Queensland backs Glencore coal mine, but thermal coal output may be capped
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While there has been much opposition towards coal — particularly thermal coal — in recent times, the Queensland government is now spruiking Glencore’s (LON:GLEN) $1.5bn Valeria coal mine in the Bowen Basin.
The state’s Treasurer Cameron Dick says the project, which has just been declared a coordinated project by Queensland’s independent coordinator-general could deliver 1,400 construction jobs and 950 ongoing jobs once operational.
Like other mines in the Bowen Basin, Valeria is expected to produce a mix of up to 20 million tonnes (Mt) per annum of metallurgical coal that is used for the production of steel and thermal coal for power generation over a 35-year mine life. The exact mix has not been specified.
However, there is an interesting point raised by Queensland Mines and Energy Minister Dr Anthony Lynham.
“The mine’s proponent, Glencore, has advised any thermal coal produced by the new mine will be subject to the company’s cap on thermal coal output, to support global transition to a low carbon economy,” he noted.
Glencore had moved to cap its global coking and thermal coal output at about 145Mt per annum in February 2019 in response to increasing pressure from its shareholders to take action to address climate change.
It also committed at that time to start from 2020, disclosing its longer-term projections for the intensity reduction of Scope 3 emissions, which are all indirect emissions that occur in the value chain of the reporting company, including mitigation efforts.
In 2019, the miner produced a total of 139.5Mt of coal, including 123.9Mt of thermal coal, up from 129.4Mt in 2018.
Notably, while coking and semi-soft coal production totalled just 15.6Mt of the total, the two types of metallurgical coal recorded greater production growth of 23 per cent and 64 per cent respectively.
The Guardian quoted Glencore as saying that production from Valeria would replace production from the company’s other projects and would be “in line with Glencore’s global climate change commitments”.
Anglo American is another miner that is limiting its coal production, noting in December 2019 that it had reduced its 2021 thermal coal target from 30Mt to 26Mt.
More drastically, several other major diversified miners have already exited or flagged plans to exit the coal sector.
These include Rio Tinto (ASX:RIO), which completed its exit from coal after selling its assets in Queensland in August 2018.
Coincidentally, these include the sale of its interests in the proposed Valeria coal mine to Glencore.
Fellow Australian and the mining industry’s 800 pound gorilla, BHP (ASX:BHP) has identified the decarbonisation of stationary power and electrification of public transport as important strategic themes for the future.
BHP was reported by Bloomberg in July 2019 to be exploring options to exit its remaining thermal coal mines in Colombia and Australia.
In its March quarterly report, the company said it had placed its Cerrejón mine in Colombia on care and maintenance due to government action to contain the spread of COVID-19, while production in New South Wales fell 13 per cent to 11 million tonnes as a result of change in focus to higher quality products.
Returning to Valeria, Glencore will be required to prepare a comprehensive environmental impact statement for the project that will be subject to a rigorous assessment of all environmental, social and economic impacts, including extensive community consultation.
The designation of Valeria as a coordinated project was also welcomed by the Queensland Resources Council, which noted that such projects could create thousands of jobs and billions of dollars in investment, exports and royalties.
But the Queensland Labor government’s endorsement of Valeria is not sufficient for Federal Resources Minister Keith Pitt, who called on the state to approve the stage three expansion of New Hope Corporation’s (ASX:NHC) New Acland mine.
The expansion will extend the mine’s life until 2031 and boost annual production from 5.2Mt to 7.5Mt.
However, the expansion has been caught up in a legal stoush with farmers and local residents who are concerned that the project, which will swallow up the (nearly abandoned) town of Acland, will have serious impacts on groundwater depletion, noise, air quality, visual amenity, soil damage, social disruption and land values.