Queensland coal project on hold as Glencore eyes savings
Commodities giant Glencore Xstrata has promised to achieve $US2 billion worth of synergies across its newly merged, global portfolio, in a move that is set to prevent at least one new Australian coalmine from going ahead.
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.