GOOD TIMING: State minister for mines Dr Anthony Lynham, Premier Anastacia Palaszczuk, Stanmore Coal chairman Neville Sneddon and Stanmore Coal managing director Nick Jorss officially opened the CQ coking coal mine in May.
GOOD TIMING: State minister for mines Dr Anthony Lynham, Premier Anastacia Palaszczuk, Stanmore Coal chairman Neville Sneddon and Stanmore Coal managing director Nick Jorss officially opened the CQ coking coal mine in May.

$1 billion coal price surge could boost state coffers

IMAGINE a sudden boost to the state's flagging revenue stream that could pay for 14,000 teachers or 16,000 nurses.

That's what the Queensland Government could be looking at with a $1billion boost in royalties if the price of coking coal hit and stayed above $170 a tonne.

Coking coal - the nation's second biggest export - went over $170 a tonne last week, albeit for one day, before shifting back to about $150 a tonne as the price of the commodity continued it's surge of recent months.

The Bowen Basin in Central Queensland contains almost all of the state's hard coking coal involving 29 mines and thousands of employees.

The Queensland Resource Council's Anthony Donaghy said on Friday that the price rise had jumped to another level in recent weeks but it was "too soon to be reaching for the champagne".

"While it's great to see the spot price above $170, a few days of strong prices is probably a bit soon to be banking royalty projections, which are paid on the actual prices realised over a three-month period," he said.

"It's also unclear what share of the Queensland exports are selling at spot rather than contract prices." 

The importance of coking coal to mining companies is shown in last week's report by the Australian where $US10-a-tonne move in the average annual price of the commodity, other things being equal, adds $US420 million to earnings of the world's the biggest coking coal exporter, BHP (before interest, tax, depreciation and amortisation).

Mr Donaghy said that the state budget forecast for coking coal was $88 a tonne.

"So in net terms, projecting a price of $170 or 82% above forecast gives a full year of $1,540 million which over the nine months remaining in the year would be 0.75 x $1,540 or $1,115 million in extra royalties.

He said an extra $1,115 m would give you an extra 14,707 teachers or 16,313 nurses or 16,669 police officers.

The Australian last week reported that Stanmore Coal, the junior miner which late last year paid $1 for the mothballed Isaac Plains coking coal mine in Central Queensland once valued at $860m, had timed its May production restart exceptionally well with its shares surging 50 per cent to 46c, giving it a market value of $100m.

In an August report, Macquarie analysts said they expected the price of coking coal to hold up for the next couple of months but that the fourth quarter would be a challenge.

Macquarie said.it thought the Chinese government would find it increasingly difficult to control output levels as margins continue to improve,

However it said, on a relative basis, metallurgical (coking) coal looked less vulnerable than thermal coal, since it was much more levered to Shanxi province, where production restrictions have been best enforced, and also because there wasn't as much supply flex in the seaborne market.

The Australian reported that the key to the sustainability of high prices would be whether the North American coking coal mines - that tend to be the marginal producers in the seaborne market - quickly fire up and put more coal in the market to compete with Australian exports.


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