Mining giant Anglo American plans to exit coal mining in South Africa, in a major shift away from carbon-intense operations.
The company has, in the past few years, been offloading its coal assets, which has included the sale of its Eskom coal mines in 2018, as well as the Drayton mine in Australia.
In a response to shareholder questions, the diversified global miner said it would consider its exit options, with a view to listing the demerged business on the Johannesburg Stock Exchange.
“We are therefore working towards a possible demerger of our thermal coal operations in South Africa as our likely preferred exit option, expected in the next two to three years, with a primary listing in the JSE for the de-merged business,” it said.
“We will continue to consider other exit options as we engage with stakeholders as part of our commitment to a responsible transition.”
In light of growing concerns over climate change, the global push for clean energy has seen companies adopt greener policies, which include measures to reduce C02 emissions.
Anglo American, which operates diamond, iron ore and platinum mines in South Africa, said its thermal coal operations in the country “constitute a strong and attractive business with high-quality well-located assets, and with access to established export infrastructure”.
The mining giant in 2018 sold its thermal coal mines to a black-owned entity, Seriti Resources, in a deal worth R2.3 billion. The mines, including New Vaal, New Denmark and Kriel collieries, supply coal to Eskom’s power stations Lethabo, Thuthuka and Kriel.
According to mining and labour analyst Mamokgethi Molopyane, the decision by the company to let go of the coal “burden” did not come as a surprise, in the face of a growing need for clean energy.
Coal still viable
“But that does not mean that coal in South Africa is not a viable business anymore, given our reliance on coal for energy generation,” she said.
Molopyane believes Anglo’s exit from the coal sector is unlikely to cause any overall negative impact to the industry, as coal still forms a major part of the country’s energy policy, including exports to other African countries who still rely on coal.
“I don’t think the [coal] sector would be badly impacted by the decision… at least here at home, and in other African countries it is still going to be around for some time,” she said.
Eskom generates most of its electricity from coal, and the company’s new mega-power stations, Kusile and Medupi, are coal-fired.
However, the country has been adding renewable energy sources such as wind and solar as alternatives. Earlier this week, it was announced that had begun a public consultation process which will pave the way for municipalities to directly source their own electricity from independent power producers.
Anglo American noted that it believes that the “long term prospects of our thermal coal operations in the country may be better served under different ownership” given the shift towards cleaner energy.