BOGOTÁ: Joint venture Cerrejon, Colombia’s biggest coal miner, does not plan to raise output with prices near 10-year lows, Chief Executive Officer Roberto Junguito said, despite investments to boost capacity by about one-quarter. Cerrejon has invested $1.2 billion in the last three years in an extra ship loader and infrastructure, taking its export capacity to 41 million tonnes since the works were finished late last year but it plans to hold production steady.
“Unless prices are higher or we manage to reduce costs and taxes we will not be able to move significantly from current production levels,” Junguito said in an interview at the Colombian Mining Association conference in the coastal city of Cartagena. Coal prices in Europe, one of Colombia’s most important markets, are hovering near 10-year lows at $57.40 per tonne.
To adjust to lower prices, which had held above $80 for around five years until the middle of last year, Cerrejon is implementing 150 different initiatives to cut costs, including renegotiating with suppliers and boosting efficiency.
He said the company was backing efforts by the overall mining and energy sector to persuade the government to reduce royalties and taxes for extractive industries after hiking them during the last decade’s commodities boom. Cerrejon is a joint venture between BHP Billiton, Anglo American Plc and Glencore Xstrata, and has been producing coal in Colombia since the mid-1980s under a concession that runs until 2033.
Helping margins however, Junguito said fuel costs have fallen with last year’s plunge in oil prices. The recent strengthening of the Colombian peso is also helping control expenditure, he said. While about 11 percent of the company’s coal was produced at a loss by late last year, that has since declined, Junguito said, though he did not have exact figures.
Leftists guerrilla attacks on the company’s private railway, once frequent, have not occurred since late 2013, a turnaround that Junguito attributed to increased military efforts to secure the border area with Venezuela, a hotbed of rebel activity. Despite lower prices, Junguito said demand remained steady in the seaborne coal market and growth prospects in the Asian market, particularly India, were still strong. Colombia once exported a large amount of its coal to the United States but that market has shrunk in recent years as it turned increasingly to power generation using shale gas.
