Glencore mulls copper expansion as it plans to close coal mines

As part of its decarbonisation plans London-listed global diversified miner Glencore will close 12 of its 26 coal mines that it owns across Australia, Columbia and SA by 2035.

The company, which has a secondary listing on the JSE, derives just more than half of its earnings from coal mining. This is likely to change over the next decade as it starts closing coal mines, while looking at increasing its copper output.

Glencore CEO Gary Nagle said during an investor update on Tuesday that this is in line with the business’s push towards decarbonising its industrials pipeline to meets its emissions reduction targets.

Coal mine closures would contribute towards reducing the company’s scope 1, 2 and 3 emissions by at least 15% by 2026 and by 50% by 2035.

Glencore’s medium-term guidance indicates coal production will remain stable at about 110-million tonnes until 2024 — 21% below the 2019 baseline. Coal output was heavily constrained in 2022 due to adverse weather in Australia and disruptions to the Transnet rail services in SA. While production conditions are expected to improve from 2023, the recovery is expected to be offset by coal mine closures.

The miner now produces about 1-million tonnes of copper a year, but according to Nagle it can increase this by 60% to 1.6-million tonnes through “brownfield organic growth” with most projects able to leverage existing infrastructure.

Referring to the International Energy Agency’s outlook for growth in the renewable energy sector, Nagle said the world underestimates the extent of the looming copper deficit.

Based on the outlook, adding the magnitude of wind and solar energy that is envisaged in line with the world achieving net-zero in 2050, and interim emissions reduction targets, the renewable energy sector will require an additional 100-million tonnes of copper over the next eight years.

Energy transition

Growth in the electric vehicle market will require an additional 20-million tonnes of copper between 2022 and 2030.

Added to existing copper demand of 235-million tonnes (cumulative from 2022 to 2030) the world would need about 350-million tonnes of copper if the needs created by the global energy transition are to be met, Nagle said.

“With current global copper supply, we will barely reach 300-million tonnes. That is a 50-million-tonne gap over eight years which would be like having the entire global production of copper shut down for two years.”

Nagle said the huge copper supply shortage is not reflected in the price. “People seem to think miners will just come along and fill the gap. This will not necessarily happen.”

To open a new mine or expand existing capacity in a short time is hard, and made more so by heightened country and operational risks. Glencore can ultimately double its copper production, but only if the demand exists and the price is right, Nagle said.

“We believe the [copper supply] deficit is real, but we will only see if it is real if the price is real. When the price is there, and the world is screaming for the copper that it needs, and we are a few dollars away from demand destruction that is the time that we will bring on this copper to meet that demand.”

Copper prices rose above expectations in 2022 to about $8,000 per tonne, but forecasters predict 2023 levels to be below this average. The World Bank estimated copper would trade at an average of $7,500 in 2022, but prices shot up to a record high of $10,845 per tonne earlier this year due to fears of supply shortages from Russia after its invasion of Ukraine.  

Price predictions for 2023 range from about $5,500-$8,700 per tonne against a 10-year average of $6,750. Long-term estimates by the World Bank predict prices to grow modestly to $8,250 by 2035.

erasmusd@businesslive.co.za