Macarthur profit dampens its defence

THE Queensland floods have lifted production costs and disrupted sales at Macarthur Coal’s operations in the year to June 2011, effectively capping its annual net operating profit to a 2.4% increase to $142.4 million.
Macarthur profit dampens its defence Macarthur profit dampens its defence Macarthur profit dampens its defence Macarthur profit dampens its defence Macarthur profit dampens its defence

MacArthur Coal's Middlemount Mine project

Lou Caruana

Despite the lacklustre result, Macarthur, which is the subject of a $4.7 billion takeover offer by Peabody Energy and ArcelorMittal, said it remained in continuing discussions with a number of interested parties in relation to possible alternative proposals that might result in a “superior offer to shareholders”

Chief executive and managing director Nicole Hollows said that due to the extra expenditure needed to restore its pits to normal operations its FOB costs per tonne were forecast to be higher in the coming year, rising from around $100/t in FY2011 to around $115/t in FY2012.

“The past twelve months have been extremely difficult, with our operations being substantially impacted by the record rainfall in the Bowen Basin,” she said.

“Force majeure was declared under coal sales contracts for five months as operations were severely disrupted.

“In spite of the reduced production Macarthur’s underlying NPAT [net profit after tax] was marginally better than last year due to the record prices achieved for metallurgical coal in the final quarter of the year.

“The profits realised on the sell-down of Macarthur’s interests in Middlemount, under a pre-existing option to Gloucester Coal, and Codrilla to our existing Coppabella and Moorvale joint venture partners speaks to the quality of Macarthur’s asset portfolio.”

Macarthur’s record NPAT figure of $241.4 million was in line with earlier guidance.

Annual revenues of $687.3 million were 2.5% higher than last year’s result.

“Looking forward, the impact of the wet weather will continue to be felt in the upcoming year as Coppabella and Moorvale return to normal operations,” Hollows said.

“Due to the restrictions on permitted water discharge volumes, we have retained water in some pits and our two operating mines ended the year with reduced in-pit inventories and reduced pre-strip.”

As a result of these conditions it is likely that Macarthur’s attributed share of sales produced from Coppabella, Moorvale and Middlemount in the twelve months to June 30, 2012 will be between 5 million tonnes to 5.3Mt.

“We expect to return to more typical production cost levels once the mines are restored to normal operating conditions,” Hollows said.

“On a more positive note we are now accelerating the activity around the development of Codrilla, our fourth mine.

“We anticipate that we will obtain the mining lease by July 2012 and our focus in the next twelve months will be to prepare for the commencement of development shortly thereafter, enabling Macarthur to reach its target of 9.2 million tonnes per annum by 2014.

“We have the coal resource, the long-term port and rail infrastructure and the people necessary to deliver this project. We are on track to deliver sustainable growth.”