You can’t please everyone all the time. Unless you are Anglo-American or other miners with thermal coal assets: then you apparently can’t please everyone all the time.
Anglo has won ESG praise for its plan to split its remaining South African thermal coal mines into a Johannesburg-listed company called Thungela. It has also taken a hard hit on sustainability for those who have seen it solve a problem for its shareholders.
Boatman Capital, the short-selling research group, this week questioned assumptions about the Thungela mine remediation, arguing that new regulations could nearly triple costs to $ 1.4 billion, wiping out the company value. South Africa’s newest coal miner was always going to get off to a rocky start as international investors rushed in: its London-listed shares fell nearly 25% on Monday before surging on Tuesday.
This troubled separation adds to the feeling that a different model is needed, which some in the industry see as a âbad bankâ structure to deal with the demise of outcast climate assets.
The miners are just the canary in this particular thermal coal mine. Divestment and exit policies, on the part of investors and financiers, have made coal largely uninvestable in Western finance and uncomfortable for large listed miners to hold. Glencore is unusual in conserving coal, with plans to cut production by 2050, a position that could still be under pressure.
As the transition to net zero accelerates, more and more assets will become ‘stranded’: not only in terms of the oil and gas left in the ground, but in terms of assets without a good owner of the point. from the perspective of markets and the planet, be it mining, associated rail and port infrastructure, or oil and gas production.
True, Anglo sent Thungela on his way without any debt, a large endowment, and protection against falling coal prices. Mines remain in the public sector rather than disappearing into the shadow of private property, be it private investors or state-backed companies in countries like China.
But the environmental impact appears neutral at best. In fact, the new company seems more likely to try to extend the life of mines, currently only 5 to 11 years. And a smaller company is less able to manage the costs of rehabilitation, which are uncertain.
What it takes, argues Tim buckley at the Institute for Energy Economics and Financial Analysis, is an alternative to straightforward transfer or hold options, with the appropriate funding, transparency and corporate governance, and which recognizes that it will be a 15-year process.
Just as financial institutions turned to bad banks to handle toxic assets in the aftermath of the financial crisis, miners need a way to quarantine theirs. This could keep assets tied to deep pockets and (hopefully) higher listed global industry standards, but separate them from commodities like copper, nickel and cobalt, which the world needs more in the transition. climate.
It is a structure that industry chatter suggests is being considered by some miners and their advisers, possibly with the participation of outside investors chosen for their environmental credibility.
Sustainably-minded investors should subscribe to a structure that holds coal, and ultimately other fossil fuels, associated with the companies in which they invest. sinking funds for rehabilitation are untouchable and communities are properly supported. This could involve some public sector involvement, argues Ben Caldecott of the Oxford Sustainable Finance Program.
He might eventually need it. The understandable ambivalence of some jurisdictions like South Africa or Australia about putting coal mines in runoff, with jobs and communities at stake, has been a complicating factor for miners. This has been to discourage gradual remediation as sites are mined and even allow small businesses to exploit supposedly earmarked clean-up funds, said Buckley.
But Anglo is not the only one struggling to know what to do with its coal. And a robust model of a bad bank could find itself in demand well beyond mining in the years to come.
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