Feeding coal to the dragon

LEADING thermal coal exporter Xstrata expects China to overtake the US as the largest electricity producer in 2013, while its Ulan West and Mangoola projects in New South Wales will help increase supply.

Blair Price

At the Credit Suisse conference in London last week, Xstrata head of investor relations Hanre Rossouw provided his outlook on global thermal coal demand.

He revealed that China is set to increase its power by 65% for the period of 2010-15 compared to 2000-2010.

China’s plans to provide more electricity across the country will lead to a projected requirement of 5 billion tonnes of thermal coal by 2020, while Rossouw said China produced 3Bt for 2009.

He added that China’s domestic production growth was “increasingly dependent on lower grade reserves” from the northern interior provinces of Shanxi, Shaanxi and Inner Mongolia.

While China’s eastern seaboard will increasingly turn to imported coal in the coming years, the diversified mining giant notes the other populous countries of India, Indonesia and Brazil are also fuelling more demand for commodities.

Project updates

To cash in on the expected growth in thermal coal demand, Xstrata is advancing several important projects around the world.

Rossouw said the Mangoola (Anvil Hill) greenfield project was 25% complete as of last month and on track to meet its first start date in 2011.

The open cut mine is anticipated to produce 10.5 million tonnes of run-of-mine production at full operation for a mine life of at least 18 years.

The Ulan West project is one of the most significant up-and-coming operations for the Australian longwall scene.

The $US1.1 billion development received the corporate go-ahead last month and first longwall coal is expected in 2014 for a mine life of 18 years.

The new mine is planned to complement the existing Ulan No.3 underground mine and will share some of the infrastructure at the Ulan complex.

Construction of Ulan West is scheduled to start in late 2010 while its production is expected to reach 6.7 million tonnes per annum of export thermal coal.

Over in South Africa, Xstrata’s $407 million ATCOM East project was 22% complete as in August according to Rossouw.

Production of 5.7Mtpa ROM is expected to ramp up during 2011 to generate 3.1Mtpa of saleable thermal coal for domestic and export markets.

Coal accounts for 41% of Xstrata’s profits in 2009 with its thermal coal exports eclipsing 60Mtpa.