Anglo and BHP hit by Queensland rains

Nikhil Kumar
Friday 31 December 2010 01:00

BHP Billiton and Anglo American have become the latest miners to declare force majeure on their coal operations in Australia's Queensland state as prolonged downpours disrupt road access, production and railways in the key coal producing region.

Anglo said the full impact of the torrential rain was not clear as the weather remains inclement, with "further rain forecast for the region", while BHP explained that it had invoked the clause on certain products from the fertile Bowen Basin. BHP added that "details of any significant impacts as a result of weather conditions will be included in the company's next quarterly production report".

The declaration by the two FTSE 100-listed miners follows similar moves by other big players, including Rio Tinto, which declared force majeure on coal sales contracts linked to mines where it has a majority interest, and Macarthur Coal, which invoked the legal clause at its Coppabella and Moorvale coal mines.

"The severe monsoonal rain, on top of the significant rainfalls in November and December, has had an adverse impact on mining operations and has cut access roads and rail networks," Rio said when it declared force majeure earlier in the week.

The clause is typically invoked in instances where companies cannot honour contracts owing to unforeseen circumstances beyond their control. The wet weather has led to severe disruption, with force majeure currently invoked as coal mines with an annual production capacity of at least 80 million tonnes – or around 30 per cent of the island nation's total coal exports of 259 million tonnes last year.

Australia is a key coal producing nation, feeding around 60 per cent of global consumption. It is the world's biggest exporter of coking coal, a key ingredient in steel making, and accounts for some 20 per cent of the world's exports of thermal coal, which powers electricity plants around the globe. On its own, Queensland state is the world's largest exporter of seaborne coal.

Beyond the miners, transportation firms have also been hit by the bad weather, with the Dalrymple Bay Coal terminal, Gladstone Ports Corporation and the rail firm QR National being forced to cut back their operations in the region.

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