Mining major African Rainbow Minerals (ARM) says it will no longer invest in any new coal mines as tougher environmental mandates make them less economically viable.
The company listed the introduction of the Climate Change Act as an immediate threat to its operations, with local carbon taxes, carbon budgets and mandatory climate reporting expected to raise operating costs in the near term.
The group, which is founded and chaired by mining magnate Patrice Motsepe, signalled a clear intention to pivot the business away from coal and towards critical minerals in a report on its climate change strategy.
“We will not make new coal investments and will run existing assets to the end of their current economic lives,” it said. “We will continue to look for opportunities to minimise the impact of our coal-related activities and simultaneously allocate capital to prioritise metals consistent with the transition.”
The comments come just three months after the government published carbon budget and mitigation planning regulations for its Climate Change Act, including imprisonment and hefty financial fines for companies and individuals who violate the policy framework.
The Climate Change Act, introduced in March, enables the state to set emissions targets for various sectors, such as energy and transport, as well as prescribe emission thresholds or carbon budgets at company level.
Stricter rules
Meanwhile, stricter environmental rules abroad give ARM all the more reason to cut ties with coal and strengthen its carbon competitiveness.
The introduction of the EU Carbon Border Adjustment Mechanism (CBAM) was listed as another material risk that could erode the competitiveness of its ferrous operations, which contributed the lion’s share of its revenue in the latest financial year.
Reuters reported last month that CBAM would begin imposing fees next year on the CO₂ emissions of imported goods including steel and cement, putting pressure on European trading partners in the developing world.
On top of halting investment in new coal projects, ARM said it was actively engaging with domestic policymakers and stakeholders to soften the blow by “influencing policy outcomes and aligning with best practice”.
This year it plans to finish rolling out a sustainability data management system, which automatically collects, gathers and interprets emissions data across all its operations to track their emission-reduction performance against targets.
Copper bet
Added to this was a growing focus on critical minerals, particularly copper, with the miner having spent C$4.5m (R557m) on a 19.9% stake in Canadian Surge Copper earlier this year.
Copper’s strategic significance comes from its critical role in electrifying global energy systems, integrating renewables and expanding access to electricity.
Coal aside, the group’s other commodities are also expected to enjoy continued demand as the world reduces its carbon emissions. Its platinum group metals (PGMs) are used in the development of environmentally friendly hydrogen fuel cells and have continued use in hybrid electric vehicles, while its nickel and manganese are used to produce batteries.
“We are also exploring the demand for lower-carbon metals, while exploring energy transition and critical minerals (such as copper and nickel) to best position ourselves and our operations,” the firm said.
While coal prices have rebounded in recent months on strong demand signals from China, the world’s biggest consumer, they are now nearly 25% below their level at the same time last year, as markets eye the steady shift away from fossil fuels and growing investment in renewables.
ARM’s majority-owned coal division saw its earnings plunge 88% in the year to end-June to R47m, driven by a decline in realised prices and lower saleable volumes from its SA mines.
ARM mines coal in Mpumalanga at Goedgevonden mine, a joint venture with Glencore, and holds a 10% stake in the North West Impunzi and Tweefontein coal mines.
Coal remains central to SA’s electricity grid, catering for 70% of total power demand. Even as the country works to diversify away from coal, Eskom is spending hundreds of billions of rand to build Medupi and Kusile, two coal-fired plants with a combined capacity of about 9,600MW, in a bid to stabilise the country’s electricity supply.
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