Ground Breakers: Coal, coal, coal and coal drives 800% earnings lift for Glencore
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Outwardly Glencore, one of the world’s largest producers and traders of thermal coal, is circumspect about the future of the commodity, commonly referred to as the world’s dirtiest fuel.
A crushing energy crisis, the Russian invasion of Ukraine and years of underinvestment in new coal supply have seen the commodity surge to record highs of in and around US$400/t.
Asked about whether it would consider reversing its position on running down its coal production along with net zero targets by 2050 on an earnings call yesterday, CEO Gary Nagle said the company remained aligned with the positions of global governments.
“We will not divert from our plan to responsibly run down our coal business. We made a commitment to our stakeholders, we made a commitment to the world. It’s right for the world and we will continue down that path,” he said.
“It’s not negotiable. I mean, in an extreme event that all the governments of the world come together and say, we’re putting a pause on (responding to) climate change, and we need energy security and please produce more coal… yes, we would.
“I think that’s very unlikely to happen.”
Inwardly Glencore’s traders are probably running around the halls of its Swiss offices singing “coal, coal, coal, coal” the way Vikings lovingly sing about spam in the world of Monty Python.
For Glencore coal’s magic 2022 run has translated into a stunning 800%+ lift in earnings per share from US0.10c to US0.92c in the first half of 2022, with coal sales the backbone of a jump of 119% in adjusted first half EBITDA to US$18.9b.
Coal earnings rose like a phoenix from the CO2 emitting ashes, climbing from US$912m in the first half of 2021 to US$8.9b in the first half of 2022.
Energy trading (up 344%) was also the biggest contributor to a 104% earnings lift in Glencore’s marketing division to US$3.7b. Metals and mining fell 17% as prices for hard commodities fell off.
Margins in Glencore’s coal operations rose a staggering 760% in the past year to US$160.8b. At spot levels, it will generate US$20b in earnings in 2022 at a margin of US$165/t.
Glencore will pay US$4.5 billion back to shareholders including a US$3 billion share buyback, taking its capital returns for 2022 to around US$8.5b.
Glencore expects spot adjusted EBITDA of over US$32 billion in 2022, against US$21.3b in 2021.
Like many in the lithium game, Core Lithium (ASX:CXO) has gone from a tiddler to a significant mining stock in a short time, rising 301.56% over the past year to a market cap of $2.22 billion.
The company is poised to be the next hard rock miner to enter production with its Finniss mine in the NT due to open in December.
Core has been without a leader for a while since the surprise resignation of MD Stephen Biggins a few months ago.
It is up 6.2% today though after rectifying that, with Rio Tinto (ASX:RIO) executive Gareth Manderson stepping into the void as CEO.
Manderson has been at Rio for 22 years where he was most recently the general manager of sustaining capital, running projects spending $1.6b a year across its Pilbara iron ore network.
“I have been impressed by what the Core team have achieved to date and I am delighted to be given the opportunity to lead Core at this vital time in the company’s growth,” Manderson said.
“With construction of Stage 1 of the Finniss Lithium Project nearing completion and the pending export of lithium, I look forward to leading Core and working with my colleagues across the business to ensure that we maintain strong safety, operational and financial performance.”
Core chairman Greg English said there were synergies with Core’s upcoming spodumene operations, which is 25km from the Darwin CBD and port.
Spodumene prices around record highs, fetching over US$6000/t on spot markets.