CQ coal for the future?
ALARMING fall in coal exploration casts shadow beyond 2017.
Tuesday 17 January 2017
Exploration for coal has reached its lowest point in more than a decade despite the astonishing recovery in prices at the end of 2016.
After several years of double-digit reductions, coal businesses cut more than a third from their exploration budget last year, in response to the lowest prices in a decade.
Those lows prices were the result of a major oversupply of coal that followed the biggest mining construction boom ever between about 2007 and 2014.
However, that oversupply from Australia could be fast unwinding, with year on year record coal exports on the one hand, and an almost complete halt on drilling efforts to find new economic coal deposits on the other.
According to the Office of the Chief Economist (OOCE), in 2016 there were just two new coal projects developed in Australia, a further eight projects reached the committed stage, but 37 projects are stuck in the feasibility stage, and unlikely to change in the short term.
“Producers are diverting their focus from developing new projects to cutting costs and ensuring the commercial viability of existing assets,” the OOCE said.
“Final investment decisions for many projects have been delayed to 2017 or later, with producers considering factors such as the price cycle, access to infrastructure, business conditions, and Australian cost competitiveness.
“These results are illustrative of the ongoing transition from the investment phase to the production phase of the mining boom.
“They are also a sign of the more challenging operating and market conditions that Australian producers have faced over the last year.
“The rally in some commodity prices in the second half of 2016 — particularly for coal and iron ore — will alleviate some of the pressure on Australian producers.
“However, investment decisions are taken with a long-term view of market conditions, and short-term price lifts are unlikely to have a significant effect on exploration activity and the progression of projects along the pipeline.”
With coal exploration, less than a fifth of what it was in 2012, Mr Simon Bennison, Chief Executive Officer from the Association of Mining and Exploration Companies (AMEC) has called on the government to partner with the mining sector to ensure the mines of tomorrow.
“The investment made in co-funded drilling schemes by Governments has helped reduce the cost of drilling and makes it easier for companies exploring remote Australia to decide to drill and discover the mines of tomorrow," he said.
“Each new mine creates thousands of jobs and generates significant economic and social dividends for the nation and local communities.
"The mines of tomorrow have to be discovered to replace the existing producing mines.
“The Federal Government’s Exploration Development Incentive (EDI) program has also stimulated investment in eligible Australian junior mineral exploration companies, making it more attractive for investors to decide to support the next generation of mines.”Coal exports from Queensland in 2016 totalled 221 million tonnes (mt), eclipsing the previous year’s record by one mt while LNG exports more than tripled to 17.5 mt.