An­glo Amer­i­can

Aus­tralia’s coal in­dus­try has faced dif­fi­cult times in re­cent years, but as coal prices sta­bilise, com­pa­nies such as An­glo Amer­i­can are be­gin­ning to thrive.

The Australian Mining Review - - CONTENTS - AMY BLOM

LESS than three years ago An­glo Amer­i­can looked set to exit the Aus­tralian coal in­dus­try, but now its coal op­er­a­tions are stronger than ever, with its Mo­ran­bah mine in QLD post­ing record pro­duc­tion.

An­glo Amer­i­can met­al­lur­gi­cal coal busi­ness chief ex­ec­u­tive Tyler Mitchel­son said the com­pany was pleased with the per­for­mance of its met­al­lur­gi­cal coal busi­ness as the com­pany con­tin­ued to find op­por­tu­ni­ties to im­prove pro­duc­tiv­ity.

“Mo­ran­bah North five years ago was pro­duc­ing about 5 mil­lion tonnes (mt) of run-of-mine coal per year, and with the same equip­ment and mine it re­cently pro­duced over 10mt over a 12 month con­sec­u­tive pe­riod,” Mr Mitchel­son said.

“As the largest un­der­ground coal miner in Aus­tralia, we’ve been able to lever­age out scale in hav­ing three large un­der­grounds and our con­sid­er­able ex­per­tise in long­wall min­ing.

The new fig­ures from Mo­ran­bah North come after the re­lease of An­glo Amer­i­can’s sec­ond quar­ter pro­duc­tion re­port, which showed its met­al­lur­gi­cal coal pro­duc­tion had in­creased by 33 per cent to 5.3 mil­lion tonnes driven by the strong per­for­mances at Mo­ran­bah and Grosvenor.

An­glo Amer­i­can’s to­tal Aus­tralian coal pro­duc­tion for the quar­ter was more than 5.5mt.

Dif­fi­cult Times

The re­cent suc­cess was a far cry from An­glo Amer­i­can’s an­nounce­ment in De­cem­ber 2015 that it would re­duce its global port­fo­lio from 55 to 20 as­sets after it posted a 62 per cent fall in un­der­ly­ing earn­ings to $US827 mil­lion.

At the time, the min­ing gi­ant also posted a $US5.6 bil­lion net loss on $US5.7 bil­lion in write downs.

By Fe­bru­ary 2016 it had an­nounced it would sell off even more as­sets, whit­tling them down to just 16, while it shrank to a core port­fo­lio of di­a­monds, cop­per and plat­inum group met­als.

This in­cluded the sale of Dart­brook, Cal­lide and Foxleigh, which were suc­cess­fully di­vested through­out 2016.

An­glo Aus­tralian had also an­nounced it would sell Mo­ran­bah North, Grosvenor and Mo­ran­bah South as a pack­age, while it would con­tinue to man­age Grasstree and Cap­coal while it con­sid­ered its op­tions to exit.

In­stead, An­glo Amer­i­can held on as cok­ing (met­al­lur­gi­cal) coal prices quadru­pled in 2016 to reach $US307.20 a tonne.

While the price of cok­ing coal has fallen again as it cor­rects it­self in the two years since then, it has not dropped to the lows of 2015, in­stead av­er­ag­ing about $US193 per tonne.

Look­ing Up

As a sign of the Aus­tralian coal in­dus­tries cur­rent strength, and An­glo Amer­i­can’s place in it, the com­pany has ramped up its Grosvenor op­er­a­tion.

Out­put reached 1.3mt in the June quar­ter, as it strived to reach name­plate ca­pac­ity.

An­glo Amer­i­can has con­tin­ued to own five coal ma­jor coal op­er­a­tions in Eastern Aus­tralia.

Th­ese were Cap­coal, Daw­son, Mo­ran­bah North, Grosvenor and Aquila.

An­glo Amer­i­can has also con­tin­ued to ex­am­ine Mo­ran­bah South as a fu­ture project.

“We will con­tinue to look for op­por­tu­ni­ties to in­no­vate and op­ti­mise the value of th­ese as­sets,” Mr Mitchel­son said.

An­glo Amer­i­can has also in­creased its ex­plo­ration ac­tiv­i­ties glob­ally, in­clud­ing in Aus­tralia.

The miner in­creased its ex­plo­ration and eval­u­a­tion ex­pen­di­ture for the quar­ter by 38 per cent to $US72 mil­lion.

Ex­plo­ration ex­pen­di­ture in­creased by 17 per cent to $US27 mil­lion and eval­u­a­tion ex­pen­di­ture in­creased by 55 per cent to $US45 mil­lion.

In Aus­tralia, An­glo Amer­ica’s ex­plo­ration ac­tiv­i­ties fo­cussed on ther­mal, cok­ing and hard cok­ing coals.

Beyond its suc­cess in coal, An­glo Amer­i­can chief ex­ec­u­tive Mark Cu­ti­fani said the com­pany had an­other strong per­for­mance dur­ing the first half of this year, with an 11 per cent in­crease in un­der­ly­ing earn­ings be­fore tax, de­pre­ci­a­tion and amor­ti­za­tion (EBITDA) to $US4.6 bil­lion and a 19 per cent on cap­i­tal em­ployed.

“We have also made good progress against our dis­ci­plined cap­i­tal al­lo­ca­tion ob­jec­tives, strength­en­ing the balance sheet with net debt down to $4 bil­lion, de­liv­er­ing an in­crease in the div­i­dend com­men­su­rate with earn­ings, and con­tin­u­ing to in­vest pru­dently across the busi­ness,” Mr Cu­ti­fani said.

“This strong fi­nan­cial re­sult de­rives from our con­sis­tent pro­duc­tiv­ity im­prove­ments in the un­der­ly­ing op­er­a­tions and a stronger price en­vi­ron­ment for many of our prod­ucts.”

Cok­ing Coal is Here to Stay

Com­mit Works chief ex­ec­u­tive Paul Moy­nagh, whose com­pany has been part­ner­ing with An­glo Amer­i­can for about six years, said while there had been some wor­ry­ing times in the past, the fu­ture looked bright for the com­pany and Aus­tralia’s met­al­lur­gi­cal coal in­dus­try as a whole.

“I think you’ve got to re­alise that there’s a dif­fer­ence be­tween ther­mal coal and met­al­lur­gi­cal coal, and I don’t think that’s picked up on by most peo­ple,” Mr Moy­nagh said.

“You can’t make steel if you don’t have met­al­lur­gi­cal coal, and that’s why this stuff in QLD is more highly val­ued than ther­mal coal in NSW.”

He said ther­mal coal was still nec­es­sary as well, how­ever it was likely it would be re­placed in com­ing decades as re­new­able and bat­tery tech­nol­ogy ad­vanced.

“Right now we need coal and it’s still a big ex­port for the coun­try, but I think ther­mal coal will get re­placed over the next 10, 20 or 30 years as more and more re­new­ables come in and bat­ter­ies get bet­ter,” Mr Moy­nagh said.

Ac­cord­ing to Mr Moy­nagh, the sta­bil­ity of Aus­tralia’s coal in­dus­try was not just nec­es­sary for the min­ing gi­ants op­er­at­ing within it such as An­glo Amer­i­can, but also for their part­ner or­gan­i­sa­tions and smaller economies such as those in New­cas­tle, which were still heav­ily re­liant on coal.

Al­lim­ages:An­gloAmer­i­can.

Met­al­lur­gi­cal Coal from Grosvenor and Mo­ran­bah North coal han­dling and pro­cess­ing plant (CHPP).

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