Banking & Finance | Mining & Resources

Is the current coal boom sustainable – and how should industry respond?

13 Jun 2018, by Amy Sarcevic

It has been a tumultuous few years for the coal mining industry. On the one extreme, record price surges, broadening import markets and increased global demand have boosted investor confidence and been cause for industry-wide celebration.

On the other, railway disruptions, severed balance sheets and a blighted talent pool (post bust) have stunted supply chain growth and reduced industry’s ability to respond.

“There is a way to go before many coal mining sites are functioning at full capacity”, says Bounty Mining Chairman and CEO, Gary Cochrane – who is due to speak at the Australian Coal Conference – 16-17 August in Sydney.

“Since the bust, from 2013 to 2016, a number of skilled workers have either departed the industry or retired, so securing new talent can be a challenge. Some companies are also hesitant to expand their workforce or invest in upgrading their fleet, in case the boom isn’t sustainable”.

But, with coal prices the strongest they have been in six years, Mr. Cochrane believes that now is the time to resume business-as-usual.

Gary Cochrane, Chairman and CEO, Bounty Mining

“Right now companies can take advantage of the consistently strong commodity prices and get themselves back into operation – buy equipment, hire people, and ramp up to full production in the next twelve months. Capacity can then be built up gradually over time in order to withstand the next downturn”.

Bounty Mining is leading by example, as well as advice. The firm made headlines recently when it acquired the Cook Colliery Mine-site – a significant deal given that it arose from the Caledon Coal liquidation, which left their secured creditor US$200 million out of pocket.

Bounty recommenced production at Cook Colliery at the start of the year, and have since expanded to 150 staff – from a mine that was in care and maintenance and consisted of just 14 staff. By August 2018, more than 200 staff will be employed at the site.

And now, the firm is just days away from being listed on the ASX.

Both developments reflect Mr. Cochrane’s confidence in the longevity of the current boom. “We didn’t consider this [Cook Colliery acquisition] to be a high-risk endeavor”, he says. “Coal prices have remained strong for some time and are forecast to stay so for at least the next twelve months. Investor interest is also strong and there is good support for our current IPO and capital raising”.

He highlights demand trends in Asia to account for – at least some of – his confidence in the current coal boom. “Wages in China are sitting pretty high at the moment and more and more Chinese firms are beginning to outsource their manufacturing in Thailand and Vietnam. As a result, these nations are developing at a significant rate and becoming substantial coal importers in the process. If the growth rate of China is anything to go by, I see coal demand from South East Asia and India growing exponentially in the foreseeable future”.

Gary Cochrane will present a paper and join a panel debate alongside U&D Coal General Manager, Darren Walker, at the Australian Coal Conferencedue to take place 16-17 August in Sydney.

Held at the Radisson Blu Plaza Hotel Sydney, the conference will provide an intimate platform for industry consultation during this crucial period of growth.

Learn more and register.

 

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