BHP Billiton coal boss Dean Dalla Valle insists the group's newest Queensland coalmine will turn a profit this financial year, despite plunging prices for the commodity amid a supply glut, and China's shock move to slap import tariffs on coal last week.
On Monday, BHP officially opened the eighth mine at its Queensland metallurgical coal business, Caval Ridge, about six months after production came online.
BHP – the world's largest exporter of seaborne metallurgical coal – is continuing to pump record production out of its coal business despite the deep malaise engulfing the industry.
But Mr Dalla Valle said if BHP did not continue to expand, its competitors would fill the gap. BHP started construction at Caval Ridge about two years ago, when coal prices were far more attractive.
"We are going to run this mine [Caval Ridge] profitably and competitively and hence it doesn't make sense for us to pull back production here when some unprofitable mine somewhere would fill that space anyway," he said.
But he said he was concerned by China's move to hit all coal imports with tariffs, and he had "made our concerns known" to the Abbott government, which is thought to be pushing for the measure to be scrapped.
"It is something we are worried about, and we are watching very closely," he says. "Hopefully there is a constructive resolution to this, where Australian mines are not left in an uncompetitive state."
China sent the Australian industry reeling after its Ministry of Finance said last Thursday that thermal coal will attract a 6 per cent import tariff, while the rate for anthracite coal and coking coal will be 3 per cent.
Prime Minister Tony Abbott, who opened Caval Ridge on Monday, said China's shock new tariffs on coal were disappointing and "inconsistent with the general direction of our trade and China's trade".
He would not be drawn on whether the tariffs were simply a tactic by Beijing in the final weeks of free trade agreement negotiations with Australia.
"We support lower tariffs, we support freer trade," Mr Abbott said.
"Obviously we are disappointed that this tariff has come on. It is important to get tariffs down, not up, because tariffs act in restraint of trade. Tariffs are a long-term employment inhibitor."
He is hoping to wrap up the free trade negotiations before or at next month's G20 in Brisbane.
Mr Dalla Valle also said BHP "would subscribe to free and open trade".
China takes about 20 per cent of the 45 million tonnes produced across BHP's Queensland coal business, the BHP Billiton Mitsubishi Alliance (BMA).
But Mr Dalla Valle said it was premature to gauge the tariffs' impact on BHP.
"No doubt all Australian coalminers are watching this very closely. There are many moving parts, it really depends - will it push prices up in China, will it just drop seaborne prices and how will it interplay between who stays and who drops out of the market. It is too early to tell."
In a telling sign of the level of unemployment in the sector, about 34,000 people applied for the 950 jobs going at Caval Ridge, and BHP's nearby mine Daunia, which opened 13 months ago.
Metallurgical coal prices have fallen to around $US110, well short of the $US300 achieved in mid-2011.
BHP last month cut 700 workers from across its Queensland metallurgical coal business, in a reaction to dramatic price falls for the commodity and the high cost of operating in Australia.
BHP owns 50 per cent of BMA, with Japanese giant Mitsubishi holding the other half.
When asked if more job cuts were in the offing for the Queensland business, Mr Dalla Valle said that "unless the mine is profitable, unless they are competing globally, then no one has security". He said BMA was profitable, and was confident the newest addition to the stable, Caval Ridge, would turn a profit this financial year.
"If you had a look at last year, you had a 20 per cent drop in metallurgical coal prices, we managed to get our costs down by 24 per cent in that period."
"We've seen a bit of relief on the forex rate but no doubt we are still in a tough spot. Each of these mines still have plans to drive productivity and costs down, none of them are where they need to be at this point in time."
He tipped at least another year of pain for the sector.
"We think there is still an imbalance in the market, you are probably seeing 1.5 million to 2 million tonnes come out of the market each week," he says.
"I think we've still got 12 to 18 months of difficulty ahead of us, at a minimum, until the market gets back into balance. It's not been a demand issue, it's been a supply side issue."
Last month, Anglo American chief Mark Cutifani told Fairfax Media he expects metallurgical coalmines will be mothballed at a rate of one every two or three weeks until up to 50 million tonnes has fallen out of the market.
About 13,000 jobs have been cut from the sector over the past two years amid a string of mine closures and delays to projects by companies including BHP, Rio, Glencore, Vale and Peabody Energy.
BHP is sticking to guidance to lift metallurgical coal output 4 per cent to a record 47 million tonnes in financial 2015.
Caval Ridge is set to produce about 5.5 million tonnes of metallurgical coal a year.
About 21 per cent of workers at Caval Ridge's 500-strong workforce are female.
