Global metallurgical coal costs vary considerably. A contributing factor to this is that much lower quality metallurgical coal (such as semi soft) is produced in predominately thermal coal mines. Hence some South African and Indonesian operations are low cost, but produce only a small quantity of metallurgical coal. While the majors, such as BHP Billiton, Anglo American and Teck Resources, have relatively higher costs, but these operations producing predominately metallurgical coal, and can run at higher prices because they generate higher revenues.
BHP Billiton’s decision to spin out South32 with its Illawarra coal assets, is justified in the data as these South32 operations have an average FOB Cash cost of US$70/t, while BHP Billiton’s remaining assets have an average FOB cash cost of US$58/t. Anglo American, which has announced its plans to divest itself of its metallurgical coal operations, has higher than average operating costs, at US$76/t.
Cost analysis is a hybrid approach which uses proprietary cost estimation models with results reconciled to data obtained from company reported financial statements. Costing methodology quantifies the costs incurred at each stage of production by process through the supply chain from mining through to free-on-board (FOB).
Relative mining and processing cost differentials between mines are largely a function of the size and scale of the operation, process methods, energy and in-country labour costs, and the operating efficiency of the site. Overall 30 companies have been included, ranging from the large producers, such Glencore, Anglo American and BHP Billiton, to smaller players, such as Whitehaven, and large steel producers, such as Arcelor Mittal.
Australia dominates the global production of metallurgical coal, the majority of which is exported. Canada and the US, the two other major producers, are both at freight disadvantage (when exporting to North Asia) and have higher average operating costs.
The report “Global Metallurgical Coal Cost Curve” provides an coal cost curve for 150 mines, with breakdown of costs into mining, processing, admin, land transport, port charges and royalties. Specific datasets include: Global Mine Level Cost Costs Global Company Equity Production Costs Country level Production Costs BHP Billiton Cost Curve Teck Resources Cost Curve Anglo American Cost Curve.
Companies mentioned in this report: Peabody Energy, China Shenhua Energy Co, Arch Coal, Glencore, Alpha Natural Resources, Anglo American, SUEK, China National Coal Group Corporation, BHP Billiton, KZRU, Bumi Resources, South32, Adaro, Yanzhou Coal, Banpu, Rio Tinto, Teck Resources, Exxaro, Mechel, Consol Ene.