Rio move raises doubts over coal-loader

RIO Tinto is considering delaying the start of its Mount Pleasant mine near Muswellbrook, in turn raising questions about the need for the controversial T4 coal-loader on Kooragang Island.

The multinational miner did nothing yesterday to dispel a front-page report in the Australian Financial Review that said the $2 billion mine was under threat because of rising production costs and falling coal prices.

Mount Pleasant was approved by the state government in 2000 and would produce 10.5 billion tonnes of coal a year and employ 350 people.

Prime Minister Julia Gillard weighed into the debate, saying she had spoken with Rio managing director Tom Albanese, who had told her that mining companies were facing rising costs around the world and not just in Australia.

Rio is reportedly due to make a decision on Mount Pleasant in the next few weeks, with analysts tipping the mine will be further delayed, having been on Rio's books since 1992.

Mount Pleasant is one of the Upper Hunter and Gunnedah mines from which the Rio-backed Port Waratah Coal Services is expected to take coal, if its T4 loader is approved by the state government.

PWCS says it is contractually obliged to build T4 under a "long-term commercial framework" signed with various organisations after former premier Nick Greiner was brought in to fix the Newcastle coal queues in 2008.

The T4 trigger was reached when demand exceeded 145 million tonnes and PWCS confirmed yesterday it had take-or-pay contracts for 176.7 million tonnes a year.

But Hunter coal exports totalled just 114 million tonnes last year and this year's predicted total is about 130 million tonnes.

With coal prices falling below $US100 a tonne and costs hitting about $US75 a tonne, industry analysts believe the commodity cycle has turned for coal and that bullish predictions of Newcastle exports hitting 300 million tonnes or more are unlikely to reach fruition.

Despite increasing signs of a slowing coal market, PWCS still achieved a record monthly throughput of 9.9 million tonnes in April, with China's portion a record 1.84 million tonnes.

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