The open-cut mine near Muswellbrook employs about 2000 people and provides thermal coal to international customers.
BHP is licensed to operate the mine until 2026 and will now ask permission from the NSW and federal governments to extend that timeline until the end of the 2030 financial year.
It then expects to spend $US700 million ($A999 million) on closing the mine and rehabilitating the site over the next 10 to 15 years, with final plans for the site yet to be determined.
"We will work with our people, local business partners, Traditional Owners and local and state governments to operate safely and productively, prepare for closure and sustainable rehabilitation of the site, and ensure the pathway to closure is managed in a way that meets community and regulatory expectations," said Adam Lancey, vice president of BHP's NSW Energy Coal operation, which operates the mine.
Under pressure from investors to respond to climate issues, BHP has been divesting its thermal coal and lower-grade coking coal assets, such as the Poitrel and South Walker Creek coalmines in Queensland it sold to Stanmore Resources last year for $US1.35 billion.
Minerals Australia president Edgar Basto said BHP "thoroughly reviewed potential options" for the Hunter Valley operation, including divestment and future investment requirements.
NSW Minerals Council chief executive Stephen Galilee said the decision to seek an extension would give those who rely on the mine years to work and plan for the future.
"While the Mt Arthur mine is a large operation, it is just one of nearly 40 coal mines operating across NSW, and 17 operating in the local region," he said.
"Fifteen other local coal mines in the Upper Hunter either have approvals already in place or are seeking approvals to continue mining to 2035 or beyond, with several seeking extensions to operate beyond 2040."
BHP had talked about seeking an extension for the Mt Arthur mine to operate until 2045 as part of the divestment process, although it never formally applied for that extension.
The operation reported operating losses in fiscal 2020 and 2021, and BHP said its review concluded that the mine's "commercial viability" was limited past the 2030s.
"Or certainly not secure enough to warrant the significant capital investment and effort that would be required in the near term for mining beyond 2030," the company says on its website.
Lock the Gate Alliance national coordinator Carmel Flint said the environmental group was pleased that BHP was closing the mine, although it would have liked it to happen in 2026 rather than 2030.
""This is a very significant step by BHP, and the absence of buyers for the mine sends an incredibly strong message that thermal coal is in decline globally, as customer countries act on climate change."
Harriet Kater, Climate Lead (Australia) at the Australasian Centre for Corporate Responsibility, said that closing the mine instead of selling it was the right call.
"Use of asset divestment as a tool to lower carbon footprints and avoid responsible closure is not acceptable," she said.
