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BHP Mitsubishi Alliance's (BMA) coal production in Australia is expected to be at the lower end of its projected output for the fiscal year ending June 30, 2024, due to disruptions caused by heavy rainfall.
The joint venture, equally owned by BHP and Mitsubishi, had revised its guidance in January to 46-50 million tonnes of metallurgical coal, down from the previous range of 56-62 million tonnes set in July 2023.
The adverse weather conditions this year have further pushed production towards the lower end of the revised estimate, according to BHP CEO Mike Henry.
BMA was already grappling with reduced inventories due to above-average rainfall in 2022, attributed to the La Nina weather pattern impacting the east coast of Australia. The heavy rainfall in late 2023 and early 2024 has led to production disruptions, although the company is actively working to replenish its inventories.
The unanticipated wet weather ran counter to expectations, as the El Niño weather phenomenon, which usually results in drought on the east coast, took an unexpected turn. Coronado, a US-Australian coal mining firm, has factored in additional disruptions from heavy rainfall in Queensland into its 2024 guidance.
A portion of BHP's reduction in BMA's guidance, around 3-4.5 million tonnes, is linked to the planned sale of its Blackwater and Daunia coking and thermal coal mines in Queensland to Australian mining firm Whitehaven. The sale, slated to conclude on April 2, is anticipated to increase BHP's share of premium hard coking coal sales from 64% to 86%.
Despite the production challenges, Henry remained optimistic about coking coal prices, citing demand growth from India and a restrained supply response. However, he highlighted the unattractive investment landscape in Queensland due to an effective tax rate of 62% following increased royalty rates implemented in July 2022.
(Writing by Alex Guo Editing by Harry Huo)
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