BMA warns Queensland met coal royalties render operations uncompetitive

BHP Billiton Mitsubishi Alliance Pty. Ltd. has warned workers in Queensland, Australia, that high royalties have rendered its metallurgical coal operations uncompetitive, according to an internal email seen by Platts, part of S&P Global Energy.

BHP Group Ltd.'s results for the half-year period ended Dec. 31, 2025, show that, under Queensland's royalty regime, its 50-50 BMA joint venture with Mitsubishi Development Pty. Ltd. returned 0% on capital employed. The state government hiked royalties in 2022 to capitalize on miners' windfall profits when met coal prices were at a record high.

While BMA's "underlying operational performance is strong ... our financial performance is challenged by unsustainable royalty payments, increased production costs and fluctuating coal prices," Adam Lancey, BMA's asset president, said in a March 2 email to BMA staff, which was obtained by Platts on March 4.

"BMA cannot compete for investment when our returns sit at zero, and royalty payments far exceed profits," Lancey said in the email. "Our 'Better BMA' strategy is the vehicle that moves us forward -- by stabilizing our operations, simplifying the way we work and tightening our controls to make us more efficient."

Simplifying operations

Amid lower realized met coal prices in the second half of 2025, BMA is already "taking further action to reduce costs, such as placing Saraji South into care and maintenance" in the second quarter of fiscal year 2026 (July-June) and removing about 750 roles across Queensland, BHP said Feb. 17 as it reported results.

"These changes are not easy, but they are important to simplify our operations, strengthen performance and position BMA for a stronger future. We will need to continue to respond and react to the pressures around us," Lancey said in the internal email.

BMA -- the largest producer and supplier of seaborne met coal in Australia, which is also the world's largest producer -- operates five Bowen Basin mines and also owns and operates the Hay Point Coal Terminal near Mackay, Queensland.

BHP delivered strong half‑year results, which were largely driven by iron ore and copper, which, according to Lancey's email, generated returns that "far exceed ours" at BMA. In the email, he also warned that across BHP, "capital flows to assets and jurisdictions that deliver competitive returns -- and right now, that puts BMA at a disadvantage."

Platts assessed the FOB Australia premium hard coking coal price at $220.50/metric ton on March 3, up from $185.50/mt a year earlier.

Even with the "slight uptick" in met coal prices, which were "consistently low" in FY 2025, "we continue to see upward pressure on our costs," Lancey said in the email.

"Queensland has the highest coal royalties in the world, and as our high-quality coal prices recover, we are increasingly exposed to the top tier of payments. Royalties in Queensland are levied on revenue, not profit," Lancey said.

"We cannot continue to sustain losses of this scale without the flow-on effects for our operations, our people and the communities we operate in and support."

Ross McEwan, BHP's chair, told the AFR Business Summit in Sydney, Australia, on March 3 that "when you are making no money with an operation in an area like Queensland, because the royalties just spoiled your business, you do not invest. So, our process right now is zero investment into Queensland."

Academy to close

BHP informed staff and students at its FutureFit Academy in Mackay on March 4 that the center will "cease operating in its current form, and a transition is now underway to consolidate the FutureFit program in Western Australia," a BHP spokesperson said in a statement to Platts on the same day.

Current Queensland-based students have been told they can still finish what they started at FutureFit and that their pathways into permanent roles at BHP operations will not be impacted when they successfully complete their training, the spokesperson said.

The FutureFit Academy has trained nearly 600 graduates since opening in 2020, according to BHP.

"This is a difficult but necessary decision in the face of the low returns in Queensland, a function of the extreme royalty settings introduced in 2022," BHP's spokesperson said.

BMA's existing apprenticeship and traineeship commitments remain unchanged, and 35 new apprentices have already started their careers with BMA in Central Queensland this year, according to BHP.

Janette Hewson, CEO of the Queensland Resources Council, told Platts on March 4 that the state's coal royalties "remain one of the biggest concerns for the sector and this state's prosperity long term."

"This is yet another example of the sustained pressure on the coal sector, which is forcing businesses to review their operations and investments in Queensland," Hewson said.

QRC's Queensland Minerals and Energy Academy will continue to provide science, technology, engineering and mathematics education in Mackay to attract future resources workers, Hewson said.