Rio says Australia coal output on track after rains

By Fayen Wong

SYDNEY, Jan 31 (Reuters) - Rio Tinto Ltd (RIO.AX)(RIO.L) said on Thursday it expects all three of its mines in Australia's Queensland state to be back at full production within a week, following disruptions caused by havy rain.

Rio's comments come after rival BHP Billiton Ltd (BHP.AX)(BLT.AX) said on Wednesday that the extreme weather was likely to severely disrupt its coking coal operations in Queensland for up to six months [ID:nSYD304759].

Force majeure declarations by Australian coal producers in the wake of the Queensland flooding have contributed to Asian thermal coal prices rocketing to a record high of $105 a tonne [ID:nSYD276984].

Rio said its Blair Athol and Hail Creek mines were already in full production late last week, while its Kestral mine was expected to reach full production within a week.

Production at Kestrel, which produces about 3.6 million tonnes of coking and thermal coal each year, was suspended early last week after flood waters cut access to the main roads and prevented workers from entering the mines.

"Railings (transportation) continued without disruption through the flooding period and Hail Creek mine is poised to take advantage of additional sales opportunities if port allocation becomes available," said Dean Yates, chief operating officer of Rio Tinto Coal Australia, in a statement.

Shares in Rio were up 3.1 percent at A$117.90 by 0200 GMT, beating a 0.4 percent gain in the broader S&P/ASX 200 index .AXJO.

Blair Athol is Rio's key thermal coal mine, producing about 10 million tonnes of saleable thermal coal in 2006. Rio has declared force majeure on shipments from the mine since late November due to a cut-back in port allocations at Gladstone coal terminal.

The Hail Creek mine produces about 8 million tonnes of coking coal a year.

Other producers were also working to resume production.

Thermal coal producer Ensham Resources Pty Ltd, whose mine at Emerald in central Queensland was flooded, said late on Wednesday that mining operations have restarted but it would probably run at reduced production rates for the rest of the year.

Ensham, controlled by Idemitsu Kosan Co (5019.T), said it expects to resume about 70 percent of normal production within weeks. Its mine has a production capacity of about 8 million tonnes a year.

Merrill Lynch in a research report last week said the flooding may have wiped out 10 million tonnes of coking coal earmarked for export, threatening to drive long-term contract prices higher.

Resource-rich Queensland has been pounded by heavy rains this month, bringing a deluge which has damaged mine equipment at collieries owned by a number of companies and cut access to roads and rail lines across large parts of the coal belt. (Reporting by Fayen Wong; Editing by James Thornhill)