Coal industry predicts ‘bleak’ future for investor confidence

Queensland mining and resources companies say recent state and federal intervention into the coal and gas markets are ‘­destroying’ investor confidence.

The Queensland government blindsided industry in July by hiking its coal royalty tax to 40 per cent, Picture: Macarthur Coal Ltd. via Bloomberg News

Queensland mining and resources companies say recent state and federal intervention into the coal and gas markets are ­“destroying” investor confidence, as new analysis forecasts a loss of more than $100bn as a result of the Palaszczuk government’s coal royalty tax hike.

Queensland Resources Council chief executive Ian Macfarlane warned the federal government’s new energy package – which includes immediate caps on gas and coal prices – would be “hugely disruptive” for the market, scare off overseas investment, and not bring down prices for consumers.

The warnings come after the Queensland government blindsided industry in July by hiking its coal royalty tax to 40 per cent, which is expected to deliver $3bn to the state’s coffers this financial year.

Mr Macfarlane said the future of the industry was “looking bleak” as a result of state and federal intervention, the recent passage of Labor’s industrial relations reforms, and a new federal environmental agency that threatens to force companies to pay compensation for destroying habitats.

Queensland Resources Council's chief executive Ian Macfarlane. Picture: Zak Simmonds

“Both the coal and gas caps show governments are now prepared to intervene in the market at any time and the fiscal uncertainty of royalty hikes plus (coal price cap) is destroying investor confidence,” Mr Macfarlane said.

“In the end the fallout will be that companies invest in other countries. It’s just getting too hard in Queensland … there’s only so much that shareholders will take in terms of risk.

“If you can’t invest in coal without paying extraordinary royalty rates, and you can’t invest in coal without having a huge part of your profit taken off you in the good years and no sympathy in the bad years, then it all gets too hard, then you add a price cap that is no way reflective of international prices,” he said.

An independent report by Commodity Insights commissioned by the QRC found the sector was projected to lose $105bn from the coal royalty tax hike, using figures from the state’s ­Industry, Science, Energy and Resources Department.

The Australian has confirmed the QRC will use the new figure in ad campaigns this week as part of its push to force the Queensland government to wind back the tax.

Amid industry warnings that companies would be forced to remove investment from Queensland, The Australian revealed last week mining giant BHP was planning for the potential early closure of the company’s flagship coking coalmines in Queensland, setting aside $750m in its annual financial accounts for early closure and rehabilitation costs.

Australia’s largest coal producer, Glencore, also announced last week it had axed plans to build a $2bn thermal coalmine near Emerald in Queensland’s Bowen Basin.

Mitchell Services chief executive Nathan Mitchell said the royalty tax hike had created uncertainty for future investment in the resources sector and was made with no consultation with industry.

The company, which services coal and minerals projects in the Bowen Basin and Mt Isa region, generates 50 per cent of its revenue from Queensland.