Who’s buying our dirty, polluting coal mines?

Australia has a new breed of coal barons – wealthy individuals, families and companies who don’t mind being associated with polluting fossil fuels.

Over the past decade, the country’s largest ASX-listed miners have cleaned out their coal portfolios, getting a head start on the global energy transition and sidestepping growing shareholder activism, environmental and governance mandates, and tightening emissions standards.

Investor campaigns are pressuring publicly listed fossil fuel players and the banks that fund them to divest from, or wind back, their carbon-polluting activities.Credit: Bloomberg

Mining giants such as Rio Tinto, BHP and South32 have sold the majority of their thermal and metallurgical coal assets – the hydrocarbons used to generate electricity in coal-fired power stations and heat in the steelmaking process.

Both types of coal release substantial planet-warming greenhouse gases, but thermal coal is likely to be replaced sooner – by cleaner wind, hydro and solar energy – than metallurgical coal, which is much more difficult for steelmakers to replace.

“Divestment gives companies like BHP a nice payday and makes them look good, but it’s clear they don’t care what happens to the mines in the long term,” said Axel Dalman, head of research with activist investor group Market Forces.

Investor campaigns, run by the likes of Market Forces, are pressuring publicly listed fossil fuel players and the banks that fund them to divest from, or wind back, their carbon polluting activities.

“Investors have been doing much more than asking companies to divest, including holding boards accountable for managing down coal production or diversifying in line with global climate goals,” Dalman said.

“The fact that coal is moving into often more costly private markets shows the success in making it a toxic investment.”

The big three’s unwanted mines have ended up in the hands of billionaire Indonesian families, a rich Czech businessman, Chinese state-controlled enterprises and a former Wesfarmers coal salesman – sometimes selling cheaply because of a paucity of buyers.

But they are still producing greenhouse gases under their new owners who don’t have to deal with shareholders, aren’t necessarily concerned about climate change or the stigma of trading fossil fuels, and are intent on wringing large profits from their investments in what time remains for the industry.

‘The fact that coal is moving into often more costly private markets shows the success in making it a toxic investment.’

Axel Dalman, head of research with activist investor group Market Forces

South32, a $13.6 billion ASX behemoth spun off from BHP in 2015, last month finalised a $2.48 billion deal to sell its Illawarra Metallurgical Coal business.

It was a milestone, as Illawarra was the last coal mine in its portfolio.

South32’s boss Graham Kerr has previously stated the miner was selling its coal assets to cut its carbon- emission profile – mines leak coal seam gas into the atmosphere – and focus on commodities critical to the decarbonisation and electrification of the world’s economies, such as zinc and copper.

He told analysts several weeks ago: “I do believe absolutely that Illawarra has been a very good deal for us in terms of reducing complexity, lowered our sustaining capital intensity, [and] strengthened our balance sheet.”

A Stanmore Coal mine at Moranbah, inland of Mackay in Queensland.Credit: Glenn Hunt

The black rock dug out of Illawarra that supplies Bluescope’s Port Kembla Steelworks, the country’s largest manufacturer and supplier of flat steel, is now owned by Golden Energy and Resources and M Resources.

Golden Energy and Resources is controlled through a number of entities by Indonesia’s wealthy Widjaja family, who also have other coal interests in Australia.

M Resources is headed up by Queenslander Matt Latimore, a Ferrari-collecting father-of-six, avid wildlife photographer, and former Wesfarmers coal salesman. Latimore, with an estimated wealth of $450 million, runs the hugely successful metallurgical coal marketing and trading business, M Resources, and is behind a string of transactions involving the former coal assets of major Australian miners.

Latimore has stakes in multiple coal mines, the underground mining company Metarock and a substantial portion of One Rail, an east-coast coal haulage business.

The Widjaja family’s company also has a 60 per cent stake in Stanmore Resources, an ASX-listed coal miner where Latimore is a board member while also holding an interest of almost 5 per cent.

Stanmore snapped up BHP Mitsui’s three coal mines in Queensland’s Bowen Basin two years ago, buying out the resource giant’s 80 per cent share of the joint venture for about $1.8 billion. That deal left the world’s biggest miner with seven high-grade metallurgical coal mines in the Bowen Basin, despite having substantially whittled down its exposure. BHP has since divested another two Australian mines.

“We continue to focus our steelmaking coal operations on high-quality product and have one of the lowest greenhouse gas emission production intensities of benchmarked export steelmaking coal mines. We believe a wholesale shift away from the blast furnace process for steelmaking is decades in the future,” the company said.

BHP’s deal with Stanmore made the Indonesian conglomerate “one of the largest global producers of metallurgical coal”, said Fuganto Widjaja, whose interests span forestry to financial services.

And Widjaja’s business has grown since then. The company added more Bowen Basin coal to its portfolio in February when it took over South32’s half share in the Eagle Downs mines.

Rio Tinto, too, has made a string of sales to Indonesian interests.

Its Mount Pleasant thermal coal mine passed into the hands of MACH Energy Australia in 2016 for $244 million, a company ultimately owned by the Salim family, who made their fortune from instant noodles.

Two years later, PT Adaro Energy, a major Indonesian coal company majority-owned by the Thohir and Soeryadjaya families, took a hefty chunk of Rio’s Kestrel Coal Mine, alongside the resources-focused private equity firm, EMR Capital.

Indonesia’s wealthy families are not the only acquisitive billionaires sniffing big profits in Australia’s coal sector who are willing to go where other investors fear to tread. Coal soared above $US430 ($625) a tonne in late 2022, generating bumper profits for miners as Europe’s energy crisis boosted sales at inflated prices. It has since settled lower at current rates around $US135 a tonne.

A little know Czech businessman, Pavel Tykac, is also quietly building a coal empire.

Czech entrepreneur and investor Pavel Tykac.Credit: Michaela Pollock

Tykac rose from obscurity as a computer distributor to rapidly accumulate a billion dollar fortune in the Czech energy sector by taking advantage of the 1990s privatisation era through his investment company Sev.en Global Investments. His wealth, valued about $12 billion by Forbes, has been generated by running cut-price coal mines and energy firms.

More recently, Sev.en has pushed into Australia, buying Vales Point coal-fired power station and Chain Valley mine in NSW, the Lake Way potash project in Western Australia, and holding minority stakes in Queensland’s Callide C and Millmerran power stations.

But an ambitious bid by Tykac to get control of $1.65 billion ASX-listed coal miner Coronado Global Resources fell over in June after he failed to get Foreign Investment Review Board approval within time to acquire 51 per cent of Coronado’s shares owned by Houston-based private equity firm, Energy & Minerals Group.

“We deploy our private capital into higher risk opportunities offering strong risk-adjusted returns,” the company states on its website.

“Australia remains at the centre of our interest,” Sev.en said in response to questions from this masthead. “Coal remains an essential commodity, without which the energy system is currently unable to function.”

Latimore’s deal making isn’t slowing either.

He has already passed on two thirds of his Illawarra coal stake to India’s top steelmaker JSW Steel for $175 million, a transaction that secures the Indian giant access to a future stream of coking coal. JSW is controlled by its 60-year-old reclusive billionaire chairman Sajjan Jindal.

The Queensland trader says he is not a climate sceptic.

“Producing steel using metallurgical coal is critical to an orderly energy transition,” he said.

“Globally, the industry is perhaps 20 years away from landing a viable alternative, at scale, to using the coking process to make steel. We have a great confidence in the long-term future of metallurgical coal, and we expect it to continue to make a significant contribution to the global supply of steel for many years,” Latimore said.

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