BHP share price pushes higher despite coal sale fail

BHP has failed to sell its New South Wales based coal operations…

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Three coal miners smiling while underground

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Key points

  • BHP has failed to find a buyer for its coal operations in New South Wales
  • The Big Australian will instead operate them until they close in 2030
  • This remains subject to obtaining approval to allow mining activities to continue beyond 2026

The BHP Group Ltd (ASX: BHP) share price is pushing higher this morning.

At the time of writing, the mining giant’s shares are up over 1% to $44.43.

While this is positive, it is a touch softer than the gains being made by some of its large cap rivals.

What’s going on with the BHP share price?

The relative underperformance of the BHP share price today in comparison to its peers may have been driven by news that the Big Australian will not be selling its New South Wales Energy Coal (NSWEC) portfolio.

Following a coal divestment review, the mining giant appears to have decided that holding onto these assets would create more value than selling them even if it ruffles the feathers of some of its ESG-focused shareholders.

This follows a trade sale process for NSWEC that was conducted but did not result in a viable offer being tabled.

According to the release, an assessment of the resource economics, geotechnical profile, and future investment requirements determined that continued mining in the near term and moving to a closure in 2030 provides the optimal financial outcome when compared to alternate options.

Though, plans to continue operating NSWEC to FY 2030 are subject to obtaining relevant approvals to enable mining beyond the current consent of 2026. Work is now underway to prepare the application for the relevant approvals with the New South Wales and Australian governments.

BHP advised that this will include plans for closure of the operations, including rehabilitation and determining the most appropriate post-mining land use.

It is expected that continued work on rehabilitation will take 10 to 15 years following the cessation of mining. The provision for closure of the mine as at 31 December 2021 was approximately US$700 million.

Management commentary

BHP’s Minerals Australia President, Edgar Basto, commented:

We thoroughly reviewed potential options for NSWEC including divestment and future investment requirements. Seeking approval to continue mining until 2030 avoids closure in 2026 and enables BHP to balance the value and risk of those considerations and our commitments to our people and local communities.

NSWEC’s Vice President, Adam Lancey, added:

We will work with our people, local business partners, Traditional Owners and local and state governments to operate safely and productively, prepare for closure and sustainable rehabilitation of the site, and ensure the pathway to closure is managed in a way that meets community and regulatory expectations.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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