The Queensland state government is due to debate next month a legal amendment that could allow Australian firm BHP and Japanese trading house Mitsubishi to sell off individual coal mines included in their BHP Mitsubishi Alliance (BMA) joint venture.
The government's Transport and Resources Committee has recommended that the amendment to the Central Queensland Coal Associates Agreement be passed, as part of broader legislation, making it likely that it will be approved. This will allow BHP and Mitsubishi to continue the process of reducing their carbon emissions while maintaining some exposure to the high-grade coking coal market.
BHP completed the sale of its 80pc stake in BHP Mitsui Coal (BMC) coking and thermal coal joint venture to Australian firm Stanmore in May, leaving it with its higher grade BMA joint-venture mines. But not all BMA mines produce the highest grade coking coal that BHP is targeting, with the 7mn t/yr Blackwater and 2.5mn t/yr Daunia mines at the lower end.
The amendment will allow BHP and Mitsubishi, which each own 50pc of BMA, to either together or separately sell off the lower grade hard coking coal, pulverised coal injection and thermal coal mines, while retaining ownership of premium hard coal mines like the 6mn t/yr Peak Downs and 5mn t/yr Saraji. This will allow the BMA owners to cut their emissions, while focusing on the premium end of the coking coal market, which offers steel producers a slightly lower emissions option during the transition to "green steel". Production of green steel, made using hydrogen or another low emissions method instead of coking coal, is still decades away, according to BHP.
It will also give BHP another opportunity to blame the Queensland government's coal royalty price increases for its sale of these non-core assets, after it cut all investment in Australian coking coal earlier this month.
There are several potential buyers for the lower grade BMA assets, with the BMC sales process likely to have flushed out options for BHP. Chinese coal mining firm Yancoal, which has thermal coal assets in Australia, is one potential buyer, as are Australian firms Whitehaven and New Hope.
