Getting the balance right so the Bowen Basin can continue to thrive

Paul Flynn, Managing Director and CEO Whitehaven Coal

As we approach the end of an eventful 2024, the mining industry continues to prove its resilience and ongoing importance to the Queensland economy.

With the energy transition, industrial relations and project assessment processes featuring prominently in policy discussion at all levels of government, mining remains integral to Australia’s future direction and prosperity – as it has been throughout our recent past.

Against this backdrop, it’s important our industry continues to stand up for itself and advocates for appropriate regulatory settings that enable us to maintain the significant contributions we make.

The ATO’s latest Corporate Tax Transparency Report showed Australia’s mining industry remains the nation’s biggest taxpayer, contributing $43.1 billion in company tax for 2022-23 – the second consecutive year the sector has paid more in tax than all other industries combined.

This was supplemented by a further $31.5 billion in royalties, highlighting the crucial role mining plays in keeping our economy strong and funding the essential services that Australians rely on every day.

Our companies are also responsible for billions more in economic support for regional communities across the country. In FY24, Whitehaven invested $669 million in our North West NSW regional communities via procurement, salaries and wages, and corporate community partnerships and donations, and we’re excited to expand this investment into the Bowen Basin via our recently acquired Blackwater and Daunia mines in the decades ahead.

Mining’s role as Queensland and Australia’s economic engine room is one we should all be very proud of and it’s appropriate that, as an industry, we take some time to reflect on our successes and sharpen our focus as we look ahead.

Building our presence in the Bowen Basin

2024 has been a transformative year for Whitehaven Coal, marked by a successful entry into the Bowen Basin.

The acquisition of Blackwater and Daunia in April has seen us successfully reposition our business in line with our long-held strategy to grow in metallurgical coal. It was a strategic investment to evolve, diversify and derisk our business.

Through the acquisition, we have roughly doubled our production and opened the door to new and critical market segments across Asia, where demand for both metallurgical and thermal coal will remain strong for decades to come.

Today, we are proud to have a workforce of around 3,000 people across Queensland making a real impact in communities throughout the state. We are committed to building lasting relationships in the region, and we were delighted to host our first Queensland Community Open Day in Blackwater in November.

Our commitment to supporting local communities has seen us hit the ground running and spend some time speaking with stakeholders locally to identify areas of need. We recognise the importance of supporting the communities that support us, and we’re pleased to have funded the first round of our Community Grants Program for 28 community organisations and causes across Central Queensland, including Blackwater CWA, Moranbah State School, Emerald Neighbourhood Centre and CQU’s U-Beach Disability Support Program.

The next grant round opens on 1 January 2025, and we look forward to extending the reach of our support in years to come.

Importantly, our first two quarters in Queensland have also been strong from an operational perspective, with both Blackwater and Daunia making substantial contributions to the business and achieving some notable productivity gains.

The ongoing importance of the metallurgical coal these mines produce was validated by our agreement to sell 30% of the Blackwater mine to Nippon Steel and JFE Steel – key customers of ours in Japan and significant users of Blackwater metallurgical coal. This strategic joint venture reinforces the strong long-term demand for metallurgical coal in more mature markets such as Japan and our customers’ desire for greater security of supply.

Today, we are proud to have a workforce of around 3,000 people across Queensland making a real impact in communities throughout the state.

It is interesting that, directionally, our bigger customers are more often starting to look for joint venture partnerships, offtake agreements and greater duration in their contracts with us.

As Nippon Steel noted in its forthright commentary when we announced the deal, customers are growing increasingly concerned about the supply of high-quality metallurgical coal required to help them reduce emissions in their steel-making methods and build the infrastructure needed to decarbonise.

While this bodes well for demand for our products and helps to maintain a supportive pricing environment, it is an area of particular concern and focus for our export partners across Asia who rely on our coal.

As an industry, we recognise this issue must be addressed, but it will require coordinated backing from governments and considerable ongoing investment – both of which are becomingly increasingly difficult to secure.

While coal markets have largely stabilised following periods of uncertainty in recent years, the operating landscape in Australia continues to be tested by the forces of politics and policy.

While coal markets have largely stabilised following periods of uncertainty in recent years, the operating landscape in Australia continues to be tested by the forces of politics and policy.

Getting the balance right

The resources industry is responsible for so much of Australia’s economic prosperity and resilience, particularly in our regions, but unfortunately, we’re seeing governments increasingly take this contribution for granted.

When Australia’s world-leading resources sector does well, Australians all benefit. However, despite this, we have had to endure a range of punitive policy interventions in our industry that make it substantially harder and more costly to do business, and to attract the investment dollars we rely upon to grow.

Whether it’s royalty increases, industrial relations changes or significant approval delays arising from unnecessarily protracted State and Federal Government assessment processes, these interventions undermine Australia’s status as an investment destination and curtail the economic contribution of the coal industry, which has underpinned Australia’s prosperity for decades.

Royalties, in particular, is a topic that has continued to receive plenty of airtime this year in the context of the Queensland election. The case in support of our industry, and the significant impact this onerous royalty regime has on our operations, has been well made by many, and I know we are all hopeful that the new Crisafulli government will be receptive to a more reasonable approach in time.

Royalties are an illustrative example of the balance that governments need to consider between what is in the long-term interests of the people of Queensland, versus the opportunity to chase short-term revenues. Our industry knows that producing commodities is a cyclical business, where short-term increases in commodity prices and higher revenues are needed to cover the cycles of weak prices and lower revenues.

It’s important that our leaders get the balance right and create a competitive regulatory environment to set Queensland up for long-term, sustainable success.

Looking ahead

Despite the challenges we have faced, and those that lie ahead, we remain steadfast in our optimism for the Bowen Basin and the outlook for the industry more broadly.

Metallurgical coal is Queensland’s biggest export and the coal industry contributes 22% of Queensland’s gross regional product. Regional communities and the Bowen Basin’s world class resources sector are already playing a leading role in supporting South East Asia and India, which are at the centre of coal consumption growth and the ongoing expansion of steel demand.

Commodity Insights forecasts global seaborne demand for metallurgical coal to grow by 28% from 2024 to 2040, driven by India, while Wood Mackenzie forecasts 29% growth into Asia by 2050.

Countries like Japan, India, Vietnam and South Korea rely on Queensland’s energy exports and high-grade coals. These powerful and important strategic partnerships will continue for decades to come as millions of tonnes of steel is produced each year to support construction, expand transport and manufacturing capacity, and to build the region’s low emissions energy infrastructure.

While demand is forecast to increase, supply is also expected to tighten due to large mines reaching their end-of-mine life and the underinvestment in development projects. According to Commodity Insights, this will result in a 74 million tonne shortage in supply of seaborne metallurgical coal by 2040.

For us at Whitehaven, this not only means our products will continue to be highly sought after, but that our development projects, such as Winchester South in the Bowen Basin provide us with a competitive advantage and further growth opportunities.

It also highlights the importance of the industry working together with policymakers to enable and encourage further growth and project developments.

The decades ahead bring the potential for an exciting period of growth and an opportunity to deliver even more long-lasting benefits for regional communities across Queensland, but it must start with getting the regulatory settings right now. 