Rio Tinto's massive write-down of Mozambique coal assets proves Australia's deposits and infrastructure are of a higher quality, UBS analysts claim.
The $2.8 billion write-down Rio posted earlier this month contributed to the demise of former CEO Tom Albanese, and according to UBS commodities analyst Tom Price the move has dimmed the view of Mozambique coal.
Price told Fairfax Media yields from Rio's Riversdale assets in Mozambique were around 50 per cent lower than normal because of their high clay content.
He also said the lack of washing and transport infrastructure meant doing business in the country could be more complicated and expensive than in developed regions.
“I'm not a big bull on the growth story of Mozambique,” Price said.
“I think it will take longer than people expect.”
Price said as metallurgical coal production grew in Mozambique and Mongolia global prices for the commodity would fall from about $US165 a tonne now to $US160 in 2014.
But Price said if Mozambique failed to deliver demand could rise, which would benefit higher cost producers in Australia and the United States.
“The Aussies and the Americans would be very happy at the moment,” he said.
“There's a little bit more security about their medium-term outlook.”
Late last year Bank of America analysts said Australian miners would “hurt the most” as US producers started to export more coal.
Analysts said US companies were already stealing market share from some Australian producers, and the trend was set to continue over the next few years.