Friday, August 30, 2013

Coal loss hits $148m on operational problems, weak rand

South African coal miner Coal of Africa (CoAL) has reported a 6% year-on-year increase in its loss for the 12 months that ended on June 30 this year.

The company recorded a $148.1 million loss for the year, compared with $138.9 million a year earlier, in a financial statement published on Friday August 30.

It blamed the result on difficult operating and financial conditions, including force majeure declarations and exchange rate losses.

Non-cash charges of $106.6 million were included in the loss figure for 2013, following an impairment on Mooiplaats, one of CoAL’s thermal coal collieries, as well as foreign exchange losses due to the weakening of the South African rand against the US dollar.

The exchange rate averaged R1 to $0.0994 in the last week of June this year, compared with R1 to $0.1192 in the last week of June last year, according to exchange rate service

The Johannesburg Stock Exchange-listed miner has made “significant progress” in executing a strategic turnaround of its business in the past four months, CoAL CEO David Brown said.

“This strategy will reposition CoAL as a project development company with a significant pipeline of hard coking coal near-term and longer-term projects,” he added.

The Vele Colliery in Limpopo province, where CoAL produces semi-soft coking coal, increased its output two-fold during the 2013 financial year as the ramp-up of operations continued.

Run-of-mine production reached 536,846 tonnes in the year, compared with 161,107 tonnes a year earlier. Of this, 149,690 tonnes were exported, compared with 46,066 tonnes in the 2011-12 financial year.

However, the colliery suffered from higher-than-normal rainfall in January, resulting in flooding of the pit, which caused CoAL to declare force majeure.

In February, a train derailment on the Maputo corridor, which CoAL uses for its coal exports, resulted in the closure of the railway line and a further force majeure period.

CoAL’s Makhado project is progressing, Brown said, with the definitive feasibility study now finalised. Makhado is expected to produce 2.3 million tpy of hard coking coal.

China’s imported met coal market edges up amid mixed sentiment

China’s imported metallurgical coal market strengthened during the week ended Friday August 30 although sentiment has turned cautious.

A trading source in Beijing hasn’t been asking for prices because he doesn’t want to match the higher offers when sales at ports are not picking up much.

He remains positive, however, that it’s only a matter of time before downstream customers to accept higher prices at ports because an uptick in domestic coke market is expected to lift the coal market.

Shenhua Group raised its coke prices by 50 Yuan ($8) earlier this week, leaving the grade II coke at 1,310 ($212) Yuan per tonne and grade I coke at 1,420 Yuan ($230) per tonne to Tangshan area.

Shanxi Coking Coal will raise its September price for coking coal by 60 Yuan ($10) but it has yet to reach an agreement with steel mills and coking plants, sources said.

Several market participants have maintained a cautious attitude.

“At this price level right now, we’re a bit more cautious and it’s really hard to tell how the market will go,” a trader in Singapore said.

“Miners are still pretty bullish but I think it’s going to be difficult for the seaborne prices to go up much further. Because the price increase we’ve seen over the past weeks was due to traders’ bullishness rather than end customers’ real demand,” he added.

Seaborne coking coal will lose its appeal if the prices continue to rise when domestic materials are not catching up, he said.

A second source in Beijing agreed.

“I think it’s a fake bull market right now, prompted by traders. Downstream demand is not really getting any better. I’m waiting for the market to fall again, probably in a month or so,” he said.

Sales at ports remain limited, according to a Dalian-based trader. “There are prices but there’s no market. Buyers are still in a wait-and-see attitude.”

“It’s like a Mexican standoff now – both sides are waiting for the other to move first,” a third Beijing-based trader said, referring to the situations at ports.

Market sources this week pegged premium hard coking coal at $157-158 per tonne cfr China and mid-vol hard coking coal at $145-148 per tonne.

Last week, Metal Bulletin’s coking coal indices were calculated at $155 per tonne cfr Jingtang for low-vol materials and $145.50 per tonne cfr Jingtang for mid-vol materials.

Trades/offers heard

Russian K10 coking coal was heard traded at $140 per tonne cfr China for September loading. The material was also heard traded at 1,020 Yuan ($165) at Jingtang port including VAT and port charges.

A 70,000-tonne cargo of Russian gas coal with 38% volatile matter, 0.8% sulphur, 8% ash and CSN 8 was heard offered at $118 per tonne cfr China for late September loading.

50,000 tonnes of Russian PCI with 18-19% volatile matter and 9% ash was heard traded at $118.5 per tonne cfr China.

Saraji was heard offered at $165 per tonne cfr China earlier in the week, while the material was heard offered at 1,120 Yuan ($181) at Jingtang port including VAT and port charges.

German Creek was heard traded at 1,100 Yuan ($178) at Jingtang port last week, and 10,000 tonnes of Windsor was heard traded at 1,090 Yuan ($177) at Dongjiakou port last week.

One half-capesize cargo of Capricorn PCI was heard offered at $125 per tonne cfr China last week.

Peak Downs North PCI was heard traded at $113 per tonne fob Australia this week for October loading, while South Walker Creek PCI was heard traded at just above $130 per tonne cfr China.

A panamax cargo of Australian PCI with around 18% volatile matter and 10% ash was heard offered at $129 per tonne cfr China.

Thursday, August 29, 2013

Rio Tinto awarded Zambeze coking coal mining license in Mozambique

Anglo-Australian mining major Rio Tinto has been awarded a mining license for its wholly owned Zambeze coal project in Mozambique, a source at the country’s ministry of mineral resources told Steel First.

The 25-year mining concession will be made public once it is signed off by Mozambique’s administrative court, the source said on Thursday August 29.

Riversdale Mining originally applied for the mining license in 2010, before Rio Tinto’s acquisition of the Mozambique-focused Australian miner in 2011, a Rio Tinto spokesman told Steel First.

The circa-$4 billion acquisition included the flagship Benga coal mine and the adjacent Zambeze project, in Mozambique’s coal-rich Tete province. The deposits hold both thermal and coking coal.

“We are finalizing our longer term development plans, which include the expansion of the Benga mine and the development of the Zambeze mine,” the spokesman said.

“The timing and scale of these developments will depend on the global economic environment and the availability and cost of the coal chain,” he added.

Lower coking coal and iron ore prices saw Rio Tinto’s earnings drop by 18% in the first half of 2013.

Metal Bulletin’s weekly index for premium low-volatility coking coal dropped from more than $180 per tonne cfr Jintang in February this year to less than $140 per tonne in June, before rising to $155 per tonne on August 23.

Rio Tinto started coking coal exports from the Benga joint venture with Tata Steel in June 2012.

Its Mozambique venture has, however, proven to be a costly affair because of over-ambitious estimates, infrastructure constraints and social unrest.

Rio Tinto CEO Tom Albanese stepped down in January this year following a $14 billion writedown which included £3 billion for its Mozambique coal division.

While new CEO Sam Walsh dismissed plans to divest the Mozambique coal business in February, rumors of a full or partial sale of Rio Tinto’s coal assets in the south-east African country circulated in June.

The mining major did not give a timeline for when the longer term development plan for Mozambique will be finalized.

Champion Iron Mines closes $3m deal with Hong Kong investor

Canadian iron ore developer Champion Iron Mines has closed a C$3 million ($2.86 million) strategic investment deal with Hong Kong mining investor Baotou Chen Hua Investment.

Baotou will buy 15 million shares for $3 million ($2.86 million), which will equate to it owning 11% of the common shares of Champion.

The company and its affiliates have the potential to provide Champion with access to multiple end-users of iron ore in China, and to Chinese companies that have a strong interest in participating in the financing of Champion’s short-term endeavors.

It can also provide a strategic relationship, which will help Champion achieve its long-term objectives.

“Baotou’s investment in Champion reaffirms the value of Consolidated Fire Lake North and the marketability of its concentrate product, and is the first step in growing Champion’s presence with Chinese investors” Champion president and CEO Tom Larsen said in a recent statement.

“It also sets the stage for our expanded discussions with Asian steel producers that are seeking lower risk and direct sources of iron ore,” he added.

The proceeds from the transaction will be used to continue the feasibility study and technical work for development of the Consolidated Fire Lake North Project, which is located in the Fermont iron ore district of Quebec.

Production is expected to begin in 2016.

In a recent interview, Jean Luc Chouinard, Champion’s VP of project development, told Steel First that the company plans initially to produce nearly 10 million TPY of iron ore concentrate and 20 million TPY of iron ore sinter concentrate in phase 2 of its development project.

Champion is conducting a feasibility study that will expand production capacity to 18-20 million TPY of iron ore concentrate.

Coking coal, coke futures on DCE plunge to daily limit

Coking coal and coke futures on the Dalian Commodity Exchange both dropped to their daily limit on Wednesday August 28, in a sharp correction that brought prices closer in line with physical fundamentals.

The most-traded January contract for coking coal closed at 1,141 yuan ($185), down from its settlement of 1,188 yuan ($193) on Tuesday August 27, while the most-traded January contract for coke closed at 1,585 yuan ($257) on Wednesday, compared with a settlement of 1,651 yuan ($268) a day earlier.

The limit for price movements on the exchange is 4% from the previous day’s settle.

“The futures prices went up too fast but the increases in the physical market are considered fairly weak,” an analyst said from Shanghai.

Even taking into account yesterday’s drop, the January coke contract has risen 9.1% since the beginning of August, while the January coking coal contract has gone up by 8% over the same period.

Prices for Chinese hard coking coal delivered to mills have risen by 3% since the beginning of the month to 1,185 yuan ($192) per tonne on August 23.

Grade II coke is currently trading at around 1,280-1,300 yuan ($207-211) at Shandong area, up 4% from the start of August.

Shanxi Coking Coal raised its coal prices by 10-40 yuan ($1.6-6.5) last week, leaving its Tunlan hard coking coal at 1,150 yuan ($186) free-on-rail.

There have been talks that Shanxi Coking Coal will continue to raise prices in September, but steel mills and coking plants are not expected to accept the increase as they remain cautious on keeping the costs down, according to the analyst.