivan Glasenberg as chief executive next year. He will move into the top job in the second half of next year, by which time Mr Glasenberg will have been running the company for 19 years. The South African joined in 1984 when it was Marc Rich + Co, and led Glencore through its listing in 2011 and the pivotal merger with Xstrata in 2013. 

The younger South African will take over at a dramatic time for the company: Mr Glasenberg has handed him a difficult net zero carbon emissions target, sizeable debt, while several regulatory investigations into Glencore’s operations are ongoing.

The net zero emissions goal also announced on Friday includes offsetting unavoidable operational emissions from its mines, and critically scope 3 emissions. This is the CO2 linked to Glencore’s customers, including the coal power plants in Colombia and South Africa that buy its thermal coal. Scope 3 emissions account for 92 per cent of Glencore’s emissions. 

The target also includes a 40 per cent emissions reduction within 15 years. The 2035 goal coincides with Glencore’s mine life estimates for its Colombian coal assets, meaning there will be a decline in scope 3 emissions as production falls.

Mr Nagle, 45, joined Glencore in 2000 and has largely worked in the coal division, running its Colombian subsidiary before a stint in South Africa as head of the alloy assets division. He has been the coal industrials boss since 2018. 

Glencore chairman Tony Hayward said the South African was taking over “at a time of great change”. “As the world moves to recover from the impacts of the COVID-19 pandemic, while also addressing the challenge of climate change, our industry has a significant opportunity to contribute to the economic recovery by providing commodities essential to the transition to a low-carbon economy,” he said. 

Mr Glasenberg had said his successor would come from the younger generation running the company’s divisions. The choice of the coal boss fits with the longstanding chief executive's strong defence of Glencore continuing to hold fossil fuel assets. The company has ruled out selling the mines, saying it would operate them "until they reach the end of their lives". 

Fellow mining majors Rio Tinto (RIO), BHP (BHP) and Anglo American have either sold out of thermal coal or have plans to do so. 

The regulators looking into Glencore include the Serious Fraud Office and the US Department of Justice. Separately, the US Treasury has accused the company’s former partner in the Democratic Republic of Congo, Dan Gertler, of being behind “hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals”. The Ontario Securities Commission fined a former listed subsidiary of the miner $22m in 2018 over disclosures around its relationship with Mr Gertler and payments to him.

Alongside the difficulties, Mr Nagle is coming in while Glencore’s key commodity, copper, is surging. The red metal is trading at a seven-year high, close to $8,000 (£5,915) a tonne (t), while the company’s share price is at a 10-month high of 239p. Macquarie Bank has forecast a $7,050/t average for copper in 2021, which would see free cash flow surge. Consensus forecasts compiled by FactSet put free cash flow at $4bn next year, 52 per cent above 2020.

As well as the net zero and chief executive announcements, the company has also said it intended to bring back the dividend at the release of 2020 full year results, after pulling this year’s payout because of Covid-19 and the need to pay down net down debt. Mr Glasenberg said at the interim results announcement in August net debt would be under the $16bn level needed to restart dividends by the end of the year. 

Glencore's portfolio - outside coal - is well suited to the energy transition, providing copper, nickel and cobalt, which are needed in batteries and infrastructure. The return of the dividend and energy transition metals exposure are positive for investors, but we think there are still risks here given the open investigations. Hold.

Last IC View: Hold, 196p, 6 Aug 2020