By Avinash Govind

September 17, 2025 - Japanese-Australian joint venture BHP Mitsubishi Alliance (BMA) will place its Saraji South mine into care and maintenance in November because of low coal prices and high state-level royalty rates in Queensland.

Maintaining lower margin areas of BMA's mine footprint is not sustainable under current conditions in Queensland, Australian mineral producer BHP said on 17 September. But medium-term demand for BMA's premium hard coking coal is strong, it added.

The joint venture will also lay off 750 staff across Queensland, including 72 production workers at Saraji South. BMA will work with the Mining and Energy Union (MEU) to redeploy affected Saraji South staff to other mines where possible, the union said.

BMA produced 8.1mn t of coking coal at its Saraji complex, which includes Saraji South and other nearby mining operations, over the 2024-25 financial year to 30 June. The company has not adjusted its production guidance for 2025-26. It plans to produce 36mn–40mn t of coal over the year by improving the operational performance of existing mines.

Saraji premium hard coking coal has not been available on the spot market for a prolonged period, but there may be some panic among long-term buyers, an international coal trader told Argus. Although the overall impact on index pricing is unlikely to be significant, they added.

BHP — which owns a 50pc stake in the venture — flagged possible Queensland mine closures in mid-August. BMA may need to move quickly to pause unprofitable mines as royalties prevent it from reaping the full benefits of price rises, it said on 19 August.

The Queensland Resources Council called on the state's government to urgently reform its coal royalty regime, soon after BMA announced the Saraji South pause. The company's announcement confirms that Queensland's international reputation as a reliable place to invest is at risk, it said.

But Queensland's government is backing the current royalty system. The government is providing certainty for Queensland's coal industry with faster decisions, streamlined approvals and a stable royalty regime as it promised before the election, Queensland treasurer David Janetzki told Argus on 17 September. There will be no changes to Queensland's royalty regime, he said.

Queensland coal producers pay marginal royalty rates of 7-40pc depending on coal prices, under the system introduced in 2022. Argus' metallurgical coal premium hard low-volatile fob Australia price was last assessed at $187.70/t on 16 September.

Producers would have to pay an effective royalty rate of approximately 16pc at that price, up from 12pc under the state's pre-2022 royalty regime, based on Argus' marginal rate calculations.

BMA is not the only producer facing royalty-related challenges. Australian producer Bowen Coking Coal (BCC) entered voluntary administration on 30 July after failing to secure a royalty deferral from Queensland's state revenue office. Administrators from accounting firm McGrathNicol Restructuring will run BCC's flagship 5mn t/yr Burton mine as they work to sell or recapitalise the business.

Argus’ metallurgical coal premium hard low-volatile fob Australia price ($/t)