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.
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.