Australia's HVO to seek short-term extension of key coal mine operations

Hunter Valley Operations, a joint venture between Australia's top coal miners Yancoal and Glencore, is planning to seek a short-term extension for the continuation of its two key coal mining projects from both the New South Wales and federal governments, according to HVO's statement seen by S&P Global Commodity Insights Oct. 14.

The development comes after HVO temporarily withdrew its application -- EPBC -- seeking life extension of its two mines in the region by about 20 years following concerns raised by officials over the greenhouse gas emissions impact the extension will have. The New South Wales Department of Planning, Housing and Infrastructure has sought additional information regarding the same, the statement read.

Under the proposal, the joint venture firm was seeking to extend the life of HVO North and HVO South to 2050 and 2045, respectively, from the current 2025 and 2030.

"This (short-term extension) will give the New South Wales and Australian governments more time to complete their assessments of the HVO Continuation Project. It is also necessary to safeguard jobs for our workforce and provide certainty to our contractors, community partners, and the businesses that rely on us for work in the region," the statementadded.

HVO South and HVO North mines produce up to 42 million metric tons of high-quality thermal and semi-soft metallurgical coal each year, and the company says while its high-quality coal is in demand in other countries to meet short to medium term energy needs, there will be little change to the scale or intensity of mining and no increase to approved annual production rates.

"The New South Walesgovernment has requested more detailed information as part of its assessment of our proposal. We are undertaking additional modelling and mine planning to provide this information. In view of this, we have withdrawn our EPBC application to the Australian government until we can supply this information and consider any impact on the referrals under the EPBC Act," the company said.

Yancoal's HVO mines' run-of-mine -- ROM -- production decreased by 14% year on year, but its saleable production increased by 14% in first-half 2024, which ended June 30. The decrease in ROM production was primarily due to a combination of wet weather delays, blasting quality issues, and below-target truck availability, according to its financial statement. ROM volumes are expected to recover in the second half of the year, it added.

Glencore's total coal production in H1 2024 was 50.6 MMt, of which production from Australian mines was 27.9 MMt, marginally down from 29.9 MMt in the same period the previous year. The statement does not separately mention production from HVO mines.

Demand for Australian thermal coal has been robust from China in the current financial year as the country contends with above-average power demand. China has been consistently trying to build stockpiles amid fears of shortages during peak winter months and drops in hydropower generation post-autumn.

China imported 34 MMt of thermal coal from Australia in H1 2024, up 48.5% year on year, S&P Global Commodities at Sea data showed.

The country's exports to Japan fell by 2.7% to 32.6 MMt in the same period amid Japan's increasing reliance on nuclear energy and escalating prices of high CV Newcastle coal, the same data showed.

Australian thermal coal is struggling to remain competitive in India as lower prices of South African coal continue to attract sponge iron buyers.

"The impact of HVO withdrawing a proposal for the largest coal mining project in New South Wales from consideration will not have any short-term impact. The availability of cargoes is already tight, and offers are very high, so Indian buyers don't see any price advantage for the same," said an India-based trader.

According to an Australian trader, on the contrary, China is unwilling to match the high offers from Australian suppliers, leading some miners to liquidate certain cargoes.

Platts assessed the price for Newcastle 5,500 kcal/kg NAR at an average of $91.30/t FOB for January-June, down from $114.65/t FOB over the same period the previous year. The price for this grade was last assessed at $91/t FOB Oct. 11.