BHP says Queensland’s sovereign risk profile has increased

In language usually reserved for developing nations struggling with the rule of law, mining giant BHP has issued a “blunt warning” about Queensland to investors around the world.

In language usually reserved for unstable, developing nations, mining giant BHP says Queensland’s ‘sovereign risk’ profile has increased following the introduction of new coal royalties.

In shocking language usually reserved for unstable, developing nations, mining giant BHP says Queensland’s “sovereign risk” profile has increased following the introduction of new coal royalties.

The remark, contained within the company’s latest production report, confirms again that Australia’s biggest company has soured on Queensland.

“The near tripling of top end royalties by the Queensland Government makes Queensland the highest coal taxing regime in the world,” the report states.

“Given the negative impact this has on investment economics and the increase in sovereign risk, we will not be investing in any further growth in Queensland, however we will sustain and optimise our existing operations.”

Sovereign risk refers to the calculation potential investors make before putting money into a country or economic zone.

BHP boss of Queensland Coal Mauro Neves (left) and CEO Mike Henry gives a press conference on the sidelines of the World Mining Congress in Brisbane on June 27, 2023. Picture: Duncan Evans

Political instability or a capricious investment climate widens the potential cost-benefit ratio of an investment and affects the distribution of capital in the world.

Queensland Resources Council chief executive Ian Macfarlane said BHP’s statement would affect how international investors looked at the state.

“This is a blunt warning to the international investment community about the risks of committing to new projects in Queensland,” he said.

“When BHP talks, international investors and multinational companies listen.”

But Treasurer Cameron Dick dismissed BHP’s rhetoric this week and said investment interest in Queensland coal remained healthy.

“This is the same thing BHP always says,” he said.

“Long before the new royalties tiers were introduced, BHP made their intentions clear to withdraw from coal.

“Other companies are looking to increase investments in Queensland, including Whitehaven, Coronado, Peabody and Yancoal.”

Coal firms in the Bowen Basin now shell out 40 cents on the dollar when prices rise above $300 a tonne, the highest rate in the world.

BHP is offloading the Blackwater and Daunia mines to focus on its Broadmeadow, Caval Ridge, Peak Downs, Goonyella Riverside and Saraji operations.

But while BHP’s Queensland footprint is declining, a subtle shift in language from earlier production reports suggests it will still invest in these five remaining assets for the long-term.

In its production report for the year ending December 31, 2022, the company stated it was “unable to make significant new investments in Queensland” because of unpredictable government policy.

But the company’s 2023 commitment to “sustain and optimise” its existing assets suggests BHP dollars will still flow into the Basin.