Glencore cans Wandoan

THE parlous state of the global thermal coal market has prompted the newly merged Glencore Xstrata to shelve its $7 billion Wandoan coal project in Queensland’s Surat Basin.
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Wandoan project, image courtesy of Xstrata Coal.

Lou Caruana

But in an investor presentation, Glencore Xstrata Coal president Peter Freyberg revealed that the company’s $1.5 billion Ravensworth North and $1.3 billion Ulan West projects in New South Wales are on target.

Glencore is the world’s largest thermal coal producer and almost 30% of global production was now cash-cost negative, he said.

The future of Wandoan was always in doubt as Glencore chief executive Ivan Glasenberg signalled that he wanted to wind back on capital expenditure and focus more on returns to shareholders once the $58 billion merger with Xstrata had been bedded down.

Glasenberg favoured brownfields projects that could utilise existing infrastructure and were less capital intensive.

Wandoan, which would have been a mining powerhouse in the newly emerging Surat Basin coal mining province, was still awaiting a mining licence from the Queensland government and had unresolved legal issues with local landowners.

Freyberg said other early-stage Australian coal projects that would be left on the shelf included the Pentland and Sarum projects in Queensland and the Running Stream project in NSW.

Glencore Xstrata has undergone a major restructuring over the past 12 months, which has seen the Australian coal operations run out of Sydney and the closure of its Brisbane office.

In March, Xstrata Coal indicated it would cut another 100 positions as it consolidated its NSW and Queensland operating units in response to the tougher operating environment for coal.

The move followed the announcement late last year that it would be retrenching 600 contractors and employees as part of a restructure of its Australian coal business because of the high dollar and low coal prices.

The new Australia-wide operations are leveraging off the existing structure and systems in place in NSW and are headed up by current chief operating officer Ian Cribb.

The company has slashed its workforce by almost 11% to 8900 in that time and focused on increasing margins by about 20% on tonnes produced per employee.

Freyberg said the Ravensworth North project should be completed by the December quarter this year, and the Ulan West project by the middle of next year.

Glencore Xstrata, which is counting on achieving $600 million in cost savings in the coal business next year through, should benefit from greater growth in revenues once Ulan West and Ravensworth North come on stream.

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