I wrote last week on how the pain needed to be shared if we are to migrate the planet away from coal fired power plants. These power plants are predominantly in Asia and predominantly in China and India. Both countries have their own coal to burn but they also import heaps of it, predominantly from South Africa, Brazil, Indonesia and, until last year, Australia.
NSW – based real estate expert Paul Nelson points out just one example of that pain in that BHP is currently offering A$275 million (US$200 million) to whoever will take the Mt Arthur thermal coal mine in Australia off its hands. The company has very publicly written A$2.4 billion (US$1.8 billion) off the value of Mt. Arthur this year and it still can’t find a buyer.
Hunter Valley coal is currently selling for US$160 per tonne and the mine is producing 16 million tonnes p.a. So how come billions in revenue equate to a liability?
The answer lies with i) a hugely volatile coal price. BHP was selling its coal for US$44 in the second half of last year. Wood MacKenzie, for one, have a long term target of US$80 for Hunter Valley coal ii) uncertain and politically sensitive costs of rehabilitating the mine when its license expires in June 2026. Rehabilitation has not been done before on this scale and to the environmental standards expected today. Even the easy stuff looks expensive: A$40 million to move 4 km of road across an empty field? Negotiations with the local council have been underway for a while over a 19 year extension to the license, which could kick the can down the road.
Elsewhere, Engie has been selling its coal assets for several years. In terms of who bears the pain of transitioning beyond coal, the mining companies are already having to do their bit.
