A tree stands in bushland burned out by wildfires near Lake Conjola, New South Wales, Australia, on Wednesday January 15 2020. Picture: BLOOMBERG/ DAVID GRAY
A tree stands in bushland burned out by wildfires near Lake Conjola, New South Wales, Australia, on Wednesday January 15 2020. Picture: BLOOMBERG/ DAVID GRAY

Melbourne — Australia’s deadly wildfires are threatening output at BHP Group’s power-station coal mine in New South Wales, where production has been affected by smoke and reduced air quality.

Volumes have already been affected in recent months, the world’s biggest mining company said on Tuesday. “If air quality continues to deteriorate then operations could be constrained further” in the six months to June, BHP said.

The overall economic consequence of Australia’s recent fires could be to shave 0.2-0.4 percentage points from GDP, according to James McIntyre of Bloomberg Economics. And in a worst-case scenario, he estimates the disaster could cut up to 1.6 percentage points from growth.

Australia, the second-biggest shipper of thermal coal after Indonesia, is forecast to earn about A$21bn from exports of the fuel this fiscal year, according to government data.

Wildfire smoke has caused reduced visibility and raised safety concerns for workers at BHP’s Mount Arthur open-cast mine near Muswellbrook, about 140km north of Sydney, while some staff have been away from their posts to serve as volunteer firefighters or to help protect their homes and communities, a company spokesperson said.

Production at the New South Wales Energy Coal unit declined 11% in the six months to December 31 from a year earlier, in part because of the fires and as the operation shifts strategy to extract a smaller volume of higher-quality product.

Areas around BHP’s mine have experienced a number of incidents during Australia’s bushfire season, with a fire being tackled on Tuesday near Spring Gully, according to the New South Wales rural fire service.

While firefighters continue to tackle blazes, Australians have experienced thunderstorms in recent days that have brought torrential rain and flash floods, quelling some of the threat. Australia’s wildfire season since September has claimed 28 lives and seen an area about the size of England scorched.

Whitehaven Coal’s Maules Creek operation, about 280km north of Sydney, has also been affected by smoke from regional bushfires, drought and labour shortages, according to a January 16 statement. Run-of-mine production at the site, the exporter’s biggest operation, fell 44% year on year in the December quarter.

BHP has indicated it will consider selling its thermal coal mine in Australia and a stake in an operation in Colombia. It expects the market for power-station coal to “plateau and then decline”, CFO Peter Beaven said in May 2019.

Bloomberg