Queensland holds $5.38 billion in rehabilitation securities, in the form of cash or bank guarantees, and New South Wales holds $1.8 billion.
Companies such as Peabody Energy and Rio Tinto, which have been under financial pressure or have signaled their intention to exit from the coal business, are ready to engage with potential buyers about taking responsibility for the rehab costs of the operation as a sweetener.
A NSW budget estimates hearing was told the state government had more than $150 million in security deposits for mines owned by Peabody Energy, ensuring its rehabilitation obligations were met.
However, Peabody, which has just come out of Chapter 11 bankruptcy protection, disclosed in a recent US filing: "Expenditures for post-retirement benefit and pension obligations could be materially higher than predicted if our underlying assumptions prove to be incorrect".
This could explain the desperation to sell assets at historically low prices.
Peabody thought it had secured a buyer for its Metropolitan underground coal mine in NSW last year for US$200 million, however, that sale was stopped in its tracks by the Australian Competition and Consumer Commission last month on competition grounds.
Last week, TerraCom subsidiary Orion Mining received confirmation from the Queensland government that it has satisfied the conditions for acquiring the Blair Athol coal mine from a joint venture headed up by Rio Tinto Coal for $1.
TerraCom will also receive $80 million from Rio Tinto to meet Blair Athol Coal Mine’s rehabilitation liability as determined by Queensland’s Department of Environment Heritage Protection in November 2015.
The financial assurance will be provided as cash to be held in a bank account approved and controlled by the Queensland Department of Natural Resources and Mines.
That $80 million was the value of the existing rehabilitation fund held by the Queensland government from the Blair Athol joint venture, made up of Rio Tinto, J Power, JCD and Leichardt.
A Rio Tinto Coal spokesman told Australia’s Mining Monthly the transaction was subject to the execution of a binding sale and purchase agreement and approvals from the joint venture participants and the Queensland government.
Rio Tinto ceased mining at Blair Athol in November 2012, after 30 years of operation.
A previous sale and purchase agreement with New Emerald Coal was terminated after it was unable to meet conditions of the agreement.
Close to 500 hectares of land at the Blair Athol site has already been progressively rehabilitated.
The transaction will result in the transfer of the Blair Athol mining tenure, on-site assets, infrastructure and environmental obligations.
TerraCom director Jim Soorley said the company planned to restart mining in June with more than 600 direct and indirect jobs expected to be generated in the local and regional communities.
“Coupled with $93.1 million in financial assurances, the approval is positive proof that TerraCom has the capacity to successfully rehabilitate and mine Blair Athol,” he said.
