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Look on the bright side: New Hope tips good earnings as coal sector winds down

New Hope is counting on a chronic underinvestment in coal to lift prices above long term averages.

Oct 23, 2023, updated Oct 23, 2023
New Hope sees a strong future in a depleted industry (file photo)

New Hope sees a strong future in a depleted industry (file photo)

The thermal coal producer’s annual report said that despite falling demand a supply gap was emerging as mine closures and chronic underinvestment in new thermal coal projects constrain supply.

That represented a “significant earning potential” for those companies with organic growth potential, the company said.

However there were concerns about new coal royalty structures in NSW and Queensland as well as the Federal Government’s proposed labour hire laws and the Safeguard Mechanism for the nation’s biggest carbon emitters.

Chair Robert Milliner said price volatility would continue for the commodity and the company was well positioned to increase production at minimal investment risk and high returns.

The company was also planning significant coal production increases over the next five years.

While acknowledging climate change, chief executive Rob Bishop said it was the company’s job to supply low-cost, long -life assets while demand for thermal coal continued.

“We believe companies that responsibly manage operational impacts on the environment, people and communities are the most appropriate operators to produce the coal that will be required through the energy transition,” Bishop said.

The company also claimed that royalty structures in NSW and Queensland and the Federal Government’s safeguard machanism had “the potential to impact future growth and invesmtnet while changes to labour hire rules included in industrial relations laws could stymie expansion projects and the building of new infrastructure”.

New Hope’s Bengalla mine qualifies as one of the nation’s biggest emitters under the Safeguard Mechanism and it was evaluating the CO2 emission reduction requirements to determine potential cost impacts.

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Initial modelling suggested the cost of buying carbon credits would be immaterial in 2024.

 

 

 

The company’s confidence followed a record profit of $1.5 billion and New Hope has $730 million sitting in cash and no debt.

 

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