BHP, an Anglo-Australian multinational conglomerate, has reported decline in coal production over concerns regarding bad weather and strike activities which had majorly affected its mining operation.
Total production during the final quarter of CY ’20 decreased by 30% to 13.1 mn t compared with 17 mn t registered in the year-ago period.
Restriction on coal imports from China has been a major challenge into which the company is currently looking upon to monitor any potential impact. However, output of metallurgical coal (coking coal) at Queensland region in the period under consideration was down as a result of wash plant maintenance and significant wet weather from La Nina across most operations.
Production guidance for the financial year (Jun’20-Jul ’21) was retained at 40-44 mn t, but the company has estimated that output would attain lower half of the target following the weather disruption.
A greater fall was recorded in volume of energy coal (thermal coal) due to an increased proportion of washed coal in response to reduced port capacity, following damage to a ship-loader at the Newcastle port in Nov ‘20, and widening price quality differentials.
Moreover, production level was further brought down by the 31 day strike called upon at Cerrajon mine that started on 31 Aug ’20. Although operations at the mine restarted in the first week of Dec ’20 and are continuing to ramp up after negotiation, the company has slightly lowered the production guidance to 21-23 mn t on lost ground.
| Grade/Location | Q4 CY’20 | Q4 CY’19 | % Change |
| Metallurgical Coal | 9.52 | 10.92 | -15% |
| BMA | 7.54 | 8.72 | -16% |
| BHP Mitsui Coal | 1.98 | 2.20 | -11% |
| Energy Coal | 3.58 | 6.08 | -70% |
| Australia | 3.23 | 3.76 | -17% |
| Colombia | 0.35 | 2.32 | -567% |
| Grand Total | 13.10 | 17.00 | -30% |
Source: BHP Quarterly Report | Quantity in mn t
Disinvestment of thermal coal assets:
Company is planning to slash up to USD 1.25 Billion from the value of its Australian thermal coal mine amid weaker coal market conditions and its continuing efforts to offload the asset.
The miner has informed shareholders about impairment charge of between USD 1.15-1.25 Billion post tax in relation to NSWEC (New South Wales Energy Coal) and associated deferred tax assets.
Australia’s thermal coal producers have been under pressure this year, with the price of BHP’s coal collapsing 25% to USD 44/t, amid the lingering shock of the COVID-19 slump and the escalation of China’s bans on Australian coal imports weighing on the market.
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