JSE-listed BHP's share price plunged by 7.32 percent on Friday, following the company announcing that it has delayed its plan to exit thermal coal as it will retain New South Wales Energy Coal (NSWEC) in its portfolio.
The shares traded at R475.95 after the company told its shareholders it would seek the relevant approvals to continue mining beyond its current mining consent – that expires in 2026 – and proceed with a managed process to cease mining of the asset by the end of the 2030 financial year.
The move comes after it failed to find a buyer, having announced in August 2020 it planned to divest the mine.
“A trade sale process for NSWEC was conducted; however, the process did not result in a viable offer,” it said.
According to Australian multinational mining, metals and petroleum company BHP, the decision follows its review of its lower grade metallurgical and energy coal assets that was announced in August 2020, and has also resulted in the divestment of its interests in Cerrejón and BHP Mitsui Coal (BMC) in January and May 2022, respectively.
The move also comes amid bumper commodity prices as the war in Ukraine causes supply disruptions.
This as ratings agency Fitch also increased its thermal coal assumptions on Friday for 2022-2023, reflecting high year-to-date prices, supported by tight supply due to the Australian wet season, strong Indian demand mitigating lower demand in China and structurally higher prices of Newcastle 6000.
NSWEC made earnings before tax and interest of $404 million (R6.5 billion) in July-December, compared with a loss of $208m in the same period of 2020, boosted by higher prices of coal.
The New South Wales Energy Coal (NSWEC) asset comprises the Mt Arthur Coal operation, and is located near Muswellbrook, New South Wales.
Minerals Australia president Edgar Basto said: “We thoroughly reviewed potential options for NSWEC, including divestment and future investment requirements. Seeking approval to continue mining until 2030 avoids closure in 2026, and enables BHP to balance the value and risk of those considerations and our commitments to our people and local communities.”
BHP said the continuation of mining to the end of 2030 would give it eight years to work with its employees, state and federal governments and local communities in the Hunter Valley region on a transition approach that supports long-term community sustainability.
NSWEC vice-president Adam Lancey said: “We will work with our people, local business partners, traditional owners and local and state governments to operate safely and productively, prepare for closure and sustainable rehabilitation of the site, and ensure the pathway to closure is managed in a way that meets community and regulatory expectations".
Plans to continue operating NSWEC to 2030 were subject to obtaining relevant approvals to enable mining beyond the current consent, which only provides approval for mining until 2026, it said.
"Work is underway to prepare the application for the relevant approvals with the New South Wales and Australian governments to support mining until 2030. This will also include plans for closure of the asset, including rehabilitation and determining the most appropriate post-mining land use," BHP said.
BHP said it expected that continued work on rehabilitation would take 10 to 15 years following the cessation of mining.
“The provision for closure of the mine as at December 31, 2021 was approximately $700m,” it said.