Australian coal miner Aquila Resources hopes to produce hard coking coal in 2013 from its Washpool project in Queensland’s Bowen Basin.
A feasibility study for the mine has just been completed and the miner is hoping production costs will be an at port price of around A$106 a tonne, although this price excludes royalty payments.
“The feasibility study confirms the status of the Washpool hard coking coal project area as a major coking coal resource and provides confirmation that this resource is economically recoverable with opencut mining methods,” said Aquila executive chairman Tony Poli.
Aquila said it would require A$320m of capital investment in the project with construction commencing in 2012. Washpool would be able to produce 1.6m tonnes of high-quality hard coking coal for a period of 25 years. Expected future cash flows from the mine over its expected life span would be $364m a tonne with an internal rate of return of 30 per cent.
Coal from the project will be exported via the Wiggins Island coal terminal at the port of Gladstone, Queensland.
The Washpool product would be hard coking coal with very strong coking coal properties and a higher-than-specification ash content.
United States coal miner Peabody has cut its offer for Australia’s Macarthur in a move which seems to have been triggered by the Australian government’s plan for a 40 per cent tax on mining companies’ profits.
Peabody has dropped its bid for Macarthur Coal Limited from A$4.07 billion (US$3.67 billion) to A$3.82 billion after completing its due diligence and after the announcement by the government on the 40 per cent ‘super tax’ at the start of last week.
"The definitive proposal delivers a clear, compelling and significant premium for Macarthur shareholders, and follows Peabody's due diligence as well as the introduction of the Australian resources profit tax proposal," it said.
The revised offer is for A$15.00 per share. Peabody's first bid was for A$13 per share and was followed by further offers of A$14 and A$16 per share. Macarthur’s shares – which had been trading higher than the current offer in the middle of April – closed at A$13.38 in Sydney on Monday.
Macarthur's board has rejected two Peabody bids as well as a bid from Australia's New Hope in favour of its own takeover of Gloucester Coal. However, that was rejected last month by Noble Group, a key Gloucester shareholder in a move which would have given Noble a 24 per cent stake in Macarthur and which would most likely have thwarted the Peabody bid. Noble says it is no longer interested in that transaction.
In response to the new offer, Macarthur continued to advise shareholders to take no action until its directors had reviewed the offer. It is believed that the Macarthur board is set to meet in the next couple of days.
Surging Iron Ore Prices Boost Profits at Mitsubishi and Mitsui
Surging iron ore prices are likely to boost profits at two of Japan’s largest trading houses.
Both Mitsubishi Corp. and Mitsui & Co., Japan’s two biggest trading houses, are forecasting higher profit this year on the back of increased prices for iron ore and coking coal.
Mitsubishi said on Friday said that net income may climb to 370 billion yen ($3.99 billion) in the year ending March 2011 - up from 273.1 billion yen a year earlier.
Mitsui expects profits of 320 billion yen, up 114 per cent on 149.7 billion yen a year ago.
Mitsubishi has stakes in iron ore mines in Chile and Canada and in a coking coal venture with BHP in Australia. It expects profits from metals to hit 185 billion yen this fiscal year compared to 137.9 billion yen in the year ended March. Earnings from energy are expected to climb to 73 billion – up from 71.9 billion.
Australian coal miner Macarthur Coal Ltd has said that full-year profits may fall as much as 39 percent from a year ago after a fall in prices.
Net income may be A$103 million to A$113 million for the year ending 30 June from A$168.6 million in 2009, the company said in a statement to the Australian stock exchange.
Macarthur is currently the target of a A$4.1 billion ($3.8 billion) takeover offer from America’s Peabody Energy.
“Profitability in the June 2010 quarter has improved given recent coal price settlements with higher prices starting April 1”, the company said in the statement. Macarthur said it is still on course for full-year sales volumes of 4.8 million to 5.0 million tons.
Coking coal prices have risen sharply in recent months after the global steel industry came into recovery. A number of global coking coal suppliers including BHP Billiton, Rio Tinto and Teck Resources won a shift from annual to quarterly contracts and a rise of 55 per cent for supplies in the April to June quarter. Australia’s Centenntial Coal also warned of a tightening in the global supply of the product.
Peabody asked Macarthur, the world’s largest exporter of pulverized coal, for more information after completing a review of its finances yesterday. The American miner is also said to be concerned after the Australian government announced on Sunday that it plans to bring in a new 40 per cent tax on mining company’s profits. Macarthur said on Tuesday that the new tax had a brought an air of uncertainty to the industry.
Australian coal exporter, Centennial Coal, has said that fragile supply conditions in the global metallurgical coal market mean that it expects the contract price to "significantly increase" from the $US200 per tonne in the Japanese fiscal first quarter.
In March Japanese steel mills agreed to pay BHP Billiton, Rio Tinto Group and Teck Resources around $200 a tonne for a three month contract beginning 1 April 2010. That’s a 55 per cent increase over the 2009/10price. Previous contracts have run for one year’s duration.
In a presentation to a coal industry conference, Tony Macko, Centennial’s general manager of corporate affairs said he expects a recovery in demand for metallurgical coal to drive the contract price increase for the Japanese fiscal second quarter commencing 1 July 2010. This is on the back of an increase in global steel demand.
Centennial said that China is expected to remain a net importer of thermal coal, used to fuel electrical power stations to remain tight after bad weather caused cuts in production in Queensland and Indonesia and impacted on export shipping times.
Centennial said there are more than 60 export vessels queued at the Dalrymple Bay and Hay Point coal terminals in central Queensland.
Terminal Opens to Protests from Unions and Environmentalists
A third coal export terminal has opened in Newcastle, New South Wales, at a cost over $A1 billion.
Owner Newcastle Coal Infrastructure Group (NCIG) says the expansion is needed because of continued strong export demand and the step will keep a workforce of 800 busy for another two to three years.
NCIG won the right to construct the third terminal three years ago. The new terminal – stage one - will take shift as much as 30 million tonnes a year. NCIG will now turn to plans for stage two which will take capacity to 66 million tonnes a year.
"Stage two will double the capability of stage one, adding more than $600 million a year to state revenue through royalties and attract extra investment of more than $1 billion to New South Wales," NCIG chairman Tony Galligan said in a statement. However, the new terminal has incurred the wrath of trade unions and environmentalists.
About 100 members of the Maritime Union of Australia gathered outside the terminal this morning angry that workers at the new terminal are paid 17 per cent less than those at nearby terminals.
Greens MP Lee Rhiannon said the project would lock the region into what she described as “coal dependency".
"The New South Wales government should be working with the people of the Hunter on a transition plan involving restructuring of industry and retraining programs for workers in clean energy delivery and manufacturing," she said in a statement. "This coal terminal will drive the opening up of coal mining in the Upper Hunter, Gloucester and Liverpool Plains.
"The resulting increase in coal exports is a setback for dealing with climate change."
Meanwhile, environmental protesters painted "quit coal" in large white letters on the side of a bulk carrier bound for Japan.
The Australian Financial Review’s Street Talk column reported in its Wednesday edition that Noble Group Ltd may be preparing to make a new approach to Macarthur Coal as early as this week.
Last week Noble saw a deal rejected by its shareholders in which it would have become the largest shareholder in Macarthur.
Macarthur is currently in talks with US miner Peabody Energy Corp., which has made a A$4.1 billion cash offer for the company.
Mine Will Sell 65 Per Cent Of Output To Chinese Mill
Australia’s Northern Energy Corporation has agreed a multi-million dollar deal with the Xinyang Group in China to sell 65 per cent of coking coal mined at its Colton mine near Maryborough in Queensland over the next 10 years.
At current coking coal prices the agreement would result in $700 million revenue to Northern Energy over the next 10 years.
The company will issue 16 million shares to Xinyang, raising $23 million to develop Colton and securing 100 jobs anticipated at the site.
Northern Energy expects to mine 500,000 tonnes a year of coking coal for each of the next eight to 10 years, although the possibility of extending the life of the mine was not being ruled out.
“The agreement with Xinyang provides us with the capital to take the next step in the development of Colton while retaining 100 per cent of the project as we fully evaluate the size of the Maryborough resource base and the potential for further mine expansion,” managing director Keith Barker said.
“The size of the resource identified to date has exceeded our original expectations and the ongoing evaluation work provides us with confidence that additional resources will be defined which will in turn enable us to ultimately increase production beyond the 500,000 tonnes per annum currently planned. Expansion of production will require additional mining lease areas and will be subject to a separate approval process to that applicable to Colton.”
The board of Macarthur Coal has said that it will open talks with Peabody, following the American company’s latest $16-a-share offer that values Macarthur at $4.07 billion.
Peabody will be granted a five day period of due diligence.
However Macarthur said an extraordinary general meeting scheduled for Monday to approve its takeover of Gloucester Coal has been postponed to a date, time and venue to be advised.
The moves came after two of Macarthur’s largest shareholders, Korean steel mill Posco with an 8.3 per cent stake and international steel company, ArcelorMittal, which has a 16.6 per cent shareholding in Macarthur, gave a guarded welcome to Peabody’s latest offer.
POSCO said that it "confirms its in-principle support for a Peabody-led privatisation of Macarthur" while ArcelorMittal stated "that the Peabody offer is one that warrants due consideration". Macarthur’s largest shareholder, China’s Citic, has yet to indicate its support for the offer. Peabody has indicated that Macarthur’s three largest shareholders may be allowed to keep their stakes in the company.
The deal to buy Gloucester Coal and a stake in Hong Kong-based Noble Group’s Middlemount project in Queensland would have given Noble at 24 per cent stake in Macarthur. Industry-watchers are suggesting that this deal is now dead as Macarthur begins its engagement with Peabody. However, Macarthur is yet to officially recommend Peabody’s latest bid which could leave the way open for a bid from another mining giant, Switzerland’s Xstrata.
American miner Peabody Energy has upped its takeover offer for Australian coking coal miner to $16 a share. The offer values Macarthur at $4.1 billion and is Peabody’s third bid for the company.
In its bid, Peabody said it is “clearly superior” for Macarthur’s shareholders to accept their offer rather than taking over Gloucester Coal.
Meanwhile, Gloucester Coal itself says it has doubled the prices it has achieved to US$180 a tonne compared to US$90 a tonne last year.
Tata Steel is expected to start sending coal to its Corus operations in Europe from a new $1 billion coalfield in Mozambique by the end of this year.
The groundbreaking ceremony was attended by Mozambique’s president Armando Emilio Guebuza, who officially inaugurated the Benga coal project in the country’s Tete province on Tuesday.
Tata has a 35 per cent stake in the project, with the remainder held by an Australian company, Riversdale Mining, in which Tata has a 21 per cent stake.
Tata has the right to buy 40 per cent of the mine’s two million tonnes a year initial output, 85% of which is good quality hard coking coal with the remainder low ash thermal coal. Production is expected to rise to almost 8 million tonnes over the next few years. The same level of production is likely to continue for 25 years at least.
Macarthur Coal, currently the subject of a takeover battle, involving America’s Peabody Energy Group and Australia’s New Hope – amongst others – has said that global miner Xstrata has approached a “substantial” shareholder in Macarthur. The ove suggests that Xstrata may be about to join the fray.
``Macarthur advises that it has become aware that an investment bank representing Xstrata has approached one of the major shareholders in Macarthur,'' Macarthur said in a statement. The discussion was ``preliminary and highly conceptual,'' the company said, adding it had no further details.
The Australian Financial Review suggested on Friday that Xstrata had approached two of Macarthur’s biggest shareholders, POSCO and ArcelorMittal, about a joint bid for Macarthur. Macarthur has already rejected two bids from Peabody as well as a $3.4 billion bid from New Hope.
Also on Friday Macarthur announced that a shareholder’s meeting on Monday to vote on its takeover of Noble Group’s Gloucester Coal had been postponed for a week to allow shareholders more time to digest information on the deal. Peabody had previously asked Australia’s Takeover Panel to have the meeting postponed.
With this latest development it is thought that Xstrata in a bidding war. Macarthur is Australia’s biggest exporter of pulverised coal used by steelmakers.
Macarthur shares closed the week at $15.51 a share – some 6% more than the highest bid, New Hope’s $14.58 a share.
The New Zealand Stock Exchange has written to hard coking coal miner, Pike River Coal, asking it to explain at 15% rise in its share price.
The exchange wrote to Pike River after shares rose 14.74% to $1.09 on Wednesday; however, managing director Gordon Ward has said that there was no material information that could be released to explain the rise. The shares rose again on Friday, up 4.5% to $1.14. Analysts suggested that bids for Australia’s Macarthur Coal, a rise in coking coal prices and a shift to quarterly rather than annual contracts were possible reasons behind any increase in the share price.
In March Pike River exported its first shipment of coking coal to India and aims to produce 1 million tonnes of coal per year.
Russian coal miner, Intergeo, controlled by billionaire tycoon Mikhail Prokhorov's Onexim, has bought Siberian coking coal producer, Kolmar. No details have been given of the financial details of the deal, or the vendor.
"It is a great acquisition which will allow us to diversify the portfolio of assets," Intergeo's president, Maxim Finsky, said in a statement on Wednesday.
"High-quality coking coal is in good demand on the market right now and the upward pricing trend has only begun," he added.
Kolmar has reserves of over 400 million tonnes of coal in Southern Yakutia.
SinoCoking Coal and Coke Chemical Industries, Inc. reported net income of $4.7 million in the quarter ended 31 December 2009 – an 18% increase over the same quarter in 2008. The company achieved higher coal product revenue and improved margins on coal products and coal tar.
In the quarter ending December 31, 2009, SinoCoking's net income increased to $4.7 million, representing an 18% increase from $4.0 million in the same quarter of 2008. The increase was primarily related to higher coal product revenue and improved profit margins on coal products and coal tar.
Revenues increased to $14,763,958, up 30% from the same quarter of 2008 primarily due to a strong increase in coal product sales revenue, offset by a moderate decrease in revenue from coke sales. Coal product sales revenue increased by $4.2 million while coke sales revenue decreased by $0.7 million, as management continued its strategy of increasing coal sales relative to its coke production to bolster profitability.
Cost of sales increased 25.5% to $8,736,811, driven primarily by a significant increase in the sale of raw coal, offset by a moderate reduction in coke production. Cost of revenue for coal products alone increased to approximately $5.0 million, compared to $1.6 million the previous year. In the quarter ending December 31, 2008, cost of revenue from coal products was 23% of the overall cost of revenue. In the same quarter ending December 31, 2009, cost of revenue for coal products rose to 57% of the overall cost of revenue.
Gross profit increased 37%, to $6,027,147. Gross profit as a percentage of sales increased to 40.82% in the three month period ending December 31, 2009, up from 38.69% in the same period ending December 31, 2008. The increase in gross margin was due to higher margins on coal product sales and coal tar, offset by the effect of a reduction in high-margin coke product sales. While coke products generate the highest gross margin among the company's products, increases in gross margins on coal products and coal tar sales coupled with a large increase in coal product sales more than offset the effect of reduced coke product sales on gross margin in this period.
Commenting on the results Mr. Jianhua Lv, Chairman and Chief Executive Officer said "In 2009 our industry faced some tough challenges, with a cloudy macroeconomic outlook," and added "however, we believe our company addressed these challenges successfully by strategically shifting our emphasis toward coal product sales during these periods. In the last half of 2009, the global economic picture began improving, and we are optimistic about the coming year in terms of industrial demand for coke and coking coal. Market prices for coke products rebounded firmly in late 2009, and we expect that trend to continue in 2010, particularly due to strong demand in China."
China’s cabinet, the State Council, announced on Tuesday that it will continue to shut down outdated industrial capacity to reduce pollution, save energy, and upgrade industry.
The industrial sectors affected include power, coal, steel, cement, non-ferrous metals, coke, paper making, tannery and printing and dyeing, according to the statement.
The statement said that by the following are expected to close by the end of 2010:
• more than 50 million kilowatts of small coal-fired power generators
• 8,000 small coal mines which are lacking in safety standards, or are not what it described as "environmentally friendly".
• coking coal makers with a coking chamber height of less than 4.3 metres
• mill furnaces below 6,300 kilovolts in the ferro-alloy s and calcium carbide
Steelmaking furnaces smaller than 400 cubic metres will be shut down by the end of 2011 and the statement added that the government will also close outdated capacity in the construction materials, light industry and textile industry sectors.
The government has been stepping up the shutdown of outdated production capacity with 21.13 million tonnes in the iron-smelting industry, 74.16 million tonnes in the cement industry and 18.09 million tonnes in the coke industry all being phased out.
Noble"would really like the Americans to go back home"
Singapore-based commodities trader Noble Group is threatening to derail Peabody Energy’s $3 billion bid for Australian coal miner, Macarthur Coal.
Peabody's bid is conditional on Macarthur not proceeding with a proposed A$832 million ($766 million) takeover of Noble-controlled Gloucester Coal, however Noble has reacted in a statement to the Singapore Stock Exchange and has accused Peabody of trying to spoil the bid.
"Life was great until a few days ago when, instead of jumping on their horses, the Americans charged into town on a Gulfstream jet for the afternoon and plunked a bid down that was a great deal for them, and not, in our view, anywhere near what was already on the table," Noble said in a statement on Monday.
"Hats off to them for being opportunistic and crafty; it ruined our Easter weekend. We will also have to give thought to other ways in which we would make the interlopers from St. Louis leave us alone," Noble said.
"What we would really like is for the Americans to go back home. We busted our tail to put together a good fair deal that will build a great company," it said.
Noble may well exercise its option to increase its stake of the Middlemount coking coal mine in Queensland to 50 percent, which would give it the right to sell 100 percent of output for the life of the mine.
Macarthur said Peabody's bid undervalued its growth prospects. The company produces a third of the world's supply of a cleaner coal coveted by steelmakers.
SAIL, Shipping Corp of India JV To Ship Imported Raw Materials
Steel Authority of India Ltd (SAIL) is to form a joint venture company with the Shipping Corporation of India (SCI) that will cater to the growing raw material import needs of the steel maker.
"SAIL is keenly focused on ensuring its long-term raw material security and will continue to give thrust on logistics facilities and creation of infrastructure for smooth flow of raw materials and movement of finished products," the company's Chairman S.K. Roongta said.
The two state-run companies entered into an agreement on Monday to set up the JV in which both will have equal stake. The agreement was signed by SAIL Director (Finance) Mr. Soiles Bhattacharya and SCI Director (Technical & Off-shore Services) Mr. U.C. Grover in the presence of SAIL Chairman Mr. S.K. Roongta and SCI Chairman Mr. S. Hajara. Mr. Roongta said that SAIL is keenly focused on ensuring its long-term raw material security and will continue to give thrust on logistics facilities and creation of infrastructure for smooth flow of raw materials and movement of finished products.
The JV will ship around one million tonnes a year of raw materials used by the steel company with the prospect of an expansion in capacity later.
The deal enables SAIL, India's largest public-sector steel producer, to have control over part of its coking coal supply chain and mitigate the risks existing in avolatile shipping market.
SAIL currently imports around 10 million tonnes coking coal each year, a major input for steel making. The company expects its requirement of imported coking coal to increase as it plans to double its hot metal production capacity in the coming years from the current level of around 14 million tonnes.
SCI, India's largest shipping company, will bring its expertise in the shipping arena to the JV. It is already in the process of acquiring new vessels, according to a statement issued by SAIL.
Iron ore firm London Mining has bought the remaining 80 percent stake in the Colombian coking coal business, International Coal Co (ICC) that it did not own in a deal that could cost it as much as $14 million in cash and 9.8 million shares.
The company is to pay $5.5 million in cash and 3.5 million shares immediately but says it might have to pay an additional $8.5 million in cash and up to 6.3 million shares depending on the performance of the Colombian business.
London Mining says it expects capital expenditure of $40 million over the next 18 months and is targetting 250 kilotonnes per annum (KTPA) of coking coal within 18 to 24 months and up to 400 KTPA of coke. The first coke production will be within 12 months.
Shares in London Mining rose in early trading but fell back to 265p, a fall of 0.75p by 1030 BST (0930 GMT).
South Korea's POSCO, the world's fourth-largest steelmaker, is to pay Xstrata $167 per tonne for its April-June soft coking coal imports, according to a report by Reuters. The news agency quoted a source with knowledge of the deal.
The price compares with last year’s price of $80 per tonne last year.
Hard coking coal and pulverised coal injection (PCI) would be likely imported at $200 and $170 respectively, the same as Japanese and Chinese mills were paying.
