New Hope managing director Shane Stephan. Image: New Hope Group.
Demand for coal fired power is expected to increase in the coming decades, both at home and abroad. Emma Davies spoke with New Hope Group managing director Shane Stephan about its Bengalla mine, flow on effects of Stage 3 at New Acland and his outlook for coal exports to Asia.
Q. What steps did you take to achieve a 5 per cent increase in production in FY18 to 9 million tonnes?
It was really due to a 10 per cent increase in the production out of Bengalla in NSW.
Multiple things drove the production improvements from Bengalla; investments were made in 2016 in improving pit room which enabled great throughputs to be achieved; also a new large excavator was put into the fleet in FY18.
While the increase is only moderate at 5 per cent to 9 million tonnes we will progressively increase that production significantly over the next couple of years and we will move to 80 per cent [ownership] of Bengalla before the start of April.
The transaction has already been agreed with Mitsui for its 10 per cent interest so we expect that will stabilise the ownership structure of Bengalla and we will progressively take a much more active role in the management of Bengalla than what we have done in the past.
Q. What did you see in Bengalla that made you decide to increase your stake?
We are believers in high-quality thermal coal demand out of Asian markets, and we believe that that demand will continue for many decades to come.
Bengalla is a long life asset, it’s fully approved through to 2039 and it is a high-quality asset which is the key attraction to us.
We purchased our original 40 per cent off Rio Tinto in 2015, and subsequently and Taipower and ourselves have purchased Wesfarmers interest in the joint venture – so we have been a willing acquirer for willing sellers.
Q. What is the expected development timeline of Stage 3 at New Acland?
We’re working towards achieving the Stage 3 mining lease grant for New Acland and recently achieved our environmental authority which is a good step forward. There’s a number of quite stringent environmental conditions attached to that authority but we are certainly happy to progress through that step.
Then there are three remaining steps. Firstly, there’s a court of appeal decision to be granted. Our opponents appealed against the results of a Supreme Court case and so we’ve had a hearing in the court of appeal (which is the highest court in the State of QLD) and we’re awaiting the results of their appeal. Secondly, we need what’s called an associated water license (AWL). We’ve had an application in to the Department of Natural Resources and Mines for a long period of time and the next step is the AWL will go to public consultation – and we believe that will be the critical item to us achieving the approvals.
Finally the key approval we need next is the mining lease from the QLD Department of Natural Resources and Mines.
We need those approvals around the middle of this calendar year otherwise we face a gap in production between the end of the Stage 2 mining lease and the start of Stage 3.
If we’re not able to achieve an orderly transition between the stages jobs will be lost and our customers will not be able to be supplied.
It’s very important that people are aware that we don’t just support the export market, we have more than 25 small domestic customers with a large number of those in the meat processing industry.
In the meat processing industry they need to produce steam to sanitise the workplaces every 24 hours and to do that they need coal.
If they have to use gas its well over three times more expensive and we’re the best local supplier of coal to those customers.
That industry is actually the largest manufacturing industry in QLD; it employs more than 6000 people and a lot of people aren’t aware of that fact.
If we can’t have an orderly transition from Stage 2 to Stage 3, there are potential flow on effects.
Q. What activities are progressing this year?
We’ve actually had some exploration done in and around Acland to see if we can chase down every scrap of coal that is available within the Stage 2 mining lease area.
We’ve also been actively exploring our four projects in and around Glencore’s Wandoan project where we have a billion tonnes open cut resource.
Our strategy is to drill those projects up so we can bring that resources into a measured and indicated JORC standard progressively over time.
We believe that when you look at the supply of thermal coal out of Australia, unless new supply is brought on, there will be a deficit in the mid-2020s – which is when our resource could potentially be available.
Over the last 12 months we’ve also done a fair amount of exploration work at Burton, which is right next door to the New Lenton project, and has its own mining lease already, so we’re looking to ultimately progress it into production.
Q. What does 2019 look like for New Hope?
Our focus is on Stage 3 approvals for Acland, and on integration and optimisation activities with Bengalla.
Bengalla has an excellent management team and for us it’s about aligning business systems to get the best approach between our existing operations and the operations at Bengalla.
Access to port capacity for the Burton-Lenton project is also essential this calendar year because that’s the key enabler to us moving forward with Burton.
At Jeebropilly, our aim is to finish well. The end of the life of a mine can be a difficult time for the workforce and sometimes, unfortunately, that reflects on safety and performance.
We are very focussed on finishing well, which means finishing with a positive workforce,. We also want to make sure that we leave behind a well rehabilitated site that actually has an economic future going forward.
Q. Where do you see New Hope positioned in the next five to 10 years?
I see us managing close to 17-18 million tonnes of production, which will come from Bengalla, New Acland Stage 3 and Burton-Lenton – which is not just thermal coal but also metallurgical coal.
We are fundamentally a coal producer and exporter in Asian Markets and a growing organisation. We’ve been growing and we will continue to grow because the opportunities are there – and we believe the market is there.
We are believers of the long term future of thermal coal in Asia because the building of ultra-super critical, latest generation technology, thermal coal power stations are multibillion dollar investment decisions by our customers – and they are 40 year investment decisions which gives us the confidence to invest to be able to supply those power stations.
Q. Is there anything else you would like to add?
We’re exporters and generators of thermal coal and with some of the media commentary one would think that we’re producing a toxic product – we’re not – we’re producing a product that is in great demand both domestically and in Asia.
We supply the energy that provides electricity to millions of people and I think people need to understand that that’s actually for a great social good.
