Vale flags more mine closures

BRAZLIAN mining giant Vale, which posted a $US1.4 billion ($A1.6 billion) net loss in the recent quarter, has forecasted more coal mine closures ahead as “sluggish” metallurgical coal demand continues.
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The Isaac Plains CHPP.

Blair Price

A half owner of the Isaac Plains coal mine in Queensland, which will shut in late January, Vale said oversupply was persisting in its metallurgical coal outlook.

It noted that mine shutdowns had become a reality in Australia and the US over the past two years.

The miner said that global production was still outpacing demand, mostly from efficient producers in Australia.

“The market is not expecting any material price rise without a serious supply shock. Prices are expected to improve slightly in 4Q14 due to seasonal effects,” the mining house said.

“For the coming years, the market is expected to move sideways, with more closures and still sluggish demand.”

Q3 coal results

Vale announced its decision to put its Integra coal operations in New South Wales on care and maintenance in May with the longwall ceasing production first.

However, the complex still produced 101,000 tonnes of met coal (82% down year-on-year) and 28,000t of thermal coal (17% higher YOY) in the September quarter as the open cut continued at reduced capacity.

“The last shipment occurred on September 24 2014,” Vale said of the now-closed Integra operations.

The Isaac Plains mine lifted met coal output by 42% to 209,000t and thermal coal by 28% to 86,000t.

Vale’s Carborough Downs met coal mine in QLD’s Bowen Basin increased output by 52% to 620,000t in the recent quarter with the mine continuing to perform well following the longwall move in the March quarter.

“Production was supported by improved mining conditions and equipment reliability in 3Q14,” Vale said of Carborough Downs.

While the Moatize mine in Mozambique produced nearly 1.3 million tonnes in the recent quarter, this rate is still far below Vale’s goals.

“The ramp-up of the first phase of the Moatize coal project is being currently restricted by the

existing limitations of the logistics infrastructure – railway and port – which do not allow for total

utilisation of the mine’s nominal capacity of 11Mt per annum,” Vale said.

“The start-up of the Nacala logistics corridor, expected by the end of 2H14, will gradually eliminate the above-mentioned logistics bottleneck.”

Financial results

The mining giant posted a net loss of $US1.44 billion in the recent quarter – a startling 141% fall from the $US3.5 billion net income of the corresponding September quarter of 2013.

While lower iron ore and other commodity prices had some impact, there was a 1666% year-on-year surge in foreign exchange and monetary variation losses – they totalled $US1.94 billion compared to a $US110 million loss for this category in the September quarter of 2013.

Vale stressed the mainly non-cash impact of a 11.3% slide in Brazil’s currency against the US dollar, and said there was a one-off loss of $US740 million in the recent quarter associated with currency swaps.