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BHP says coal output fell 30% in Australia floods

by Staff Writers
Sydney (AFP) Jan 20, 2011
Devastating floods in Australia's Queensland state have slashed production of steelmaking coal by 30 percent in the resources-rich region, the world's biggest miner BHP Billiton said Thursday.

But while the weather put the brakes on its coal production, the Anglo-Australian mining giant managed record iron ore output in the December quarter as demand for minerals boomed following the global financial crisis.

The impact of flooding and torrential rains that have shut mines and killed more than 30 people in eastern Queensland state will likely continue to hurt coking coal production and push up its cost for months to come, BHP warned.

"Queensland coal production was significantly affected by the persistent rain and flooding," it said in a statement detailing the company's resources output for the six months to December 31.

"In the December 2010 quarter, Queensland coal production declined by 30 percent when compared with the September 2010 quarter, while sales declined by 15 percent."

BHP has declared force majeure on most of its coal products from Queensland's Bowen Basin, including on output from three of the world's largest coking coal mines -- Goonyella Riverside, Blackwater and Peak Downs.

Force majeure declarations are made to allow a miner to escape penalties if it is unable to meet its contractual delivery obligations due to events beyond its control.

"When combined with disruption to external infrastructure, we expect an ongoing impact on production, sales and unit costs for the remainder of the 2011 financial year (to June 2011)," the company said.

BHP's overall coking coal output was 7.8 million tonnes in the three months to December 31, a 12 percent decline over the same period a year earlier.

Force majeure also continues at the Queensland coal projects of rival Rio Tinto due to the floods, though the company this week said all four mines were "operational but are still constrained in some way by weather impacts."

"Rio Tinto is currently unable to provide an estimate of the full impact of this adverse weather or the duration of the force majeure declaration," Rio said in a Tuesday operations review.

Australia supplies two-thirds of the world's hard coking coal, and analysts warned this week that prices could more than double to a record high of more than $500 per tonne, squeezing costs for steel producers in China and India.

But BHP's iron ore production rose four percent to a record of 33.7 million tonnes in the October to December quarter, hitting an annualised output rate of 148 million tonnes.

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