Australia Floods Bless and Curse Farmers, Hit Coal

James Regan and Fayen Wong, PlanetArk 22 Jan 08;

SYDNEY - Flooding across large tracts of eastern Australia was giving long-sought drought relief to farmers while forcing coal mines to curtail operations.

"Finally, some good rains," said Ron Storey of Australian Crop Forecasters, which upped its sorghum crop forecast by 17 percent to nearly 2 million tonnes on Monday.

The deluge that has caused rivers to overflow, forcing residents in rural towns to evacuate to higher ground, was set to provide long-absent water for irrigation and long-term benefits worth around A$1 billion (US$877 million), AgForce Queensland chief executive Brett De Hayr said.

However, farmers whose sorghum crops are nearly ready for harvest may see the tallest crops severely damaged and unable to stand up again once the flooding recedes.

"A lot of crops are physically washed away and there's a lot of mold and that will certainly have an impact," De Hayr said.

The Bureau of Meteorology has issued flood warnings for 13 rivers and creeks and a strong wind warning for coastal waters.

Xstrata Plc, Rio Tinto Ltd, BHP Billiton Ltd and Macarthur Coal Ltd all said their operations had been hampered by the deluge.

"The news will definitely spook the market and spot coal prices could potentially go through the roof," said Andrew Pedler, a resource analyst at Wilson HTM.

Mid-size producer Ensham Resources Pty Ltd, which had to use helicopters to evacuate workers stranded at the mine, said on Monday it has declared force majeure at its Ensham coal project, which has a production rate of about 8.4 million tonnes a year.

Queensland's rail operator was forced to halt coal transport on Friday after rail tracks were cut by flooding.

The state's emergency services department has dropped food by helicopter to isolated areas and brought in sandbags to construct temporary levees.

Xstrata, the world's largest exporter of thermal coal, said flooding at its Newlands and Collinsville mines had made it difficult to get to its mines and reduced output.

Xstrata spokesman James Rickards said it was too early to assess the damage and the impact on production.

Newlands produces about 10 million tonnes of thermal coal a year, most sold to Japanese utilities. The Collinsville mine produces a combined total of 5 million tonnes of coking and thermal coal annually.

Rio said workers at its 3.7 million-tonnes-a-year Kestrel coking and thermal coal mine were being advised to stay home.

"In the interest of safety across the business we have limited production at our operations to varying degrees," said BHP spokeswoman Emma Meade.

Coal mining in Queensland directly employs almost 23,000 people, according to Queensland Resources Council.

While output from collieries has been hurt, some companies were drawing on stockpiled coal to keep shipments moving, Greg Smith, general manager of the Dalrymple Bay coal terminal, said. (US$1=A$1.14) (Editing by Michael Urquhart)