Australia’s Fierce Wildfires Are Also Threatening Its Coal Mines

(Bloomberg) -- Australia’s deadly wildfires are threatening output at BHP Group’s power-station coal mine in New South Wales state, where production has been impacted by smoke and reduced air quality.

Volumes have already been impacted in recent months, the world’s biggest mining company said Tuesday. “If air quality continues to deteriorate then operations could be constrained further” in the six months through June, BHP said.

The overall economic impact of Australia’s recent fires could be to shave 0.2-0.4 percentage points from GDP, according to James McIntyre of Bloomberg Economics -- and in a worst case scenario -- he estimates the disaster could cut up to 1.6 percentage points from growth.

Australia’s Fierce Wildfires Are Also Threatening Its Coal Mines

Australia, the No. 2 thermal coal shipper behind Indonesia, is forecast to earn about A$21 billion ($14 billion) from exports of the fuel this fiscal year, according to government data.

Wildfire smoke has caused reduced visibility and raised safety concerns for workers at BHP’s Mt. Arthur open cut mine near Muswellbrook, about 150 miles north of Sydney, while some staff have been away from their posts to serve as volunteer firefighters or to help protect their homes and communities, a company spokesman said.

Production at the New South Wales Energy Coal unit declined 11% in the six months to Dec. 31 compared to a year earlier, in part because of the fires and as the operation shifts strategy to extract a smaller volume of higher quality product.

To read more on the economic impact of the fires, click here

Areas around BHP’s mine have experienced a number of incidents during Australia’s bushfire season, with a fire being tackled Tuesday about 20 miles to the south in Spring Gully, according to the New South Wales Rural Fire Service.

While firefighters continue to tackle blazes, Australians have experienced thunderstorms in recent days that’ve have brought torrential rain and flash flooding, quelling some of the threat. Australia’s wildfire season since September has claimed 28 lives and seen an area about the size of England scorched.

Whitehaven Coal Ltd.’s Maules Creek operation, about 300 miles north of Sydney, has also been impacted by smoke from regional bushfires, drought and labor shortages, according to a Jan. 16 statement. Run-of-mine production at the site, the exporter’s biggest operation, fell 44% year-on-year in the December quarter.

BHP has flagged it will consider selling its thermal coal mine in Australia, and a stake in an operation in Colombia. It expects the market for power-station coal to “plateau and then decline,” Chief Financial Officer Peter Beaven said in May.

©2020 Bloomberg L.P.

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