The economic importance of coal – why we shouldn’t rush to toss the baby out with the bath (or Bathurst) water

Defying the  critics  and  climate  change warriors, the country’s biggest coal miner has reported a near tripling of its underlying profit as higher prices lifted revenue.

At  the  same  time the  company,  Bathurst Resources, underlined  its  value to the broader  economy by generating a  substantial proportion of  its earning from  exports.

Coal production was down about 8% to  1.9m tonnes, of which just under half was export coking coal used in steel making. Production was affected by bad weather, which caused flooding and slips.

The  company  is  looking  at expanding production, including the output from one of  its Waikato  operations.

The profit of $30.5m for the year ended June compared with $66.7m the year before.  But stripping out one-off items, such as changes in value of investments and the previous year’s impairments, the underlying profit was $43.1m compared with $14.8m.

Radio  NZ  reported chief executive Richard Tacon as  saying the results reflected a tripling in export prices.

“The long-awaited pricing recovery began in June last year as the global economy began to re-open after Covid related lockdowns, which increased demand against a tight supply and limited spot cargo availability.”

Tacon said prices hit record levels for part of the year, but had since fallen to more sustainable levels.

While the Ukraine war had unsettled markets, higher prices for fuel and labour added to its overheads.

Bathurst operates the Stockton mine on the West Coast, a small mine in Southland, and two mines in Waikato.

It is looking at development options for reopening a mothballed operation in Buller as well as the expansion of one of the Waikato operations.  It also has an interest in a Canadian exploration project and is remediating a mine in Canterbury, which it closed last year.

Australian-owned   but  dual-listed, Bathurst has  to  battle  critics  on several  fronts,  particularly  when  it seeks  to  expand its  operations.

Meanwhile  the  higher price  of  coal has affected  another  NZ   business  in a  different way.  The  NZ  Herald’s  Jamie Gray reports that Genesis Energy’s supply contracts with other power generators, known as “swaptions”, are to be replaced with market security options (MSOs) when those contracts expire at the end of this year.

The majority Government-owned Genesis has the coal and gas-fired Huntly Power Station, which backs up the grid when renewable energy sources such as hydro and wind become constrained by the weather.

The main power generators typically take out swaptions to ensure they have enough supply when their own renewable power sources fall short.

The move allows outside parties effectively to hire thermal capacity at Huntly at their own cost to meet their obligations.

Genesis says the new regime will open Huntly to a more varied group of power users – including the second-tier power retail companies – who seek security of supply.

“We feel like it is a good opportunity for generators, power retailers and other energy users to secure supply and stable pricing when international coal prices are skyrocketing,” Genesis’ chief trading officer Pauline Martin  said.

“This is a product that is reflective of the backup role that Huntly has always played,” she said.

Based on Genesis’ current forecast, its coal stockpile can cover average requirements until the end of 2024.

Point  of  Order  contends  these  two  reports  underline  the  importance  to  NZ of  retaining  an active  coal  mining  industry,  even  as  the  country   moves to  a low-carbon economy.  All  the  more  so  when,  just  across the  Tasman, Australians  find their  standard of living rising faster  than they  would in NZ because of  the  vast  production of—–coal.

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