Colombian Cerrejon to miss coal target owing to strike

Colombian coal producer Cerrejon will not meet its 20mn t output target for this year because of strike action currently affecting its operations.

"For 2020, we had a projected initial goal of around 26mn t, which we had to adjust to 20mn t owing to the impact of the pandemic. Now, with the strike, this volume will not be achievable and today we do not know what its impact will be," Cerrejon president Claudia Bejarano said.

The strike, which enters its 22nd day today, has prevented around 56,000 t/d of coal, or 1.23mn t, from reaching international markets.

Bejarano called on union Sintracarbon, which represents the largest share of the company's workers, to understand the challenging outlook for the coal sector because of the continuing weakness in the Atlantic basin market, exacerbated by the impact of Covid-19. Cerrejon has offered competitive salary increases and benefits to workers, despite recording losses of 368bn pesos ($98.9mn) in the first half of this year, Bejarano said.

The labour ministry has called a meeting between the two parties for tomorrow, Sintracarbon president Igor Diaz told Argus today. But Cerrejon has not confirmed whether it will participate, Diaz said.

Cerrejon, which is Colombia's second-largest thermal coal producer, exported 12.4mn t in the first eight months of 2020, down by 5.1mn t from the same period last year. If the company maintains that pace of shipments for the rest of this year, it would export 18.6mn t — well below its initial 20.5mn t target. But even this projection could be overoptimistic if the strike is not lifted soon.

La Puente pit impasse continues

Bejarano expressed her disappointment that Cerrejon is still unable to develop the La Puente pit.

"It is worrisome that, after carrying out the partial modification of the channel of the Bruno stream, with all the required authorisations, plus a successful process of prior consultation, we have suspended the mining progress in this area for three years, without being able to extract a single tonne of coal from this area that has very profitable reserves," Bejarano said.

Colombia's highest court, the Constitutional Court, suspended the development of the northern portion of La Puente three years ago because of concerns about the impact on local water supply of rerouting the Bruno waterway.

After a lengthy delay, Cerrejon and a number of government institutions are conducting studies to determine whether the diversion of the Bruno creek, required to expand the area, would affect local communities' access to water, as plaintiffs have claimed. The parties carried out consultations with some communities, but the meetings were suspended amid the pandemic.

Cerrejon planned to mine La Puente to offset expected production declines elsewhere. The pit contains 35mn t of proven coal reserves and was expected to enable Cerrejon to offset a forecast production decline of about 3mn t/yr over 2015-33 from other pits.

Two of Cerrejon's shareholders could file a lawsuit against the Colombian state challenging the ban preventing the company from mining the key site, the director of Colombia's national agency for legal defence of the state, Camilo Gomez Alzate, said recently.

The shareholders — Switzerland-based commodities firm Glencore and London-listed Anglo American — sent a notice of intent to pursue an investment arbitration claim as a result of the Constitutional Court's decision to suspend the development of La Puente's northern section, Gomez said.

The northern La Puente project received environmental approval by authorities in 1998, and Colombia's environmental regulator Anla endorsed detailed engineering studies in 2014, Cerrejon said.

UK-Australian resources firm BHP, Anglo American and Glencore are equal shareholders in Cerrejon.

By Diana Delgado