Mining Job Cuts Imminent if Australian Dollar Remains Strong Says BHP, Rio
The strong Australian dollar had done a number on the coal mining sector in Australia in the past few years, and things look like they will continue in much of the same vein for the short term. BHP’s global coal president Dean Dalla Valle and Rio’s energy CEO Harry Keynon-Slaney cite not only the strong Australian dollar, but the added pressure of high costs and equally high taxes as problems plaguing the industry.
The $60 billion coal sector has already cut 12,000 jobs in the past two years, and further mine closures and job losses are expected this year. Companies like BHP and Rio, and Glencore, Vale and Peabody energy are all experiencing similar trouble in these tough times, and many operators are not making money at current prices.
Rio's Keynon-Slaney commented on the state of the industry, saying that "the big established and high-quality resource bases where there are efficient and effective operations will have to continue this relentless cost drive – they will probably survive, but there are going to be some operations that are challenged."
For example, industry experts believe that around 10 percent of mines in Queensland are in a delicate position, specifically in regards to lower-grade coking and thermal coal. The state's output is currently producing at a loss, including half of all thermal coal production. New South Wales is seeing similar numbers.
To combat the tough market, decisions regarding the long-term goals of the company need to be made. The tight situation has become even tighter in the last six months, and the relief is not yet on the horizon.
Miners are remaining relatively confident regarding the long-term outlook. And for BHP and Rio, belts have had to be brought in, but both are operating at a profit as the lowest cost producters in the country. Rio is looking to deliver record-level productions with their thermal operations, and BHP is also running at capacity.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.