BENGALLA Coal in NSW’s Hunter Valley has literally provided new hope for the New Hope Group.
A promising performance from the mine has been the main reason for solid coal earnings for New Hope in the past year, driven mainly by increased production.
The company generated a revenue of $618m in the six months ending January, which was in line with its income in the prior corresponding period.
New Hope managing director Shane Stephan said this was largely due to the success of Bengalla, in which New Hope has 80pc interest.
He said the result was achieved despite a 29pc decline in coal prices during the period, which the company had offset with 42pc higher sales volumes.
Mr Stephan, who will retire in August, said New Hope’s share in Bengalla saw a production of 4.3mt of coal in the six months to January 2020, an increase of 84pc on the previous year.
“This saw a corresponding lift in coal sales, both internationally and domestically, with the company exporting 5.8mt, up 32pc on the prior corresponding period, and 0.6mt domestically, also up on the prior corresponding period,” Mr Stephan said.
The Bengalla mine was on track for another positive production year, although the second half of 2020 could see lower productions for a number of reasons.
In its April quarterly report, New Hope reported that Bengalla production was 21pc lower than the average of the prior two quarters due to mine sequencing, wet weather and a localised geotechnical issue.
“The company has access to sufficient funds for current and future developments and the industry continues to attract funding both domestically and internationally,” Mr Stephan said.
Operations
Bengalla Mining Company, located 4km south west of Muswellbrook, supplies international markets with thermal coal.
A JORC study in 2014 estimated the single-pit, open cut mine’s coal reserves at 269mt, including 163mt proved and 106mt probable.
Bengalla received an initial 21-year development consent in 1996, which was renewed in March 2015, extending mining through to 2039.
Geologically the operation is situated in a Permian basin called the Sydney basin, and mines the Whittingham Coal Measures of the Hunter Coalfields.
Currently all coal is sold to the export market, supplying a vast array of consumers in Asia.
Bengalla produces a high calorific value energy coal and supplies countries like Japan, Korea, China, Taiwan and India, earning a well-regarded reputation as a high quality producer that delivers a consistent and predictable thermal coal product.
Its sales, marketing and logistics division provides up-to-date information about the products clients have purchased, and relevant progress of shipments on the way to export.
Bengalla is a member of the Hunter Valley Coal Chain Coordinator (HVCCC), a cooperative of coal producers, rail haulage providers, the rail track provider, a range of export terminals and port managers that seek to work together to allow for the efficient movement of coal from mine to the port.
The Port of Newcastle is the world’s largest coal terminal with more than 160mt exported in 2015.
With such congestions and competing interests for the required infrastructure, HVCCC is commissioned to facilitating over 20,000 train trips, and the loading of 1600 vessels annually.
Bengalla Coal Sales Company (BCSC) is responsible for managing all sales made on behalf of the Bengalla JV partners.
It has its own dedicated logistics department that works with HVCCC, vessel owners, port operators, the rail provider and other third party service providers to seamlessly deliver the thermal coal products to customers’ awaiting vessels.
Bengalla is also proud of its environmental stewardship, with firm commitments to manage health, safety and environmental risks and work with the community to build enduring relationships.
History
As a mining project, Bengalla dates back to 1990, when the NSW Government called for expressions of interest from mining companies to develop a coal resource.
In its first decade of operating, the mine typically produced around 5mt-6mt of thermal coal per year.
This number increased throughout the years, and in November 2010, Rio Tinto subsidiary Coal & Allied and its joint-venture partners, Wesfarmers, Mitsui and Taipower, approved a $141m expansion to the mine, increasing yearly production to 9.3mt.
In 2015, the ownership was re-structured, with New Hope owning 40pc, Wesfarmers Bengalla owning 40pc, Taipower Bengalla 10pc and Mitsui Bengalla Investments 10pc.
In 2018, Wesfarmers sold its shares to New Hope, pushing its ownership to 80pc.
Currently, Taipower holds the remaining 20pc.
Challenges
Although New Hope’s second mine, New Acland in Qld, has been cleared by the courts, the State Government has not yet granted approval.
In October last year, New Hope downsized its operations at New Acland and made 150 workers redundant as a result of the impasse.
Regulatory approval of mining at New Acland would certainly add significant value to the business, but if the stalemate lingers, the company could look elsewhere.
The current downturn could in fact offer a chance for New Hope to purchase new coal assets cheaply, as it has done in the past.
The impact on Bengalla remains to be seen.
However, the mine is expected to ride any coal price slump.
Bengalla uses a large dragline to operate around the clock, boosted by a fleet of trucks and excavators at work in the single open pit.
It’s a simple, low-cost operation with approvals and resources to last decades.
Its continued importance will rest on coal demand in an increasingly anti-fossil fuel age, but the encouraging news is that there are still new coal-fired power plants being built in Asia and few new mines to supply them.
New Hope recognises that the era of climate change means the glory days for hydrocarbons are over, and that coal use will diminish.
That transition, however, will take time and there is still value to be found in high quality, low-cost coal mines such as Bengalla.
Words of Hope
Chairman Robert Millner remains optimistic about the future of coal.
In the latest new hope annual report, he acknowledge company growth despite impediments caused through “over-regulation of the Australian resources industry”.
“Back in 2011 environmental activists prepared a strategy called Stopping the Coal Export Boom,” he said.
“Their strategy was to use the court systems to hold up projects by prolonging approval processes to discourage investment.
“Sadly many of these campaigns are being funded by State Governments using our taxes, having the effect of costing jobs in regional Australia.
“These anti-development campaigns have been effective due to outdated overly complex legislation and have resulted in a significant deterioration in our political risk profile for resource investment.”
Mr Millner said it was encouraging to see the establishment of a Productivity Commission inquiry into the unnecessary red tape holding back investment in the resources industry.
“Hopefully the tide is turning as a greater number of people become aware of the critical importance of the resources industry to the quality of living for all Australians,” he said.
