The Australian Competition and Consumer and Commission will decide by April 6 whether it will approve the acquisition, which forms part of South32’s expansion in the Illawarra region.

South32 is proposing to acquire the Metropolitan mine and associated 16.67% interest in the Port Kembla Coal Terminal from an Australian subsidiary of Peabody Energy.

South32 and Metropolitan are two of the largest producers of coking coal in the Illawarra region and the two largest suppliers of coking coal to Australian steelmakers.

The ACCC is concerned that the proposed acquisition may substantially lessen competition in the supply of coking coal to Australian steelmakers, it said in a statement.

South32 would become the Illawarra’s only supplier of large volumes of coking coal in the medium term, following the expected closure of Glencore’s Tahmoor mine.

ACCC Chairman Rod Sims said Australian steelmakers appeared to benefit from competition between South32 and Metropolitan in the form of lower prices and a wider product range.

“This transaction will remove that competitive rivalry,” he said.

“The ACCC recognises that coking coal is a globally traded commodity where producers typically compete on a global basis. However, local competition between South32 and Metropolitan to supply the Australian steelmakers is important in determining the prices paid by Australian steelmakers.

“The ACCC’s preliminary view is that coal suppliers outside the Illawarra region may not act as a strong competitive constraint on South32, largely due to the additional costs to the Australian steelmakers associated with transporting material volumes of coal from other regions, such as the Bowen Basin in Queensland.”

The ACCC invited further submissions from interested parties in response to the Statement of Issues up until March 10.

A South32 spokesperson told Australia’s Mining Monthly: “South32 acknowledges the Statement of Issues released by the Australian Competition and Consumer Commission in relation to the proposed acquisition of the Metropolitan Colliery and associated 16.67% interest in the Port Kembla Coal Terminal from a subsidiary of Peabody Energy Corporation.

“Metropolitan Colliery is a natural fit within our portfolio and the acquisition is consistent with our strategy to invest in high quality mining operations where we can create value.

“The mine’s recently upgraded infrastructure and close proximity to Illawarra Metallurgical Coal will enable us to further optimise performance and unlock unique blending and resource synergies.

“We continue to engage with the ACCC on the review process and a final decision from the ACCC is expected on April 6 2017.”

South32’s Illawarra Metallurgical Coal subsidiary’s saleable production guidance was revised in December to 7.9 million tonnes as a result of challenging ground conditions at Appin Area 9 and a moderation of mining rates at Appin Area 7 to ensure gas concentrations were maintained at safe levels.

With the completion of the 901 panel and associated release of ground stresses, longwall availability and cutting rates are anticipated to improve in FY18.

The lower production rate in FY17 has, however, impacted the timing of longwall panel extraction and production guidance for FY18 has been revised accordingly.

Outburst

The gas outburst incident, which occurred on January 4 on the longwall face, resulted in the release of carbon dioxide and a significant amount of coal, which obstructed passage across the face.

No people were injured as a result of the incident.

A prohibition notice and scene preservation notice have been issued in relation to the incident to prevent further production from the longwall.

As well as its own review of risk control measures, the mine operator has been required to engage an independent consultant to review the adequacy of the mine outburst management plan and the mine’s operating procedures, and then report to the regulator.

 

The incident followed a low-energy gas outburst on the longwall at the mine on December 24 where there was little evidence of ejected material from the face.