US coal producer Xcoal Energy wants to increase its exports from Australia to 17.5 million tpy to match its exports from the US, as it looks to balance its portfolio.
According to Argus Media, Xcoal exported around 3.5 million tpy from Australia in 2017 and plans to increase this fivefold over the next few years through offtake agreements and investments in smaller mining projects, according to Chief Executive Ernie Thrasher. He wants to have a balanced portfolio of coal exports between Australia and the US to give increased security of supply, with the hurricane season in the US and the cyclone season in Queensland at different times of the year. It will also give Xcoal access to lower cost coal to sell into Asia at times when depressed metallurgical coal prices makes it uneconomic to sell US metallurgical coal into those markets.
"All coal clears the market at current prices, but at US$100/t, US coal is challenged, so we want to have the Australian coal options for that," Thrasher said.
He warned that costs are going to increase in Queensland over the coming years, as the easily accessed reserves are depleted and more expensive deposits are developed. But costs of Australian delivered coal into Asia are still significantly lower than from the US, providing an excellent hedge for US coal marketing firms, such as Xcoal.
"People are missing the scale of depletion and cost inflation in our industry,” Thrasher told the Energy Mines and Money conference in Brisbane. “But that cost inflation will underpin stronger prices over the longer term and allow new mining regions in place like Queensland to be developed,” he added.
Xcoal made unsuccessful attempts to break into the Australian coal industry through participation in all of the larger scale asset sales over the past three years, including attempting to acquire Wesfarmer's Curragh mine that was sold to Coronado for AUS$700 million (US$520 million) in April. It has now turned its attention to smaller scale opportunities, starting with its deal with Australian independent Bounty to take 275 000 t of mid-volatile hard metallurgical coal from the Cook Colliery on a fob basis at the port of Gladstone. It also agreed to acquire about 10% of Bounty, which this week raised US$18 million through an initial public offering that valued the firm at AUS$120 million. Xcoal plans to take similar equity positions with associated offtake agreements in other smaller Australian coal mining firms to underpin its plans to increase its exports to 17.5 million tpy.
Xcoal and Coronado are the only major US coal mining firms with assets in Australia, with other US coal mining firms still struggling to recover from the last period of low prices.
Xcoal exports most of its coal to Japan, followed by the Atlantic basin, South Korea and then India. Thrasher has seen exports of US thermal coal to India increase significantly over the past few years and expects that India will boost its metallurgical coal imports over the next year or two.
Thrasher played down concerns about Chinese tariffs on US metallurgical coal, as part of the negotiating process between the two nations.
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