Cerrejon expansion advancing

DAYS after partners in Colombia’s largest coal producer Cerrejon announced approval of a $US1.3 billion expansion, officials for the Colombian entity said it had already earmarked funds for construction and equipment as the impressive development forged ahead.
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Cerrejon coal, Colombia.

Donna Schmidt

Cerrejon president Leon Teicher reportedly told Reuters on Wednesday it would spend about 50-60% of the budget on construction and the balance on equipment that would help it potentially expand to a capacity of 60 million tonnes per year.

Current plans are to boost output to 40Mtpa by the end of 2015. The ramp-up will be gradual, with milestones of 34Mtpa in 2012 and 37Mtpa in 2014. Production is now about 32Mtpa.

“Basically what we're doing is adding another berth and another shiploader at the port, that is the bottleneck that we’re breaking,” Teicher told the news service.

“Then we're adding a substantial amount of mining equipment to mine 25 per cent more tonnes [of coal] and 25% more waste material.

“We're adding rolling stock equipment, railroad equipment and some construction along the railway line.”

He confirmed the expansion of Cerrejon – jointly held by Anglo American, BHP Billiton and Xstrata – had begun and would be completed in 2013.

As for the hefty 40Mtpa end goal, Teicher said “the deposit permits it, the market wants it”.

While the producer may opt to take on some debt to provide funding for the expansion – which also includes a second port berth and another shiploader with a 12,000 ton per hour capacity – Teicher reportedly told Reuters the shareholder trio had the money to keep the project moving ahead.

Looking ahead to the remainder of the year, according to the news service, Cerrejon output is fully sold for the third quarter and “some tonnes” are available for the final period. About 5% of output is headed for Asia, down from 10% in 2010 due to higher freight costs.

As for the 60Mtpa potential, Teicher said the company was evaluating a plan and was accepting public input. Much would go into that possibility, he told Reuters, including feasibility studies and government agencies’ approval, as well as the green light from shareholders.

“That's going to take us two to three years. We're not going to be talking about an approved [plan] until most likely middle to the second half of 2014,” he said.

Last week the international partnership of BHP, Anglo American and Xstrata announced they had approved the billion dollar project with each company investing equal amounts, $437 million, on the production and export capacity improvements at the complex in La Guajira.

The enhancement, known as the P40 Project, will raise each partner’s share of output to 13.3Mtpa from 10.7Mtpa.

Cerrejon is one of the world’s largest coal deposits in the world, with a resource base of about 5 billion tonnes. Of that, 2.1Bt is currently at a measured and indicated export quality status.

It is also Colombia’s largest operation and largest exporter. Colombia is the world’s fourth largest overall coal export country.

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