Centennial fuels about 40 per cent of NSW’s coal-fired electricity. All Images: Centennial Coal.
BY CAMERON DRUMMOND
IF 2017 was a year of design for Centennial Coal, then 2018 is the year of implementation. The company is tracking well in enhancing its social licence to operate, integrating productivity improvements and new mining systems, operational excellence and production growth, and automation and digital transformation.
Owned by Thai-based Banpu, Centennial Coal is one of the largest underground thermal coal producers in NSW, employing more than 1400 personnel across five operating coal mines producing more than 12 million tonnes per annum (mtpa).
It fuels 40 per cent of the State’s coal-fired electricity and exports about 40 per cent of production to power stations in Taiwan, Japan, Korea and Europe.
The Airly, Springvale and Clarence mines are a part of Centennial’s Western Operations in the Sydney Basin, northwest of Sydney, producing more than 5mtpa.
Airly and Clarence export out of Port Kembla and Springvale is the sole supplier to Mt Piper Power Station.
The Mandalong and Myuna mines make up its Northern Operations in the Newcastle Basin, producing more than 7mtpa.
The majority of production is used domestically at Eraring and Vales Point powers stations and the balance is exported through the Port of Newcastle.
Results
The resilient demand for coal, coupled with limited supply in the region continued to support coal prices at a high level for Banpu throughout 2017.
“The Northeast Asian ‘premium’ markets of Japan, Korea and Taiwan remained the most important destination markets for our coal sales, with 12.5mt headed to these countries from our mines in Indonesia and Australia in 2017, up from 11.4mt in 2016,” Banpu chief executive Somruedee Chaimongkol said.
While annual coal production decreased 400,000t in FY17, revenue from Centennial’s operations brought in $1.11bn, an increase of $245m on FY16 figures.
Ms Chaimongkol said Centennial’s EBITDA in 2017 nearly doubled from the previous year to $287m.
“This was thanks to an increase in average sale price of 27 per cent (to $83/t) with the majority of legacy contracts repriced, and a minimal unit cost increase, up only 6 per cent to $53/t,” Ms Chaimongkol said.
The miner delivered strong quarterly performances during the first half of FY18 through increased coal production and higher realised average sale prices.
Coal sales for the September 2017 quarter were 8 per cent higher quarter-on-quarter (QoQ) at 3.4 million tonnes (mt), and improved a further 6 per cent in the December quarter, selling 3.61mt to domestic and international markets.
A sustained strong coal market meant average sale prices from operations (ASP) hit $92/t in the December quarter, up 8 per cent QoQ and 22 per cent compared to the December 2016 quarter.
Production at Mandalong was up 66 per cent to 1.6mt for the December quarter and 57 per cent YoY, after gas management issues had extended a scheduled longwall (LW) changeover to mid-October 2017.
At Myuna, quarterly production was down 18 per cent, impacted by poor geological conditions and equipment availability, however it was up 19 per cent compared to the previous corresponding period.
A LW changeover at Springvale delayed full production by six weeks after encountering a lithology zone, causing output to drop 69 per cent QoQ and 64 per cent YoY.
Full production recommenced mid-December last year.
Clarence output was down 28 per cent QoQ and up 5 per cent YoY.
Despite encountering an unusual fault during the quarter, a new half-yearly production record of 1.3mt was achieved in H1 FY18.
At Airly, output was down 20 per cent during the December quarter.
Banpu said it would focus on development at the mine this year in preparation for narrow panel extraction mining, planned to commence in 2019.
Springvale
Centennial’s 4.5mtpa Springvale underground coal mine near Lithgow is the sole supplier of the nearby Mount Piper power station, which generates up to 15 per cent of NSW’s electricity needs.
In 2015 Centennial renewed Springvale’s planning consent, gaining an approval for a 13 year extension to the mine under the proviso that the company comply with improved water quality standards.
As part of that commitment, the company developed the Springvale Water Treatment Project (SWTP), which was approved by the NSW Planning and Assessment Commission (PAC) in 2017.
The facility will treat the mine water from Springvale over a 15 year period and deliver water to Mount Piper for beneficial reuse via a 16km water pipeline connecting the two sites.
Water treatment specialist Veolia was contracted for the project’s construction and ongoing maintenance, and is estimated to receive $400m worth of revenue over the contract period.
The treatment facility is expected to be completed by mid-2019.
Legal challenge
A lengthy court battle over the approval of the Springvale extension was thought to have put the mine, and more than 300 jobs, in jeopardy.
In late 2015, 4Nature filed a summons in the Land and Environment Court (LEC), seeking to challenge Springvale’s State Significant Development (SSD) consent granted by the PAC.
The grounds for the review were whether the PAC complied with NSW’s Environmental Planning Policy, which required it to be satisfied that the proposed development would have a neutral or beneficial effect on water quality (the NorBE test) in the Sydney Drinking Water Catchment.
Representing 4Nature, the Environmental Defender’s Office (EDO) claimed that the PAC applied the wrong test, and that water discharged from the mine would increase salinity in the nearby Cox’s River and ultimately, the Warragamba Dam.
In September 2016 the LEC rejected 4Nature’s legal challenge and dismissed the case, however the group took its challenge to the NSW Court of Appeal, which overturned the LEC decision in August 2017.
Centennial maintained all issues were appropriately addressed during State and Federal assessment processes to secure Springvale’s mine extension.
“While the court’s decision is obviously disappointing, we have prepared for this outcome,” Centennial Coal External Affairs executive general manager Katie Brassil said upon the outcome of the hearing.
“A range of options have been identified and we will now proceed to implement these options to seek to ensure Springvale can continue operating without disruption,” Ms Brassil said.
“Our immediate focus will be ensuring Springvale can continue to operate, thereby securing the livelihood of our local community while also continuing to meet the State’s electricity needs.”
Springvale would not end up needing to shut its doors, as the NSW government intervened and passed legislation to keep the coal mine open two months later.
NSW Energy minister Don Harwin said the new laws allow the mine to continue supplying the Mount Piper power station, putting downward pressure on wholesale electricity prices and avoiding possible blackouts.
CFMEU Mines and Energy South Western District president Andy Honeysett welcomed the legislation, but said uncertainty about Springvale’s future had put undue strain on the local community who relied heavily on employment from the mine and power station.
“It’s been a very tense wait for the people of Lithgow, not only for the mining and power workers and their families but for the rest of the community which relies on the continuation of local customers for their businesses,” Mr Honeysett said.
“Regional communities rely on employment in key industries like mining and energy to provide income to other sectors like retail and hospitality. The decision to allow the extension of the mine comes as a relief for many people.”
Sustainability
Over the last two years, Centennial continued to make progress towards its 2020 sustainability targets and has identified new initiatives to lift efficiencies.
It successfully implemented its Step Change Productivity Initiative, aimed at improving efficiencies across process monitoring, process reporting and review, process mapping, cutting rates, utilisation, engineering support, Centennial Continuous Improvement Model (CCIM) projects, and audit and reporting.
Mr Cairney said another target to rehabilitate 50 per cent of all available land also remained on track.
“As at the end of last year, 131 hectares of the forecast 257 hectares of the identified available and suitable land has been rehabilitated,” Mr Cairney said in April.
“Our closed Charbon Mine carried out considerable rehabilitation in 2017 (99 hectares), with further progressive rehabilitation underway this year.”
To maintain Centennial’s reserve base, Mr Cairney pointed out that while that target was progressing well, a more appropriate indicator of sustainability needed to be developed as the company seeks to diversify into an energy company.
“As a large industrial energy user, Centennial has not been immune to the significant increase in electricity supply costs,” Mr Cairney said.
“As a result, Centennial is undertaking a feasibility assessment of solar generation for self-consumption.
“Centennial has significant land holdings and has substantial existing electricity reticulation systems; both of which form a solid basis for the establishment of solar systems.
“Centennial is progressing a solar installation project at Awaba Colliery (closed in 2011) and also currently evaluating one at Airly mine.”
Mr Cairney said that while 2017 was a year of design, 2018 is a year of implementation.
“It was timely to step back, recognise our strengths, face up to our weaknesses and to develop strategic initiatives to ensure sustainable success – in safety and health, environment, community engagement and financially,” Mr Cairney said.
“The strategic initiatives we identified included a renewed focus on health and safety, enhancing our social licence to operate, productivity improvements and new mining systems, operational excellence, production growth, automation and digital transformation and improved exploration standards.
“We are now resourcing and implementing these initiatives.”