In its annual earnings report (FY 2023), BHP called out the Queensland Government for the near tripling of top-end royalties making the Australian state the highest coal-taxing regime in the world. Given the negative impact this has on investment economics and the increase in sovereign risk, BHP said it will not be investing in any further growth in Queensland. The company said it will, however, sustain and optimize existing operations.
The BHP Mitsubishi Alliance produced 58 million metric tons of metallurgical-grade coal in FY 2023.
In this case in its simplest terms, sovereign risk means that the situation with the government is so unpredictable (or hostile) that a company can no longer justify investments. Most of the world’s seaborne coking coal is exported from Queensland and this is a significant statement considering the Australian state’s mining heritage.
It follows on the heels of BHP CEO Mike Henry’s recent comments during a speech he gave at the World Mining Congress in Brisbane on June 27, 2023. “… By way of contrast, and it saddens me to have to say this on this stage and in this place, but I think we owe it to our host state and to this audience to be honest – here in Queensland, the approach to raising royalties could not have been more different,” Henry said. “No industry engagement, no effort to understand and no interest in understanding. The near tripling of top-end royalties makes Queensland the highest coal-taxing regime in the world. I repeat, the highest coal-taxing regime for mining in the world.”
“In this case, both the outcome and the process have meant for BHP that we have opportunities to invest for better returns and lower risk elsewhere around the world, as well as here in Australian states like Western Australia and South Australia,” Henry said. “And we will not be investing any further growth dollars in Queensland under the current conditions.”
