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BHP Colombia mine CEO seeks cost savings amid coal price slump

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World Coal,

The jointly owned Colombian coal-mining venture by BHP Billiton Plc, Anglo American Plc and Glencore Plc expects all of its operations to be profitable by the end of the year after cost savings and productivity measures.

Cerrejon will continue the renegotiation of contracts with outsourced contractors and ensure machinery is being used as efficiently as possible amid a price slump, according to Chief Executive Officer Roberto Junguito. He said Cerrejon is losing money on “a little less than 11%” of its current production.

Colombia is one of the world’s largest exporters of coal, serving European power producers including Electricite de France SA and Germany’s EON SE. The Andean nation produced 88.6 million metric t last year, missing a target of 95 million t.

Coal futures for European delivery have fallen 30% in the past year. The slump means future investments to significantly boost production at Cerrejon are on hold.

“If there’s already a fraction that’s close to the profitability threshold, it’s very hard to justify additional investment,” Junguito said in an interview. “Our objective is to continue implementing initiatives to ensure that we can at least maintain our current production in a profitable way.”

Cerrejon produced 33.7 million t of coal and exported 34.2 million t in 2014. At current rates, figures will be very similar this year, Junguito said.

Drummond Co., Colombia’s second-largest coal producer, has said a ban on nighttime rail transportation is slowing production at mines and exports from its Caribbean port. Cerrejon, which uses a separate railway, is unaffected by the ban.

Edited from source by Joseph Green

Source: Bloomberg

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