Rio Tinto battles to keep Warkworth coal mine open

Giant miner Rio Tinto (ASX, LSE, NYSE: RIO) has submitted an application to Australia’s New South Wales government to access 350m of land to keep its Warkworth coal mine production at an economic level.

The company, which has been fighting to expand the Hunter Valley-based coal mine since April this year, told The Australian Wednesday the new request is a “litmus test” for the aptitude of authorities “to deliver regulatory results that match their economic aspirations.”

A NSW Land and Environment Court turned down Rio’s mine expansion even though the company had already received government approvals to proceed, claiming that Warkworth’s pit expansion would wreck nearby communities.

And while the company awaits the outcome of its appeal against that ruling, it realized that “seeking access to the extra land was the only real option Rio had to avoid further significant impacts on production and jobs,” the company’s coal division managing director, Chris Salisbury, was quoted as saying.

"We are already at the point where production will drop by around a million tonnes next year regardless of any actions that can be taken now,” he said, adding this will cost NSW taxpayers millions of dollars in royalties. According to Salisbury, the figure is a fraction of the more than $100 million in royalties at stake each year if the coal mine is not secured a long-term future.

Even if the appeal succeeds, it might come too late to save the 1,300 jobs it is planning to axe at the mine, as the company said it has already spent close to four costly years trying to secure the expansion approval.

Australia’s coal industry is struggling with a supply of the commodity and China’s cooling economic growth. About 11,000 coal mining jobs have been lost since late last year as giants such as Rio Tinto itself, BHP Billiton (ASX: BHP), Glencore Xstrata (LON: GLEN) and Brazil’s Vale (NYSE:VALE) have been cutting costs and closing down non-core divisions.

Last year, Rio Tinto obtained the state government approval for a US$546 million development of its Warkworth mine, which is in the Hunter Valley region, from 2020 until 2033.

The open-pit operation is part of a larger mining complex producing about 12 million metric tons a year of thermal and coking coal for the local market and customers in Asia.

Image by Jeremy Buckingham MLC