Last week, the miner revealed that it will slash the value of its coal assets by AUD 1.25 billion as it looks to reposition its portfolio towards greener commodities like copper and nickel. BHP plans to sell its New South Wales Energy Coal unit, along with a stake in a Colombian coal mine, and has said it will take a write down of between AUD 1.15 billion and AUD 1.25 billion on the asset, cutting its value down to just AUD 250 million to AUD 350 million.
BHP said the impairment, which will show up when it publishes its half-year results to 31 December 2020 in February, reflects current market conditions for Australian thermal coal.
Another Australian miner, South32, which is in the process of exiting its SA coal assets, said last week that its domestic coal volumes declined in its half year to end-December. South32 energy coal production in South Africa decreased by 5% YoY to 11.2 million tonnes in the group’s December 2020 half-year as domestic sales declined due to reduced demand from Eskom.
A strengthening of the rand has also pushed up operating costs, while export sales were also lower following the suspension of activity from loss making pits in response to market conditions.
The deal to divest the SA Energy Coal to Seriti was announced in November 2019 and would result in Seriti becoming a major supplier of coal to Eskom.