Partnership the key to managing risks: Anglo Coal
Speaking at the recent Annual Global Iron Ore & Steel Forecast, Anglo Coal Australia brought its perspective to the management of projects during the economic downturn.
By Paula Wallace
“One of the critical issues impacting us is the volatility of the markets…not just in terms of prices but offtake, and bringing investment proposals to our Board,” said Anglo’s chief executive Seamus French.
“Trying to guarantee offtake and price over a certain period is, as you can imagine, very difficult.”
 | |
 |
It had been reported that parent company Anglo American Plc is looking at possible iron ore joint ventures or acquisition opportunities in Australia. The group has interests in steel around the world including iron ore production but its interests in Australia to date have focussed on coal - thermal and metallurgical.
Anglo Coal operates six mines in Queensland and New South Wales and is the second largest exporter of metallurgical coal. It hopes to double its annual production of coking and thermal coal in Australia to 56 million tonnes over the next 10 years.
However, the company has not ruled out shutting coal mines in Australia if prices continue to fall.
Earlier in March, Anglo Coal said it was cutting more than 10 per cent of its workforce at its coal mines in Australia, some 650 positions, and had mothballed its Aquila and Dawson North coking coal mines amid the sharp global slowdown in steel-making.
Market volumes are down by more than 25 per cent and metallurgical coal prices down by 50 per cent, said French.
In order to position the company in the downturn, French said it was focussing on an asset optimisation target of US$400m and capital expenditure reductions and labour cost reductions.
What he emphasised was the focus on Anglo’s long-term growth strategy - which includes completion of brownfields metallurgical coal projects and prioritising of greenfields metallurgical coal projects in Central Queensland.
“We will not allow short-term uncertainty to distract us from long-term growth commitment and value creation.
“Our view of long-term growth is positive and our project portfolio is well positioned to meet this growth,” said French
“And we see a need for a new approach, we see a need for partnership with some of our key customers to co-develop those projects.
“And that’s something we’ll certainly be looking at over the next few years.”
While he did not give any indication who those partners may be French said, “We will need to develop partnerships in terms of exploration, in terms of development of the projects but also…in terms of offtake with our customers.”
One of the “world-class” projects which Anglo believes will position it well for market recovery is the Minas-Rio iron ore project in Brazil, the first phase of which could produce 26.5Mtpa pellets with first production in 2012.
“Our view is an upturn will come, we are very confident that the BRIC economies will continue to grow at the rates they’ve grown historically. And our view is we want to position ourselves for that upturn [inaudible] strategically important projects,” said French.
“The rise of BRIC economies has been well documented…in 2007 China took 54 per cent of global iron ore, 40 per cent of coal, 27 per cent of copper.
“I think…what’s more interesting is the future and some of the statistics are that 600 million people will move to urban centres by 2020 in China and India.
“And the BRIC economies will collectively spend on infrastructure US$20 trillion. And for that people need steel, and for that they will need coal and iron ore.”
In answer to where these reserves of coal and iron ore will come from French said, “from new frontiers, where no man has gone before”, referring to Anglo’s $290 million exploration budget.
He said partnerships will also play an important role in unlocking the potential of new deposits in order to access the most advanced technology in exploration and extraction.
French said the two main challenges in developing new projects were access to water and energy. Additional local challenges faced by Anglo in Australia include the impending Carbon Pollution Reduction Scheme and the development and balanced expansion of infrastructure.
There has been significant progress made in providing a more streamlined coal chain with the establishment a few years’ ago of the Dalrymple Bay Coal Chain Board, by the CEOs of the eight coal producers and five service providers operating in the region.
“The single most critical issue in this multi-user situation is performance transparency. When I arrived in Queensland it was impossible to work out what the performance of the system was and where the bottlenecks were.
“That’s the first issue we addressed, we now have a fully integrated view and we have monthly reporting on exactly where those bottlenecks are in the system,” said French.
Before the recent cut backs in global steel production and coal shipments through Dalrymple, the group had managed to reduce ship queues from more than 45 to less than 15.
In regard to the Government’s planned Carbon Pollution Reduction Scheme, French said, “…we really need to incentivise reduction of emissions but the introduction of the scheme should reflect the technological capability to reduce or eliminate emissions. If it doesn’t it just adds as a tax not as an incentive.”
He has reportedly suggested that the planned carbon reduction scheme could add costs of around $5 a tonne for coal producers in Australia.
| Tweet |
