AFTER declaring it would continue to produce thermal coal for decades to come, mining giant Glencore is looking to put its Hunter mines into a new company that would arise out of a proposed merger with Canadian mining company Teck Resources.
The proposal to split Glencore into separate "MetalsCo" and "CoalCo" companies comes after Glencore had previously taken a different stance to other big miners including BHP and Rio Tinto, who had moved to get out of thermal coal as the climate change related pressures on the sector began to mount.
On April 3 Glencore's Swiss head office announced what it described as a "proposal for a merger between Glencore and Teck and a simultaneous demerger of the combined coal business".
Teck rejected the initial takeover bid, and Glencore responded on Tuesday with a revised offer, which the Teck board described soon after as "largely unchanged".
Glencore' original offer would have paid Teck shareholders in Glencore stock only, but the new offer adds $US8.2billion ($11.9billion) in cash.
Glencore values its offer at $US23billion ($33.8billion) but Teck says this description is "illusory".
Teck had announced plans in February for its own split, proposing that its coking coal assets go into a company to be called Elk Valley Resources, with the parent company to become Teck Metals.
Such spin-offs are the way that BHP turned the Whyalla steelworks and Newcastle steel mills into OneSteel, and the Port Kembla works became Bluescope Steel.
Having built its thermal coal business into one of the world's biggest, Glencore's intention to isolate the parent company from the environmental, social and governance (ESG) issues confronting the coal industry represents another turning point in the global campaign to replace fossil fuels with renewable energy.
Glencore operates nine coal mines that export through the Port of Newcastle, and another six in Queensland.
A 2022 study of its operations said the nine mines employed more than 5300 people directly, with the majority of its employees living and working in the Singleton local government area.
But the company has been repeatedly targeted by climate activists.
Announcing the proposed hookup with Teck, the company said: "Glencore intends that CoalCo would oversee a responsible decline of its thermal coal portfolio production in line with Glencore's current ambition to achieve net zero by 2050, with a supportive policy environment.
"Glencore also intends for CoalCo to continue to uphold Glencore's commitment to responsible operating practices. Further study of the emissions pathway of the combined companies would be required in order to establish revised combined targets."
But in an analysts' call on Monday, Teck executives said they intended to proceed with their original separation plans, which are due for a shareholder vote on April 26.
Teck chief executive Jonathan Price told market analysts that the Glencore proposal would have "benefited Glencore only".
"Teck has engaged in discussions before with Glencore regarding a similarly structured transaction to Glencore's opportunistic proposal," Mr Price said.
"In 2020, after discussions, the Teck Board determined not to proceed because the value to shareholders wasn't there. It still isn't.
"There has not been any meaningful engagement between Teck and Glencore concerning this type of transaction for over two years."
Mr Price continued: "The Glencore proposal would expose Teck shareholders to a large thermal coal business and oil trading business, significant jurisdictional risk and poor track record of value creation, all of which would negatively impact the value and value potential of Teck's business.
"Not to mention the significant ESG issues it would introduce. Maintaining social license to operate and grow is critical to maximising shareholder value."
In its own analysts' call the day the proposal was made public, Glencore said its Australian mines produced 61.1million tonnes of thermal coal last year, and 12.7million tonnes of coking coal.
"We intend for CoalCo to respect the net zero climate strategy Teck has announced in respect of its coking coal operations and continue to see a responsible decline of its thermal coal operations," reads an information slide from the briefing.
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