Anglo American shares fall amid Grosvenor mine fire

Company News

by Glenn Dyer

Shares in Anglo American ended down 2.4% in London after news broke that it had suspended production at the Grosvenor premium coking coal mine in central Queensland due to a fire that began Saturday morning and is still ongoing.

At the same time, world coking coal prices leapt 5% in late trading in Singapore, the main pricing hub, to more than $US262 a tonne. Initially, prices had not reacted to the news of the fire, remaining at $US238 a tonne, last Friday’s close. Prices only rose after traders realized that Anglo American had announced the mine would be closed for several months, which in turn sparked a surge in the share prices of Australian coal miners.

Anglo shares fell 4% at the opening in London on Monday before a partial recovery trimmed the loss by the close.

The mine is one of five Anglo owns in central Queensland and supplies hard (premium) coking coal to markets in Asia.

Grosvenor was expected to contribute around 2.3 million tonnes to Anglo’s half-year production (to June) of around 8 million tonnes. For 2024 as a whole, production guidance for the steelmaking coal business was 15 to 17 million tonnes, of which Grosvenor was expected to contribute around 3.5 million tonnes, representing lower production in the second half of the year due to a planned longwall move. This move would have seen December half production of 1.2 million tonnes, worth more than $US300 million at current world prices.

As of Tuesday morning, there is a growing feeling that the mine will need extensive repairs, if it can be accessed. When it will be safe to do so is impossible to estimate now, but it is expected to take months. This could delay Anglo's sale as part of its restructuring plan.

The fire continued overnight Monday with activities concentrated on pumping nitrogen into the underground. There are reported to be six shifts in addition to the main mining area where the longwall was located. The fire at Queensland's largest underground coal mine, near Moranbah, is now in its fourth day. Mining engineers say the damage could see the mine closed permanently after the blaze is controlled and engineers can gain access to make an assessment, which may not happen for months.

Anglo American has reassured the community that its exclusion zone will contain any fallout in the event of a blast similar to one that occurred in 2020.

The mine employs about 1,400 people, many of whom live in the town of 10,000 residents.

Media reports from the mine say a truck-mounted unit powered by a jet engine is pumping nitrogen into the mine.

Anglo shares fell because analysts believe the fire might reduce Anglo’s mines to four rather than the five it is looking to sell as part of its restructuring plan announced when it fought off BHP’s £31 billion takeover offer two months ago.

The news saw the share prices of Queensland-based rivals rise. Coronado, which produces coal from central Queensland, saw its shares rise more than 9%, while Whitehaven, which is in the process of merging the former BHP-Mitsubishi mines at Daunia and Blackwater, saw its shares rise 4%. Stanmore, another smaller rival to Anglo, saw its shares rise 5%, New Hope shares rose 3%, and Yancoal, which produces coking and thermal coal from NSW and Queensland, saw its shares jump 4%.

Even BHP shares rose—the 1.4% gain reversing the recent slide in the shares for a day at least.

BHP might be wondering if this news has opened the door to a new offer later this year.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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