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.
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.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton