Xstrata's growing longwall ambitions

XSTRATA’S new Blakefield South longwall operation should reach full production of 8 million tonnes per annum of run-of-mine production in the next two months. The Swiss major details its coal project progress within its bumper half-year results.

Blair Price

The Blakefield South mine is designed to replace the Beltana longwall operation in the Upper Hunter Valley of New South Wales, which was a longwall production leader for several years.

After completing development of the first panel in May, the longwall equipment at Blakefield South was commissioned in June.

Beltana is scheduled to cease mining in late 2010 after Blakefield South ramps up to full output this quarter.

Xstrata approved the $US1.1 billion development of the Ulan West longwall mine in NSW yesterday, which will share infrastructure with the existing Ulan mine.

Ulan West is gunning for 6.7 million tonnes per annum of export thermal coal for a mine life of 18 years, creating 350 operational jobs.

The underground extension project at Newlands Northern in Queensland was 26% complete by the end of June.

Xstrata is continuing development of the first extended longwall block.

Longwall mining in the new area is expected in the second half of 2011.

The greenfield Sarum longwall and open cut project southeast of the Collinsville mine in the state is targeting a total of 11Mpta of ROM coal.

Using truck and shovel mining, the open cut operation is slated to start in 2013 producing 7Mtpa ROM for 13 years with a product mix of 60% semi-soft coking coal and the rest as export thermal coal.

The longwall operation is aiming for 4Mtpa ROM in a 12-year mine life with a product mix of 80% semi-soft coking coal and thermal coal for the other 20%.

The project remains under evaluation but Xstrata plans to start a feasibility study in the first half of 2012.

While Xstrata closed down its United longwall mine at the end of February there are still more options to mine in the area.

The Construction Forestry Mining and Energy Union previously suspected Xstrata would resume mining at or near the United site in 2012.

Xstrata said its United Optimisation project is on track to complete its “options analysis and selection study” with a feasibility study to start up within the next few months.

The new United project under consideration is expected to host open cut and underground components.

Xstrata’s $1 billion Mangoola (Anvill Hill) open cut project in the state is targeting 10.5Mtpa of ROM coal at full operation and will produce thermal coal for export and domestics markets for a mine life of 18 years.

This greenfield project is almost 30% complete with the coal-handling and processing plant expected to be ready in the first half of 2011 – three months ahead of the previous schedule.

Prestrip mining is due to start this September.

The Ravensworth North open cut expansion project in the Hunter Valley is aiming for 14.5Mtpa of ROM coal.

First coal is expected in 2012 if government approvals are received before the end of this calendar year.

Xstrata expects the ramp-up to full production to take another four years with its stake of the capital expenditure to add up to $1.1 billion.

The feasibility study of the Wandoan project in Queensland’s Surat Basin is continuing despite the federal government’s Minerals Resource Rent Tax, although work for it was shelved under the previous proposed super-profits tax.

The open cut thermal coal project hosts more than 1 billion tonnes of reserves but more exploration and development planning has Xstrata shooting for a further 4Bt resource target.

Xstrata said this would underpin more than 100Mtpa of capacity from the new basin.

The approval of the supplementary environmental impact statement is expected in the current half-year period with Xstrata’s subsequent mining lease application forecast to take up to 12 months.

The expansion project for the Rolleston open cut mine is in a prefeasibility stage with full feasibility studies to start in early 2012.

The project aims to provide another 240Mt of mineable coal.

Xstrata is also advancing ambitious plans to build a new $1 billion coal export terminal with capacity of 35Mtpa on Queensland’s Balaclava Island, 40km north of Gladstone.

The project will move from the prefeasibility phase to full feasibility studies in the current half-year period.

Half-year results

For the six months to the end of June, Xstrata raked in a total of $942 million of profit before interest and tax from its thermal coal operations around the world and $459 million from coking coal.

From the entire mining portfolio across all of its commodities, Xstrata more than doubled its operating profit year-on-year to $3.2 billion for the first half of 2010.

Xstrata’s attributable profit rose 153% year-on-year to $2.3 billion for the recent half year.

Revenue surged 43% year-on-year to $13.61 billion as commodity prices recovered from the tougher first half of 2009.

The company’s net debt was reduced by almost one-third to $8.4 billion by the end of June compared to a year ago.

This was despite a 73% year-on-year increase in capital expenditure of $1.4 billion for the six months to end of June, as Xstrata invests heavily in its growth projects.

But Xstrata Coal’s operating profit fell by 9% year-on-year to $1.03 billion in the first half of 2010 because of a stronger Aussie dollar compared to the US dollar.

“Adverse foreign currency movements” dented the result despite the favourable conditions of higher average prices, sales volumes and cost savings from the corresponding period in 2009.

Xstrata’s average Australian free-on-board export coking coal price achieved in the recent half was $193.7 per tonne, up 36% year-on-year.

But the average Australian export thermal coal price was $80.3/t FOB, down 10% from the first half average in 2009.

Xstrata chief executive Mick Davis is very confident on the outlook in the medium term, especially for the company’s core commodities of thermal coal and copper.

“Our growth plans aim to take advantage of these robust market conditions, bringing forward a 50 per cent increase in both copper and coal volumes over the next five years with substantial reductions in operating costs,” he said.

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