March 2016
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World Coal
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5
Coal News
Coal News
R
estructurings and divestments were
the flavour of the month among
the world’s major mining companies as a
series of negative results statements forced
many to rethink their business strategies.
Of the majors, Anglo American
provided perhaps the most dramatic news.
The company, which announced a
US$5.5 billion loss in 2015, said it would
significantly reduce its operating platform
to just 16 assets – from 68 in 2013 – focused
on its De Beers diamond, platinum group
metals (PGMs) and copper businesses.
As a result, the Moranbah and
Grosvenor metallurgical coal mines in
Australia will join the list of assets on the
company’s lengthy for-sale list. The
company has already agreed the sale of the
Dartbrook and Callide coal mines in
Australia and had previously announced it
would look for buyers for its South African
coal business. The Grosvenor project has
only recently been completed and is likely
to be one of the company’s more attractive
assets – but the company is unlikely to
receive anywhere near its US$1.95 billion
construction cost.
It is South Africa, however, that is likely
to be the country hit hardest by
Anglo American’s reinvention, according to
a recent research note from BMI Research.
The company currently accounts for 21.5%
of the country’s thermal coal production,
employing over 24 000 people. “As the
miner is keen to offload the majority of its
South African assets, this could result in a
significant decline in the country’s coal
production growth,” BMI Research said,
adding that it expects a contraction in the
Rainbow Nation’s coal production of 4%
this year and 1.5% in 2017.
BHP Billiton restructures
Anglo American was far from the only
company to announce such moves,
however. The world’s largest mining
company, BHP Billiton, announced it was
to streamline its operating structure based
on geographical operating regions rather
than commodity type, reducing its
operating divisions from five to three.
Its mineral production assets will be
organised into two divisions: Minerals
Australia headed by the company’s current
coal chief, Mike Henry, and including its
Australian and Indonesian coal operations,
and Minerals Americas, which will include
its New Mexico coal assets in the US and
stake in the Cerrajon coal mine in
Colombia. Its oil and gas assets will be
housed in a separate Global Petroleum
unit.
“These changes are a continuation of our
simplification journey,” said BHP Billiton’s
CEO, AndrewMackenzie, when
announcing the changes. “They are made
possible by the recent demerger of South32
and well-timed asset divestments, and
reflect our continued commitment to
improve productivity.”
South32 cuts jobs
Meanwhile, South32 announced it was
cutting 300 jobs at its Illawarra
Metallurgical Coal business as part of a
plan to reorganise production around two
operations. The company also said it would
cut sustaining CAPEX and underground
development following the completion of
its Appin Area 9 project. Despite this,
production is expected to increase to
9.5 million t by the end of the financial year
ending in June 2017 as longwalls ramp up
at the Appin and Dendrobiummines.
“The refinement of our regional
operating model allows us to remove
additional layers of management, while
further aggregating functional support,”
said South32’s CEO, Graham Kerr, in a
statement. “As a result we expect another
significant increase in labour productivity
and reduction in cash costs.”
Selling spree continues at
Rio Tinto...
The world’s second largest mining
company continued its coal sell off,
completing the sale of its interest in the
Bengalla coal mine to New Hope Corp. for
US$616.7 million. This follows the
agreement at the end of January to sell its
Mount Pleasant thermal coal assets to
MACH Energy Australia Pty Ltd for
US$224 million plus royalties.
“These agreements, for over
US$800 million in asset sales, deliver
significant value for our shareholders,”
said Jean-Sébastien Jacques, Rio Tinto
Copper & Coal CEO. Rio Tinto, which
announced a loss of US$866 million in
2015, has now announced or completed
US$4.7 billion of divestments since
January 2013.
... but Glencore might buy
Meanwhile, Glencore bucked the trend and
expressed an interest in buying coal assets,
with CEO Ivan Glasenberg saying he
would be interested in boosting Glencore’s
ownership of the Cerrajon mine in
Colombia through the purchase of
Anglo American’s stake – particularly if he
could persuade BHP Billiton, the other
member of the three-way joint venture that
owns the mine, to split the purchase.
“Cerrejon is an opportunity,” Glasenberg
said. “It is something that we would have
to find a way to do if we can get the right
price; it is something we wouldn’t want to
walk away from.”
Glencore is much more bullish on coal
than their rivals with Glasenberg predicting
a better year ahead: “What is good about
coal going forward and looks interesting is
there is no new production in the world, if
anything we have seen this massive
cutback off Indonesian coal supply,” he
said. “It should be better this year than
what happened last year.”
INTERNATIONAL
Majors restructure and divest to meet challenging commodity markets
