Coal from Bathurst Resources will be relying on domestic
production until price recovery. Pictured: coal at Westport
from the Cascade mine on the Denniston plateau. Photo from
Depressed global prices of premium hard coking coal
appear set to continue, but West Coast mine developer Bathurst
Resources is confident its domestic coal production can bridge
the gap until exporting can begin.
Research from Goldman Sachs last week said global prices of
the specialist steel-making coking coal might have
bottomed-out at around $US120 ($NZ137) tonne, but a recovery
back to the $US140 level, which represents the marginal
actual cost of production, was unlikely before 2016.
Bathurst chief executive Hamish Bohannan was contacted and
said the current consensus, of analysts' pricing, concurred
with Goldman Sachs' analysis.
''We're fortunate that we have a robust domestic coal
business [of three South Island mines] that is not linked to
global pricing, so we can afford to delay Escarpment and rely
on our domestic business,'' he said.
Bathurst had several coal samples in the Japanese and Indian
markets at present and Mr Bohannan expected a move to bulk
samples ''some time in the next 12 months''.
Having in the past four years spent $300 million preparing to
begin coking coal extraction on the Denniston plateau above
Westport, and fought off numerous legal challenges, Bathurst
had to suspend Denniston development operations in February
in the face of the price slump.
Bathurst has in the past estimated its three South Island
mines could boost production by 100%, from the expected
400,000 tonnes this year to 800,000 tonnes over four years.
Craigs Investment Partners broker Peter McIntyre said the
Goldman analysis ''did not bode well'' for Bathurst, He said
Goldman had cuts its forecasts for premium hard coking coal
by 9% to $US133 tonne in 2015, by 7% to $US140 in 2016, and
by 9% to $US145 in 2017.
There were several factors from China also to be considered,
Mr McIntyre said.
China was moving from export-led to domestic economy, had
large stockpiles of many commodities and faced its own
''This [pricing] looks like taking two to three years to
clear. Bathurst have a hard road ahead and domestic
[production] will be crucial to see them through,'' he said.
Mr Bohannan said the present price, and consensus on future
pricing, was the reason behind Bathurst having pulled back on
the full development of the Escarpment mine, on the plateau.
''As we are well aware, however, coal pricing is cyclical and
when it comes back, it will come back quickly.''
A small number of staff from the adjacent Cascade mine were
working on erecting fences and signage at the Escarpment
site, he said.
As announced in recent weeks, Bathurst would then proceed to
site-clearing works, installation of water management
systems, stockpile areas and infrastructure ''in readiness
for a ramp-up to full production as export prices recover'',
Mr Bohannan said.
Goldman said while low prices had prompted miners to cut
about 21 million tonnes globally of coking coal output
capacity during the past 18 months, the production cut impact
would become stronger during late 2014, which should mark the
beginning of a recovery.