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Glencore coal production rises; releases Glencore Xstrata merged results

World Coal,

Swiss commodities producer and trader, Glencore, has released its annual production report for 2012. Among the headlines highlighted by the company was a 1% increase in production at its Colombian subsidiary, Prodeco, and growth in its South African operations, following the purchase of stakes in Optimum Coal and Umcebo Mining.

Overall, coal production was 43.6 million t (41.8 million t “own”; 1.8 million t “buy in”), a 104% increase on 2011 production.


Total production at the Prodeco operations was 14.8 million t, despite a three month strike at the La Jagua mine. Production expansion at Calenturitas was enough to offset the impact of the industrial action.

The company also reported that its expansion plan remains on track to deliver 20 million tpa of production by 2014. The commissioning of a new port, Puerto Nueco, is expected in H1 2013, which will allow a much higher annual throughput at lower costs per tonne.

South Africa

The company’s South African production totaled 27.1 million t, a substantial increase on 2011 due to the acquisition of stakes in Umcebo Mining (43.66%) and Optimum Coal (67.01%)

According to the company, the focus of its South African coal operations is a number of expansion and development projects, which are “progressing well”. At Umcebo, the Wonderfontein project started production and railed its first coal during December 2012. At Shanduka and Umcebo, the definitive feasibility studies relating to the Springboklaagte and Argent projects remain on track to be completed in April 2013.

At Optimum, construction has started at the Pullenshope underground brownfield project with first coal expected in Q2 2013, while licensing for the Koornfontein project has been delayed slightly to Q1 2013, with construction expected to start in Q2 2013. In addition, Glencore, along with the other shareholders, has recently taken an active role in the management of the Kusipongo project at Kangra Coal (30% owned by Shanduka Coal).

Glencore Xstrata proforma results

Glencore also released proforma results for the merged Glencore Xstrata, showing a combined 26% increase in coal production. Total coal production for the merged company would have been 134 million t, compared to 105.8 million t in 2011.

However, the company showed drops in coal prices across the board, with Australian coal particularly hard hit. The price for Australian metallurgical coal dropped 25% from US$ 265/t to US$ 198/t. Australian and South African thermal coal showed the smallest drop, both down 5% on 2011.

Completion of the merger remains conditional upon the receipt of the outstanding regulatory approval in China, completion of the Xstrata court process, and Glencore giving effect to the commitments required by the European Commission. The “long stop” date for the merger is now 15 March 2013.

Written by Jonathan Rowland.

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