A 100-Year-Old Australian Coal Mine Returns as Prices Double

(Bloomberg) -- Jindal Steel & Power Ltd. has ramped up output at the 100-year-old Wongawilli coking coal mine in Australia and is set to resume operations at another in Mozambique as prices more than doubled this year.

The New Delhi-based company is producing about 100,000 metric tons a month at the mine in Australia’s New South Wales, which it started in July, and has sought regulatory approval for resuming output at the Russell Vale mine in the same area, Chief Executive Officer Ravi Uppal said. The company, which is one of India’s largest steel producers, plans to resume operations this month at its Chirodzi coal mine in Mozambique and produce 300,000 tons a month, he said.

“Our mines have zoomed into action,” Uppal said in an interview in New Delhi Monday. “Coking coal prices are going to remain high for the next six months.”

Metallurgical coal prices have surged and thermal coal has rebounded after five years of declines as China seeks to cut its overcapacity and curb pollution. Output from the world’s biggest producer and consumer of the fuel has fallen more than 10 percent in the first eight months of the year.

Jindal joins commodity producers including Chinese steel mills and U.S. oil explorers in boosting activity as prices rally, a response that can aid company balance sheets but also sustain the gluts that have plagued the raw materials industry.

Jindal Steel, controlled by former lawmaker Naveen Jindal, has reported seven consecutive quarterly losses and is counting on its steel and mining operations to help generate profits. The company took an impairment charge of 6.26 billion rupees ($93.5 million) on the Australian mining assets in the quarter ended June 30, according to a stock exchange filing on Sept. 8.

The company’s shares rose 0.7 percent to 81.60 rupees in Mumbai on Wednesday. The stock has lost 15 percent so far this year, compared with an 8.6 percent gain for the benchmark S&P BSE Sensex.

Jindal Steel needs coking coal for its 1.7 million-tons-a-year blast furnace in the central Indian state of Chhattisgarh. The company’s demand is set to rise after December, when its 4 million tons-a-year blast furnace in eastern Indian state of Odisha starts operation, according to Uppal. The company uses about half a ton of coking coal to produce a ton of steel.

The Wongawilli mine started operation in 1916, according to the website of Jindal Steel subsidiary Wollongong Coal Ltd. Production restarted in July after the mine was placed on care and maintenance status in 2014, the Australian company said.

To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net, Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net. To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark