Bathurst confident of riding out depressed hard coking coal prices

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 ODT files.
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 ODT files.
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 funding issues.

''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.

-simon.hartley@odt.co.nz

Denniston Plateau

Bathurst Resources do have an open cast mine at Denniston, not on the escarpment, it is the Cascade mine, as I am sure you are aware.  As for your comment re Denniston's history, I am fully aware of that, not only from my wanderings on the Plateau but also from my own research.  The early mining, of course, was not open cast and barely disturbed the landscape, unlike open cast coal mining.  The world needed Denniston coking coal back then and it is beautiful coal and burns so hot.  Now however, there is climate change, and countries divesting from fossil fuel technology to renewable resources such as solar and wind power, therefore Bathurst Resources are fighting an uphill battle before they have even started digging, so why start?

Denniston Plateau

I have lived on the Denniston Plateau and am well aware of it's environment and stark beauty.  Loved on a clear day looking down to Waimangoroa, the beauty of the native bush in the valley and the sea.  Why has Solid Energy laid off workers at Stockton?  Could it be because the price of coking coal has dropped?  Could it also be because countries are divesting from fossil fuel energy to renewable energy sources?   The jobs for Coasters haven't eventuated and as one fossil fuel company (Solid Energy) is downsizing I cannot see how Bathurst Resources will make a profit with current trends.  I fear they will dig the hole, go bust, be unable to pay our government the $22 million, and leave an unsightly open cast gash, having destroyed the sandstone and consequently flora, fauna and wildlife that existed before the hole was dug.  Hopefully Bathurst Resources will see sense and not dig the hole. 

Uninhabitable plateau

Jendy: How much time have you spent on the Denniston Plateau? Do you actually know where it is? If you did you would know there are plenty of coal mines up there and have been for over 100 years. There is the still smoldering mine down towards the Cascade that has been burning for over 100 years. The place is vast and a windswept oasis of cracks and gullies totally unusable for anything except what it has been used for in the past. It is covered in cloud most of the time, with a permanent population of around three.

Bathurst are hardly destroying anything picturesque, and while I am not familiar with the exact location of the mine I bet you have to travel far into the wilderness to access it so it won't be seen from any tourist walk.

This will be good for Westport with the recent layoffs at Stockton.

Denniston Plateau

I cannot believe that Bathurst Resources (an Australian mining company) are continuing with preparations to destroy the Denniston Plateau.  How do they know that coking coal prices are suddenly going to improve?  They didn't know they were going to drop did they? 

Bathurst Resources appear hellbent on destroying the plateau with it's unique sandstone, wildlife, flora and fauna which has developed over the centuries on the sandstone, and is ultimately what makes the Plateau so unique. 

No amount of money i.e. $22 million negotiated with our government is going to remediate the Plateau.  The government has recently extended the time that Bathurst has to pay this money.  What if coking coal prices remain low?  After all more and more countries are realizing the impact that co2 emmisions have on our environment and are withdrawing from using fossil fuels which emit co2.  My biggest fear is the Plateau will be destroyed by Bathurst Resources and then they go bust, thus leaving a big hole, and a needlessly shattered environment.

It's time for Bathurst Resources to let go of the proposed escarpment open cast coal mine on the Denniston Plateau. Our world and the Plateau will be far better without this open cast coal mine.

 

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