Environmentalists have reacted with fury to the news mining behemoth BHP will sell its Blackwater and Daunia coalmines in Central Queensland to NSW producer Whitehaven in a mega $6.4bn transaction.
Whitehaven, which produces thermal coal in the Gunnedah basin north of Newcastle, will pay BHP about $3.3bn upfront and then about $1.75bn in three separate tranches over three years to take over the large-scale metallurgical coalmines.
Environmental Advocacy in Central Queensland director Coral Rowston said BHP should have left the coal in the ground.
“BHP had a real opportunity to be a climate leader but is instead flogging off its dirty assets to another company,” she said.
“This sale is going to lead to more emissions at a time when the Intergovernmental Panel on Climate Change and scientific experts are screaming at governments and companies to leave fossil fuels in the ground.
“Central Queenslanders can’t afford the climate crisis to worsen. We can’t afford any more coal.”
Thermal coal is used to generate electricity, while met coal is used in the steelmaking process.
Whitehaven has moved to buy the mines to diversify from thermal coal, which is subject to intense scrutiny from environmentalists and financial institutions because of its contribution to climate change.
Major lenders such as NAB and Commonwealth Bank have pledged to stop funding thermal coal as part of net zero commitments and environmentalists want a complete ban on all new coal projects and an immediate transition away from coal as a fuel source.
Lock the Gate Alliance Queensland co-ordinator Ellie Smith called Whitehaven a “repeat offender” and wanted its move into the Bowen Basin to be “prevented”.
“As far as coal companies go, Whitehaven is bottom of the barrel,” she said.
“Whitehaven has been warned, fined and prosecuted dozens of times for crimes committed at its NSW coalmines, yet has shown no signs of changing its behaviour.
“Whitehaven simply isn’t worth it. Its Winchester South proposal must be rejected and its attempts to gain a foothold in Queensland by buying up existing mines should be prevented.”
In his statement to investors, Whitehaven chief executive Paul Flynn said the purchase would make Whitehaven a “better balanced business”.
“This transformational acquisition will pivot our portfolio towards metallurgical coal, which has been a core pillar of our strategy for many years making this a better balanced business,” he said.
“Daunia and Blackwater produce much-needed metallurgical coal that is in high demand across Asia, including in India and Southeast Asia, where population growth and economic development is expected to drive strong demand for steel production and metallurgical coal through to at least 2050.”
Whitehaven could pay out a further $1.4bn to BHP if met coal prices keep above $250 in the first year after the takeover and above $211 in the following 24 and 36-month periods.
BHP’s latest production reports show Blackwater has generated about 3.9 million tonnes of saleable coal so far this year, while Daunia has produced about 1.8 million tonnes.
Whitehaven also holds the proposed $1bn Winchester South development in the Bowen Basin close to Daunia.
If approved, the mine would deliver another 15 million tonnes of run-of-mine coal every year for 30 years.
The market reacted positively to the deal, jumping more than 11 per cent on the news Wednesday afternoon.
But some Whitehaven investors are unhappy, including Bell Rock Capital, which wanted the company to return more money to shareholders instead of buying up the mines.
“The board and management of Whitehaven must guarantee this deal will be a clear positive for shareholder value from day one,” Bell Rock chief investment officer Mike O’Mara said.
“Anything less is a licence to destroy shareholder value.”