In Commodity News 05/05/2015
Goldman Sachs Group Inc. got a disconcerting update a year after buying its second coal mine in Colombia: “Certain operational issues have arisen,” commodities executives reported.
That was putting it mildly. Local women and children had formed a human blockade to protest labor issues, shutting down production. Coal prices had dropped 20% in three years, and another 6% decline could permanently impair the value of Goldman’s investment, the executives told directors in late 2013.
After that, the bad news kept coming. Coal prices tumbled by more than 40%. An environmental law shut down production for most of last year.
It now appears that Goldman has had enough. The firm is in talks to sell the coal mines at a loss, according to people familiar with the negotiations. Any deal, coming after Goldman’s prior sales of power plants and an aluminum-storage business, would mark the end of the firm’s rocky sideline as a producer of raw materials.
The sale talks come as the Federal Reserve weighs new restrictions on the ways commercial banks can produce, store and sell raw materials. A Senate panel concluded last fall that such operations are rife with potential conflicts of interest and systemic risks to banks. It expressed concern that banks involved in producing commodities, as opposed to merely trading them, might gain an unfair advantage in the market and possibly manipulate prices.
