Coal production costs have doubled over six-year span
Friday, November 11th, 2022
These rising costs are only one of the challenges facing the industry.
Whitehaven Coal, a prominent player in the coal mining space, said unit costs were an estimated seven per cent higher than anticipated this year. This is largely due to flooding in the Gunnedah Basin in New South Wales, which cut mining production and sales by five per cent and seven per cent, respectively.
Whitehaven now predicts the costs will settle between $95 and $102 per tonne of coal that needs to be mined and delivered to the Port of Newcastle until June 2023. This is in stark contrast to the company’s June 2016 figures, which saw Whitehaven spend $56 in digging and transport costs.
Lower sales volumes partly explain these increased costs; Whitehaven sold 15.4 million tonnes of its own coal in 2016 but will only sell an estimated 14.4 million tonnes this year as weather continues to hamper production.
Whitehaven managing director Paul Flynn has warned of this pressure for years, as the company continues to implement high-risk strategies into the workforce, such as flying workers to hazardous areas via helicopter and increasing employee wages amid rising social stigma around the industry. This is on top of a shortage of skilled labour and the rising costs of diesel and electricity.
“You have to be more inventive about how you attract people in … bringing people in on different roster structures and pay rates, which need to be ironed out just to make sure you have got a harmonious workplace,” he said.
Whitehaven is not the only juggernaut to endure these rising costs. BHP expects costs from its Mt Arthur mine in NSW to settle between $116 and $132 per tonne this year, and also shares the trouble of diminishing volume.
Yancoal will be affected the least as costs, which is expected to be only $89 per tonne in the coming year.
The kinds of costs do not include additional pressures royalty rates paid to state governments, and the added costs of shipping products to international customers.
Queensland coal miners have been hit with a three-tiered royalty system where companies must pay 20 per cent for prices above $175, 30 per cent for prices above $225 and 40 per cent for prices above $300. Many companies in the region are grimacing at this new program, with BHP halting operations in Queensland as it reconsiders future investments in the state.
Despite the inflated costs of production, coal prices are soaring and companies anticipate significant profits. The prices paid for NSW thermal coal this year has surpassed previous records between 2008 and September 2021, with top quality coal asking for $556.61 per tonne as of November 4, according to GlobalCoal.
“We are offering certain retention initiatives for our people to slow down the turnover, I think that has hit the mark,” Flynn said.