Anglo American is likely to list its SA thermal coal business as the easiest way to remove the assets from its portfolio within three years.
Anglo CEO Mark Cutifani has been speaking about the exit from thermal coal as one of the strategies the globally diversified miner is following to become a greener and more environmentally friendly resources company.
The pressure from investors wanting socially and environmentally sustainable companies is telling, not only for Anglo but for other companies that may wish to buy those collieries.
The mines are free from the drama of securing approval from state-owned power monopoly Eskom because they are predominantly focused on the export market, selling about 28-million tonnes a year, and a further 10-million tonnes into the domestic market.
Anglo made the smart decision to extract itself from the Eskom-tied collieries in early 2018 to Seriti Resources, a black-owned company.
Seriti then jumped on the thermal coal mines up for sale by South32, the company spun out of BHP, but difficult talks with Eskom about contracted coal prices have made this a prolonged and difficult exercise.
While the Anglo coal mines are free of the Eskom factor and come with a 23% stake in the Richards Bay Coal Terminal export facility, a precious asset all by itself for guaranteeing export facilities, the listing will be by far the easiest of all options to dispose of the assets.
It removes the risk of a third party having to find the money and perhaps prolonging Anglo’s exit.
Investors who don’t mind a bit of fossil fuel exposure and see the potential value in the stand-alone coal mines as a separate company can put their money into the listing, and those who have problems with it can find alternative options that will sit more easily on their consciences.
Climate change and green investing
There’s nothing quite like a pandemic to concentrate the mind on what really matters.
Many things that seemed imperative have simply had to take a back seat. The upkeep of one’s hair and nails, for example, or doing business face-to-face, have lost their once critical importance.
Now, as the need to reopen the world economy takes centre stage, could environmental concerns go the same way?
Already the trend against single-use plastics has reversed as consumers opt for convenience over tackling plastic pollution which, until now, was a growing trend.
In fact, research from Wood Mackenzie has predicted a 5% increase in consumer demand for single-use plastics in Europe in 2020, after falling in 2019.
But will the reduction of global carbon dioxide emissions prove another victim of Covid-19?
Companies with highly polluting operations — such as SA’s very own Sasol — are now suffering the effects of a low oil price and other economic trends and have already indicated their intention to cut back on some greening initiatives as they slash spending to stay afloat.
Eskom, SA’s largest carbon dioxide polluter, is already in crisis and has lost billions in revenue as a result of lower electricity sales during the nationwide lockdown.
Goldman Sachs analyst Michele Della Vigna, however, thinks the trend towards decarbonisation, what he calls “carbonomics”, will remain.
Why? Because it’s not just politics that is driving the debate about climate change any more. Now it’s the capital markets that have truly taken this matter into their own hands.
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