The world’s biggest mining company is to sell off its thermal coal sites as it prepares for a greener future.
BHP will offload mines in Australia and Colombia within two years, bowing to pressure from activist investors to stop producing what is seen as the dirtiest fossil fuel.
Thermal coal is mainly used for power generation and accounted for around 1.6 per cent of the UK’s supply last year.
Kicking coal: BHP will offload mines in Australia and Colombia within two years, bowing to pressure from activist investors to stop producing what is seen as the dirtiest fossil fuel
However, burning the fuel releases substances including climate-warming carbon dioxide and sulfur dioxide, a major cause of acid rain.
BHP’s move comes after Norway’s trillion-dollar sovereign wealth fund signalled that it could offload shares in the Anglo-Australian giant, by putting it on a climate change-related ‘observation’ list.
The Norwegian fund is the firm’s third-biggest shareholder and last year announced plans to ditch investments connected to fossil fuels, including those in companies that mine more than 20m tons of thermal coal per year.
BHP’s exit from the resource means it will now avoid the chop.
It follows similar shifts toward greener energy by other major companies, with BP pledging to slash oil and gas production and invest more in renewable sources.
Yesterday BHP said it would also look at selling its older oil and gas sites, starting in Australia’s Bass Strait.
Its 80 per cent stake in a venture that mines lower-quality ‘coking’ coal – used in steel production – in Queensland will be sold as well. But it stopped short of abandoning coal, saying that higher-quality coking coal would remain a key part of its output.
Along with high-quality iron ore, BHP expects this type of coal to be in demand in the coming years as steel plant operators try to cut carbon emissions.
About two-thirds of its profits come from iron ore, much of it for China’s steel mills. Boss Mike Henry said: ‘The strong cash flows from these two businesses, metallurgical coal and iron ore, will support attractive returns for shareholders and growth in future-facing commodities.’
Under the chief executive, who took over in January, BHP is expanding into resources used by the green energy industry. This includes copper and nickel, which are used in electric cars and batteries, as well as potash used as fertiliser for food crops.
BHP and its rivals, such as Glencore and Anglo American, are under growing pressure to exit thermal coal as investors worry about the environment.
Blackrock, the world’s largest asset manager, joined Norway’s sovereign wealth fund this year in saying it would reduce its exposure to fossil fuels.
And miners have separately been hit by tumbling thermal coal prices, after the shutdown of factories during the pandemic caused a collapse in demand.
The tough conditions have left many coal exporters in the red, with the International Energy Agency warning that demand for the fossil fuel this year was set for its biggest drop since 1945.
BHP yesterday said its annual profits had fallen from £11.4billion to £10.2billion, with its strong income from iron ore overshadowed by disruption from the pandemic.
It declared a dividend of 55 cents (40p) per share, taking its full-year payout to 120 cents (90.7p) – down from 133 cents (100.5p) last year.
Analysts and environmentalists warn that BHP’s plans to sell its thermal coal mines could be ‘challenging’ because of growing fears about the fossil fuel.
Dr Doug Parr, chief scientist of campaign group Greenpeace UK, said: ‘Most coal plant operators are in the position where closing down their coal plants and building wind farms instead will make them more money than continuing to burn coal.
‘Vested interests can only resist market forces for so long, and that short period of time is the length of coal’s future as a power source. BHP moving out of supplying thermal coal is not a sign of environmental concern, but a response to market forces.
‘Unfortunately the market is moving too slowly, on coal and particularly on oil and gas, and so we still urgently need governments to stop propping up those vested interests and decarbonise while we still have a human-friendly climate.’
There are also fears that as major firms exit coal, mines will be taken over by smaller companies that are less transparent and lack resources to properly decommission sites.
Lock the Gate, an Australian environmental group, told the Guardian: ‘Large companies like BHP should rehabilitate the land they carved up for mining.’
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