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Anglo American to halt output at Aquila mine

World Coal,

Anglo American has decided to place its Aquila coal mine, located in central Queensland, under care and maintenance.

Anglo American metallurgical coal business CEO, Seamus Finch, said the decision had been made due to the current market outlook and low coal price that has been forecasted for the remainder of the year.

Despite producing a record 17.7 million t of met coal for export in 2012, which represented a 24% increase on 2011, Anglo American still recorded a pre-tax loss of US$ 239 million and a net loss of US$ 1.49 billion in its 2012 results.

At the end of 2012, Anglo released a statement in which they claimed “recent policy changes ought to stimulate growth in 2013. Alongside a continuing recovery in the US, we expect robust growth in the major emerging economies – especially China and India – as they benefit from continuing urbanisation. Rising living standards and an expanding middle class should support demand for our products across our diversified mix.”

However, Anglo American, like many other companies, has found it difficult to contend with adverse market conditions. Last year, for instance, witnessed a 29% decrease in export met coal prices.

Prices for met coal have continued to decline since last year, due in part to weak markets for steel. Ratings agency Standard & Poor's said last week that met coal prices have fallen "significantly" as a result of lower demand in Europe, slowing economic activity in China and lack of operating disruptions, particularly in Australia where floods in 2011 caused prices to spike.

World Coal reported in May that, while other Australian resource sectors are set to benefit from expected record investment, spending on coal would make up approximately 10% of this investment. Mr Gero Farruggio, Head of Global Metals and Mining Supply Research, said: "Coal will remain subdued over the next few years due to the tough economic environment.”

The Queensland coal sector, in which Anglo American’s Aquila mine is located, has experienced difficulties now for over a year. The Australian Coal Association estimates about 9000 jobs have been lost in the Queensland and New South Wales coal sectors over the last 15 months.

Of the decision to place the Aquila mine under care and maintenance, French said: “We continuously review our operational margins and since early last year we have taken out two-million tonnes of high cost production capacity as part of this review.

“The closure of Aquila is the next step in this process. Aquila is a bord and pillar operation producing around 500 000 t of premium hard metallurgical coal pa.”

French noted that operations would now begin to ramp down and work would be carried out to place Aquila under care-and-maintenance from late July. He said that Anglo American would work with all affected personnel at the operation over the coming weeks to explore potential redeployment opportunities and discuss redundancy options.

Edited from various sources by Samuel Dodson

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