BHP bites back at Queensland’s threat to strip its mining leases

BHP CEO Mike Henry says coal royalty hikes make Queensland an unattractive place to invest as Treasurer Cameron Dick threatens to strip the company of its mines.

BHP boss Mike Henry has dismissed threats by the Queensland Treasurer to strip the company of its lucrative coalmining leases if the Big Australian pushes ahead with an investment strike in the state, saying BHP’s position was not “particularly controversial”.

On Monday, Queensland Treasurer Cameron Dick escalated a long-running royalty dispute with the resources industry, warning the state government had power to cancel mining leases and stated his “clear expectation” that BHP continue to invest in its current projects.

BHP has stopped new growth investment in Queensland ­because of the Palaszczuk government’s controversial coal royalty scheme, although it has said it would keep putting money in to sustain its existing operations in the state.

Speaking after BHP delivered its annual financial results on Tuesday, banking $US12.92bn profit, Mr Henry said the company’s position was simply that the royalty hike made Queensland a less attractive place to spend money.

“In essence what we’re saying is that if returns go down and risk goes up, of course that makes investments elsewhere in relative terms more attractive. Any business, or frankly any of us in our personal finances, would look at it in exactly the same way,” he said.

“We are continuing to invest in these Queensland businesses. BMA invests over $1bn a year in keeping these operations going because we do see the business as attractive.”

The new royalty scheme – introduced last year despite an election promise of no new or increased taxes – cost BHP an extra $US700m ($1.1bn) in royalty payments last financial year.

In total, the BMA joint venture paid more than $5bn to the state government last year, about $2bn more than under the previous royalty regime.

Mr Dick reiterated his threats during question time on Tuesday morning, saying mining companies had to “use it or lose it”.

BHP CEO Mike Henry. Picture: Thomas Graham

“We want those companies to properly develop the leases that they have been granted by the people of Queensland,” he said. “If they fail to do so, without legitimate commercial reason, our government has the power to act.”

Mr Dick said BHP’s profit last year was its fourth largest on ­record and bigger than any of Australia’s big banks.

“For all the complaints about progressive coal royalties, for coal BHP’s underlying return on capital employed came in at a very healthy 47 per cent,” he said.

BHP’s coking coal earnings plunged, however, on lower prices and the hit from increased royalty rates. The mining giant and the Queensland Resources Council have been at war with the Palaszczuk government for more than a year over Mr Dick’s royalty regime, which pumped $15bn into ­government coffers last year.

The scheme, which has a top tier of 40 per cent for coal prices above $300 a tonne, helped the government bankroll $550 energy ­rebates for every Queensland household, totally wipe power bills for some pensioners, and make kindergarten free for all families from next year.

The Queensland Resources Council, the state’s peak resources body, said Mr Dick’s “extraordinary threat” to revoke coal mining leases would further shake investor confidence in the resources sector.

“We shouldn’t take for granted that Queensland will always have a strong resources sector to rely on if policies are introduced which make us less competitive and less attractive to investors,” chief executive Ian Macfarlane said.

“Resources companies generally take a long-term view on where to invest in new projects because of the scale of capital required and length of time involved, so any sudden and extreme change in government policy, like we saw in Queensland last year, is a major deterrent to future investment.

“We know other companies are also reviewing their investment plans for Queensland.”