BHP stops coal-fired power mining after failing to find a buyer

BHP has abandoned efforts to sell one of Australia’s largest thermal coal mines, choosing to reduce assets over the next eight years as it works to transition away from fossil fuel mining.

The coal mine, located at Mount Arthur in the Hunter Valley area north of Sydney, is up for sale in 2020. BHP plans to extend the life of the mine, which supplies power plants in Japan and South Korea. , to 2045 from 2026, when its original license ends.

It will now close the location in 2030 after failing to find a buyer. The decision to keep Mount Arthur afloat comes as Australian premium thermal coal prices are near record levels, at around $390 a tonne, according to the energy data provider, according to energy data provider Argus Media. volume of Argus Media.

Europe’s decision to ban coal imports from Russia, which took effect in August, has tightened the market further. The lack of investment in new markets has resulted in supply and demand lagging as major Asian economies lift their pandemic restrictions.

Coal mining has been lifeblood of the economy in the Mount Arthur area since the 1960s, and BHP turned the site into one of the largest open-pit mines in the country 20 years ago. About 2,000 people work there and a decision to extend its life beyond 2026 will need government approval.

Edgar Basto, head of BHP’s Australian minerals unit, said: “Finding approval to continue mining until 2030 avoids closing in 2026 and allows BHP to strike a balance between value and risk. risks of those considerations as well as our commitment to local people and communities.”

Coal mining has dominated the political scene as Australia’s economy is dependent on fossil fuel exports. The country is also suffering from an energy crisis with the New South Wales state government warning of the potential for power outages due to a generator outage.

This is the second time BHP has played a major role in reshaping the region’s economy after it pulled out of the major steel business in Newcastle in the late 1990s.

Mount Arthur has been prepared for disposal as part of the reshaping of the mining company. BHP sold its shares in a Colombian coal mine with Glencore – which also owns coal mines in the Hunter Valley – last year and merged its oil assets with Woodside into a separate listed company.

The Mount Arthur mine has suffered heavy losses in recent years, but a sharp rise in thermal coal prices has turned the financials of the operation. However, the mine is not expected to continue to be profitable beyond 2030 even if prices remain high.

Saul Kavonic, an analyst with Credit Suisse, said it was not surprising that BHP struggled to find a buyer with capital costs and government approvals, as well as high mine shutdown costs, predicting expected about 700 million USD.

Kavonic said BHP, which had said it would end its coal-fired power operations, had previously advocated for a quick divestment of coal assets. But higher coal prices following Russia’s invasion of Ukraine and changing attitudes toward environmental, social and governance (ESG) issues prompted BHP to change its approach.

“Just 12 or 24 months ago, the stock market really shunned fossil fuel exporters, but now that has changed as some stock markets say there is an ESG case to manage. your property instead of just handing the matter over to someone else can Kavonic say.

Additional reporting by Neil Hume in London

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