Rising costs to impact Australian coal miners'' margins sooner
It is not yet clear how the Australian government''s revised Safeguard Mechanism will impact unit costs, though these are expected to mostly affect underground mines, coming
Unfortunately, there is not any reliable data for coal mines in Australia in comparison to US and Canada. Table 2 endeavours to collect operating cost, capital cost and production rate for 20 Australian open pit coal mines. As can be seen in Table 2 real data for Australian mines was not readily available.
Rising costs are impacting coal miners' profits in Australia, with evidence mounting of a higher baseline for operational costs in the longer term amid lower market prices for coal.
The increases are widespread. No coal miner across Australia is exempt. IEEFA reported in August 2023 that thermal coal miners experienced cost inflation of more than 50% over two years to (June) 2023. Metallurgical coal miners' unit costs have also experienced similar increases over the two years to December 2023, as shown in Figure 1.
Meanwhile cost inflation has become embedded in Australian coal mining operations through increased labour costs; extreme weather events impacting production; elevated energy and consumable input costs; rising port costs; increasing strip ratios; higher financing costs; and government royalty hikes.
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