BHP’s plan to divest the Daunia and Blackwater mines in Queensland follows a 32 per cent drop in half-year profits, as well as discontent over the state’s coal royalty hike.
The major miner announced in its half-yearly report that it was looking for buyers for the Bowen Basin coking coal operations, both of which are jointly owned by BHP and Mitsubishi as part of the BHP Mitsubishi Alliance (BMA).
“Whilst high-quality assets with growth potential, the Daunia and Blackwater mines would struggle to compete for capital under our current capital allocation framework, including given our choices for deploying capital globally,” BHP said in its report.
“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 trade sale.”
In addition to BHP’s falling profits, driven in large part by lower commodity prices, the Queensland Government’s controversial coal royalty hike has been cited as a catalyst for selling the two mines.
“We considered a range of factors, including the resource base, technical planning and the market outlook for lower grade coals,” BMA asset president Mauro Neves said.
“The uncertainty caused by the unplanned increase in royalties did come into play as a contributing factor in our decision-making.
“Based on all of those factors, we determined that Blackwater and Daunia would struggle to compete for capital and may be better suited to a different owner.”
BHP had previously made it clear that the company would not make any “significant new investments” in Queensland due to the coal royalty tax, saying the state had become “uncompetitive”.
But the sale of the Daunia and Blackwater mines does not mean BHP is giving up on coal. Chief executive officer Mike Henry yesterday made it clear other operations that are considered of a higher quality have a place in the company’s long-term plans.
“The sales that we’ve announced … of Blackwater and Daunia are wholly consistent with what we’ve been saying for quite a number of years now,” Henry said on a call with media.
“Which is that as the world and the steel industry seek to decarbonise and in fact accelerate on that effort, a key route for steelmakers to be able to reduce their carbon intensity will be through more efficient blast furnace operations.
“That requires the highest of quality coking coal. And that’s what we have in assets like Peak Downs, Goonyella, Saraji, Broadmeadow.
“And so those assets we see as having both sides through the energy transition. What we’re doing here is further concentrating our portfolio on the best of the best assets.”