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Activist Investor Push To End Coal Mining Is Backfiring

  • Climate activists and impact investors have seen their plans to end coal mining turn into exactly the opposite
  • The push to end coal mining has made several mines more valuable in the face of robust global coal demand
  • Miners that were planning mine shutdowns have extended the production life of their assets

The obvious case for allowing the free market to make decisions in industries like energy is that, when changes are forced instead of adopted naturally (usually via laws or government subsidies), they often work against the interests of efficiency. 

That's a lesson several companies found out first hand. In fact, Bloomberg writes there is now a "growing unease among climate activists and some investors that the policy many of them championed could lead to more coal being produced for longer".

For example, Anglo American Plc, one of the world’s most powerful mining companies, has become "a case study in unintended consequences" after climate activists and investors urged it to stop digging up coal, Bloomberg reported this week. Now, it has transformed mines that were one set for closure into "the engine room for a growth-hungry coal business".

Anglo American CEO Mark Cutifani had seen Rio Tinto sell off its coal mines and had a plan to shut down its seven South African mines. But the company wasn't taking action fast enough for activists and investors, so Anglo spun off another company called Thungela and tucked its coal operations into the SpinCo. Investors could then "decide for themselves" if they wanted to hold or sell shares of the SpinCo. 

The SpinCo Chief Executive Officer, July Ndlovu, then announced they were looking to grow their coal production, not shrink it. 

“I didn’t take up this role to close these mines, to close this business,” Ndlovu said. Its South African mines have the potential to add a decade or more of mining, producing more than 10 million tons of coal per year. 

BHP Group, a rival company, had trouble selling a colliery earlier this year so it applied to extend mining at the site for another two decades. It was thought of as a way to sweeten a deal to sell the mine, but may wind up turning into BHP simply mining at the site for longer than expected. Investors continue to bring up BHP's exit strategy from the mines as a point of contention. 

Related: Can U.S Shale Drillers Help Prevent An Energy Crunch?

“The big push from investors is around ensuring that any divestment that occurs is to parties that are responsible,” BHP CEO Mike Henry said.

Glencore Plc announced earlier this year it would increase its ownership of a large Colombian coal mine after seeking out the opinions of activists, the report says. The company has promised to end its coal operations by 2050, but has also prepared "contingency" plans in the event investors "force it". 

Nick Stansbury, head of climate solutions at Legal & General Group Plc, told Bloomberg: “Everyone in the industry is starting to be more sophisticated, more nuanced and more careful on the way they think these issues through.” 

Ashley Hamilton Claxton, the head of responsible investment at Royal London Asset Management, concluded by stating that fossil fuel companies should hold on to their coal assets and manage their decline: “Selling the problem to a third party has unintended consequences. We need to shift the debate in the investment industry about being more sophisticated around these things.”

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