This archive report was first published on 19 July 2020.
Published on July 19, 2020, the Mt Arthur coal mine in Australia is one of the world's best thermal coal assets, with plenty of reserves and low-cost supplies that can be easily shipped to Southeast Asia. However, its owner, BHP Group, is struggling to find a buyer willing to pay the right price.
The world's biggest mining company's unsuccessful effort over the past year to offload the asset highlights the predicament producers are in. To bow to mounting investor pressure to exit the most polluting fuel, BHP may need to sell a profitable mine for much less than it believes it's worth.
Activists have long warned that miners could face a cliff-edge moment by holding onto assets for too long. Now, that seems to be happening in thermal coal. While the mines generate plenty of cash and will have customers for years to come, investors increasingly don't want to hold shares in companies digging the fuel.
“We could have exited a few years back, and we probably would have got a better price, but we've also made good cash flows from what are good assets,” said Anglo American Chief Executive Mark Cutifani. “How we exit is more important to me, in terms of stakeholders and reputation, than getting an absolute number on the bottom line.”
Coal-asset values have collapsed quickly. Rio Tinto Group sold its last coal mines for almost $4 billion (Sh424 billion) just two years ago amid strong interest from big miners and private equity groups. Now, rivals BHP and Anglo American risk paying the price of waiting too long.
