BHP seeking to raise its thermal coal profile

BHP seeking to raise its thermal coal profile

SYDNEY (Reuter): The Broken Hill Proprietary Co Ltd is looking
to raise its profile as a miner of thermal coal.

BHP last week dropped "Australia" from the name of its coal
subsidiary to reflect an expansion of activities to include the
management of several thermal coal mines in Kalimantan,
Indonesia, a company spokesman said.

BHP's managing director, John Prescott, said recently that
while weakening copper and steel markets were weighing on overall
operations, coal operations were among the better performers.

The Indonesian properties, in which BHP has 80 percent stakes,
will deliver around seven million tons of coal taking BHP's total
coal-producing capacity to around 70 million tons a year, a BHP
spokesman said.

BHP produces some Australian thermal coal and operates thermal
coal mines in South Africa and the U.S., although it
predominantly mines coking coal from Australia.

A larger share of the market for thermal coal would help
diversify BHP away from coking coal, where demand and prices tend
to move in tandem with world steel markets, analysts said.

BHP's coal mines in Australia -- nine in central Queensland
and five in New South Wales -- account for about 20 percent of
global trade in seaborne coking coal, the spokesman said.

Markets have been mostly steady for coking coal. But thermal
coal use is seen growing in step with increasing demand for power
generation, particularly in Asia.

The Asia-Pacific Economic Cooperation group estimates energy
consumption among its 18 member nations alone will grow by an
average 2.2 percent a year to 2010, with much of the new energy
generated from coal-fired plants.

"We are not a big operator in that market (thermal) but we'd
like a bigger share of it," the BHP spokesman said.

Thermal coal sold in to the Japanese market currently fetches
a benchmark price of US$40.30 a ton, although recent mid-year
tenders have seen smaller-sized shipments being delivered at as
much as $7.00 a ton below that price, industry sources said.
Negotiations between Australian coal producers and Japanese
customers are traditionally held on an annual basis to coincide
with the Japan's March-to-April fiscal year.

While BHP takes a leading role in negotiations with the
Japanese in coking coal, it is less influential during thermal
coal contract discussions.

In Australia, BHP is spending A$185 million to expand thermal
coal production at its Mount Owen mine in New South Wales to 3.5
million tons from one million tons by the end of next year.

At the South Walker Creek mine in Queensland's Bowen Basin, a
two-year trial of shipments of soft coking/thermal coals are
underway to customers at annual rate of 1 million tons a year,
the spokesman said.