TerraCom through its wholly-owned subsidiary Orion Mining has commenced coal production at the Blair Athol mine in Queensland. This has occurred on schedule and the operation will continue to rapidly ramp up to an annual rate of approximately 2 million tonnes in the December quarter of 2017.
Initial coal sales this month will meet product specification as a bypass crushed thermal product. Production has been in conjunction with bulk earthworks required for the rehabilitation of the prior operations towards a final landform as defined in the Environmental Authority.
The dragline overhaul is continuing as planned with the dragline being placed back into operation before the end of the month. Similarly, the recommission of the CHPP continues on plan with a scheduled recommencement mid-October 2017.
TerraCom says mining and rehabilitation activities have continued to progress on schedule to meet the first coal sale timeline. Expected production in August is 46,000 tonnes, increasing to 74,000 in September, 163,000 in October, 173,000 in December and 205,000 in January 2018. November’s production is forecast to be 157,000 tonnes.
Orion has signed a purchase agreement for the sale of the first six months of production which will underpin the start-up of the Blair Athol mine with pricing linked to the Newcastle Thermal Coal Index in line with expectations.
For this interim period coal will be transported to a nearby train loading facility where it will be loaded onto trains and transported to DBCT port for export into Asia. There is an option to extend this purchase agreement for a further six months.
Orion has assembled a project team being led by Aurizon to establish Blair Athol’s own dedicated private train loading facility re-commissioning the rail line that runs across the site and connects into the main Goonyella Rail Line which runs to DBCT.
The project is conducting detailed design and work programs which has an indicative time line of 6-9 months and delivers significantly improved margins compared to other path to market options.
TerraCom says the market for high quality Australian thermal coal continues to strengthen heading into the second half of 2017 and further into 2018.
Extensive wet weather across Indonesia in recent months, coupled with lost production following Cyclone Debbie in Queensland earlier this year and continued strike action at Australia’s largest thermal coal producer in the Hunter Valley, has resulted in a market that is tight in the medium term and is providing the support for further thermal price increases.
Physical coal trades in the first week of August for September tonnage on the globalCOAL platform have seen prices confirmed at US$99/tonne basis 6000 kcal/kg NAR and US$96.75/tonne basis 6000 kcal/kg NAR for Australian bituminous thermal coal FOB Newcastle.
Chinese import prices have also remained strong on the back of positive GDP growth in the first half of 2017, further supporting Australian thermal coal pricing. Prices for prompt high ash 5500 kcal/kg NAR thermal coal are seeing bids for the China market in the early to mid US$70’s/tonne level, basis 5500 kcal/kg NAR FOB Newcastle.
TerraCom says this is all very positive for the reintroduction of Blair Athol thermal coal into the international market.
The company has also fully commissioned the Baruun Noyon Uul (BNU) Coking Coal Mine in Mongolia’s South Gobi region with export shipments under a 5.5 year offtake agreement having commenced on schedule.