In a region of northeastern Wyoming and southern Montana, seams of rich coal line the walls of open-air mines like layers of a marble cake, and supersized yellow trucks ferry around huge piles of coal as though on giant platters. This 37,500-square-mile region known as the Powder River Basin is home to some of the largest coal mines in the world, and it supplies around 40 of the countrys 700 million tons annually.
Note: If you are interested in our products, please submit your requirements and contact information, and then we will contact you within 24 hours, welcome your message.
This is what the end of Americas coal mining industry looks like so unneeded that its two biggest companies now say they cant compete without attempting a potentially illegal consolidation. According to Joshua Macey, a professor at the University of Chicago Law School who studies the industry, Thats a pretty dramatic statement from an industry that has insisted its product cannot be replaced.
Only a decade ago, the argument now being made by Peabody and Arch might have seemed absurd. In 2011 coal supplied 47 of Americas electricity and the competition was deep in the rear-view mirror. Nuclear energys popularity was tanking in the wake of the Fukushima Daiichi disaster cost-competitive wind and solar energy were still a fever dream and the fracking revolution that would unleash waves of cheap of natural gas was mired in controversy before it had even begun. Peabody Energy, the worlds largest private mining company, had a market capitalization of 18 billion.
The outlook is very different today. Peabody has a market capitalization of 268 million, 169th of its 2011 value. Coal is Americas most expensive mainstream energy source and is shunned by investors around the world. Last year coal supplied only one-quarter of Americas electricity and that share is rapidly falling, accelerated by the COVID-19 economic crisis and pandemic.
The result has been bankruptcy after bankruptcy. As much as 60 of all coal mined in the U.S. now comes from companies that went through bankruptcy in the last 5 years, according to research by Macey.nbspThe resulting absence of health care and pension plans for workers orphaned by failed coal firms has become a national crisis. As of July 179,000 people were still working in the U.S. mining sector, making an average of 31 an hour, according to the Bureau of Labor Statistics.
Walking away from the coal mining industry is not a simple matter of liquidating assets and turning off the lights. Coal mines and their surroundings need to be thoroughly cleaned up at the end of their useful livesa process known as reclamationlest they leak pollutants. Reclamation can cost billions and is an obligation often attached to any sale of assets. No investor is enthusiastic about picking up the tab.
So instead of selling the industry off for parts, mining companies have instead plunged over a series of cliffs. People talk about a downward glide-path for the end of coal, but I dont think thats the way it plays out in reality, said Mark Haggerty of Headwaters Economics, a Bozeman, Montana-based non-profit that studies community development and land management, in an interview.
More likely, markets or policy will cross thresholds where things begin to happen very quickly, he told Dustin Bleizeffer in a piece for WyoFile.com in January. We may be in that now, or it could still be off in the future. But its likely not far.
Mar 20, 2016nbsp018332Im based in South Africa, my main business is Coal Mining Im in need of an investor who can invest 25million USD. This will enable us to procure one of the largest remaining coal field.
The BHP-operated Escondida and Spence copper mines in northern Chile are set to pay US840 million to end a 2008 energy contract with a thermal coal power generator as the companies seek to move.
This is the first installment of a two-part series on the impact of ESG standards on investing in coal-related assets. Read part two here.
To some investors, the advent of environmental, social, and governance ESG investing represents the welcome arrival of a more conscientious investment approach in the U.S. and the coal mining sector is low-hanging fruit thats easy enough for them to avoid.
CUMBERLAND, KENTUCKY - AUGUST 26 Coal is loaded onto a truck at a mine on August 26, 2019 nearCumberland, Kentucky. Eastern Kentucky, once littered with coal mines, is seeing that lifeblood rapidly slip away. The region has lost more than 15 percent of its mining jobs in the past year and less than a third of the jobs remain from a decade ago. Recently, more than 300 miners lost their jobs in Cumberland when Blackjewel LLC declared bankruptcy and shut down their mining operations. Photo by Scott OlsonGetty Images.
But the exodus of investors from ESG non-compliant coal miners likenbspMurray Energy,nbspPeabody Energy, andnbspContura Energynbsp creates a domino effect, where a shrinking investor base repels others with less stringent ESG policies from the increasingly illiquid coal securities.
Still, for some, the capital flight from coal could lead to enhanced investment opportunities, as securities prices decline and coal and related assets become available even more cheaply. This strategy, however, requires careful stewardship of potential free cash flow, and any resulting stranded coal assets carry inherent risks for both the environment and the investors themselves, sources told Debtwire.
Stranded assetsnbspare those that, before the end of their projected life cycle, lose the ability to generate an economic return as a result of the transition to a low-carbon economy.
It still varies dramatically based on the investor, but pension funds and endowments who hand over capital to third party asset managers are pressing more and more for ESG standards, and its impacting securities prices as some funds refuse to invest outright in certain companies, with coal being one of the dirtiest sectors, said a high yield portfolio manager, whose fund has invested in coal companies in the past but has cut back amid demands from its investors.
And U.S. banks, too, have stepped away from backing investments in coal. Goldman Sachs said in December that it would no longer provide financing for new thermal coal power plants or mines anywhere in the world unless they have carbon capture or other emissions reduction strategies.
If youre looking at a coal name under the premise of an eventual debt refinancing at this stage, you have to think long and hard about that, said a buysider whos been involved in multiple coal names and whose firm has not implemented an ESG strategy. His fund, he says, has nevertheless limited its coal exposure in recent months due to the growing prominence of ESG investing.
Public coal company equities including Peabody,nbspArch Coal,nbspCONSOL Energynbspand others throughout the year have traded closer to the 3x range based on 2020 EVEBITDA multiples, sources noted. Thats in contrast to multiples in the 4x 6x range in 2015.
Activist investor group Market Forces tells coal miners to prepare for own demise Market Forces says coal mining groups need to start planning for their own demise in order to protect investors.
Jul 29, 2020nbsp018332The United States mined 706 million tons of coal in 2019 the lowest total since 1978.and halt global business activities in coal mining by 2025and climate-minded investors who are.
Because the U.S. still employs roughly 50,000 coal miners earning wages and benefits of 4 billion and many of these miners work in regions that offer few alternatives to mining.
Bloomberg -- The Mt Arthur coal mine in Australia is one of the worlds best. Its got plenty of reserves and the low-cost supplies produced there are easily shipped to Southeast Asia, where theres insatiable appetite for the fuel.
Aug 19, 2020nbsp018332Multinational mining major BHP has announced its plans to sell a number of coal assets following mounting investor pressure to distance itself from the high-polluting fossil fuel. The latest move comes as the mining major is getting ready for a transition towards a low-carbon future.
If you are interested in our products, or have any questions for us, you can click the button below