Connect with us

News

BHP’s Mt. Arthur bind illustrates mining’s coal dilemma

Published

 on

By Melanie Burton

MELBOURNE (Reuters) – As BHP Group looks at options to spin off or sell its thermal coal assets, the miner is facing pressure from climate conscious investors who want divergent paths and that’s even before getting to the tough task of finding a buyer.

The world’s largest miner has been in talks with stakeholders on its plans to divest the Mt. Arthur thermal coalmine, its stake in a steel-making coal project with Japan’s Mitsui and a stake in a thermal coal mine in Colombia.

Some large shareholders are pushing the miner toexit immediately while other investors want a slower exit, to ensure the mine is wound down responsibly.

How BHP, which faces about $1 billion in clean up costs at Mt. Arthur alone, divests could be a template for other miners,including Glencore Plc and Anglo American whoare also mulling ways to offload coal assets.

BHP spin-off South32 agreed this month to pay up toA$250 million ($194.70 million) to smooth the sale of its SouthAfrican thermal coal business, partly funding environmentalclean up costs over a decade.

“The best thing that BHP could do is set a global precedentabout how to exit responsibly,” said Tim Buckley, director ofAustrian think tank Institute for Energy Economics and FinancialAnalysis (IEEFA).

BHP said that it had rehabilitated more than 1,211hectares already at Mt. Arthur and that transparency was“fundamentally important” to any mine rehabilitation. It said itcould not speculate on the outcome of any potential divestmentof the Mt. Arthur asset.

BHP’s exit from thermal coal would satisfy investment criteria laid down by Norway’s government pension fund, which owns about 5.58% of BHP’s London-listed arm.

It put BHP under observation for possible exclusion if itdid not address its use or production of coal last year beforeraising its stake after BHP announced divestment plans.

The Norwegian wealth fund declined comment.

MINING LICENCE SET TO EXPIRE

Shareholder proposals that press companies to exit fromfossil fuels without taking into account rehabilitation needs donot solve the problem, said Alison George at investment advisorRegnan, part of the Pendal Group which manages about A$97.4billion.

“We have been concerned that (the proposals) really aren’t well targeted to address the system risk nor are they really likely to get the company to manage that risk better,” she said.

BHP is considering smaller buyers and splitting the assets, with bids due in the next few weeks, said a banker familiar with the matter who declined to be identified as the information is not public.

While it would be a coup for a small company, BHP prefers abuyer that can sustain long term responsibilities, the bankeradded.

In 2016, Rio Tinto sold its Blair Athol mine inQueensland to coal junior Terracom for A$1 along withproviding a rehabilitation fund of A$80 million.

The fund now stands at about A$50 million after the state government trimmed its rehabilitation requirements at Terracom’s request and allowed Terracom to draw down A$27 million in exchange for an insurer’s guarantee.

One stumbling block to a sale has been the expiration of BHP’s mining licence, set for June 2026. BHP said in March it will apply to extend operations to 2045.

The miner wrote down its Mt. Arthur coal business by $1.2billion this year and took a smaller write-down on its Colombiacoal asset, Cerrejon.

A listing may also not garner the value that BHP desires,with recent coal IPOs attracting tepid demand in Australia. RBC recently valued any spin-off at $2.7 billion.

As part of any spin off, think tank IEEFA has proposedBHP set up a $1 billion sinking fund to cover futurerehabilitation liabilities.

That would see BHP maintain a controlling minority stake to prevent vulture funds stripping the fund or cashflow and with capital invested to reward shareholders with dividends and any land resale.

One institutional investor, who has been approached about the proposal via a third party, said the model carried high riskbecause it was untested and may not offer the security ofreturns his organization was looking for.

The competing shareholder pressures add to BHP’s coalheadaches for a business that has become problematic for minersamid action by environmental activists and with banks andinsurers scaling back financing because of global warmingconcerns.

“The question is, how do you ensure the clean up of the messthat you have created in a socially responsible way?” said IEEFAdirector Buckley.

($1 = 1.2840 Australian dollars)

 

(Additional reporting by Gwladys Fouche in Oslo; Editing by Raju Gopalakrishnan)

Continue Reading

News

AMC expects people to return to theaters as vaccine rollout gathers pace

Published

 on

(Reuters) -AMC Entertainment Holdings said on Thursday its business was expected to improve in the coming months as the mass rollout of COVID-19 vaccines draws moviegoers back to the cinema chain’s theaters.

A strong slate of big-budget movies, including “Fast & Furious” film “F9” and Marvel’s “Black Widow,” in the summer is expected to fuel a rebound in box-office sales after the pandemic-driven slump in 2020.

“We finally can now say that we are looking at an increasingly favorable environment for movie-going and for AMC as a company over the coming few months, Chief Executive Officer Adam Aron said in a statement.

However, the company’s revenue fell to $148.3 million in the quarter ended March 31, from $941.5 million a year earlier, missing a Refinitiv IBES estimate of $153.43 million.

Its net loss shrunk to $567.2 million, or $1.42 per share in the quarter, from a loss of $2.18 billion, or $20.88 per share, a year earlier.

(Reporting by Chavi Mehta in Bengaluru; Editing by Aditya Soni)

Continue Reading

News

Drugmakers say Biden misguided over vaccine patent waiver

Published

 on

By Stephanie Nebehay and Ludwig Burger

GENEVA/FRANKFURT (Reuters) -Drugmakers on Thursday said U.S. President Joe Biden’s support for waiving patents of COVID-19 vaccines could disrupt a fragile supply chain and that rich countries should instead share more generously with the developing world.

Biden on Wednesday threw his support behind waiving intellectual property rights for COVID-19 vaccines, angering research-based pharmaceutical companies.

If adopted by the World Trade Organisation, the proposal would invite new manufacturers that lack essential know-how and oversight from the inventors to crowd out established contractors, the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) said.

“I have heard many (vaccine makers) talking about ‘our resources are stretched, our technicians are stretched’,” IFPMA Director General Thomas Cueni told Reuters. He warned of a possible free for all if “sort of rogue companies” were allowed to become involved.

Vaccine developers echoed his comments that waiving intellectual property rights was not a solution.

“Patents are not the limiting factor for the production or supply of our vaccine. They would not increase the global production and supply of vaccine doses in the short and middle term,” said Germany’s BioNTech, which aims to supply up 3 billion doses together with Pfizer this year.

BioNTech said it took more than a decade to develop its vaccines manufacturing process and replicating it required experienced personnel and a meticulous technology transfer, among several other factors beyond patents.

Another German company CureVac, which hopes to release trial results on its messenger ribonucleic acid (mRNA) vaccine as early as this month, said patents were not to blame for supply bottlenecks.

“Since mRNA technology has emerged as the key technology in the fight against COVID-19, the world now needs the same raw materials in unfathomable amounts. The biggest problem is how to coordinate this,” a spokeswoman said.

IFPMA’s Cueni said the real bottlenecks were trade barriers, in particular the U.S. Defense Production Act (DPA).

The DPA is a decades-old U.S. law that prioritised procurement orders related to U.S. national defence, but it has been widely used in non-military crises, such as natural disasters.

Cueni said the way to kickstart low-income countries’ vaccination campaigns was for rich countries to donate vaccine, rather than widen eligibility to young and healthy people at home.

Moderna, which on Thursday reported quarterly results, said waiving intellectual property rights would not help to increase supply of its vaccines in 2021 and 2022.

The U.S. drugmaker said last year it would not enforce its vaccine patents. CureVac said on Thursday it would also not enforce its patents during the pandemic and that it knew of no other developer that would.

Italy’s ReiThera which is in late-stage tests on an experimental COVID-19 vaccine, was also critical of patent waivers.

“There is proprietary know-how that has to be transferred by the owner. And then there is the problem with process materials, which at the moment have delivery times of almost a year,” ReiThera’s chief of technology Stefano Colloca said.

In contrast to the industry reaction, the GAVI vaccine alliance, which co-leads the COVAX dose-sharing programme with the WHO and faces major supply constraints, welcomed Biden’s support for waiving intellectual property rights.

(Writing by Ludwig BurgerAdditional Reporting by Emilio Parodi in Milan; editing by Barbara Lewis and Jane Merriman)

Continue Reading

News

EU supports COVID vaccine patent waiver talks, but critics say won’t solve scarcity

Published

 on

By Philip Blenkinsop and Carl O’Donnell

BRUSSELS/NEW YORK (Reuters) -The European Union on Thursday backed a U.S. proposal to discuss waiving patent protections for COVID-19 vaccines, but drugmakers and some other governments opposed the idea, saying it would not solve global inoculation shortages.

European Commission President Ursula von der Leyen expressed willingness to explore a waiver after President Joe Biden on Wednesday promoted the plan, reversing the U.S. position.

“The main thing is, we have to speed this up,” U.S. Secretary of State Anthony Blinken said on Thursday as India battled a devastating COVID-19 outbreak. “None of us are going to be fully safe until … we get as many people vaccinated as possible.”

A patent waiver is “one possible means of increasing manufacture, and access to vaccines,” he said, as the White House denied a split among officials over the waiver idea.

Biden’s administration endorsed negotiations at the World Trade Organization to gain global agreement.

WTO Director-General Ngozi Okonjo-Iweala told member states that she “warmly welcomed” the U.S. move. “We need to respond urgently to COVID-19 because the world is watching and people are dying,” she said.

World Health Organization (WHO) chief Tedros Adhanom Ghebreyesus reached for capital letters in a tweet calling Biden’s move a “MONUMENTAL MOMENT IN THE FIGHT AGAINST #COVID19,” and said it reflected “the wisdom and moral leadership of the United States.”

Despite that enthusiasm, drugmakers, who stand to lose revenue if they are stripped of patent rights to COVID-19 vaccines, and other critics found flaws in the proposal.

The complexities of manufacturing means free access to the intellectual property is not enough to immediately increase vaccine production, they said. Moderna waived its patent rights in October, and on Thursday noted the lack of companies able to rapidly manufacture a similar vaccine and secure approval for it.

Combined, Pfizer Inc and Moderna Inc have forecast over $45 billion in sales this year for their COVID-19 vaccines.

In the long term, a waiver would discourage pharmaceutical companies from rapidly responding to future global health threats with large research investments, some said.

Germany, the EU’s biggest economic power and home to a large pharmaceutical sector, rejected the idea, saying vaccine shortages were due to limited production capacity and quality standards rather than patent protection issues.

Health Minister Jens Spahn said he shared Biden’s goal of providing the whole world with vaccines. But a government spokeswoman said in a statement that “the protection of intellectual property is a source of innovation and must remain so in the future.”

Moreover, a waiver would take months to negotiate and require unanimous agreement among the 164 countries in the WTO. Drug companies urged rich countries instead to share vaccines more generously with the developing world.

DOES NOT ADDRESS ‘THE REAL CHALLENGES’

Stock prices for drugmakers largely recovered after initially falling sharply after Biden backed the waiver idea. Moderna was off 1.3% after earlier dropping 12%, and the U.S. shares of its German partner BioNTech SE shed 0.6% after falling as much as 15% earlier. “The bottleneck is neither access nor patents (or price) butsimply that there aren’t enough vials, raw materials, etc tomanufacture it regardless of patents,” Jefferies analyst Michael Yee said of expanding COVID-19 vaccine production.

The pharmaceutical industry’s main lobbying group, PhRMA, said: “This decision does nothing to address the real challenges to getting more shots in arms, including last-mile distribution and limited availability of raw materials.”

There have been more than 155 million confirmed coronavirus infections worldwide and almost 3.4 million peopled have died for COVID-19, according to a Reuters tally.

But the vast bulk of the 624 million people who have received at least one dose of the vaccine, according to the Our World in Data website, live in wealthier countries.

The global COVAX vaccine distribution program, led by the WHO and the Global Alliance for Vaccines and Immunization (GAVI), that aims to supply vaccines to low-income countries, has so far handed out around 41 million doses.

French President Emmanuel Macron said he was “very much in favour” of opening up intellectual property. However, a French government official said vaccine shortages was the result of a lack of production capacity and ingredients, not of patents.

“I would remind you that it is the United States that has not exported a single dose to other countries, and is now talking about lifting the patents,” the official said.

The United States has shipped a few million vaccine doses it was not using to Mexico and Canada on loan.

South Africa and India made the initial waiver proposal at the WTO in October, gathering support from many developing countries, which say it will make vaccines more widely available.

Until now, the European Union has been aligned with a group of countries, including Britain and Switzerland – home to large pharmaceutical companies – that have opposed the waiver.

(Reporting by Philip Blenkinsop and Sabine Siebold in Brussels, additional reporting by Robin Emmott, Francesco Guarascio and John Chalmers in Brussels, Emilio Parodi in Milan, Gwenaelle Barzic in Paris, Emma Farge in Geneva; Additional reporting by Trevor Hunnicutt aboard Air Force One, Andrea Shalal in Washington, Carl O’Donnell and Michelle Nichols in New York, and Ankur Banerjee in Bengaluru; Writing by Nick Macfie and Cynthia Osterman; Editing by Kevin Liffey, Mark Heinrich and Bill Berkrot)

Continue Reading

Trending