Royalty hike blamed for BHP’s Queensland mine sell-off

Queensland’s controversial coal royalty hike has made the state “uncompetitive”, mining giant BHP has warned after it announced a decision to sell-off two mines.

Queensland’s controversial coal royalty hike has made the state “uncompetitive”, mining giant BHP has warned as it announced a decision to sell-off two mines.

BHP announced on Tuesday it had decided to sell-off the Daunia and Blackwater coking coal mines, which it owns as part of its Queensland-based joint venture BMA, as the projects would “struggle” to compete for capital moving forward.

BMA asset president Mauro Neves said the decision was “consistent with BHP’s strategy to focus our portfolio on the highest quality metallurgical coal assets” but noted the “uncertainty caused” by last year’s royalty hike had played a part.

BHP posted a half-year net profit of $US6.46bn, which is high by historic standards but 24 per cent beneath the previous year on the back of lower iron ore prices and rising costs.

BHP CEO Mike Henry said the royalty increase had been “quite a radical shift”. Picture: Thomas Graham

In Queensland, BMA paid $2.3bn in royalties in the first six months of the financial year, more than double the $1.1bn bill in the same time frame for 2021/22. The state government, in the budget last year, added new coal royalty tiers to rake in extra revenue during periods of exceptionally high global coal prices.

The Queensland Resources Council warned BHP’s concerns and decisions to divest would be noted by “other major investors” as it called for the state government to reverse the controversial royalty hike.

But the state government pointed to BHP’s decision to sell off the Blackwater and Daunia coking coal mines in central Queensland as part of the mining giant’s ongoing strategy to focus only on its best metallurgical coal projects.

BHP chief executive Mike Henry said the sell-off was part of the ongoing “consolidation of the portfolio towards the highest quality coal” but the royalty increase had been “quite a radical shift” which had increased the risk and “worsened the economics” of mines not at the top tier.

Queensland’s Mining and Energy Union has called on BHP to “guarantee” workers’ entitlements would be protected throughout the divestment process, including for the contractor workforce.

“BHP has long been the biggest coal mine operator in central Queensland and I believe they owe it to their workforce and the communities that have sustained them to provide some ongoing support,” president Stephen Smyth said.

Queensland Treasurer Cameron Dick. Picture: NCA NewsWire / Dan Peled

Treasurer Cameron Dick said the two mines were “quality” and predicted they’d be “snapped up” by some of the many companies which wanted to continue mining in the Bowen Basin. Queensland Resources Council chief executive Ian Macfarlane seized on BHP’s divestment notice as confirmation the royalty hike had made the state “uncompetitive”.

“BHP’s concerns will be noted by other major investors here in Australia and around the world, which adds to the serious threat the royalty tax increase poses to future investment and jobs in Queensland,” he said.