Rio Tinto Group completed its exit from coal with a bang, agreeing to sell more than $4bn of Australian mines in just a week.
The world’s second-biggest miner on Tuesday agreed to sell its last coal mine, the Kestrel operation in Australia’s Queensland state, for $2.25bn to private equity firm EMR Capital and Indonesia’s PT Adaro Energy. That follows announcements last week that Rio will offload coal assets to Glencore Plc for $1.7bn in cash and sell an undeveloped project.
Just five years ago it would have been hard to imagine that one of the top miners wouldn’t be digging up the dirtiest fuel, which generates about 40% of the world’s electricity. Rio’s coal-free future is in stark contrast to many of its rivals, such as Glencore, the world’s top coal shipper. The commodity is one of BHP Billiton’s main strategies, while Anglo American has pulled back on plans to sell out.
Rio won a high price for the Kestrel asset – which mainly produces hard coking coal used in steelmaking – offering the producer more flexibility to boost shareholder returns and to pursue possible acquisitions, London-based RBC Capital Markets analyst Tyler Broda said in a note. “Additionally, Rio Tinto will become the only major without coal assets – certainly helpful for ESG-conscious investors.”
Rio declined 0.3% to A$73.96 in yesterday’s trading in Sydney, as BHP Billiton fell 0.7%.
While many miners are bullish on coal, the fuel has become a flashpoint for a growing movement of investors calling for miners to cut their exposure. For example, Norway’s sovereign wealth fund doesn’t invest in firms that make 30% of their sales from coal, while the Church of England sets the limit at 10%.
Rio’s decision is aimed at prioritising iron ore, copper, bauxite and aluminium operations, chief executive officer Jean-Sebastien Jacques said on Saturday in an interview with Bloomberg Television. Jacques has argued that even a mining firm as large as his has only so much managerial talent and money, and must focus those on more productive assets.
Rio has also been able to sell coal mines for what it sees as good prices, allowing more cash to be returned to shareholders. 
The sales deliver “exceptional value to our shareholders and will leave our portfolio stronger,” Jacques said in a statement.
The London-based miner has been shedding its Australian coal assets since dismantling its coal division in 2015. Last year, Rio agreed to sell its Coal & Allied Industries to China’s Yanzhou Coal Mining Co, before Glencore then bought a stake in the project. Rio has also sold other projects in places from Australia to Mozambique.
Rio’s energy operations, including coal, uranium and other assets, accounted for about 7% of revenue last year, down from a peak of 24% a decade earlier, according to data compiled by Bloomberg.
In 2017, the Kestrel mine produced 4.25mn metric tonnes of hard coking coal and 0.84mn tonnes of thermal coal. Rio will decide in August whether to use proceeds from the Kestrel sale to fund additional returns to investors, Jacques said in the Saturday interview. The deal is expected to complete in the second half of the year.
Rio’s move to sell its final coal mine leaves the producer “leaner and greener,” UBS Group analysts including Sydney-based Glyn Lawcock said in a note. There’s scope for Rio to raise a further $3bn this year with additional sales of aluminium and iron ore assets, according to Lawcock.