Qld coal boss warns of wave of mine closures due to royalty hikes

Bowen Coking Coal boss Nick Jorss says Queensland’s crippling royalty regime means 500 jobs at its flagship mine are on the line as it ‘shovels money’ to the state government.

Nick Jorss says the current Queensland coal royalty scheme is unsustainable.

Bowen Coking Coal boss Nick Jorss has warned of a wave of coal mine closures across Queensland if a crippling state royalty regime was not wound back.

Bowen Coking Coal entered a trading halt on Tuesday pending an update on funding after warning crippling royalties threatened 500 jobs at its flagship Burton mine, west of Mackay. Mr Jorss said Bowen was not alone in its financial predicament following the introduction of a bruising coal royalty scheme introduced in 2022 by the previous Labor Government.

Burton opened the same year with a projected 10-year life and annual production of two million tonnes of coal. But the combination of falling coal prices and “the world’s highest royalty rates” means it may have to be temporarily closed.

Mr Jorss said the company has so far paid $120m in royalties without even turning a profit, a situation that was not sustainable.

“There’s a lot of mines now underwater,” Mr Jorss said “Closing a mine is never an easy decision and some companies have the balance sheet to ride through for a period.

“But if you look at how many mines are at risk of closure, it’s a significant portion of the Queensland industry. Some of our largest miners, as I see it, are currently cash negative.

“So it is a warning sign. We’re the canary in the coal mine, unfortunately, because we’re a small Queensland company.”

Bowen closed its Bluff mine near Blackwater in December 2023 due to rising costs.

Nick Jorss said it was not clear if the LNP Government would reduce royalties.

Mr Jorss, a coal industry veteran, famously invested $1 in the mothballed Isaac Plain coking coal mine in 2015 as head of Stanmore Coal and turned it into a billion dollar asset. But since then prospects for the coal sector have soured.

He said it was not clear if the LNP Government would reduce royalties or provide any relief to the struggling sector but at least they were listening.

He said it would be a “long bow to expect” any relief in today’s state budget given the debt levels faced by the government.

“Unlike the previous regime, at least you can have a dialogue with them,” he said. “We’re having a conversation with them and they’re aware now of the situation. Obviously, there’s a budgetary crisis and it’s now landed in their lap. But if mines shut, mines already have shut, and more mines will shut, and then they won’t be receiving any royalties.”

Bowen has previously flagged plans to operate the Burton mine on its own from July 1 to save costs following the end of contractor BUMA Australia’s involvement in the site.

Mr Jorss said the current coal royalty scheme in Queensland was the “definition of sovereign risk” and made capital raising increasingly difficult.

“We’ve basically just been working hard and all our people on site have been working hard to just shovel money to the state government, and that’s not very rewarding or very sustainable,” he said.

“We’re obviously working around the clock to solve this issue and we will fight hard for our workers and our operations. But we are dealing with these giant royalties, with a top rate of 40 per cent of revenue. That’s around four times the comparable average top rate around the world. So, we’re totally uncompetitive compared to our peers. If this mine was in New South Wales or even British Columbia in Canada, we’d be operating without problems. In Queensland, we’ve got the best coal, but we seem keen on taxing our industry out of existence.”

Royalties delivered a $15bn return to Queensland’s budget in 2022 and $9bn in 2024. The current LNP Government has not given any indication it plans to wind back royalties in the state that accounts for 56 per cent of the nation’s coal production.

Originally published as Qld coal boss warns of wave of mine closures due to royalty hikes