South32 has shown again the returns from coking coal projects can’t outweigh the risks. That’s good for the planet but bad for inflation.
on the grounds the returns were simply not high enough to compensate for the risks – including ESG-related criticism – that are now embedded in coal projects.“When we looked at the completion of the feasibility study for Eagle Downs, it certainly was a positive project, it had an IRR that, to be honest, if it was a base metals project, we would have done it,” South32 boss Graham Kerr told’s Peter Ker in May 2021. “But there is probably not enough in it to do a met coal mine.
That South32 still can’t make the case for this investment – which, it should be stressed, has also previously faced environmental hurdles – shows just how high the bar is to justify a major investment in coal.And that’s even the case when the project in question is coking coal, rather than dirtier thermal coal used for power generation.
South32 is also pushing ahead with a $US260 million project to expand its Appin mine, with plans to keep that mine open until 2039. The Australasian Centre for Corporate Responsibility applauded South32’s decision and suggested the Dendrobium mine’s key customer, steel giant BlueScope Steel, should get on with a plan to shift to make so-called “green steel”. But this ignores the not insubstantial problem that green steel appears decades away from being commercially viable.Demand for coking coal will remain robust because the technological solutions required to replace coking coal at scale remain some way off.
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