Engineering & Mining Journal

FEB 2018

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NEWS - THIS MONTH IN COAL 22 E&MJ • FEBRUARY 2018 www.e-mj.com Wesfarmers Will Sell Curragh Mine Wesfarmers announced it has agreed to sell one of the world's largest metallur- gical coal mines, its 8.5-million-met- ric-ton (mt) producing Curragh mine in Queensland, to Coronado Coal Group for $700 million under an agreement that also includes a value share mechanism linked to future metallurgical coal prices. Upon completion, Wesfarmers estimates it would report a post-tax profit on sale of approximately $100 million. Reflecting recent volatility in spot coal prices, Wesfarmers will also receive 25% of Curragh's export coal revenue gener- ated above a realized metallurgical coal price of US$145 per mt, paid quarterly over the next two years. Curragh also produces 3.5 million mt/y of steaming coal, which is sold to the Queensland government's Stanwell Corp. Coronado Coal Group is a leading U.S. producer of metallurgical coal with three mining complexes in West Virginia and Vir- ginia currently producing 8.2 million mt/y. The sale is subject to a number of conditions precedent including obtain- ing approval from the Foreign Investment Review Board, and work is under way to achieve satisfaction of these conditions in the next six months. Wesfarmers Managing Director Rob Scott said the agreement to sell Curragh follows the company's plan to evaluate all strategic options for the Resources busi- ness to maximize shareholder value. The strategic review of Wesfarmers' 40% inter- est in the Bengalla coal mine is ongoing. "We believe this agreement with Coro- nado is in the best interests of our share- holders, while giving the employees and customers of Curragh the opportunity to work with a leading coal producer with am- bitions to expand in Australia," Scott said. Curragh was acquired by Wesfarmers for approximately $200 million in 2000, when it was producing 4.5 million mt of metallurgical and thermal coal. Australian Met Coal Production Dips A number of Australian metallurgical coal exporters have recently signaled that they have suffered production setbacks and they are expecting lower output for Fiscal Year 2018. In its most recent production report, BHP said metallurgical coal production for the half-year ending December 2017 decreased by 4% to 20 million mt. The company's guidance for FY2018 has been revised downward from 44 million to 46 million mt to 41 million to 43 mil- lion mt, which reflects lower volumes now expected at Broadmeadow and Blackwa- ter mines. BHP's Queensland-based coal produc- tion for the half-year ending December 2017 was lower due to the impacts of on- going challenging roof conditions at Broad- meadow and geotechnical issues brought on by wet weather at Blackwater. This was partially offset by record production at South Walker Creek, Saraji, Caval Ridge and Daunia, underpinned by improved truck and shovel performance, utilization of latent dragline capacity at Caval Ridge and increased wash-plant feed rates. The company said its Caval Ridge Southern Circuit project is progressing according to plan, with production ex- pected to ramp-up early in FY2019. Anglo American reported less met- allurgical coal production from its Aus- tralian operations for 2017. Total met production decreased to 21.3 million mt from 22.7 million mt. The company said the Grosvenor ramp-up and record pro- ductivity levels at underground operations were offset by the removal of higher cost volumes at Dawson. During the fourth quarter, Anglo Ameri- can's export metallurgical coal production decreased by 8% to 4.9 million mt due to an extended longwall move at Grosve- nor and lower production at Dawson. The Dawson mine was reconfigured at the end of 2016 to remove higher cost volumes and, in Q4 2017, was transitioning to a new mining area. This was partially offset by an increase in production at Grasstree, which experienced geological issues and a longwall move in Q4 2016. Grosvenor completed its first long- wall panel during Q4 2017 which was followed by an extended longwall move to rectify component defects identified during the first panel. For the half year ending in Dec. 2017, Perth-based South32 reported a decrease in coking coal production to 1.3 million mt from 2.8 million mt during the same period one year ago. The company restart- ed a single longwall at the Appin colliery during mid-October. Saleable production from Illawarra Metallurgical Coal decreased by 50% (or 1.9 million mt) to 1.9 million mt in the December 2017 half year as the Appin colliery recovered from the extended out- age and the Dendrobium longwall pro- gressed through a faulted zone. The company said it remains on track to produce 4.5 million mt of coal at Illawarra during FY2018, even with a longwall move scheduled for the Dendro- bium mine. An excavator loads a haul truck at Wesfarmers' Curragh mine.

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