Sherritt International Corp. (TSX: S), Canada’s largest producer of thermal coal, said April 25 that at its Mountain Operations export coal producer, full-year 2012 production is now 7% (0.3 million tonnes) lower than previous guidance, with the current full-year projection at 4 million tonnes.
That lowered guidance reflects a delay in the receipt of licenses that were required to enter a new mining area (received at the end of the first quarter), delays at equipment suppliers that affected the scheduled delivery of a large shovel, and continued management of production levels at the Obed Mountain mine to achieve an optimal export thermal sales mix. The Mountain Operations are the Coal Valley and Obed Mountain strip mines in Alberta.
First-quarter 2012 production volumes of 8.6 million tonnes at the Prairie Operations, which consists of seven strip mines in Alberta and Saskatchewan that are largely dedicated to supplying minemouth or nearby power plants, were consistent with the prior-year period. First-quarter production volume of 1 million tonnes at the export-oriented Mountain Operations were 9% lower (0.1 million tonnes) compared to first-quarter 2011, as production levels at the Obed Mountain mine were reduced to achieve an optimal export thermal sales mix.
First-quarter 2012 sales volumes were 5% (0.4 million tonnes) lower at the Prairie Operations compared to the prior-year period, primarily as a result of unscheduled maintenance activities at the customer’s power generating unit at the Boundary Dam mine. The power generating unit returned to service in February. First-quarter 2012 sales volumes were 20% (0.2 million tonnes) lower at the Mountain Operations compared to the prior-year period, due to port and rail congestion that caused a shipment to be delayed until the second quarter of 2012.
Realized pricing (excluding royalties, char and activated carbon) for first-quarter 2012 at Prairie Operations was 13% (C$1.97/tonne) higher than the prior-year period, primarily due to higher cost recoveries at the Highvale mine (contract mining operation) and the Boundary Dam mine as a result of having a significant fixed component of mining revenue on lower sales volumes. Realized pricing at Mountain Operations for first-quarter 2012 was 14% (C$12.60/tonne) higher than in first-quarter 2011, reflecting stronger thermal coal export prices.
Unit operating costs at Prairie Operations were higher for first-quarter 2012 (5% or C$0.60/tonne) relative to the prior-year period, due to higher cost recoveries at the Highvale mine, partially offset by lower unit costs at the Poplar River and Boundary Dam mines resulting from higher production volumes. Unit operating costs at Mountain Operations for first-quarter 2012 were 14% (C$10.82/tonne) higher than first-quarter 2011, primarily due to lower Obed Mountain mine production volumes.
Spending on capital at Prairie Operations for first-quarter 2012 was 54% (C$8.3m) lower than in the prior-year period, primarily due to the timing of equipment arrivals at the mines. Spending on capital at Mountain Operations was 274% (C$11.8m) higher for first-quarter 2012 compared to the prior-year period, primarily due to the purchasing of loading equipment at the Coal Valley mine.
For the Prairie Operations, full-year 2012 expected production of 33 million tonnes and spending on capital remains consistent with prior guidance.