Mining costs, taxes, low coal prices weigh on Yancoal Australia's profits
Perth (Platts)--28Feb2013/700 am EST/1200 GMT
Yancoal Australia, a 78%-owned subsidiary of Chinese coal miner Yanzhou
Coal, posted a loss before tax and non-recurring items of A$9.6 million ($9.8
million) for the year ended December 31, compared with a pre-tax profit of
A$440 million in 2011, the Australian-listed coal company said in a report
Lower coal prices, a strong Australian dollar, increased operating costs
and payments for unused port and rail capacity were responsible for the
significant decline in pre-tax profit year on year, said the company.
Yancoal stressed, however, that after including some non-recurring items
in its accounts the company actually recorded a post-tax net profit of A$404
million for the 2012 year.
The miner said its liabilities to Australia's Minerals Resource Rent Tax
on coal mining profits amounted to A$154.9 million at the end of 2012, and
Yancoal estimated the impact of Australia's A$23/mt carbon tax on its coal
mining operations at A$0.93/mt of saleable coal produced from its underground
and open-cut mines.
Article continues below...
|Sign up to International Coal Report today.
International Coal Report and its daily companion, Coal Trader International, deliver expert and respected price assessments for coal trading in the Atlantic and Pacific markets including price assessments for European CIF ARA, FOB Newcastle, Richards Bay and Indonesia.
Transaction costs from Yancoal's merger last year with Gloucester Coal
were A$20.7 million on a post-tax basis in the 2012 year, and the impact of
foreign exchange movements on its business loans were $47 million post tax.
Revenue for the coal producer which has seven mine operations in eastern
Australia were down slightly year on year at A$1.41 billion for 2012 period,
compared with A$1.46 billion in 2011.
Existing mine expansions, including at its flagship Moolarben mine
would boost the company's coal production in the 2013 year, as it pledged in
its report to find new markets for the additional production it was bringing
"Recent coal pricing action suggests that the cycle lows for coal prices
were experienced during the second half of 2012," Yancoal said in its report.
An extensive cost reduction program has been instituted at Yancoal's
coal mines which produced 14.7 million mt in 2012, and this was aimed at
ensuring its mines remained competitive, the company said.
Two mines -- Premier and Cameby Downs -- were transferred out of the
Yancoal Australia group following the company's merger with Gloucester Coal,
and their production was included in the company's results only for the first
six months of 2012.
The two mines now sit under the control of Yancoal's parent company
Yanzhou Coal and in 2012 the Premier mine in Western Australia recorded a
profit of A$5.8 million, while the Cameby Downs mine in Queensland incurred a
loss of A$5 million last year.
INCREASED NCIG SHAREHOLDING
Yancoal increased its shareholding in the Newcastle Coal Infrastructure
Group terminal for coal exports at Newcastle port during the year to 27%
through its acquisition of Gloucester Coal;s 11.6% stake in the facility last
Yancoal previously held a 15.4% stake in the coal shipment facility, and
its 27% shareholding puts it second to BHP Billiton which has a 35.5% stake
in the NCIG coal export facility.
"The increased ownership of the coal terminal will lift Yancoal's
allocation [for NCIG coal exports] to about 14.6 million mt when the facility
achieves its full-rated capacity of 66 million mt/year by the end of 2014,"
Yancoal said in its report.
The NCIG terminal is used by several Yancoal coal mines in New South
Wales, including its Austar, Donaldson Group, and Stratford and Duralie mines
-- all 100%-owned by Yancoal -- and the company's Ashton mine and flagship
Moolarben mine. Moolarben is set to become the largest user among its mines
of the terminal in the longer term, said the company.
In addition to the NCIG terminal, Yancoal has capacity for its New South
Wales coal exports in Port Waratah Coal Services' shipment facilities at
Newcastle port where Yancoal's current capacity allocation is 11 million
In Queensland where Yancoal operates its 100%-owned Yarrabee mine and
has a 50% stake in the Middlemount mine joint venture with Peabody Energy,
the company has been allocated 1.5 million mt/year of shipment capacity for
its Yarrabee mine in the first stage of the Wiggins Island coal terminal
being built at Gladstone port.
Heavy rainfall in central Queensland generated from ex-tropical cyclone
Oswald between January 24 and 27 did have some material impact on Yancoal's
Yarrabee and Middlemount open-cut operations said Yancoal in its report, but
without quantifying any production losses.
Murray Bailey, Yancoal's managing director since September 2010 and who
was appointed chief executive in June last year, is to leave the company for
personal reasons after his current term expires in July, the company said.
--Mike Cooper, firstname.lastname@example.org
--Edited by Maurice Geller, email@example.com