Nicola Chand: On the 21st of June, the Queensland government put an end to a decade of frozen royalties on coal which shocked miners. Today I'm here with equity analyst Jon Mills to discuss the changes and their impact on Australian miners. So Jon, could you please walk us through the changes and why they're so important?

Jon Mills: Yeah, so Queensland dramatically increased the royalty rates that they charge on coal sales made from mines in the state. Previously the top rate was 15% which kicked in at AUD150 a tonne. Now they've added few more higher rates above that and so you now have a top royalty rate of 40% about AUD300 a tonne. That's quite a significant in cost on coal miners in Queensland.

Chand: I saw in your latest research report, that you had reduced the fair value estimates for a couple of miners, including BHP in light of the news from the Queensland government. I was wondering if you could explain, why?

Mills: Yeah, sure. At the moment metallurgical coal prices and Queensland's mainly a metallurgical coal producer are dramatically, well they're very high. Last I looked around AUD380 a tonne. And this is one of the reasons that Queensland decided to go after the miners because they're benefiting from these very, very high prices. We assume that prices go back to more reasonable levels around AUD100 a tonne over long term so it's more just a short term impact based on the current futures curve. And so of our coverage list Anglo American is the most affected, but even then it's only a 4% reduction in our fair value estimate and lower 4s in our fair value estimates for Glencore and BHP. Because both companies have coal operations in Queensland, but in the scheme of things they're pretty minor, for such large companies.