Wandoan coal project scuppered
Commodities giant Glencore Xstrata has promised to achieve $US2 billion ($2.16 billion) worth of synergies across its newly merged, global portfolio, in a move that is set to prevent at least one new Australian coal mine from going ahead.
The Swiss company unveiled the 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, and its most bearish sentiments on Tuesday were reserved for the thermal coal sector, which has been struggling under low prices and high costs in this country.
"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 see the Wandoan project - a greenfield thermal coal development in Queensland - frozen or divested, after it was listed as one of seven Australian coal prospects that are now "on hold".
The $7 billion project had been going through feasibility studies, but its future has appeared clouded ever since an associated export terminal was axed in May.
"Greenfield projects are disproportionately risky," the company said. "Glencore prefers brownfield (expansion of existing mines) and bolt-on mergers and acquisitions."
Glencore said it had reduced its workforce by 11 per cent and improved productivity by 21 per cent at its Australian coal mines over the past year.
Cutbacks have also hit the Australian copper division, with the company's Brisbane office being 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.