BHP Group told workers at its vast coal operations across Queensland, Australia, that the mines can no longer “compete for investment” and the company was receiving no returns from the projects.
The portfolio includes some of the world’s biggest mines of the steelmaking fuel, which BHP operates in a 50-50 joint venture with Mitsubishi Development Pty Ltd. While they brought in more than $1.67 billion in revenue during the six months through December, they were entirely unprofitable amid lower commodity prices and higher costs, according to BHP.
“Our financial performance is challenged by unsustainable royalty payments, increased production costs and fluctuating coal prices,” BHP Mitsubishi Alliance asset president Adam Lancey said in an email to workers seen by Bloomberg. “Our ability to compete is under significant pressure.”
A spokesperson for BHP confirmed the content of the email on Tuesday.
Chief executive officer Mike Henry has made capital discipline a priority amid rising costs, and is focusing on growth in so-called future-facing commodities such as copper.
Last September, BHP announced it would shutter one of its Queensland coal mines due to cost pressures, including high state royalties.
“For every dollar we have invested,” Lancey said in the memo, “we are getting zero in return.” He didn’t say what specific measures the joint venture would take to address the current situation.
(By Paul-Alain Hunt)
