The Hindu Business Line : Mine with a view

The pleasant fragrance of eucalyptus gum invigorates the lungs as you walk up the hill slope, the overnight rain having turned the vegetation a richer, lush green. Turn around and you will see a picturesque, little town below you on the plain, and beyond it, the vast Pacific Ocean stretching all the way to the horizon. Welcome to one of the best views in the Sydney area; welcome to one of Australia's oldest coking coal mines, 60 km south of the metropolis. And as the samosa and gulab jamun on the board-room table beckon, welcome to an Australian coal mine owned by an Indian company.

For over a century, the mine, set deep within the bowels of the mountainside had yielded some of the best coal for Australia and its export market. But production seemed to ebb away over the last five years till last year Mr Arun Jagatramka Pal, Managing Director of Gujarat NRE Coke, which makes coke in three plants including Jamnagar in Gujarat, made his move.

COAL ECONOMICS

He was troubled by the rising price in the international market of his company's raw material, coking coal and, even more exasperatingly, by the unreliability of supplies. That is when his company's subsidiary, Gujarat NRE Australia, bought over this 118-year-old coking coal mine.

The mine extends across 6,421 hectares and is estimated to hold around 300 million tonnes of coking coal in three coal seams, only one of which has been exploited over the years.

Low phosphorous and low ash content (said to be seldom above 18 per cent) make the coal attractive to mine. Gujarat NRE Australia dispatched its first consignment of coal to Gujarat last month and will be ramping up capacity to the rate of a million tonnes a year. It will be an achievement because the previous owners did not think it was possible to extract more than 300,000 tonnes a year. The question that Gujarat NRE is keen to answer is how an Indian managerial talent and drive can deliver what home-grown Australian managers did not.

Mr Rajendra Sahay, Managing Director, Gujarat NRE Australia, is clear. "We have to be focussed... we have not let anything divert our attention from the fact we are here to get coal," he said.

"The previous company was wondering whether it could make more money by turning this hill side into residential plots, attractive as real estate prices are in Sydney. We don't even look at the view. (Our job is to) get the coal out. The coal is beautiful, wow!" Many of the workers on the mine have been retained; one of them has spent more than thirty years here — equipment has been refurbished or new ones obtained.

"Maintenance had been neglected so we are having to play catch up," says Mr Sahay, but he is confident that the operations will soon be profitable.

The costs for the previous owners were high because the operations were small. "As long as the international price of coking coal remains above $80 a tonne over the next four to five years — the current price of this type of coal is $115, we should be profitable," he says. We will reach a rate of 5,000 tonnes a day (or a million tonnes a year) by July and then we should go beyond breakeven. After that it would be a matter of recovering the investment."

The view can only get better.

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