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BHP vows to end Queensland coal investment in protest against royalty hikes

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By Colin Hay - 
BHP ASX Queensland coal investment royalty hikes BMA Blackwater

BHP (ASX: BHP) has told the Queensland government it will make no further investments in the state’s coal industry in response to recent royalty hikes.

The global mining giant says Queensland remains one of the highest-royalty jurisdictions in the world.

It initially raised concerns when a change to the regime in 2022 increased coal royalties to the highest maximum rate in the world and resulted in an additional US$0.3 billion in royalties paid to the Queensland Government by BHP in relation to HY24.

BHP said that, combining the royalties with income taxes, this equated to an adjusted effective tax rate of 62%.

“Given the negative impact on investment economics resulting from the change in coal royalty rates and the increase in sovereign risk due to the decision to raise royalties without consultation, we will not be investing in any further growth in Queensland,” the company announced in its half yearly report.

“However we will sustain and optimise our existing operations,” it added.

Major Queensland investor

BHP is one of the biggest investors in Queensland’s mining sector.

Its Queensland operations mine metallurgical coal for steel-making at seven assets located in Central Queensland’s Bowen Basin.

BMA, 50%-owned by BHP and Mitsubishi Development, is Australia’s largest producer and supplier of seaborne metallurgical coal.

It currently operates mines at Goonyella Riverside, Broadmeadow, Daunia, Peak Downs, Saraji, Blackwater and Caval Ridge and owns and operates the Hay Point Coal Terminal near Mackay.

However, BHP has already moved to reduce the size of its Queensland operations with the BMA partnership announcing in October 2023 the sale of the Blackwater and Daunia mines to Whitehaven Coal in a deal expected to be completed on 2 April 2024.

Metallurgical coal support

In its half year report, BHP noted that over the longer term, higher-quality metallurgical coals like those produced by BMA will continue to be required in blast furnace steel-making for decades, driven by the growth of the steel industry in hard coking coal importing countries such as India.

“In particular, such higher quality coking coals are expected to be valued for their potential to help reduce the greenhouse gas emissions intensity of blast furnaces,” the company stated.

“With the major seaborne supply region of Queensland having become less conducive to long-life capital investment as a result of changes to the royalty regime, the scarcity value of higher quality coking coals may well increase over time.”