Caval Ridge is a high-quality, hard coking mine in the northern section of Bowen Basin. Image: BHP.
BY AMY BLOM
BMA Coal has posted record production at several of its mines as metallurgical coal continues to strengthen. With construction of its Caval Ridge Southern Circuit project steaming ahead, BMA is set to continue production growth into FY19.
BMA Coal is set to accelerate growth and productivity with construction of its Caval Ridge Southern Circuit (CRSC) project on track to be completed by the end of the year.
When complete, the $270 million project will result in an 11km overland conveyor system, which will transport coal from the Peak Downs mine to the coal handling preparation plan (CHPP) at the nearby Caval Ridge mine.
Caval Ridge is a high-quality, hard coking mine in the northern section of the Bowen Basin in QLD, about 6km south-east of Moranbah and 160km south-west of Mackay.
The mine is adjacent to Peak Downs, which is a large open cut coking coal mine about 31km south-east of Moranbah.
Peak Downs is also owned and operated by BMA Coal, the alliance formed by BHP and Mitsubishi Development.
Construction of the CRSC between Caval Ridge and Peak Downs began in mid-2017.
At the time, BHP Australia Minerals operations president Mike Henry said the CRSC formed the missing link between the two mines, and would accelerate growth and productivity.
“This investment furthers our productivity agenda, reduces costs, release latent equipment capacity, and strengthens our coal business’ global competitiveness,” Mr Henry said.
“We are committed to QLD’s Bowen Basin and this project creates new employment opportunities during construction and locks in ongoing operational roles.
“The investment flowing from the project will help support the local community and State economy after what has been a difficult time in the region.”
The CRSC’s impending completion comes off the back of a bumper year for BMA, which saw several mines achieve production records in FY18, with an increase of nearly 1.5 million tonnes of coal produced on the prior financial year.
BMA is Australia’s largest coal producer and supplier of seaborne metallurgical coal.
As well as Peak Downs and Caval Ridge, the alliance owns and operates Goonyella Riverside, Broadmeadow, Daunia, Saraji, and Blackwater – all of which are in the Bowen Basin.
BMA also owns and operates the Hay Point Coal Terminal near Mackay.
BMA was also the former owner of the Gregory Crinum mine, 60km north of Emerald.
In May, it entered an agreement with Japanese-owned Sojitz to divest the mothballed mine for $100 million after a detailed review concluded there was potential for another party to generate greater value at the project, which had been out of action since January 2016
In addition to BMA, BHP partners with Mitsui and Co to form BMC, which owns and operates two open-cut metallurgical coal mines in the Bowen Basin.
Together, BMC and BMA form Queensland Coal.
In BHP’s full year results for FY18, it reported a 7 per cent rise in metallurgical coal production to a record 43mt.
BHP believed record stripping performance, increased truck hours and high wash-plant utilisation from low-cost debottlenecking activities offset lower volumes from Broadmeadow and Blackwater.
Despite the overall lower volumes at Broadmeadow and Blackwater, operational conditions improved at the mines significantly in the June 2018 quarter.
More generally, BHP chief executive Andrew Mackenzie said the company had announced a record final dividend for shareholders, which reflected strong operating performance, solid prices and capital discipline.
“Our relentless focus on safety and productivity has released additional volumes across our supply chain with 8 per cent volume growth for the year,” Mr Mackenzie said.
“Our balance sheet is strong, with net debt now at the lower end of our target range, and our investment plans on track across iron ore, copper and petroleum.
“Across our dramatically simplified portfolio of tier one assets, we see this year’s strong momentum carried into the medium term as our leadership, technology and culture drive further increases in productivity, value and returns.”
Outlook
According to BHP, the metallurgical coal price performed strongly in FY18, with healthy demand conditions and relatively tight supply.
The average realised price for BHP’s metallurgical coal, produced as part of BMA, increased 9 per cent from $US163.30 per tonne in FY17 to $US177.22 in FY18.
Altogether, Queensland Coal produced nearly $US7.4 million in FY18 compared to about $US6.3 million in FY17.
In the near term, the company expected supply constraints should ease with additional volumes expected from various regions.
The application of China’s coal supply side reform, and its environmental policies, remained a source of uncertainty for BHP’s BMA operations.
Over the longer term, emerging markets such as India were expected to support seaborne demand growth, while high-quality metallurgical coal would continue to offer steelmakers value-in-use benefits.
BHP’s outlook for its BMA operations were largely shared by the Department of Industry, Innovation and Science, which found that Australia’s coal exports would continue to grow over the next two years, although it predicted a softening of prices.
In the September Resources and Energy Quarterly, the Department found metallurgical coal prices had been supported by strong demand from both China and India.
China’s imports were expected to remain elevated over the next couple of months as steel margins remained high.
The Department forecast premium hard coking coal would decline from an average of $US197 per tonne in 2018 to $US145 in 2020 as the impacts of improved supply and weakening demand from China began to outweigh the impact of growing demand from India.
Despite the anticipated drop in price, Australia’s export volumes were forecast to grow from 179mt in 2017-18 to 198mt in 2019-20, reflecting an expected recovery from supply disruptions and modest production growth.
Overall, Australia’s metallurgical coal export earnings reached a record $38 billion in 2017-18, driven by stronger prices.
Export earnings were forecast to fall to $31 billion in 2019-20, as rising export volumes were partly offset by lower prices.
Planned expansions and productivity improvements at operations such as BMA’s CRSC project were expected to support production growth over the outlook period.
Queensland Resources Council chief executive Ian Macfarlane welcomed the figures, despite the softer prices forecast, saying QLD was a premier coal producing State, which would benefit from the increase in production and exports.
“Met coal production is forecast to grow by 11 per cent between 2017-18 and 2019-20, driven largely by the resurgence in the QLD coal sector,” Mr Macfarlane said.
“Metallurgical coal exploration is also on the way back up.”
Mr Macfarlane said new projects, expansion projects and productivity improvements such as CRSC brought growth, economic development and re-population of regional areas.
“On the ground in the resources industry in QLD we’re seeing a new job created every 40 minutes and $1 million being invested every hour, and it’s not all in metallurgical coal, it’s been across the industry,” Mr Macfarlane said.
“QLD has arguably the best metallurgical coal in the world, so that puts us in a very strong position in terms of export.
“Combine that with a very competitive and efficient mining and technology situation and it adds up to QLD being the biggest coal exporter in the world.”
