Rising productivity levels and lower operating costs have lifted the competitiveness of Queensland’s coal industry in a difficult trading environment. Productivity jumped 26% in calendar 1999 to 14,491 tonnes per employee and the state also strengthened its international standing, with 17 central Queensland hard coking coal mines placed in the world’s top 20, including the entire top 13, and ditto for seven thermal/semi-coking coal mines.

Coal production also improved with records achieved for saleable production (123 million tonnes) and exports (102Mt) in the 12 months ended March 2000. Higher output resulted from expanded capacity at the Burton, Ensham and South Walker Creek open-cut mines and Moranbah North, Newlands and Oaky Creek underground mines, and from two new open-cut operations — Coppabella and Foxleigh.

 

 

"It is likely that in the shakeout ahead, the industry will experience more mergers and acquisitions resulting in fewer and larger producers." - Rick Gazzard, president, BHP Coal Queensland.

 

“We have had to work hard to remain competitive in the world market. Our fundamental challenge is always to stay competitive with low-cost suppliers,” said Australian Coal Association joint director, Michael Pinnock.

The strength of the US dollar and the Euro against the Australian dollar over the past 12 months has helped to boost returns for many operators. However, a weak Australian dollar does not benefit companies that hedge or companies such as Rio Tinto that report in US dollars. Some analysts consider that price resistance will be met if the Australian dollar rises above US68-72c, and an Australian dollar at US80c will severely affect the viability of the industry. Of particular concern is the recent escalation of the world oil price which has led to an increase in ocean freight costs, decreasing the competitiveness of Queensland coals in the growing European market.

Although world coal demand is predicted to grow steadily over the next five years, ABARE analysts cautioned that coal prices are likely to continue to decline in real terms. For the Japanese fiscal year beginning April 1 2000, premium coking coal prices struck with Japanese steel mills fell 5% to $US39.75 per tonne. Many companies in the first wave of settlements managed to negotiate volume increases at the expense of those that held out for better prices. And though spot thermal coal prices seem to be edging up, it is still a difficult market.

“If we had the prices of two-and-a-half years ago, we’d be making another $100 million plus per year. That’s how severe it is. It’s a lot of money,” said Pacific Coal’s managing director, Brian Horwood.

In this environment, Queensland producers are employing diverse strategies to remain competitive. Large, mature open-cut mines are moving towards underground mining as the depth of mining reaches economic limits, contract miners are being used for small jobs through to longer life-of-mine contracts, small “niche market” mines are being developed, and many producers are focusing on industrial relations and workplace reform.

BHP Minerals chief operating officer, Bob Kirkby, told business analysts and institutional shareholders in May this year that BHP Coal was pursuing an integrated planning strategy in order to maximise capital utilisation and enhance production costs. This strategy included centralised planning, punch longwall mining and bigger capacity equipment. Over the past 12 months, BHP Coal has reduced costs at its Queensland operations by 20%. The company is developing a trial underground adit at the Goonyella Riverside mine. If successful, the technology could be applied across hundreds of kilometres of highwalls at mines managed by BHP Coal in the Bowen Basin. Development of the adit is progressing to plan with 7950m developed down-dip from the Goonyella Ramp 4 South highwall to the end of May. The first bulk coal sample was washed at the Riverside preparation plant in January, and tested in the BHP Research coke ovens with “encouraging results”. A decision on whether to proceed with a full underground longwall operation is expected to be made in the first quarter of 2001.

“The advantage of this technique is that the capital cost of establishing these operations and then the ongoing operating costs will be substantially less than a conventional mine,” Kirkby said.

He said a focus on higher capacity equipment providing lower costs would continue.

The new Peak Downs dragline was three times the size of previous draglines and would provide substantially lower unit costs than the company’s existing draglines. Research into bucket design is seeking to derive 15-20% better productivity from older draglines. Recent benchmarks indicated BHP Coal’s dragline operations and some of its truck and shovel operations were world class. “So there are lots of opportunities in Queensland to reduce costs and improve productivity. If the market picked up, we have a substantial latent capacity to serve the market at low cost,” Kirkby said.

MIM Holdings has also made the transition from open-cut to underground, with almost two-thirds of its production coming from underground operations. Previously plagued by high costs and low productivity, the MIM operations have produced a dramatic turnaround. Australia’s Mining Monthly sister publication, Australia’s Longwalls, earlier this year ranked Newlands the highest producing longwall mine in Australia for calendar 1999 (5.55Mt total raw coal), followed by Oaky No.1 (4.13Mt). Oaky North commenced production in February 1999 and was ranked third in one quarter, but was pushed out when difficulties stopped longwall mining from August last year. Following a successful recovery and relocation operation, the longwall recommenced cutting coal in March 2000. In April this year, Oaky North set new Australian monthly records for longwall and total underground performance.