As Glencore Walks, Colombia Envisages Decades of Coal Mining
Glencore Plc may be walking away from its Colombian coal mines, but Colombia isn’t.
The South American nation better known for its coffee and
crude is also a major supplier to European coal-fired power plants. While that
market may be shrinking as Europe leads a clean-energy shift, there’s still
plenty of demand elsewhere for the most polluting fossil fuel, according to
Mines and Energy Minister Diego Mesa.
His government is betting coal will continue to play a major
role in Asia’s energy mix for the foreseeable future. After Colombian output
plunged last year amid a strike and a decision by Glencore, the world’s biggest
shipper of coal, to halt operations in a depressed market, Mesa expects
production and exports to bounce back. While Glencore plans to start handing
back contracts for its Prodeco mines, Colombia hopes to find a new operator.
“We do believe that these assets continue to be of interest
to many investors, specially Asian ones,” Mesa said in an interview from Bogota
Thursday.
Two of Prodeco’s six license areas have enough coal to
continue operations for another decade, Mesa said. The ministry and Glencore
have been in contact with some companies interested in taking them on, he said.
China, which burns half the world’s coal supply, has
succeeded in reducing the fuel’s share of its energy mix in recent years, but
that’s happened as total energy consumption has risen, meaning the amount of
coal being burnt hasn’t changed much since the early 2010s. In fact, after a
sharp drop in recent years, global coal demand is forecast to rise slightly
this year before flattening out to 2025, according to the International Energy
Agency.
Glencore declined to comment beyond a February announcement
that it planned to start handing back contracts after the government refused to
let it prolong a shutdown of the operation. While a company review concluded
that resuming the operations was uneconomic, Mesa said they would be profitable
for another owner.
Still, a sale isn’t the only option. The mines may be closed
down or Colombia could auction the licenses. But Glencore transferring them to
another investor is certainly on the table even as some mining heavyweights
exit coal in a bid to reassure investors they can curb their environmental
impact.
“We’ve received interest from companies located in Asia, and
companies that already have operation in Colombia,” the minister said, adding
that the country can increase competitiveness via royalty payments.
Closely held Drummond Co. is expected to increase Colombia
output by about 5% or 6%, and the Cerrejon mine, in which Glencore owns a
stake, has resumed operations after a 91-day strike last year.
While Colombian production may not get back to previous
levels of more than 80 million tons a year, it could return to 65 million to 70
million, he said. The country’s current high-quality mines can keep operating
for “a couple more decades,” he said.
“Coal demand from China and India is going to continue. It’s
impossible for them to switch their power matrix overnight and stop depending
on thermal coal,” the minister said. “We are going to continue to give support
to the operations we currently have.”
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