Macarthur hits 95% PCI output

MACARTHUR Coal’s saleable coal production dipped during the last quarter due to the rough wet season in Queensland, with almost all the output metallurgical coal.
Macarthur hits 95% PCI output Macarthur hits 95% PCI output Macarthur hits 95% PCI output Macarthur hits 95% PCI output Macarthur hits 95% PCI output

Coal trucks at Coppabella. Image courtesy of Macarthur Coal

Blair Price

While total production was lower than the December quarter, it was still better than during the global steel market slump a year ago.

 

The Coppabella mine produced 820,200 tonnes of run-of-mine coal in the March quarter, up 36.4% year-on-year but 8% lower than the December quarter.

 

Output was affected during the wet season as Macarthur declared force majeure on shipments on March 19 due to Cyclone Ului’s impact on the Dalrymple Bay Coal Terminal and rail services.

 

The Moorvale mine produced 507,400t of ROM coal, down 31% year-on-year and down 33% quarter-on-quarter.

 

The wet weather hit Moorvale harder, while mining also focused on thermal coal production.

 

Total sales for the quarter reached 1.23 million tonnes, up 50% from a year ago and just 3.5% down from the previous quarter.

 

About 95% of sales were of low-volatile pulverised coal injection coal, but they also included a shipment of 74,700t of semi-hard coking coal from the bulk sample pit at the Middlemount mine project.

 

The second shipment of Middlemount coal was processed at Coppabella, while the construction of the coal handling and processing plant for the new mine is expected to be finished in September.

 

This morning, Macarthur’s stake of the Middlemount joint venture was reduced to 72.48% as JV partner Noble Group increased its stake to 27.53%.

 

Commodities trader Noble might still exercise its option to acquire 50% of the project, plus retain the right to sell 100% of the mine’s output.

 

The rail loop for Middlemount is expected to be completed in the second half of 2011, while Macarthur plans to kick off stage 2 development of the mine in mid-2011.

 

Production capacity at the coking and PCI coal mine is expected to double to 3.6 million tonnes per annum for the first year before reaching 5.4Mtpa for the next 19 years.

 

On the exploration front, Macarthur encountered problems mobilising its rigs due to the wet weather with only two out of five managing to drill during the quarter.

 

Over the next couple of months, rigs will explore the Wilunga project while other drilling will support the environmental impact statement for further Middlemount development.

 

Macarthur also plans to start drilling areas adjoining the Olive Downs mining lease.

 

While its takeover of Gloucester Coal has not officially been binned, Macarthur said it was unlikely to proceed.

 

Gloucester also updated the market this morning, making investors aware Macarthur’s takeover offer will remain open until May 13.

 

Peabody Energy is undertaking due diligence until May 3 for its $16 per share cash bid for Macarthur.

 

The major American coal company is after a controlling interest in the Queensland producer as opposed to a full takeover.

 

This arrangement allows Macarthur’s substantial shareholders to keep their stakes.

 

CITIC Resources, ArcelorMittal and POSCO collectively own 47.4% of Macarthur.

 

Sales guidance

 

Macarthur settled quarterly contracts last month, but will shift some March quarter contracts to the June quarter because of port congestion.

 

The Queensland coal producer remains confident of hitting its 4.8-5Mt sales guidance for the year, providing there are no disruptions in the current quarter.

 

Stocks were at a low level by the end of March due to continuing strong demand and the recent weather-related production losses.

 

Commenting on the results, Goldman Sachs JBWere was expecting the PCI percentage of Macarthur’s sales to clock in at 85%, not 95%.

 

The investment bank noted that spot prices were about $US170/t for PCI coal compared to $100/t for thermal coal and said it would review its forecasts due to the positive impact on Macarthur’s earnings.

 

Shares in the leading PCI coal exporter are 5c down to $15.85.

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