MARKETS

BHP meets guidance, Rio coking coal production down

DESPITE adverse weather conditions across the country during the first three months of 2013, BHP ...

Staff Reporter
BHP meets guidance, Rio coking coal production down

Floods in Australia's northeast took their toll on BHP’s coal production, with the company reporting its lowest thermal coal production in five quarters.

Energy coal production fell 10% on the same quarter last year and 15% on Q4 2012, citing weather conditions as well as industrial action at Colombia’s Cerrejon coal mine for the decrease.

Coking coal production rose 22%, with BHP saying flood mitigation infrastructure enabled a rapid recovery.

The company noted that its South Walker Creek mine in Queensland achieved record quarterly production following the completion of a wash plant upgrade prior to the period.

Its Daunia mine, also in Queensland, achieved first quarter production ahead of schedule and BHP says the ramp-up of the mine and the future commissioning of Caval Ridge will underpin an increase in the capacity of its Queensland coal business to 66 million tonnes per annum.

Meanwhile, Rio Tinto’s coking coal woes continue, with upgrade works at its Kestrel longwall mine extension project in Queensland contributing to a 10% plunge in production for the three months to March.

Rio reported that coal production at its Hail Creek mine in Queensland was also impacted by lower than expected overburden removal during 2012, as well as wet weather.

The company produced 1.5Mt of coking coal for the March quarter, which was 14% lower than the December quarter and 10% lower than the previous corresponding period.

Rio lifted its force majeure on coal sales contracts from its Kestrel mine in March as a result of damage caused to the Blackwater rail system by ex-tropical cyclone Oswald in January.

Kestrel mine operations are in the process of transitioning to the Kestrel mine extension as it seeks to access the remaining resources at the site more efficiently.

When the extension is completed, capacity will increase to up to 7Mtpa, with an average of 5.7Mtpa of saleable coal expected over the extended 20-year life of the mine.

The extension is expected to come onstream in the second quarter of 2013.

The Kestrel mine has also seen its extension costs blow out by $900 million as speculation mounts that it may have to cut jobs.

Rio said 50% of the Kestrel cost overrun resulted from the high Australian dollar, 20% was from higher inflation, while 30% was due to delays and scope changes.

March quarter semi-soft production fared much better and was 72% higher than the first quarter of 2012, as operations in the Hunter Valley changed their production profile to take advantage of the stronger short-term market for alternate product to hard coking coal due to wet weather in Queensland.

Rio produced 1Mt of semi-soft coking coal for the quarter.

Australian thermal coal production for the March quarter was 4.9Mt, an increase of 19% over the previous corresponding period.

It was driven by an 80% rise in production at the Clermont mine in Queensland as well as increased production at sites in the Hunter Valley following brownfield expansions and ongoing work to improve the efficiency of operations, according to the company.

But first quarter production in Mozambique was impacted by heavy rain in January and February, with force majeure called for two weeks in late February due to the closure of the rail system.

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