Shares in Coal & Allied, Gujarat NRE Coking Coal and NuCoal have all risen strongly in the last two weeks on the expectation that NSW-based companies will reap windfall gains from the global coal shortage resulting from reduced supply from Queensland over coming months.
Nine mining companies including Xstrata, BHP Billiton and Rio Tinto have declared force majeure on their coal contracts and production problems at their central Queensland operations because of the floods.
These represent approximately 25% of Australia’s 330 million tonnes of annual production.
Analysts are now predicting coking coal will soar up to $US300 per tonne from its present $US225/t, while the spot price for thermal coal shipped out of Newcastle has risen from $US115/t to $US128/t since December 10.
While Coal & Allied has reported some effects of unseasonal rain during the last quarter, its NSW-based operations have not been affected to the same extent as operations in Queensland, where nearby rail and infrastructure has also been debilitated.
Extended periods of wet weather lowered Coal & Allied’s share of total saleable production in the September quarter by 15% year-on-year to 4.29 million tonnes.
Around 13% of calendar time was lost to rain during the quarter, leading the company to revise its full-year production and sales expectation to 25-26Mt, depending on coal chain performance and more favourable weather patterns.
Despite lower than expected production, Coal & Allied has continued to target increased overburden removal as part of its plans to increase the Hunter Valley operations and Mount Thorley Warkworth mines to full capacity.
“Our Hunter Valley mine operations experienced some interruption … but overall the adverse impact was minimal compared to the disruptions previously experienced during November and early December due to the ongoing rainfall,” a Coal & Allied spokesperson toldILN.
“For example, rainfall in November was around double the monthly average. This impacted overburden removal and the availability of coal.
“Further rain events would obviously impact and result in a lower level of production through the first quarter of 2011. However, we are working through this to minimise these impacts.”
Gujarat NRE Coking Coal, whose operations are based in the Illawarra away from any flood damage, is on track for more growth after generating a net profit of $A29.4 million for the six months to the end of September, compared to a net loss of $6.1 million for the corresponding period of 2009.
Revenue from its two mines near Wollongong was $157.4 million for the six months to the end of September up 133% year-on-year.
Gujarat almost doubled production year-on-year to 847,000t in the September quarter and the company is aiming for 6Mtpa by 2014-15.
With a Joy Mining Machinery longwall system due to arrive at NRE No. 1 in 2011, Gujarat will also upgrade its existing longwall gear at the NRE Wongawilli colliery in 2013.
Looking further ahead, NuCoal Resources will start a prefeasibility study on its Doyles Creek project in the Hunter Valley after confirming it could support a 10-year longwall mine producing 4.5-5Mtpa of semi-soft coking coal.
The average forecast free-on-board cash cost during the first 10 years of the possible 30-year mine is estimated at $60/t excluding royalties with 100% yield, according to the development consent study.
The prefeasibility study completion date is currently set at June 2012, NuCoal said.
Coal & Allied’s shares were down by 34c to $127.36, Gujarat’s shares were up by 9.5c to 96c, and NuCoal’s shares were up by 1c to 60c in morning trade.