BHP Billiton's coal interests

BHP Billiton has major coal mines in Australia, South Africa, Colombia and the USA. In its annual report the company boasts that it is the "world's largest supplier of seaborne metallurgical coal" and "one of the world’s largest producers and marketers of export energy coal." The company's metallurgical coal division is headquartered in Brisbane and its thermal coal business in Sydney.

For many years BHP Billiton had separate internal business units for "Energy Coal", which caters for power generation, and "Metallurgical Coal" which is largely used in steel making. However, in an April 2013 restructure the company merged the two divisions. Dean Dalla Valle, who had been President of the Energy Coal division, was appointed to head the merged coal business unit.

Production

In its 2013 annual report, BHP Billiton reports that its metallurgical coal division produced 37.7 million tonnes and the energy coal division 72.9 million tonnes in the year to June 30, 2013.

Thermal coal

BHP Billiton stated in its 2013 annual report that it "is one of the world’s largest producers and marketers of export energy coal (also known as thermal or steaming coal) and is a domestic supplier to the electricity generation industry in Australia, South Africa and the United States. Our domestic sales are generally made to nearby power stations under long-term fixed price or cost plus arrangements. Our export sales are delivered to power generators and some industrial users in Asia, Europe and the United States, under contracts that are generally index linked."

Australia

Of the metallurgical coal, the company produced 22.6 million tonnes from its BHP Mitsubishi Alliance mines in Queensland (50% BHP), 7.1 million tonnes from its BHP Mitsubishi Alliance (80% BHP) mines in Queensland, and the 7.9 million tonnes from its Illawarra Coal mines in New South Wales produced in 2012-2013. The company reported that the reserve lives of its BHP Mitsubishi Alliance mines at current production rates range from three years to 39 years, between seventeen and 21 years for its BHP Mitsubishi Alliance mines and "four years to 31 years" for the Illawarra mines. The company also noted that some of its 'metallurgical' mines produced minor amounts of energy coal -- less than 2% from the BHP Mitsubishi Alliance mines and less than 17% from the Illawarra mines.

South Africa

In the year to the end of June 2013 BHP Billiton's South African subsidiary, BECSA, produced 31.6 million tonnes of thermal coal from four mines in the in the Witbank region in the province of Mpumalanga. The company stated that "approximately 56 per cent of BECSA’s sales were to Eskom, the government-owned electricity utility in South Africa. The remaining production was exported predominantly to China and India, via the Richards Bay Coal Terminal (RBCT), in which we own a 22 per cent share."

Greenhouse risk

In its 2009 annual report, BHP Billiton stated that "we recognise that the need to control carbon dioxide emissions has substantial implications for the use of thermal coal as an energy source. Our Company has committed to invest US$300 million over the five years from June 2007 to support the research, development and demonstration of low-emissions technologies, including ‘clean coal’ and carbon sequestration technologies. We have also developed the capacity to offer our export customers emissions credits in conjunction with their coal purchases."

In its 2012 annual report the company stated that:

"The physical impacts of climate change on our operations are highly uncertain and will be particular to the geographic circumstances. These may include changes in rainfall patterns, water shortages, rising sea levels, increased storm intensities and higher average temperature levels. These effects may adversely impact the productivity and financial performance of our operations."

BHP Billiton's coal subsidiaries

As of mid-2013 BHP has eight thermal coal mines and eleven metallurgical coal mines. Two new metallurgical coal mines in Queensland are currently being built.

BHP Billiton has interests in the following operations that produce thermal or steaming coal:

• BHP Billiton Energy Coal South Africa (BECSA) which is a wholly owned subsidiary operating four mines - the Middelburg mine, the Khutala mine, the Klipspruit mine and the Wolvekrans Colliery;

• Hunter Valley Energy Coal which is a wholly owned subsidiary which operates the Mt Arthur Coal mine in the Hunter Valley in Australia and has proposed the Caroona Coal Project;

• Cerrejon Coal Company, Colombia, in which BHP Billiton has a 33.3% interest; Coal from the Cerrejon coal mine is exclusively mareketed by CMC Coal Marketing Company, which has offices in Dublin and Atlanta.

• New Mexico Coal, North America which is a wholly owned subsidiary operating the San Juan mine and the Navajo mine in New Mexico; and

• the company is also the exclusive agent for marketing the coal exported from PT Arutmin Indonesia.

The company also has interests in:

• BHP Billiton Mitsubishi Alliance (BMA), Australia (50 per cent ownership) which produces both metallurgical and some thermal coal. BMA operates the Goonyella Riverside mine, Peak Downs mine, Saraji mine, Blackwater mine, the Gregory Crinum mine as well as the Hay Point Coal Terminal. In 2012 BMA closed the Norwich Park mine "indefinitely". BMA is also completing the construction of the Daunia mine and the Caval Ridge mine. Daunia is expected to be fully commissioned in late 2013 and Caval Ridge in 2014. Coal from the company's mines is exported through the company's Hay Point Coal Terminal near Mackay;

• Illawarra Coal in Australia which is a wholly owned subsidiary and which produces metallurgical and some thermal coal which is marketed through BMA. It operates that Appin mine, the West Cliff mine and the Dendrobium mine. Some of the coal is supplied to the Port Kembla Steelworks and some exported through the Port Kembla Coal Terminal;

• BHP Mitsui Coal in Australia in which BHP Billiton has an 80% interest and which produces metallurgical and thermal coal which is marketed through BMA. The joint venture owns the South Walker Creek mine and the Poitrel mine.

• the IndoMet Coal Project (IMC), of which BHP Billiton is a 75% owner, has metallurgical and thermal coal deposits in seven coal contracts of work (CCoWs) in Kalimantan, Indonesia. In July 2012 IMC began construction work on the first mine, the one million tonne per annum Haju Mine. BHP Billiton states that the mine "is expected to produce first coal by third quarter CY2013."

Coal Growth Plans

In a May 2013 presentation on a tour of some of its Queensland coal operations, BHP Billiton made clear that "we will substantially reduce development expenditure with no new major projects planned." The wariness of investing in new projects refelected BHP Billiton's concern that the downturn in prices and the oversupply in the international coal market - both for thermal and metallurgical coal - was likely to persist for some time. Despite the downturn, BHP Billiton remained committed to completing new coal projects which were initiated in the coal boomtime.

In an investor presentation in 2007, BHP Billiton staff flagged a range of coal mining expansion plans to cater for both the Atlantic and the Pacific coal export markets. For the Pacific market the company flagged the expansion of Cerrejon mine in Colombia and the development of Klipspruit and the rationalisation of the Middleburg and Douglas mines in what it refers to as the Douglas-Middelburg Optimisation Project in South Africa. To cater for the expansion of the Pacific market, the company has flagged its intention to develop the Mt Arthur Underground mine as well as the Mt Arthur Coal mine in the Hunter Valley in Australia. It is also looking to develop the Caroona Coal Project in New South Wales, Australia; Western Arctic Coal Project in Alaska, United States and the Southern Start project near Punta Arenas, Chile.

South Africa

In its 2009 annual report BHP Billiton lists a number of potential thermal coal mines as "projects". It also lists several other deposits under the "miscellaneous" subheading. (It appears that the company uses the term "projects" for potential mines where a "measured resource" estimate has been determined while "miscellaneous" is applied to deposits at an earlier exploration stage where the resource has only been indicated or inferred.)

The South African projects listed were:

• Leandra North coal project;
• Naudesbank coal project; and
• Weltevreden coal project.

The deposits listed under the "miscellaneous" sub-heading are:

• Leandra South coal project;
• Theunissen coal project;
• T-Project coal project;
• Davel coal project; and
• Remainder Block IV coal project.

Australia

In Australia it lists the Togara South coal project as a potential future thermal coal mine.

The company also listed undeveloped metallurgical coal deposits in Queensland, of of 2009, as being the:

• the Daunia coal project (This project, as of early 2013, is being commissioned)
• the Red Hill coal project
• the Peak Downs East coal project (this project, orginally associated with the commissioning of the Caval Ridge Project, has been deferred)
• the Sariji East coal project
• the Liskeard coal project
• the Nebo West coal project
• the Bee Creek coal project
• the Wards Well - Lancewood coal project

Indonesia

BHP Billiton has also investigated the IndoMet Coal Project (which it previously referred to as the 'Maruwai coal project') in central Kalimantan in Indonesia. The company holds seven Coal Contracts of Work within which 5 significant coal deposits have already been identified. In July 2009, following the global financial crisis, the company shelved the project after reviewing work on the Haju trial mine. In a brief media release the company stated that it had "assessed the progress of the Haju trial mine and determined it is not a sufficient fit with our long term investment strategy." It also stated that "further evaluation of the company’s interests in the Maruwai Coal Project is underway to determine the best future commercial options." In May 2010 BHP Billiton sold a 25% stake in the project to the Indonesian company Adaro Energy for $335 million.

The five deposits within the umbrella Maruwai coal project are:

• the Lampunut coal project, which is listed as having 72 million tonnes of measured metallurgical resource;
• the Haju coal project, which is listed as having 11 million tonnes of measured metallurgical/thermal resource;
• the Luon coal project;
• the Bumbun coal project;
• and the Juloi Northwest coal project

Coal export terminal interests

• On its website the North Queensland Bulk Ports Corporation states that in late 2009 it sought sought expressions of interest for the developed of Terminals 2 and 3 at the Abbot Point Coal Terminal. The corporation states that "the Preferred Developers, Hancock Coal Limited and BHP Billiton Limited are currently working with NQBP to enter into a Framework Agreement to progress the project and are finalising preliminary design and environmental studies."

• BHP Billiton is a 35.5% shareholder in Newcastle Coal Infrastructure Group, a jointly controlled entity that is operating the Newcastle Third Port export coal loading facility.

• BHP Billiton is also a have a 1.75 per cent interest in Port Waratah Coal Services Limited which operates two coal loading facilities at the port of Newcastle.

BHP Billiton's lobbyists

In Australia and the US, there are various state and federal lobbyist registration requirements for companies. In Australia the only requirement is for lobbying firms to disclose who their staff are and who clients are. However, there is no requirement to disclose which individual lobbyists work for which clients or what issues they were lobbying on.

As of April 2014, in both NSW and federally BHP Billiton is represented by John Connolly & Partners Pty Limited

In Queensland BHP Billiton was formerly represented by John Connolly & Partners

Employment

In it 2013 annual report BHP Billiton states that it employs 14,225 employees in its coal businesses, comprising both its metallurgical and thermal coal interests.

Articles and Resources

Related GEM.wiki articles

• Australia and coal
• BHP Billiton
• BHP Billiton and Carbon Capture and Storage
• Colombia and coal
• Corporate market share of global coal export trade
• Global use and production of coal
• Rio Tinto's coal interests
• South Africa and coal
• Xstrata Coal

External resources

BHP Presentations to Investors

• Dave Murray, "BHP Billiton Coal CSG Anlayst Visit: Hunter Valley Energy Coal", BHP Billiton, November 2nd, 2007.
• Hubie van Dalsen President – Metallurgical Coal, "Prerequisites for Metallurgical Coal Growth", Presentation to Macquarie Australia Conference, May 2010.
• Marcus Randolph, CEO Ferrous and Coal, "Goldman Sachs JBWere Australasian Investment Forum", New York, March 2010.
• "BHP Billiton Coal Briefing and Queensland Coal Site Tour", BHP Billiton, 28 May 2013.