Coal Age

MAY 2019

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Page 10 of 43

May 2019 9 worldwide news continued Then in April, the company low- ered its guidance for production at its South African units. South32 said in a regulatory filing in Sydney it had reduced output of energy coal by 11% for the coming financial year. Com- munity protests that disrupted oper- ations, and a delay in introducing a new worker shift pattern had ham- pered production. Export guidance was cut by 7%, South32 said. SAEC's revenue for the first half of 2019 has also declined to $517 million, down from $622 million for the same period last year. Production, mean- while, is expected to rise to 29 million mt this year and to 30 million mt in 2020. Production came to only 27 mil- lion t in 2018. Production costs will also rise however, to $38/mt in the first half of this fiscal year, from $36/mt in the previous financial year. A sale of SAEC would leave South32 to focus on its higher margin assets, such as its alumina and man- ganese operations in Australia, and as one of the world's largest ferronickel producers in Colombia. SAEC's disposal will be the largest mining transaction South Africa has seen for some time. As such, it has drawn considerable interest with up to 50 companies reportedly showing an interest in acquiring SAEC. A figure of around $540 million was floated for the assets when SAEC was first put up for sale in late 2017. The final price is likely to be lower however, as the coal price has tum- bled around 20% since the sale was first announced. Current free-on- board coal price at the Richards Bay Coal Terminal (RBCT) are $78/mt. Whoever wins the bidding process must be anchored by a black-owned company to meet the government's long-term requirements to create more black businesses. The winner must also have the financial resources to take on further mine development, and to cover the nearly $700 million in site rehabilitation charges as older operations are closed. The final contenders have been whittled down to a handful, accord- ing to local reports with local com- panies Exxaro, Wescoal and Seriti among those expected to be leading the pack for SAEC. Each claim to be black-owned and have the solid bal- ance sheets to fund an acquisition of this size. Earlier this year, Exxaro CEO Mx- olisi Mgojo said he was indeed look- ing at the SAEC assets. "We have expressed interest at this very early round in the South32 assets," he told Reuters in Johannes- burg. "Our primary objective is to get further exposure on the export side and the South32 assets also come with Richard Bay Coal Termi- nal entitlements." Export entitlements are an im- portant factor for local coal produc- ers, as they essentially serve as quo- tas for users of the RBCT. As such, they are a limiting factor on offshore sales. Domestic sales, meanwhile, are almost exclusively to Eskom, and priced at a cost-plus basis. Eskom pays the cost of production with a small percentage added on for reve- nue. Exports, however, are priced ac- cording to international benchmarks providing a greater potential upside. Local producers must also con- tend with Eskom's schizophrenic buying policies. The utility is in a fi- nancial crisis that has interfered with coal purchases. Even though global demand is currently slack, export en- titlements help offset the risk of being tied to a single domestic customer. Besides, Eskom, like utilities around the world, is under pressure to close coal plants in favor of renewables. Queensland Accepts Yancoal's Cameby Downs Mine Expansion The Queensland Government has approved Yancoal Australia's pro- posed expansion of the Cameby Downs thermal coal mine in South- east Queensland, Australia, to in- crease production. Earlier, the mine operation was approved to extract up to 2.8 million metric tons per year (mtpy) of run-of- mine coal annually over a 45-year pe- riod. The new approved mining leases will increase the production capacity of the mine to 3.5 million mtpy over a 75-year period. Yancoal Australia, which manages the mine, expects the expansion proj- ect to create up to 20 extra jobs, and extend mine life. The mine produces low-ash export thermal coal. Located in the Surat Basin, ap- proximately 360 kilometers north- west of Brisbane, the Cameby Downs comprises an open-cut thermal coal mine, coal handling and preparation plant and related infrastructure. The mine is operated by Syntech Resourc- es, a subsidiary of Yancoal Australia shareholder Yanzhou Coal Mining Co. Commenced production in 2010, the mine is connected by rail to the port of Brisbane with port allocation through the Queensland Bulk Han- dling facility in Brisbane. SCCL Expedites Coal Mining Projects to Meet Fuel Needs To meet the demands of new pow- er plants, state-owned SCCL has expedited the development of cer- tain coal mining projects, including Kalyani Khani-6 Incline block, and invited expression of interest for carrying out pre-mining activities. Kalyani Khani-6 Incline in Telanga- na, which has extractable reserves of 15.65 million metric tons (mt), is a new underground coal mining pro- ject and carved out of Mandamarri shaft block in Mancherial district of Telangana. The Singareni Collieries Co. Ltd. (SCCL) said, "SCCL invites expression of interest for carrying out pre-min- ing activities, development and ex- traction of coal seams by introducing 3 nos continuous miner technology equipment in a phased manner by Worldwide News Continued on Page 14

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