News Wrap

IN THIS morning’s News Wrap: Slimmer profit margins forecast for coal producers; Santos begins approval for $A2B Narrabri project; and Metgasco refuses deal to protect farmers' rights.

Lou Caruana

Slimmer profit margins forecast for coal producers

The profit margins of Australian coal producers are likely to be trimmed amid analyst predictions stronger supply dynamics and softer demand from China are affecting contract negotiations, according to the Australian Financial Review.

On the back of further coalmine closures in Australia, analysts say the industry is bracing for the lowest ­thermal coal price settlement between Australian producers and Japanese customers since 2009.

“Profit margins are already under pressure for coal producers and further weakness in prices will add to that,” Royal Bank of Canada iron ore and coal analyst Chris Drew said.

Contracts for coking coal are also down, with a recent contract between coal giant Anglo American and Japanese steel mill Nippon Steel said to be $US23 a tonne, or 16% lower than previous benchmark settlements. Still, that represents around a $12/t premium to the current spot price.

Thermal coal producers have been the hardest hit in the downturn.

Santos begins approval for $2B Narrabri project

Santos has kicked off the formal environmental approvals process for its controversial $2 billion Narrabri coal seam gas project in New South Wales’s Pilliga forest, to the consternation of environmental and local opponents to the venture, according to the Australian Financial Review.

The submission of the preliminary environmental assessment for the project to the government on Monday precedes a detailed environmental impact assessment to be released later this year for public comment.

Santos NSW general manager Peter Mitchley said that the statement would “provide a solid foundation against which to measure our performance over the coming years”

Metgasco refuses deal to protect farmers' rights

Coal seam gas mining company Metgasco refused to sign up to a deal that would recognise the right of farmers to reject drilling on their properties, and will not rule out forcing itself onto private land in future, according to the Sydney Morning Herald.

The revelation will do little to dispel distrust from some parts of the community over the company's operations in northern NSW, where gas drilling is expected to start within weeks.

Metgasco has been on the defensive this week over its handling of a hoax email written by a Lismore teenager, which falsely announced it was shutting down its Northern Rivers project. The company referred the incident to the corporate regulator, prompting claims it was heavy handed.

The O’Farrell government last week announced an agreement with farming groups and energy giants Santos and AGL, which recognised the right of landholders to reject or allow coal seam gas exploration and production on their properties.