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Farallon and Co put price on coal’s pariah status

A coal merchant holds up a lump of coal for the camera in his yard in Melmerby, northern England November 5, 2008. A global recession and cheaper coal are likely to cut Britain’s demand for natural gas this winter, possibly speeding up the fall in gas prices which have so far lagged behind the slump in oil markets. Photograph taken on November 5, 2008. REUTERS/Nigel Roddis (BRITAIN) – LM1E4BO16J501

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MELBOURNE, March 3 (Reuters Breakingviews) – Climate-change concerns are making it ever harder for coal-mining companies to raise money. A group of hedge funds has put a price on the fossil fuel’s status as a financial pariah: a whopping 11.5% interest rate on a five-year secured loan. That’s what Canyon Capital, Farallon Capital and Varde Partners are charging to lend around half the $1.3 billion Australia’s Stanmore Resources (SMR.AX) agreed in November to pay for some BHP (BHP.AX) assets. read more

Even that pricing is likely to be unattainable for many rivals: Stanmore and the BHP unit mine coking coal used in steelmaking, a type of the commodity that has yet to receive the same opprobrium from bankers, bondholders and shareholders as thermal coal, which is used to generate electricity.

With coking coal prices at or near record highs, Stanmore can afford it. At an average of $250 a tonne, its net debt will be less than the company’s estimated 2022 EBITDA. If prices retreat back to 2020 levels, Stanmore and its lenders will have to tread more carefully. (By Antony Currie)

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Editing by Una Galani and Thomas Shum

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2022-03-02 21:52:00

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