The slowing resources investment boom has seen another project delayed – with the $1.25 billion Eagle Downs underground export coking coal mine’s start up date put back by at least six months as the developers Aquila Resources (AQA) and Brazilian mining giant Vale slow the pace of work.
The news came as a mining industry magazine revealed that Peabody Energy and Xstrata were making job cuts across their NSW and Queensland operations to try and downsize their businesses to cope with weakening prices for thermal and coking coal.
Aquila revealed the slowdown at Eagle Downs in an update to the ASX yesterday.
"In light of continuing softness in the coal price environment, the (joint venture) participants requested Eagle Downs Coal Management focus on critical path development tasks and re-prioritise some of the scheduled early works," Aquila said in a statement.
Shorn of the jargon the mine’s start up has been put back from late 2016 to the first half of 2017 (or after the next federal election!). The market liked the news, marking Aquila shares 4c higher at $1.77. The rise of just over 2% came in a market which was up around 1.6%.
"Aquila notes that, short-term deferral of non-critical path expenditure has the potential to considerably improve the economics of the Project, if contracts can be executed in a lower cost environment, "the company said in the statement yesterday.
"Aquila also considers that the recent overdue correction of the Australian dollar, to re-align with reduced commodity prices, is likely to provide an additional positive boost to the economics of the Project."
The Eagle Downs project saw excavation begin at the site in February this year.
The Project is located in the Bowen Basin in Central Queensland, adjacent to and immediately near the BHP Billiton Mitsubishi Alliance operating Peak Downs Coal Mine. The Project involves construction, development and operation of an underground longwall hard coking coal mine over an estimated mine life of 47 years for all target seams.
Aquila has a 1.6 million tonne a year deal under a Take or Pay contract to ship coal through the first stage of the Wiggins Island Coal Export Terminal, together with corresponding rail agreements with Aurizon (formerly Qld Rain) through its 100% subsidiary Washpool Coal Pty Ltd.
Aquila said it had reached agreement with Wiggins Island for the addition of Eagle Downs as a source mine under the Take or Pay Agreement, for Aquila’s share of coal from the mine. Discussions on the rail freight contract are continuing. Aquila said it had terminated a deed of commitment to ship an extras one million tonnes of coal a year through an export terminal in Gladstone.
Meanwhile the Australian Mining magazine said Peabody and Xstrata were in the process of sacking around 600 mostly contractors from their mines in NSW and Queensland in a major cost-saving move. Most of the cuts will come at the Peabody mines (including Macarthur Coal’s mines in central Queensland) with around 450 jobs to go. Xstrata is sacking around 130 people, mostly at its Ravenworth mine in the upper Hunter Valley.
Anglo American is another coal miner cutting jobs, mostly in its small Queensland operation.
