BHP can't ignore the writing on the wall for Saraji East, regardless of government go-ahead

ACCR is commenting on the Queensland Government’s recommendation that the BHP Mitsubishi Alliance’s (BMA) Saraji East Mining Lease Project is suitable to proceed.

Located in the Bowen Basin, Saraji East is a metallurgical coal mine awaiting Final Investment Decision from the BMA joint venture. The proposed mine is adjacent to BMA’s existing Saraji site and is expected to operate for around two decades and produce 110 million tonnes of coal.

The Queensland Government’s Environmental Impact Statement (EIS) indicates that the mine will generate around 18 million tonnes of direct emissions. The report estimates that 451 MtCO2e of scope 3 emissions^[1] will be generated from the project, primarily from use of the mine’s coal in steelmaking.

The recommendation is not final and the proposal for Saraji East will now go to the desk of Federal Environment Minister, Murray Watt, for further consideration.

Commenting on the announcement, ACCR Head of Engagement and Sector Strategy, Naomi Hogan said:

“Despite a state-level recommendation, there is no indication BHP will advance Saraji East toward development. Rising labour and energy costs, alongside the return of metallurgical coal prices to long-run averages, have squeezed BMA’s margins in Queensland. It is difficult to make the case that Saraji East would stack up financially.

“The recent decision to mothball Saraji South, among other mines, shows that Queensland coal operators are already facing significant economic challenges. Investors will rightly ask about Saraji East’s viability when nearby projects are being sunk by rising costs, tight margins and mounting transition risk.

“In a world where steelmakers are increasingly planning for low-carbon and coal-free technologies, greater scrutiny of any new potential coal investments is a must. BHP should clarify for investors how Saraji East aligns with its ambition to support lower-emissions steelmaking and reduce scope 3 emissions.

“Communities and workers in the region will require assurances from BHP that any future investment supports long-term economic resilience. Transition impacts are increasingly central to how investors assess project risk.”

Background

Earlier this year, BMA placed Saraji South into care-and-maintenance, due to economic challenges, raising further questions about long-term project economics in coal.