Mt Arthur Coal

ALSO known as New South Wales Energy Coal (NSWEC), BHP’s Mt Arthur coal mine produces coal for domestic and international customers in the energy sector.

In 2018, the company angled towards optimising the mine design by re-opening its Ayredale pit to gain earlier access to a higher margin resource over the next decade.

BHP also constructed multiple elevated roadways to reduce haulage cycle times and increase productivity, reporting 18.54 million tonnes of saleable coal produced throughout the year – and the outlook for 2019 was even brighter.

Production at Mt Arthur decreased by six per cent in FY18 as improved stripping fleet performance was offset by lower bypass coal and a higher average strip ratio.

In October 2018, Thiess secured a $1.2 billion contract with BHP to provide mining services at the Mt Arthur coal operation.

This five-year contract built on Thiess’ existing agreement would expand the scope of Thiess operations to include additional services as mine operator of the southern end of the operations (the Ayredale and Roxburgh pits).

Under the new contract Thiess would perform mine design, planning and scheduling services, drill and blast operations, overburden removal and coal mining.

“This is the third successive contract that Thiess has secured with BHP at Mt Arthur Coal,” CIMIC Group chief executive Michael Wright said at the time.

“It recognises our team’s specialist mining capability within the Hunter Valley’s complex geology and our team’s ability to work flexibly with our client.”

The plans to expand both the Ayredale and Roxburgh pits would push the life of the mine out to 2026, with mining set to start in FY19.

Extensive operations were underway on site including the first phase of the tailings dam Stage 2 raise project, involving the downstream raising of an existing embankment by 10 meters to provide ongoing tailings storage capacity.

Powerlines would also be relocated and the replacement of Mt Arthur’s communication tower was planned, subject to final approval.

CIMIC Group Mining and Mineral Processing executive and Thiess managing director Douglas Thompson said the company was looking forward to contributing to the success of the Mt Arthur coal operation.

“We have a proud history in the region and working with BHP,” Mr Thompson said.

“We’re pleased to continue our work at Mt Arthur coal’s southern operations and support local jobs, suppliers and businesses.”

As of 30 June 2018, Mt Arthur employed 985 permanent and fixed-term contract employees and about 518 contractors on a full-time equivalent basis.

The scope of the new developments would create up to 300 permanent, locally-based roles.

About 54 per cent of Mt Arthur’s employees resided in the local government areas (LGAs) of Muswellbrook, Upper Hunter and Singleton.

Production Outlook

In its annual report, BHP said its average realised sales price [from NSW Energy Coal] increased from $US75 per tonne in 2017 to $US87 in 2018 due to strong growth in Chinese seaborne demand.

“Seaborne demand from India benefited from disappointing domestic production,” the report stated.

“In the short term, Chinese imports are unlikely to repeat their recent strength.

“In the long term, global demand offsetting weakness in OECD countries [due to switch to cleaner fuel sources] amidst slowing demand from China.”

Energy coal production was flat at 29 million tonnes as a strong performance at New South Wales Energy Coal was partially offset by the impacts of wet weather and higher strip ratio areas being mined at Cerrejón Coal in Colombia – and production in FY19 was expected to remain broadly unchanged.

NSWEC unit costs were expected to be between $US43 and $US48 per tonne in FY19, reflecting mine progression through geological constraints from the monocline transition, higher strip ratios and diesel prices, as well as increased contract mining costs.

Geological constraints were expected to continue into the medium term, with unit costs forecast to remain at about $US45 per tonne during this period.

As one of Australia’s largest active coal mines, Mt Arthur was well placed to take advantage of Chinese seaborne demand with the economic development and urbanisation of the Southeast Asian region in particular also driving strong demand for its coking coal for steel production.

“Coal mining in NSW is currently in a ‘sweet spot’ with high commodity prices, record levels of exports and increasing demand for our resources from traditional and emerging markets,” NSW Minerals Council chief executive Stephen Galilee said.

“According to the independent International Energy Agency, coal consumption in Southeast Asia will more than double by 2040, driven by an increase in demand for reliable and affordable electricity, and deployment of more advanced technology coal-fired power stations.

“NSW is in a prime position to capitalise on this growing demand as the new technology coal-fired power plants being developed in Southeast Asia work best using the type of high-quality coal we produce.”

Community Backlash

While the outlook was largely positive for the coal mine, the local community around Mt Arthur were not convinced the benefits would be passed on to the surrounding region.

In December 2018, BHP announced its new in-house labour hire company Operations Services would move into Mt Arthur – and have declined to comment if this would impact the 300 local roles expected with the mine extension.

The Construction, Forestry, Maritime, Mining and Energy Union (CFMEU) said the move was a blow to local Hunter mine workers, who deserved direct employment at the mine on industry-standard conditions.

“BHP says it is responding to community concerns about casualisation and labour hire – but it is just driving down wages and conditions by other means,” CFMEU Mining and Energy Northern District president Peter Jordan said.

“If BHP was genuine, it would offer permanency under the existing Mt Arthur enterprise agreement to current labour hire workers – many of whom have worked for years at the mine as casuals.”

Mr Jordan said the jobs being advertised at Mt Arthur had traditionally been performed by the permanent workforce.

“BHP is simply replacing external labour hire with an equally segregated and divided work arrangement under its in-house labour hire company Operations Services,” he said.

“Our local workers and communities deserve better.”