By Peter Ker
The potential for efficiencies through close proximity was behind Glencore's decision to buy a shuttered coal mine in the Hunter Valley this week.
In a transaction that demonstrated the Swiss miner's continued appetite for coal in spite of languishing prices for the bulk commodity, Glencore paired with family owned coal miner Bloomfield Group to buy Vale's Integra mine.
Glencore chief Ivan Glasenberg's appetite for coal remains undimmed, despite poor prices for the bulk commodity Photographer: Simon Dawson/Bloomberg Credit: Bloomberg
The two companies did not disclose the cost of the transaction but the price tag was described by one source as "peppercorn".
The Integra mine has been shut since mid-2014, but the underground parts are next to Glencore's operating Mt Owen coal mine, while the open cut parts of Integra are adjacent to Bloomfield's Rix Creek mine.
"This acquisition provides Glencore with future optionality to realise synergies from adjoining tenements," the head of Glencore's Australian coal operations, Ian Cribb, said.
"Glencore has no plans to restart the operation in the near term. We intend to evaluate a number of options for the Integra underground mine in the months ahead."
Bloomfield said it would spend the rest of 2015 investigating options for the mine before restarting in the near future.
Glencore is becoming the driving force behind rationalisation and co-operation in the Hunter Valley, having agreed with Peabody Energy last year to combine the Wambo and United coal assets into a single, more efficient entity.
Glencore famously sought to merge its Hunter Valley assets with Rio Tinto. It is believed to remain interested in Rio's coal business.
The urgency behind Glencore's desire to find synergies and efficiencies in the Hunter Valley was revealed last week in the Swiss miner's financial results, which showed its Australian coal division had lost $US39 million ($54.7 million) in the 2015 financial year.
Three years into the coal downturn, Glencore is not the only Australian coal miner to be loss-making.
South32's Illawarra coal unit lost $US30 million on an earnings before interest and tax basis for the year to June 30, while Yancoal reported a $153 million loss for the first six months of 2015.
Foreign miners like Peabody and Vale are exiting from Australian coal. Rio Tinto's Australian coal business, which is in the shop window, was only just in the black for the first half of 2015.
BHP's Queensland coking coal unit delivered $US287 million of earnings before interest and tax, while its Hunter Valley operations delivered just $US142 million.