A resources multinational will exit two coal operations in Queensland’s Central Highlands and Isaac regions.
BHP recently confirmed it would sell its Blackwater Coal Mine (226km west of Rockhampton) and Daunia Coal Mine (170km southwest of Mackay). AMSJ can reveal the deal is widely speculated to be worth $2 billion, with Coronado Global Resources plus Peabody Energy Australia the most likely bidders.
“In Queensland, together with our joint venture partner, Mitsubishi Development Pty Ltd, we have initiated a process to divest the Daunia and Blackwater mines,” BHP CEO Mike Henry said in a public statement.
“Whilst high quality assets with growth potential, the Daunia and Blackwater mines would struggle to compete for capital under our capital allocation framework …. and we are seeking to divest these assets to an operator who is more likely to prioritise the necessary investments for continued successful operation.”
Henry suggested the difficult decision came in response to the global decarbonisation movement and State Government imposing the “world’s highest coal royalty tax rates”.
“As the world continues to evolve towards a lower carbon future we must actively manage our portfolio to mitigate the risks that a changing world presents and to take advantage of opportunities to grow value,” he said.
“The regulatory environment has become less conducive to long–life capital investment in the world’s premier premium low volatile basin – Queensland.”
He also blamed substandard production for looming coal shortages.
“In coming years most committed and prospective new metallurgical coal supply is expected to be mid quality or lower, while industry intelligence implies that some mature assets are drifting down the quality spectrum as they age,” he said.
“The relative supply equation underscores that a durable scarcity premium for true, premium low volatile coals is a reasonable starting point for considering medium term trends in the industry.”
The remarks came months after employees approved a new enterprise agreement (EA) that guarantees 105 new EA positions across the Blackwater, Saraji, Peak Downs and Goonyella Riverside operations.
The deal is promised to prevent EA numbers from dropping below current levels across all mines. It also gives a one-for-one replacement of EA employees within the same mine site and work area.
The Mining and Energy Union (MEU) expressed disappointment over the proponent’s decision to “cut and run”.
“BHP has long been the biggest coal mine operator in Central Queensland and I believe they owe it to their workforce and the communities that have sustained them to provide some ongoing support,” Queensland district president Stephen Smyth said in a public statement.
“BHP must guarantee that workers’ entitlements will be protected throughout this process, including their contractor workforce and … make a commitment to providing ongoing community support – especially to the town of Blackwater which has supported the Blackwater mine for over 50 years.”
Smyth promised to extend “all possible support” to those impacted at the Daunia and Blackwater mines.
The Queensland Resources Council (QRC) believes the sale proves the coal royalty hike made the Sunshine State less attractive for investment.
“It is very concerning to see BHP point to the royalty tax increase as a contributing factor in its decision to divest its interests in the Blackwater and Daunia mines in Central Queensland,” QRC CEO Ian Macfarlane said in a public statement.
“BHP indicated the two mines would struggle to compete for capital … [and] the State Government needs to urgently reconsider its royalty tax increase before other companies join BHP in divesting their Queensland assets, threatening thousands of future jobs.”