Post by Ben-son Quek

(Australian Financial Review) "Glencore coal spin-off still viable despite price slump" Glencore shareholders and analysts say there is still a case for the Swiss giant to spin off its global coal assets despite prices of the commodity falling to five-year lows, but it would need to be tied to a broader deal to sell its larger copper-focused business. Glencore is expected to update investors next month on the company’s strategic direction after it shifted $30 billion in coal mines and other assets into the Australian entity that holds its NSW and Queensland coal mines, reviving speculation about a demerger. JPMorgan says a Glencore coal spin-off remains viable despite five-year low prices. Bloomberg JPMorgan analysts said Glencore could still spin off the coal division, dubbed DirtyCo by some analysts, despite weak coal prices. However, they said the most strategically logical structure for the new entity would involve a highly leveraged balance sheet, which would need to be agreed upon by the company’s lenders. “We note that any re-allocation of debt may require creditor consent, which is an important consideration for the mechanics of any de-merger scenario,” JPMorgan told clients last week. In May, The Australian Financial Review revealed Glencore chief Gary Nagle had quietly bundled the London-listed miner’s global coal assets into the same Australian entity that holds its NSW and Queensland coal mines. News that it had beefed up the Australian entity reignited speculation that Glencore was positioning for a spin-off of its coal business, currently valued by JPMorgan at $US8 billion ($12 billion), freeing up its $US24 billion copper-focused metals business for sale. Tribeca Global Natural Resources Fund portfolio manager Ben Cleary, said Glencore would only consider spinning off its coal division if it received a strong offer for its copper-focused metals business, which also includes zinc and nickel. Tribeca has been a long-term shareholder of Glencore. “Glencore has shown to be very disciplined buyers and sellers of assets over the last decade,” he said. “There would be lots of interest in their metal business from the likes of Rio Tinto, BHP, Teck, Anglo, Freeport and the Chinese.” “If they received the right price for the metals business I would imagine Glencore would be happy to revert to a largely coal business, whether that was by spin-off or in specie.” https://lnkd.in/g6wVBzgm