Perth (Platts)--19Oct2012/505 am EDT/905 GMT

Australia-based Yancoal may have to reschedule production in the January-March quarter of 2013 to ensure stockpiles at some of its coal mines in the states of New South Wales and Queensland do not become full, the company said Friday.

Coal stockpiles at Yancoal's mines have grown considerably to undisclosed levels after weaker coal markets drove a 5.5% fall in sales of the miner's thermal and metallurgical coal to 3.26 million mt in the September quarter, from 3.45 million mt in the June quarter. the company said in its operating report for the September quarter Friday.

"As a consequence coal stocks have increased, resulting in the potential for production re-scheduling during the next quarter [January-March 2013] to mitigate being stockbound at several group mines," Yancoal said in its report.

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The company disclosed in the report that lower coal sales meant it was not fully utilizing all of its available rail and port capacity to ship coal exports, and that it was paying for this unused capacity under its contracts with rail and port operators.

"Sales across the group are currently less than both port and rail 'take or pay' allocations, resulting in these liabilities having an impact on the financial performance of the company," Yancoal said in the report filed to the Australian Securities Exchange Friday.

Yancoal subsidiary Donaldson Group has an increasing liability exposure to take-or-pay contracts as capacity is expanded in the Newcastle Coal Infrastructure Group terminal in which Donaldson is a founding shareholder, the report said.

Yancoal said it was finding it difficult to re-allocate its unused rail and port capacity to other Australian coal miners due to weakness in the seaborne coal markets.

SEPTEMBER QUARTER COAL OUTPUT UP 21% ON YEAR

Yancoal's share of saleable production from its eight operated Australian coal mines was 3.65 million mt in the September quarter, up 21% year on year.

The miner's share of saleable metallurgical coal production from its mines was 704,000 mt in the September quarter, down 31% year on year.

Yancoal's report said a significant amount of its lower quality metallurgical coal was being sold into the thermal coal market on an energy adjusted basis, and at prices lower than would have been achieved if it had been sold into the metallurgical coal market.

Commenting on the metallurgical coal market, Yancoal said: "The market outlook remains uncertain despite coal production cuts in several countries, a restocking phase in China at steel mills and higher gas prices in the US."

Yancoal's thermal coal production rose 47% year on year to 2.55 million mt in the September quarter.

Yancoal listed on the ASX in July through a A$762 million [$767 million] reverse takeover of ASX-listed Gloucester Coal.

Chinese state-owned coal miner Yanzhou Coal owns 78% of the company, and commodities trader Noble has a 13% interest.

--Mike Cooper, michael_cooper@platts.com --Edited by Wendy Wells, wendy_wells@platts.com

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