There is a wide expectation the cost of carbon permits will soar once the carbon tax morphs into an emissions trading scheme in the 2015-16 financial year.
Woodmac estimated a permit price of $40/t would amount to average cash costs of $4.60/t for Australian coal producers, while this would increase to $6.70/t if permits reached $60/t for carbon emissions.
On the impacts, Woodmac expects that surface metallurgical coal miners like BHP Billiton, Macarthur Coal and Aston Resources will be less impacted by the carbon tax.
Companies with low margins and gassy underground coal mines – especially Gujarat NRE Coking Coal and Caledon Resources – were cited as those which would suffer the most.
Woodmac coal supply analyst Ben Willacy said the carbon tax would cause net present value losses of between 2% and 15% to coal companies based on a conservative scenario of the policy.
“This is an average of a 4% reduction in net present value of coal companies’ Australian portfolios,” he said.
However, analysis conducted by Macquarie Private Wealth has estimated NPV falls of 20-65% for Gujarat and 10-40% for BHP subsidiary Illawarra Coal.
MPW previously forecast that open cut miner Coal & Allied would have an NPV hit of 5-16%, which would support the competitiveness warnings made by parent company Rio Tinto before the tax details were released.
Gujarat’s carbon emissions were estimated by the bank to be 0.737t of carbon dioxide for each tonne of coal production, while Centennial was estimated to produce 0.163t of CO2 for each tonne of coal produced.
Consequently both of these companies were deemed to be the most likely to qualify for the federal government’s $A1.3 billion Coal Sector Jobs Package.
Whitehaven Coal’s looming North Narrabri longwall operation was also seen as another key mine to win support from this six-year industry assistance package.
Aston Resources, which is advancing the significant Maules Creek thermal and semi-soft coking project in the Gunnedah Basin of New South Wales, was estimated to suffer NPV impacts of 3-9% by MPW, compared to an up to 2.5% NPV loss estimate for BHP.
Open cut coal mines also face significant uncertainty in how they report fugitive carbon emissions, given that they cannot be precisely measured.
“We have spent a lot of time explaining the facts,” Australian Coal Association executive director Ralph Hillman previously told ILN of the two industry meetings with the federal government over the carbon tax.
“There is no technology available or prospective to deal with fugitive emissions from open cut mines or from mine shaft ventilation air.”
