Diversified miner BHP has unveiled plans to divest of the Daunia and Blackwater coal mines, in Queensland, under the BHP Mitsubishi Alliance (BMA).
The miner said in its interim results that given its strategy to focus its coal portfolio on the highest-quality metallurgical coals, the BMA partners have started to pursue options to divest of the Daunia and Blackwater mines following a detailed consideration of BMA’s longer-term plans.
“While high-quality assets with growth potential, the Daunia and Blackwater mines would struggle to compete for capital under our capital allocation framework, including given our choices for deploying capital globally, and we are seeking to divest these assets to an operator who is more likely to prioritise the necessary investments for continued successful operation.
“We will look to maximise the value of these assets via a trade sale,” the company said in its results.
BHP last year said it was “reassessing” future investment in Queensland coal following a royalty hike, saying at the time that Queensland had become unconducive 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.
The miner told shareholders that as a result of the Queensland government’s decision to raise coal royalties to the highest maximum rate in the world, the fiscal environment is no longer competitive or predictable and as such BMA is not making significant new investments in Queensland and is not providing annual sustaining capital expenditure guidance at this time.
The Queensland Resources Council (QRC) has called on the Queensland government to “urgently reconsider” its coal royalty hike, with CEO Ian Macfarlane saying it was concerning to see BHP point to the royalty tax increase as a contributing factor in its decision to divest of the two mines.
“While it’s hoped a new buyer will be found, the decision to sell the mines will create uncertainty for the employees at these two mines, their families, local businesses, and the local communities as the divestment review takes place over the next 18 months.
“BHP indicated the two mines would struggle to compete for capital under its current global investment plans, which is why the Queensland government should be doing whatever it can to attract investors, not scare them off with the world’s highest royalty tax rate,” Macfarlane said.
He added that BHP’s concerns will be noted by other major investors in Australia and around the world, which would add to the serious threat the royalty tax increase poses to future investment and jobs in Queensland.
“Queensland’s resources sector is the state’s biggest industry, contributing A$94.6-billion to the state’s economy and supporting the jobs of around 450 000 Queenslanders.
“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 and jeopardising the state’s economic prosperity,” Macfarlane said.
On news of BHP’s decision to divest of the two assets, the Miner’s Union has called on the mine to guarantee worker entitlements and ongoing community support.