Queensland coal project on hold as Glencore eyes savings
The newly merged Swiss company unveiled the dramatically increased $US2 billion target during an investor day in Europe late on Tuesday, and promised to achieve the goal by 2014.
Glencore mines coal, zinc, lead, nickel and copper in Australia. Its most bearish sentiments on Tuesday were reserved for thermal coal, which has been struggling under low prices and high costs.
"Current price levels are unsustainable in the medium term, with close to 30 per cent of seaborne thermal production being cash-cost negative," the company said.
The pessimism will result in the Wandoan project, a greenfield thermal coal development in Queensland, being frozen or divested, after it was listed on Wednesday as one of seven Australian coal prospects that were now "on hold".
The $7 billion project had been going through feasibility studies and government approval processes, but its future has been clouded ever since an coal export terminal was axed in May.
Glencore said it had reduced workforce numbers by 11 per cent and improved productivity by 21 per cent at its Australian coalmines over the past year. Cutbacks have also hit the Australian copper division, with the company's Brisbane office shut down recently.
Glencore also has exposure to Australian agriculture through its subsidiary Viterra, and expressed optimism that next month's grain harvests in South Australia could achieve records.
While there was little optimism for Australia out of the presentation, Glencore expressed firm optimism about its presence in South Africa, where it intends to set up a second listing within months.
Frequently Asked Questions about this Article…
Glencore Xstrata unveiled a target of US$2 billion in synergies across its newly merged global portfolio, announced at an investor day in Europe. The company said it aims to achieve these cost savings by 2014.
Glencore listed the Wandoan greenfield thermal coal project as 'on hold' amid a pessimistic outlook for thermal coal prices and high operating costs. The $7 billion project had been in feasibility and approval stages, and the decision followed the earlier cancellation of a nearby coal export terminal.
Glencore said current thermal coal price levels are unsustainable in the medium term, noting close to 30% of seaborne thermal production is cash‑cost negative. That weaker market outlook has led Glencore to freeze or divest some Australian coal prospects and implement cost reductions.
Over the past year Glencore reduced workforce numbers at its Australian coal mines by about 11% and reported a 21% improvement in productivity. Cutbacks have also affected the Australian copper division, including the recent closure of its Brisbane office.
Yes. Through its subsidiary Viterra, Glencore has exposure to Australian agriculture and has expressed optimism that South Australia’s upcoming grain harvests could achieve record levels.
When Glencore lists projects as 'on hold'—as it did for Wandoan and other Australian coal prospects—it signals reduced near-term capital spending and a more cautious approach to thermal coal exposure. Everyday investors should view this as the company prioritising cost savings and portfolio discipline given weak coal markets.
Yes. While the company was cautious on Australia’s thermal coal, it expressed firm optimism about its presence in South Africa and said it intends to set up a second stock market listing there within months.
Glencore revealed the US$2 billion synergy target, its bearish view on thermal coal, and the status of Australian projects during an investor day in Europe late on a Tuesday, where it outlined plans to achieve the savings by 2014.
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