Wesfarmers expects flooding in Queensland to significantly reduce output at its Curragh coal mine, according to its December quarter production report issued yesterday.
Wesfarmers declared force majeure after extensive rains in December and January shut most of the region’s coal mines.
The company has therefore gone without sales income from Curragh since December 2, that’s more than $100 million of missed revenues which will be hard to make up.
The impact in the September quarter was substantial, well over $100 million in missed sales revenues, according to some estimates.
"The month of December was affected by record wet weather and major flooding in Central Queensland resulting in significantly reduced coal production. The March 2011 quarter production will be affected by this extreme flood event," Wesfarmers said in yesterday’s statement.
The month of January will also be affected when the company produces the current March production report in mid-April.
The Curragh mine had lost production and revenue in the September quarter, so Wesfarmers is facing a considerable slump in the half yearly contribution from the Curragh mine’s exports of coking and thermal coal.
Mines have slowly begun to come back to production but the Queensland Resources Council earlier this week estimated that only 15% of mines are in full operation.
Wesfarmers said yesterday that production of metallurgical (coking) coal at Curragh operation for the December quarter was 1.736 million tonnes (mt), up 25.4% from the September quarter, when unseasonal wet weather also hampered output.
Metallurgical coal production at Curragh for the full 2010 calendar year totalled 6.27 mt, down 5.1% compared with the previous year’s output of 6.6 mt.
Wesfarmers in December downgraded the full-year metallurgical coal sales volume forecast for the mine to between 6.0 and 6.5 mt, down from a previous guidance of 6.2 to 6.7 mt.
Earlier this month it further cut its production guidance to 5.8 to 6.2 mt because of the continuing poor weather and flooding.
Guidance for the 2011 financial year was originally set at 6.5 to 7.0 mt of coal, so at best output for the year to June could be 17% lower, or more, depending on when the mine and the rail system return to full operational capacity.
Wesfarmers also reported on Wednesday a rise in December quarter steaming coal production at its Premier mine in Western Australia to 811,000 tonnes, up 16% on the September quarter, due to increase demand from the state’s power generator Verve Energy.
For the full year, however, production at Premier of 2.79 mt was down 9% compared with 2009.
Wesfarmers said that its share of production from the Bengalla mine in the Hunter Valley (owned with Rio Tinto subsidiary, Coal and Allied) for the quarter was 664,000 tonnes, 49.2% higher than the previous quarter due to operating in a more productive part of the mine sequence.
The two companies approved the expansion of the Bengalla mine’s production from 7.8 to 9.3 mt of coal in November of last year.
The lost production and sales in January means Wesfarmers will miss the benefits of a price increase for metallurgical coal for the March quarter.
Wesfarmers said last week that the price for March quarter would be $US221 a tonne for metallurgical coal, up from $US205 a tonne for the December quarter, but under the $US227 a tonne for the September quarter.
Wesfarmers shares ended up 71c at $33.35, a rise of more than 2% on the day.
