BHP is reportedly considering the early closure of its Mt Arthur coal mine in New South Wales (NSW), Australia due to concerns over domestic coal requirements.
This comes after the NSW Government’s mandate of requiring coal producers to reserve 10% of their output for domestic use at a capped price of $125 per tonne.
With this move, the government aims to lower the cost of operating coal-fired power stations to offset surging energy bills.
However, the mining giant will reportedly find it tough to make any profit margin with this $125 cap, with concerns that Mt Arthur’s production costs would surpass the cap.
BHP had approval to extract coal from Mt Arthur until 2026 and was planning to seek extension of the permit until 2030.
Mt Arthur is the largest coal mine in the NSW Hunter Valley.
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Last year, the miner said it will bring ahead the mine closure from 2045 to 2030 after being unsuccessful in getting viable bids.
In an internal email to its 2,000 Mount Arthur employees, the BHP leadership has now informed that the latest requirements could compel the firm to re-assess its plans for operating the mine until 2030.
In a statement to The Australian Financial Review, BHP vice-president of NSW energy coal Adam Lancey said: “In light of these [government] directions, we are actively reviewing operational plans and existing commitments to understand their implications. And, while I would like to avoid this scenario, the findings of this review may lead to a reassessment of our pathway to 2030 plan.”
“Our primary concerns relate to the potential impacts on Mt Arthur Coal’s operations and business model, including what to do if our production costs are above the price cap,” he added.
“While I would like to avoid this scenario, the findings of this review may lead to a reassessment of our Pathway to 2030 plan,” Lancey said in a letter seen by ABC.
OZ board has recommended shareholders to vote in favour of the proposal of A$28.2 a share, in the absence of a superior offer.