Weak coal price takes its toll on the mining industry

WEAK coal prices are bleeding multinational miners dry and drawing smaller and more nimble firms out of the shadows ready to prey on an operation going cheap.

Industry conditions are ripe for sales, with the Queensland Resources Council last week telling the Queensland Government it expected one in four coal mines in the state were now failing to turn a profit.

Just days earlier, former billionaire miner Nathan Tinkler snapped up the mothballed Wilkie Creek mine near Dalby in a deal worth up to $150 million.

The south-west Queensland Peabody mine was shut down late in 2013, putting up to 200 out of work.

Speaking in Mackay on May 9, QRC chief Michael Roche discussed just how little companies were earning when their coal is dispatched from port.

Coking coal - used to create iron ore - is currently selling for US$115 per tonne. After port, rail and royalty costs, just $8 of that returns to the company coffers.

Energy coal now sells for US$73 per tonne, up to $4 below what it takes for a miner to shift it from the ground to the customer.

HSBC Chief Economist Paul Bloxham said there would be more to come.

"That's one way to reduce costs in an environment where (coal) prices have come down," he said.

"That's all the companies involved can focus on, finding ways to reduce costs to minimise losses or find ways to profit.

"One way to help achieve that is some consolidation.

"If the price is right, deals get done."

In late April, Peabody chief executive Gregory Boyce told the New York Stock Exchange it wanted to offload "non-core assets", beyond the sale of a $70 million coal deposit earlier this year.

Topics:  coal mining queensland resources council

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