Part of a tunnel boring machine being unloaded for transport to the
Woodsmith potash mine of ... [+] Britain's Sirius Minerals. Photo by Ian Forsyth/Getty Images.
The greening” of the world’s biggest mining companies is
accelerating with a rush into environmentally benign material, such
as potash, a high-value fertilizer, matched by an exit from the
most polluting of minerals—coal.
Global miner Anglo American flagged its renewed interest in
fertilizer with a proposal last week to acquire a troubled British
potash-project developer, Sirius Minerals, which is developing the
Woodsmith mine in Yorkshire, in the U.K.
If successful, the $500 million takeover would mark a return to
fertilizer three years after Anglo American sold a phosphate
business as part of a company-wide clean up.
BHP, the biggest of the four major diversified western world
miners, a group which includes Rio Tinto and Glencore, is also
investing in potash through the development of a new mine in
More than $2 billion has already been sunk by BHP into the Jansen
project in the province of Saskatchewan, and at least that amount
needs to be spent to finalize construction and start delivering
potash to farmers who value its beneficial effects on plant growth.
Green” Minerals Replacing Black Coal
BHP’s new-found interest in less environmentally polluting minerals
has also seen it withdraw a nickel processing business from sale,
thanks to surging demand for nickel from battery makers supplying
electric car makers.
It’s not quite a revolution among the big miners, but it is
definitely a sea change as pressures from environmental activists
and governments make some of older minerals less acceptable to
Coal has, so far, been the business suffering the most severe
pruning by the Big Four. Rio Tinto has sold all of its coal
interests. BHP is mulling an exit of its thermal (power generating)
coal assets while keeping its metallurgical (steel making) coal
interests. Anglo American is considering its position, and only
Glencore appears determined to stick with coal, and perhaps even
Selling Coal Mines, But Not Cutting Production
Selling coal assets has pleased some investors, but the exit
process is more cosmetic than actually making a contribution to
cutting the production of carbon dioxide, a gas blamed for climate
change and the devastating bush fires which have damaged large
tracts of southeast Australia, and could trigger a countrywide
A bucket wheel reclaimer operates at the Newcastle Coal Terminal in
Newcastle, north of Sydney, ... [+] Australia. Photographer: Ian Waldie/Bloomberg
What’s happening is that coal mines are being sold, but coal
production is not declining because new owners are still able to
obtain high prices from countries where coal is a key source of
electricity, including China and India.
Lithium is another mineral high on the green target list of the Big
Four because of its use in batteries, though copper is arguably the
greenest of the metals thanks to its heavy use in all forms of
Potash Attracts, But It Might Not Be That Profitable
Potash, however, is where the green rush is becoming most
interesting because it is a business currently dominated by a
handful of Canadian and European producers. But it’s not wildly
profitable, with more potash mines being mothballed over the past
12 months than have been opened.
A recent list of the mining world’s biggest winners and losers in
2019, using stock market value as the yardstick, showed that two of
the worst performers were two of today’s leading potash producers:
Mosaic and Nutrien.
Squeezing two big new suppliers of the fertilizer into an already
well-supplied market almost certainly means that prices will fall
further and high-cost producers will be forced out.
But for BHP and Anglo American, there is an urgency in developing
new business units to replace those earmarked for disposal,
especially coal assets.
Prairie Machine electric vehicle sit parked at the entrance to the
Nutrien Ltd. Cory potash mine in ... [+] Saskatoon, Saskatchewan, Canada. Photographer: James
2019 Bloomberg Finance LP
As the potash deals currently stand, BHP is effectively halfway to
becoming a producer, but with speculation common that it might
complete construction of Jansen only to delay the start of
production, twist which seems unlikely as Jansen has the potential
to be the world’s cheapest source of potash.
Anglo American’s potash play is in the early stages of a bid for
Sirius having been made at a low-ball price of 5.5 British pence (7
cents), an 85% haircut on the price of Sirius 18 mont