AUSTRALIAN coal is in demand for both energy and steel-making.
Its high-energy, low ash characteristics ideally match the requirements for high efficiency, low emission (HELE) coal-fired power plants being built throughout Asia, while the high grade metallurgical coals are among the best in the world for modern steel making.
Australian coal can also reduce emissions when compared to lower-quality coal from other exporters.
Supplier reliability, proximity to key markets and good infrastructure availability puts Australia in a strong position to take advantage of growing demand from existing customers such as Japan, China, Taiwan and Korea, as well as newer buyers such as Vietnam, the Philippines and Thailand.
Coal mining in Australia is a sophisticated and hi-tech activity.
Continuous improvements in mining technology, occupational health and safety and environmental performance have ensured that Australia is an efficient and reliable producer of high-quality thermal and metallurgical coals for the international market.
Whitehaven Coal
The company’s stalwart reputation is solid as a rock and it shows no sign of resting on its laurels.
It operates four mines, three open cut and one underground, in the Gunnedah Coal Basin in North West NSW, producing high-quality metallurgical and thermal coal for export to advanced and developing economies across North and South East Asia.
They are complemented by two high-quality, near-term development assets: Vickery, near Gunnedah, and Winchester South, in Queensland’s Bowen Basin.
Whitehaven’s high quality coal helps power regional economies through its contribution to energy generation and steel production and is sought after for its unique properties, including the fact it delivers among the lowest carbon emissions per tonne of coal consumed in the seaborne trade.
Increasingly, countries in the Australasian region are looking to HELE coal-fired power as a critical component of the energy mix because it does not force them to choose between their economic aspirations and their carbon emissions reduction obligations.
Contribution and commitment
Whitehaven proudly claims to deliver value to customers, its workforce, shareholders, local communities and suppliers by developing and safely and responsibly operating high-quality, cost-efficient, long-life coal assets.
A company spokesman said its approach was pragmatic and specifically oriented to those areas where we know we can have a positive impact.
“This starts with promoting local economic growth through permanent job creation in the communities around which our operations are based,” he said.
“Our people are our greatest asset and our best advocates, not only because they work in the local areas around our mine operations, but also because they live locally and are part of the social fabric of their communities.
“Our commitment to local procurement, and our focus on building capacity among regional suppliers seeking to work with us, recognises the contributions of local enterprise to long-term community prosperity and cohesion.”
The spokesman said the company helps build local community capacity and viability through intergenerational investment in education, healthcare, skills training and infrastructure.
“We do this through direct discretionary contributions, or indirectly via voluntary planning agreements and mining royalties,” he said.
“We aim to see the benefits of our operations extend beyond our direct workforce and beyond the life of any single mine.”
Today, about 75pc of the 2400-strong workforce (of which 9pc identifies as Indigenous) lives and works in the towns and regional centres immediately surrounding its operations, and Whitehaven plays a significant role in sustaining and helping build capacity in these communities.
“We have always believed local communities should be the disproportionate beneficiaries of our presence and have taken care to put this belief into action as we have grown,” the spokesman said.
Performance
In FY 19, Whitehaven:
- Contributed $515k in donations and sponsorships
- Spent $333.9m with 350 local suppliers
- Paid $323.8m in taxes and royalties to governments, of which $225.9m was royalties
- Paid $189.9m in wages and salaries
- Maules Creek Open Cut Mine
Run-of-mine (ROM) coal production for the quarter was 2.362mt, 39pc above the previous corresponding period (PCP).
Mining efforts in the comparative period focussed on overburden movement in support of box-cut development.
According to the latest annual report, ROM coal production in the quarter reflected the rebuilding of employee numbers, which saw a full operator production complement achieved at the end of the quarter.
In the March 2020 quarter, works to support increasing the volume of in-pit dumping continued.
Over the next three years the proportion of overburden material dumped in-pit will increase to 100pc, which is expected to increase operational productivity and to decrease unit costs.
Year to date ROM coal production is 17pc below PCP which, as previously reported, was affected by labour shortages and production disruptions due to drought and bushfires.
Since December 2019, Maules Creek has been recruiting experienced and cleanskin employees to ensure the fleet is fully deployed in Q4 FY20.
Whitehaven Coal managing director and CEO Paul Flynn said that the company fully met manning requirements at Maules Creek and is now investing in the skills development to achieve full utilisation of equipment and productivity of the workforce, with skill levels of cleanskins expected to improve in coming months.
The return to full manning and scheduled ROM coal production from the Braymont seam in the June quarter underpin Maules Creek’s production guidance for FY20.
ROM coal production was weighted to the end of the quarter, which resulted in both saleable coal production and sales being below the quarter’s PCP, and has led to higher coal stocks at the end of the period than in that period .
Equity sales of metallurgical coal for the quarter were 0.3mt, or 21pc, of sales volume.
Autonomous haulage (AHS) of overburden has commenced.
As planned, a fleet of six EH5000 trucks and excavator was in operation in March.
During Q4 FY20, additional labour resources will be trained and deployed to allow for seven-day operation of AHS by end of the financial year.
- Narrabri Underground Longwall Mine
March quarter ROM coal production was 1.562mt, 10pc below the PCP and 22pc below the year-to-date period.
ROM coal production ramped up after completing the longwall relocation from LW108 to LW109 in January.
Following a strong production performance through January and February, ROM coal production in March was impacted for 20 days by a weighting event which caused a deferral of 500-600Kt of longwall coal production.
The longwall hydraulic leg cylinders, which were upgraded during the move from LW108 to LW109, have performed well.
YTD ROM production reflects the impact of the eight-week scheduled longwall move in Q2 FY2020.
Saleable coal production and sales of produced coal were down on PCP, reflecting the lower ROM coal production.
The inventory drawdown supported sales volumes, with sales for the quarter including 0.3mt of lower CV fault-effected thermal coal produced from the end of LW108.
Metallurgical sales were 0.15mt for the quarter.
- Tarrawonga Mine
Tarrawonga ROM production of 0.639Mt was 8pc down on PCP, due to the impact of rain events in February and March.
Saleable coal production and sales of produced coal volumes were further impacted by both a decrease in bypass coal as a results of the mined coal mix, and localised flooding on the haulage corridor between the mine and Gunnedah coal handling and processing plant. During the March quarter, commissioning of the new EH4000 trucks was ongoing, to be finalised in April 2020.
Installation of supporting infrastructure has commenced, with completion in Q4 FY20.
- Werris Creek Mine
Werris Creek ROM coal production of 0.385Mt was 20pc down on PCP and 28pc down on year-to-date.
This decrease reflects localised geological losses in the pit, a continuation of difficult mining conditions around uncharted underground workings and rain delays, which has resulted in lower saleable coal production and sales of produced coal.
The final quarter of the year is expected to see a greater contribution of ROM coal from mining the lower seams in the Werris Creek mining sequence.
These thicker seams have historically delivered an increase in ROM production in the quarter that they are mined.
Development projects
Studies continue to be carried out to advance Whitehaven’s three main development projects: the Narrabri Underground Mine Stage 3 Extension Project, the Vickery Extension Project, and the Winchester South Metallurgical Coal Project.
These projects underpin Whitehaven’s plans to expand managed ROM production in the next 10 years.
While coal markets in the March quarter have demonstrated their resilience, volatile financial market conditions have caused Whitehaven to continue to be cautious in allocating capital to expansion.
Whitehaven does not expect to consider making a Final Investment Decision in relation to these projects in 2020.
Projects will continue to be the subject of Whitehaven’s strict capital allocation framework.
Expenditure incurred on expansion and growth projects by Whitehaven during the March quarter was $6.9m, reflecting engineering studies relating to Narrabri Stage 3 Environmental Impact Statement (EIS) studies and pre-feasibility design work for the Vickery Extension and Winchester South.
- Narrabri Underground Mine Stage 3 Extension Project
The project seeks to convert Narrabri’s existing exploration licence into a mining lease and use the existing portals, CHPP, rail loop and associated infrastructure to extract, process and ship 80-100mt of ROM coal using the longwall mining method.
The project involves extending the longwall panels planned for the mining lease south of the current main roads into the contiguous Narrabri South Exploration Licence area, to extend the approved life of the mine by about 14 years, from 2031 to 2045.
The project has received its Secretary’s Environmental Assessment Requirements from the NSW Government as well as its EPBC Act referral from the Federal Government.
Whitehaven has been incorporating these requirements in the preparation of an EIS which it plans to lodge with the NSW Government Department of Planning, Industry and Environment (DPIE) in Q1 FY21.
- Vickery Extension Project
Open cut and underground mining was undertaken at Vickery by Rio Tinto until the second half of the 1990s when operations ceased.
The Vickery open cut project was approved in September 2014 to produce up to 4.5mt ROM coal per annum.
Works necessary to maintain the current approval in good standing have been completed and the approval for the Vickery open cut project expires in September 2034.
The Vickery Extension Project seeks consent from the NSW Government to increase the approved Vickery open cut project to operate at up to 10Mtpa with onsite processing and railing capacity.
The NSW Government DPIE is finalising its whole of government (WOG) report on the Project.
The WOG report will be used by the NSW Independent Planning Commission (IPC) to complete its final review and prepare its determination.
The Minister for Planning and Public Spaces has requested the IPC convene a second public hearing; the IPC is giving consideration to how best to hold a public hearing in light of current restrictions on public gatherings.
Progress on design work for the CHPP, rail spur, and other site infrastructure continued during the quarter as did planning for operational readiness and mine planning.
Draft management plans including those for noise, air quality, cultural heritage and traffic management continue to be refined.
These management plans are scheduled to be finalised in the three to six month period following receipt from DPIE of the conditions of approval.
- Winchester South Metallurgical Coal Project
The proposed Winchester South open cut metallurgical coal mine, situated in Queensland’s Bowen Basin, continues to progress through the Queensland Government’s major project development process.
Studies to support drafting of the EIS have been progressed.
Progress on design work for the CHPP, rail spur, and other site infrastructure continued during the quarter.
Work continues on the maiden JORC Reserve estimate for the project with an expected release date in Q4 FY20.
The role of coal
Whitehaven’s products are essential inputs for continued economic development in advanced and emerging economies across the region.
Its business is leveraged to strong and continuing demand for high-quality coal in the Asian region.
According to the IEA New Policies Scenario (NPS), global thermal coal consumption is expected to be stable out to 2040, with coal likely to remain the single largest source of electricity generation worldwide through the forecast period.
There are also demand trends at the regional level that are counter-cyclical to more subdued global demand trends.
Demand for higher-quality coal among developing economies in the Asian region, for example, will continue to grow, driven in part by electrification and new policy settings sensitive to the need to reduce carbon emissions and atmospheric pollutants (particulate matter). This is especially advantageous for Australia as a key global producer of high-CV, low-ash, low-sulphur coal, and for Whitehaven’s business, which is specifically oriented to supplying demand in our region for coal meeting these specifications.
The IEA forecasts demand for high-quality coal from Australia to grow disproportionately to world seaborne growth because of its higher quality.
Given Gunnedah Basin coal is at the upper end of the national CV range and with a lower ash component, Whitehaven is well-positioned to continue to supply this market.
The Whitehaven spokesman said the NSW mines supplied metallurgical coal in the form of semi-soft coking coal and high volatile matter (high vol) PCI coal.
“These coals are low in impurities, specifically ash, sulphur and phosphorus, and are important components in our customers’ broader coking coal requirements,” he said.
“Our coking coal sales have a significant exposure to India, which is forecast to experience strong growth in coking coal imports over the coming decades.
“Our customers use low-impurity Whitehaven products in their coke blends to offset impurities in the hard coking coals they purchase, which is an important attribute to the ongoing demand for our coking coals.”
The trend of increasing impurities in hard coking coal, specifically sulphur and ash, is expected to continue, positioning Whitehaven’s business well in terms of future demand for our product.
The seaborne coal market is a large, fluid market and a global perspective is required to understand the direction and volatility of forecast coal prices.
Coal has historically been a cyclical commodity, driven by changes in supply, demand and pricing.
There is little evidence to suggest this cyclical nature will change; in fact there is some evidence it will become more volatile as new influences over supply and demand come to the fore.
Steel the one
Coal is also crucial in the manufacture of steel, an essential material for modern life.
Manufacturing steel delivers the goods and services that societies need – healthcare, telecommunications, improved agricultural practices, better transport networks, clean water and access to reliable and affordable energy.
It is fundamental to a more sustainable world, helping to build lighter, more efficient vehicles, new highly efficient power stations and in the construction of smart electrical grids.
Steel is a critical component in the construction of transport infrastructure and high energy efficiency residential housing and commercial buildings.
Coking coal is an essential element in blast furnace steel production, making up 70pc of global steel production (the remainder is produced from electric arc furnaces using scrap steel and a tiny share through open hearth ). World crude steel production was 1.8b tonnes in 2018.
Steel also has a significant role in delivering renewable energy; each wind turbine requires 260t of steel made from 170t of coking coal and 300t of iron ore.
And there are many other applications.
Coal is used to make cement, the key ingredient in the production of concrete, an essential building material for society’s infrastructure around the world, second only to water in total volumes consumed annually.
Cement is essential for building houses, bridges, roads, dams, harbours and airports.
Coal is used as an energy source in cement production to melt raw materials – limestone, silica, iron oxide and alumina.
Kilns burn coal in the form of powder and consume around 200g of coal to produce one tonne of cement.
Coal is also a key energy fuel in the production of aluminium – a non-ferrous metal known for its lightweight properties and widely used in cars, trains and airplanes to reduce the weight of these vehicles and their energy consumption.
In fact, new cars in Europe use, on average, 132kg of aluminium per car, with coal accounting for more than 50pc of the energy used to produce aluminium.
Also dependent on coal are energy-intensive materials such as steel, cement and lime used to build railroads, tunnels, bridges and roads.
Coal, because of its relative affordability, is the most widely used source of energy in the manufacturing process of these materials.
