Diversified miner and commodities trader Glencore says its coal production in SA recovered in 2023, and output is expected to maintain its momentum in the medium term.
SA thermal coal output for export rose 8% to 13.7-million tonnes, the miner said in its full-year 2023 production report on Thursday. Thermal coal production for national use rose 11% to 4.1-million tonnes, bringing the total SA production to 17.8-million tonnes — a 9% jump from 2022.
The turnaround comes after Glencore had battled with rail constraints, flooding and other logistical issues in 2022 that hit production.
Glencore said the improvement reflected “higher productivity in SA and a year-over-year easing in certain external factors that constrain capacity, such as wet weather and blockades”. Still, it lamented that “both periods were constrained by capacity restrictions in the SA rail network”.
The local performance contributed positively to the overall group, which reported that coal production had increased by 3.6-million tonnes to 113.6-million tonnes, up 3% from 2022.
SA is one of the top coal-exporting countries in the world and is heavily reliant on coal for electricity production. The group has previously said that although it believes coal’s share of primary energy demand will decline over time, it acknowledges that for many countries it continues to drive economic and social development.
In its latest update on Thursday, Glencore said coal production was forecast to be “steady” at the guidance range of 105-million to 115-million tonnes.
CEO Gary Nagle said the guidance excludes any contribution from the Elk Valley Resources (EVR) steelmaking coal assets, in which Glencore agreed in November 2023 to acquire a 77% interest from Teck Resources.
Glencore is one of the world’s largest global diversified miners, with more than 150 mining and metallurgical sites and oil production assets, and a footprint in more than 35 countries. It is also one of the world’s largest traders of physical commodities, and that sets it apart from many of its peers, which rely mostly on physical production.
The London-based group said it expects its 2023 profits from its trading division would be $3.5bn.
While coal and gold were the star performers with gold production rising 13% in 2023 to 747,000oz, production slipped in most categories including silver, nickel and ferrochrome.
The miner reported lower production in these commodity categories, including cobalt production, and flagged a further decline in output in 2024.
The dip in its own sourced copper production, which declined 5% from the prior year to 1.01-million tonnes, reflected the sale of a mine in New South Wales, Australia, the group said. The CSA copper mine in Cobar was sold in June 2023 to Metals Acquisition Corp (MAC) for $1.1bn.
It said it expects copper production of 950,000 to 1.01-million tonnes in 2024. In addition, due to increased inflation across key operating regions, as well as the impact of cobalt stockpiling and related non-cash inventory adjustments within copper, it expects to report higher copper, zinc and nickel unit costs for full-year 2023 than in previous guidance.
Copper — a malleable and ductile metal with high thermal and electrical conductivity — is expected to play a key role in the global energy transition mega trend.
In January Business Day reported that equity analysts at investment banking group Goldman Sachs believe the market is undervaluing the potential impact that growth at Glencore’s copper business will have on the company and its stock in the long term.
Glencore offered one of the lowest capital-intensive organic copper growth opportunities, according to the analysts, who have attached a “buy” sign to the Swiss company.
The group, which is listed on the London Stock Exchange with a secondary listing on the JSE, extracts and processes copper ore in South America, the Democratic Republic of Congo and Australia. Glencore is also one of the world’s largest producers of cobalt, a major by-product of copper production.
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