5 April 2018
ANZ has contributed to a US$1.7 billion (AU$2.2 b) deal to finance the purchase of Rio Tinto’s last coal asset by Indonesian coal miner Adaro Energy and private equity manager EMR Capital. The deal comes despite ANZ’s repeated claims that the bank’s lending to coal is on its way down and will continue that trend into the future.
Adaro’s Tutupan coal mine in Indonesia. ANZ is a major lender to Adaro and has just helped finance the company’s purchase of Rio Tinto’s Kestrel coal mine in Queensland.
Rio last week announced the sale of its 80% stake in Queensland’s Kestrel coal mine, which is predominantly metallurgical coal but also produces a significant amount of thermal coal. The $2.9 billion deal is the last in a string of Rio coal divestments since 2016, with the company now completely out of the coal game. Clearly Australia’s second biggest miner doesn’t see a bright future for the dirty coal industry.
But every sale needs a buyer, and several Australian and international coal mining companies have splashed out on Rio’s coal assets, often backed by Australia’s big four banks as this recent ANZ deal reveals.
ANZ is a regular lender to Adaro, Indonesia’s second largest coal producer. But with the bank claiming to have subjected its coal-related customers to “climate related scenario testing,” it’s hard to see how ANZ can justify extending yet more credit to a pure play coal miner.
The biggest buyer of Rio coal assets has been Yancoal, the Australian subsidiary of China’s Yanzhou Coal Mining Company. Yancoal paid $3.5 billion in June 2017 for Rio’s Hunter Valley coal assets, including the Warkworth/Mount Thorley coal mines and a major stake in Newcastle’s Port Waratah coal terminal.
Despite its unsuccessful bid for the Hunter assets, the Australian arm of Swiss mining and commodities giant Glencore has also bought up big. Last month Rio sold its Hail Creek coal mine and undeveloped Valeria coal project to Glencore for a combined $2.2 billion. Australia’s big four banks have all loaned hundreds of millions of dollars to Glencore over the past decade. In May last year ANZ, CommBank, NAB, and Westpac each gave Glencore US$200 million (~AU$270).
Also last month, Rio sold an undeveloped coal tenement in Queensland to Whitehaven Coal for $258 million. Whitehaven has enjoyed plenty of support from the big four banks, receiving loans totalling over $1.5 billion to help expand its coal mining operations. ANZ and NAB are major contributors, and along with Westpac, these banks remain exposed to Whitehaven to the tune of $425 million.
Other noteworthy Rio coal sales include a 40% stake in the Bengalla coal mine, sold to New Hope for $867 million in 2015; and the Mt Pleasant coal project, sold to Indonesia’s MACH Energy for $320 million in 2016.