Below is certainly promising to see with regards to likely mining costs for Sorby Hills project.
Inflation - Big mining’s decade of inflationary pressure is ending - AFR
Great news… unless you’re on the tools.
A decade of inflationary pressures in the mining sector appears to be over, with bulk commodity producers Fortescue, Whitehaven Coal and Stanmore Coal telling investors their unit costs were tracking lower.
Lower commodity prices and a weaker Australian dollar have driven the trend, which is being accelerated by rising unemployment and, in some cases, deferral of spending on growth projects.
Each tonne of West Australian iron ore produced by Fortescue in the three months to March 31 cost $US17.53 ($27.31); the company’s lowest quarterly unit cost in US dollar terms since September-December 2022.
Fortescue had warned investors that unit costs could rise by up to 10 per cent in the year to June 2025, but unit costs have been lower than last year for six months now.
Unit costs are far higher in the NSW and Queensland coal sectors, where mining methods are more intensive, economies of scale are less available, workforces are more unionised and the mining companies typically do not own the railways and ports that export their products.
Whitehaven managing director Paul Flynn said on Tuesday that unit costs for the year to June were tracking towards the “lower end” of the company’s guidance range of between $140 and $155 a tonne.
Flynn said the availability of labour had improved, and wage expectations were also moderating.
“During this period of soft markets, everybody is looking at ways to do more with less and that is putting more people back into the employment pool,” he said.
The comments come after Flynn observed in July 2024 that inflation remained “rife”. Whitehaven’s unit costs in NSW coal more than doubled between 2016 and 2024.
Whitehaven is in strong financial health despite buying BHP’s Blackwater and Daunia coking coal mines last year, but the company that acquired BHP’s Poitrel and South Walker Creek coal mines, Stanmore, revealed tighter finances on Tuesday.
Stanmore’s cash balance declined from $US289 million to $US169 million in the three months to March 31 as it paid $US60 million of dividends to shareholders, invested in growth projects and saw its profit margins shaved by sliding coal prices.
Stanmore chief executive Marcelo Matos announced a cost reduction program that will cut full-year unit costs to between $US85 and $US90 a tonne; Stanmore had previously told investors that each tonne of coal would cost between $US89 and $US94.
Matos said he had not yet seen relief in wage costs, with Stanmore’s Poitrel mine suffering “quite a substantial increase in costs” because its heavy reliance on labour hire workers had fallen foul of the Albanese government’s “same job, same pay” industrial relations changes.
Stanmore will also curb spending on growth projects to between $US80 million and $US90 million for the year to June; down from the previous guidance of between $US100 million and $US115 million.
Lower spending on growth means the development of the Eagle Downs coking coal mine in Queensland will be delayed again.
Construction of Eagle Downs began in 2013 when it was owned by ASX-listed Aquila Resources, with a plan to produce coal by 2016.
But the project was halted when China’s biggest state-owned steelmaker, Baowu, acquired Aquila shortly before a slump in prices for both coal and iron ore.
South32 bought 50 per cent of Eagle Downs in 2018 with a plan to revive the project, but very little progress was made, prompting both South32 and Baowu to sell their respective halves of the project to Stanmore in 2024.
Stanmore said on Tuesday it had slowed the pace of studies on Eagle Downs and no longer expected to make a final investment decision on the project in 2025, with such a decision pushed back to at least next year.
(20min delay)