Macarthur Coal Set To Take Advantage Of The Coal Boom

Sydney, Aug 15, 2006 (ABN Newswire) - Australia is in the grip of a coal boom. As fast as we can dig it up, foreign markets are snapping it up. Much of it leaves from here - Dalrymple Bay Coal Terminal in Central Queensland. Twenty-four hours a day, seven days a week, Australian coal is loaded onto ships, destined for the hotspots of global industry. It’s a coal rush, one that school children will be reading about for generations to come. And a central figure in that story is Macarthur Coal, and the entrepreneur who created it, Ken Talbot.

Ken Talbot CEO Well, Macarthur Coal is a Queensland-owned company, our business is coal mining and we’re exporting coal to the major steel mills of the world.

Voice over Macarthur Coal’s substantial success has been built on three key platforms.

Ken Talbot Firstly, what we’ve done is we’ve taken a project, very quickly turned it into an advanced project, and in turn developed an operating mine. The second platform of our success is the fact that we targeted a growth area of the coal market and the segment of coal that we’re in represents the fastest-growing segment of, in fact, the international coal market. The third area that’s very important to us is that we’ve supported grassroots exploration over a very long period, in fact about 10 years, so that’s given us fantastic organic growth opportunities.

Voice over The company is ready, willing and able to meet the challenge of maintaining that success.

Ken Talbot We’ll that’s an ongoing challenge to us. On the revenue side we must continue to be the dominant player within our segment. And partnerships that we develop, particularly in the emerging countries like China and India, are going to be very, very important to us in the next 10 years. On the production side of our business, the ongoing challenge for us is to find ways to be more competitive and reduce our cost structure so we need to apply a lot of entrepreneurship to make sure we find the right way to produce our coal competitively.

Voice over Macarthur’s profit powerhouses are its two mines in Queensland’s Bowen Basin - Coppabella and Moorvale. Shane Stephan is the executive in charge of these two world-class operations, the biggest of which is Coppabella.

Shane Stephan Vice President - Open-cut Production

The mine is located right next to the Peak Downs Highway. The deposit’s 5.5 kilometres in length. We operate 365 days a year, 24 hours a day and we mine approximately 5.5 million tonnes of raw coal to produce 4.2 million tonnes of product coal each year.

The Moorvale Mine is located 13 kilometres to the south of Coppabella and mines the same seam. We mine approximately 3.3 million tonnes of raw coal to produce 2.5 million tonnes of product coal each year.

The key point that makes Coppabella and Moorvale excellent mines is the very low capital cost. Typically mines such as Coppabella and Moorvale have cost $60-$80 Australian dollars per tonne of annual production capacity to develop. Both Coppabella and Moorvale were developed for well under half of that. Because of the low capital cost in developing these mines and the high production rates we are able to maximise our returns to shareholders on their investment.

Voice over One of Macarthur’s key advantages is that it dominates in PCI, the fastest-growing sector of the coal market.

Shane Stephan Steel mills globally demand PCI coal because it reduces their costs and reduces their emissions. Our markets are global; our principal customers are in Japan and other Asian countries where we sell 50 percent of our production. We sell 40 percent of our production into Europe and 10 percent into the growing markets of Brazil and we’re very comfortable with our diversified customer base.

The future for PCI is aligned with growth in the global steel industry, and the global steel industry is entering a new Golden Age where growth rates are expected to be in excess of 5 percent for a number of years into the future. We in particular are interested in focusing on the Indian market where the growth in steel usage for infrastructure and construction will demand the importation of large volumes of coking coal and PCI coal from Australia.

Voice over So as the world gets richer, it demands more steel and energy. And that’s great news for Macarthur Coal.

Ken Talbot I see the future very strong. If you look at the coal industry there are two markets. Firstly the market for steel, and if you look at global steel production the world has achieved a fantastic milestone in 2003 of 1 billion tonnes of global crude steel production capacity. Now that was achieved in about 120-130 years, we predict the second 1 billion tonnes will happen in the next 30-40 years. That means a doubling of all the raw materials necessary to support that production base so Macarthur Coal has a great opportunity to really be a very important part of that.

In addition to that, if you look at energy, and that’s the second important market for coal, I think coal is undervalued relative to oil and gas around the world and I see a great opportunity for coal to participate particularly as we are developing as an industry clean-coal technology. We also see that the world will double its energy requirements over the next 30-40 years and that’s to say I think coal will be a very important part of that.

Voice over Ian Neill is the man Macarthur has charged with overseeing their impressive list of pipeline projects. Macarthur has announced plans to develop up to five new mines from its impressive project pipeline by 2010. Among these are Olive Downs, Moorvale West and Monto.

Ian Neill Our Olive Downs project is located about 15 kilometres south of our existing Moorvale Mine. Olive Downs will be developed as a satellite open-cut mine, about a million tonnes per annum, and that coal will be hauled up to the Moorvale facility where we will wash the coal at Moorvale and transport it out through the existing infrastructure.

The Moorvale West deposit is approximately 8 kilometres west of our existing Moorvale operation. We’ve been very active over the last 8 months with our exploration efforts at Moorvale West and we now have 140 million tonnes of resources at Moorvale West. The coal there is a shallow underground resource but it has demonstrated good coking properties as well as some PCI coal in that resource.

The Monto deposit is located south of the town of Monto about 120 kilometres west of Gladstone. The resource contains about 500 million tonnes of open-cut thermal coal and the quality of that coal is well regarded in the Asian market.

Our projects need to be developed in line with market demand, particularly in the steel industry. Our projects also need to be developed in line with the growth in infrastructure to support the coal mining industry in Central Queensland.

We are now looking to diversify into coking coal and thermal coal and our exploration areas cover both those products.

Voice over Through vision, innovation and hard work, Macarthur stands out as a company its shareholders can be extremely proud of.

Ken Talbot Well, I think there are many things. We developed some mines, two mines, we have the opportunity to develop another five or six mines in the future, we’re very proud of that. I’m very proud of our exploration effort because we’ve actually gone out and made discoveries; many companies never make a discovery in this world. We’re also proud of the fact that we are the largest supplier in our particular segment on a global basis so that’s very important. We’re also very proud of the revenue that we’ve created and the profitability, not just for Macarthur Coal but for Queensland. And also we’re very proud of the partnerships and relationships we have, which are at the highest level across a whole range of international companies as well as governments here in Australia and overseas.

Voice over Undoubtedly, Macarthur is a company that knows what it’s doing. And knows what it’s going to do. The way forward is clear.

Ken Talbot Well, we must remember that we’re operating in a global environment. There’s a lot of consolidation of ownership, companies are getting bigger. We want to continue to be a Queensland-owned company so there’s always room for an independent company but we’ve got to grow. So that’s why the exploration efforts that we are undertaking are important and now it’s a matter of bringing those through. So the final vision for us is to be a company with a production base of 20-30 million tonnes.

Voice over So, like the great American general after which it’s named, Macarthur has skillfully used strategy, swift action, and vision to amass an enviable list of successes. And there are many more to come.