Page 108 - Annual Report 2020

1.11.4 Coal

Detailed below is financial information for our Coal assets for FY2020 and FY2019 and an analysis of Coal’s financial performance for
FY2020 compared with FY2019.
Net
Year ended 30 June 2020 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets (5) expenditure gross to profit
Queensland Coal 5,357 1,935 684 1,251 8,168 523
New South Wales Energy Coal (1) 972 (19) 152 (171) 841 73
Colombia (1) 364 69 112 (43) 776 24
Other (2) − (155) 11 (166) (276) 8
Total Coal from Group production 6,693 1,830 959 871 9,509 628
Third party products − − − − − −
Total Coal 6,693 1,830 959 871 9,509 628 22 9
Adjustment for equity accounted investments (3) (4) (451) (198) (138) (60) − (25) − −
Total Coal statutory result 6,242 1,632 821 811 9,509 603 22 9
Net
Year ended 30 June 2019 Underlying Underlying operating Capital Exploration Exploration
US$M Revenue EBITDA D&A EBIT assets (5) expenditure gross to profit
Queensland Coal 7,679 3,722 532 3,190 8,232 549
New South Wales Energy Coal (1) 1,527 431 166 265 920 102
Colombia (1) 698 274 101 173 853 104
Other (2) 2 (110) 2 (112) (331) 5
Total Coal from Group production 9,906 4,317 801 3,516 9,674 760
Third party products 19 (1) − (1) − −
Total Coal 9,925 4,316 801 3,515 9,674 760 23 15
Adjustment for equity accounted investments (3) (4) (804) (249) (134) (115) − (105) − −
Total Coal statutory result 9,121 4,067 667 3,400 9,674 655 23 15
(1) Newcastle Coal Infrastructure Group and Cerrejón are equity accounted investments and their financial information presented above with the exception of net
operating assets reflects BHP Group’s share.
(2) Predominantly comprises divisional activities and ceased operations.
(3) Total Coal statutory result revenue excludes US$364 million (2019: US$698 million) revenue related to Cerrejón. Total Coal statutory result Underlying EBITDA includes
US$112 million (2019: US$101 million) D&A and US$25 million (2019: US$70 million) net finance costs and taxation expense related to Cerrejón, that are also included
in Underlying EBIT. Total Coal statutory result Capital expenditure excludes US$24 million (2019: US$104 million) related to Cerrejón.
(4) Total Coal statutory result revenue excludes US$87 million (2019: US$106 million) revenue related to Newcastle Coal Infrastructure Group. Total Coal statutory result
excludes US$61 million (2019: US$78 million) Underlying EBITDA, US$26 million (2019: US$33 million) D&A and US$35 million (2019: US$45 million) Underlying EBIT
related to Newcastle Coal Infrastructure Group until future profits exceed accumulated losses. Total Coal Capital expenditure excludes US$1 million (2019: US$1 million)
related to Newcastle Coal Infrastructure Group.
(5) Refer to section 6.1 for a reconciliation of Net operating assets to Net assets and section 6.1.1 for the definition and method of calculation of Net operating assets.
Key drivers of Coal’s financial results Production
Price overview Metallurgical coal production for FY2020 decreased by 3 per cent
Metallurgical coal to 41 Mt (73 Mt on a 100 per cent basis) as a result of significant
Our average realised sales price for FY2020 was US$143.65 per wet weather events and geotechnical constraints at South Walker
tonne for hard coking coal (FY2019: US$199.61 per tonne) and Creek. At Queensland Coal strong underlying operational
US$92.59 per tonne for weak coking coal (FY2019: US$130.18 per performance, including record underground coal mined at
tonne). Metallurgical coal prices were under downward pressure for Broadmeadow and record annual production at Caval Ridge and
most of FY2020. Broad-based demand weakness in all major import Poitrel, was offset by planned major wash plant shutdowns in the
regions but China was a weight on the price. This was amplified first half of the year and significantly higher rainfall during January
during the second half of FY2020 with each of the major importers and February 2020 compared with historical averages.
going into lockdown. In China, uncertainty regarding the approach Energy coal production decreased by 16 per cent to 23 Mt. NSWEC
to the volume of coal imports was an additional headwind for the production decreased by 12 per cent to 16 Mt as a result of the
physical trade at times. In the short term, metallurgical coal still change in product strategy to focus on higher quality products
has to navigate a difficult period as major importing regions and unfavourable weather impacts from December 2019 to
manage their re-openings. COVID-19 permitting, a sustained February 2020. This was partially offset by a strong performance
improvement is possible in the second half of FY2021. Over time, in the June 2020 quarter driven by record truck utilisation. Cerrejón
premium-quality coking coals are expected to be particularly production decreased by 23 per cent to 7 Mt due to a temporary
advantaged given the drive by steelmakers to improve blast shutdown during the June 2020 quarter in response to COVID-19,
furnace productivity, partly to reduce emissions intensity. as well as a focus on higher quality products. The temporary
We believe that a wholesale shift away from blast furnace shutdown lasted for approximately 6 weeks and allowed for
steelmaking, which requires metallurgical coal, is still decades completion of COVID-19 control measures to meet the Colombian
in the future given the high cost of conversion and operation Government’s regulations.
associated with alternative steelmaking technologies. For more information on individual asset production
Energy coal in FY2020, FY2019 and FY2018, refer to section 6.3.
Our average realised sales price for FY2020 was US$57.10 per tonne
(FY2019: US$77.90 per tonne). The Newcastle 6,000 kcal/kg price
reached its high for the financial year in July 2019. It then declined
gradually over the course of the first half of FY2020, the rate of
decline accelerated in second half of FY2020 due to lockdowns
in major consumption markets. Tighter import controls at Chinese
ports also contributed to lower prices. Longer term, we expect total
primary energy derived from coal (power and non-power) to expand
at a compound rate slower than that of global population growth.

106 BHP Annual Report 2020