BHP has used its half-yearly results to criticise the NSW and Queensland governments for their recent interventions into the coal market, saying it was now selling two Queensland mines as a result, and would not put any more "growth" capital into its Mount Arthur mine at Muswellbrook, which made it more than $US1.2 billion in the six months to December 31.
Overall, BHP's after-tax profit of $US6.457 billion was down 32 per cent on the previous corresponding period (to December 31, 2021) from revenues of $US25.713 billion, down 16 per cent.
BHP has declared an interim dividend of $US0.90 a share, down from $US1.50 a year before.
A table of average realised prices shows BHP averaged $US354.30 a tonne for thermal coal in the first half of the 2022-23 financial year, well up on the $US302.60 average in the previous six months and the $US137.68 it averaged in the first half of the 2021-22 year, for a full 2022 average of $US216.78.
These prices are so extraordinary that they outstripped the prices BHP obtained for even its flagship hard coking coal for steelmaking, which normally sells for about twice the price of thermal coal.
But with coal for electricity generation in arguably permanent short supply, the $US354.30 average for thermal coal well outstrips the $US270.65 average it obtained for its hard coking coal from Queensland.
Half-year coal revenues totalled $US5.566 billion ($US5.368 billion previously), with $US11.822 billion from iron ore ($US15.818 billion previously) and $US7.305 billion from copper ($US8.494 billion previously)
Underlying earnings from coal before income tax, depreciation and amortisation (EBITDA) totalled $US2.631 billion ($US2.642 billion previously).
Although earnings from copper and iron ore were noticeably down on the previous corresponding period, coal earnings held up.
BHP said costs at Mount Arthur were above an already revised range, based on an exchange rate of 72 cents, mainly due to lower volumes because of wet weather and increased port costs driven by higher thermal coal prices and inflation.
Its costs in the first half of last year were $US67.62, with guidance for the rest of this year at $US108.85, a substantial increase, also based on an exchange rate of 72 cents.
Production for the first half of the year at Mount Arthur totalled 5.5 million tonnes, compared with 7.2 million tonnes in the first half of the previous year, a fall of 24 per cent.
Despite only mining 5.5 million tonnes in six months, its full-year guidance remains unchanged at 13 million to 15 million tonnes.
"Lower volumes at NSW Energy Coal (Mount Arthur) as a result of record wet weather, continued labour shortages and an increased proportion of washed coal, partially offset by higher volumes at BMA (BHP Mitsui Alliance mines in Queensland), despite wet weather, driven by an improvement in underlying truck productivity, higher yields and reduced impact of labour constraints," BHP said.
BHP said it had announced in June 2022 its decision to retain Mount Arthur (and its associated stake in the Newcastle Coal Infrastructure Group coal loaders), and to seek approval to mine beyond the existing 2026 consent expiry.
It said the 2030 consent modification process was under way.
"The consent modification we are seeking is to allow time for stakeholder consultation for a just transition and is expected to carry conditions which prevent new infrastructure or production growth," BHP said.
"As a result, over the period to 2030, we will not be allocating any capital growth to NSW Energy Coal (Mount Arthur) and production is expected to remain broadly in line with current levels of 13 million tonnes to 15 million tonnes per annum.
"In light of the NSW government announcement on potential changes to its coal price cap and domestic reservation requirements, we are actively reviewing operational plans, existing commitments and logistical practicalities to understand their implications.
"Further it is important to note that NSWEC's current unit cost of production is above the NSW government's proposed price cap of $125 a tonne."
On its BMA or BHP Mitsui Alliance operations in Queensland, the company gave short-term guidance on likely production, but did not provide medium-term guidance because of "ongoing uncertainty regarding restrictions on coal imports into China and the increase in Queensland coal royalty rates.
It has also decided with Mitsui to consider selling two of its mines - Daunia and Blackwater.
"Whilst high-quality assets with growth potential, the Daunia and Blackwater mines would struggle to compete for capital under our capital allocation framework ... (and) we will look to maximise the value of these assets via trade sale," BHP said.
"As a result of the Queensland government's decision to raise coal royalties to the highest maximum rate in the world, the fiscal environment is no longer competitive or predictable and as such BMA is not making significant new investments in Queensland and is not providing annual sustaining capital expenditure guidance at this time," BHP said.
It said metallurgical coal prices were less volatile in the six months to December 31 than in the prior half, "as seaborne trade progressively adjusted to the Russian invasion of Ukraine".
"With the major seaborne supply region of Queensland having become less conducive to long-life capital investment as a result of changes to the royalty regime, the scarcity value of such coals may well increase over time," BHP said.
"China's import policy remains a source of uncertainty."
Overall, BHP said it had lower realised prices for hard coking coal, but that these were partly offset by higher average prices for weak coking coal and thermal coal.
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