Cerrejon coal mine

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The Cerrejon coal mine, which is located near the village of Albania in the La Guajira department of Colombia. The mine is owned by the Cerrejon Coal Company, which in turn is equally owned by subsidiaries of BHP Billiton plc, Anglo American plc and Xstrata plc.[1]

The Cerrejon mine comprises four zones: the North Zone, the Central Zone, the Patilla area and the South Zone.[2]

BHP Billiton boasted on its website in 2011 that "Cerrejon's open cut mines now represent one of the biggest earthmoving operations worldwide. Approximately one million tonnes of material are moved every day, 365 days per year. To achieve this, the operation runs one of the biggest fleets of shovels and trucks in the world. The company employs nearly 4,000 people, with approximately the same number engaged as contractors."[2]

Corporate history

On its website, Xstrata Coal states that "in December 1976, an Association Contract was signed between Carbocol S.A., a state owned coal company, and Intercor, an ExxonMobil affiliate, for the development of Cerrejón North Zone. In January 1999, an agreement with the Government of Colombia extended this phase an additional 25 years more, until 2034. In November 2000, the Colombian Government sold Carbocol S.A.’s (50%) participation in Cerrejón North Zone Association Contract, to a consortium made up of subsidiary companies of BHP Billiton plc, Anglo American plc and Glencore International AG. In February of 2002, the consortium acquired the remaing 50% from Intercor and merged Intercor with Carbones del Cerrejón S.A to create Carbones del Cerrejón LLC, Cerrejón."[3]

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Production

Cerrejon has a resource base of about 5 billion tons, of which 2.1 billion tons are currently measured and indicated to be of export quality, according to the companies. Xstrata said it is one of the largest coal deposits in the world.[4]

Xstrata Coal states that the mine employs 8,400 people and has a "reserve base in excess of 900 million tonnes."[3]

In its 2014 Annual Report BHP Billiton stated that total production in the 2013/2014 financial year was 36.9 million tonnes with the mining complex having a "a reserve life of 17 years."[5]

Cerrejon Coal Company stated that in 2009 56% of its production was exported to Europe, 17% to North America, 12% to Central and South America and 15% to "other destinations".[6] Since 1985, Cerrejon Coal Company has exported over 500 million tonnes.[7]

Coal from Cerrejon is marketed by CMC Coal Marketing Company, a company owned equally by BHP Billiton plc, Anglo American plc and Xstrata plc. CMC Coal Marketing Company is headquartered in Dublin, Ireland but also established a subsidiary office in Atlanta in 2005.[8] [7]

In February 2011 BHP Billiton's website stated that coal from Cerrejon was "exported largely to Europe, but also to the USA and South America."[2]

Consortium proceeds with P40 expansion plan

In August 2011, three of the U.K.'s largest listed miners - Xstrata Coal, BHP Billiton, and Anglo American - in the Colombian Cerrejon thermal coal mine approved a US$1,311 million billion project to expand the coal mine's output by 25%. Each company owns a 33.3% stake in the mine and committed to invest US$437 million in the expansion. The approved Cerrejon project will increase coal output by 8 million tons to 40 million tons a year, as well as expand the coal handling facilities and the fully-owned Puerto Bolivar port, adding an extra loading berth.

In a media release announcing the go-ahead for what was dubbed the P40 project, BHP Billiton stated that:[9]

"Construction will commence in the 2011 calendar year with completion expected in the 2013 calendar year. Ramp up to expanded capacity of 40mtpa is expected by the end of the 2015 calendar year. The expansion project will see BHP Billiton’s estimated share of production and sales from this long life, tier 1 asset increase from 10.7mtpa to 13.3mtpa."

BHP Billiton' Energy Coal President, Jimmy Wilson proclaimed:[9]

"Today’s announcement highlights our commitment to invest in growth throughout the cycle and to continue to produce at maximum volumes to take advantage of the strong demand for energy coal."

The joint venture company stated that "the P-40 expansion will be carried out within the current mining areas without affecting new terrain and will demand an increase in coal production and train transport, as well as the shipping capacity in Puerto Bolívar. P-40 includes a production increase at each one of the current pits, and as a result the usage of a larger amount of mining equipment. Crushing and train transport capacities will also be increased, in addition to the construction of a second loading pier and a second ship loader in Puerto Bolívar."[10]

The day after the joint venture partners announced the expansion project, journalists from regional media outlets and were being hosted at the mine.[11] A few days later a crew from the the Latin-American production company Endemol was at the mine filming a feature for from Discovery Channel International.[12]

... but the global thermal coal market sours

While construction was underway, the global thermal coal price was in steady decline. In a January 2014 media release the Cerrejon joint venture stated that "as regards expectations in 2014, the company will continue working to produce and export a greater volume than in 2013, which could vary depending on the trend in international coal prices."[13]

In its 2013-2014 annual report BHP Billiton stated that:[14]

"Construction commenced in CY2011 and the project handled its first coal in the December 2013 quarter.The port expansion associated with the Cerrejón P40 project is currently being commissioned, although operational issues are expected to constrain capacity to approximately to 35 Mtpa (100 per cent basis) in the medium term. At 30 June 2014, the project was 94 per cent complete."

By late August, the expanded port was in operation and began loading its first shipment.[15]

However, before the expanded mine and port could substantially increase exports, the rapidly falling price for coal in the global market began to take it toll. In October 2014 Mining Magazine reported that the focus of the company had shifted from expanding production to cut costs by improving the productivity of its fleet of haul trucks and excavation operations.[16]

While the expansion project had been predicated on a booming market, the global seaborne thermal coal price fell dramatically. With European coal markets the dominant destination for Cerrejon's coal, the project had been hit hard by a 30 per cent fall in coal prices in the year to early 2015.

In BHP Billiton's production review for the half year to the end of December 2014, the company stated that "anticipated drought conditions constrained production volumes at Cerrejón given the need to manage dust emissions."[17]

In March 2015 Cerrejon Coal Company's Chief Executive Officer, Roberto Junguito, said that Cerrejon was losing money on "a little less than 11 percent" of its current production of 33.7 million tonnes in 2014. “If there’s already a fraction that’s close to the profitability threshold, it’s very hard to justify additional investment ... Our objective is to continue implementing initiatives to ensure that we can at least maintain our current production in a profitable way,” he told Bloomberg.[18]

Junguito stated that the joint venture expects to export about 34 million tonnes in 2015, well under its 40 million tonnes per annum capacity.[18]

Articles and resources

References

  1. Susan Wacaster, "2012 The Mineral Industry of Colombia", U.S. Geological Survey, U.S. Department of the Interior, June 2014, page 7.
  2. 2.0 2.1 2.2 BHP Billiton, "Cerrejon Coal Company", BHP Billiton website, archived page from February 11, 2011.
  3. 3.0 3.1 Xstrata Coal, "Cerrejòn", Xstrata Coal website, accessed August 2010.
  4. Alex MacDonald, "U.K.-listed miners OK $1.3B Colombia coal plan", MarketWatch, August 18, 2011.
  5. BHP Billiton, "Annual Report 2014, BHP Billiton, September 2014, page 18.
  6. Cerrejon Coal Company, "Exports volume", Cerrejon Coal Company website, accessed June 2010.
  7. 7.0 7.1 "CMC Coal Marketing Company", CMC Coal Marketing Company website, accessed March 2015.
  8. Cerrjon Coal Coampany, "Marketing", Cerrjon Coal Company website, accessed June 2010.
  9. 9.0 9.1 BHP Billiton, "Expansion of Cerrejon Coal", Media Release, August 18, 2011.
  10. Cerrejon Coal Company, "Cerrejón announces the creation of more than 5,000 new jobs and important additions in the value chain in La Guajira", Media Release, August 25, 2011.
  11. "La Guajira journalists visit the new Roche settlement", Cerrejon Coal Company, August 19, 2011.
  12. "Discovery Channel visits Cerrejon", Media Release, August 22, 2011.
  13. Cerrejón Coal Company, "Cerrejón Increases Exports in 2013 despite Difficulties", Media Release, January 14, 2014.
  14. BHP Billiton, "Annual Report 2014, BHP Billiton, September 2014, page 43.
  15. "Cerrejón Loads First 20,000 Tonnes of Coal from New Pier at Puerto Bolivar", Cerrejon Coal Company website, September 2, 2014.
  16. Paul Harris, “Cerrejon reflects on P-40 expansion”, ‘’Mining Magazine’’, October 17, 2014. (Sub req’d)
  17. BHP Billiton, "BHP Billiton Operational Review for the Half Year Ended 31 December 2014", News Release, January 21, 2015.
  18. 18.0 18.1 Andrew Willis, "BHP Colombia Mine CEO Seeks Cost Savings Amid Coal Price Slump", Bloomberg, March 15, 2015.

Related SourceWatch articles

External resources

External links

Video

  • La Buena Vida, A Documentary about the Involuntary Resettlement of Indigenous Communities in Colombia affected by Cerrejón coal mine, 2015.

Articles & Reports