Sultan Mining, Glencore ink coal supply contract

Sultan Mining and Energy Development Corp. will make the first overseas shipment of its coal output after entering into a supply contract with Switzerland’s Glencore International AG, documents from the Department of Energy (DOE) showed.

Glencore, one the world’s largest suppliers of commodities and raw materials, will purchase 90,000 metric tons of local coal from Sultan subsidiary MG Mining and Energy Corp.

MG Mining said it will be able to supply the international market as it has maintained favorable level of production in its coal mine in Bislig, Surigao del Sur.

The company said its production has been sustained at over 20,000 metric tons a month despite adverse weather conditions.

Under the contract, Bislig steam coal will be shipped between August to December this year to Glencore which also buys some of its coal requirements from Semirara Coal Corp., the coal mining firm controlled by the Consunji group.

Steam coal or bituminous coal has the broadest range of commercial uses among the coals and has long been utilized for steam generation in electric power plants and industrial boiler plants.

Glencore is the first company  to seal a supply contract among several prospective foreign buyers who have expressed strong interest in buying Bislig coal.

According to Sultan vice chairman Rufino Bomasang, they intend to pursue talks with the potential buyers soon since the firm really aims to start exports within the year to take advantage of higher prices overseas.

Earlier, Sultan Mining said it is eyeing major coal markets such as China, India and Japan as well as global coal traders. Coal prices continue to go up in the global market as the price of crude oil rises.

Bomasang said there is currently a shortage of coal in the world market due to growth in the power generation industries in the red-hot economies of China and India, thus foreign buyers pay more for coal than what they are getting from local buyers.

On the local front, Sultan Mining supplies coal to cement and power generation companies as well as some canneries that have shifted to the use of coal for their boilers instead of the more expensive bunker fuel.

A few months back, Sultan Mining also entered into an agreement with Conal Holdings to supply coal to a proposed power plant in Mindanao from the Daguma coal reserve where Sultan Mining owns a 12.5-percent stake.

Other power plants expanding their current capacities have also expressed interest to undertake a similar agreement.

The Sultan Mining official said it is currently a sellers market for coal in the Philippines as well as overseas since they cannot produce enough to meet demand from power generators and manufacturing firms that operate their own boilers.

“This is why we are trying to raise production as fast as we can and we are buying more equipment to increase our coal output,” Bomasang said.

Sultan Mining intends to start mining coal underground in Bislig in addition to existing open pit mines while starting to develop its reserves in Argao where coal is of the highest grade and value.

He said the company is following the steps of top local coal producer Semirara by exporting only a fraction of its output while reserving the bulk to supply local buyers.

“It is our commitment to prioritize the domestic market since the country continues to import coal and this is putting pressure on our foreign reserves and raising the trade deficit,” he said.