Cerrejon P-40 Expansion

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This article is part of the CoalSwarm coverage of Colombia and coal.
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The Cerrejon P-40 Expansion is the name given to an expansion project of the Cerrejon Colombian coal mine. Xstrata Coal, BHP Billiton, and Anglo American approved the project in 2011 to increase the Cerrejon coal mine's output by 8 million tonnes a year. The expansion was initially stated as being "carried out within the current mining areas without affecting new terrain." The Cerrejon coal mine is located near the village of Albania in the La Guajira department of Colombia.

Location

The satellite photo below shows the location of the Cerrejon 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 - in the Colombian Cerrejon thermal coal mine approved a US$1,311 million billion project to expand the coal mine's output by 25%. Each company owns a 33.3% stake in the mine and committed to invest US$437 million in the expansion. The approved Cerrejon project will increase coal output by 8 million tonnes to 40 million tonnes a year, as well as expand the coal handling facilities and the 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' 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 and were being 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 from Discovery Channel International.

... but the global thermal coal market sours

While construction was underway, the global thermal coal price was in a steady decline. In a January 2014 media release the Cerrejon 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 it 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 Cerrejon'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 Cerrejon Coal Company's Chief Executive Officer, Roberto Junguito, said that Cerrejon 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 expects 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 Cerrejon was only up 3% on the same period the year before while the sale price of was just US$58 per tonne, a 16% fall on the year before. (Glencore also notes that coal from its other coal mine, operated by its Prodeco subsidiary, sold its coal for US$65 per tonne. Prodeco produce 5 million tonnes in the quarter compared to 3 million tonnes from Cerrjon, representing Glencore's one-third share from 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 of 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: Cerrejon Coal Company
• Parent company: BHP Billiton plc, Anglo American plc and Xstrata plc
• 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 (annouced)

Articles and resources

Related SourceWatch articles

• BHP Billiton's coal interests
• Colombia and coal

External resources

• BHP Billiton, "Cerrejon 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.