Sliding into Ivan Glasenberg’s shoes was never going to be easy. Glencore’s new boss, Gary Nagle, has inherited a $70 billion miner-cum-trader with a unique suite of metals crucial to a low-carbon economy, and a strategy for dirty coal that is thus far keeping investors onside. With that roadmap largely laid out by his South African compatriot, he needs something different to make his mark.
The Glencore logo is pictured in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmannnew boss, Gary Nagle, has inherited a $70 billion miner-cum-trader with a unique suite of metals crucial to a low-carbon economy, and a strategy for dirty coal that is thus far keeping investors onside. With that roadmap largely laid out by his South African compatriot, he needs something different to make his mark.
Glencore is already a top copper producer and controls a third of the global supply of cobalt, a key ingredient of electric vehicle batteries, courtesy of its mines in the Democratic Republic of Congo. Coal is kryptonite for green investors but could generate $7.3 billion of EBITDA this year, Citi reckons. That’s a third of Glencore’s total and almost as much as copper. With net debt at $10.
Neither option looks hugely appealing. Ditching coal may not help if investors think Nagle is merely handing carbon emissions to someone else. And copper near June’s record high of nearly $10,500 a tonne means acquisitions carry the risk of overpaying, a particular problem after the sector’s disastrous M&A splurge a decade ago.
A safer bet would be buying his own stock. Even though Glencore shares have more than doubled since last year, the company is worth just 3.9 times its forward EBITDA, based on Refinitiv estimates. That’s half the average for the last decade, Citi says. With $35 billion of free cash flow before dividends forecast by 2025, Nagle could afford to buy half the company in just four years.
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