Switzerland-based mining and trading company Glencore will take 100pc ownership of the Rolleston thermal coal mine in Australia’s Queensland, after agreeing to buy Japanese firm Sumitomo’s 12.5pc stake and having completed the purchase of a 12.5pc stake previously held by Itochu in June.
Glencore’s move to full ownership is part of a wider trend for global conglomerates, particularly Japanese firms, selling out of minority holdings in thermal coal mines under pressure from those concerned about climate change. The deal follows Glencore’s acquisition of its joint-venture partners’ stake in the 28mn t/yr Cerrejon thermal coal mine in Colombia in June.
Rolleston produced 12.5mn t of thermal coal in 2020, down from a record 15.5mn t/yr in 2018, as Glencore chose to wind back production in response to weak coal prices last year. Production is likely to be higher this year in response to stronger prices for thermal coal.
Glencore put its 75pc stake in the mine up for sale in August 2017, but closed the process in October 2018 after it failed to find a buyer and the seaborne thermal coal market made a strong recovery.
Rolleston produces 5,470 kcal/kg coal, so it receives the significant discount that 5,500 kcal/kg coal has attracted over higher-grade 6,000 kcal/kg coal over the past six months. Prices for 5,500 kcal/kg coal are almost at $100/t fob Newcastle compared with $58/t a year ago and around $72/t when Glencore put the mine on the market in August 2017.
Argus last assessed high-grade Australian thermal coal at $166.81/t fob Newcastle for NAR 6,000 kcal/kg on 13 August, up from $120.58/t on 4 June and a low of $46.18/t on 4 September. It assessed lower-grade coal at $97.83/t fob Newcastle for NAR 5,500 kcal/kg on 13 August, up from $70.10/t on 4 June and $35.04/t on 4 September.
The heat-adjusted premium on a NAR 6,000 basis for higher-grade thermal coal was at a record $60.09/t on 13 August, up from $50.52/t on 31 July, $44.11/t on 4 June and $8.65/t at the end of August last year.
Rolleston is one of eight foundation projects associated with the struggling Wiggins Island Coal Export Terminal (Wicet) at Gladstone. Wicet agreed to restructure its debt in September 2018, increasing the financial burden on its coal mining shareholders.
Rolleston has environmental approval to continue mining beyond 2040. The mine is in the south of the Bowen basin and uses the Blackwater rail network to deliver coal to the port of Gladstone.