Steaming ahead

A MAJOR expansion at one of central Queensland’s largest thermal coal mines will reflect fundamental changes in underlying demand from key Asian markets. That is the view of John Pegler, chief executive of Ensham Resources, which runs the Ensham mine near Emerald on behalf of its Japanese and Korean owners.
Steaming ahead Steaming ahead Steaming ahead Steaming ahead Steaming ahead

Ensham's new Bucyrus dragline.

Richard Roberts

Presiding over a clutch of studies on the $600 million, multi-phase development of the Ensham operation, Pegler says a decision to invest $100 million in the world’s second biggest dragline, a Bucyrus 8750-63, is aimed at improving efficiencies and lowering operating costs at the mine. Current strong demand and prices provided impetus for the move. But more than doubling Ensham output to 20 million tonnes per annum would mark a longer-term shift in confidence and market requirements, he said.

In a series of interviews last month, Pegler and senior executives at Ensham provided extensive insights into the expansion plans for the site, which hinge on continuing growth in demand for steaming coal from Japan, Korea, China, India and other significant Asian markets, and environmental approvals for surface and underground mining in a 4000-hectare area of Ensham Resources’ extensive landholding. The proposed mining area includes a section of the floodplain of the Nogoa River and a strip of Crown Land associated with the river.

Ensham Resources currently produces about 9Mtpa of thermal and semi-soft coking coals from up to five active pits running along a nearly 20km north-south strike length. Ensham Central, the focus of plans for new openpit and underground operations, contains enough high quality, low strip ratio coal to support a 4Mtpa openpit mine for 15-20 years. Underground resources of more than 70Mt in 5m-plus thick seams are expected to sustain Ensham’s first longwall operation for at least a decade.

Pegler said environmental issues connected to the Nogoa River posed technical challenges that required “some careful work”. The company expects to submit its draft Environmental Impact Statement this month. Securing the necessary approvals would allow the openpit project to start in 2007 and the underground mine in 2008 or 2009.

The very public face of privately-owned Ensham — Japanese energy group Idemitsu Kosan Company owns 85%, one of Japan’s biggest power generators, J Power, owns 10%, and South Korean trading and industrial group LG International owns 5% — Pegler became president of the Queensland Resources Council last December and has been outspoken on the coal industry’s need for image building, its recruitment drive and matters such as investment in transport infrastructure for exports.

A veteran of three decades in the Australian coal industry, Pegler said sharp rises in thermal and coking coal prices in the past two years had inevitably drawn significant new supplies into the market. “That has a moderating effect on price, and that can happen quite quickly,” he said. “While I see no reason why demand is going to come off and availability of markets is going to change, we’ll see a bit of surging go on with supply and that might effect the ultimate timing of our production ramp-up.”

At this stage the new capacity is due to come on stream in 2009. Pegler is relaxed that it might be a year later.

He said Ensham’s export destinations were diverse. As well as its Japanese customers, it supplied Korea’s five power companies. Up to 25% of sales were to India and China, and Ensham coal is also sold into other Asian and Middle Eastern countries.

“We will certainly continue to mix our markets across these countries and indeed they will mix their supply sources anyway,” Pegler said.

He said while new contracts were “not written until they are written”, he had received indications the extra production out of Ensham would be required by existing customers as they battled to keep up with surging energy demand in domestic markets.

“Probably the best way to put it is that we have contracts in place with customers whose demand is likely to increase in a corresponding way,” he said.

The proposed expansion will make Ensham the biggest producer of thermal coal in central Queensland. Since production started late in 1993 annual coal sales have grown from about 1Mtpa to the calendar 2005 mark of about 9Mt. The 50 millionth tonne of Ensham coal was recently shipped from Gladstone.

Bucyrus rising

Start-up of the 6600t Bucyrus 8750 in March next year will add a fourth dragline to Ensham’s earthmoving fleet. Ensham projects general manager Chris Greig said the Bucyrus unit was the largest dragline available “with a proven performance history”. Dragline overburden removal is currently supplemented by truck/shovel earth movement to achieve a total annual waste movement rate of about 100 million bank cubic metres. While the fourth dragline will add 60% to the mine’s stripping capacity it will also, in the short- to medium-term, displace higher cost truck/shovel capacity and slice a projected 75% from overburden removal costs.

Ensham development general manager Peter Smith said introduction of the Bucyrus 8750 was among a range of measures under review, aimed at maintaining the mine’s standing as one of the Bowen Basin’s most efficient and low-cost producers.

An early coal industry adopter of large-scale contract mining services — already being widely used in the Australian gold industry at the time — Ensham currently outsources pre-strip mining, drilling, blasting and maintenance services. It directly employs only about one-fifth of the 630 people on-site.

Smith said the massive projected build-up in pre-strip work in coming years had prompted a review of future fleet requirements. A full feasibility study — looking at the optimum size of equipment doing the work — will be completed by the middle of this year. Golding Contractors is currently doing most of the pre-stripping.

Ensham is also reviewing its coal...click here to read on.

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