SOUTH32 has ditched a $700m project aimed at expanding its Dendrobium metallurgical coal asset in Australia, saying it would focus on metals “critical to a low carbon future”.
Returns from the Dendrobium Next Domain project, south of Sydney, did not justify the investment, the Perth-headquartered firm was quoted by Bloomberg News as saying today. The miner is due to report its full year results on Thursday (August 25).
“Over the past 18 months we have made significant progress actively reshaping our portfolio and this decision increases our capacity to direct capital to other opportunities,” South32 CEO Graham Kerr said in a filing to the Australian Securities Exchange. He said the company would focus on North American projects.
The announcement echoes the company’s decision last year to put on hold plans to develop the Eagel Downs metallurgical coal mine in Queensland, which it holds in a joint venture with Chinese steelmaker Baowu, on the grounds that it wouldn’t deliver an adequate return on investment, said Bloomberg News.
South32’s decision latest comes after other coal miners said they would pull back on investment in Australian coal. Last week, BHP said it had paused all investment in new projects involving the fossil fuel in the Australian state of Queensland, after its government increased royalty rates to among the highest in the world. Other miners also warned the new rates would stall investment in coal mines.
The North American focus by South32, which was created through a demerger from mining giant BHP in 2015, isn’t new. It acquired the Hermosa mine in Arizona for $1.3bn in 2018. The mine contains zinc, manganese and silver oxide deposits.
Still, South32 indicated on Tuesday it isn’t abandoning its metallurgical coal portfolio. The company said it would continue “to optimise Dendrobium and the broader Illawarra Metallurgical Coal complex.”