Miner and commodities trader Glencore (LON:GLEN) will reopen its Integra coal mine in southeastern Australia next year thanks to an ongoing rally in coal prices and increased demand for the commodity.
“The Integra underground mine has been on care and maintenance since July 2014 and Glencore has continued to assess options for a restart against global coal market conditions,” said the company according to Reuters.
The move comes only a few days after the company resumed operations at its Collinsville mine in Australia’s Queensland state.
Integra, formally called Glennies Creek, became part of Glencore’s portfolio last year after its previous owner, Brazil’s Vale (NYSE:VALE), mothballed it.
The underground operation is expected to generate about 1.3 million tonnes of coal in 2017.
At least seven other coal mines are expected to resume operations in Australia before 2016 ends — four in Queensland and three in New South Wales. These include Collinsville and Isaac Plains, which Vale and Sumitomo sold last year to Stanmore Coal (ASX:SMR) for only $1.
These operations have benefitted from an increasing demand for Australian coal because of restrictions on production in China. They are expected to provide work for hundreds of people and lead to a jobs growth able to keep mild downward pressure on Australia’s unemployment rate.
But the potential multibillion-dollar windfall could be short-lived, economists have warned.
NAB’s chief economist, Alan Ostler, believes that global production peaked in 2014, which together with action on setting a carbon price after the Paris climate accord will continue to suppress demand, inevitably affecting prices.
Liberum analyst Ben Davis agrees. He said in a report last month that thermal coal may start a downward trend soon as Chinese policymakers decided to temporarily reverse limits on thermal-coal production until December.
“We expect the hedging loss to shrink as thermal-coal prices drop faster than what is currently being implied by the forward curve,” he wrote.
There also are still plenty of major companies including Peabody Energy, Anglo American and Rio Tinto that are trying to sell its coal assets. Meanwhile, BHP Billiton, the world’s largest mining company, warned last week that coking coal supply could grow “more quickly than demand” in the near term.
Isaac Plains has been operating and producing coal since April 2016 using Open Cut and Highwall Mining methods.