Good to see more CEO's calling out QLD ludicrous price gauging. New stae govt have the power to cut these royalties they inherited.
from today's Oz.

NSW big investment winner over Queensland, declares Whitehaven boss Paul Flynn

Brad Thompson

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Whitehaven Coal's Daunia mine in Queensland's Bowen Basin.

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2 hours ago.

Updated 1 hours ago

Whitehaven Coal boss Paul Flynn has doubled down on BHP’s criticism of a Queensland royalty regime, declaring it is encouraging a shift in capital over the border into NSW.

He said job cuts were on the table over the next 12 months as Whitehaven, which operates mines in both states, looks to reduce operating costs and make big savings on capital expenditure.

Mr Flynn said Queensland metallurgical coal miners were struggling through a low point in the price cycle, and it was “quite extraordinary” that even a small rise in premium would push producers into a 40 per cent royalty bracket.

“This is supposed to be a (royalties) regime that that took a greater share when everybody was doing well. Companies are failing now and a very modest improvement in prices would actually see miners exposed to a 40 per cent take of their revenues, and that’s an extraordinary thing,” he said.

Over the border in NSW, the same modest price rise would see miners pay a 10.5 per cent royalty.

Whitehaven Coal CEO Paul Flynn.

Mr Flynn’s example is based on a current metallurgical price of $US190.40 ($296.60) a tonne. Even a $5 price rise would exceed the $300 a tonne threshold that triggers a royalty rate of 40 per cent.

The Queensland government has ruled out any reset, with Treasurer David Janetzki saying the royalty regime is set in stone until at least 2029-30.

Mr Flynn said the Queensland government should talk to industry now about a royalty reset, but he remained pessimistic about any changes before the next state election, due in 2028.

“We understand that the Queensland government has inherited a difficult financial set of circumstances and also inherited the current royalty regime,” he said.

“And we understand that they need to thread the needle in terms of their financial obligations and the projections of revenue they have at their disposal.”

BHP has flagged mothballing some of its Queensland coal operations and warned the state’s high royalties will be a major factor in any closures and job losses. It is also maintaining a ban on investing in growth in Queensland.

The mining giant’s BMA business, owned in partnership with Mitsubishi, is Australia’s largest producer and supplier of seaborne metallurgical coal, and employ about 9000 people including contractors.

Whitehaven appears to have no regrets about the $US3.2bn deal to acquire the Daunia and Blackwater mines from BMA in 2023.

The deal allowed Whitehaven to diversify its coal offerings, and it later sold a 30 per cent stake in Blackwater to Nippon Steel.

Under a price contingent element in the BMA deal, Whitehaven paid $US9m to BMA in its first full year of ownership of Daunia and Blackwater – well below the $US350m cap.

Boosted by the former BMA mines, Whitehaven reported a 52 per cent jump in annual underlying earnings of $5.8bn from $3.8bn a year earlier.

Net profit came in at $649m and revenue of $5.8bn was split by 64 per cent metallurgical coal sales and 36 per cent thermal coal sales

Whitehaven declared a fully franked final dividend of 6c a share and will spend $48m over six months buying back shares.

Mr Flynn said M&A was not on Whitehaven’s agenda despite some of the opportunities opening up in Queensland, and had plenty of growth options within its existing portfolio of assets.

In Queensland, Anglo American’s coal mines appear back up for grabs after Peabody Energy officially backed out of a $5.8bn deal to buy them. Their sale dispute is now headed for the courts.

Other mines are in loss-making territory and with Nick Jorss-backed Bowen Coking Coal in the hands of receivers.

Mr Flynn said it made more sense for companies like Whitehaven that had an option to invest in NSW rather than Queensland, given the huge royalty difference.

“If you’re exposed to a 40 per cent take of your revenue off a very modest increase in coal prices today – marginally over the level at which certain companies are already failing – and you have an alternative investment in NSW … the incremental dollar would logically flow to NSW rather than Queensland,” he said.

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