A methane explosion at a coal mine in southern Poland on September 18 killed 12 miners and left 15 seriously injured, according to Agence France Presse. About 30 miners were hospitalized after the blast ripped through the Wujek-Slask mine in Ruda Slaska-Kochlowice. Wujek-Slask mine spokesperson Andrzej Bielecki said around 40 miners were underground in the area where the blast occurred at a depth of 1,050 m (3,500 ft). Of those, 29 emerged to the surface and the rest were evacuated, Bielecki said, warning the death toll could rise as several had suffered serious burns. The explosion was the worst for Polish mines since the death of 23 miners in November 2006 in a methane blast at the Halemba mine nearby. Poland’s most recent mine accident involved the death of six miners in a methane explosion at the Borynia mine in southern Poland in June 2008.
Shell, Shenhua Join in Clean Coal Research & Development
Shell (China) Ltd. and Shenhua Coal to Liquid and Chemical Co. Ltd. Agreed to seek opportunities for conducting joint research and development in clean coal technology. Under a memorandum of understanding between Shell and Shenhua, the two parties will explore opportunities to jointly develop more advanced coal gasification technology. In addition, they will discuss the possible application of carbon capture and storage technology. A joint working team will be set up to implement the agreement.
Vale's Coking Coal Output Seen Higher in Mozambique
Global miner Vale’s Moatize coal mine in Mozambique could produce up to 12.7 million metric tons (mt) of hard coking coal per year in the first phase of the project, according to Reuters. The company had previously forecast an annual production of 8.5 million mt of hard coking coal. Vale said the mine would also target to produce 2.4 million mt of thermal coal for exports and an additional 2.5 million mt for a 600-mw power station the company plans to build close to the mine.
Peabody Energy Establishes Asian Coal Trading Hub in Singapore
Peabody Energy recently opened an office in Singapore that will serve as the new hub for Peabody COALTRADE International activities in Southeast Asia. “Our presence in Singapore will expand our sourcing and shipping capabilities to China, India, Indonesia and other key Asian markets,” said Peabody Chairman and CEO Greg Boyce. “The expectation is that these markets will continue to expand at a 5% to 10% compound annual growth rate, and Peabody is best positioned to capitalize on that growth.” Pacific seaborne coal demand is strong as Asian nations lead the world out of recession and drive sustained growth in coal consumption. China is the fastest-growing coal market in the world, and net coal imports are up nearly 150% in 2009. India is the fastest-growing coal importer and expects to be short by as much as 200 million tons of coal per year within five years. Australia and Indonesia are the top global coal exporters.
Mechel's Mines Cuts Coal Output 47% in Russia’s Kuzbass Region
Mechel coal and steel group Yuzhny Kuzbass, or Southern Kuzbass Coal Co., cut coal production 46.5% year-on-year in January to July to 5 million metric tons (mt), Interfax reported. A sharp drop in coking coal production, by 2.6 million mt to 2.2 million mt was mainly responsible for the overall reduction in output. Demand for coking coal started to plummet in the fourth quarter of last year. As a result, Southern Kuzbass produced just less than 15 million mt of coal last year as a whole including 7.8 million mt of steam coal and 7 million mt of coking coal. It produced 18.6 million mt in 2007 including 8.7 million mt of coking coal. Southern Kuzbass is one of Russia’s largest coal producers. It operates four open-pits, three deep mines and four prep plants in the Kuznetsk basin in the Kemerovo region.
Australia’s system for rationing shipping berths at Newcastle must now stop unless the New South Wales state government steps in to protect it from anti-trust action. According to Reuters, Graeme Samuel, chairman of Australian Competition and Consumer Commission, made the comment after withdrawing anti-trust immunity for the system, which was originally devised as an interim step toward a more competitive long-term solution. “The interim, transitional measure has been running for five years now. We no longer think this (the immunity) is in the public interest. I expect the queue management system will go into suspension for a period of time, until the government spells out what it wants to do,” Samuel said.
Southern Energy Company, Inc. announced that it has closed on the acquisition of 1 hectare (10,000 sq m) at the base of the former major shipping pier in Lota Bay, Chile. The pier is surrounded by the Lota Bay coal concessions. The property gives the company full road, rail, electrical, water and other infrastructure access required for not only a washing and separation plant, but for all components including the sales, pickup, and delivery of the recovered coal from the Lota Bay coal concessions
The awarding of a concession for the Colombian central railway system will favor coal producers in the country’s central region, BNAmercias reported. According to the Director of Coal Producers Federation Fenalcarbon, Alfonso Escobar, “Once the licenses and contracts for the central railway system have been awarded this will clear up some doubts about the use of the Fenoco [northern railway] network and about sharing around 300 km of the railway with users of the Carare railway, two independent but complementary factors.” The resolution of these issues means that the Carare railway, which will be used to transport coal from the country’s central zone to ports on the northern coast, will be more efficient. The Ferroviario Central project involves the preparation, construction, maintenance and operation of a 1,050 km railway, running from Huila department in southern Colombia to Cesar department in the north.
South Africa's Sekoko in Talks to Supply Coal to Eskom
Sekoko Resources is in talks to supply coal to Eskom Holdings Ltd, Bloomberg recently reported. South Africa’s Department of Minerals & Energy has granted Sekoko a permit to begin mining at its Waterberg coal project and tests by Eskom showed the fuel met its prescribed quality standards. Sekoko plans to begin processing about 60,000 metric tons a month (mt/m) of coal bearing ore by the end of this year from its Waterberg operation through a joint venture with Australia’s Firestone Energy. Processing of the ore will provide between 30,000 mt/m and 40,000 mt/m of saleable coal.
Ukraine’s Prime Minister Yulia Tymoshenko recently said the Cabinet of Ministers has proposed that Parliament allocate UAH 21.6 billion ($2.59 billion) in 2010 to support the coal sector. According to the Ukrainian Journal, Tymoshenko said that UAH 12.3 billion ($1.47 billion) from the state budget is planned for support of the coal sector, UAH 5.4 billion ($649 million) is planned to subsidize the prime cost of products UAH 1.1 billion ($132 million) is foreseen for the construction and technical re-equipment of coal and peat extraction enterprises, and UAH 4.2 billion ($8.33 billion) for the pensions of employees working a full day underground.
Japan's Idemitsu to Triple Coal Output at Australian Mine
Idemitsu Kosan Co. recently said that it will spend some 11.5 billion yen ($126 million) to roughly triple coal production at an Australian mine to 4.3 million metric tons (mt) in fiscal 2013, The Nikkei reported. At the Boggabri coal mine, subsidiary Idemitsu Australia Resources Pty. will ramp up output of steam coal. Current output of 1.5 million mt will be lifted to 2.5 million mt next fiscal year, then to 4.3 million mt in fiscal 2013. Idemitsu Kosan has three coal mines in Australia in addition to the Boggabri facility, which is located in New South Wales. Together, they are expected to churn out some 10 million mtpy.
Vale Blames Oversupply for Poor Colombia Coal Results
Thermal coal oversupply in the Atlantic market and logistics costs have led to very poor performance at Brazilian miner Vale’s Colombian coal mines, Reuters reported. In July, Vale reported that its overall second quarter profits fell 84% from the same period of 2008 due to lower iron ore output and prices. Vale bought 100% of the coal assets of Cementos Argos SA in Colombia in December 2008 for $305.8 million. These consist of the El Hatillo opencast mine, which produced 1.8 million metric tons for export in 2008, and the Cerro Largo reserve. Vale has been forced by low sales and logistical problems to almost fill its stockpile capacity at the mine.
Indonesian Government Upbeat About Coal Railway Project
In addition to a 30-year concession right, the Indonesian government will also award a competitive pricing scheme as an incentive to lure investors in a $1.5 billion, 185 km-coal railway project in Central Kalimantan. Data shows the project will affect 24 coal miners whose production capacity is between 300,000 mt and 5 million mt per year. The railway will be capable of transporting 10 million mt of coal per year, and 20 million mt after the first 10 years.
Japan's Mitsubishi Materials to Continue Domestic Coal Production
Mitsubishi Materials Corp. will continue to produce coal in Japan even after winding down extraction at a mine in Hokkaido by the end of this year. According to The Nikkei, the company began mining coal on Japan’s northernmost main island last year for the first time in 18 years, amid a worldwide surge in coal prices. Although it will close that mine by year-end, in the fall it will start production at another site nearby because global coal prices have remained high. The output will be supplied primarily to a coal-fired thermal power plant run by Hokkaido Electric Power Co. It will also be used at a cement factory owned by Mitsubishi Materials.
World Bank to Give to Pakistan's Thar Coal Project
The Sindh provincial government and the World Bank recently signed a $30 million agreement for the proposed Thar Coal and Power Technical Assistance Project. Under the agreement, the World Bank would loan $30 million to Sindh government in four yearly tranches with a 10-year payback time. The World Bank said that out of total amount, $25.8 million would be provided to the Provincial Mining Board and the remaining $4.2 million will be given to the Private Power and Infrastructure Board to provide technical assistance for the development of Thar coal.
San Miguel in Talks to Buy into Indonesian Coal Company
San Miguel Corp. is in talks to buy a stake worth about $500 million in Adaro Energy, Indonesia’s largest coal producer by market value. According to Reuters, it will be the second time that San Miguel has attempted to buy a stake in an Indonesian coal firm, after earlier talks to take a majority stake in the Southeast Asian country’s top miner PT Bumi Resources fizzled out. Goldman Sachs, Citigroup, and hedge fund Farallon were looking to sell around 17% of Adaro Energy to strategic investors. The sale was expected after a lockup period ended in March for financial sponsors, which included the three financial groups, which had participated in Adaro’s $1.3 billion initial public offering last year. Goldman Sachs, with a 9.94% stake in Adaro, is coordinating the sale of the shares and was the was adviser to San Miguel in the Manila-based conglomerate’s ambitious diversification plan, which resulted in San Miguel’s purchase of 27% of utility Manila Electric Co. last year, a planned telecommunications venture, and a pending purchase of majority of oil refiner Petron Corp.
Western Canadian Coal Corp. announced that it has entered into an agreement to acquire Cambrian Mining Plc. The combined operations of Western, a Canadian producer of high quality metallurgical coal, and Cambrian, a U.K.-based diversified mining company operating in three continents, will result in a financially stronger and more diversified coal mining company. "[The agreement] simplifies the corporate structure and provides a solid foundation for growth," said John Byrne, chairman, Western and Cambrian. The combined company would have operating coal mines in three key coal producing regions: Western Canada, West Virginia, and Wales, UK; product diversification with the introduction of thermal coal to the existing product mix of hard coking coal and low-vol PCI coal; and an expansion of coal reserves and resources by 39% and 50%, respectively.
Ukranian steel producer Metinvest purchased United Coal Co. (UCC), an American metallurgical and steam coal producer, based in Teays Valley, W.Va. UCC has significant reserves of high quality met coal, which will help Metinvest's coke and chemical facilities produce a better quality feedstock for the company's steel works, reducing iron production costs and improving quality characteristics. Both parties are privately held and details of the transaction were not disclosed.
The production capacities of UCC's four operating business units total approximately 7 million tons. UCC is one of the five largest metallurgical coal reserve holders in the Central Appalachian region with total reserves of 160 million clean metric tons (mt) of coal, 82% of which are metallurgical coal—coking coal and coals used for pulverized coal injection (PCI). In 2008, UCC produced 5.1 million clean mt of coal (both metallurgical and steam coal), which represented 17% growth over 2007 production. Revenues totaled more than $500 million in 2008.
"We intend to maintain the existing business model of UCC, working closely with its excellent management team and employees," said Igor Syry, CEO, Metinvest Holdings. One of the things that attracted us to UCC was that they had managed to grow production quickly since 2005, and that they had several opportunities for additional expansion in the near term that matched our needs. Metinvest will continue to invest in the company to increase production.""
Metinvest has the capacity to produce 10.8 million mt per year (mtpy) of crude steel, more than 11 million mtpy of rolled stock and semi finished steel, over 5 million mtpy of metallurgical coke, and over 40 million mtpy of iron ore—enough to meet the company's internal demand in steelmaking raw materials and to be a key supplier to major steelmaking companies in Europe. The company has acquired a number of companies recently and now consists of 23 industrial companies in mining and steel, many of which are located in the Ukraine.
"That Metinvest trusts our management team to continue to run the company in the manner we have built it means everything to us," said Michael Zervos, president and CEO, UCC. "We have dedicated ourselves to building a world class met coal producer, while keeping an unwavering focus on our core principles of employee safety and respect for the environment. That foundation of our company will not change. As we built the company, however, we saw that in order to maximize our growth opportunities, we would have to partner with an integrated steel producer so that our coals would have a sales outlet even in challenging market conditions. We believe that this transaction is a great outcome for all stakeholders in UCC, and we look forward to helping Metinvest achieve its goal of becoming the most efficient global steel producer."
UCC's metallurgical coal customers are primarily steel companies and merchant coke producers in the Northeastern and Midwestern regions of the United States, although nearly half of metallurgical coal volumes were exported, primarily to South America and Europe.
Coal of Africa (CoAL) has submitted environmental reports on its Vele coking coal project near Musina to the South African Department of Minerals and Energy, and is continuing to schedule the start of mine development in the third quarter. According to Business Day, however, environmental groups warned that securing environmental permits would be lengthy, and reiterated they were adamant in opposing the mine. In a presentation to investors, posted on its Web site, CoAL said it expected to secure a mining permit for Vele by the third quarter and start production by the fourth quarter. Vele will supply Arcelor-Mittal SA, replacing some of the coking coal that the steel maker is sourcing from outside South Africa. CoAL CEO Simon Farrell said that Arcelor-Mittal SA, which already holds a 16% stake in CoAL, could make a takeover offer for the company after the mining permit for Vele was obtained. Cash flow from Vele and CoAL's thermal coal project, Mooiplaats, which is now ramping up activities, would enable the group to bring a third mine at Makhado into production by late next year. According to the company presentation, "CoAL is committed to the fastest possible development of its assets, given its existing cash resources of A$122 million as of March 31, 2009."
China Shenhua Energy Sees Coal Output Swell During April
China Shenhua Energy Co. Ltd., which is engaged in the coal mining, power generation, and transportation businesses, on May 14 announced that its coal output totaled 17.5 million metric tons (mt) in April, a year-on-year increase of 16.67%, China Knowledge reported. Last month, the company sold more than 22 million mt of coal, a year-on-year growth of 11.7%. The coal yield of the enterprise increased 16.1% to 51.8 million mt in the first quarter of this year. In March alone, coal output was 19.2 million mt, up 25.5% year on year. China Shenhua Energy recorded total power generation of 7.28 billion kilowatt-hours (kWh) in April, a year-on-year decline of 6.4%. Energy sales amounted to 6.76 billion kWh, down 5.5% year-on-year. In the first three months, the power generation of the firm stood at 21.2 billion kWh, down 10.3% year-on-year. Total energy sales declined 11% to 19.7 billion kWh.
Europe’s largest coal producer, Poland’s Kompania Weglowa, intends to invest PLN 9 billion by 2015 to increase its coal production capacities to 49 million metric tons per year (mtpy), Interfax reported. Currently Kompania Weglowa extracts some 46 million mt of coal a year. Since Kompania Weglowa’s creation in 2003 the company has had to decrease its coal production by 9 million mt a year in order to adjust to the market conditions. Kompania Weglowa will invest PLN 7 billion out of its own coffers, while the remaining PLN 2 billion will come from external sources. The company earmarked PLN 950 million in 2008 for investments and plans to invest more than PLN 1 billion annually in the following years. As of 2013, the investment level is seen increasing to PLN 1.5 billion annually. Kompania Weglowa will invest in new coal deposits in currently existing coal mines.
The Czech government will give 800 million crowns every year to the regions affected by coal mining and energy production from coal, Czech News Agency reported. The money will come from the dividends the state receives from the CEZ power utility. The largest sum, or 450 million crowns per year, will go to the Usti region. Regional authorities will receive the money that should be used for the revitalization of the landscape affected by coal mining. The aim is to revitalize the landscape so that people can live in it again. The current law orders mining companies to give money to the repair of environmental damage, but the sums were too low and the revitalization often had to be covered from local budgets. The cabinet also approved the plan to give 3 billion crowns to the coal-mining area of northwest Bohemia that are to go for land revitalization. In this way, the government will meet the promise made in 2001 to earmark 15 billion crowns to the Usti and Karlovy Vary regions. Until now, the state has distributed 11 billion to the two coal-mining regions. Coal mining has affected some 350 km2 in the Usti region.
Vattenfall Plans to Build New Coal Power Station in Poland
Energy giant Vattenfall has announced plans to build a coal-fired power station of at least 1,600 mw that should come online within the next seven years, the Warsaw Business Journal reported. The location for the plant has not yet been revealed. "We are still considering several locations in various parts of Poland," said Torbjörn Wahlborg, Vattenfall president. Environmental activists were outraged by the plans to build the coal powered plant, but Tomasz Chmal, an energy expert from the Sobieski Institute, was optimistic about the plan. He noted that investments in energy are needed and there is no viable alternative to coal at the moment. Currently, Vattenfall has a 10% share in the energy distribution market and a 4% share in the energy production market, but the firm wants to build up its share in the latter to some 15% over the next five years.
Indonesia Wants to Speed Up Power Plant Construction
Vice President Jusuf Kalla has renewed calls for state-owned power company PT Perusahaan Listrik Negara (PLN) to speed up construction of coal-fired power plants in a bid to swiftly resolve a power crisis plaguing Java. Kalla made the statement during a visit to the Suralaya coal-fired power plant in Cilegon, West Java. The 652-megawatt Suralaya project is scheduled for completion in 2010. However, since Java has frequently suffered power blackouts due to a lack of power capacity, the government has requested PLN wrap up several key power projects on the island before next year’s general election.
New World Resources Applies for Mining License in Poland
Czech coal producer New World Resources N.V has announced that it has filed an application for a mining license in the Debiensko 1 area of southern Poland with the Polish Ministry of Environment. The application was made by NWR's wholly-owned Polish subsidiary, Karbonia PL Sp. z.o.o. NWR’s growth strategy includes actively pursuing opportunities in Poland and the wider Central European region to expand its reserve base and long-term production capabilities. With indicated resources in excess of 100 million metric tons (mt) of coal located in southern Poland near to NWR’s existing operations in the Czech Republic, Debiensko 1 also represents a key opportunity for NWR to leverage economies of scale from integration with its existing operations over time.
The license application follows extensive preparation of the mining plan as well as discussions with the relevant constituencies including mining authorities and local municipalities. NWR’s mining concept, which is fully consistent with the local zoning plans, was accepted by the Polish Ministry of Environment in September 2007 and the relevant regional authority, the office of the Katowice governor, approved the Environmental Impact Assessment earlier this year.
"The Debiensko 1 license application follows our signing last October of a Letter of Intent with Jastrzebska Spółka Weglowa S.A., Poland’s largest coking coal mining company, to cooperate on the potential development of mining operations in the Morcinek coal field in southern Poland," said Mike Salamon, chairman, NWR. NWR’s mining consultant for the Debiensko 1 project is John T. Boyd, which is exploring various shaft sinking and engineering approaches from around the world that could help to minimize the development time necessary to commence mining at Debiensko 1.
Coalcorp Announces Agreement on Colombian Port Concession
Coalcorp Mining Inc. recently announced that it has completed its review of available port concessions in Barranquilla and has elected to partner with an existing concession holder to jointly develop a multi-purpose port, initially to be designed to handle 10 million metric tons of coal per year (mtpy) and ultimately 30 million mtpy. Preliminary design work is already underway and Sandwell Engineering has been retained for the detailed design and engineering for a state-of-the-art direct-loading port, fully in accordance with Colombian and international environmental requirements. This port will take advantage of the Magdalena River to provide export capacity in cape size ships for all coal producers and ultimately other cargoes.
A mining company in the process of developing a new coal mine near Stewart in British Columbia’s far northwest is looking at the cost of building a pipeline to get its coal to the nearest port. According to The Vancouver Sun, Fortune Minerals announced in late October that it hired an engineering firm to conduct an economic assessment of the cost of transporting coal products from its Mount Klappan site by pipeline. The idea, according to Robin Goad, Fortune Minerals president, is to assess whether alternative methods of conveying coal to the port of Stewart or Prince Rupert would mitigate the impacts of a stronger Canadian dollar and increasing fuel costs, and reduce the environmental impact with the use of existing transportation corridors. The pipeline assessment will look at possible production rates of between 1.5 million mt and 3 million mt of clean coal per year along three different route options from the mine site located 330 km northeast of the port of Prince Rupert.
Peabody Energy became the only non-Chinese equity partner in “GreenGen,” the first near-zero emissions coal-fueled power plant with carbon capture and storage which is under development in China. Peabody joined the initiative at a formal signing ceremony at the prestigious State Guest House in Beijing. The agreement was announced during the Sino-U.S. Joint Commission on Commerce and Trade meetings attended by U.S. and Chinese dignitaries, including U.S. Secretary of the Treasury Henry M. Paulson, Jr. and China’s Vice Premier Wu Yi.
The US$1 billion GreenGen project will use advanced coal-based technologies to generate electricity. It will be capable of hydrogen production and will advance carbon dioxide capture and storage, providing a clean energy prototype to address carbon dioxide concerns. Led by managing partner China Huaneng Group, the GreenGen Company will design, develop and operate an integrated gasification combined cycle power plant near Tianjin, southeast of Beijing. A 250-megawatt plant will be built in the initial phase, expanding to 650-megawatts in later phases. Project design and review is complete, a site has been selected at the Lingang Industrial Park, and construction is expected to commence in early 2008, with the first phase of the plant expected on line by 2009. The project includes multiple phases for additional generation and carbon capture.
Czech Republic’s New World Resources Announces Major Mining Equipment Purchase
New World Resources N.V. (NWR) has announced plans for a major capital investment program of approximately € 300 million at its wholly-owned subsidiary OKD a.s., the Czech Republic’s largest hard coal mining company. The capital investment program involves the acquisition of 10 new systems of longwall mining equipment and 12 new sets of gateroad development equipment for OKD’s mining operations and is expected to be purchased and rolled out in phases over the coming 24 months. A Letter of Intent to purchase the equipment has been signed with Bucyrus International. The new equipment purchased as part of the capital investment program is expected to increase operating efficiency and to enhance productivity and safety.
Mitsubishi Corp. has acquired a 0.2% stake in China Shenhua Energy Co., the world’s largest coal mining company in terms of production volume, to expand its natural resources business in China, The Nikkei reported. The major trading house annually imports into Japan about 2 million metric tons of coal produced by the mining firm and plans to boost the amount it handles under a business alliance it plans to make with the company. In addition to the development of coal mines inside and outside China, the two companies aim to broaden cooperation in the environmental business, including emissions credit trading, the treatment of wastewater from coal mines and the installation of energy efficient devices at mines. Mitsubishi, which has purchased about 30 million shares in the Chinese firm for about 15 billion yen ($135 million), does not plan to enter into a cross-shareholding arrangement with the mining company. In 2006, China Shenhua Energy produced 235 million mt of coal at mines in Inner Mongolia and other places, and also runs power generation stations using coal as fuel. It is a core firm of the Shenhua group, accounting for about 80% of group sales.
South Africa's Eskom Awards Deals to Hitachi, Alstom
In a key step toward the construction of Eskom’s first new coal-fired power plant, the power utility has awarded contracts for the construction of the boiler and turbine of the Medupi power plant in Lephalale to Hitachi of Japan and France’s Alstom, respectively. According to Business Day, the contracts, with a combined value of R33.5 billion—20.2 billion for the boiler and R13.2 billion for the turbine—are the largest in Eskom’s history. Eskom said work on the projects had started, with work on site to start in early 2009. And Eskom is already negotiating with Alstom and Hitachi to provide turbines and boilers for its next coal-fired power station, near Emalahleni.
Hill & Associates Forecasts Healthy World Seaborne Demand
Hill & Associates released its latest study titled “International Coal Trade–Supply, Demand and Prices to 2025” during October’s CoalTrans 2007 in Rome. The study identifies the major trends in the International Coal Trade (ICT) and looks at the outlook for coal demand and supply and coal prices out to 2025.
“Looking at the long term, from 2016 to 2025, we forecast that demand will outpace supply, leading to the markets tightening significantly which will drive prices up toward 2025,” said Daniel Walton, head of Coal Sales and Account Management for Hill & Associates. “We attribute this to undeveloped economic reserves becoming scarcer. This really is a wake up call for the industry to focus its attention on exploration and development of new projects. We forecast that world seaborne coal demand will reach 1 billion metric tons (mt) by 2025, from 770 million mt today. Therefore for supply to meet rising demand, new reserves are a must.”
Hill & Associates’ report looks at the major trends in the ICT and identifies two distinct periods. “In sharp contrast to the long term picture, between 2009 and 2015, we foresee that supply, across all coal types, will overcome demand. This is a supply-driven phenomenon which is a result of several existing constraints, at ports and on rail lines, being eliminated during this time, coupled with additional supply coming on-stream from committed and planned coal development projects,” said Walton.
The study also concludes that Asia will continue to be the main driver of seaborne coal trade for the next 20 years, particularly as industrial activity becomes focused on developing countries in the region.
“Asian metallurgical coal importers, led by India, China, Korea, and to a lesser extent Taiwan, will drive demand in this sector. We forecast Indian metallurgical coal imports to increase by almost 53 million mt and China by 24.8 million mt by 2025. Korea and Taiwan’s demand will grow through plant expansions and new coking capacity. On the supply side, the three majors–Australia, Indonesia, and Colombia will account for a remarkable 91% of growth in steam coal supply from now to 2025,” Walton said. “There are some interesting market dynamics at play–Chinese steam coal exports are forecast to continue to decline, placing a considerable strain on the expansion potential in Indonesia and Australia to supply Asia Pacific demand.” According to the Hill & Associates study, Colombia is expected to supply most of the required growth in steam coal exports in the Atlantic basin, with annual exports from Colombia and Venezuela increasing by 86 million mt.
Sasol Implements Second Phase of BEE in South Africa
Sasol Mining, the wholly-owned subsidiary of Sasol Ltd., announced the formation of a black-women controlled coal mining company called Ixia Coal (Pty) Ltd. In a transaction valued at almost R1.9 billion, Ixia Coal will acquire 20% of Sasol Mining’s shareholding through the issue of new shares. Ixia Coal is a venture with Women Investment Portfolio Holdings Ltd. (WIPHOLD) and Mining Women Investments (Pty) Ltd., a newly established company comprising women drawn from the areas where Sasol Mining has operations and coal reserves.
Heralding the second phase of Sasol Mining’s broad-based black economic empowerment (BEE) strategy, this transaction enables Sasol Mining to achieve compliance with the Mining Charter’s ownership requirements. The first phase of Sasol Mining’s BEE strategy was the creation of Igoda Coal (Pty) Ltd., a coal export venture with Eyesizwe Coal announced in March 2006. Now, with the formation of Ixia Coal, Sasol Mining’s BEE ownership component will increase to an estimated 26% (calculated on attributable units of production) well before the 2014 deadline.
“This transaction not only achieves compliance with the Mining Charter, but also promotes women in mining,” said Sasol Executive Director, South African Energy Businesses, Dr. Benny Mokaba. “We want to create lasting empowerment by providing opportunities for our country’s women to enter and benefit from the traditionally male-dominated mining industry. Our focus will be on developing relevant skills and building capacity among historically disadvantaged women.”
Sasol Mining will also benefit from the proposed 10% BEE transaction, which if approved by shareholders, will be implemented in 2008 and will take Sasol Mining beyond compliance with the Mining Charter’s ownership requirements. Sasol Mining Holdings will have a 49% ownership in Ixia Coal. The other 51% will be owned by WIPCoal Investments. WIPHOLD will be the majority shareholder in WIPCoal Investments, with 60% shareholding. The other 40% shares will be owned by Mining Women Investments. Ixia Coal will be independently controlled and separate from Sasol Mining.
Marubeni, Sojitz to Invest in Australia Coal Project
Two Japanese trading houses, Marubeni Corp. and Sojitz Corp., will invest ¥24.8 billion ($3.3 million) in a coal mining project in Australia, Dow Jones reported. They will partner with Queensland Coal Mine Management Pty and American Metals & Coal International Inc. for their Lake Vermont project in Queensland, the companies said in a joint statement. Production at the mine will start in 2009 with annual output of up to 4 million metric tons.
New World Resources Signs Agreement to Jointly Develop Polish Coal Deposits
New World Resources B.V. (NWR), the sole owner of OKD a.s., the Czech Republic’s largest hard coal mining company, and Jastrzębska Spółka Węglowa S.A. (JSW), Poland’s largest coking coal mining company, recently announced that they have signed a Letter of Intent to cooperate on the potential development of mining operations in the Morcinek coal field in the southern part of the Upper Silesian coal basin in southern Poland near the Czech-Polish border. Located in proximity to OKD’s ČSM mine, NWR and JSW plan initially to access the Morcinek coal deposits from the Czech Republic using NWR’s existing mine and surface facilities. There is also the potential to develop new mining facilities in the Morcinek region on the Polish side of the border.
Scharrig Mining (Schamin) and Jonah Capital had entered into a joint venture with an Australian company to explore coal properties in Botswana that could support a mine and power station, Business Day reported. The project is one of a number of ventures in the coalfields of Botswana and South Africa’s Waterberg to respond to the urgent demand for power in southern Africa. Jonah Capital, controlled by former AngloGold Ashanti president Sam Jonah, owns about 16% of Schamin. The plan is to establish a new company, Jonah Coal, to house all the companies’ future coal interests in Africa, excluding SA, and the current Nkomati anthracite project.
Czech state-run power producer CEZ plans to invest more than Kc100 billion to renew and build coal-fired power stations in six years, CTK reported. CEZ, 66% controlled by the state, has so far spent Kc5.2 billion to renew coal-fired plants. It wants to reconstruct up to 10 and build up to three coal-fired units. In early June, CEZ started to modernize its Tusimice 2 plant in northwestern Bohemia, seeking to renew four 200-megawatt brown-coal units by 2010. At end-2007, CEZ plans to launch the construction of a 660-megawatt source in Ledvice, northwestern Bohemia. CEZ wanted to cut carbon dioxide emissions by 15% through the reconstructions. The company is also contemplating the construction of new steam-gas units if it signs a long-term contract on gas supplies. CEZ, the largest Central European power producer, runs 13 coal-fired power stations in the Czech Republic, which make up almost two-thirds of the company’s total output.
Xstrata Buys Tahmoor & Anvil Hill in Australia (Oct 2007)
Xstrata Coal Pty Ltd. announced during September its intention to make an off-market takeover cash bid to acquire Austral Coal Ltd. for A$557 million ($501 million). Under Xstrata Coal’s proposal, Helios Australia Pty Ltd., a subsidiary of Xstrata Coal, will offer to acquire all of the shares in Austral. Xstrata Coal, Austral, and Helios have signed a bid implementation agreement under which standard exclusivity arrangements have been agreed. The offer is subject to limited conditions, including an 80% minimum acceptance condition and regulatory approval.
“The acquisition of Austral’s Tahmoor underground mine will increase Xstrata Coal’s exposure to hard coking coal at a time of significant growth within the market,” said Xstrata Chief Executive Peter Coates. “It will also facilitate the company’s entry into the southern coalfields and allow immediate access to an unconstrained port.” Austral’s Tahmoor mine is a longwall operation in the southern coalfields of New South Wales (NSW), producing approximately 2.3 million metric tons per year (ROM) in the last financial year. Tahmoor exports via Port Kembla, near Wollongong.
Xstrata Coal also recently announced its plans to purchase the Anvil Hill Project for A$425 million ($382 million) from Centennial Coal. The Anvil Hill coal project is located in the Upper Hunter Valley, NSW, with the mine plan envisaging production of up to 10.5 million mt of both domestic and export grade thermal coal annually over a 20 year period.
“Xstrata Coal is an industry leader with the business principles, experience and capacity to develop the Anvil Hill site in accordance with global environmental and safety standards,” Coates said. “We also have a proven commitment to working with the communities which neighbor our operations.”
South Africa’s Chamber of Miners Signs Wage Agreements (Oct 2007)
South African coal mining companies (Anglo Coal, Xstrata, Eyesizwe, Optimum Colliery, and Delmas Coal) recently signed the 2007/2009 wage agreement at the Chamber of Mines’ offices in Johannesburg with three trade unions negotiating on behalf of coal mining workers: the National Union of Mineworkers (NUM), UASA, and Solidarity.
In terms of the agreement, which becomes effective from July 1, 2007, the wage increment for the first year will range from between 7.5% and 8.5% for the highest category workers to 10% for the lowest category workers. From July 2008, the increment will be calculated on an average CPIX plus 1%, subject to a minimum of 8% for most companies. This is in addition to other items on which the employers and the unions had agreed.
“I am sure that all of us gathered here are delighted that we have been able to reach this stage without disruptions to production in the mines,” said Eric Nwedo, the Chamber of Mines negotiator for coal mining companies. “The process has been very difficult and all of us worked very hard to reach a solution workable for both the coal mining industry and its employees. Neither the employers nor the workers got everything they wanted, but we have managed to get this far by compromising for the common good. I would therefore like to thank the employers and the unions for their part in this process because without their vision and foresight, we would not be here today. From now, all of us have to start the process of implementing the terms of this agreement.”
Canadian Pacific Acquires DM&E Railroad (Oct 2007)
Canadian Pacific Railway Ltd. (CP) announced in early September that it has reached an agreement to acquire Dakota, Minnesota & Eastern Railroad Corp. (DM&E) and its subsidiaries for $1.48 billion. The transaction expands CP’s current network by approximately 2,500 miles and increases its access to U.S. Midwest markets. The deal consists of a $1.48 billion cash payment at closing and future contingent payments of up to approximately $1 billion. Future contingent payments of $350 million will become due if construction starts on the Powder River Basin (PRB) expansion project prior to December 31, 2025.
Future contingent payments of up to approximately $700 million will become due upon the movement of specified volumes of coal from the PRB over the PRB extension prior to December 31, 2025.
“The DM&E is an excellent fit for Canadian Pacific making this a strategic end-to-end addition to our network,” said Fred Green, president and CEO of CP. “The DM&E is a high-quality, growing regional railroad that complements our existing franchise. This investment presents the opportunity for future growth through further expansion of our network and is accretive to our EPS in 2008.”
The DM&E has been pursuing a strategy to become the third rail carrier in Wyoming’s PRB. “Canadian Pacific is excited about the prospect for growth in the coal-rich Powder River Basin,” Green said. “The DM&E’s favorable geographic position provides a unique ability to create an efficient and competitive additional link to midwestern and eastern utilities. We have created a disciplined plan aimed at facilitating a decision on the expansion and ensuring the investment provides returns that exceed our thresholds. Our purchase agreement has been structured to share further upside as the benefits of the expansion are realized.”
