Cockatoo turning profits, and heads

Cockatoo Coal, a relatively small Queensland coal producer, is turning heads in the coal industry because of its ability to turn around a loss-making resource.

Cockatoo Coal, a relatively small Queensland coal producer, is turning heads in the coal industry because of its ability to turn around a loss-making resource.

The company has moved from explorer to producer in 12 months, turning a small, loss-making asset into a profitable enterprise in record time, with strong attention to detail and a focus on efficiency.

This relatively small company has implemented successful operational improvements and proved that their decision to purchase the $52 million Baralaba coal mine was a good one.

“At around about the bottom of the market we’ve taken a decision to spend what is, in the broader scheme of coal purchases, a small amount on a coal mine, albeit a loss making one, with a view to turn it around in 12-18 months to get it to a point where it was making a profit,” Cockatoo Coal Investor Relations General Manager Greg Germon told MINING DAILY.

“To put it into context globally, profitable coal mines don’t usually transact for less than half a billion dollars, at a minimum.”

The owners have made significant inroads in reducing costs at the operation.

“We’ve just forecast that we are expecting to get costs down from where they were, which was right at the top end of the fourth quartile, and we’re looking to get those down to $100 by the end of this year,” Germon said.

A key element to reducing costs at Baralaba, according to Germon, came from a push to understand the geology of the Barabala resource.

“We’ve spent quite a bit of time and a bit of money on understanding the geology, as well drilling through the existing pit to get a very clean and clear understanding,” Germon said.

“Then there is also management of the product stockpiles, and waste, and there is a lot of attention and detail.”

The company used the recent financial crisis as an opportunity, according to Germon, putting out a request for tender in the first half of 2009 to find cost benefits.

“It is fair to say in the first six months of this year there was ability for any company to find some improved and more reasonable costs,” Germon said.

From here, Germon expects to continue to reduce cost-per-tonne through increased production and economies of scale.

“We’ve certainly made a lot of our biggest in roads in the first six to nine months, and progressively we would expect that the biggest saving from now would be in the economies of scale we achieve from greater production.”

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