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BHP’s Coal Segment Sees Record Production in Fiscal 2015


Sep. 10 2015, Updated 1:07 p.m. ET

Coal volumes

BHP Billiton’s (BHP) (BBL) coal business is the world’s largest supplier of seaborne metallurgical coal. Along with iron ore and manganese, metallurgical coal is a key input in steel production. A sustained rise or fall in coal shipments is a significant indicator that affects the stock value of coal producers (KOL) such as BHP Billiton, Peabody Energy (BTU), Alliance Resource Partners (ARLP), Arch Coal (ACI), and Cloud Peak Energy (CLD).

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Record met coal volumes

  • BHP’s metallurgical coal production rose 13% in fiscal 2015 to a record 43 million tons. Continued productivity improvements and the ramp-up of Caval Ridge helped achieve this record at Queensland Coal.
  • An increase in equipment and wash plant utilization helped six other operations achieve record volumes.
  • Energy coal production, on the other hand, fell 5% to 41 million tons. This was expected, as drought conditions and managing dust emissions at Cerrejon in Colombia impacted volumes.

Coal production expected to drop

  • Met coal production is expected to drop to 40 million tons in fiscal 2016 as operations at Crinum come to an end in 1Q16.
  • Wash plant shutdowns at Goonyella and Peak Downs mines are also scheduled for the quarter ending September 2015, which will impact production volumes for fiscal 2016.
  • However, going forward, some of this drop in production should be offset by the 1 million tons per annum Haju mine in Indonesia, which is expected to commence production during fiscal 2016.
  • Energy coal production is forecast to remain largely unchanged in fiscal 2016 to 40 million tons. This assumes a full year production from the San Juan mine. BHP sold this mine to Westmoreland Coal Company, and the transaction is expected to close at the end of 2015.
  • Going forward, BHP’s energy coal production should drop since the San Juan mine, which produced 5 million tons of energy coal in fiscal 2015, no longer contributes to BHP’s energy coal volumes.

BHP management commented that going forward, if market conditions improve, the company can add a new mining fleet at Caval Ridge, where wash plant capacity exceeds mine capacity. This will help achieve high-quality metallurgical coal at a very low cost.


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