Coal Market Implications

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Like most other companies in the mining industry, Centennial Coal (“Centennial”) has continued to review its business operations in response to the ongoing economic downturn in the sector.  While the current economic downturn to some extent reflects the traditional cyclical nature of the mining business, the boom-driven growth in commodities over the past few years has burdened the industry with record high production costs.This, combined with the weak US$ export thermal coal price and an Australian dollar that has remained stubbornly high, continues to impact the Group’s competitiveness.

Over the past 12 months, Centennial has placed two mines on care and maintenance and, collectively, worked toward reducing production costs and increasing productivity.  While improvements have been achieved, the continuing strength of the Australian dollar combined with weak thermal coal prices continues to have a material impact on business profitability.

Unfortunately, as there are few signs of an immediate improvement and following the conclusion of a business review of all operations, further cost reductions will have to be made in order for Centennial to sustain its business and be competitive under current market conditions.

While costs reductions will continue to be pursued through our suppliers and further production efficiencies, regrettably, following consultation with the workforce, Centennial has no option other than to reduce employee and contractor numbers further. While this decision has not been taken lightly, with every effort made to keep redundancies to an absolute minimum, it is essential to ensuring Centennial can sustain its current position in the market.  Approximately 120 employees and contractors are affected.

Centennial is committed to diligently working through a process that will sensitively support those impacted.

CENTENNIAL COAL:

Established in 1989 and listed on the Australian Securities Exchange in 1994, Centennial is a coal mining and marketing company supplying thermal and coking coal to the domestic and export markets.   From small beginnings in 1989 and a $20 million listing in 1994, Centennial grew to be a top S&P/ASX 100 company.  Upon the takeover by Banpu Public Company Limited (Banpu) in September 2010, Centennial’s market capitalisation had grown to approximately $2.5 billion.  Today, as a wholly owned subsidiary of Banpu, Centennial is a member of the largest independent pan-Asian coal group.

Centennial has over 1,800 employees and seven operating coal mines in NSW, making it one of the largest underground coal producers in NSW. Centennial is a major fuel supplier to the NSW energy industry, fuelling approximately 40% of the State’s coal-fired electricity and sells approximately 40% of its coal into the export market.


23 October 2013