Anglo coal mine in Qld faces closure after fire

A major fire at Anglo American’s troubled Grosvenor coal mine in Queensland is expected to impact global supply, with warnings the operation could face permanent closure.

Anglo American’s coal operations in Queensland are under pressure.

A major fire at Anglo American’s troubled Grosvenor Coal Mine in Queensland is expected to impact global supply, and an industry expert warns the operation could face permanent closure.

Anglo is still struggling to get the fire at the Grosvenor mine at Moranbah, about 1000km northwest of Brisbane, under control after the mine was evacuated on Saturday after a “gas ignition incident”.

The fire has thrown into disarray a rescue plan for the company by Anglo American chief executive Duncan Wanblad, only months after the Anglo board backed its boss against a BHP takeover offer. The sale or spin-out of Anglo’s Queensland coal assets was a central feature of Mr Wanblad’s rescue plan for the company.

Opened in 2016, Grosvenor has had a poor safety record. Incidents have included three roof collapses in 2016, an underground fire, electric shocks and numerous warnings from officials over methane containment.

Anglo’s five Queensland coking coal operations were expected to fetch about $US3bn ($4.5bn) in the current market, according to analyst estimates, but the latest disaster at Grosvenor is expected to put the mine out of commission for months.

Anglo American halted operations at Grosvenor after an explosion four years ago.

UBS mining analyst Lachlan Shaw said Grosvenor faced an uncertain future, and the suspension of production was expected to add pressure to markets short-term, and offer a price floor.

“While it is early days in terms of understanding the full impact, judging by similar events in recent years, mine entry (after the fire) could be some months away, with a full rebuild and recovery to take place over an extended period,” Mr Shaw said.

“If the mine has sustained severe damage, a permanent closure cannot be ruled out, given this is the second gas ignition event in four years.”

Mr Shaw said coking coal supply growth had slowed in recent years as investment intentions were curtailed due to environmental, social, and governance concerns and high royalties imposed in Queensland.

“Production has faced mounting challenges,” he said.

“Mines are getting older, deeper and more geologically/geotechnically challenged, and for undergrounds, more gassy. Those forces are only entrenching and will be further exacerbated as ageing assets deplete.”

Grosvenor includes far higher levels of methane than in other Bowen Basin coal deposits, which Anglo has struggled to manage. In 2020, an underground explosion seriously injured five workers, forcing its closure until February 2022.

An injured person from the explosion at Grosvenor Coal Mine in 2020.

Investment bank Morgan Stanley said the outage should bring about a tightening in the global market for metallurgical coal, following recent seasonal weakness.

“The duration of the outage is uncertain but is likely to run into months,” said Morgan Stanley, adding Grosvenor accounted for 1 per cent of the global met coal export market and 1.5 per cent of the hard coking coal market.

“The same mine was suspended for 18 months following the explosion in May 2020. We would expect a months-long outage on a mine that accounts for 1.5 per cent of the HCC export market to move the dial.”

Anglo American said all emergency protocols were followed following the incident, and the workforce was evacuated from the mine without injury.

The mine team was working with specialist teams from the Queensland Mines Rescue Service and the regulatory authorities to extinguish the underground fire, prior to being able to assess the steps towards a safe re-entry into the mine. These procedures are expected to take several months as a result of the likely damage underground, the company said.

“We are working hard with local stakeholders to ensure we stabilise Grosvenor mine and keep our community informed,” it said.

Originally published as Anglo coal mine in Qld faces closure after fire