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Japan’s Itochu delays plans to exit Australian thermal coal

Japanese conglomerate Itochu has missed a self-imposed deadline to exit its Australian
thermal coal investments, becoming the latest major company to water down climate
pledges to prioritise energy security amid rising geopolitical tensions.
Itochu’s decision to make a slower exit from the Maules Creek coal mine in NSW comes
as Glencore leaves open the possibility of retaining a division that it previously signalled
would be demerged to create a pure-play coal miner.
It also comes as Opposition Leader Peter Dutton vows to scrap Australia’s 2030
emissions target and after Jemena chief executive David Gillespie told The Australian Financial Review
ESG Summit last week that emissions reduction should be a lower priority than energy reliability and affordability.
“Security is absolutely paramount... and affordability is a pretty close second. And then if we get those two things right,
we’re certainly then hopefully on a very quick decarbonisation journey,” he said.
Itochu announced in January 2021 that exiting thermal coal mining would
be a strategic priority for the three-year period to March, and that it would fully divest its
four thermal coal assets by that deadline.
Itochu has sold three of those four thermal coal assets, but continues to own 15 per cent
of Whitehaven Coal’s Maules Creek mine, after observing a “change in decarbonisation
trends” since global energy markets were roiled by Russia’s invasion of Ukraine.
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.