Qld coal powerhouses to be struck by royalty increase

THE revised Queensland royalty structure would cost the major coal mining companies an extra $208 million this financial year with the BHP Billiton Mitsubishi Alliance being the hardest hit with a $94 million impost, according to research by broking house Merrill Lynch.
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Clermont's coal stacker/reclaimer. Image courtesy of Rio

Lou Caruana

Rio Tinto Coal, which earlier this year announced retrenchments at its Clermont mine, would have to pay $34 million, Anglo American $40 million and Xstrata $34 million. The Australian Securities Exchange-listed Yancoal Australia, which has the giant Yanzhou Corp as its major shareholder, would have to pay $6 million.

This represented 1% of forecast net profit of all these companies except for Yancoal, which would have a 9% hit on forecast net profit with the royalty.

The Queensland government this week surprised the industry by announcing it would lift the royalty rate for coal sold above $100 per tonne by 25% and introduce a new levy of 15% once the price hits $150/t – effectively a 50% increase. It will rake in $1.6 billion over the next four years with the new measures.

The royalty hike couldn’t come at a worse time for the industry with new coal data by IntierraRMG revealing that globally it is in a state of flux.

New data from its coal database reveals that uncompetitive prices in the United States relative to gas are leaving US domestic coal producers struggling to offset the cost of production.

While miners with producing assets close to the US west coast can redirect exports to satisfy Asian demand, those unable to export through the Pacific region are left to reduce output, or leave their mines idling indefinitely.

India has seen its coal import demands increase annually due to inefficient domestic production. Relative to Japan and South Korea, the sub-continental superpower is a latecomer to strategic overseas asset acquisition.

However, Indian conglomerates are increasingly venturing abroad in search of supply assets; the latest example being Jindal Steel’s acquisition of Canadian CIC Energy, which has projects in Botswana.

Research and analysis manager for IntierraRMG Susanne Gylesjo cites Mongolia and Mozambique as examples where the database helps reveal the interplay and intrinsic tension across diverse geographies.

In the long term, both countries will be able to offset their respective production, however Mongolian coking coal has a grade and price advantage in the Chinese market compared to Australian coking coal, and Mozambique’s strategic location gives it an advantage in relation to fulfilling future Indian and Chinese demand.

“The IntierraRMG coal database provides deep insights into the global coal industry,” Gylesjo said.