Glencore’s share price up 7% despite climate plan challenge

Glencore’s share price gained last week despite news that two major institutional investors voted against the miner’s climate resolution back in May. This comes at a time when Glencore is facing fierce criticism for its coal business. However, long term, it is shifting focus to extracting metals needed for the energy transition.

• BlackRock says Glencore’s climate resolution has ‘inconsistencies’.
• Glencore’s share price fails to repeat last year’s surge as commodity prices soften.
• The miner eyes the DRC to expand lithium business.

Glecore’s [GLEN.L] share price gained over 7% last week to close Friday at 456.6p. The bounce came despite the Swiss-based trading and mining company receiving negative publicity after it emerged that two big institutional investors had voted against its climate plan in May.

Overall, Glencore stock has had a muted performance in 2023 compared to last year. A big factor in this has been the softening of commodity prices this year.

With Glencore’s share price down on the year, is there any upside left as the company tilts away from coal?

Blackrock votes against Glencore climate resolution

Investment behemoth BlackRock [BLK] revealed that it didn’t support Glencore’s climate resolution at the miner’s AGM in May, according to its recently published stewardship summary. BlackRock, which is a major institutional investor in Glencore, said that there were “inconsistencies” in the mining giant’s stated strategy. BlackRock is Glencore’ s third-biggest investor, owning 8.2% of the miner.

“While the UK-listed mining company has improved their disclosure of climate-related risks and opportunities and has continued to deliver on their Climate Action Transition Plan, [BlackRock Investment Stewardship] is concerned that aspects of the report and recent developments have pointed to inconsistencies in the company’s stated strategy.”

An institutional filing showed that 70% of shareholders supported the resolution, while 30% rejected it. At the time, Glencore CEO Gary Nagle said that the resolution had the “overwhelming support” of shareholders. MFS, Glencore’s ninth-biggest shareholder, also voted against the resolution.

What’s happening with Glencore’s share price?

Glencore’s share price has gained 7.8% over the past month as it begins to exit from the downturn seen at the start of August. That slump was triggered by interim results showing Glencore’s profits had halved on weaker commodity prices.

The softening in commodity prices has loomed large for Glencore this year. Since January, the stock has dropped over 17%, well off the 47% gain seen last year after Russia’s invasion of Ukraine sparked a surge in commodity prices.

Glencore backs Tantalex’s lithium plan in DRC

Concerns over Glencore’s environmental credentials are partly down to its coal business. Fossil fuels represent a large chunk of the miner’s sales. In the run-up to the AGM, Glencore made a bid for Canadian coal miner Teck Resources [TECK]. While that bid was unsuccessful, the two companies are still in discussions over Glencore buying Teck’s coal business. Glencore plans to spin off its and Teck’s coal operations as a separate entity. Glencore said it plans to close its thermal coal mines by the middle of the 2040s.

Yet in the longer term, Glencore hopes to pivot towards mining metals needed for the energy transition, such as copper and lithium, which are needed to make batteries for things like mobile phones and electric vehicles.

To do this, Glencore is backing lithium extraction in the Democratic Republic of Congo (DRC), where it already has copper and cobalt operations.

Earlier in the month, Glencore made its first-ever investment in a lithium mine in the DRC in a deal with Canadian lithium explorer Tantalex [TTX.CN]. The deal sees Glencore provide Tantalex with $55m in three stages. The money will go towards funding the extraction of lithium-containing concentrate from a former tin mine. In return, Glencore gets the rights to sell the extracted lithium for six and a half years.

Where next for Glencore’s stock

Glencore’s exposure to coal mining is unlikely to do its ESG status any favours, but while demand remains, Glencore will benefit. Longer-term, the company has scrambled to position itself as part of the energy transition through the mining of metals like copper.

The miner is still monstrously profitable, having racked up $107.4bn in the first half of the year, alongside underlying cash profit of $9.4bn. While both figures were substantially down on the same period last year, they are nothing to be sniffed at. A forward yield of 7.73% will be welcomed by income seekers.

Among analysts tracking the stock, Glencore’s share price has a 12-month median of 534.26p. Hitting this would see a 17.1% upside on Friday’s close.