Engineering & Mining Journal

APR 2017

Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr

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NEWS - THIS MONTH IN COAL 20 E&MJ • APRIL 2017 Vale Completes Moatize Coal Transaction With Mitsui This week, Vale announced it had com- pleted the $770 million equity transac- tion with Mitsui & Co. Ltd. (Mitsui) asso- ciated with the divestment of part of its interest in the Moatize coal mine and in the Nacala Logistics Corridor (NLC). Vale received $733 million and the remaining $37 million will be paid at the conclu- sion of the project finance transaction of as much as $2.7 billion, which will help fund the project and is still expected to happen in 2017. The decision to complete the equity transaction prior to the signing of the proj- ect financing is a major milestone for the NLC as it demonstrates Vale's confidence on the progress of the project financing, the company said. If the signing of the project financing is not achieved by the end of De- cember, Mitsui has certain rights to trans- fer their participation in the Moatize coal mine and the NLC back to Vale. Mitsui will pay $255 million for a 14% stake in the Moatize mine; $350 million for half of Vale's 70% share in the Nacala project, which includes railway and port infrastructure; and $165 million in a long-term loan for the NCL. Mitsui could contribute an additional $195 mil- lion if certain conditions are met, such as mine performance. Vale will retain an 81% share in the Moatize mine. The company has invested $2.1 billion in the operation, and achieved commercial pro- duction in 2016 with the startup of the coal handling and processing plant. Cyclone Debbie Sweeps through Queensland Cyclone Debbie struck Queensland at the end of March and rail provider Aur- izon confirmed none of the four railways serving regional coal mines were in full operation while two of them were entirely out of action. The disruption will likely spark a short-term rally in coking coal prices given that Queensland produces more than half of the world's seaborne coking coal. The worst affected railway is the Goon- yella railway system, which is also the most extensive rail network serving the world's top coking coal district in the Bowen Basin. It connects Bowen Basin mines to the Dalrymple Bay Coal Terminal and Hay Point Coal Terminal. While ac- cess to inspect the Goonyella line remains "severely limited," Aurizon said the rail corridor had suffered "significant land- slips" which could take five weeks to fix. Teck Updates Coking Coal Guidance Teck Resources expects coking coal sales volumes for the second quarter of 2017 to be at least 6.8 million metric ton (mt), and mining costs in the second quarter are expected to be in the range of $47/mt to $51/mt. For the first quarter, Teck re- alized an average price between $209/mt to $212/mt, at the higher end of its pre- vious guidance range. Sales volumes in March improved relative to weak sales in January and February, but not sufficient- ly to result in sales above 5.8 million-6 million mt in the quarter. Final quarterly sales will depend on timing of shipments. The company said mining activity largely continued at full production rates through the first quarter, but lower sales volumes, winter weather and transporta- tion issues affected clean coal production. As a result, mining costs will be above its annual guidance range in the first quarter, in the range of $54/mt to $57/mt. With production and sales volumes expected to return to more normal levels in the second quarter, the company re- confirmed its previous annual production guidance of 27 million mt to 28 million mt and annual mining cost guidance of $46/mt to $50/mt. The second-quarter 2017 quarterly contract price for steelmaking coal has not yet been agreed upon, as the market awaits the outcome of the cyclone event in Australia. Trump to Overhaul US Energy Strategy U.S. President Donald Trump signed an executive order on energy independence on March 28 that will re-evaluate former President Barack Obama's Clean Power Plan (CPP) and lift the ban on federal leases for coal production. According to a Senior Administration Official, the administration will provide the framework, or the beginning frame- work for a strategy on energy, such that each executive department and agency in the United States government will be responsible for identifying all regulations, all rules, all policies and guidance docu- ments that serve as obstacles or impedi- ments to domestic energy production. "President Trump's Energy Indepen- dence Executive Order, which, among other things, announces the coming end to the CPP, is a crucial win for Texas and the nation," said Michael Nasi, general counsel of Balanced Energy for Texas. "An illegal attempt to force states to ac- commodate an ideological environmen- tal agenda, the CPP represented federal overreach at its worst." Mitsui purchased a significant stake in the Moatize mine, which includes this coal handling and processing facility in Mozambique.

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