UPDATE: Gloucester Coal Output Jumps As Demand Weakens
January 24 2012 - 6:26PM
Dow Jones News
Australia's Gloucester Coal Ltd. (GCL.AU) Wednesday posted a
sharp jump in production for its financial second quarter, but said
sales volumes were below expectations as overseas coking coal
demand weakened.
Gloucester, which has accepted a A$2.2 billion (US$2.3 billion)
takeover offer from China's Yanzhou Coal Mining Co. (YZC), said
demand for coking coal continued to weaken as steel producers ran
at reduced capacity in the quarter. Coal from its Gloucester Basin
and Donaldson operations was cleared in the spot market at
lower-than-anticipated prices, particularly Gloucester Basin
semi-hard coking coal, it said.
Thermal coal prices were also lower over the period, although
demand remained reasonably robust. Management has taken steps to
shift the company's production profile to focus on thermal coal, it
said, adding that stockpiles were at more manageable levels by the
end of the second quarter as deferred deliveries were shipped.
Australia is a top exporter of coking coal and iron ore, both
steelmaking ingredients, and demand from China and other rapidly
industrializing countries has climbed in recent years to send
prices soaring. Steel companies, however, slowed production late
last year as China's economic growth cooled and concern grew over
Europe's economic health.
Gloucester said it produced 1.1 million metric tons of coal in
the three months through December, compared with 451,000 tons a
year earlier. The company has made a number of acquisitions over
the past year, and plans to increase production to more than 12
million tons in less than 10 years.
Output from the Gloucester Basin operations increased 24% to
541,000 tons, while the Donaldson operations bought last year
contributed 427,000 tons and the Middlemount venture jointly owned
with Macarthur Coal Ltd. added 157,000, it said.
Mining giant BHP Billiton Ltd. (BHP) earlier this month said its
volumes of coking coal from Australia's eastern Queensland remained
below capacity in the December quarter following flooding across
the state early in 2011, and rolling strikes at several mines. Rio
Tinto PLC's (RIO) production of hard coking coal in Australia was
2% lower on the year for the quarter, and semi-soft coking coal
output down 7%.
Gloucester in December agreed to a takeover by Yanzhou's
Australian subsidiary, Yancoal Australia Ltd., in a deal that will
create one of the country's largest listed coal producers. The
takeover, which has been accepted by Gloucester's 65% owner Noble
Group Ltd. (N21.SG) of Singapore, will allow Yanzou to fulfill an
undertaking given to the Australian government to list its
Australian activities on the ASX, a condition of its acquisition of
coal miner Felix Resources in 2009.
-By Robb M. Stewart, Dow Jones Newswires; +61 3 9292 2094;
robb.stewart@dowjones.com
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