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On Wednesday, the CEO of $61 billion Swiss miner Glencore changed his mind about a New York IPO for his coal division. However, he may relist the entire business there.
Glencore’s initial plan to spin off its coal division after acquiring 77% of Teck Resources has new implications. July steelmaking coal unit made sense. It would have centered the group on green transition metals like copper, which trade at a higher valuation multiple than miners with a more diverse commodity mix. Sustainability-focused European investors would have been less annoyed: UK asset firm LGIM warned in June that some of its funds would liquidate Glencore stakes because to Nagle’s coal mine closures.
However, RBC forecasts the merged coal companies could generate 34% of Glencore’s 2024 EBITDA, or $6 billion. That exceeds the analyst’s $4.7 billion copper business estimate for Glencore this year. Nagle can invest the money in copper mines and has long advocated that progressively closing coal mines is more responsible than selling them to someone who could expand them.
A consolidated Glencore in London may preserve its valuation discount. Visible Alpha data shows the group trading at 3.9 times its 2024 EBITDA forecast. Rio Tinto BHP and Anglo American which have more exposure to iron ore, trade on average at 5 times. Nagle might buy back cheaper Glencore shares to close the disparity. Moving the entire company to New York is another option.
Many UK-listed companies have considered a shift to the U.S. market due to its greater values. London-listed pure-copper play Antofagasta trades at a premium to other diversified miners because to its exposure to the red metal. Glencore’s past U.S. Department of Justice encounters would also be unusual alongside a love-in. Nagle said Wednesday he was “comfortable” listing in London.
A coal-heavy European corporation might aim for a better New York valuation. American pension funds are more sanguine, thus as of May, they invested $770 billion in coal company bonds and shares, compared to $118 billion by European investors, according to Urgewald. Glencore’s coal arm could be worth $28 billion, nearly half of the Swiss miner’s enterprise value, if valued at 4.7 times its expected 2024 like U.S. coal rivals Alpha Metallurgical Resources, Arch Resources , Consol Energy and Warrior Met Coal. It’s unlikely Nagle hasn’t noticed.
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