Lossmaking mines hold on

THERE are about 13 metallurgical coal operations in Australia which are producing at a loss according to an estimate by WoodMackenzie coal analyst Ben Willacy.
Lossmaking mines hold on Lossmaking mines hold on Lossmaking mines hold on Lossmaking mines hold on Lossmaking mines hold on


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He told Bloomberg that larger BHP Billiton Mitsubsihi Alliance operations were part of this group of potentially closure-facing mines.

He estimated that mining costs had declined by 13% but coal prices had averagely fallen 24%.

“Cost cutting has been really successful, particularly for big operators, but prices have fallen by more than costs,” Willacy said.

However, the analyst also expected most mining companies to soldier on until market conditions improve – with the Australian dollar already falling over recent weeks.

“We anticipate margins rising and profitability improving,” Willacy told Bloomberg.

“We’re not forecasting closures, so our assumption is that Australian operators, even those operating at a loss, will continue to survive through the fourth quarter to be able to take advantage of better conditions in 2015.”

Meanwhile, ANZ commodity strategist Daniel Hynes is surprised that more Australian mine closures have not taken place at this stage.

“We’ve been surprised by the lack of cutbacks so far considering the price is eating pretty heavily into the cost base particularly of the Australian producers,” Hynes said. “We’ve seen some cuts, but not enough to balance the market.”

Spot hard coking coal prices have reached a new 2014 low of $US110 a tonne in recent weeks. This was flowed by news of the Isaac Plains mine closure and of the planned 700 job cuts to BMA’s operations in Queensland.

At this stage BMA is still calling for voluntary redundancies under that plan.

“Over the coming weeks, we will continue to work through this process with our employees and their representatives,” A BMA spokeswoman told ICN.

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