The Coal Trader

Coal News for Mining & Investing Professionals

Status of BHP’s BMA

BHP Billiton Mitsubishi Alliance (BMA) Australian coal output is heading towards the low end of its decade-low target for the 2023-24 financial year (July 2023 to June 2024) as heavy rainfall disrupts production.  

The BHP-Mitsubishi Alliance is each owned 50% by Australia’s BHP Group (BHP) and Japanese trading company Mitsubishi Corporation. In January this year, the BHP Billiton Mitsubishi Alliance lowered its metallurgical coal production target for the 2023-24 fiscal year to 46-50 million tons from the 56-62 million tons released in July last year.   Heavy rainfall so far this year means the company’s output is trending toward low levels, according to BHP Chief Executive Mike Henry. Henry added that above-average rainfall in 2022, as a La Niña weather pattern brings more rain to Australia’s east coast, has impacted the company’s stock levels at low levels. Although the company worked hard to build inventories, heavy rainfall in 2023 and early 2024 quickly affected production.  

The wet weather in late 2023 and early 2024 was not anticipated because the El Niño weather phenomenon typically causes drought along the East Coast. The atypically wet weather has prompted US-Australian coal company Coronado to factor in more heavy rainfall disruptions in Queensland in its 2024 guidance. In addition, the sale of the Blackwater and Daunia mines to Australia’s Whitehaven Coal is expected to be completed on April 2, 2024. Therefore, due to the above factors, the BHP Billiton Mitsubishi Alliance’s guidance target for the 2023-24 fiscal year has been lowered.  

At present, the BHP Billiton Mitsubishi Alliance operates 7 coal mines in the Bowen Basin in Queensland – Donia Mine, Blackwater Coal Mine, Saraji Coal Mine (Saraji), Goonyella Riverside Coal Mine (Goonyella Riverside), Pickdowns Mine ( Peak Sowns, Broadmeadow and Caval Ridge. and operates the Hay Point Coal Terminal.  

The BHP Mitsubishi Alliance is Australia’s largest producer and supplier of seaborne metallurgical coal. Currently, more than 40% of the company’s metallurgical coal is exported to India. BHP estimates the sale of the Blackwater and Donia mines will increase its premium hard coking coal share of Queensland coal sales to 86% in 2022 from 64% now, while removing its stake in BHP Mitsui Coal (BMC) This was up from 55% before the 80% stake was sold to Australian metallurgical coal producer Stanmore Resources.  

Henry remains optimistic about the outlook for coking coal prices, given rising demand in India and a muted supply response. However, it is said that after the higher royalties are levied in July 2022, plus income tax, BHP Billiton’s effective tax rate in Queensland will reach 62%. “Queensland is so attractive and risky compared to our other investment opportunities that we simply cannot allocate any growth capital to the state.”

Source: Sxcoal