Australia's Wesfarmers said Wednesday it expects its sales of metallurgical coal to be negatively affected in the 2017-18 (July-June) fiscal year by rail issues announced recently by rail operator Aurizon.
Wesfarmers, operator of the Curragh metallurgical coal mine complex, one of the world's largest, said in a half-year report it was expecting its sales to be in the range of 8.5 million mt-8.8 million mt for the 12-month period.
Its sales in the July-December first half were up 8% year on year at 4.5 million mt, Wesfarmers said. This indicates its sales will be lower at 4 million-4.3 million mt in the current January-June second half.
"Aurizon's recently announced changes to its network operating and business practices are having an ongoing impact on available rail capacity," Wesfarmers said in its July-December results report.
"Combined with an Aurizon train derailment in January 2018, which impacted exports from the Port of Gladstone, Curragh's ability to export coal will be affected during the second half," it added.
Aurizon, operator of the Central Queensland Coal Network, announced last week the network was at risk of losing 20 million mt/year of coal throughput because of a draft decision by the state of Queensland's competition authority.
The Queensland Competition Authority says that Aurizon's maintenance allowance for the next four year regulatory period, which its proposed tariffs are based on, should be A$817.3 million, below the A$920.6 million that Aurizon had been budgeting for.
Aurizon said that going forward it will prioritize lowest-cost maintenance over flexibility and lowered its above rail coal volumes guidance for fiscal 2017-18 to 210 million mt-220 million mt from the previously expected 215 million-225 million mt.
In December, Wesfarmers announced it had agreed to sell Curragh to US coal producer Coronada Coal Group for A$700 million.
As part of the deal, which remains subject to a number of conditions before being completed, Wesfarmers will receive 25% of the mine's export coal revenue generated above a realized metallurgical coal price of $145/mt, paid quarterly over the next two years.
The sale of Curragh is expected some time during the current half year, Wesfarmers said.
It estimates its fiscal 2017-18 sales mix will be 46% hard coking coal, 12% semi-soft and 42% PCI.
Wesfarmers is also conducting a strategic review of its 40% interest in the Bengalla thermal coal mine in the neighboring state of New South Wales, and has sought expressions of interest from potential buyers.
