Move follows pressure from investors but company stops short of full exit from coalmining
BHP has announced it plans to sell off its thermal coalmines within two years as part of moves by the global mining giant to ready itself for a low-carbon future.
The move stops short of a complete exit from coalmining because BHP will retain its stake in a venture that produces the higher coking coal used to make steel. BPH said coking, or metallurgical, coal will be in higher demand in coming years as steelmakers clean up their processes.
It follows consistent pressure from investors including Norway’s mammoth sovereign wealth fund, which owns more than US$2bn (A$2.8bn) in BHP shares and in April registered its objection to the company’s continued thermal coal operations by putting it on an “observation” list that is the first step before selling its stake.
Announcing a full-year profit of US$7.95bn on Tuesday, BHP chief executive Mike Henry also left the door open to supporting a resolution from activist shareholders that would require BHP to stop mining that would destroy Aboriginal cultural heritage sites in Australia until laws are changed to strengthen their protection.
Henry said BHP agreed with the intent of the resolution, which was to prevent “another Juukan Gorge” – a reference to rival miner Rio Tinto’s decision to blow up 46,000-year-old-caves in the Pilbara to get access to higher quality iron ore.
He said BHP already operated to a standard higher than legislation required and had been lobbying for the law to be beefed up.
“But of course we want to understand the perspectives of all parties, including the Indigenous leaders who are participating in that registration, but also the most important voice in all of this is the traditional owners of the land on which we’re actually mining.”
Henry said the board would decide its position on the resolution after consulting with Indigenous groups and the traditional owners.
BHP’s exit from thermal coal would satisfy investment criteria laid down by Norway’s Government Pension Fund Global, which owns about 3.8% of BHP’s London-listed arm and about 0.6% of the company’s Australian-listed entity.
The company’s efforts to sell Mt Arthur have previously been widely reported, but it has never before publicly committed to selling its coal assets.
In addition to the Mt Arthur mine, BHP owns a third of the Cerrejón mine in Columbia and 80% of BHP Mitsui Coal, a joint venture with Mitsui that mines coking and thermal coal in Queensland.
The miner has previously been unable to find a buyer for Mt Arthur, which supplies coal to the Liddell and Bayswater power stations. Liddell is outdated and was slated to close in 2022 but late last year was given an extra few months of working life after owner AGL buckled to pressure to keep it open through the following summer.
Environment groups say the high cost of remediation associated with Mt Arthur and Cerrejón may make them difficult to sell to a third party.
In a note published earlier this month, Tim Buckley, of the Institute for Energy Economics and Financial Analysis, said the mines might be worthless and as a result BHP might have to spin them off as a separate company, which would prevent it needing to find a buyer willing to take on the assets.
Henry said yesterday that BHP was willing to do this. BHP has spun off assets before – in 2015 it handed its metals mining business over to its existing shareholders by giving them stock in a new company, South 32.
“We will pursue all option in parallel,” Henry said. “Notwithstanding the fact that right now we’re kind of in a lull when we look at the coal market, that can all change very quickly, so we’re very open to all options.”
The Lock the Gate group expressed concern that BHP might hand Mt Arthur to a smaller company that lacked resources to clean up the mine site.
“The world is moving away from thermal coal, and large companies like BHP, which is among the top 100 greenhouse emitting companies of all time, should rehabilitate the land they have carved up for mining and diversify coalmining communities,” NSW coordinator Georgina Woods said.
“There is a great risk that less experienced mining companies will move in on these assets and fail to adequately rehabilitate the land.
“Adani is one of the companies that has been named as showing interest in Mt Arthur,” Woods said. “Selling Mt Arthur might make BHP’s greenhouse rap-sheet look better, but the pollution will still be created and leave the Hunter with an even more uncertain future.”
