Coal Markets

Buffalo Coal supplies bituminous and anthracite coal to both the export and domestic markets.

aviemore collieryBituminous
The API 4 coal price index was at US$61 per ton at the end of June 2015 and has decreased to around US$56 per ton as of August 11, 2015. Over the past six months, approximately 20% of the Group’s sales have comprised export bituminous sales which have been priced against the API 4 coal price index. The Group significantly mitigated its exposure to this index based risk through the restructuring of one of its major bituminous export contracts to a fixed price contract during PY2014, however, there still remains a risk on future export sales to current and new potential customers. The short- to medium-term outlook for the API 4 coal price index still remains in backwardation.

On the domestic front, the bituminous coal market has remained steady, with a continued healthy outlook for the upcoming year. Domestic coal supply contracts are typically structured at a negotiated coal price over a twelve month period.

Anthracite
The anthracite market is highly correlated with the metals industry where anthracite is primarily used as a reductant.

South Africa is also a large steel producer and continues to be a net importer of metallurgical coal and coke products. South Africa is one of the world’s largest ferrochrome and ferroalloy producers, however as these markets are under severe pressure, the domestic demand for anthracite has weakened over the last quarter. Anthracite supply contracts are typically structured at a negotiated price.

Due to the current economic climate the Group has focused all efforts on securing new market opportunities for both anthracite and bituminous products.