Glencore: Fuelling demand

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 28 Jul 2017   Posted by admin


Coal trucks at the Newlands coal mine, QLD. All images: Glencore.

 

BY CAMERON DRUMMOND

 

ON the back of resurgent coal prices, mining giant Glencore has boosted output and looked at expanding its Australian portfolio.

 

One of the world’s largest global diversified natural resource companies, Glencore is a major producer of Australian coal, with 12 active mining operations across NSW and QLD employing about 7000 personnel.

Its QLD operations employ more than 2900 personnel across five projects in the Bowen Basin – Clermont, Rolleston, Oaky Creek, Newlands and Collinsville.

In NSW, 4750 personnel are employed across four coalfields – Hunter Valley, Newcastle, Western Districts and Southern Districts.

During 2016, the Swiss-based miner produced 67.6 million tonnes (mt) of coal in Australia, up from 65.6mt in 2015.

Thermal coal production of 62.3mt was 4 per cent higher than 2015, mainly as a result of planned increases at its Mangoola, Rolleston and Ravensworth North operations, along with improved production at South Blakefield following geological challenges in 2015.

Rising coal prices during the second half of 2016 caused prompted Glencore to reverse its strategy, implemented the year before when revenues from coal were bottoming out, of reducing its Australian coal output by 15mt when revenues from coal were bottoming out.

Instead, it made the decision to reopen its Collinsville and Integra mines towards the end of 2016 to meet renewed demand and take advantage of the higher saleable commodity price.

Glencore acquired Integra (formerly Glennies Creek) in 2015 from Brazilian miner Vale with the mine already on care and maintenance since July 2014.

Integra was expected to produce 1.3mt of coal from the mine during 2017, and Glencore had already begun expansion work to extend the life of the mine.

“We have begun work to add an additional longwall block to current mine plans, which will extend the current mine life by up to 12 months,” Integra operations manager Peter Ostermann said.

“In addition, we will require a second development crew which will add up to 30 extra positions to nearly 200 people working on site at present.”

Glencore said the decision was a reflection of the current market conditions, improvements to the existing infrastructure and initial development performance meeting targets.

 

Asset restructure

On 9 May, Glencore kicked off the sale process for its Tahmoor underground mine in the NSW Southern Highlands.

This followed an August 2016 announcement that the company would discontinue mining beyond 2018 because ongoing operations did not meet its internal investment criteria.

However, with a recent market increase in coking coal prices, Glencore recommenced development for additional longwalls blocks in the North West area of the mine.

 

“We believe the asset has a number of development options for the future and presents a potential buyer with the opportunity to establish or increase a strategic position in the Australian coking coal industry,” Glencore said in a statement.

 

Tahmoor has 57mt of reserves and a 650mt total resource, and produces about 1.8mt of saleable coal each year.

Glencore said it would continue business as usual at the mine until a sale was agreed.

 

Asset bid

In January 2017, Rio Tinto announced it would sell off its Coal & Allied assets to Yancoal Australia, a subsidiary of China-based Yanzhou Coal Mining Company in a deal worth $US2.45 billion.

Coal & Allied comprises of Rio’s thermal coal business in the Hunter Valley region of NSW, which includes its 67.6 interest in the Hunter Valley Operations mine, Mount Thorley (80 per cent), Warkworth (55.6 per cent) and a 36.5 per cent interest in Port Waratah Coal Services.

Before the deal was finalised, Glencore also offered to by Coal & Allied, trumping Yancoal’s bid with an offer of $US2.675bn.

On top of the offer, Glencore would then purchase Mitsubishi Corporation’s 32.4 per cent share of the Hunter Valley Operations mine and 28.9 per cent interest in Warkworth for an additional $520m.

However, Yancoal hit back on 25 June with a revised offer of $US2.69bn which Rio agreed to a day later, stating that Yancoal would be able to complete the transaction by September.

“Any transaction with Glencore is unlikely to complete until the first half of 2018 at the earliest, [and] given the uncertainty of receipt of certain cash flows under Glencore’s revised terms, the Yancoal offer presents greater net present value,” Rio said.


 

 

Recent activities

Production of 15.4mt was 1.1mt (8 per cent) higher than the comparable period, reflecting planned ramp ups at Rolleston and Mangoola, and Glencore’s increased ownership of the Newlands and Collinsville mines.

It was however 1.4mt (8 per cent) below Q4 2016 as a result of adverse weather in NSW and dragline maintenance at Rolleston in QLD.

Cyclone Debbie had minimal impact on mine production across the portfolio, with stoppages limited to a few days, however railings to port were disrupted following the cyclone.

Glencore recently received certification for a 73 hectares area of rehabilitation at Newlands open cut operations, located 33km northwest of Glenden, in the northern part of QLD’s Bowen Basin.

It was a first for the coal mining history of the region for a coal complex to receive a certification for the rehabilitation of overburden spoil.

“Although this is the third area in history to be certified in QLD, it is the first time that rehabilitation of coal mine overburden spoil has ever been certified,” Glencore Coal Queensland Environment & Community manager Pieter Swart said.

“We maintain a very strong focus on progressive rehabilitation across all our coal mining operations, with each site required to achieve annual targets that go beyond regulatory requirements.

“As an example, last year alone Newlands mine completed over 270 hectares of rehabilitation and in 2017 the mine has set itself an even higher target of 285 hectares of rehabilitation.”

Mr Swart said certification had been achieved after Glencore worked collaboratively with Government, the Queensland Resources Council and other resource industry members to develop a formal process that properly evaluates rehabilitation against agreed standards for a project.

“This is an important step not only for Glencore, but for the wider industry,” he said.

“The Newlands work is the first of several areas in our Queensland mining operations that we will be submitting for possible certification, including additional areas at Newlands, Collinsville, Oaky Creek and Rolleston coal mines.”

Mr Swart said in the past five years, 53 per cent of land disturbed by Glencore’s coal operations in QLD over that period had been rehabilitated, with a 2017 target to rehabilitate more land than the mines will disturb.