The decreased coal revenue of $US9.115 billion from $9.895 billion the previous year mainly reflected lower realised prices. Yet there have been improvements too, with its coal business a noted beneficiary of BHP’s focus on reducing operating costs through productivity initiatives.
The reduced operating costs overall even offset the $2.6 billion worth of higher expenses associated with increased production across BHP’s four major businesses.
BHP’s metallurgical coal production increased 20% in FY2014 to a record 45 million tonnes, with record production and sales volumes at Queensland coal reflected strong performance across all operations.
This included first production from Caval Ridge, the successful ramp-up of Daunia and record production at Peak Downs, Saraji, South Walker Creek and Poitrel.
Illawarra Coal production declined by 5%, with an extended outage at the Dendrobium mine impacting performance in the first half of FY2014.
BHP also reported that its energy coal production of 73Mt for FY2014 was broadly unchanged from the prior period.
“Another year of robust performance was underpinned by a fifth consecutive annual production record at New South Wales Energy coal and record volumes at Cerrejon,” the company said.
“Extended outages at both a local utility and the Richards Bay Coal Terminal led to lower production at Energy Coal South Africa, while Navajo Coal production declined following the permanent closure of three of the five power units at the Four Corners Power Plant.”
Coal revenue for FY2014 decreased by $780 million to $9.1 billion, with Illawarra revenue decreasing by 31% to $886 million and revenues for New South Wales Energy Coal and Energy Coal South Africa also decreasing.
However, this was partially offset by an increase in revenues for Queensland Coal of 5% to $4.7 billion. BHP attributed the decrease in revenues to a 20% reduction in the average price for hard coking coal and 14% reduction in the average price received for both weak coking coal and thermal coal.
The company’s proposed demerger would see a new company emerge that included Energy Coal South Africa and Illawarra metallurgical coal, along with its integrated aluminium business, its manganese business, Cannington silver and Cerro Matoso nickel.
Things are looking up in the company’s outlook, with metallurgical coal production for FY2015 expected to increase by 4% to about 47Mt as the Caval Ridge ramp-up is completed.
In noting external factors, BHP said the Global Coal Newcastle FOB average price decreased by 12% in FY2014, which the company attributed to weaker import demand growth from India and China, coupled with supply growth from Australia, Russia and Indonesia.
The average Platts Low-Vol Hard Coking Coal Index also decreased by 19% during FY2014.
“While demand from traditional markets recovered steadily, the price decrease was mainly driven by continuing supply growth from Australia. The year-end price also decreased 14% versus the average price for the year,” BHP said.
