Date: November 08 2012
Mitsubishi, Japan's biggest trading house, is flagging partial closures of its Australian coal mines and is rethinking its natural resources investment plans after having spent more than $12.5 billion on copper, gas and coal assets in the past three years.
Ken Kobayashi, president and chief executive of Mitsubishi, said it would be hard for the company to break even at its Australian coking coal joint venture at current coal price. BHP Billiton Mitsubishi Alliance, the world's biggest coking coal producer, was Mitsubishi's cash cow until last year.
"Global mining businesses have entered a new phase, where cost matters. Closing part of coal mines is an option to boost [our] cost edge," Mr Kobayashi said.
Mitsubishi has also yet to find a partner for its $10 billion Jack Hills iron ore mine and Oakajee port and rail development projects in Australia, Mr Kobayashi said.
"Recent tension between Japan and China have slowed talks with potential Chinese partners. But we believe this is a vital project as demand will remain tight in the long term," he said.
Mitsubishi took full control of the two projects and completed feasibility studies early this year just before iron ore prices started to fall. It has said it would not go ahead with the projects unless the company finds a partner with solid financial background.
Japan's top trading houses had been ramping up a natural resources buying spree until early this year, using financial firepower bolstered by a decade-long commodities boom and the yen at near record highs.
But recent steep falls in coal and iron ore prices following a slowdown in demand in China forced Mitsubishi to slash its full-year profit outlook by nearly a third and Mitsui by a quarter.
"We have done what [we're] going to do for now as far as investment in natural resources is concerned," Mr Kobayashi said.
"While a fall in the cost of assets is attractive, we won't find easy coal, easy gas, easy copper projects any more." Mitsubishi said it would accelerate replacement of assets including natural resources to generate cash and bolster returns, and also would focus on boosting cost edge at its existing mines by implementing restructuring measures.
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