Japan’s Itochu delays plans to exit Australian thermal coal

Itochu did not respond to inquiries.

But Itochu president Keita Ishii said in the company’s most recent annual report that the blacklisting of Russian commodities following the Ukraine invasion had slowed decarbonisation efforts and put more emphasis on security of supply.

He said he was willing to take longer to exit Maules Creek to ensure Itochu fulfilled its “responsibility for stable supply”. Mr Ishii said Itochu still planned to exit Maules Creek eventually, but would do so in an economically rational way.

While Itochu has sold some Australian coal assets, like its 12.5 per cent stake in Queensland’s Rolleston mine to Glencore, it has also bought some Australian coal assets since making its 2021 climate pledge. In April last year, Itochu paid $213 million for a 30 per cent stake in Fitzroy QLD Resources; the company that owns the Carborough Downs mine and several other Queensland coal assets.

While Fitzroy is principally focused on coking coal for steelmaking, about eight per cent of its revenue in 2022 – the most recent set of accounts lodged with the corporate regulator – came from selling thermal coal to power generators.

Most coking coal mines also sell thermal coal as a byproduct, and Itochu has been mooted as a possible buyer of a minority stake in the Blackwater and Daunia mines that Whitehaven recently acquired from BHP.

Glencore is one of the world’s biggest coal exporters and has twice contemplated a demerger of its coal division in the past 14 months as part of efforts to acquire part or all of Canadian mining company Teck Resources. Glencore originally proposed to acquire all of Teck for $23 billion in April 2023, under a “merger demerger” proposal that envisaged the combined coal assets of the two groups would be subsequently spun-out to form a pure coal miner listed on the New York Stock Exchange.

Facing opposition to the transaction, Glencore scaled back its ambitions and lobbed a $US6.93 billion ($10.5 billion) offer to acquire Teck’s coal division in November.

Announcing the scaled back offer, Glencore reiterated its belief in separating its coal and metals divisions, saying it “intends to demerge the combined business, once Glencore has sufficiently delevered, which is expected to occur within 24 months from close”.

Investors like Tribeca Global Natural Resources portfolio manager Ben Cleary have since publicly urged Glencore to retain the coal division, which is dominated by thermal coal mines in the Hunter Valley region of NSW and some coking coal assets in Queensland.

At Glencore’s annual meeting on May 29, chief executive Gary Nagle’s view on the coal demerger appeared to soften; he told shareholders they would only get a vote on a coal demerger if his listening tour on the subject found significant support for the idea.

“Our intention is, once we close [the transaction], and obviously, we want to embed that asset into the business and there are synergies that we want to ensure that we capitalise on, we will immediately consult with shareholders,” he said.

“If the majority of our shareholders, through that consultation, indicate a willingness to spin-off coal, then we will immediately take it to a vote. If the majority of shareholders … choose not to move ahead with a spin-off, there’s no need for a vote.”

Mr Nagle added that any vote on the matter would be binding, not advisory.

Glencore will ultimately own 77 per cent of the Teck coal assets, with the other 23 per cent to be owned by Nippon Steel and Korean giant POSCO.