Shafted Miners Leaving Regional Towns in the Pits

The times are a-changin' in Queensland's coal-rich Bowen Basin. One by one, the mining giants are moving out — but what does it mean for Queensland if the exodus keeps going, and they don't come back?

Rio Tinto stopped digging up coal in 2018. Anglo American sold off its portfolio last month in a blockbuster $5.8bn deal, and BHP, the world's largest mining company and a core anchor of Queensland's prosperity, has scaled back its footprint, selling off four mines to winnow down its operation to five sites.

The pullback comes as fear and loathing engulfs the sector. A storm of rising production costs, lower prices and an onerous government royalty regime has smashed the state's miners, sending smaller firms into bankruptcy and stripping billions from the balance sheets of long-term operators.

Last year, BHP cut 750 jobs and put its Saraji South mine into "care and maintenance" mode, blaming costs, royalties and a complex industrial relations regime for the cull.

It has announced a freeze on "capital growth" investment and in September last year, BHP Mitsubishi Alliance Queensland boss Adam Lancey told workers that the division had returned just 1 per cent on the capital deployed to the business.

"Numbers like these are not sustainable," he said.

All of this is happening as coal prices range between $US200 and $250 a tonne, which are not historically low prices.

Could BHP be next and follow Anglo out the door? And what does that mean for isolated mining towns such as Dysart, Moranbah and Emerald when the major operators move out, to be replaced by small and mid-tier companies?

The Saturday Courier-Mail spoke with coal industry insiders, the region's mayors and the state's coal lobby groups to find out.

MORE VOLATILITY

For one coal industry insider, who asked not to be named, the pullback from the majors was "absolutely" worse for Queensland and would mean more volatility for the region as second-tier companies moved in to take control.

Smaller companies with smaller balance sheets would not have the same capacity to invest or sustain the region, he argued.

"It's just naturally going to make the sector more volatile," he said.

"It's going to be harder to have stability. We can't go to dad in London and say, 'hey, we need another cheque this year to keep the business afloat'. That's just not an option for us."

UK company Dhilmar, which is backed by Indonesian billionaire Alexander Ramlie, will take control of Anglo's assets.

Stanmore, a $2.43bn company backed by Indonesian investors, bought Poitrel and South Walker Creek from BHP.

Whitehaven, a $7.2bn enterprise, bought BHP's Blackwater and Daunia mines.

Rio Tinto offloaded the Blair Athol mine near Clermont to junior miner TerraCom in 2016 for $1.

"The guys who suffer are these towns. Dysart, Moranbah, Clermont, Emerald. All these places."

— Industry insider

BIG JOB CUTS AND 'RIPPING OUT THE DIVIDENDS'

Smaller companies will likely move to cut costs and squeeze what's already there rather than build out or expand operations, our industry source added.

"The new capital that is coming in is not building and expanding. They are just buying and optimising existing operations," he said.

"For them, it's balance sheet gymnastics. They're not going out to make big significant discoveries and invest in new infrastructure build-outs."

"It's all just trading hands of existing assets ... what are they going to do? They're going to go in there and look at how to cut costs. How do you cut costs? You cut jobs."

"The guys who suffer are these towns. Dysart, Moranbah, Clermont, Emerald. All these places. It's just going to become cut-throat. It's really depressing."

A second insider, who also asked to remain anonymous, warned that smaller operators might opt to just "rip out the dividends" from existing assets rather than plan for long-term operations.

"If you look at BHP, or Rio, Anglo, or Glencore, they have multiple assets across the country," he said.

"They have their iron ore assets in WA, Rio and BHP, and they don't want to piss off government."

"They have social licence and their impact on the community and society is critical to them ... whereas an offshore billionaire ... just doesn't have that same longer-term view."

"They'll be looking to wring more cash out more quickly and that comes with probably lower sustaining capital expenditure."

SOCIAL LICENCE

The major miners have traditionally pumped large sums of social support payments into local mining communities, on top of the wages and salaries they pay out to workers and the money they funnel to local supply chains.

BHP sponsors the region's rescue helicopters and contributed $2.3m to build Blackwater's new aquatic centre in 2016. It also built and owns the Moranbah Bunhdhara Airport, a key transport hub for the region.

It invested in an apprenticeship training centre in Mackay called the FutureFit Academy before closing it in March, blaming royalties again for the shutdown.

One insider warned companies needed to be incentivised to invest in communities or the region risked becoming a "FIFO landscape" similar to Western Australia's Pilbara.

"They (new owners) are just going to put everybody in (mining) camps," he said.

But Central Highlands Mayor Janice Moriarty, whose vast council area covers multiple coal mines, has some positive news on that front, praising Whitehaven's social impact following its acquisition of the Blackwater mine from BHP.

"I think there were some changes for the workforce once they took over, but Whitehaven has continued to support the community, buy local, invest in the community through sponsoring events, having their community funds and they've always had a really good relationship with council as well," she said.

"So that change, though you're always thinking, what is going to be the result of change, we were very fortunate that Whitehaven worked with everybody to ensure there was minimal to any impact on the workforce or the supply chain businesses."

"I can only hope that Dhilmar, with the takeover of the Anglo coal mines, are making sure they are talking to council and community and they are good corporate citizens."

'WE'VE SOLD OFF THE CROWN JEWELS'

One insider decried the transfer of Australian ownership to foreign capital and said Queensland was losing its "crown jewels".

"We kill our industries and then guys from offshore come and buy them," he said.

"What we've done, with the activists convincing all of our banks and our BHPs and Rios that coal is untenable, we've taxed it largely out of existence, and we're just selling off the farm."

"These are the best assets in the world — they cannot be replicated. The best coking coal assets are in Queensland."

"The activists have convinced many people that they don't have a future but there is no replacement for coking coal ... Why would we sell them all relatively cheaply?"

"There is no reason why these assets shouldn't be owned by Australian companies."

THE ROYALTIES SAGA

The royalties bombshell hit in 2022, when former Labor state treasurer Cameron Dick added three new tiers to the regime.

Companies pay a 7 per cent royalty on prices up to $100 a tonne, 12.5 per cent between $100 and $150, 15 per cent between $150 and $175, 20 per cent between $175 and $225, 30 per cent between $225 and $300 and 40 per cent when prices breach $300.

The 40 per cent tier means Queensland has the highest maximum coal royalty rate in the world.

Before 2022, the top royalty rate was 15 per cent.

The regime mirrors personal income tax. For example, if coal is trading at $350, a company does not pay 40 per cent all the way down, but rather 40 per cent on the $50 slice between $300 and $350.

Payments are collected regardless of whether or not a company has booked profits for the year.

Royalty rates are also calculated in Australian dollar benchmarks, though global trade is conducted in US dollars.

One insider called it an "own goal" that had eliminated any "bull case" for investment in coal.

"When someone runs a scenario, a bull case and a base case and a bear case, the bull case isn't there anymore because it's taken by somebody else," he said.

"You can just never get the return on equity you need to justify it."

SO IS BHP LEAVING?

Officially, no.

Mr Lancey, speaking with media for the release of the company's third quarter operational report late last year, said met coal was a "key part" of the company's portfolio with a "long future".

BHP mines predominantly iron ore, copper and coal. The bulk of its earnings come from the iron division, centred in the Pilbara, and the copper division, spanning across South Australia and South America.

But there are now multiple dark signals that the company's attachment to Queensland is becoming increasingly tenuous, from its relentless rhetorical warfare campaign against royalties to the Saraji South shut-down. In unusually stark language, BHP chief Mike Henry told investors late last year that the royalty regime had degraded the company's appetite to sustain underperforming mines through "tougher times".

"What has happened that due to changes that were made to the royalty regime ... the benefit of any upswing in coal prices has been seriously eroded from a BMA (BHP Mitsubishi Alliance) perspective," he said.

"So in the face of tougher times like we see currently, there is less ability or willingness on the part of the business to see through those tough times and perhaps carry some negative cash flows, we have to act even more expediently to shut any loss-making production."

The coal division's financial results have also declined. In the 2022 financial year, coal delivered $US6.4bn in EBITDA.

In 2025, following the sale of Blackwater and Daunia and a rise in production costs, earnings slumped to $US600m.

Further, BHP is a global enterprise with the power to allocate capital wherever it sees fit. If Queensland land sinks as an attractive destination, then competing jurisdictions and commodities will win the battle for capital.

"In the case of BHP, there would be a fierce battle internally for capital, particularly being so mobile, where you've got copper and you've got iron ore," Coal Australia CEO Stuart Bocking said.

"There would be an ongoing battle for capital, and royalty rates in Queensland on coal mining would come in very sharp focus when a company of that size has got a whole range of other potential minerals and metals within its portfolio where precious capital could go."

It has privately slammed the state LNP government led by Premier David Crisafulli for lacking what it calls the "courage" to roll back the regime.

Mr Crisafulli has repeatedly pledged to keep the royalties in place at least until 2028-29 to protect state revenues and pre-existing funding commitments to schools, roads and hospitals.

'VERY SERIOUS INVESTMENTS'

But caution is warranted. It's a mug's game to predict the future. Commodities are volatile and prices swing all over the place.

On May 22, an explosion at the Liushenyu coal mine in China's Shanxi province killed 82 miners and triggered widespread mine closures across the province.

Met coal prices have surged on the back of the subsequent supply disruption.

Mining has always been a cyclical business and it's possible BHP will burrow down and try to ride out the storm, betting the LNP government will axe or alter the royalty regime some time after 2028-29.

Mackay Mayor Greg Williamson said he expected BHP to continue mining in Queensland.

"There's no indication that that's what they might be thinking (leaving Queensland)," he said.

"They've got some very serious investments in Queensland in met coal. Met coal is not going to go away in our lifetimes ..."

"There is plenty of money to be made here."

Original article from Courier Mail by Duncan Evans