New generation of Australian coking coal emerges

Market: Coal, Coking coal
17/11/21

There are more than 100mn t/yr of feasible metallurgical and associated thermal coal projects in Australia that could be developed to bring additional supplies to the seaborne market if current high coal prices are sustainable.

Entrepreneurial coal firms that picked up projects or old mines over the past few years of depressed metallurgical coal prices are already moving ahead with restart projects, like the 1mn t/yr Gregory-Crinum and 1.2mn t/yr Bluff mines in Queensland. Others paused during the Covid-19 pandemic are reinvigorated and pushing toward construction or final approval, such as the 3.5mn t/yr Tahmoor South extension and the 15mn t/yr Olive Downs mine with a stage one phase of 4.5mn t/yr.

A new generation of Australian mid-tier firms are developing, with Stanmore taking on UK-Australian mining firm BHP's 80pc stake in the BHP Mitsui Coal (BMC) joint venture, Pembroke pushing forward with Olive Downs, Bowen Coking Coal aiming for 5mn t/yr of mined coal in 2024 and Fitzroy Australia reopening the 1mn t/yr Broadlea mine and starting construction of its 2.7mn t Ironbark No.1 project this year. These firms could replace the mid-tier firms Gloucester Coal, Macarthur Coal and Felix taken over by Glencore, Peabody and Yancoal respectively around 2010 when coal prices were higher than average.

Fewer development barriers

These new mid-tier firms have lower internal barriers to coal mine development than the incumbent big producers. BHP has put its 14.5mn t/yr Red Hill Mining and 7mn t/yr Saraji East metallurgical coal mines on hold while it focuses on productivity boosts at its market-dominant BHP Mitsubishi Alliance operations, because these major coal projects cannot compete with other growth options within its diversified portfolio.

BHP's agreement to sell BMC to Stanmore is likely to put the 6mn t/yr Wards Well metallurgical coal project back on the table, if Stanmore can find the financial backers to manage such a large project. The 4.5mn t/yr Eagle Downs coking coal project could follow suit, if South32 finds a suitable buyer for its 50pc stake and Aquila adds its 50pc holding to its ‘for sale' list.

Larger companies like Glencore and Whitehaven may be slower to move, but sustained firm prices and upgrades to medium-term price outlooks are likely to see them revisit projects like the 20mn t/yr Valeria and 15mn t/yr Winchester projects. Anglo American has significant growth options that it will be able to pursue once its 5mn t/yr Grosvenor mine is restarted this year, after safety concerns relating to the explosion at the mine in May 2020 have been addressed.

Spot premium hard coking coal prices more than trebled from early May to a high of $409.75/t fob Australia in mid-September before easing slightly. Argus last assessed the premium hard low-volatile coking coal price at $372/t fob Australia on 16 November, up from $110.95/t on 11 May. Lower grade metallurgical coal prices have also increased at a slightly lower rate. Argus last assessed the pulverised coal injection grade low-volatile price at $251.90/t fob Australia on 16 November, down from a high of $282/t on 22 October but up from $106.50 on 17 May.

By Jo Clarke

Australia coking coal projects
Project	Developer	Capacity	Status	Coal type	Proposed start date

Bluff	Bowen Coking Coal	1.2	plans to restart early 2022	metallurgical coal	2022
Gregory Crinum	Sojitz	1.0	restart delayed by roof fall	thermal and metallurgical coal	2022
Tahmoor South	Simec Group	3.5	GFG pushing ahead	metallurgical coal	2022
Olive Downs	Pembroke Resources	15.0	NAIF loan underpins development	metallurgical coal	2022
Isaac Plains complex	Stanmore Coal	1.0	building started	thermal and metallurgical coal	2022+
Ironbark No.1	Fitzroy Australia Resources	2.7	development coal 2022, longwall 2023	thermal and metallurgical coal	2023
Burton and Lenton	Bowen Coking Coal	2.0	acquired from New Hope in August	thermal and metallurgical coal	2023-24
Hillalong	Bowen Coking Coal	4.2	exploration phase	thermal and metallurgical coal	2023+
Broadmeadow East	Bowen Coking Coal	1.2	final investment decision expected this year	metallurgical coal	2024
Baralaba South	Baralaba Coal	6.0	looking at alternate development path	thermal and metallurgical coal	2023
Wilton-Fairhill	Futura Resources	3.0	designed to compliment Gregory Crinum	metallurgical coal	2023+
Dendrobium extension	South32	5.2	waiting approval	thermal and metallurgical coal	2026+
Eagle Downs	Aquila Resources, South32	4.5	South32 selling, Aquila may follow	metallurgical coal	2023
Valeria	Glencore	20.0	working through approvals since June 2020	thermal and metallurgical coal	2026+
Winchester South	Whitehaven Coal	15.0	to be developed over next decade	metallurgical coal	2026+
Grosvenor Phase 2	Anglo American	6.0	waiting for restart of Grosvenor	metallurgical coal	2026+
Moranbah South	Anglo American	18.0	waiting for restart of Grosvenor	metallurgical coal	2026+
Source: company updates

Metallurgical coal prices ($/t)

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