04 Mar 2021

Indonesia's Salim Plans Australian Coal Mine Growth

04 Mar 2021  by Jo Clarke   

The Indonesian owners of Australia's 8mn t/yr Mount Pleasant high-grade thermal coal mine in New South Wales (NSW) have applied to expand the mine to 17mn t/yr and extend its life to the end of 2048 from 2026.

Indonesian conglomerate Salim's MACH Energy Australia subsidiary has applied for environmental approvals to increase run-of-mine capacity to 21mn t/yr from 10.5mn t/yr, to deliver 17mn t/yr of saleable coal to export and domestic customer. The expansion includes a larger mining footprint, as well as an upgrade to the coal handling and preparation plant and the rail loop that loads coal for delivery to the port of Newcastle.

The proposal is a show of confidence in Australia's thermal coal industry, which was largely unprofitable in July-December when high-grade thermal coal prices slumped to around $50/t fob Newcastle. Many coal mining companies, including UK-Australian firm BHP, are looking to exit their thermal coal businesses in NSW, with Chinese-owned Yancoal buying up many of the coal assets already sold.

MACH acquired the Mount Pleasant project in January 2016 for $224mn plus royalties as part of UK-Australian mining firm Rio Tinto's plan to divest all of its coal assets.

MACH has an offtake agreement with Japan Coal Development subsidiary JCD Australia (JCDA) that includes a clause that JCDA will acquire 5pc of Mount Pleasant coal. The deal sees MACH supplying thermal coal from Mount Pleasant to a number of Japanese utilities through a marketing agreement with JCD, while retaining the rights to market the coal to other customers itself. MACH had been looking for other offtake partners, with the possibility of further diluting Salim's stake in the mine, but no others have been publicly released.

Mount Pleasant produces low-impurity coal of around 6,000 kcal/kg NAR for export through Newcastle. It also supplies bypass coal to Australian utility AGL's 2,640MW Bayswater and 2,000MW Liddell power plants in NSW.

The high-grade thermal coal price was around $49/t fob Newcastle for 6,000 kcal/kg NAR when MACH acquired Mount Pleasant from Rio Tinto.

Argus last assessed high-grade Australian thermal coal at $82.57/t fob Newcastle for NAR 6,000 kcal/kg on 26 February, down from $89.62/t on 29 January but up from a low of $46.18/t on 4 September. It assessed lower-grade coal at $55.65/t fob Newcastle for NAR 5,500 kcal/kg on 26 February, up from $55.01/t on 29 January and $35.04/t on 4 September.

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