January 24, 2011 / 10:23 AM / 8 years ago

Queensland mines reap benefits of flood precautions

* Higher levees, better planning mitigated impact

* Mines plan for more stringent measures going forward

By Rebekah Kebede

PERTH, Jan 24 (Reuters) - As floods that nearly brought Australia’s $50-billion coal industry to a halt recede in the state of Queensland, coal mines that stepped up precautions after similar flooding in 2008 may be able to rebound faster.

The flooding in recent weeks, brought on by rains triggered by a La Nina Pacific weather pattern, caused coal price spikes.

“Our analysis suggests better contingency planning after the equally severe 2008 floods, including increased pumping and drainage capacity, has left the industry in good stead for a sustained recovery in the second quarter,” analyst Mark Pervan with Australia New Zealand Bank said in a note on Monday.

“In the absence of another flooding event— not entirely out of the question — prices should ease back to the $120 tonne in the coming weeks,” he said, referring to the Australian thermal coal price.

Australia is the world’s largest coking coal exporter and the second largest thermal coal exporter after Indonesia. Coking or metallurgical coal is used for steelmaking while thermal coal is used for power generation.

The Queensland Resources Council estimated last week that only 15 percent of the state’s 57 coal mines are fully operational, 60 percent are operating under restrictions and another 25 percent have yet to restart production.

Analysts said decisions by Queensland mines to raise levees, for instance, were now paying off.

“Mines that were hit fairly badly two years ago took some pretty hard decisions on raising the height of levee protection around certain pits. This time around, because of those changes, they were kept relatively protected,” said Tom Sartor, an analyst at RBS Morgans in Brisbane.

Macarthur Coal , which has declared force majeure on its Coppabella and Moorvale mines due to flooding, said its increased focus on water management since 2008 has paid off.

A force majeure is a legal let-out suspending sales obligations because of factors beyond a suppliers’ control.

“Given that it’s been an extraordinary weather event the last couple of months, we’ve certainly contained it better as a result of the investment in water infrastructure,” said Genevieve Fraser, a spokeswoman for Macarthur Coal.

Ensham Resources’ Ensham mine also took additional precautions after one of the company’s draglines, a piece of equipment used for mining, was submerged after flooding.

“(The Ensham mine) was spared inundation during the flood event and that was primarily because of the flood protection levees which were built in response to the 2008 floods,” said Marc Joshi, a spokesman for Ensham Resources.

Other mines will soon begin preparing for Queensland’s next floods and looking to take precautions to withstand even more copious floods.

Reporting by Rebekah Kebede

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