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South32 will not follow BHP's lead in greenhouse gas targets


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South32 will not follow BHP's lead in greenhouse gas targets

South32 Ltd. will not follow the footsteps of its former parent company BHP Group in setting targets to cut greenhouse gas emissions produced by customers, The Australian Financial Review reported Aug. 5, citing Chief Development Officer Simon Collins.

Collins said that South32 was attracted to the fundamentals of the Illawarra coal operation in New South Wales, Australia, with a final investment decision for the Eagle Downs joint venture in Queensland, Australia, with China Baowu Steel Group Corp. Ltd. unit Aquila Resources Pty Ltd. to be reached in the first half of its fiscal 2020.

The miner took up a 50% stake in Eagle Downs in September 2018 as it saw that metallurgical coal, a commodity it sees as key in its future, lacked a suitable replacement.

"We look at the lack of a substitute in steelmaking and we look at the requirements for steel in construction and in infrastructure developments across large parts of the world," Collins said at the Diggers and Dealers conference in Kalgoorlie, Australia. "Obviously, if we can reduce carbon emissions associated with the production of metallurgical coal we will do that, but we certainly look at the commodity and see a robust outlook and believe we have a role to play in bringing it to market."

Collins, who refused to comment on BHP's move to set targets, hinted that setting emissions targets was not necessary to improve outcomes.

Amid South32's plan to divest its South African thermal coal assets, the executive believes that demand for thermal coal will remain resilient in countries with newer coal-fired power plants, as well as those countries that plan to increase capacity.

Collins said the decision to sell off the business was due to the fundamentals of local coal supply in South Africa, rather than greenhouse gas emissions.

"Our exit there is driven largely by the fact that a cost-plus arrangement with the state utility is not going to give the sort of returns our investors expect, particularly when looking at that return through a South African country risk lens," he said.

Meanwhile, a pre-feasibility study for the Hermosa silver-lead-zinc project in Arizona is expected to be completed before the end of its fiscal 2020. South32, in June, outlined a maiden resource estimate for Hermosa's Taylor deposit of 155 Mt grading 3.39% zinc, 3.67% lead and 69 g/t silver, at a net smelter return royalty cutoff grade of US$90/t.