Australian coal mine sold for one dollar to resume production in 2016

An Australian colliery mothballed in 2014 will restart production next year despite moves by global giants to restrict output as the commodities downturn bites, the operator said Thursday.

Brazilian mining giant Vale and Japanese Firm Sumitomo halted operations of the 1.1 million tonne Isaac Plains coking coal operation in central Queensland state in September 2014.

Junior Australian miner Stanmore Coal bought control for one Australian dollar (72 U.S. cents) the following July, ensuring the junior took on all existing contractual obligations.

Stanmore on Thursday announced the mine would re-open, expecting shipments of coking coal to commence in April 2016, creating 7 million Australian dollars in royalties to the cash strapped Queensland state government, as well as other federal and state taxes.

"Challenging commodity markets have presented an exceptional opportunity for Stanmore and in early 2016 we will become an independent producer of high quality coking coal for export to the steel industry in the region," Stanmore Coal managing director Nick Jorss said in a statement.

Stanmore at odds with Australia's dwindling coal sector as the industry contracts from mine closures - some adjacent to Isaac Plains - forcing 4,000 job losses over the past two years alone from falling key industrial commodities as the global supply glut continues.

Prices for coking coal, used in steal making, have slumped from 300 U.S. dollars per tonne in 2011 to around 80 U.S dollars per tonne, reflecting the downfall of iron ore as China's steal sector, a key destination for Australian commodities, begins to slow output.

"The acquisition of Isaac Plains for a nominal sum gives us a fully equipped coking coal mine with three years of mine life at current prices," Stanmore Coal chairman Neville Sneddon said.

"It comes with over 350 million Australian dollars (251.54 million U.S. dollars) of plant and equipment including dragline and wash plant with excess capacity."

Mining certain pits with the low-cost plant equipment and combining existing transport infrastructure at lower "take or pay" rates from a smaller annual tonnage means negates new capital expenditure, resulting in a 35 percent cost reduction compared to the mine's previous operations.

Stanmore's stocks surged 12.50 percent, or 1.5 Australian cents (1.08 U.S. cents) to 13.5 Australian cents (9.70 U.S. cents) on Thursday for a market capitalization of 30.04 million Australian dollars (21.59 million U.S. dollars).

The miner's much larger rival, Swiss-based coal giant Glencore, announced earlier in December it was placing its Collinsville thermal coal mine - which has slumped along with coking coal - in idle mode and restricting production.

Glencore has effectively closed the mine after it noted production would only come from in-pit inventory and current stockpiles with little cost and effort unless prices improve.

"We will reassess the situation during the year," the company said in a statement, though local analysts predict coal prices won't rebound until after 2020.

Glencore's move preceded global giant Anglo American's divestment out of Australia's coal industry amid its global restructure, merging six businesses into three with plans to cut its workforce by two-thirds.

Anglo's three Queensland mines and its mothballed New South Wales mine, which are currently in care and maintenance mode, are still for sale. Enditem