Brazilian mining group Vale has reported that heavy rains significantly reduced production at its Moatize coal operation, in the Tete province of Mozambique, during the first quarter of this year (1Q19). Total 1Q19 coal production of 2.2-million tons was almost 29% down on the fourth quarter of last year (4Q18) and 9% less than for the first quarter of 2018 (1Q18), stated the company in its ‘Vale’s Production and Sales in 1Q19’ report.
Moatize, which is primarily a coking coal project, is the group’s only coal asset, apart from minority shareholdings in projects in China. Production at Moatize came to 2 213 000 t in 1Q19, compared with 3 108 000 t in 4Q18 and 2 432 000 t in 1Q18. Vale described the rains as “extremely severe”, adding: “The heavy rain also affected the access to some mine faces, thus impacting the grade quality of the run-of-mine (ROM) and the mix of thermal and metallurgical coal. Product mix was also affected by the already planned lower ROM grade quality of the mine sections being opened.”
In terms of sales, Moatize sold 2 394 000 t of coal during 1Q19. This was 30.3% less than the 3 433 000 t sold in 4Q18 and 4.1% down on the 2 497 000 t sold in 1Q18.
In terms of types of coal, metallurgical coal production during the first quarter came to 1 051 000 t, which was actually less than the thermal coal production figure for the quarter. Metallurgical coal production during 4Q18 was 1 641 000 t, meaning the 1Q19 figure was 36% lower than the 4Q18 figure; 1Q18 metallurgical coal production was 1 401 000 t, meaning that the 1Q19 number represented a 25% fall. Thermal coal production in 1Q19 was 1 162 000 t, down 20.7% on the 4Q18 figure of 1 466 000 t but 12.7% up on the 1 031 000 t of 1Q18.
In terms of sales volumes, these amounted to 1 291 000 t for metallurgical coal during 1Q19, down 27.9% on the 1 790 000 t for 4Q18 and down 9.8% on the 1 432 000 t for 1Q18. Regarding thermal coal, 1Q19 sales volumes were 1 103 000 t, a drop of 32.9%, compared with the 1 643 000 t for 4Q18, but an increase of 3.6% in relation to 1Q18’s figure of 1 065 000 t.
In its parallel ‘Vale’s Performance in 1Q19’ report, the miner stated that the earnings before interest, taxes, depreciation and amortisation of its coal business were minus $69-million during 1Q19. This was primarily the consequence of the lower volumes produced, plus reduced market reference prices. The lower production volumes had the effect of reducing the dilution of Moatize’s fixed costs.
The miner reported that the average price of seaborne coking coal during 1Q19, which was $205.8/t, was 7% less than in 4Q18 and 10% down on the figure for 1Q18. This was driven by reduced Chinese demand for coke and an increase in supply. There had been a “tight market” in 4Q18 because of maintenance activities at coal berths in Queensland, Australia.
Regarding thermal coal, Vale noted that the average Richards Bay free-on-board price during 1Q19 was $82.9/t, which was 13% down on 4Q18 and 12% less than in 1Q18.