Polish thermal coal producer Lubielski Bogdanka Wegiel said Friday it expects to produce an average of up to 9.2 million mt/year in 2017-25 if market forecasts of supply shortages prove correct.
In its new development strategy to 2025, Bogdanka said it is ready to increase its production if shortages of thermal coal on the Polish market start to occur from 2017 onwards.
In 2015, the company produced 8.5 million mt, rising to an estimated 9 million mt in 2016.
If the shortages occur, Bogdanka said it expects to produce an average of 9 million mt/year in 2017-20, 9.3 million mt/year in 2021-25 and 9.1 million mt/year in 2026-30.
In its base scenario, in which thermal coal shortages do not occur, Bogdanka plans to reduce its production to 8.6 million mt/year in 2017-20, and to 8.5 million mt/year in 2021-30.
Bogdanka plans capex of Zloty 3.712 billion ($920 million) in 2016-25 in its base scenario, rising to Zloty 4.006 billion in its flexible development scenario.
Most of the additional capex in the development scenario, Zloty 224 million, would be spent on mining machinery, while Zloty 70 million was earmarked for preliminary work to start exploitation of the Ostrow coal field, which contains an estimated 186 million mt of recoverable coal.
The company plans to double its operational coal reserves from 227 million mt by 2025 and increase its share of the domestic thermal coal market from 22.5 % to 25% in 2025.
Bogdanka, based in Puchaczow, mines the Lublin coal basin in south east Poland. It is majority owned by state utility Enea. It sells most of its coal under long-term contracts with power generators, including Enea's Kozienice plant.
Enea's planned acquisition of Engie's Polaniec plant would increase the level of Bogdanka's production for Enea's own needs from 43% to 75% in 2025.
The company said it plans to reduce its production costs, which are already among the lowest among Polish hard coal miners, by 10% in 2025 from 2015 levels.
Although Bogdanka forecasts annual electricity demand in Poland to rise 15% by 2025 to 189 TWh -- a slower pace than forecast GDP annual growth of 3% -- the company expects domestic thermal coal demand to fall 4% from 57.9 million mt/year in 2015 to 55.4 million mt/year in 2025.
Bogdanka said it expects hard coal's share of domestic electricity production to remain fairly stable, falling only from 47% in 2015 to 46% in both 2020 and 2025.
