Anglo’s coal withdrawal could boost South Africa’s fossil fuel production

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  • Anglo American quit coal operations in South Africa this week – but there is a potential problem.
  • The spin-off, Thungela Resources, could end up generating more greenhouse gases than the mines which have been gradually dismantled by Anglo.
  • CEO July Ndlovu expects demand for marine coal to remain constant for at least a decade.

Under pressure from investors and environmentalists, Anglo American withdrew from its coal business in South Africa this week, but the spin-off could have an unforeseen result: higher production of the most polluting fuel.

Anglo CEO Mark Cutifani said it was a “responsible transition” from thermal coal, but July Ndlovu, head of spin-off Thungela Resources, has a different view. Ndlovu wants South Africa’s largest coal exporter, which started trading in Johannesburg and London on Monday, to develop new resources and buy up competitors.

“I did not take on this role to shut down these mines, to shut down this business,” Ndlovu said in an interview on June 8 at Thungela’s new offices in the Rosebank business district in Johannesburg. “I took on this role to do what’s right for the people of this country.”

The CEO’s optimism about an industry where prices are currently rising highlights the potentially unintended consequences of the withdrawal of the world’s largest mining companies from thermal coal. As Anglo’s exit strengthens its appeal to institutional investors with ambitious climate goals, Thungela’s expansion could mean the spin-off generates more greenhouse gases than if the mines had been phased out. by Anglo.

Mining investment

“Anglo was not necessarily going to invest in the future of these mines,” Ndlovu said. “We are now independent, where it makes sense that we absolutely invest in these mines. We know how to convert resources into production.”

The CEO expects the demand for marine coal to remain constant for at least a decade. Thungela’s annual exports total 16.5 million tonnes, most to Asian countries stretching from Pakistan to China and some to new markets in North Africa.

Still, embarking on the expansion could put the company on a collision course with big investors such as Old Mutual Group, which manages around R380 billion in assets. Jon Duncan, responsible investment manager at Old Mutual, said the market for marine thermal coal is expected to decline and players like Thungela will have to pull out over time as the world goes by. to cleaner energy.

“We see local charcoal producers like Thungela as yield companies; they should align their production with the demands of climate science and national decarbonization policy, and most importantly, pay dividends while properly planning for rehabilitation and remediation needed, ”he said in an interview. . “I expect they will have a lot of very unhappy shareholders if they withhold dividends and wasted capital on projects that have no way of return.”

Own management

This will no longer be Anglo’s concern, as he has said Thungela will now make “his own decisions on his direction and growth”.

“For many countries, especially in developing economies, access to reliable and affordable energy depends on access to thermal coal,” said Anglo, who still owns coal assets in Colombia and Australia. “Many communities and countries around the world benefit from thermal coal production through local economic development, employment, export earnings and the provision of essential services.

Ndlovu is confident that his company will have no trouble finding financing for its expansion, saying that lenders in coal-consuming countries in the Far East could fund new developments even if financial institutions in South Africa and Europe are reluctant to do so.

“If you have good quality resources in the soil, I think there are some great opportunities there,” he said.

For Anglo, this could risk damaging his reputation.

Anglo was very clear that the split was aimed at ‘continuing a responsible transition away from thermal coal as the world shifts to a low carbon economy,’ said Tracey Davies, director of the activist shareholder organization based in Cape Town, Just Share. “If Thungela now expands its operations, thereby increasing its carbon emissions, then Anglo’s claims ring hollow.”

Source: News24


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