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BHP Billiton opens Duania metallurgical coal mine

World Coal,

BHP Billiton has opened its new Daunia mine, the company’s ninth operating metallurgical coal mine in central Queensland. The mine was opened by Dean Dalla Valle, president of BHP Billiton Coal, Campbell Newman, premier of Queensland, and representatives from its joint venture partner, Mitsubishi.

A new coal mine

According to the company, the mine has created 450 direct jobs in Queensland. At the ceremony, Dalla Valle said: “It’s not often, even in a long career in mining, that the opportunity arises to open a new mine, and I am privileged to be doing that today among our proud coal miners.

“In recent years, through the BHP Billiton Mitsubishi Alliance (BMA), we have made significant capital investments to expand our operations here in Queensland, where we mine the world’s premium quality metallurgical coal.”

Investing in Queensland coal

BMA has made a number of major investments in the Queensland coal industry over the past three years, Dalla Valle went on to say. In addition to the US$ 1.4 billion investment in the Daunia mine, the joint venture has committed a further US$ 7.7 billion for major projects, including the new Caval Ridge mine and the expansion of the Hay Point coal terminal currently underway, as well as the Broadmeadow mine extension completed this year.

BHP Billiton’s combined coal business, headquartered in Brisbane, includes 20 operations around the world and a workforce of approximately 30,000 people. Last year, it produced 111 million t of coal and, with its partners in Queensland, was the world’s largest seaborne supplier of metallurgical coal, said Dalla Valle.

Construction of the Daunia mine started in 2011 and was completed in July this year, under budget and producing coal four months ahead of schedule. The new mine is expected to produce 4.5 million tpa of coal.

Challenging market for metallurgical coal

The mine opens at a challenging time for the metallurgical coal market as oversupply has hit prices – and profits. Last month, BHP Billiton recorded a drop in revenue, joining its rivals, such as Rio Tinto and Vale.

It also shut - and sought to sell - the Gregory mine in Queensland.

“The near-term will be challenging,” said Dalla Valle. “We’re seeing lower prices as a result of subdued demand in some traditional markets and strong supply from some competitors.”

However, there has been a glimmer of good news with Inside Coal reporting BHP Billiton is offering Peak Downs premium hard coking coal at US$ 152/t FOB Australia for the month of October, above the spot price of US$ 145.45/t.

According to analysts at Investec, a specialist bank and asset manager, this is a positive sign for struggling metallurgical coal producers as the offer suggests that the Q4 hard coking coal price settlement could be above US$ 150/t, particularly if spot prices remain firm in the next several weeks, as the October price will likely be predictive of Q4 price settlement. Investec forecasts Q4 settlement at US$ 147/t, up from US$ 145/t in Q3.

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