Six months on from the Queensland floods the economy, and the state’s coal mines, still haven’t recovered. In fact, water equivalent to the volume of Sydney Harbour is still present in many open pit mines.
Coal exports in May were 23 per cent lower than the previous May, and the lowest for Australia in five years. Seventy five per cent of Queensland’s 57 coal mines are still flooded, with the government and mining companies still in talks as to what to do with the polluted water.
Cockatoo Coal (ASX:COK) was one of many companies that ceased production after a bund wall( containment wall) stopped working at its Baralaba open pit mine in the Bowen Basin, the world’s largest resource for export high quality coking coal.At the time, company director Peter Nightingale said the flooding of the open pit mine was simply “impossible to avoid”.
Rio Tinto Ltd (ASX:RIO) declared force majeure on coal contracts for its Bowen Basin mines, as did major mines owned by companies including Macarthur Coal (ASX:MCC) and BHP Ltd (ASX:BHP).
And it wasn’t just the miners who were hit hard by the floods. QR National (ASX:QRN), Australia’s biggest rail freight haulage operator with 700 locomotives and 9,400 employees faced having one of their major rail links under water. The company released an announcement last month, admitting slower than expected full recovery of coal supplies.
“In recent weeks the Company has hauled approximately 1 million tonnes per week below expectation,” it said.
“The rate of improvement moving into the 2012 financial year is uncertain and there may be opportunities for catch-up, depending on the circumstances of individual customers.”
The company declined to comment on its crisis management operations during the floods, and how it plans to continue to recover.
Queensland Resources Council’s (QRC) chief, Michael Roche, said that before the wet season, the Queensland coal industry was set to export a record more than 200 million tonnes in 2010-11, but now looks likely to fall to about 40 million tonnes short.
In the aftermath of the floods, he points the finger at the Queensland government for not fully understanding the extent of the damage the floods have caused on the coal sector.
“I can only hope that treasurer Fraser has received assurances from his colleague, environment and resource management minister Kate Jones, that she has a plan to help remove the water,” Roche said.
He also said that a governmental review of the conditions governing water discharge from coal mines must quickly translate into real changes, so mines can prepare for the next wet season in just a few months times.
“Moving water around on mine sites is a temporary solution. Sustainable royalty numbers over the forward estimates require a long-term fix, which in itself will take some months to have effect.”
Peter Rekers, owner of Crisis Ready, consults with companies like Leighton Holdings Limited (ASX:LEI). With a defence force background, Mr Rekers served two tours in Iraq and has also worked as media manager for the Department of Emergency Services in Queensland.
“Surely we’ve learnt the lesson this year that up to $7 billion worth of investment is worth getting it right,” he said of the loss and recovery status of the coal industry.
“Investors should ask questions about how prepared their company is. If you have a position on a board, ask questions about the company’s crisis management plan: how seriously does it take that stuff? If you get the attitude that it’s not taken very seriously then I wouldn’t be investing in that company.”
Mr Rekers said up to 40 per cent of businesses affected by a natural disaster never reopen.
“In terms of why do we take this seriously, the evidence couldn’t be clearer. The safety people on the sites take it very seriously because it’s regulated very well in Australia, but what we don’t do well is the crisis and disaster planning because it’s not regulated, because essentially the impacts that are going to come out of it, are financial.”
Australia's economy suffered its biggest quarterly contraction in March since the recession of the early 1990s. The Australian Bureau of Statistics national gross domestic product (GDP) figure fell a steep 1.2 per cent for the quarter, arguably largely as a result of the flood impact on Queensland coal exports.
-Rebecca Richardson
