Vale SA (VALE) produces metallurgical and thermal coal through its subsidiaries. Vale Mozambique, operates the Moatize mines. And Vale Australia operates coal assets in Australia through wholly owned companies and unincorporated joint ventures.
Vale SA also has minority interest in two Chinese companies, Henan Longyu Energy Resources and Shangdong Yankuang International Coking. Vale SA’s proven and probable coal reserves totaled 1,530.4 million metric tons at the end of 2013.
Here’s a look at Vale SA’s major coal mines:
- Moatize – This opencut mine in Mozambique was developed directly by Vale SA. Operations at this mine started in August 2011 and are expected to reach a nominal capacity of 11 million tons per year. Moatize is Vale’s biggest investment in the coal segment.
- Integra – Located in New South Wales, Australia, this is an opencut and underground coal mine. The company idled the coal mine in June 2014 to stem the operation’s losses caused by its high costs and by the low coal prices prevailing in the market.
- Carborough Downs – This is an underground mine located in central Queensland. The mines here produce mainly hard and semi-hard coking coal. The site is expected to continue producing till 2019, but there is also potential for the extension of the mine’s life beyond that.
- Isaac Plains – This is an opencut mine and a 50-50 joint venture between Vale SA and Sumitomo. It’s situated 7 kilometers from Moranbah in Queensland’s coal-rich Bowen basin. The operation’s product split covers pulverized coal injection, or PCI, thermal coal, and coking coal.
Coal production from Australia is mainly destined for East Asia. Coal production from the Moatize operations, in Mozambique, target global steel markets including Asia, India, Africa, Europe, and the Americas. Vale SA’s Chinese coal joint ventures direct sales at China’s domestic market.
Other coal producers
Coal prices have fallen ~25% this year. As a result, other coal producers including BHP Billiton Ltd. (BHP), Rio Tinto plc (RIO), Peabody Energy Corporation (BTU), and Walter Energy Inc. (WLT) are also struggling to recover costs. This has led to production cuts and idled mines across the board. These companies are part of the VanEck Vectors-Coal ETF (KOL).
Investors can also invest in the SPDR S&P Metals and Mining ETF (XME). The XME provides diversified exposure to all of the stocks mentioned above.