Yancoal cuts Australian mine spending

Chinese-Australian coal producer Yancoal has cut its capital expenditure budget for 2020 to below A$300mn ($217mn) from A$380mn as it focuses on cost control in this period of weak coal prices.

The firm maintained its production guidance at 38mn t for 2020, unlike its rival Glencore, which this week starts a series of mine closures to cut its output from Australia by 7mn t/yr. But Yancoal has cut its capital expenditure budget and revealed that it expects costs to fall to A$60/t excluding government royalties from A$61/t in 2019.

The firm received an average thermal coal price of A$88/t in January-June, down from A$112/t a year earlier, and an average metallurgical coal price of A$140/t, down from A$184/t. This includes the period of higher spot coal prices until the end of March. Both thermal and higher-grade coking coal prices have begun to pick up over the past week, but prices of the lower-grade PCI and semi-soft coking coals that Yancoal mostly produces have remained subdued.

Argus last assessed high-grade Australian thermal coal at $49.95/t fob Newcastle for NAR 6,000 kcal/kg on 21 September, up from a low of $46.18/t on 7 September but down from $65.70/t at the start of the year. It assessed lower-grade coal at $39.79/t fob Newcastle for NAR 5,500 kcal/kg on 21 September, up from a low of $35.04/t on 7 September but down from $51.52/t at the start of the year.

Argus assessed the PCI and semi-soft coking coal prices each at $71/t fob Australia, down from $82/t and $100/t, respectively, at the end of March.

Despite cutting its capital expenditure budget for 2020, Yancoal remains committed to its long-term strategy of organic growth and brownfield expansion projects in Australia, the firm said in its interim financial report. It is undertaking a pre-feasibility study into developing an underground mine at its Mount Thorley Warkworth mine in the Hunter Valley region of New South Wales and another study into expanding its Moolarben open-cut and underground coal mine to 24mn t/yr from 20mn t/yr.