While coal production in Illinois has been maintained, the Wyoming hub is seeing competition from shale gas

Coal remains the fastest growing fuel outside renewable energy according to BP’s latest figures, with production growing by 2% in 2012, but this is still significantly lower than the 10 year average of 4.8%. The Asia-Pacific region accounts for all of this net increase with China and Indonesia’s coal production growth at 3.5% and 9%, respectively, which offsets a large decline in the US ( down 7.5%). But the Illinois basin in Indiana and west Kentucky had an output 10% higher than the previous year, with most of the falls in Wyoming and elsewhere.

Equally, over the past 12 months Australia has experienced a serious decline in coal mining investment and related infrastructure with many companies now in ‘survival mode’ leading to the implementation of cost saving measures. The long term outlook for the future is also bright according to BP’s Energy Outlook, when projected to 2030, with expectations that coal will continue to play a major part in world development, especially in the Asia Pacific region, particularly with the issues surrounding nuclear energy.

Mixed fortunes in Australia

The Australian coal sector exported A$48 billion of coal in the year to June 2012 and employs over 180,000 people both directly and indirectly.  But the coal industry has experienced a rapid deterioration in investment in both mining and associated infrastructure projects over the last year, which was highlighted in figures from the Bureau of Resource and Energy Economics (BREE). The report from BREE, Resources and Energy Major Projects, showed that in the six months prior to April 2013 no coal projects had progressed from initial public announcement to feasibility stage and no coal projects had progressed to investment commitment. A$19 billion of project investment had reverted to the first stage of the investment cycle, or been cancelled altogether.

Four distinct coal infrastructure projects had been deferred or cancelled in the past 12 months, with Abbot Point T4 – T9 project in Queensland, Port Waratah Coal Services Kooragang Island T4 at Newcastle, Yarwun Coal Terminal and the Balaclava Island Coal Terminal at Gladstone all halting development. 

Nikki Williams, CEO of the Australian Coal Association states: “We have now entered a different stage of the investment cycle.  Australian coal companies are responding by making very difficult decisions to reduce employment, investment and confine projects to their existing footprint. Companies are in survival mode in this part of the commodity cycle. Australia is competing in a global market against established exporting countries like South Africa, Indonesia, the USA and Canada, as well as emerging energy producers such as Mozambique and Mongolia.”

Despite the low confidence in Australia, there are numerous projects at an advanced stage such as the Alpha Coal Project. This represents the largest scale coal production facility from a single mine in Australia and is a thermal deposit in the Galilee Basin of central Queensland. The Galilee Basin consists of four main thermal coal seams suitable for the global export market and has the additional benefit with the coal having the potential for both liquefaction and gasification. The coal seams dip gently from east to west with thicknesses from 5 to 8 m. The project is being jointly developed by the Indian conglomerate GVK and Hancock Coal, which holds a 21% interest in the project. The deposit is composed of 1.82 billion tonnes of measured, indicated and inferred JORC-compliant resources and with a life of mine estimated at 30 years.  There is a planned 6,000 t/h coal wash plant and 495 km rail line from the mine to Abbot Point port. The project has completed prefeasibility, bulk sampling, bankable feasibility and all environmental and governmental approvals and is now awaiting construction and the start of overburden removal which is predicted to commence in 2014.

Waratah Coal’ s Galilee Coal Project, also known as the China First Coal Project, is located near Alpha in Central Queensland’s Galilee Basin and is an integrated coal project including a coal mine, a 453 km railway and port facility to export thermal coal to international markets.  The project will proceed through a staged development process that targets first coal production in late 2016 and has an estimated total project cost of A$8.8 billion dollars. The project has a JORC compliant measured, indicated and inferred resource of 3.68 billion tonnes and will produce 40 Mt/y using open-pit mining in addition to underground longwall mining.

The Adani Group are also active in the Galilee Basin with the Adani Galilee Coal Mines Project.  Adani has applied for an environmental assessment from the government for a 300 km rail line from the Galilee Basin to Abbot Point Coal Terminal as it looks to develop the Carmichael coal mine. The Chairman of the Adani Group, Gautam Adani said that the company plans to export its first coal to India by 2016. The 10 billion tonne resource at Carmichael is one of the largest in the world.

Underground operations at Peabody’s Twenty Mile mine

Liberty, a Perth-based exploration company has been granted a coal exploration licence for a tenement in the Bowen Basin surrounded by existing BHP Billiton, Peabody and Vale coal mines and projects. Andrew Haythorpe, Liberty Managing Director said: “Early planning for a drill program on the now granted EPC 1949 permit recognises the shallowness of the coal seams in the area and the near-term potential to develop a commercially attractive coal resource.  We lodged an application for this tenement with the Queensland Department of Natural Resources and Mines in 2009. The tenement is a high quality asset surrounded by existing coal mining and export infrastructure.”

The first drilling program will explore the potential for coking coal deposits within the tenement and as the coal seams are shallow, it is anticipated that a drilling schedule of around 20 holes or so at no more than 100 m depth will be sufficient to generate a JORC standard estimate if drilling is successful.

BHP Billiton and Mitsubishi have commenced construction work on their Caval Ridge Mine, which is expected to produce some 5.5 Mt/y of quality hard coking coal. The mine is located in the northern section of the Bowen Basin, with first coal production expected in 2014. The open pit mining operation will be carried out using a combination of excavators, front-end loaders and large capacity coal haulers.

Anglo American are busy in the Moranbah region, having recently commenced construction on the Grosvenor project, a 5 Mt/y longwall mine in Central Queensland. Seamus French, Anglo’s Metallurgical Coal CEO said: “We have the best hard coking coal assets and a unique opportunity to develop four identical world class longwall projects in the Moranbah region.” The mine is targeting the Goonyella Middle coal seam that is currently mined by the nearby Moranbah North Mine and will process its coal through the existing Moranbah North CHPP and train loading facilities. Anglo American is also carrying out a prefeasibility study for the addition of a second longwall at Grosvenor. 

In the same region BHP Billiton-Mitsubishi Alliance (BMA) has sought environmental clearances to extend its Goonyella and Broadmeadow coal mines. BMA operates six coal mines in Queensland and is now looking to extend mines rather than develop new ones due to the rising cost of mine construction. If the proposal is accepted the mine would produce a further 14 Mt/y. Dean Dalla Valle, BHP Coal Division President said the company’s investment in coal would reach more than A$4 billion in the year through June and would then reduce once the expansion of the mines is complete.

In the Gunnedah Basin of New South Wales, Whitehaven Coal has secured conditional approval to expand its Tarrawonga mine, increasing capacity from 2 Mt/y to 3 Mt/y and extending the life of mine by 13 years to 2030. The open pit mine commenced operations in 2006 and is a joint venture between Whitehaven Coal (70%) and Boggabri Coal (30%) and is mined by conventional truck and shovel excavation. Tony Haggarty, Whitehaven Managing Director said: “We welcome the federal government’s approval under the Environmental Protection and Biodiversity Conservation Act and are committed to working within the stringent conditions that have been placed on the project.”

Canada – metallurgical stronghold

Canadian coal production has been around 66 Mt/y over the last decade, and increased to 67 Mt in 2012, with 56% being thermal coal predominantly produced in the prairies and 29 Mt being metallurgical which is produced in Western Alberta and British Columbia. There are currently 24 operating coal mines in Canada, primarily based in the western area of the country, with 25 coal project currently going through various governmental regulatory processes. Of the ten producing coal mines in BC, nine are metallurgical coal and one thermal.  Ann Marie Hann, President of the Coal Association of Canada said: “Coal is essential to British Columbia as a catalyst for economic development, international trade, investment in regional communities and employment of thousands of British Columbians. With 12 billion tonnes of potentially mineable resources, coal can help ensure that BC’s economy remains strong for years to come.”

The Vista coal project near Hinton, Alberta is one of the largest undeveloped coal mines in North America. The project is owned by Coalspur Mines and has seen the completion of a Bankable Feasibility Study (BFS), estimating an initial marketable reserve for the project of 313 Mt. The mine will be developed through open pit methods in two phases with the first phase capacity of 5 Mt/y, scheduled to commence in 2015 which will increase to 11.2 Mt/y by 2018.  Construction for this project will commence once all detailed engineering work has been completed and final regulatory permits are received, which is expected by the end of 2013.  The development of an ore processing facility will include a ROM coal handling area and coarse coal handling area and include two dump ROM bins with a capacity of 800 t of ROM coal, an apron feeder and low speed twin roll primary sizer. Coalspur Mines recently announced the finalisation and board approval of the development plan for its Vista coal project which includes the construction and commissioning of a 6 Mt/y capacity thermal coal facility by mid- 2015, with the capability to expand to 12 Mt/y. A development capital cost of C$458 million is expected, with a lump sum turn-key contract covering C$221 million of this expenditure. President and CEO, Gill Winckler, said: “We are extremely pleased with the Development Plan that the Board has approved as it significantly enhances shareholder value. Shareholders will benefit from reduced capital requirements and a faster production ramp up than previously contemplated. Furthermore, being able to construct the facility in one stage as opposed to the previously envisaged two stages provides for more effective project execution and delivery.  The current downturn in the commodities industry with the associated pressure on commodity prices and service industries afforded us considerable opportunity as we finalised our project execution strategy and capital. This is evident through our capital efficiency of C$76 /t of capacity, which is very competitive with comparable thermal coal greenfield and brownfield expansion projects.  We are pleased to have selected an EPC contractor, Taggart Global, who has an extensive track record in North America in designing, constructing and commissioning coal preparation and material handling plants. We are confident that the combination of Taggart, together with our management and Owner’s team, which has been significantly strengthened over the last 12 months, will ensure Vista is constructed on time and within budget.”

Atrum Coal recently upgraded the coal resource estimate at the company’s flagship Groundhog anthracite project located in BC with the JORC compliant resources increasing by 460% to a global coal resource of 1,570 Mt across measured (16 Mt), indicated (553 Mt) and inferred (998 Mt). The upgraded resource confirms Groundhog as one of the largest undeveloped high grade anthracite deposits in the world. Eric Lilford, Technical Director of Atrum Coal said “The size of the Groundhog deposit is extraordinary. The coal is generally shallow and exhibits an exceptionally high rank. As one of the largest undeveloped anthracite deposits in the world, Groundhog has the potential to be a strategic asset in the global metallurgical coal space. We have an exciting year ahead of us.”

China’s unrelenting appetite

China’s strong appetite for thermal coal will lead to a doubling of demand by 2030 with demand growing at approximately 7 billion tonnes per year according to Wood Mackenzie’s report titled ‘China: The Illusion of Peak Coal’ , William Durbin, Wood Mackenzie’s President of Global Markets said: “It is very unlikely that demand for thermal coal in China will peak before 2030 because China’s aggressive investment program for nuclear, natural gas and renewables capacity is centred in the coastal region while coal-fired capacity grows in the central and western provinces.  There are also a plethora of coal-intensive conversion projects being built or planned that are significantly adding to demand”.

China may impose higher quality standards for both imported and locally traded coal to cut air pollution. The National Energy Administration (NEA) held a meeting with major state-owned coal producers to discuss new standards.  China’s government, led by the new leader Xi Jinping, has vowed to tackle the country’s pollution issue which has become a particularly emotive issue for the public in recent years.  The proposal includes having a minimum calorific value on imported coal (4,540 kcal/kg), and a maximum sulphur content of 1% and 25% ash on a net-as received basis said a source at a major state-owned coal mining company. For locally traded coal the calorific value would be 3,584 kcal/kg, and a maximum ash of 40% and sulphur content of 3%. The date of implementation is currently unconfirmed and there has not been any official governmental release of information regarding this discussion. However, if carried out this could seriously disrupt surrounding markets for coal production, including Indonesia and further developments in Mongolia.

Colombia – disputes, violence and force majeures

Cerrejon is one of the largest open-pit mines in the world

Colombia is the world’s fourth largest coal exporter and the largest in South America, producing high quality thermal coal. In 2012 production had increased by 14% over the same period in the previous year to 46.72 Mt. The Colombian coal industry is regionally distinct, with small artisanal metallurgical coal operations being carried out in the central regions of the country, in contrast to the large-scale thermal mines on the Atlantic coast that serve international markets.

The Colombian coal industry is facing unique challenges and in October 2012 Henry Medina, Vice Minister of Mines and Energy, had revised the forecast for coal production from 97 Mt to 93 Mt due to labour disputes and violence directed at coal mines and the collapse in the global coal price.

Workers’ demands for higher wages and better working conditions has led to a series of strikes during last year and led to many producers declaring force majeure.  Another major issue affecting production were bombing attacks at mines and railway lines, with one attack knocking 17 wagons off the line, days after the end of the workers strike in the Guajira province. The Sintracarbon union, who represents the workers of Colombia’s largest coal mine, said in a statement following this act of violence “We call on the authorities to redouble efforts to ensure our safety and that of the company.”

One of the largest open-pit coal mines in the world, called Carbones del Cerrejón, is located in the La Guajira Province of Colombia and is a jointly owned Anglo American, BHP Billiton and Xstrata venture. The integrated operation also includes a railroad and a port. The open cast mine produced 34.6 Mt in 2012, but in the last quarter Cerrejón mine’s output fell by 49%, largely owing to a 32-day strike in February and March.

The Titribi Coal Project is located in the Department of Antioquia, a region renowned for its high quality coal, is 90% owned by Ascot.  Titribi Coal Project is located close to existing utilities and infrastructure only 70 km away from the State Capital, Medellin. Ascot recently announced the results of the recently completed Phase 1 drilling program and also completed an additional 5 diamond drill holes for a total of 2,465 m and continued to intersect significant coal seams within the El Balsal and El Silencio areas. The company has also completed a resistivity survey as part of the overall scoping study which is due in the next few months. It is anticipated that operations could commence in 2014, exporting coal primarily into the European coal market.

Puerto Nuevo port in the Caribbean province of Magdalena is owned by the Colombian coal unit of Glencore which opened in May with a capacity of 21 Mt/y to boost exports and comply with new environmental regulations on coal loading. Puerto Nuevo cost around $550 million and will load the coal directly onto ships.  Cerrejón has similar plans to increase its capacity, with its Cerrejón’s former CEO, Leon Teicher stating that it would spend 60% of a $1.3 billion expansion budget on building a second dock and another loader, as well as more rail and new machinery in order to ‘break the bottleneck’. It is hoped that production at Cerrejón will increase to 40 Mt by 2015. 

India takes off

India’s thermal coal imports climbed 48% in April 2013 to 9.95 Mt. India does not release coal import data on a regular basis, and it places no restrictions on the imports of the commodity, which are brought into the country by traders and consumers. Over 50% of India’s power generation is fuelled by thermal coal, but domestic suppliers still struggle to keep pace with capacity growth in the power sector, leading to power cuts that stutter growth for the vast nation.

State-run power producer NTPC plans to nearly double its thermal coal imports to 17 Mt this fiscal year due to strong demand. Deepna Mehta a spokesperson for NTPC reported to Reuters: “We welcome falling prices but that would not change the import strategy of the company.” Coking coal imports fell 14% in April to 2.2 Mt as demand for steelmaking slipped, and data from Reuters showed that imports of coking coal are expected to rise in 2013/2014 as additional steelmaking capacity comes online.

The Ministry of Environment and Forests (MoEF) cleared 18 coal mining projects of stateowned Coal India for development in May 2013.  Pratik Prakashbapu Patil, Minister of State for Coal said: “Some 14 projects have received environmental clearances and four forestry clearances.” According to the MoEF, 12 coal mining projects were considered for fast tracking. These 12 projects are estimated to lead to an extra annual coal production of 36.97 Mt.

CIL has set a new high in coal off-take growth, managing to supply 465.18 Mt of coal to its consumers during 2012-13, an increase in absolute terms being the highest ever at 32.10 Mt, registering a growth of 7.4%. After a lull of two years, when the coal off take wavered from sluggish to negligible growth, the Maharatna Company saw a new vibrancy in the fiscal 2012- 13. Coal supplied from CIL to power utilities during 2012-13 grew by 10.7%, surging ahead to 345.43 Mt, up by 33.36 Mt from that of 312.07 Mt achieved in 2011-12. Supplies to thermal power plants of NTPC were 132.74 Mt, compared to 115.84 Mt in 2011-12, increased by 16.9 Mt registering a growth of 14.6%.

Into Indonesia

In 2011 Indonesia replaced Australia as the world’s largest coal exporter on a tonnage basis and since the turn of the 21st century, Indonesian coal exports have increased on average 18.4% year on year.  This is due to Indonesia’s abundant reserves with low overburden to coal ratio, the strategic location of deposits and proximity to large Asian importing countries. Indonesian coal consumption is expected to reach 125.7 Mt in 2022, up from 57.3 Mt in 2012. Despite the murmurs of China banning low quality coal imports from Indonesia, most see a positive outlook for the industry in this region.

A number of coal mines are located in the Kalimantan province of Indonesia including Adaro’s Tutupan, Wara 1 and North Paringin deposits located in the Warukin Formation.  Adaro Indonesia is the second largest coal producer in Indonesia, with a major mine located in the Tanjung district of the South Kalimantan province. Adaro produces what is trademarked ‘envirocoal’, typically containing 0.1% sulphur, 1.5% ash and low in nitrogen and is a key supplier to Castle Peak Power Station in Hong Kong, which is one of the world’s largest coal-fired power stations. In 2012 Adaro supplied the domestic market with 10.74 Mt.

The Central Kalimantan Provincial Government Environmental Agency approved Cokal’s EIS for its Bumi Barito Mineral coal project (BBM). The approval of the EIS by BPLH allows finalisation of the upgrade from IUP exploration to IUP production/operation mining lease by the Murung Raya Regency Mines Department. The BBM has a JORC resource of 77 Mt in four seams comprised of 70 Mt inferred and 7 Mt indicated as well as an exploration target of 200 to 350 Mt in 13 seams.

Orpheus Energy has announced a JORC resource increase of 3.45 Mt at its 51% owned Kintap ADK mining project in South Kalimantan.  Wayney Mitchell, Executive Chairman of Orpheus said “Orpheus is pleased to report our initial JORC resource at our ADK project. The ADK project is currently producing with favourable mining properties and has existing infrastructure in place, thus the resource report confirming our tonnage for entering into longerterm off take agreements with end-users for the next five years, is particularly encouraging.”

A drilling program is about to commence on Orpheus’s 51% owned B4 project, where an exploration target of 5-10 Mt (for both blocks) and coal sample assays of over 8,000 Kcal/kg have previously been announced. In April 2013, an Orpheus field team was sent to B4 to conduct a coal seam outcrop geological mapping (and sampling) exercise. Additionally, the team determined the best drill hole locations and prepared 13 drill hole site pads spaced no more than 500 m apart.

Kaltim Prima Coal (KPC), owned by Bumi Resource and Pakar Discovery has a licence to explore, produce and market coal in an area measuring 90,938 ha until 2021 in the East Kutai Regency, East Kalimantan Province. It is Indonesia’s largest coal mine and has set a target to mine 49.7 Mt in 2013. KPC operations include a series of open pits, coal preparation facilities and over 13 km of overland conveyors to the coast and marine terminal, capable of handling bulk carriers of up to 220,000 DWT. KPC uses conventional truck and shovel extraction and has between six and twelve open pits in operation at any one time. The KPC also owns Sangatta coal mine, which comprises of the Prima, Pinang and Melawan pits has a mine life estimated up to October 2020 and the smaller Bengalon coal mine which is so far undeveloped but has 165 Mt of marketable reserves , with 706 t of measured and indicated resources.

Kangaroo Resources’ (KRL) Pakar Project is still in development, with the potential for large scale, long life thermal coal production located close to existing infrastructure. Total resources are as much as 3,019 Mt inclusive of 442 Mt of JORC compliant reserves. This resource is particularly attractive to KRL due to the thick and shallowly dipping seam. KRL is also engaged in the Mamahak Project, which it fully owns and looks to extract coking coal and high quality thermal coal and has options for a further five projects all located in East Kalimantan.

Altura Mining recently completed a maiden coal reserve estimate at the Delta coal operations which is just over 33% owned by AJM in East Kalimantan, Indonesia. The operation currently produces and sells medium energy thermal coal at a rate of 1.5 Mt/y with production split between the Gunung Lampu and Noni mining areas and has production and sales looking to rise to 2.0 Mt/y in 2014. The reserve estimate was completed by Australian based mining group Xenith Consulting and have estimated a current coal reserve of 12.5 Mt consisting of 10.4 Mt proven and 2.1 Mt probable. The revision of the estimates led to an increase in a JORC compliant resource estimate from 57.4 Mt to 61.4 Mt.

Mongolia’s might

Mongolia possesses an estimated 152 billion tonnes of coal resources and became China’s largest coking coal provider in 2011.  There have been over 80 geologically studied coal deposits in Mongolia. Transportation between Mongolia and China has been rapidly developing for bulk materials with a railway line being developed to the Ceke border point, where a major automated railcar loading facility exists. A second railway line from Ceke PRC to the industrial city of Linhe PRC has also been completed. The Mongolian government has designated the Shivee Khuren (Ceke) border crossing as a permanent border crossing which allows for distribution of Ovoot Tolgoi coal to customers in China. One concern for the nation’s coal industry is the prospect of resource nationalism which could prevent outside investment for the development of Mongolia’s vast resources.

South Gobi Resources owns a significant production mine at Ovoot Tolgoi as well as three development projects. The Ovoot Tolgoi has resources of 119.1 Mt proven and 56.5 Mt probable as of measured in October 2011. The mine shut down for eight months in June 2012 and resumed in March this year. The shutdown was due to weak market conditions and regulatory issues and South Gobi stated that they hope to produce 3.2 Mt of semi-soft coking coal during 2013.

The development projects of South Gobi include the Soumber Deposit, Zag Suuj and the Ovoot Tolgoi underground deposit, Tsagaan Tolgoi. The Soumber Deposit has a measured and indicated resource of 137.2 Mt and 83 Mt inferred. The Zag Suuj Deposit, located in the Ovoot Khural Basin, 150 km east of the Ovoot Tolgoi complex has 17 Mt of measured and indicated resources and 66 Mt inferred. Tsagaan Tolgoi surface coal reserves have been measured with a measured and indicated in place resource of 36.4 Mt and 9 Mt inferred. 

Mongolia Mining Corp owns the Ukhaa Khudag (UHG) deposit which is located within the Tavan Tolgoi coal formation in the South Gobi and approximately 560 km from Ulaanbaatar. The license area is 2,960 ha in size and has a JORC-compliant resource size of 581 Mt of indicated and inferred and 286 Mt of proven and probable reserves as of May 31 2010, but was subsequently increased by approximately 120 Mt as of June 30 2012. The majority of the reserves are high quality hard coking coal. UHG produced 9.4 Mt during 2012, up 32% from 2011 and the mining operations are completed by Leighton Asia.

BaruunNaran coking coal deposit has a JORCcompliant measured, indicated and inferred coal resource of 282.2 Mt with approximately 185.3 Mt of the resource being open-pit mineable. The mine infrastructure preparation and overburden pre-striping work has commenced under a premining agreement signed by the Mineral Resources Authority of Mongolia in February 2009 and coal mining operations started in February 2012 with a target of approximately 1 Mt of ROM coal production in 2012.

Odjargal Jambaljamts, Chairman of MMC said: “Despite challenging market conditions for the entire coal industry in 2012, MMC continued to implement its strategy of creating a fully integrated coking coal mining, processing, and transportation and marketing platform. As a result, we have solidified our position as the largest coal producer and exporter of washed coking coal in Mongolia. Committed to our initiatives for internal improvements to infrastructure, we have consolidated our foundation for future business growth.”

Aspire Mining has recently completed a comprehensive carbonisation test work program at the Mogoin Gol coal mine, which is an extension of the coal seam that is present at the Ovoot coking coal project and has similar quality characteristics. The MG mine is currently producing unwashed coal in relatively small quantities for local thermal power as well as for exports to the Russian steel industry.

David Paul, Managing Director of Aspire said: “We are pleased with the initial coal quality indications for our Ovoot coking coal. This work has confirmed the attractiveness of adding Ovoot coking coal into coke blends. This is an important step which will now allow Aspire to progress commercialisation negotiations for future sales and funding.”

Prophecy Coal’s wholly owned subsidiary, Prophecy Power Generation Prophecy Coal possesses two large and distinct coal deposits in Mongolia and was recently granted 532.4 ha of land to be used for Prophecy’s proposed Chandgana Power Plant construction. The proposed Chandgana Power Plant is the largest foreign investment ever made in Khentii Aimag, and is expected to generate over 500 direct permanent jobs. Prophecy has issued a contract to Erchim Concern LLC to bring 4 MW of temporary power to the Chandgana Power Plant site and has issued tenders for the construction of 250 housing units along with a water supply to the site.

Celadon completed a feasibility study on and received approval from the Inner Mongolia Government to establish a Coal-to Olefins project (CTO) which could utilise coal from Chang Tan West. Celadon is now beginning work on receiving outstanding approvals as well as environmental and safety impact assessments, and is in discussions to acquire land on a developed industrial site, with access to the infrastructure and utilities required for the facility.

Chang Tan West has also been granted an additional 38 km2 of back-up resources on an adjacent license area which could contain up to 1,800 Mt if coal, subject to Celadon successfully developing its CTO project. This back-up resource has been set aside in the event that the CTO project is deemed to require additional feedstock for future stages of development which would take the total resource, inclusive of the back-up would be 2,800 Mt of coal.

The CTO project will convert coal to gas which is then transformed into olefins that are used in the production of chemicals such as polyethylene and polypropylene. Chinese demand for chemical feedstock from coal is growing as a result of shortages of several key feedstocks.

Chris Rynning, CEO of Origin said: “I am delighted with the progress Celadon is making in developing the Chang Tan West resource and the associated coal to olefins project. The significant scale of the resource at Chang Tan West together with the strong demand for olefins in China means this is an extremely attractive project. Celadon is at the core of Origo’s investment strategy, supplying the energy needed for continued urbanisation in China.”

Mozambique: beyond Moatize

Exploration and development in the Tete region of northern Mozambique continues with large scale coal projects that are in addition to Vale SA’s Moatize mine. The mine lies 17 km northeast of the city of Tete, on the Zambezi River. During the first phase of the of the estimated 35-year life span, Vale SA plans to mine 8.5 Mt/y of metallurgical coal and 2.5 Mt/y of thermal coal and is Vale SA has aimed to double total production to 22 Mt/y after a $6 billion investment in late 2014.  Major investments have been made by Vale with the Nacala Corridor project, which will connect the 912 km stretch between Moatize Coal and the Port of Nacala with a transport capacity of 18 Mt/y.

Production at Moatize during Q1 2013 was 30.4% below that in Q1 2012 due to heavy rainfall in Mozambique, with Vale issuing a force majeure in February and lifting it on March 20, 2013. The rainfall caused significant challenges to the Linha do Sena railway, thus impacting shipments of metallurgical coal of approximately 500,000 Mt.

Benga mine, Rio Tinto’s 65% owned joint venture with Tata Steel (35%) exported its first hard coking coal in June 2012 with a shipment of 34,000 t leaving the Port of Beira. Rio Tinto gained control of Benga when it acquired Riversdale Mining for $4.2 billion in 2011. The mine is located in the Moatize basin of Tete and requires significant investment in infrastructure.  In January 2013, Rio Tinto announced that it had written off $3 billion relating to Rio Tinto Coal Mozambique (RTCM) due to a more challenging infrastructure to support coal assets than originally anticipated. First production from the expanded mine is expected in the second half of 2014. Rio Tinto recently suspended coal exports from northwest Mozambique due to threats by the opposition Renamo party to disrupt the Sena railway line in Tete province. Rio Tinto said it had ‘paused’ its operations on the rail line, but production continues at its Benga mine. Sena is the only railway line leading from the massive coal fields of Tete to the Indian Ocean port of Beira. The railway’s dominant user is the Brazilian mine, Vale, which is investing $4 billion in coal operations in the region and stated “We are alert, observing the events, avoiding unnecessary exposure in zones of potential conflict and interacting with other companies looking to obtain the best possible information.

The BHR Minas Moatize Coking Coal Project has begun commissioning for Phase 2A of the project with the first coal due May

Storeyard at Moatize coal

2013. A mining contract has been agreed between the company and the Government of Mozambique to underpin development. The rolling stock conditions precedent expected to complete in April 2013 to export coal on the rail line to the east coast. New executive personnel employed to ensure strategic delivery.

Beacon Hill Resources (BHR) produced 194,343 t if RoM thermal coal and 54,432 t of saleable coal in 2012 and has been developing establish a logistics chain to link the Minas Moatize mine to the Port of Beira. This connection will establish a economically attractive infrastructure along with the loading at the Carbonoc facility in Minas Moatize and unloading at the Dando siding for a final 30 km haul to Port of Beira.

Beacon Hill CEO, Rowan Karstel said “We continue to make excellent progress on all fronts. The commissioning of the Minas Moatize wash plant is a major milestone in the Company’s history and I am delighted that we will now deliver coking coal product as promised. The signing of the mining contract also represents a major strategic shift for Minas Moatize bringing it closer to government objectives and ensuring the longevity of the operation, fiscal exemptions and its sustainability going forward. The rolling stock conditions precedent will be completed this moth and, with the addition of new highly experienced personnel, I am highly confident that we will deliver on our strategy and build shareholder value.”

Announced on January 31 2013 that whollyowned subsidiary Minas Moatize Ltda (MML) signed an operating lease agreement with Thelo Rolling Stock Leasing Propriety, for the provisions of rolling stock on the Sena railway line in Mozambique connecting Tete with the Port of Beira. Thelo will lease five Grindroc RL30SCC-3 Locomotives as new for a term of 10 years as well as 90 Gondola type coal wagons for 10 years and will appoint RRL Grindrod Locomotives Proprietary as its rail services operator.

Managing Director of Beacon Hill, Rowan Karstel commented “We look forward to working with our new rail consortium. The new rolling stock is an important milestone for our coal export operations on the Sena Railway line.”

Nippon Steel & Sumitomo Metal Corp (NSSMC) and Nippon Steel Trading (NST) together hold 33.3% interest in Revuboe coal mine development project. The mining concessions needed for its development from the government were obtained on April 3 2013 to explore coal reserves in the Tete Province. The Revuboe project has already identified deposits of high-quality coking coal on a scale large enough to permit open-pit mining.

Revuboe adjoins Vale’s Moatize and Rio Tinto’s Benga coal mines and Rio Tinto’s Zambezi coal project. Revuboe has an inferred resource of 1,400 Mt of a quality “comparable to hard coking coal of Australia” said NSSMC. The project is looking at an operation producing 5 Mt/y of coking coal. The coal production is scheduled to start in 2016.

Russia’s rising

Russia is the fifth largest coal producer globally and possesses vast quantities of unexploited coal reserves and accounts for 18.2% of the proved reserves globally. Coal production in Russia increased by 6.1% in 2012 compared to the previous year according to BPs statistical review of world energy, accounting for 4.4% of the total coal production for the year.

Many Russian coal companies reported growth for mining volume during 2012 with Siberian Coal Energy Co. (SUEK) increasing its production by 6% on the same period of 2011 to 97.5 Mt. SUEK are the largest supplier for the domestic market and account for over 20% of Russian exports of thermal coal.

Kuzbassrazrezugol (KRU) invested RUB 23 billion in developing coal mining operations which include the delivery of 23 BelAZ rock haulers, including 10 with the carrying capacity of 130 t and 13 with the carrying capacity of 220t. In spite of the investment the production for KRU decreased in 2012. Igor Moskalenko, Director of KRU said: “The main strategic goal was to increase the amount of stripping, and this task is done.” Investment in KRU has reduced in 2013 due to the fact that major investments in the development and modernisation of the production capacities were made in 2012.

SDS-Coal is Russia’s third largest coal producer and experienced a growth rate of 11.4% in 2012 compared to the previous year.  Investment has been made in many areas including the development of the new Chernigov-Coke processing plant and the launch of a new site for Sibenergougol, part of the holding company SDS-Coal. The new site, Ananyinsky-West, will produce 1.5 Mt of coal by 2018.

The Elga Coal Complex, owned by Mechel is one of the largest high-quality coking coal projects in Russia with JORC reserves amounting to approximately 2.2 billion tonnes. Elga is located in south-eastern Yakutia and mining was launched in 2011 and in the same year transport began at the 321 km railway built by Mechel. A license agreement for a 9 Mt washing complex has been completed and states that the construction must be completed no later than August 1, 2017. The mining enterprise’s first phase must have no less than a 9 Mt coal mining annual capacity must reach design capacity by no later than August 1, 2018. The mining enterprise‘s second phase with an annual production capacity of no less than 18 Mt must reach design capacity by the end of 2021.

The Minisitry of Energy proposed a long-term program for the development of the coal industry until 2030. It estimates that by 2030, coal production in Russia will increase to 430 Mt and there will be 82 surface mines and 64 underrground mines. The aim of the program is to reduce transportation costs and improve the efficiency of coal supplies.

The Russian government is also keen to provide high-priority investment to large and medium mining companies for near term future.  For example, further developments in the Kuzbass region as well as the Yerunakovsky area and expects that by 2013, the Kuznetsk Basin will have 11 new underground mines and four surface mines that will reach a total capacity of 40.5 Mt/y.

The Russian government recently announced plans to build a port in the Far East, able to ship 20 Mt/y of coal in addition to the existing port in the area, Vanino. Vanino is a large transit hub situated in Khabarovsk Territory and handles cargoes heading for Japan, South Korea, China, US and other Asia Pacific countries and is supposed to undergo an upgrade programme, with the SUEK owned port expected to increase capacity from 12 Mt to 24 Mt. There is also the potential that the Vanino port may be merged with Sovetskaya Gavan which is on the brink of being shut down due to problems investment issues.

South African developments

South Africa’s coal industry has continued to develop over the past two decades. One of the areas with some of the country’s largest coalfields is Mpumalanga, which includes thermal coal projects from Continental Coal. The Penumbra mine has an estimated gross saleable reserve of 5.4 Mt and an onsite reserve of 68.3 Mt. The company achieved an annual export coal sale of 500,000 t in June which is expected for the life of mine. Penumbra mine has two mechanised production sections in its underground operation and had increased run-of-mine (ROM) coal production by 99% in the April to June quarter. All coal produced is beneficiated at the Delta processing operation, which also beneficiates coal from Continental Coal’s Ferreira operation. In May, the company’s 74%-owned local subsidiary, Continental Coal South Africa (SA), completed the acquisition of the outstanding minority interests in coal mining junior Mashala Resources, which gives Continental Coal SA a 100% interest in the Ferreira and Penumbra coal mines, amongst others.

One of the limitations in the South African coal mining industry is rail capacity such as transportation of coal to the Richards Bay Coal Terminal (RBCT) according to Yeukayi Kadzere, Frost & Sullivan Industrial Automation, Mining and Manufacturnig Research Analyst.

Kadzere says: “Transportation and logistics constraints increase the cost of freight, which, ultimately increase the final selling price, making South Africa’s coal exports potential uncompetitive in international markets. In addition, the coalmining industry is faced with depleting coal deposits and a decline in the quality of coal resources. Some mines have failed to se3cure long-term supply contracts and have to rely on the spot market.”

One of South Africa’ largest remaining coal deposits is in the process of receiving funding. Mine construction activities have started at Resource Generation’s Boikarabelo mine with the site now classified as an operating mine site. Initial activities encompass site infrastructure, road works and water and power connections Paul Jury, MD of Resgen said. “The knock-on effect of this construction activity is significant in terms of physical site establishment, as well as providing a stimulus for further funding of the remaining construction. Further geotechnical boreholes are also being drilled across the initial mining area.”

US sees fall in output

There is generally falling output in the US with production down from 993.94 Mt in 2011 to 922.06 Mt in 2012. The output change has been regionally divisive with the largest output falls occurring in Wyoming’s Powder River Basin (PRB), and Central Appalachia, but with output increasing by 10% in the Illinois Basin.

Production at the Illinois Basin is said to cost around half of that of the Appalachia.  However, 2012 and early 2013 has seen record coal exports. The decline in domestic coal consumption was partially offset by relatively strong global economic factors, particularly coal demand from Europe and Asia, that drove demand for both steam and metallurgical coal.  The coal in the Illinois Basin is characterised by high BTU, mid-range sulphur, moderate ash and low moisture content coal.

So far this year, US coal-fired power generation has risen 8%, with a corresponding fall in natural gas use, but this reflects an uptick in gas prices, with the overall trend still towards more gas usage.

Energy Ventures Analysis expects US production of some 889 Mt this year, down from about 1,000 Mt in 2011. In late 2012, the US Energy Information Administration commented that domestic utilities that have added scrubbers can burn high sulphur coal while remaining in compliance with recent requirement to reduce sulphur dioxide emissions. Because of the relatively low cost of Illinois Basin coal and its use in larger, efficient plants with modern pollution control equipment, its producers were less affected by recent low natural gas prices.

Peabody Energy is the leading producer in the Midwest, shipping about 27 Mt/y of coal from Illinois and Indiana mines to electricity generators and industrial customers throughout the region. It operates multiple underground and surface mines throughout the Illinois Basin.

Bear Run mine, based in Sullivan County, Indiana is owned by Peabody Energy. The mine, on completion, will be the largest in the eastern US, with a 7.25 Mt/y annual production capacity. The mine uses dragline, truck and shovel mining, as well as dozer pushing to remove overburden and access coal reserves.  Wild Boar surface mine, located in Lynnville was commissioned in 2010, and in 2012 produced 1.8 Mt of thermal/steam coal.

There have been some new coal-fired power plants that have entered commercial operation in 2012, such as the Cliffside 800 MW plant; the John W Turk 600 MW plant; the Prairie State Energy 1,600 MW plant; and the Virginia City Hybrid Energy 600 MW plant.  Analysis by the American Public Power Association (APPA), using the Velocity Suite database, indicates that only 9.2 % of all power plants currently under construction are coal plants, putting coal behind natural gas at 41% and wind at 19 % of new builds.  About 3,700 MW of coal fired capacity is still under construction and due to come on line by the end of 2015. Another 4,354 MW of coal fired capacity has been permitted but is not yet under construction.  IM

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