“Anglo to stick with coal despite losses, safety woes” AFR Article 1st March 2021
Anglo American chief executive Mark Cutifani has vowed to persist with Australian coking coal despite a string of safety incidents at the company’s local mines and big losses amid China’s ban.
Safety problems at Anglo’s two best Australian mines played their part in the losses. The Grosvenor mine is out of action since an underground explosion badly injured five workers in May 2020.
The neighbouring Moranbah North mine also suffered a roof collapse in January 2020 and has been out of action for the past week because elevated levels of carbon monoxide raised fears of another underground fire or explosion.
Anglo has found no evidence of an underground explosion at Moranbah North during its investigations over the past week, and Mr Cutifani told investors the mine would hopefully resume operations in less than a month.
The Queensland government has established a public inquiry into last year’s Grosvenor explosion and Mr Cutifani said he hoped the mine could restart before Christmas.
Patient and cautious
“We expect to restart sometime in the second half of the year but we don’t want to pre-empt the inquiry or its findings. We will be both patient and cautious in our approach,” he said.
He has promised to have Anglo out of thermal coal before 2025 and has increasingly talked up the company’s prospects in a decarbonised future.
Asked whether it was worth persisting with its coking coal division given the company’s operational struggles in Queensland and the longer-term challenges of reducing carbon emissions from coking coal, Mr Cutifani said the division had great earnings potential.
“It is a great business. It is worth the effort … we are going to stick with it” he said.
“The [Queensland coking coal] business generated I think about $US5.5 billion of free cash flow since 2016.
“We will nurture those assets and make sure that we get ourselves back up to the full rate.
“It will probably take us the best part of this year with the Grosvenor restart and Moranbah.”
Anglo and its Japanese partner Mitsui are spending $US226 million reviving an old Queensland coking coal mine called Aquila that has been shut since the global financial crisis in 2009.
First production
The first production at Aquila will come in early 2022, around the time Anglo’s Grasstree mine reaches the end of its life, and Aquila will use Grasstree’s infrastructure.
The Anglo board will also take a final investment decision in 2022 on whether to spend a further $US400 million expanding the processing infrastructure that serves the Grosvenor and Moranbah North mines; a move that could allow the company to increase coking coal exports from Queensland.
Anglo’s big loss in Australian coal came as Yancoal reported a $295 million underlying loss for 2020 on Friday night, which blew out to a loss of $1.04 billion once accounting losses for the re-absorption of the struggling Watagan subsidiary were included.
The second half of 2020 was much tougher for Yancoal than the first half of the year, and the company posted an underlying loss of $258 million in the six months to December 31.
Yancoal’s big loss came after Coronado Global Resources posted a $US226.5 million loss for 2020 on Friday morning. The six months to December 31 were responsible for $US88.3 million ($114.5 million) of those losses.
Queensland coal miner Stanmore Coal also reported a loss of $16.1 million on Friday for the six months to December 31.
Earlier in February Whitehaven Coal reported a $94.4 million loss for the six months to December 31, and Glencore’s Australian coal division lost $US602 million ($776 million) before interest and tax in the same period.
BHP’s Australian coal business lost $US478 million ($613.8 million) in the six months, and that loss did not include tens of millions of dollars spent managing coronavirus precautions such as Queensland’s hard border.
Coal prices have recovered significantly since October, particularly in thermal coal, and most coal miners noted that financial results should be much improved the next time they report in August.
“You are going to see a dramatically different first half of financial year 2021 to what we are currently experiencing; in January and February [it is] already much improved, and the outlook is looking very positive for the run home into June 30,” said Whitehaven managing director Paul Flynn on February 17.
