BHP winding down thermal coal mine after failing to discover a purchaser


BHP has pulled out of makes an attempt to promote considered one of Australia’s largest thermal coal mines, selecting to run down the asset over the subsequent eight years as it really works to transition away from mining fossil fuels.

The coal mine, positioned at Mount Arthur within the Hunter Valley area north of Sydney, was put up on the market in 2020. BHP had deliberate to increase the lifetime of the mine, which provides energy stations in Japan and Korea, to 2045 from 2026, when its authentic licence ends.

It will now shut the location in 2030 after failing to discover a purchaser. The resolution to maintain Mount Arthur operating comes as costs for high-grade Australian thermal coal commerce near file ranges, at round $390 a tonne, in line with power knowledge supplier Argus Media.

Europe’s resolution to ban coal imports from Russia, which is able to come into pressure in August, has additional tightened the market. An virtually whole absence of funding in new markets has resulted in provide lagging demand as huge economies in Asia raise their pandemic restrictions.

Coal mining has been the lifeblood of the economic system within the Mount Arthur area for the reason that Nineteen Sixties, and BHP turned the location into one of many nation’s largest opencast mines 20 years in the past. Around 2,000 individuals work there and the choice to increase its life past 2026 would require authorities approval.

Edgar Basto, head of BHP’s Australian minerals unit, stated: “Seeking approval to continue mining until 2030 avoids closure in 2026 and enables BHP to balance the value and risk of those considerations and our commitments to our people and local communities.”

Coal mining has dominated the political panorama on account of Australia’s financial dependence on fossil gas exports. The nation can be gripped by an power disaster with the state authorities of New South Wales warning of potential blackouts because of generator outages.

It is the second time that BHP has performed a major position in reshaping the area’s economic system after it pulled out of its massive metal enterprise in Newcastle within the late Nineteen Nineties. 

Mount Arthur was earmarked for disposal as a part of the reshaping of the mining firm. BHP offered its stake in a Colombian coal mine to Glencore — which additionally owns coal mines within the Hunter Valley — final yr and has merged its oil property with Woodside right into a individually listed firm.

The Mount Arthur mine had accrued heavy losses lately however a pointy rise within the thermal coal value has turned across the operation’s funds. However, the mine will not be anticipated to stay worthwhile past 2030 even when costs keep excessive.

Saul Kavonic, an analyst with Credit Suisse, stated it was no shock BHP struggled to discover a purchaser given the capital expenditure and authorities approvals required, in addition to the excessive value of decommissioning the mine, anticipated to be round $700mn.

Kavonic stated BHP, which has stated it’s going to finish its thermal coal operations, had beforehand favoured quick divestment of coal property. But increased coal costs following Russia’s invasion of Ukraine and altering attitudes in direction of environmental, social and governance (ESG) points had prompted BHP to shift its method.

“Only 12 or 24 months ago, equity markets were really shunning fossil fuel exporters, but there’s now been a shift where some in equity markets say there is an ESG case for managing your assets down rather than just flicking the problem to someone else who might have less ESG scruples,” Kavonic stated.

Additional reporting by Neil Hume in London