Clean coal demand drives Yancoal growth aspirations

Yancoal Australia is aggressively targeting organic growth opportunities to build on a rapid turnaround in company performance that led to a record 2018.

The company has highlighted a continuation of demand for its high efficiency thermal coal after posting several production records last year.

Yancoal stated that the power industry’s ongoing focus on improving thermal efficiency in generators would drive demand for the high-quality, low ash thermal coal product in which the company specialises.

Key Asian coal markets such as China and Japan have made a push towards high-efficiency, low emissions (HELE) thermal coal in order to help meet environmental targets.

Yancoal chief executive officer Reinhold Schmidt said the company would invest in new fleets and operational efficiencies across its open cut mines, while progressing a pipeline of Australian brownfield projects, with focus on the Mount Thorley Warkworth and Moolarben operations in New South Wales.

“With three of the most successful low-cost, high-quality producing Tier 1 assets in Australia, we are aggressively pursuing new organic growth opportunities to sustain the profitable return of Yancoal,” Schmidt said.

“Coal remains a critical part of global baseload energy supply and we are well positioned to maximise returns from current market conditions by meeting increasing needs for high quality coal supply.”

Chinese customs reforms this month have resulted in a fall in Australian coal prices, however. Customs clearing times at some Chinese ports have doubled to at least 40 days, according to a report from Reuters.

An official at Dalian Port Group told the news agency that the port was capping coal imports at 12 million tonnes for 2019. Five harbours within Dalian are no longer clearing Australian coal through customs, though coal from Russia and Indonesia is still allowed, the official said.

Despite this market volatility, Yancoal has raised its saleable production guidance for 2019 to 35 million tonnes, 2.1 million tonnes higher than its 2018 record.

The company’s attributable production in 2018 was 32.9 million tonnes, 27.7 million tonnes of which was thermal coal. This figure was nearly 78 per cent higher than the 18.5 million tonnes recorded in 2017.

Correspondingly, the company also achieved a record for its operating earnings before interest, tax, depreciation and amortisation (EBITDA) at $2.18 billion, a 121 per cent year-on-year increase. Yancoal secured a hat-trick third record, net profit after tax, which stood at $852 million (compared to $229 million in 2017).

Yancoal also announced a $377 million final dividend for shareholders (28.5 cents per share), another record for the company.

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