New South Wales fails to sell coal mine

The government of New South Wales (NSW) in Australia has failed to attract bidders to fund and develop its 12 million tpy Cobbora thermal coal project amid current weak coal prices.

According to Argus Media, the NSW government called for expressions of interest for those interested in acquiring the project and both times the deadline has passed without any viable bids being submitted. NSW treasurer, Andrew Constance, will now commission further analysis of the outlook for coal prices before deciding what to do next about the 140 million t resource.

"The thermal coal reserves within the Cobbora Coal Mine area are significant and the possibility remains that with more favourable economic conditions for this type of coal, the mine may yet be developed," Constance said.

Full state and federal government approval for the development of the mine, which would require up to 550 construction workers, was secured earlier this year.

Thermal coal prices have fallen from a high of US$137/t fob Newcastle for 6000 kcal/kg at the start of 2011 to its last assessment at US$63.86/t. These low prices have made existing Australian coal mines marginal and new developments less economic, although the weaker Australian dollar is starting to improve margins for Australian coal mining firms.

The development of Coborra is expected to cost around AUS$1.5 billion (US$1.2 billion). The project is located to the west of NSW's Hunter valley coal-producing region and will use existing rail infrastructure to haul coal to power stations in the region and to the export port of Newcastle.

The NSW government had agreed in 2010 to fund and develop Cobbora itself as part of a deal struck when it privatised the Eraring power plant. But it found that the project could leave the state AUS$1.5 billion out of pocket and instead agreed to pay AUS$300 million to Eraring's new owner Origin Energy to compensate it for cancelled coal contracts. The original deal with Origin included the supply of up 5 million tpy of coal from Cobbora from the 2014-15 fiscal year to 2031-32.

Still hanging in the balance is the government's process to sell the Delta Coastal power plants, for which final bids were due earlier in December. Again, the weak market, this time for wholesale power, is expected to make the process to sell Delta's Vales Point coal-fired generator and its Colongra gas-fired peaking plant difficult.

Edited from various sources by Sam Dodson

Read the article online at: https://www.worldcoal.com/coal/23122014/cobbora-coal-mine-fails-to-sell-1707/