The Swiss-based company said all surface infrastructure at Blakefield South was now complete, while underground development was progressing to allow longwall installation.

The $A375 million project in the Hunter Valley of New South Wales is to replace production from the industry-leading Beltana longwall – which produced 6.4 million tonnes of coal in 2008 – in the first half of 2010.

In the Upper Hunter Valley, Xstrata is developing the Mangoola (formerly Anvill Hill) open cut mine, which is expected to produce 10.5Mt per annum of thermal coal from 2011.

Xstrata said the project had undergone re-engineering and optimisation to realise significant savings over the past six months.

Over to its vast Wandoan project in Queensland’s Surat Basin, Xstrata said the feasibility study, which covers associated infrastructure, was continuing.

The proposed open cut mine is expected to produce over 20Mt of thermal coal annually for a mine life of more than 30 years.

During the first half, Xstrata was granted approval for an extension to its Newlands Northern underground thermal coal longwall mine, which has been forecast to produce 6.76Mt of raw coal for this calendar year.

Outside of Australia, the company’ new Goedgevonden open cut thermal mine in South Africa is almost complete, with the commissioning of the coal preparation plant underway.

Initial production has started with the coal being washed at neighbouring plants, while full production of the mine is expected to be 6Mtpa.

At the massive Cerrejon open cut thermal coal mine in Colombia, one-third owned by Xstrata, the company said feasibility studies were underway to expand the operation, which exported 31.36Mt last year.

Feasibility studies are also assessing the development of a new direct ship loading facility in the country at Puerto Nuevo, which will benefit its Prodeco coal mine.

Production

Total thermal coal production for the first half reached 39Mt, 18% higher than the first half of 2008.

The share from Australian operations was 18.8Mt, 11% higher year-on-year, while thermal coal output from Xstrata’s South African operations was 11% lower year-on-year, at 9.8Mt.

The impact of Colombian production was evident with the Americas coal division producing 10.4Mt in the first half, double the output from the same period last year.

Xstrata’s coking coal production from Australia reached 2.2Mt in the first half, a 31% fall year-on-year, as production cuts due to the global steel market slump took effect, including the idling of the Oaky No. 1 longwall mine.

Semi-soft coking coal production for the six months also fell, by 21% year-on-year.

Xstrata’s average free-on-board coal prices during the period saw its coking coal fetch $US142.60 per tonne, semi-soft coking coal hit $169.80/t and Australian thermal coal reach $89.20/t, while Americas thermal coal averaged $76.80/t and South African thermal coal was sold at $69.80/t.

All these were down on the boom-driven record prices of last year, with semi-soft coking coal plummeting the most, by 37% year-on-year, while coking coal fell 14%.

Financials and outlook

Xstrata’s revenue reached $US9.87 billion for the first half, down 39% year-on-year, while operating earnings before interest, tax, depreciation and amortisation was down 51% to $2.815 billion and operating profit fell 63% to $1.675 billion.

Xstrata chief executive Mick Davis cast doubt on the stock market gains of the past months.

“As stock markets rebound and achieve significant gains, it would be tempting to believe that the world is returning to pre-financial crisis conditions,” he said.

“However, until US consumers emerge from the current deep recession to resume expenditure and consumption in any meaningful way or domestic consumption in China of similar power emerges, I fear that this belief is somewhat premature.”

Commenting on thermal coal markets, Xstrata is expecting stronger pricing for the commodity in 2010 despite higher stocks in the Pacific and Atlantic markets.

The producer noted that China’s net import position on the commodity and higher demand from Korea and India were positives for seaborne thermal coal demand in the Pacific market.

With term and annual contracts representing 50% of Xstrata’s hard coking coal and semi-soft coking coal sales in this year’s first half, the company has noted that recent spot hard coking coal sales in the $140-150/t range reflect an improving market outlook for metallurgical coal.

At the end of June Xstrata had a net debt position of $13.09 billion and a cash position of $1.04 billion.