As union doomsayers cry foul over potential job losses because producers have accepted lower coal prices, on the other side of the ledger many mine owners are quietly doing their sums to decide whether production should continue at existing levels or is expansion worth the risk over the next few years?

Weighing up this exact decision at present is the Glencore Coal Australia-owned Mt Owen open cut operation, located in the upper Hunter Valley, New South Wales. Management is currently assessing the economic merits (or non-merits) of increasing saleable output by about 1.5 million tonnes per annum.

"Thiess offers a very professional service and does a very good job. There are other advantages of having a contractor on site - they expose your other operations to other ideas and operating methods. There is a cross-fertilisation of ideas." - Glen Robinson, Mt Owen's general manager.

Annual production from the Mt Owen mine currently stands at roughly 4.9Mt run-of-mine (ROM) coal or 3.3Mt saleable coal and consideration is being given to lifting output to about 5Mtpa product coal (8Mtpa ROM coal), dependent on a range of factors including what has just happened with coal pricing.

Planning consents are already in place and minor adjustments have been made to Mt Owen’s production schedule to allow pre-stripping in preparation for future expansion. A decision is expected by the end of the March 2000 quarter.

In Mt Owen’s favour, and it is not a luxury enjoyed by most, is that expansion would come relatively cheaply and could be effective within six months, said Mt Owen’s general manager, Glen Robinson. The mine has substantial infrastructure over-capacity, particularly in the coal handling, preparation, stockpiling and rail loading facilities. A relatively small “capex” outlay on an additional excavator and trucks, plus an increase in extraction rates, are virtually all that is needed to deliver the extra 1.5Mt.

What management is working through is what to do with the extra product. “Internally we are trying to work out whether the expansion should be triggered by the coal price or whether there are other factors,” Robinson said. “Do you produce that extra coal and potentially increase your exposure to the spot market? It’s a double-edged sword.”

The fact that each of Glencore’s eight mining operations markets its own product independently has been frequently stressed by the group’s senior management. “Because each project is a separate business we have to stand alone. It (the proposed expansion of Mt Owen) is not a bulk marketing exercise for Glencore,” Robinson added.

Believed to be on the bidding list for Shell’s coal assets, Glencore has aggressively expanded its coal holdings in Australia in the past year, particularly in steaming coal in the Hunter Valley. The group’s combined output is about 13.6Mtpa and seems likely to continue growing. Analysts have predicted that rapidly expanding groups such as Glencore might seek to achieve synergies by sharing development costs of greenfields operation for instance, or by utilising already constructed infrastructure. The undeveloped Glendell deposit, adjacent to Mt Owen, would be a natural candidate for such synergy. Glendell was part of the coal package bought last year by Glencore from Pasminco and hosts 100Mt of in-situ reserves.

Development of Glendell too would depend to a large extent on whether Glencore feels it can make adequate returns on investment. A major benefit of an expansion at Mt Owen would be a maximisation of asset utilisation, an important aspect of Glencore’s fiscal management.

One issue that remains to be seen is whether Glencore owner-operates any new mines it develops or opts to bring in contractors such as Thiess Contractors. When Glencore acquired Mt Owen it inherited the partnering agreement between previous owner BHP and Thiess. While several Glencore operations are contractor-operated, the group’s fundamental philosophy about contractors is unclear.

Since taking ownership of Mt Owen, Glencore has introduced a more stringent cost reduction policy. Glencore and Thiess are in fact quite closely aligned in their respective approaches to costs, according to mine manager, Rob Monaci. “Since Glencore came in, there has been a lot more focus on trying to reduce costs while maintaining a safe, productive and efficient operation,” he said.

From Glencore’s perspective, one of the advantages of having a contractor on site is ready access to a highly skilled workforce with world-class operating standards. Mt Owen’s most recently completed safety audit is testimony to this. Despite dropping to a four-star rating, the mine achieved a 94.8% safety effort rating, the highest by any NOSA-audited company in Australia and one of the highest of any NOSA-audited mines in the world.

“Thiess offers a very professional service and does a very good job,” Robinson said. “There are other advantages of having a contractor on site — they expose your other operations to other ideas and operating methods. There is a cross-fertilisation of ideas.”

Operationally, Mt Owen is often a leader in testing and embracing new technologies. It is currently trialling the new TI-272 Liebherr truck, launched at AIMEX last year. The truck has a load carrying capacity of 272 metric tonnes and is powered by a 2014kW (2700hp) 16-cylinder Detroit Diesel 4000 engine.

Two Liebherr 590-tonne R996 hydraulic excavators are currently used for bench strip mining and loading to rear dump trucks and the new truck has been incorporated into the existing fleet for the trial.

Liebherr-Australia and Thiess are evaluating the new truck’s potential. Liebherr is keen to prove that the new technology and the “load management” philosophy applied in this truck will assist customers to move more material in less time for less cost, in comparison with conventional trucks.

Liebherr said the AC Siemens-Liebherr drive system improves performance in both propulsion and braking modes, requires low maintenance and provides better utilisation of engine power.