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Reopened mines face considerable headwinds

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World Coal,

Attempts to re-open shuttered capacity at Australian metallurgical coal mines will face commodity price headwinds through 2016 as the market remains oversupplied, according a CRU analyst.

Speaking to World Coal following announcements from Stanmore Coal and Wollongong Coal indicating that they intend to recommence shuttered production, Stephen Duck, Senior Consultant for Steel Raw Materials, highlighted the difficulties still facing metallurgical coal production.

“The market will be oversupplied for some time and we need more mines to come offline to rebalance the market,” Duck said in an emailed statement. “Therefore, I don’t expect many idled mines to re-open in the current environment and likewise more Greenfield projects under development will be on hold until we see a recovery.

Duck was particularly skeptical of Wollongong Coal’s plans to re-open its Wongawilli coal mine. According to the coal company, Wongawilli will recommence operations in early 2016 after the New South Wales Planning Assessment Committee approved a five-year extension to the Wongawilli mining license.

“The mine was previously high-cost and was closed at a time when the hard coking coal spot price was around US$110/t compared to US$78/t currently,” Duck said. “The company has also recently closed the Russell Vale operation.”

Duck was more optimistic on Stanmore Coal’s plans to restart Isaac Plains mine, however.

“I would expect the Isaac Plains mine to come back online next year,” Duck said. “The mine will be operated at a reduced production of about 1.1 million tpy compared to 2 million tpy under the previous ownership. I understand that Stanmore is investing in the operation to bring down the operating costs, which might make it economically feasible in the medium term.”

Stanmore said it expected production to restart at Isaac Plains in April 2016 and has appointed Golding Contractors to operate the mine.

“The acquisition of Isaac Plains for a nominal sum gives us a fully-equipped coking coal mine with three years of mine life at current prices,” said Neville Sneddon, Chairman at Stanmore Coal in a statement announcing the company’s plans to restart operations at the mine. “Combining this with out adjacent Isaac Plains deposit has created a low-cost, long-term coking coal mine, utilising the existing Isaac Plains infrastructure without the need for any material capital expenditure.”

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