BHP Billiton Opens Caval Ridge Mine in Australia Despite Struggling Coal Prices

As Australia’s coal sector continues to endure low prices and tough market conditions, BHP Billiton (ASX:BHP) (NYSE:BHP) is fighting on.

The Australian mining company announced on Monday the opening of its $3.4 billion Caval Ridge coal mine in Queensland’s Bowen Basin. The mine, which is a 50-50 joint venture with Mitsubishi Corp, was delivered ahead of schedule and under budget and expected to produce 5.5 million tons of coal per year.

“Today’s opening of the Caval Ridge mine is a significant milestone for BHP Billiton,” said Dean Dalla Valle, BHP’s coal president.

“The operation will produce metallurgical coal for the steel industry and has been constructed with the latest technology to be one of the most productive, sustainable and highly performing metallurgical coal mines in the world.”

The mine's workforce will include 21 percent females and three percent indigenous workers. In addition, 43 percent of the workforce will be new to the mining industry. BHP, which announced last month it would cut 700 jobs from its Queensland coal operations, confirmed the mine will create 500 new jobs.

“We are confident that if we maintain our productivity focus then we will continue to have a globally competitive business that will provide employment opportunities for generations to come,” Valle said.

Rising concerns

Last week China announced it would impose tariffs on imports of certain types of coal, raising concerns among companies and analysts about the Australian coal sector’s outlook.

“The exact impact of an import tariff on domestic and seaborne volumes is subject to a range of coal price and demand elasticities,” said Commonwealth Bank of Australia analyst Lachlan Shaw.

“However, what is certain is that a coal import tax would be negative for China’s coal import demand and, by virtue of likely resultant slower seaborne demand, seaborne coal pricing.”

According to the Steel Index, the price of Australian coking coal has dropped more than 15 percent this year, to around $112 a ton.