First off, the company has made out like bandits because it decided to hold on to its huge coal assets. It did so in contrast to, say, Anglo American which, under heavy investor pressure, unbundled its South African coal assets into Thungela in June last year. In an amazing turn-up for the books, Thungela’s share price rose from R22 at listing to around R280 now. If Anglo shareholders had kept their shares after the demerger, they too have made out like bandits. But if you didn’t, and you decided to follow the advice of the experts and divest from coal, you might be kicking yourself — and your financial adviser.

The whole sector has been an amazing jumble. Think about BHP, for example, which to much fanfare decided to sell some of its less valuable thermal coal assets (electricity-producing coal as opposed to metallurgical coal or “coking coal”) in 2021. The company sold some, including a huge mine in Colombia, but couldn’t find buyers for others. What luck! The company then did a complete U-turn earlier this year, and decided, well, let’s keep ’em. BHP claimed that the surging coal prices made the assets more valuable and investor attitudes had shifted.

What they mean by that is that investors circa 2021 were hugely concerned about the issue from a climate-change point of view and companies felt their attractiveness diminishing. But when the coal price jumped, investors decided on, let’s call it, a “different approach” to climate change. That approach would entail holding on to the money, while promising to close the mines in a “responsible” way, ie, later.

The other big global miner, Rio Tinto, decided to exit coal entirely and you have to say, from an investment point of view, it hasn’t been a success. All the share prices of the big miners are up over the past three years, but of the four (Anglo, Rio, BHP and Glencore) the out-and-out winner has been Glencore.

So you might think that after a share price rise of 150% over three years, Glencore is trading at a peak. Turns out not so much, because the earnings flow has been so strong, it outpaced the price rise. All of the big miners are cheap, with price-earnings ratios below, or around, 10, but Glencore’s is five. That is screaming buy territory.

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Or is it? Because once you get past your conscience on the climate change issue, you still have to confront Glencore’s history of corruption. This year alone, Glencore had to pay a record R6-billion fine for “endemic” corruption at its African oil trading desk. 

Glencore employees flew cash bribes to Africa in private jets and used “sham” documents to hide the true purposes of cash, the Serious Fraud Office in the UK said. And The Guardian reported that senior Glencore employees signed off on cash withdrawals used for the pay-offs. The court heard how Glencore employees and its agents had given “bungs” worth $27-million to unnamed officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea and South Sudan, causing harm worth $128-million (£81-million at the time of the offences).

This was the second fine Glencore coughed up this year! The company agreed in May to pay $1.1-billion to US authorities for violations of bribery laws and commodity price manipulation and had said before that it did not anticipate further costs.

To quote an old joke, a billion here a billion there, soon you are talking about real money. Except in Glencore’s case.

With all of this fizzing in the background, I was interested to read Glencore’s 2022 investor update released last week. The update squared the circle on the coal issue by tabling a gradual closing of its coal operations so the company will be net zero by 2050. However, its production forecast for coal mining over the next two years at least is flat.

As something of a mitigation strategy, the company is investing heavily in its recycling business and its blue-hydrogen project. But it’s clear, the company’s heart is increasingly attracted to copper. Mining companies will always tell you commodity shortages are looming and significant mine development is lagging. But sometimes it happens to be true.

The total requirement for copper for renewable energy alone is around 100 million tonnes by 2030. That would put global copper demand at 355 million tonnes per year, and supply, including 100 million tonnes of recycled scrap, at around 304.5 million tonnes. That is a huge, huge deficit. It explains why the copper price is six times what it was in 2002, and, incidentally, why copper theft is making it hard for Transnet to keep its trains running.

Sometimes I’m glad I don’t have to make these decisions: your conscience or your pocket. I think the real lesson of the past few years is that companies do respond to shareholder pressure — up to a point. If we are to see real CO2 reductions, it’s crucial that investor groups don’t drop the ball. DM/BM