PERTH (miningweekly.com) – Diversified miner BHP is "reassessing" future investments into Queensland coal, following a royalty hike earlier this year.

The company said this week that its metallurgical coal operation, BMA, was unable to provide sustaining capital expenditure guidance for the 2023 financial year.

BHP noted that Queensland had become "less conducive" to long-term capital investment as a result of the changes to the royalty regime, and that the company would assess the impact of the new royalty rate on the BMA economic reserves and mine lives, as well as the impact on production, jobs and the communities of Central Queensland.

“This further cost pressure is expected to discourage investment, operational growth, job creation and local business spending across the state,” the miner said in its preliminary final report.

In the same report, BHP said that considering its long-term outlook for metallurgical coal commodity prices, which reflected a range of drivers of commodity demand and supply, along with the significant increase in coal royalties in Canada, the end of operations at the BMA sites could be "earlier than previously anticipated".

During the results announcement, BHP CEO Mike Henry said that the royalty increase, which was announced in June, was "quite sudden".

“[It] didn't involve any engagement with industry which has been a significant increase in the sovereign risk associated with Queensland, which has caused us to say we really can't deploy further capital into that business for the time being and we'll go back and reassess what the plans for the business are going forward,” Henry was quoted by the ABC.

The Queensland Resources Council (QRC) on Wednesday said that BHP’s decision to pause investment plans in Queensland was no surprise to the industry.

QRC CEO Ian Macfarlane said the Queensland government's decision to lift coal royalty tax rates to the highest in the world, without consultation and behind closed doors, was a huge blow to the sector and had harmed Queensland’s international reputation as a safe place to invest in resources projects.

“This decision to halt investment in Queensland for the foreseeable future and reassess its plans for the business going forward is typical of what we warned the Queensland Treasurer would happen since he unilaterally decided to add three new tax tiers to the coal royalty system in the May budget,” he said.

“This, however, is not an isolated case - coal companies, large and small, are saying to us they're going to have to put a hold on investments for now and see what happens with the state government around royalties.”

Macfarlane said there was no need for the government to impose a ‘super tax’ on coal because Queenslanders were already benefiting from higher coal prices under the previous royalty regime.

“Under the previous system, last year Queensland coal companies paid more than A$7-billion in royalty taxes, which is four times as much in royalty taxes compared to the previous year,” he said.

“As commodity prices go up, so do royalties - that’s how the system worked.

“Unfortunately, the state government has now lifted rates to unprecedented levels, without consulting our industry and the consequences of that decision are now being laid bare for all to see.

“The state government has effectively killed Queensland’s golden goose - the resources sector - and put at risk the economic and employment future of Queensland,” Macfarlane said.

“A loss of investor confidence in Queensland’s resources sector will have an enormous impact on the future of our industry and therefore on the economy, jobs and the amount of royalty taxes paid to the government to fund hospitals, schools, nurses, doctors, teachers and other essential public services.

“The resources sector supports the jobs of more than 422 000 people, we contributed A$84.3-billion to the state economy last year and we’re Australia’s number one export industry.

“As an export industry, resources companies have to navigate the highs and lows of the international commodity price cycle, so ripping billions out of our sector when prices are high doesn’t allow companies to ride out the tough times when prices inevitably fall again.”