How will Bank of America's new policy affect coal mining?
Bank of America’s announcement on Wednesday -- a new policy that will significantly reduce its lending to coal extraction companies and coal divisions of broader mining companies – is expected to have major implications on the coal industry.
"With regard to coal, over the past several years, we have been gradually and consistently reducing our credit exposure to companies focused on coal mining," said Andrew Plepler, Bank of America's Corporate Social Responsibility executive.
“Our new policy reflects our decision to continue to reduce our credit exposure, over time, to the coal mining sector globally.”
The new policy supports the growing fossil fuel divestment movement, which looks to abandon or curb investments in high-carbon energy, including mountaintop removal.
"Today, our renewable energy portfolio is more than three times as large as our coal extraction portfolio," said Plepler. "The transition from high-carbon energy to low-carbon energy will continue. At Bank of America, we will continue to do our part to accelerate this transition for our customers, clients and communities."
Bank of America’s new policy cites pollution regulations, changes in economic conditions, increased competition from shale gas and renewable power as the main drivers of such change.
A Bank of America spokeswoman told the Guardian, “over the last several years, the coal mining sector has experienced a challenging environment in which increasing risks and shifting dynamics have reshaped its landscape,”
Global bank HSBC said the recent drop in energy prices has put a spotlight on "stranded" fossil fuel assets, making them a risk to investors.
"As rigs are dismantled, capex (capital expenditures) is cut and operating assets quickly become unprofitable, stranding risks have become much more urgent for investors to address, including shorter term investors," the bank said.
One of the groups that pressured Bank of America on this policy said the announcement represented a 'sea change' as the bank was turning its back on the coal mining industry.
"Today’s announcement from Bank of America truly represents a sea change: it acknowledges the responsibility that the financial sector bears for supporting and profiting from the fossil fuel industry and the climate chaos it has caused,” Amanda Starbuck, director of the climate and energy program at the Rainforest Action Network, said in a statement. “In real terms, this means the bank is turning its back on the coal mining industry and committing to energy efficiency and renewable energy.”
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Bank of America’s departure from coal signifies the second banking firm to distance themselves from coal, as Goldmach Sachs recently announced it is in talks to sell off some of its mining operations.
As coal mining companies pose an increasingly risky investment, and environmental concerns become ever more pressing, the coal industry in the United States could be in a structural decline.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.