Coal price slump finishes Carabella Resources
Mining contractor MACA calls in receivers over $34.7m of unpaid bills from Chinese-owned Carabella Resources.
Chinese-owned Carabella Resources has become a victim of the coal slump, with mining contractor MACA calling in receivers over $34.7m of unpaid bills.
Carabella was bought in 2014 by China’s Wealth Mining, a subsidiary of privately owned China Kingho Energy Group, and had operated the Bluff PCI coal project in Queensland. The company put the mine into care and maintenance in late October, citing “below economic” coal prices and uncertainty around China’s ban on Australian metallurgical coal imports.
MACA said at the time it was owed about $34.7m for its work at the mine, and said on Thursday it had called in FTI Consulting as receivers and managers over Carabella in an attempt to recover its debts.
Bluff produces about a million tonnes a year of lower grade metallurgical coal, and MACA was handed a 10-year $700m contract to run the mine in 2018, with Bluff exporting its first project in mid-2019.
Wealth Mining paid about $70m for Carabella in 2014 in a hostile takeover bid.
The collapse comes as metallurgical coal fell below $US100/t for the first time since mid-2016, putting pressure on many higher cost Australian metallurgical producers.
US-headquartered Peabody Energy told shareholders last week it needed to negotiate waivers on its debt covenants with lenders before the end of the year, or risked being forced to again seek Chapter 11 bankruptcy protection from its creditors.
Other coal miners, including Whitehaven Coal have also sought temporary accommodations from their lenders to ensure they have the headroom to cope with an extended period of lower coal prices as the market is disrupted by China’s bans, which are forcing Australian producers to sell cargoes into other markets at a discount.
In a client note on Thursday, RBC Capital Markets analyst noted that benchmark metallurgical coal prices had fallen below $US100/t this week for the first time in more than three years, but noted China’s bans on Australian coal were putting pressure on its own steel industry.
“Seaborne met coal set a new 2020 low and fell under-$100/t for the first time since July 2016 as Australian supply increased despite China‘s ban on Australian coal. Meanwhile, the spread between seaborne and imported coal into China continues to widen,” RBC analysts said.
“This indicates that there is demand for imported met coal in China (backed by a booming steel industry). China is looking elsewhere for its coal, but CRU reports that Canadian met coal is in limited supply and US met coal has too much sulphur for Chinese coke producers. As a result, China has relied on Mongolian coal imports, but these have been impacted as Mongolia implemented new safety measures after recording increases in COVID-19 cases.”