Rio Tinto Group eyes total exit from coal

Bloomberg

Just five years ago it would have been almost unthinkable that one of the world’s biggest mining companies would not dig any coal. It’s now likely to become a reality.
Rio Tinto Group, the world’s second-largest miner, has been steadily backtracking from coal to focus on better assets. It’s now looking for buyers for its remaining coal mines in Australia, and a sale will mark a complete exit from the fuel.
Rio’s potential coal-free future is in stark contrast with many of its rivals. Glencore Plc, the world’s top coal shipper, this year increased its exposure by agreeing to pay $1.1 billion plus royalties for a large stake in Australian assets sold by Rio. The fuel, which generates about 40 percent of the world’s electricity, is one of BHP Billiton Ltd.’s main strategies, while Anglo American Plc has pulled back on plans to sell out of the commodity.
While many miners are bullish on coal, the world’s dirtiest fuel has become a flashpoint for a growing movement of investors calling for miners to cut their exposure.
For example, Norway’s sovereign wealth fund doesn’t invest in firms that make 30 percent of their sales from coal, while the Church of England sets the limit at 10 percent.
“People are picking different levels, whether they are divesting for ethical reasons or for business driven reasons,” said Helen Wildsmith, head of climate change at CCLA Investment Management, which manages money for the Church of England. “Having one of the big diversified miners without thermal coal does give investors more options.”
Yet Rio’s decision is more to do with its coal mines not being able to compete with its other assets, rather than pressure from climate-change or divestment campaigns. Chief Executive Officer Jean-Sebastien Jacques has argued that even a mining firm as big as his only has so much managerial talent and money, and must focus those on more productive assets.
It has also been able to sell coal mines for what it sees as good prices, allowing more cash to be returned to shareholders.
Even so, mining companies are increasingly having to consider how global proposals to curb greenhouse gases will impact the future of commodities they mine, said Wildsmith, who’s part of a team of investors that talks to firms like BHP and Rio about climate change.