mcc update

MELBOURNE (Dow Jones)--Macarthur Coal Ltd. (MCC.AU) Executive General Manager of
Corporate Development Ian McAleese said Tuesday the miner is seeing no signs yet of a
slowdown in demand for its coal from China and has had some preliminary approaches from
Chinese steel mills about possible contracted sales.
Lower freight rates have sparked Chinese buying of Australian coal and McAleese said
that for now Chinese demand remains strong, although the sustainability of the trend is
not certain with the risk that recent increases in freight rates could have an impact.
"Logically that could be right, but we have not seen any evidence of that to this
point, we are still seeing quite reasonable demand," he told Dow Jones Newswires in
an interview.
The Chinese buying has allowed Macarthur to upgrade its production guidance for the
year ending June 30 to 4.5 million-4.8 million metric tons and McAleese said that while
it was too early to give hard guidance for the coming year, the base case was for sales
at similar levels.
As weak demand from steel mills hit sales of Macarthur's pulverized or PCI coal,
the miner boosted thermal coal production and in the March quarter its sales were about
half PCI and half thermal.
McAleese said this has changed, with the majority of coal being sold to China now the
more valuable PCI coal, meaning the overall sales mix for the June quarter would be
around 70% or 75% PCI and 25% or 30% thermal coal.
Sales of PCI to China to date had been on a spot basis but McAleese said that the miner
has now had preliminary inquiries from Chinese mills about contracted sales of PCI coal.
Macarthur may incur some extra overburden removal costs as it moves to increase output,
McAleese said, with this offset by lower royalty costs due to lower coal prices.
"Otherwise costs are pretty sticky and it is going to be difficult for us to make
significant reductions in costs going forward," he said.