Rio Tinto Group, the world’s second largest mining company, is selling off its coal mines with the goal of getting out of the business. Although environmental concerns are motivating some to act against coal, London-based Rio Tinto is choosing to dump coal due to its declining profitability. Still, Rio Tinto’s stated reason for moving away from coal must be taken in the context of a world that is shifting towards a low-carbon economy, in which renewable energy is steadily overtaking fossil fuels as the more economic choice to power the planet.
Rio Tinto CEO Jean-Sebastien Jacques framed the decision as a question of making the most out of limited resources, according to Bloomberg, stating that even a company as large as Rio Tinto needs to maximize its human and financial resources. Although Rio Tinto’s decision is based on effective usage of resources and profitability, it and other mining companies are wrestling with the future returns on dirty and increasingly cost-ineffective energy sources like coal. “The big diversified miners are all trying to work out which commodities are going to be most disadvantaged in the future, and the low-carbon transition is one of the big uncertainties that they and other companies are facing,” said Helen Wildsmith, head of climate change at CCLA Investment Management, according to Bloomberg. “We’re seeing more companies integrating their thinking on climate change scenarios into the macro-economic and cyclical scenarios that they work with.”
Despite coal’s declining prospects, Rio Tinto is finding buyers for its coal mines, much of which are located in Australia. The mining giant has been selling off its coal assets since 2015. In early 2017, Rio Tinto reached an agreement to sell its Coal & Allied Industries Ltd. to China’s Yanzhou Coal Mining Co. With coal out of the picture, Rio Tinto will be focus more of its resources on extracting more valuable materials.