INTERVIEW: Optimism persists in Queensland amid copper smelter, coal royalty issues

Industry in Queensland, which accounts for about half of Australia's refined copper output and the bulk of the country's standing as the world's largest metallurgical coal exporter, is under considerable pressure.

The long-term futures of Glencore PLC's Mount Isa copper smelter and Townsville copper refinery remain uncertain, despite the federal and state governments committing up to A$600 million in October to keep them operational for the next three years. The company has already shut down underground copper mining at Mount Isa this year.

Meanwhile, Queensland's met coal industry has seen hundreds of jobs cut as miners struggle with low commodity prices and the world's highest royalty rates, imposed in 2022.

Yet there is optimism in increasing demand, critical minerals financing opportunities and exploration upside, according to Janette Hewson, CEO of the Queensland Resources Council. The association is lobbying for government support in all of these areas.

Platts, part of S&P Global Energy, spoke to Hewson about the challenges and opportunities for Queensland's metals and mining sector. This interview has been edited for clarity.

Platts: How do you see the issue of Glencore's smelter and refinery playing out after the government assistance?

Janette Hewson: That's just temporary relief. We welcomed that announcement of assistance from the two governments. It's such an important part of the Mount Isa region and community, but it's also about ensuring we retain a smelter that could be utilized by others, particularly given the significant copper reserves in North West Queensland.

Long-term, a transformation study is one of the conditions for receiving that funding. We're going to get involved as much as we can on behalf of the industry because it's not just about one company. If you lose that smelter, we'll never get it back. Things are just too expensive to build from scratch.

The key to unlocking the value in North West Queensland, where Glencore's assets are, is having a common user infrastructure to share costs for what are sometimes smaller companies that are trying to develop mines, which means making rail, their energy and water costs affordable. It's a very expensive rail network from Mount Isa to Townsville, so improving those economics and making sure everyone has water and power are priorities.

There's also a lot of critical mineral potential in the North West province, and the focus for the government and us in the next year or two will be on how to unlock it, particularly with common user infrastructure.

There's been real excitement in the critical minerals space for Queensland, particularly in vanadium, graphite and rare earths processing. We've had a few Queensland companies and projects that have managed to get support from the Export-Import Bank of the US, including Graphinex Pty. Ltd. and RZ Resources Ltd., coming off the critical minerals agreement signed in Washington in October.

Platts: What other priorities are you working on?

Hewson: The other thing we hear regularly from our explorer and junior members is the need for government grant funding to continue to help with exploration, which is so critical. It's not a lot of money for individual companies necessarily, but it gives them that backup and ability to go out and raise money as well to do that exploration, find those discoveries and firm up their reserves. That is a really easy one for governments to get involved in with those collaborative grant programs.

Queensland has had an exploration incentive scheme, but the state government is looking at discontinuing that, which is something we keep raising with them.

The Queensland government is actually releasing tenements for expressions of interest, even for coal and gas, which we haven't seen in a while. There is still untapped met coal exploration potential in Queensland. A significant portion of it is brownfields, but we have seen a decline in exploration spending and activity for coal over the past two to three years.

However, the expressions of interest in further coal exploration indicate that there are positive developments underway. If we could have royalties fixed, then things would be looking pretty positive.

Platts: What are the chances of the state government actually lowering royalties, and what impact is it having?

Hewson: The government has been very firm about not changing the royalties framework that they inherited. We understand it's challenging for them from both a political and budgetary perspective. However, we continue to talk with the government about the risks -- and it's not just a future risk anymore. It's about the fact that companies have really struggled this year with lower coal pricing and higher production costs. Our research has shown that since 2022, the industry's production costs here in Queensland have gone up about 29%.

We've got cost-of-living pressures, which are always felt by the mining industry, but they're usually amplified; plus the federal Safeguard Mechanism that sets baselines of allowable emissions for facilities that emit over 100,000 metric tons of CO2 per year. We continue to see upward pressure on production costs.

Yet our coal industry is pretty resilient. They're very good at trying to manage their costs. I've seen a lot of cost discipline from our members this year. We've still got really high environmental, sustainability and safety standards in this state.

We're working with the Queensland government on how to take away a lot of red and green tape from approvals for new and extension projects, and life extension projects for mines. However, while it's great to get approvals faster, unless the economics also stack up for investors, it will be hard for companies to secure those capital allocations, particularly when competing across the globe for capital.