China-backed Yancoal Australia Ltd yesterday said it has put expansion plans at all seven of its mines under review to keep costs down as weaker demand from key North Asian importers weighs on coal prices.
“Yancoal is considering all options to reduce costs,” it said in a shareholder presentation. “Expansion plans across all mines will be reviewed and ranked to ensure that the appropriate capital expenditure discipline is maintained.”
Yancoal’s major shareholder, with 78 percent of stock, is parent company Yanzhou Coal (兗州煤業), one of China’s largest international mining groups by market capitalization.
The Australian entity was formed through Yanzhou Coal’s recent takeover of Gloucester Coal with its shares floating in Sydney in late June to become the biggest Chinese-controlled entity listed on the Australian Stock Exchange.
In yesterday’s presentation, the mining company said the price of metallurgical coal used in steelmaking has been declining since the middle of last year as demand in several of the major consuming countries falls.
“In the second half, Yancoal expects the metallurgical coal prices to remain weak and volatile,” it added.
As for thermal coal used in electricity generation, the company said prices dropped during the first half of the year as supply overwhelmed subdued economic activity, but it was upbeat on the future.
“As excess stocks are consumed and production cuts take effect the thermal coal price should respond positively in the next year,” it said.
Yancoal Australia owns five mines in New South Wales state and two mines in Queensland state.
Separately, struggling BlueScope Steel yesterday reported a A$1.04 billion (US$1.09 billion) net loss for this fiscal year, but said it was now well-positioned globally for growth.
The figure, taking in a A$315 million charge mostly in writedowns on goodwill, follows a A$1.05 billion full year loss for last year which prompted the company to cut more than 1,000 jobs and shut down its Australian export business.
“Financial year 2012 was a transforming year, we delivered what we promised,” BlueScope chief executive Paul O’Malley said, referring to the 12 months ending on June 30.
O’Malley said net debt was lower than forecast and the firm’s Australian businesses were expected to post positive earnings next year, while globally the company was well-positioned for growth.
BlueScope this month announced a US$1.36 billion joint venture with Japan’s Nippon Steel aimed at capturing growth in new market segments and easing concerns over its balance sheet, hard hit by the high value of the Australian dollar.
The 50-50 joint venture, NS BlueScope Coated Products, will see Nippon Steel acquire half of BlueScope’s interest in its Southeast Asian and North American building products businesses.
For the current financial year, BlueScope expects total capital expenditure for the group to be about A$300 million, with one-third to be invested in growth projects, O’Malley said.
BlueScope has operations in Australia and New Zealand, Asia and the Pacific as well as in the US.