Flooding keeps force majeure in place for Macarthur mines

first_imgOn December 3, 2010, key Australian coal miner Macarthur Coal had declared force majeure to customers as a result of unseasonal heavy rain in the Bowen Basin. On January 5, Macarthur advised the market that its declaration of force majeure with customers remained in place. Force majeure allows the coal miners to be released from delivery obligations due to the flooding.  Cockatoo Coal has also advised that severe flood conditions resulted in a significant water inflow into the main pit of its Baralaba coal mine. No company or contract personnel associated with the mine have been injured as a result of the flooding. Flooding in Queensland has resulted in the temporary closure of 8% of the global thermal coal exports supply, according to ANZ Bank. The mainly produces coking coal used for steel making, but also produces thermal coal for power generation.  Record rainfall at Macarthur’s Coppabella and Moorvale mines in December (Coppabella 611 mm and Moorvale 475 mm) has continued to hamper coal mining and production. But despite the weather conditions, coal sales for the six months to December 31, 2010 were 2.4 Mt, in line with guidance provided to the market in mid-December.The Goonyella rail corridor has reopened and Macarthur Coal has been able to resume transporting coal to Dalrymple Bay Coal Terminal, however, future railings will be dependent on coal availability. Commenting on the status of the mines, Nicole Hollows, managing director and CEO said: “We have activated our water management plans and are currently able to mine overburden at both sites. Coal is already being mined at Moorvale, but the sustained wet weather has slowed coal recovery at Coppabella. Dewatering of the pits at both sites is underway and we are aiming to have coal recovery progressively return to normal over the next few weeks. Once the pits are free of water, we’ll have more coal exposed that can be processed and transported but it is not possible to predict when we will return to a steady state of mining as that largely depends on any future rain.”All Baralaba mine’s key capital assets, including offices, workshop and coal processing equipment at Cockatoo’s operation remain undamaged and on high ground. It says “advising a timetable for recommencement of Baralaba main pit production is currently premature, given the extent of current flooding and uncertainty regarding future weather patterns. At a minimum however, a production delay of some weeks and potentially longer should be anticipated.“The company has sufficient cash reserves to meet the relatively low fixed costs of this small (50,000 t/month) mining operation during any reasonably foreseeable restoration period. Typically less than 20% of the mine’s quarterly operating costs are from fixed costs.”Peak flood levels in the region have passed, and access to the mine by Cockatoo staff is occurring today to conduct a safety audit, and preliminary assessment. Cockatoo has activated its water management plan, and dewatering processes will begin once approvals are in place. Mining engineers, hydrologists and environmental scientists will work in conjunction with the relevant Queensland Government departments to ensure all dewatering is conducted in a safe, efficient and environmentally sound manner.Cockatoo also advises that exploration activities at its Bowen and Surat Basin projects will resume as soon as access permits.Xstrata Coal, Rio Tinto Coal Australia, Peabody Coal and BHP Billiton Mitsubishi Alliance are all also affected by the flooding in Queensland to varying degrees with warnings of missed deliveries should the heavy rains continue. It is not unusual for Queensland’s wet season to disrupt coal mining, but in late 2010 the rains began sooner than usual, making it harder for coal producers to build stockpiles to last through first quarter of 2011.Australia is the world’s biggest coal exporter when supplies of coking coal to make steel and thermal coal to generate power are combined. The country shipped 259 Mt of coal in 2009, according to data compiled on the World Coal Association.And not only Australia is affected. BHP Billiton, Xstrata and Anglo American have all said that their South African operations are also being hit by unusually high rainfall. South Africa has just raised the flood-warning level for its central Orange River area as water levels in places are expected to reach their highest since 1996.last_img