Glencore to acquire JV partners' shares in Cerrejón for $588M
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(Kitco News) - Today, Glencore announced that, following notices from its joint venture partners, BHP and Anglo American, offering to sell their entire shares in the Cerrejón coal mine in Colombia, Glencore has reached agreement with each of them on substantially the same terms to acquire their respective 33.3% interests.
The company said that the transaction has an economic effective date of 31 December 2020, with an aggregate purchase consideration of c. US$588M then being subject to purchase price adjustments calculated at closing.
Based on expected operating performance and current forward coal prices, assuming a closing during H1 2022, Glencore anticipates the cash generated by the operation to reduce the effective aggregate cash consideration to approximately US$230M, making the estimated investment payback period less than 2 years from closing.
Based on its long-term relationship with Cerrejón and knowledge of the asset, the company said it strongly believes that acquiring full ownership is the right decision and the progressive expiry of the current mining concessions by 2034 is in line with Glencore's commitment to a responsible managed decline of its coal portfolio. Production volumes are expected to decline materially from 2030.
The company added that it has reviewed the impact of owning 100% of Cerrejón and is confident that its climate commitments will not be compromised by this partner buy-out.
CEO Ivan Glasenberg commented, "Glencore has been involved with Cerrejón for more than 20 years. We know the asset well and believe that we are the most responsible steward for Cerrejón at this stage of its lifecycle. Disposing of fossil fuel assets and making them someone else's issue is not the solution and it won't reduce absolute emissions."
"We are confident we can manage the decline of our fossil fuel portfolio in a responsible manner that is also consistent with meeting the goals of the Paris Agreement, as demonstrated by our strengthened total emission reduction targets," added Glasenberg.
Cerrejón is an open-pit coal-export mining operation in Colombia. The company plays an important role in the Colombian economy and in the region of La Guajira, where it operates a mine, railroad and port facilities.
According to a press-release, the gross assets of Cerrejón are US$2.968 billion. The loss attributable to Cerrejón in the year ended 31 December 2020 was US$226 million.
Glencore is one of the world's largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities. The company's operations comprise around 150 mining and metallurgical sites and oil production assets.