Cerrejon P-40 Expansion

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This article is part of the CoalSwarm coverage of Colombia and coal.
Related articles:
Existing mines Cerrejon coal mine La Loma mine El Descanso mine El Hatillo mine Coal terminals Puerto Bolivar coal export terminal Puerto Drummond coal port Puerto Brisa coal terminal Puerto Prodeco coal port (decommissioned) Puerto Nuevo coal terminal Mining companies and agencies Proposed coal plants

The Cerrejón P-40 Expansion is the name given to an expansion project of the Cerrejón coal mine, located near the village of Albania in the La Guajira department of Colombia. Xstrata Coal, BHP Billiton, and Anglo American approved the project in 2011 to increase the Cerrejón coal mine's output by 8 million tonnes a year.

Location

The satellite photo below shows the location of the Cerrejón coal mine, in the southeast of the department of La Guajira, near the Colombian-Venezuela border. The coal mine is situated in the northeastern part of the Cesar-Ranchería Basin, the basin of the Ranchería River, between the Sierra Nevada de Santa Marta in the west and the Serranía del Perijá to the southeast.

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Background

In August 2011, three of the U.K.'s largest listed miners - Xstrata Coal, BHP Billiton, and Anglo American - approved a US$1,311 million billion project to expand output from the Cerrejón thermal coal mine by 25%. The three companies, each with a 33.3% stake in the Cerrejón mine, committed to invest US$437 million in the expansion. The approved project was to increase coal output by 8 million tonnes to 40 million tonnes a year, as well as expand Cerrejón's coal handling facilities and the companies' fully-owned Puerto Bolivar port, adding an extra loading berth. (BHP Billiton's 2011 annual report stated that a part of the port upgrade included a "dual quadrant ship loader".)

In a media release announcing the go-ahead for what was dubbed the P40 project, BHP Billiton stated that:

"Construction will commence in the 2011 calendar year with completion expected in the 2013 calendar year. Ramp-up to expanded capacity of 40mtpa is expected by the end of the 2015 calendar year. The expansion project will see BHP Billiton’s estimated share of production and sales from this long life, tier 1 asset increase from 10.7mtpa to 13.3mtpa."

BHP Billiton's Energy Coal President, Jimmy Wilson proclaimed:

"Today’s announcement highlights our commitment to invest in growth throughout the cycle and to continue to produce at maximum volumes to take advantage of the strong demand for energy coal."

The joint venture company stated that "the P-40 expansion will be carried out within the current mining areas without affecting new terrain and will demand an increase in coal production and train transport, as well as the shipping capacity in Puerto Bolívar. P-40 includes a production increase at each one of the current pits, and as a result the usage of a larger amount of mining equipment. Crushing and train transport capacities will also be increased, in addition to the construction of a second loading pier and a second ship loader in Puerto Bolívar."

The day after the joint venture partners announced the expansion project, journalists from regional media outlets were hosted at the mine. A few days later a crew from the Latin-American production company Endemol was at the mine filming a feature for Discovery Channel International.

... but the global thermal coal market sours

While construction was underway, the global price of thermal coal underwent a steady decline. In a January 2014 media release the Cerrejón joint venture stated that "as regards expectations in 2014, the company will continue working to produce and export a greater volume than in 2013, which could vary depending on the trend in international coal prices."

In its 2013-2014 annual report BHP Billiton stated that:

"Construction commenced in CY2011 and the project handled its first coal in the December 2013 quarter. The port expansion associated with the Cerrejón P40 project is currently being commissioned, although operational issues are expected to constrain capacity to approximately to 35 Mtpa (100 per cent basis) in the medium term. At 30 June 2014, the project was 94 percent complete." (On June 30, 2013 the expansion project was stated as being 71% complete.)

By late August, the expanded port was in operation and began loading its first shipment.

Mine expands but, even after cost-cutting, loses money on some production

However, before the expanded mine and port could substantially increase exports, the rapidly falling price for coal in the global market began to take its toll. In October 2014 Mining Magazine reported that the focus of the company had shifted from expanding production to cutting costs by improving the productivity of its fleet of haul trucks and excavation operations.

While the expansion project had been predicated on a booming market, the global seaborne thermal coal price fell dramatically. With European coal markets the dominant destination for Cerrejón's coal, the project had been hit hard by a 30 percent fall in coal prices in the year to early 2015. In BHP Billiton's production review for the half-year to the end of December 2014, the company stated that "anticipated drought conditions constrained production volumes at Cerrejón given the need to manage dust emissions."

In March 2015 Cerrejón Coal Company's Chief Executive Officer, Roberto Junguito, said that Cerrejón was losing money on "a little less than 11 percent" of its current production of 33.7 million tonnes in 2014. “If there’s already a fraction that’s close to the profitability threshold, it’s very hard to justify additional investment ... Our objective is to continue implementing initiatives to ensure that we can at least maintain our current production in a profitable way,” he told Bloomberg.

Junguito stated that the joint venture expected to export about 34 million tonnes in 2015, well under its 40 million tonnes per annum capacity.

In its report for the first quarter of 2014, Glencore stated that production at Cerrejón was only up 3% over the same period the year before while the sale price was just US$58 per tonne, a 16% drop from the year before. (Glencore also noted that coal from its other coal mine, operated by its Prodeco subsidiary, sold its coal for US$65 per tonne. Prodeco produced 5 million tonnes in the quarter compared to 3 million tonnes from Cerrejón, representing Glencore's one-third share in the mine.)

Wayúu, Afro, and la Majayut de Oro Community Representatives Opposed P-40

According to an article published by Las 2 Orillas, representatives of the Wayúu, Afro and Majayut de Oro communities spoke to the media in opposition to continued P-40 expansion. They said in 2017 that the expansion has affected water resources in the region, and threatens the survival of several communities and the preservation of water in La Guajira.

Project Details

• Owner: Cerrejón Coal Company
• Parent company: Glencore International AG
• Location: Albania, Barrancas and Hatonuevo in La Guajira, Colombia
• GPS coordinates: 11.033968,-72.662926
• Mine status:Operating
• Start year: 2011
• Mineable reserves: 900 million tonnes
• Coal type: bituminous
• Mine size: 270 sq mi
• Mine type: Surface
• Production:
• Additional proposed production: 8 million tonnes per year
• Equipment:
• Number of employees: 1,200 (announced)

Articles and resources

Related GEM.wiki articles

• BHP Billiton's coal interests
• Colombia and coal

External resources

• BHP Billiton, "Cerrejón Coal Company", BHP Billiton website, archived from February 2011.

Video

• La Buena Vida, A Documentary about the Involuntary Resettlement of Indigenous Communities in Colombia affected by Cerrejón coal mine, 2015.

Articles & Reports

• John Harker, Saloman Kalmonovitz, Nick Killick and Elena Serrano, "Cerrejon Coal and Social Responsibility: An Independent Review of Impacts and Intent", February 2008. (This was a review commissioned by Cerrejon Coal).
• Oliver Balch, "Cerrejón mine in Colombia: can it address its human rights risks?", Guardian, July 25, 2013.
• Erica Jaffe Redner, "In the Name of Development: Moving Cerrejón Mountain, Its Coal, and Its People", ReVista, Winter 2014.
• Richard Solly, "Stop forced displacements by Cerrejon Coal in Colombia!", The Ecologist, December 3, 2014.