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Coal investment in Queensland unlikely

Oct. 17, 2012 at 1:46 PM   |   Comments

BRISBANE, Australia, Oct. 17 (UPI) -- Mining giant BHP Billiton Chief Executive Officer Marius Kloppers said new investments in the coal sector in the Australian state of Queensland are unlikely under current conditions.

Speaking Wednesday to the Brisbane Mining Club, Kloppers cited Queensland's "almost unparalleled resource base" of both energy coal and metallurgical coal.

While those resources will provide "substantial" opportunity in the decades ahead, Kloppers said, "the heavy cost of taxes, royalties, declining productivity and a strong Australian dollar means that further investment to grow these operations is much less likely."

Amid falling commodity prices, BHP has cut jobs and suspended production at its Norwich Park and Gregory coal mines in Queensland and delayed expansion plans for its Peak Downs coal mine, also in Queensland.

BHP has also scrapped its $30 billion expansion of the Olympic Dam copper and uranium mine project in South Australia.

Kloppers pointed to the cyclical nature of the mining industry, which he said had experienced unprecedented growth, fueled by the industrialization and urbanization of China.

But China's rapid rise drove key commodity prices like iron ore and coal to levels in the last decade which would not be repeated, he said.

"What we can instead expect is demand growth at more predictable and sustainable levels and more moderated pricing,'' he said.

In an apparent reference to new mining taxes, Kloppers said that it is "particularly unfortunate" that these costs are increasing at a time when industry profitability is declining.

Queensland's tax on coal royalties that took effect on Oct. 1 and the federal government's tax on coal and iron ore began in July.

''The next round of minerals investments in Australia will, almost without exception, be captured only if costs are decreased and productivity is improved. Companies and governments need to work in partnership towards attracting the next rounds of investments," Kloppers said.

Separately, the Queensland Resources Council said this week that a survey of the state 's coal company chief executives shows that they expect to cut costs in response to the increase in coal royalties.

Cost-cutting measures, the executives said, would include job cuts, including employees and contractors, as well as cuts in exploration expenditures.

The new royalty rates, coupled with company income tax rates, gives Queensland "the dubious honor of being the highest taxing coal jurisdiction globally," said the council's chief executive Michael Roche in a statement.

"While the current difficulties for the industry are part of the normal cycle, albeit exacerbated by a stubbornly high Australian dollar, issues such as increasing royalties and threats of further federal taxation increases do nothing to encourage continued investment in Australia's resources sector," Roche said.

© 2012 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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