People, cyclones and cash flow
Believe it or not labour shortages now back at the heart of mining production problems
Wednesday 26 April 2017
Stanmore Coal has reported another disappointing quarter of production at their flagship Isaac Plains mine with total coal production down around 15 percent, and the amount of saleable coal exported down by nearly a quarter compared to the previous three months.
Astonishingly, given the loss of jobs in mining over the last five years, Stanmore says lack of people has been a major contributor to lower production.
“The ramp up of pre-strip activities in the March quarter was impacted by a recent tightening in the labour market, with manning shortages impacting utilisation of the pre-strip fleet,” they said.
“Towards the end of the quarter, the contractor made positive steps toward securing additional operators, which will significantly assist with meeting the planned production schedules for the following quarters.”
However, labour wasn’t the only problem for Stanmore.
According to the company’s quarterly report, while strip ratios have fallen, difficult geology has significantly reduced the productivity of the dragline.
“The strip ratio for the quarter was 12.2x down from 14.4x in the December quarter,” they said.
“Although total overburden was in line with plan, the linear speed of the dragline was impacted by increased rehandle designed to maximise recovery of each repeated coal sequence around the fault zone.
As a consequence of the production problems, the mine continues to barely break even with cash costs hitting $A112 per tonne, compared to an average all coal price of $A124 per tonne.
However, the biggest problem for Stanmore now and in the short term is likely to be the shutting down of the rail network because of Cyclone Debbie.
Stanmore says there is limited capacity for stockpiling coal at Isaac Plains, so it is still assessing how it will manage production while rail lines remain closed or on reduced capacity.
Like businesses everywhere, the cyclone delays have forced Stanmore to watch its cash reserves closely since it won’t have sold any coal for most of April and March.
While it believes it has sufficient cash to handle it, it has used up its working capital fund.
“The company anticipates that sales volumes will not be caught up before the 30th June given the significant demand that will be placed on the network once the full logistic network is operational,” they said.
"The remaining US$6 million from the Taurus working capital facility was drawn in March to manage the timing of significant customer receipts due in April, and the working capital facility is now fully drawn at $US 12 million.”
On a brighter note, the company is expecting TC Debbie production problems across all of Queensland to push up the contract prices in current negotiations with Asian steel mills.However, even their ability to capitalise on this will be hamstrung by TC Debbie, because around a third of the coal produced in the next quarter will have to be sold at lower March contract prices.