Xstrata, miners’ union reach deal over disputed share scheme

Warring parties strike a deal just in time for the seven-day deadline set by the Department of Mineral Resources

Thu, 3 Nov. 2011

Diversified miner Xstrata and the National Union of Mineworkers (NUM) have reached an agreement over Xstrata’s disputed employee share-ownership scheme, the Department of Mineral Resources said on Wednesday.

Over the past seven days, the department has been facilitating discussions to resolve the two parties’ dispute over Xstrata’s share scheme, which the NUM rejected on the grounds that it was rigged in favour of managers.

Xstrata held firm to its decision to allocate these shares using three different employee bands, which prompted members of the NUM to go on strike on October 16.

With no end in sight, the department summoned both parties to its offices last week and gave them seven days to hammer out their differences in meetings facilitated by advocate Sandile Nogxina, the department’s former director-general and special adviser to Minister of Mineral Resources Susan Shabangu .

The union suspended the strike to facilitate these negotiations.

The parties struck a deal resolving the dispute, which will see Xstrata allocating shares equally over all staff levels and the department recognising the share scheme as compliant with the requirements of the Mining Charter, giving Xstrata the credits it needs to meet its 26% black economic empowerment ownership obligations across both its coal and alloys divisions.

The agreement will also see the NUM calling off its strike with immediate effect.

"We applaud both NUM and Xstrata on the co-operative spirit that they demonstrated during these negotiations in the national interest," said Mr Nogxina.

Commenting on the deal, NUM spokesman Lesiba Seshoka said Xstrata could have avoided the strike by "simply doing what they have done now, which is acceding to our demand".

"We had initially conceived this (share-ownership plan) as an incentive scheme, but during the discussions, we recognised the opportunity it provided to fulfil the spirit of the Mining Charter, as it provides a shareholding to Xstrata’s workers, 84% of whom are historically disadvantaged South Africans," said Songezo Zibi, corporate affairs manager at Xstrata. "This means Xstrata South Africa is fully compliant with the 26% ownership requirement of the charter."

(sourced Businessday)

Australia Newcastle thermal coal falls to USD 117 per tonne

Saturday, 29 Oct 201

Bloomberg reported that power station coal prices at Australia Newcastle port, an Asian benchmark dropped 0.2% in the week ended today.

According to the globalCOAL NEWC Index coal prices at the New South Wales port declined to USD 117.89 per ton from USD 118.10 the previous week.

Xstrata Plc the world largest exporter of power-station coal, BHP Billiton Ltd and Rio Tinto Group are among mining companies that ship coal through Newcastle.

(Sourced from Bloomberg)

Xstrata sets steam coal contracts above analyst expectations

Wed,19 Oct 2011

Bloomberg reported that Xstrata Plc which achieved record output of power station coal in the third quarter agreed on annual contracts with long term Japanese customers at prices that exceeded analysts’ expectations.

The Zug Switzerland based company said in a statement that Xstrata settled coal prices at USD 126.50 per tonne from October 1 compared with USD 129.85 on April 1.

Liberum Capital Ltd said "Considering recent bearishness around commodity prices we consider this an amazing settlement for Xstrata."

The Standard & Poor GSCI Spot Index of 24 raw materials has dropped 17% from this year high in April. Copper for three month delivery on the London Metal Exchange has slumped 28% from a record as economic growth in China the world biggest user of industrial metals slows.

Mr Rob Clifford a London based analyst at Deutsche Bank AG said "The third quarter 2011 marked the end of recent weather- related production impacts on the coal business. On the other side of the ledger, copper production was hampered by more issues at Collahuasi."

He said that "With the stock trading below our price target, we maintain our buy' recommendation. He has a share-price target of 1,758 pence for Xstrata."

Production of coking coal used in steelmaking increased by 26%. Total output including semi-soft coal rose 7.8% to 23.6 million tons.

(Sourced from Bloomberg)

Xstrata’s thermal coal production up 13 percent in Q3

Tuesday, 18 October 2011

On October 18, Australian coal producer Xstrata announced its production results for the third quarter of 2011. Accordingly, Xstrata's total consolidated coal production in the given quarter rose by 1.7 million mt compared to the corresponding quarter of 2010 to 23.6 million mt, hitting a quarterly production record. The Australian company's thermal production in the third quarter this year, including semi-soft, was 13 percent or 1.6 million mt higher than the same period in 2010, mainly due to the successful commencement of operations at the Mangoola open-cut mine ahead of schedule in February 2011.

Xstrata posted a 26 percent increase in coking coal production in the third quarter of the year, primarily due to full production from the Tahmoor underground mine in New South Wales compared to the same period last year when industrial action significantly impacted production.

Meanwhile, Xstrata's total nickel production in the third quarter of 2011 increased to 26,738 mt, 15 percent higher than the same period last year. This increase was driven by the successful ramp-up of the Falcondo ferronickel complex in the Dominican Republic to exceed the planned annualized run-rate of 14,000 mt of nickel in ferronickel, 50 percentof its installed capacity. Falcondo contributed 3,708 mt in the third quarter, six percent above the planned run-rate and representing an annualized run-rate of close to 15,000 mt of nickel in ferronickel.

In response to weaker market conditions, scheduled maintenance programs at the furnaces during the high-electricity-tariff South African winter were extended, resulting in reduced operating capacity utilization of 52 percent. Consequently, ferrochrome production was 18 percent lower in the third quarter of 2011 compared to the same period in 2010.

According to the statement, Xstrata's base metal and coal operations remain on track to deliver a stronger second half performance compared to the first half of 2011.

Tags: coking coal , raw mat , Australia , Oceania , production , mining , Xstrata

Xstrata's S.Africa ops disrupted by strike

Mon Oct 17, 2011

JOHANNESBURG (Reuters) - The South African operations of global miner Xstrata were disrupted on Monday after hundreds of workers joined a walk-out in protest over an employee share ownership programme, the company said.

Xstrata spokesman Songezo Zibi said the impact of the strike on its coal and alloys operations was yet to be determined.

"All Xstrata Coal South Africa's operations are affected and a number of Xstrata Alloys operations have also been impacted," he said in a statement.

Xstrata's South African operations produced 8.4 million tonnes of thermal coal and 581,000 tonnes of ferrochrome, used to make stainless steel, in the six months to the end of June.

The alloys operations also produce vanadium and platinum group metals.

The National Union of Mineworkers (NUM) said last week it wanted employees to be compensated equally under a proposed share ownership programme, regardless of rank, while the company's plan compensates employees based on their level.

Around 5,180 workers or 43 percent of Xstrata's total workforce in South Africa are members of the NUM.

The union said it expected all of the workers to participate in the strike, although it was still counting the numbers of those who have walked off the job. Spokesman Lesiba Seshoka said other unions, which represent additional workers at Xstrata, may join the strike.

"The strike is extensive and full-blown," Seshoka said.

He said the union expected the company to respond to its demands later on Monday, although no formal meetings had been scheduled.

Xstrata's Zibi said all discussions regarding the employee share ownership programme were suspended due to the strike.

The company employs just under 12,100 workers in South Africa, and three-quarters of them belong to unions.

Xstrata shares were down 0.64 percent in London at 1333 GMT, compared with a 0.13 percent fall in the FTSE 100 index.

Companies with operations in South Africa set up employee share programmes to increase worker ownership, particularly black ownership.

South Africa's black economic empowerment drive is aimed at rectifying the ownership and income disparities of white-minority apartheid rule.

(sourced Reuters)

S.Africa miners to begin Xstrata strike Sunday -union

Sun Oct 16, 2011

* Workers to strike from 1600 GMT Sunday
* Dispute is over employee share programme

JOHANNESBURG Oct 16 (Reuters) - South African miners will go on strike at Xstrata Plc later on Sunday over an employee share ownership programme, a union spokesman said.

"It begins at 1800 (1600 GMT) this evening," Lesiba Seshoka, a spokesman for the National Union of Mineworkers, said in a text message to Reuters.

The strike will affect all of the diversified miner's South African operations, Seshoka said. The Anglo-Swiss mining firm has both coal and alloy operations in South Africa.

More workers are likely to walk off the job at the start of Monday's morning shift.

No one was immediately available for comment at Xstrata.

The union wants employees to be compensated equally under the share ownership programme, regardless of rank, while the company's plan compensates employees based on their level.

Companies with operations in South Africa set up employee share programmes in a bid to increase worker ownership, and particularly black ownership.

South Africa's black economic empowerment drive is aimed at rectifying the ownership and income disparities of white apartheid rule.

(sourced Reuters)

Xstrata to buy metallurgical coal deposit from Cline Mining

Monday, 10 Oct 2011

The Canadian Press reported that Xstrata Coal has agreed to pay CAD 40 million to Cline Mining Corp to acquire 100% of a metallurgical coal deposit within the Lossan property in north eastern British Columbia.

The deposit has an estimated 240 million tonnes of metallurgical coal. The Lossan deposit covers about 3,800 hectares in the Peace River coalfield.

The deal is expected to close October 12.

Mr Ken Bates president and CEO said in a statement “The sale of the Lossan metallurgical deposit provides Cline Mining with immediately available funds to ensure efficient ramp up and expansion of its New Elk metallurgical coal mine. It also provides the ability to avail itself of other strategic opportunities.”

(Sourced from The Canadian Press)

Australia Newcastle thermal coal falls 1pct

Sunday, 09 Oct 2011

Bloomberg reported that Power station coal prices at Australia Newcastle port an Asian benchmark dropped 1.1% in the week ended today.

According to the globalCOAL NEWC Index coal prices at the New South Wales port declined to USD 121.14 per tonne from USD 122.54 the previous week.

Xstrata Plc the world largest exporter of power-station coal, BHP Billiton Ltd and Rio Tinto Group are among mining companies that ship coal through Newcastle.

(Sourced from Bloomberg)

Xstrata gets in on BC coking coal action with C$40m acquisition

Sat,08 October,2011
By Matthew Hill

TORONTO – Diversified major Xstrata has further dug into Canada’s coking coal, with the C$40-million purchase of the Lossan metallurgical coal deposit in British Columbia from Cline Mining, the Switzerland-based company said on Friday.

The acquisition follows hot on the heels of Xstrata’s August acquisition of First Coal Corporation, which also owns coal licences in the Peace River region of the province.

The company isn’t the only mining giant that has been kicking up dust around Peace River, with rival Anglo American announcing earlier this week that it had lifted its ownership of Peace River Coal to 100%, and was doing a study to raise output there from one-million tons yearly of coking coal to 3.5-million tons by 2015.

The LSE- and JSE-listed miner paid $166-million to the minority owners of Peace River, Northern Energy & Mining Inc (NEMI) and Hillsborough Resources, to buy their respective around-12% stakes in the coal assets, as well as a royalty.

Anglo American made an about turn earlier this year, after having previously said it would lead the sale of Peace River Coal.

“We see significant resource upside and plan to invest in further exploration studies to ascertain its full long-term potential,” CEO of the firm’s metallurgical coal business, Seamus French, commented earlier this week.

Coking coal prices spiked to over $300/t earlier this year after flooding in Australian mines dented global production, though they have since subsided slightly.

Coking coal is used to make steel, and the proximity of north-eastern British Columbia’s coalfields to rail and port facilities that link them to China, which supplies around half of the world’s steel, makes them attractive.

Xstrata said that Lossan had a 240-million ton resource, and covered an area of around 3 800 hectares, meaning that the company now held nearly 100 000 hectares in the area.

Local media reported that Xstrata, the biggest exporter of coal burned in power stations, offered $147 million to buy First Coal Corporation, a privately owned company.

The company operates mines in South Africa, Australia, and Colombia.

TSX-listed Tech Resources is Canada's biggest coal producer.

(sourced MiningWeekly)

Australia Newcastle Thermal Coal Falls 1.1% to $121.14 a Ton

Fri,Oct 7, 2011
By Rajesh Kumar Singh

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, dropped 1.1 percent in the week ended today.

Coal prices at the New South Wales port declined to $121.14 a metric ton from $122.54 the previous week, according to the globalCOAL NEWC Index.

Xstrata Plc (XTA), the world’s largest exporter of power-station coal, BHP Billiton Ltd. (BHP) and Rio Tinto Group are among mining companies that ship coal through Newcastle.

(sourced bloomberg)

Australia Newcastle thermal coal falls by 1pct

Saturday, 01 Oct 2011

Bloomberg reported that power station coal prices at Australia Newcastle port an Asian benchmark dropped 0.7% in the week ended today.

According to the globalCOAL NEWC Index coal prices at the New South Wales port declined to USD 122.54 per tonne from USD 123.42 the previous week.

Xstrata Plc the world largest exporter of power-station coal, BHP Billiton Ltd and Rio Tinto Group are among mining companies that ship coal through Newcastle.

(Sourced from Bloomberg)

South Africa coal miners start strike

Mon Jul 25, 2011

* Eskom sees no immediate impact from coal strike
* Above inflation wage deals hurting economy, analysts

By Agnieszka Flak and Olivia Kumwenda

JOHANNESBURG, July 25 - Tens of thousands of South African coal workers went on strike on Monday seeking inflation-busting 14 percent wage increases, but power utility Eskom said the
stoppage would not have an immediate impact on plants providing electricity to Africa's largest economy.

Hundreds of thousands of workers across the country have downed tools in recent weeks, or are threatening to do so, seeking raises double or triple the 5 percent inflation rate in the mid-year bargaining session known locally as "strike season".
State-run Eskom , which relies on coal for most of its power generation, said the latest strike would only have an impact if it became protracted.
"We've got on average 38 days of coal stockpiles at the power stations," spokesman Tony Stott said.
Lesiba Seshoka, spokesman for the powerful National Union of Mineworkers (NUM), said about 150,000 were on strike and employers have offered pay rises of 7 to 8.5 percent.
The chamber of mines said there are about 30,000 unionised workers in the coal sector and it was unclear how many were striking.

Employers over the past two years have struck wage deals averaging about 8 percent with many firms seeing the above-inflation settlements as a necessary cost of doing business in South Africa. They have also slashed jobs over the period to make up for the higher personnel costs.
Independent coal analyst Xavier Prevost said: "If there is no compromise and they continue like this, it's going to be serious and the damage to the economy will be big."
"If we don't produce coal, the first to be affected will be exports. Our (export) stockpiles will probably not last longer than 15 days".

The Richards Bay Coal Terminal, which ships most of South Africa's coal abroad, said stocks stood at a healthy 2.99 million tonnes at the end of June.
Eskom has been under pressure to build new plants to avoid a repeat of the power shortage that brought the economy to its knees in 2008, forcing mines to shut down for days and costing
the country billions of dollars in lost output.

It plans steep increases in electricity prices to pay for much-needed new power stations, adding to inflationary pressures and taking more money out of middle-class paychecks.
But Eskom is facing political pressure to settle with workers. The country's ruling African National Congress is allied with organised labour and wants to placate its millions of voters.
The Chamber of Mines is negotiating on behalf of several coal mining groups, including Anglo Thermal Coal SA , Exxaro , Optimum Coal and Xstrata Coal.

Read more
Why Coal Prices Will Soar in the Coming Years

Lontoh Coal Limited of South Africa has planned to open up China’s market

Coal prices area at US$ 120 a tonne

Mozambi Coal to acquire Mozambican coal concession

Newcastle steam coal price rises by 1pct

S.Africa's June coal exports rise to 4.78 mln T

Coal of Africa shares up almost 20%

Anglo, Xstrata Coal Miners in S.Africa Plan Strike Over Pay

July21, 2011
By Jana Marais, Bloomberg

Anglo American Plc (AAL), Xstrata Plc (XTA) and Exxaro Resources Ltd. (EXX) expect workers at their coal mines in South Africa to start striking over pay on the night of July 24, the Chamber of Mines said.

The National Union of Mineworkers, South Africa’s biggest, is yet to serve notice of its intention to strike, Frans Barker, the lead negotiator on behalf of the coal producers, said in an e-mailed response to questions. An estimated 30,000 workers are affected, he said.

The union is demanding a pay increase of 14 percent, while coal companies are offering 7 percent, and 8.5 percent to entry- level employees. Annual inflation in the country is currently 5 percent, the highest in 15 months.

The pay dispute is one of several affecting South Africa’s mining and energy industries as workers push for above-inflation wage gains that they say are needed to address the inequalities caused by apartheid, a system of institutionalized racial discrimination that ended in 1994. South Africa is the biggest supplier of power-plant coal to some European countries and is selling an increasing amount of the fuel to India.

Gold miners at companies including AngloGold Ashanti Ltd. (ANG) may walk out if talks with employers scheduled for July 25 fail, the NUM said, while miners at diamond producer De Beers plan to start a strike tomorrow, and oil company workers have been on strike for more than a week. Engineering workers ended a strike after winning a pay rise of double the inflation rate.
Coal supplies

There’s no “immediate short-term danger” to coal exports or supplies to national power utility Eskom Holdings SOC Ltd., Barker said yesterday in a telephone interview.

“Eskom’s stocks are relatively high and the companies themselves also have stockpiles,” Barker said. Eskom is involved in its own wage talks and the NUM has rejected a 5.5 percent pay rise offer made by the company, it said today.

Other coal companies involved in the talks are Optimum Coal Holdings (OPT) Ltd., Kangra Coal Ltd. and Delmas Coal Ltd. Delmas Coal, a closely held company, has made a lower offer of 7.5 percent for entry level workers and 6 percent for other miners.

Exxaro shares were little changed at 186.38 rand at 3:47 p.m. in Johannesburg trading while Optimum declined 1.9 percent to 25.51 rand. In London, Anglo was little changed at 2,979.5 pence while Xstrata dropped 1.2 percent to 1,348 pence.

Exxaro is based in Pretoria while Optimum has its headquarters in Johannesburg. Xstrata is based in Zug, Switzerland, and Anglo is based in London.

Newcastle thermal coal price declines to AUD 116

Friday, 27 May 2011

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, declined 1.6% in the week ended May 20th 2011. Coal prices at the New South Wales port fell to AUD 116.80 a tonne from AUD 118.74 the previous week.

Xstrata Plc the world’s largest exporter of power station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle. (sourced Bloomberg)

Xstrata kicks off FY 2011 thermal coal contract talks in Japan

28Mar2011/1103 am EDT/1503 GMT

Mannila (Platts)-- Major Australian coal producer Xstrata has kicked off 2011 fiscal year thermal coal contract negotiations with power utilities in the west of Japan, excluding Tohoku Electric whose major plants in the east are unoperational following the devastating March 11 earthquake and tsunami, sources said Monday.

In talks held last week, Xstrata was said to have held separate meetings with representatives of Chugoku Electric, Kansai Electric, Chubu Electric and Kyushu Electric, one Japan-based source said.

Meetings have yet to be held with Hokuriku Electric and Shikoku Electric, both of which are situated in the western part of Japan, the source said. Xstrata also held off talks with Tohoku Electric and Tokyo Electric (Tepco).

No prices were tabled by either Xstrata or the Japanese power utilities during the separate talks, sources said, although Xstrata representatives may return in the next week or 10 days to resume negotiations.

"There were no prices talked about during the meetings last week. Both sides stated their market analysis. I believe there were no numbers discussed, because both sides felt there would be a big discrepancy in the price expectations," the Japanese source said.

In the absence of Tohoku as a so-called champion negotiator for the Japanese power utilities, it is believed that Chugoku will lead the FY2011 talks for the Japanese side, the source said.

'TOKYO STILL HAVING ROLLING BLACKOUTS'

Industry sources said coal prices had not skyrocketed as previously expected following the massive Japanese temblor, as the loss of coal-fired power capacity in Japan had been huge.

"Clearly, there is a shortage. This is a power crisis. That is why Tokyo is still experiencing rolling power outages," the Japanese source said.

"Tohoku is one of the biggest coal buyers in Japan. Its Haramachi coal-fired power station alone consumes up to 5 million mt of coal annually.

The market for Australian coal in Japan has shrunk. Japan is currently not a major destination for Australian coal," the Japanese source said. A coal trader estimated Japan's fiscal 2011 coal imports would decline by 12-17 million mt.

"There has been no advice when the damaged Japanese coal-fired power stations will resume operations. From my point of view, it will take about a year or longer before these damaged power plants return to operation," the Japanese source said.

"Australian shippers have to find other markets for their coal. I don't see coal prices riding high this year because of the tragedy that struck Japan." He added, however, that certain power companies would run their coal-fired power stations at higher capacities this spring -- a season when coal stations are usually idled or stopped for maintenance -- to provide support in the current electricity crisis.

"But the JPUs will not only be increasing their coal-fired power capacities. The JPUs will also operate their other power stations running on oil and LNG at higher capacities," he commented.(sourced:The Platts)

Tags :Kyushu Electric, Hokuriku Electric, Shikoku Electric, Tokyo, raw material,

Australia Newcastle Thermal Coal Falls 4.9% to $123.29 a Ton

Mar 18, 2011 5:57 PM GMT+0530
By Rakteem Katakey

Power-station coal prices at Australia’s Newcastle port, an Asian benchmark, declined 4.9 percent in the week ending today.

Coal prices at the New South Wales port decreased to $123.29 a metric ton from $129.60 the previous week, according to the globalCOAL NEWC Index.

Xstrata Plc (XTA), the world’s largest exporter of power-station coal, BHP Billiton Ltd. (BHP) and Rio Tinto Group are among mining companies that ship coal through Newcastle.(By bloomberg)

Tags:Rio Tinto, power plant coal, Asian benchmark

Mongolia seeks balanced growth to avoid Dutch disease from mining boom

Monday, 14 Mar 2011

Mongolia needs to look beyond the coal and copper mines that are driving its economic boom to find a more balanced model of growth.

Mr Sukhbaatar Batbold PM of Mongolia said that investment in mining projects and speculation on the wealth they will create in the world’s most sparsely populated nation have made Mongolia’s tugrik the best-performing currency since the beginning of last year. That’s putting exports such as cashmere at a disadvantage and adding costs to newer industries such as tourism, food production and metal processing.

Mr Batbold said that it is important to have a good mining industry. But it is a tool of moving many other things forward. What we want to focus on is creating jobs in many other industries.

Mongolia needs to avoid developing Dutch disease where the financial benefits of a resource boom lead to a hollowing out of other sectors, according to the World Bank. Sandwiched by Russia’s far East to the north and 1.3 billion strong, resource hungry China to the south, the government is looking for ways to lessen its vulnerability to competition from its giant neighbor and reduce its reliance as a customer.

Mr Rogier van den Brink lead economist for Mongolia at the World Bank said that “Mongolia can’t compete with China on wages but it can certainly find areas in the Chinese economy where it could have an edge such as in cashmere meat and services. Diversifying from resources would be a solution similar to what the Dutch found to combat the resource disease.”

The discovery of gas in the Netherlands drove up inflation and damaged manufacturing. In Mongolia, Vale SA and Xstrata Plc are leading six groups bidding for 1 billion tonne concession at the Tavan Tolgoi coal project. Rio Tinto is developing the Oyu Tolgoi copper and gold deposit which it expects will account for 30 percent of Mongolia’s gross domestic product when completed.

The country also holds oil, potash, iron ore, uranium and the rare earth minerals used in Toyota Motor Corporation hybrid cars and Raytheon Company’s Tomahawk cruise missiles. Plans this year to begin mining part of Tavan Tolgoi and preparatory work for the 2012 start up of Oyu Tolgoi may cause the economy to expand 33 percent in dollar terms. That compares with a 10 percent growth in local currency terms. (sourced:bloomberg)

Asian Thermal Coal Contracts May Rise 36% to Record After Rains

By Ben Sharples - Feb 14, 2011
Asian utilities begin negotiations with coal producers this week and may be forced to pay as much as 36 percent more for their fuel after heavy rain in Australia, Indonesia, South Africa and Colombia disrupted output.

Prices for the year starting April 1 may increase to between $125 and $133 a metric ton, analysts from Bank of America Merrill Lynch, UOB-Kay Hian Ltd., Citigroup Inc. and National Australia Bank Ltd. said. Japanese utilities agreed to pay Xstrata Plc $98 a ton for the 12 months starting April 1, 2010, the company said in August.
“There are still lingering supply concerns around the place, not just in Australia,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said by telephone. The bank has forecast contract prices may rise to $125 a ton.

Heavy rain has crimped output in Colombia, Indonesia and Australia, where flooding in December and January shut mines and damaged rail lines in Queensland, the nation’s biggest coal-producing state. Prices more than doubled to a record $125 a ton in 2008 after floods disrupted supply from the state. Contract negotiations start this week, according to Citigroup.
While prices of the fuel for immediate delivery “have eased back” after increasing to a two-year high last month, “the focus will be on the longer-term outlook,” Citigroup analysts said in a Feb. 11 note. “We still see strong demand growth and expect contract prices to be settled at record highs.” The bank forecast contract prices at $130 a ton.

Newcastle Price The price for thermal coal at the port of Newcastle in New South Wales, the benchmark for Asia, rose to $138.50 a metric ton in the week ended Jan. 14, the highest since September 2008, according to IHS McCloskey, a Petersfield, U.K.-based provider of data. It was at $120.75 in the week ended Feb. 11.
Queensland exports about 50 million tons of thermal coal each year, according to Macquarie Group Ltd. Shipments of the power station variety may be reduced by more than 5 million tons after a landslide shut a rail network that serves mines operated by Peabody Energy Corp. and New Hope Corp., Citigroup analysts, led by Daniel Hynes, said in the Feb. 11 report.
Merrill Lynch analysts led by Sydney-based Alex Tonks said contract prices may rise to $125 a ton, and National Australia Bank Ltd. minerals and energy economist, Ben Westmore, said they may increase to $130 a ton. UOB-Kay Hian Hong Kong-based analyst Helen Lau said they may reach $133 a ton.
Annual accords between mining companies and customers may be agreed “by mid-to-late March,” Australia & New Zealand Banking Group’s Pervan said. “Xstrata has become the number one player in the market. It’s their deal with a Japanese utility, usually Tokyo Electric,” that sets the benchmark for prices.
(sourced:bloomberg)
Tags: Asian Thermal coal contracts, heavy rains, Bank of America Merrill Lynch, UOB-Kay Hian Ltd., Citigroup Inc., National Australia Bank Ltd, Xstrata Plc, Newcastle coal, Tokyo

BHP Billiton to post $15bn British record earnings

By Louise Armitstead
13 Feb 2011, 11:55AM GMT

BHP Billiton is set to reveal earnings of more than $15bn (£9.4bn) this week – putting the resources company on track to generate among the biggest ever profits by a UK company in a single year.
The Anglo-Australian miner is expected to reveal the benefits of the commodities boom at its half-year results on Wednesday and confirm that it is likely to make pre-tax profits of more than $30bn at its full-year results in June.
The expected total, which is more than a third bigger than BHP's pre-tax profits of $19.6bn for the full year in 2009, would beat the previous highest total held by Royal Dutch Shell.
The oil major, which has broken the record for the biggest profits in Britain in the past, unveiled pre-tax profits of $28.8bn for 2010 two weeks ago. Three year's ago when Shell unveiled profits of $27.5bn, Tony Woodley of Unite, Britain's biggest union, described the margins as "obscene".
BHP is expected to announce that it will return billions of dollars of its profits back to shareholders. The money is likely to include a significant rise in the dividend payments and a share buy-back of as much as $10bn.

The company has been under pressure from institutional investors in recent months who have been calling for a significant return of capital.
The shareholders have been concerned that Marius Kloppers, the chief executive of BHP, has ambitions to make a significant acquisition instead. In November BHP announced a buy-back of $4.3bn in the London-listed stock. Analysts expect the bulk of future buy-backs to be in Australian shares. A tax-credit associated with Australian stock offers is a more efficient way of returning capital than other options, such as a special dividend, the analysts said.
BHP is also likely to explain plans for significant investment in its businesses around the world. Analysts said capital expenditure in the future could be more than $15bn.
The investments will be in developing mines around the world which are experiencing high-demand, particularly from emerging markets.
For example, demand from China has fuelled a soaring commodities boom which has sparked record profits across the resources sector.
Last week BHP's rival, Rio Tinto, posted a 161pc increase in 2010 profits to $14bn and more than doubled its dividend.

Rising commodity prices - particularly iron ore - produced a record cash flow from the group's operations, which rose 70pc to $23.5bn. The company said cash flowing from Rio's operations was equal to $64m a day – that's $1m every 23 minutes.
The company unveiled a $5bn share buyback. However the mining giant's shares fell on the day because investors had expected even more.
On Tuesday, Xstrata reported pre-tax profits of $6.61bn - up from $1.53bn in 2009. The company said its net operating cash flow had doubled from 2009 to $8.2bn.
The companies announced that they plan to invest significant amounts in the business - Rio plans to spend $13bn on new mines this year alone. Mick Davis's Xstrata has a $23bn budget for investing in new mines.

However, there are concerns that the boom behind the profits is not sustainable. There have been investor worries over a slowdown in China hitting mining companies after the country's central bank raised interest rates for a third time in fourth months this week. (sourced:telegraph.co.uk)

South Africa Should Mull New Coal Port, McCloskey Says

Feb9, 2011
South Africa should study building a new coal-export harbor to meet surging demand from Asia or risk falling behind nations that are investing in transportation and output of the fuel, research company McCloskey Group said.

“South Africa is the natural supplier for India’s new demand,” Managing Director Gerard McCloskey said at the Mining Indaba conference in Cape Town today. Yet the nation is “humble in its aspirations” and infrastructure is underfunded, he said. Planned new rail lines in African countries may increase regional coal output, while Mozambique and Botswana are also looking to boost production, he said. While South Africa last year expanded capacity at Richards Bay Coal Terminal to an annual 91 million metric tons, state-run rail operator Transnet Ltd., which delivers most of the fuel to the facility, is only able to carry about 65 million tons.

The country last year shipped 62.86 million tons from the terminal, owned by producers including BHP Billiton Ltd. and Xstrata Plc. The terminal handles more than 90 percent of South Africa’s coal exports, while Asia overtook Europe as the country’s main overseas market for the product during the past two years. “The European market is fading but the Asian market is really booming,” McCloskey said. “One in three ships that goes out of Richards Bay now heads for India.” The government should consider appointing a coal “czar” to encourage development of the industry, he said. (source: Bloomberg)