Date: 26/9/2008
Author: Jamie Freed
Source: The Sydney Morning Herald --- Page: 21
Australian-listed coal mining group Felix Resources has received strong backingfrom the New South Wales (NSW) Government. It will retrospectively change thestate's Mining Act to negate a decision by the NSW Court of Appeal that hadbeen unfavourable for Felix. Rival Xstrata had sought to prevent Felix fromoperating a mine on land adjacent to its own at Mudgee, but the law change meansthe Moolarben thermal coal project, worth $A405m, can proceed. The issue hadbeen whether Xstrata was bound by a 28-day deadline for objections, which it letpass due to a potential merger with Felix at the time
http://www.theaustralian.news.com.au/story/0,,24472567-16222,00.html
AUSTRALIAN coal exporters of every type are enjoying a double-whammy windfall from export prices that has seen their gross revenue rise by more than 150 per cent since the start of 2008.
Both thermal coal and coking coal producers have found themselves with exploding margins thanks to a mixture of sharply increased long-term contract prices, signed within the last month and backdated to April 1, and the sharp drop in the value of our dollar to around the US70c level in recent days.
"Everyone's smiling," said Colin Randall, editor of the Hunter Valley Coal Report email newsletter and a long-time coal watcher.
He said that even though the spot price for steaming coal, used in power stations, had dropped from around $US190 to $US130 in recent weeks, prices of almost every type of steaming coal were at historic highs because of revised contract prices and the recent drop in the dollar.
Mr Randall said annual price negotiations with the Japanese power utilities, which lifted US dollar-denominated coal export contract prices by more than 100 per cent in many cases, had begun when our dollar was close to parity and concluded only "a couple of weeks ago" when our dollar was dropping sharply.
About 70 per cent of Hunter Valley coal is bought by Japanese power utilities on contract.
Coal price numbers from Royal Bank of Canada Capital markets, adjusted to Australian dollar equivalents, show the price received for steaming coal delivered to ships at Newcastle "free on board" has jumped from around $65 a tonne at the start of this year for some types to around $178 now, and even at spot prices, supposedly battered by the financial crisis, they are getting around $157.
"The loudest noise in Newcastle is 'ka-ching, ka-ching' as the coal producers check their revenue numbers," Mr Randall said.
Assuming a cash cost of production of around $50 a tonne, the producers' gross margin has jumped from around $15 to almost $128 now, an increase of exponential scale.
The windfall story is even stronger in Queensland in hard coking coal, despite the higher cost of production, conservatively estimated at $100 a tonne, because some Bowen Basin mines are underground and all are further from the coast.
Hard coking coal is top of the range and is only used in steelmaking, which has been widely touted as heading for a major drop-off as steel demand eases.
But Queensland producers have seen their contract price jump from around $112 a tonne at the end of last year to about $428 a tonne, an all-time high and an increase of about 280 per cent in 10 months. Those prices are guaranteed, in US dollars, until the end of March 2009.
There are very few spot sales of hard coking coal because steelworks regard supply as critical and the market is illiquid. Again, the price has slipped, but only from $US400 a tonne, reportedly for one cargo, back to $US365.
Converted to Australian dollars at today's rates, that supposedly lower price is a nosebleed $521 a tonne.