Colombia's Cerrejon says to increase coal exports after tough 2013

CARTAGENA, Colombia Thu May 15, 2014 9:25pm EDT

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CARTAGENA, Colombia May 15 (Reuters) - Coal miner Cerrejon expects to increase Colombian exports from last year when it faced a month-long strike, despite expected El Nino-related dry weather which could force miners to shut sections of their mines, its chief executive said on Thursday.

The joint venture between Anglo American Plc, BHP Billiton Ltd and Glencore Xstrata PLC, is the biggest coal miner in the world's No. 4 exporter, where a strengthening peso and distant markets are posing challenges.

Chief Executive Roberto Junguito said Cerrejon's exports should rise from last year's 33 million tonnes but he declined to give an estimate, saying it depended on market conditions.

The company's mine in northern La Guajira province could be forced to temporarily close certain sections in the coming months if an El Nino weather anomaly brings a lasting dry spell that raises air particulate levels above statutory limits.

"We could have some impact from El Nino but we don't think it will force us to change our aim for growth" in production this year, Junguito said, adding the last six months were very dry and had forced it to temporarily shut sections of the mine.

The dust problem was more related to particles kicked up by truck tires than coal, though it was not a significant health threat compared to the smaller particle pollution that accumulates in cities, he said.

Junguito said Colombia, which is distant from its main client, Europe, was facing increasing challenges to compete as its strengthening currency raises production costs in dollar terms. The company is searching for ways to cut costs such as extending the life of tires on its trucks, one of its biggest expenses, by improving roads or tracks at the site, he said.

European physical coal prices are down 15 percent from the start of the year, and contracts for June delivery to Amsterdam, Rotterdam and Antwerp (ARA) were trading at $73.25 a tonne on Thursday.

Another market challenge is that the United States' shale gas boom is enabling it to ship to Europe coal that is now surplus to U.S. needs. Before the shale gas discovery, it imported coal from Colombia.

"A client has become a competitor," Junguito said. Shipping coal to Asia, a growing coal market, would cost Colombian exporters $10-$15 more per tonne than the freight cost to Europe, making it difficult to compete with producers further east like South Africa.

Cerrejon's operations were hampered by a month-long strike over wages in February last year that caused 2013 output to fall from the 34.6 million tonnes produced in 2012.

Junguito said talks were continuing with rival U.S.-based Drummond Co Inc to agree on conditions for that company to extract methane gas at Cerrejon's mine, most of which lies below its coal deposits. The government had set Thursday as the deadline for the companies to reach a deal. (Editing by Mohammad Zargham)

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