A significant increase in costs and lower coal prices exasperated the lack of profitability at the mine and after a seven week review the company could not establish any “immediate remedies that would allow the operation to sustainably return to profitability”, BMA asset president Stephen Dumble said.
“This decision was not made lightly. However, the impact of last year’s floods, combined with lower coal prices and high costs, has resulted in an operation that is not currently viable,” he said.
“While recent industrial action has had an impact on production, the mine has been unprofitable for some months. As a result, we have had to take urgent steps to both stop the losses and find the best way to secure the operation’s longer term future.
“Importantly, this decision on Norwich Park mine is not reflective of the broader quality of our world-class Queensland Coal operations.”
The decision is expected to have knock-on effects on the price of coking coal and the supply of labour and services in the Bowen Basin, with an expected 1400 jobs attached to the mine. It comes a week after BMA was forced to declare force majeure for the supply of coal to its customers.
Deutsche Bank mining analyst Paul Young told the AFR the decision appeared to make economic sense.
“Production has been declining for five years, the strip ratio has been increasing and costs are too high,” he reportedly said.
BHP’s share of production from Norwich Park was 1 million tonnes last year, down from 1.9Mt a year earlier and accounted for around 5% of BMA’s production last year.
In its last interim report, BHP Billiton said a 15% decline in sales volumes at its Queensland Coal business reduced underlying EBIT by $216 million while higher costs, that partly reflected its flood recovery efforts, reduced underlying EBIT by a further $481 million for the six months to December 2011.
BHP Billiton reported that its Queensland coal business produced 8.4Mt for the three months to December 2011.
BMA would be aiming to maximise redeployment opportunities for Norwich Park employees to Saraji mine to enable, where possible, those employees and families to remain living in Dysart, Dumble said.
It would also focus on implementing measures that would enable Norwich Park to operate as a sustainably profitable, low-cost mine, he said.
“Until we find viable solutions for the future of the mine, we will not restart operations. We understand that this decision will have a significant impact on our employees, their families and the Dysart community, and we are committed to supporting them during this period,” he said.
CFMEU spokesman Stephen Smyth told the SMH he rejected any link between the recent strike action and the mine's closure.
''The impact of industrial action is next to nothing, the onus has got to come to the way they've been operating it,'' he reportedly said.
Seven BMA mines are this week are subject to industrial action as enterprise bargaining negotiations with more than 3000 workers and three unions flounder.
A secret ballot of employees is being proposed by BMA for later this month to help break the stalemated negotiations which have dragged on for more than 15 months.