MELBOURNE (Reuters) - Recent mine acquisitions have helped Glencore Plc (GLEN.L) achieve 50 percent more cost savings in its coal business than it had targeted, the world’s biggest exporter of coal for power plants said on Wednesday.
Glencore had expected to achieve annual cash savings of more than $300 million in its coal business by the end of 2018 in a two-year cost-cutting drive, but on Wednesday said it now expects savings of more than $450 million by year-end.
The company now expects its mine unit costs to fall to $49 a tonne in 2019, from a forecast of $52 for 2018, from its operations in Australia, Colombia and South Africa, it said in a presentation to analysts on a tour of its Australian coal mines.
“(The firm has achieved) strong unit cost performance despite material cost headwinds from energy, royalties and higher consumable costs,” it said in slides prepared for the tour.
The cost-cutting comes as the company, whose own coal sales make up about 12 percent of the seaborne thermal market, is boosted by strong coal prices, driven by rising demand in Asia.
The growth in Asia comes just as investment in new coal production has slumped and as the energy content of traded coal has dropped compared with the average energy content of coal sold by Glencore, the company said.
It added that it expected to produce 145 million tonnes of coal in 2019, which could generate $6.2 billion in earnings before interest, tax, depreciation and amortisation (EBITDA) at a spot price of $108 a tonne for Newcastle coal.
Glencore earlier this year completed the acquisitions of the Hail Creek coal mine in Australia and a 49 percent stake in the Hunter Valley Operations (HVO) from Rio Tinto in a joint venture with Yancoal Australia (YAL.AX).
Hail Creek is expected to be the biggest earner of its top 12 coal complexes in 2019 and HVO the sixth biggest, Glencore said, without giving specific forecasts for EBITDA from those mines.
The HVO joint venture has already cut nearly a fifth of its full-time workers and removed 13 percent of trucks without affecting production levels, Glencore said.
Reporting by Sonali Paul; Editing by Richard Pullin and Joseph Radford