Illawarra Metallurgical Coal: Premium Quality Hard Coking Coal Producer

(Image source South32) Illawarra Metallurgical Coal.
(Image source South32) Illawarra Metallurgical Coal.

Steeped in coal mining history dating back more than 150 years, the first coal mines in the Illawarra and Macarthur regions of NSW opened in the early nineteenth century.

Soon after this, collieries were developed to mine coal for the growing local steel industry and labourers settled into the area, bringing their families with them.

Roads, schools and hospitals then popped up and communities flourished.

South32’s (ASX:S32) Illawarra Metallurgical Coal operation is located in these regions in the southern coalfields of NSW, around 75km south of Sydney.

Illawarra Metallurgical Coal operates two underground metallurgical coal mines — Appin and Dendrobium — plus the West Cliff and Dendrobium coal preparation plants.

Over the years, mining operations have modernised at Illawarra Metallurgical Coal, making the operation safer and more efficient.

Illawarra metallurgical coal

Today, both Appin and Dendrobium produce premium-quality, hard coking coal which is processed at the West Cliff and Dendrobium plants before being transported by road and rail to Port Kembla in Wollongong.

Metallurgical coal has the metallurgical properties to produce coke, which is used to make iron within a blast furnace.

The iron is then used to make steel which is widely used as a strong a low-cost metal, particularly in building infrastructure, vehicles and machinery.

In FY23, 6.52mt of coal was produced at Illawarra Metallurgical Coal — including 5.49mt of metallurgical coal — with 3.2mt coming from Appin and 3.3mt coming from Dendrobium.

Underlying earnings before interest, tax, depreciation and amortisation dropped 50% from the same time last year to $1.08b (US$692m), largely due to a decrease in the average realised price for metallurgical coal, lower volumes and higher concentrator and labour costs.

“Illawarra Metallurgical Coal returned to stable conditions following adverse weather and other temporary impacts,” South32 chief executive Graham Kerr said in the company’s FY23 report.

“Despite the headwinds experienced in FY23, and the expectation of continued macroeconomic challenges in FY24, we are continuing to deliver results now and create value for the future.”

Community partnership program

South32 is committed to creating shared value and making a positive contribution to the quality of life of the communities, regions and countries where they operate.

In FY23, South32 invested $1.41m (US$900k) in communities around Illawarra Metallurgical Coal with a focus on the local environment, education, health,
community support and services, and initiatives for Aboriginal and Torres Strait Islander People.

The Illawarra Metallurgical Coal’s Community Partnership Program (CPP) is committed to making contributions towards the sustainable development of communities.

The CPP relates to the Appin Mine, as well as the towns of Wedderburn, Douglas Park, Razorback, Wilton and Menangle.

It aims to support projects, activities or opportunities that provide long lasting community benefit in the following areas:

• Community support and services — transport, infrastructure, youth initiatives, Indigenous services, disability services, early childhood support, sporting facilities, art and culture, economic development and flagship projects;

• Environment — environmental initiatives and improvement projects and programs;

• Education — primary and high schools, adult education and life skills;

• Health — health services and programs.

To be successful, the CPP assess applications based on how well the activity will address areas of need in the community, leave a lasting impact on the community, incorporate community participation and support, and complement other activities in the community.

Ventilation air methane program

In mid-2022, South32 contributed $4.5m to fund a new facility featuring cutting-edge technology to tackle fugitive methane emissions. A further $15m was granted by the NSW Government.

Located at South32’s Illawarra coal mine, a pilot ventilation air methane (VAM) abatement program was undertaken to demonstrate the effectiveness of the technology.

The program was said to help encourage greater investment in and uptake of VAM abatement technologies to significantly reduce fugitive methane emissions from coal mining operations in NSW.

Developed by CSIRO, three technologies were created to mitigate methane emissions by either destroying or enriching the gas or capturing VAM.

The choice of the technology was dependent upon the methane concentration in the VAM process stream.

These technologies include:

• VAMMIT the destroyer – VAMMIT is a methane mitigation unit with a compact flow reversal reactor with a newly- structured regenerative bed which destroys methane;

• VAMCAP the concentrator – VAMCAP is a capture and enrichment unit which collects and separates the methane from the ventilated air using carbon composites;

• VAMCAT the generator – VAMCAT uses a catalytic combustion gas turbine to create electricity from captured methane, deriving energy from what would otherwise be a waste product of mining.

In FY23, South32 progressed the commercial scale pilot of the ventilation air methane abatement technology into the feasibility phase.

Future operations

South32 expects FY24 production to reduce to 5mt with the next longwall at Dendrobium to begin in Q2 FY24.

Additionally, production is expected to increase by 10% to 5.5mt in FY25, consistent with medium-term production guidance for the complex.

Furthermore, South32 is investing to improve productivity and extend Appin’s mine life while also focusing on optimising the Dendrobium mine within approved domains.