Glencore grabs Anglo American, BHP stakes in Cerrejon coal mine

Miner and commodities trader Glencore (LSE: GLEN) is buying out partners Anglo American (LSE: AAL) and BHP’s (ASX, LON, NYSE: BHP; LSE: BHP; ASX: BHP) stakes in the Cerrejón thermal coal mine in Colombia, defying previous reports that said it was looking to walk away from the asset.

The Swiss company expects to pay US$588 million in cash for the combined 66.6% stake owned by Anglo and BHP when the deal completes in the first half of 2022.

Based on expected operating performance, current coal prices and assuming the closing happens as planned, Glencore said it’d likely pay only $230 million. This, it said, would make the estimated investment payback period less than two years from closing.

“Glencore has been involved with Cerrejón for more than 20 years [and] we know the asset well,” outgoing chief executive Ivan Glasenberg said in the statement.

“Disposing of fossil fuel assets and making them someone else’s issue is not the solution and it won’t reduce absolute emissions,” he said, adding he was confident the company would manage the decline of its fossil fuel portfolio in a responsible manner and consistent with the Paris agreement goals.

The deal would replace coal output lost when Glencore decided in February to mothball production at Prodeco, another Colombian coal mine.

The move marks Anglo American’s complete exit from thermal coal, as earlier in the year it divested its South African operation, forming a new company called Thungela Resources (LSE: TGA).

BHP had announced its intention to sell off its thermal-coal operations by the end of 2022. The mining giant said it expects a further impairment charge of around US$80 million post-tax will be recognized as an exceptional item in the second half of fiscal 2021.

Cerrejón is one of the world’s largest surface mining operations, extracting high-quality thermal coal for the export market. Glencore sees production volumes at the mine declining materially by 2030.

Decline has already begun. The mine produced 12.4 million tonnes of coal in 2020, down almost 52% from 2019, and its exports fell to their lowest level in the past 18 years amid coronavirus restrictions and weak global demand for the fossil fuel.