Glencore has announced the suspension of development of a AU$2 billion coal mine in Queensland, citing global uncertainties and a hike in state royalties that damaged investor confidence as the cause.
In a statement the company said, “Glencore has decided to withdraw the Valeria coal project from the current approvals process and will place the project under review.”
The company said the move was in line with its commitment “to a responsibly managed decline of [its] global coal business and ambition of being a net zero total emissions business by 2050”.
The miner had been in a permitting process for the Valeria mine in the Bowen Basin, which would have produced up to 20 million tonnes of thermal and metallurgical coal a year, and was part of a package it bought from Rio Tinto for $1.7 billion in 2018.
This decision comes against a backdrop of uncertainty over the speed of global decarbonisation and project finance becoming harder to find for greenfield coal mines – those that are not expansions of existing projects.
Queensland, also home to coal mines owned by majors BHP Group Ltd , Anglo American PLC and Peabody Energy Corp, ended a ten-year freeze on royalty rates and raised them to capture windfall profit in June 2022.
On 7 December, Queensland forecast a record surplus of AU$5.2 billion for the current financial year, largely driven by the higher royalty payments.
A spokesperson from Glencore said, “Governments are already benefiting from higher royalty and corporate tax revenue from the Australian coal sector.
“Abrupt decisions like the Queensland super royalty hike have damaged investor confidence, increased uncertainty and raised a red flag with key trading partners.”
Australia is expected to announce caps on gas and coal prices before Christmas, possibly in the coming days.
The Queensland Resources Council (QRC) said Glencore’s decision is a sign of things to come in the wake of the Queensland Government’s decision to impose excessive new royalty taxes on coal producers.
Glencore’s Valeria project south-west of Emerald would have created 1,400 construction jobs and 1,250 operational jobs, with a projected operation life of 37 years.
QRC Chief Executive, Ian Macfarlane, said Glencore had made it clear the Queensland Government’s royalty hike was a factor in its decision to cancel the project.
“Companies take into account a broad range of factors when considering multi-decade, large-scale investments in projects like this, and regulatory stability is one of those factors,” Mr Macfarlane said.
“Glencore has commented that ‘abrupt decisions like the Queensland super royalty hike have damaged investor confidence, increased uncertainty and raised a red flag with key trading partners’, which is consistent with the QRC’s position from day one – this royalty hike will affect long-term investment in this state.”
Mr Macfarlane said previous Queensland governments have offered stable and consistent investment environments for resources projects, but that was no longer the case in Queensland.
“The Queensland Government does not appear to appreciate the impact of its decision to lift coal royalty taxes to the highest rates in the world,” Mr Macfarlane said.
“Short-term political decisions like this make it harder for companies to invest here and send a signal to shift their focus to other destinations that offer better returns to investors.”
Mr Macfarlane said the QRC has made repeated warnings to the government of the long-term impact of its decision to over-tax coal producers on investment in resources projects across the board, not just coal.
“Unfortunately, our concerns have fallen on deaf ears,” Mr Macfarlane said.
“We now have a situation where major mining companies such as BHP, Peabody and Glencore are rethinking their investment plans for Queensland, which means every Queenslander loses out in terms of new jobs and business opportunities and the flow-on benefits from that.
“Japan’s Ambassador to Australia, Yamagami Shingo, has also made it clear the relationship between Queensland and Japan has been damaged by the way in which the royalties were unilaterally introduced, without any consultation with industry or investors.
“Sudden changes in the rules for investment discourage investors from future job-creating projects, which should be a major concern for any government.”
Mr Macfarlane said the QRC will continue to be open to a meeting with the government to discuss a more balanced approach to supporting the state economy without jeopardising the industry’s future.
