The continued drop in commodity prices – particularly metallurgical coal and copper – has hit British Columbia’s mining sector with a number of mines being put into care and maintenance until prices recover, the annual PwC BC Mining Industry Survey for 2015 has found. Yet there are signs that the worst could have passed as some companies are now advancing mining projects.
“What we saw in 2015 was another tough year of continued downturn in commodity prices, which remain the biggest threat to the industry’s profitability,” said Mark Platt, Partner and Leader of PwC’s BC mining practice.
“Still, BC’s mining industry is proving resilient. While most mining companies have been cutting spending and curtailing operations to held withstand the current price environment, other are raising money and advancing projects.”
According to the survey, gross mining revenues fell to CAN$7.7 billion in 2015, compared to CAN$8.2 billion in 2014. Cash flow remained steady, however, at CAN$1.7 billion. CAPEX fell to CAN$1.2 billion in 2015 from CAN$1.5 billion in 2014.
Edited by Jonathan Rowland.
By THOMAS KAPLAN
May 10, 2016
CHARLESTON, W.Va. — With West Virginia’s economy battered by a coal industry , Senator of Vermont is hoping that a strong showing in this state’s Democratic primary on Tuesday will keep him a force in the party’s politics by showing that his message still resonates, even though his rival, , has an almost insurmountable lead in delegates.
As Mrs. Clinton and Mr. Sanders have campaigned here in recent weeks, they have found frustrated voters who express the kinds of anxieties heard all across the country — only with a far greater degree of urgency and pain, as they see their communities wither before their eyes.
“We just don’t want to be forgotten,” said Betty Dolin, who co-owns a restaurant in Danville, about 20 miles southwest of Charleston, where customers tucked into hearty meals like meatloaf and country fried steak with gravy.
She pointed out the empty tables that would once have been filled. “We can’t have coal? Bring us something else,” she said. “And I don’t mean job training. A lot of these men are too old to train for another job.”
Presidential primaries tend to bring attention to local issues as candidates move from state to state, and as the candidates have come to West Virginia to campaign, coal has been no exception.
“These communities need help,” Mr. Sanders said last week at a food bank in McDowell County. “It is not the coal miners’ fault in terms of what’s happening in this world.”
In some ways, Mr. Sanders is not a natural candidate to be courting the votes of coal miners: He is outspoken on and advocates moving away from fossil fuels. But his message of economic fairness has been embraced by white, working-class voters.
Mr. Sanders has proposed legislation that would to help coal and other fossil fuel workers and their communities, offering support like financial assistance and job training.
Mrs. Clinton has her own to help coal miners and their communities, including a program to provide funding to local school districts to help make up for lost revenue.
But what people here bring up is a comment she made about coal workers in March, when she said during a televised forum, “We’re going to put a lot of coal miners and coal companies out of business.” She was talking about providing opportunity through clean energy, and she emphasized that coal miners must not be left behind, but the sound bite was a damning one.
When Mrs. Clinton last week, she was met with chants of “Go home!” from protesters. At a round-table event, Bo Copley, a 39-year-old father who had lost his job in the coal industry, told her, “I just want to know how you can say you’re going to put a lot of coal miners out of jobs and then come in here and tell us how you’re going to be our friend.”
Mrs. Clinton called her comment a “misstatement” and expressed regret. But it offended voters in struggling coal communities, and a candidate for West Virginia’s Supreme Court even used it .
“A lot of people that I know are laid off, and you know that had to hurt the people,” said Janet White, 80, a librarian whose husband was a coal miner.
With Donald J. Trump having his two remaining primary opponents last week, the Republican contest here holds little significance, but when Mr. Trump campaigned in West Virginia, he found a receptive audience.
At a rally in Charleston last week, he donned a hard hat given to him by an industry group that had endorsed him, the West Virginia Coal Association, and mimicked shoveling coal. “My hair look O.K.?” he asked after taking the hat off.
Mr. Trump gushed about mining, telling the crowd that he was fascinated by it and promising to revive the industry. “You watch what happens: If I win, we’re going to bring those miners back,” he said. “You’re going to be so proud of your president.” He did not explain how he would go about doing that.
The signs of the state’s economic distress are all over, particularly in areas known for coal production, like Boone County, south of Charleston. In the window of a barbershop and beauty salon in Madison is a yellow sign: “We support coal and those who mine it!”
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But inside, Barbara Bias had no customers. The wives of coal miners used to come in with money to spend, she said. Not anymore.
“Boone County used to be booming, and now there’s nothing,” she said. “This is a ghost town, because when the coal goes out, it hurts all of us.”
In the last quarter of 2011, West Virginia had about 24,700 coal mining jobs; by the last quarter of 2015, that number had fallen to about 14,500, a decline of more than 40 percent, according to an analysis by S&P Global Market Intelligence.
The industry has suffered because of a combination of factors, and a slew of coal companies have filed for bankruptcy protection.
The rise of hydraulic fracturing has caused a boom in production, driving down prices and prompting electric utilities to switch from coal to natural gas. A decade ago, coal was the source of about half of the country’s electricity generation; now, its share is , according to the federal Energy Information Administration.
Tougher environmental regulations have also taken a toll — the Obama administration to cut carbon emissions from coal-fired power plants, and President Obama is deeply unpopular in West Virginia — as has a decline in demand for coal exports.
“It’s a perfect storm of those three factors coming together at about the same time,” said John Deskins, the director of the Bureau of Business and Economic Research at West Virginia University. So far in 2016, coal production in West Virginia is down by more than a third compared with 2015, according to federal data.
Peabody Energy, through several of its Australian subsidiaries, has entered into sale and purchase agreements with Australia-based Pembroke Resources to sell its interest in undeveloped metallurgical coal reserve tenements in Queensland’s Bowen Basin for AUS$104 million in cash plus a royalty stream.
Peabody has received cash proceeds of AUS$65 million as part of the transaction, with an additional AUS$22 million of cash proceeds anticipated to be received before the end of 3Q16 once certain governmental and regulatory approvals are granted. The remaining proceeds are related to the sale of select tenements held by the Coppabella-Moorvale Joint Venture (CMJV) and are subject to approval by the CMJV partners and other conditions.
The transactions include the Olive Downs South, Olive Downs South Extended, Willunga and Olive Downs North tenements, which consist of undeveloped SEC-reported proven and probable reserves (as of Dec. 31, 2015) totalling approximately 165 million short t on a net basis to Peabody.
The Olive Downs Ccomplex comprises Olive Downs South (ODS), Willunga, and Olive Downs North (ODN), with rights to four exploration permits for coal and two mine Leases (both for ODN). Pembroke has acquired a 100% interest in ODS and Willunga. Subject to the approval of the minority partners, the company has agreed to acquire an 87.3% interest in ODN. The total consideration is AU$120 million plus an agreed royalty.
This sale is part of Peabody’s overall portfolio management strategy, one of a range of measures the company is taking to improve the business across three core priorities of operational, financial and portfolio. The reserves are not assigned to active mining operations within Peabody’s core Australia region. The agreement contains no financing condition, with Denham Capital providing all funding for the transaction. Peabody expects to use transaction proceeds for general corporate purposes.
Pembroke Resources has indicated that it will continue to assess other acquisition and development opportunities as it seeks to further build out its portfolio of high-quality metallurgical coal assets.
Edited from various sources by Harleigh Hobbs
Atlas Copco launches its first battery driven product within the mining and underground segment.
When it comes to safety for its operators, the Scooptram ST7 battery has been developed to meet and exceed environmental standards and modern mining safety requirements.
Traditionally, underground mobile equipment in the mining sector has relied on diesel engines, which release emissions. Those emissions must be ventilated via costly systems.
There are already electric scoops in underground mines, but these units have to be tethered via an electric cable. Thus, they have limited range and other operating challenges.
As the trend for deeper mines continues and mining companies seek to gain more control over their operations, the Scooptram ST7 Battery answers this challenge with automated functions. For example, the ability to control multiple loaders from a safe, remote location, planning and repeating the perfect production cycle every time.
“Loaders and trucks consume about 80% of the diesel fuel underground. The loaders are most often used in dead ends of the mine, which are the most difficult to ventilate. To make the greatest impact on work environment and ventilation costs, it was an obvious choice for Atlas Copco to launch a battery driven loader as our first product of this type”, said Lars Senf, Vice President Marketing at Atlas Copco Underground Rock Excavation division.
The initiative to create battery-operated equipment has been driven by new developments in battery technology. This has made it possible to create powerful and productive equipment with zero emissions. The Scooptram ST7 battery is the first step in powering heavy, mobile equipment underground and in the future there could be a broader range of battery powered equipment including scoops, trucks and drills.
“All the obvious benefits with battery power adds up to something that might not be as obvious, like a reduced environmental footprint, higher worker satisfaction, and a better standing in the community”, said Erik Svedlund, Product Manager – Electric Vehicles – Underground Material Handling.
The Scooptram ST7 Battery will firstly be introduced in North America and then gradually rolled out globally.
Edited from press release by Harleigh Hobbs
Bharat Heavy Electricals Ltd (BHEL) has added another coal-fired power plant to the grid by successfully commissioning a 500 MW thermal unit in Jharkhand, India.
The unit has been commissioned by BHEL at Bokaro Thermal Power-A Station of Damodar Valley Corporation (DVC) in Jharkhand.
BHEL has carried out the contract of setting up the 500 MW coal-fired unit on Engineering, Procurement & Construction (EPC) basis.
With this recent commission, BHEL has supplied 84% of the total coal-fired power generating capacity installed by DVC.
BHEL sets of 500/520 MW rating class today form a significant part of the Indian power sector. In Jharkhand, BHEL sets contribute a significant 87% to the total installed power generating capacity of the state. In addition, BHEL is presently executing a supercritical project of 3 x 660 MW rating at North Karanpura for NTPC in Jharkhand.
Edited from press release by Harleigh Hobbs
Augusta power plant has ceased power generation, with Northern Power Station (a coal-fired power plant) being brought offline in south Australia.
Disconnecting Northern Power Station from the network will mark the official closure of Flinders Operations, which encompasses Augusta power plants, Leigh Creek coal mine and coal haulage operations. Alinta Energy continues to manage and operate the Leigh Creek Town and is working with SA government to transition the town back to government.
Alinta Energy CEO, Jeff Dimery said: “There is no doubt that today is a sad day for our people, with the cessation of generation signalling the end of an important and proud era for Alinta Energy. I would like to reiterate once more that the decision to close the Flinders Operations is by no means a reflection on the efforts or the dedication of our people. The commitment, passion and pride of our workforce at Port Augusta and Leigh Creek have been one of the greatest assets to the Alinta business over the past five years.”
“When we announced closure, we made a commitment that our people would remain our number one priority throughout this transition. And to that note, Alinta Energy committed over AUS$3.5 million in funding to provide a suite of transitional support services to our people, in addition to the AUS$75 million of redundancy benefits and entitlement packages. We will continue to support our employees post closure with the continued availability of training,” Dimery continued.
The remaining 139 employees at Augusta Power Station will continue working to secure the site this week, before a staged departure over the next two weeks. A small group of employees will remain until the end of June 2016 for decommissioning activities, before handing the site over to a demolition contractor.
Port Augusta city council indicated in a media release that this marks an end of an era in Port Augusta and south Australia for coal-fired electricity generation.
Port Augusta Mayor Sam Johnson said today is a day of mixed emotions for Port Augusta residents, while many are pleased to see an end to the emissions and coal dust that affects areas of the city, everyone feels for the workers and their families that no longer have employment.
“Today is undoubtedly a significant day in our City’s history,” Mayor Johnson said. “I feel deeply for Alinta workers and their families as they face a time of change and uncertainty as we see the switch effectively turned off on 62 years of coal electricity generation in South Australia. Fortunately a number of the Alinta workers have already gained employment at Sundrop Farms, a new industry for Port Augusta based on renewable energy technology.”
Mahor Johnson continued: “I am certain that our future will still be in energy generation as national leaders in renewable power. We’ve already had a number of positive indicators that Port Augusta is ideally situated for a solar thermal plant, which has strongly been lobbied for by Repower Port Augusta. We’ve also got a number of interested parties looking at wind and solar options so this places us strongly to position ourselves for a new future.”
Edited from press release by Harleigh Hobbs
Australia is to join the Extractive Industries Transparency Initiative (EITI), an international standard for increased transparency and accountability in the oil, gas and mining sectors, as a partner country.
“By joining the EITI, we ensure that our domestic policy is consistent with international efforts to increase transparency, including in tax systems,” said Minister for Resources, Energy and Northern Australia, Josh Frydenberg, and Minister for Foreign Affairs, Julie Bishop, in a joint statement.
“This will provide significant benefits for Australian companies through improved global investment conditions resulting from consistent and open reporting standards for the world’s resources sector.”
Australia is already one of the largest and longest-serving supporters of the EITI, having committed more than AUS$20 million in funding since 2007. But its move to partner country status will further demonstrate its leadership in transparency and anti-corruption matters and strengthen its credibility in advocating the adoption of the EITI by other countries, the ministers said.
There are currently 48 countries participating in the EITI.
EITI provides a global standard for natural resource revenue management. Its key objective is to reconcile patyents to governments made by resource companies with those received by government.
The announcement follows an EITI pilot programe in Australia between 2011 and 2014. It has been welcomed by the country’s mining industry with the Minerals Council of Australia saying it “strongly endorses Australia becoming a partner country.”
“Many Australian mining companies already participate in EITI-compliant reporting processes around the world,” said the MCA’s Chief Executive, Brendan Pearson. “The announcement today underlines the strong commitment of the minerals sector in Australia to revenue transparency.”
The initial draft environmental impact statement (DEIS) for the proposed expansion of Millennium Bulk Terminals – Longview in Washington, US, has been released, showing how the terminal will meet environmental standards.
“Millennium is committed to meeting Washington’s high standards for environmental stewardship and this thorough study shows in excruciating detail how those standards will be met,” said Bill Chapman, CEO and President for Millennium Bulk Terminals – Longview.
“Over the course of four thousand pages, the document took a hard look at all aspects of the project and reached particularly favourable conclusions about coal dust, air quality, energy and natural resources.”
Specifically, the DEIS concluded the coal dust – a specific concern for many opponents of the terminal’s development – could be controlled.
“Our opponents have been falsely asserting for years that there will be coal dust blowing all around town,” said Wendy Hutchinson, Vice President of Public Affairs for Millennium Bulk Terminals – Longview. “The exhaustive research in this DEIS shows that won’t happen in Longview.”
Other findings indicate that the project would meet Environmental Protection Agency standards to protect people suffering from respiratory disease, while boosting economic growth in Longview and the surrounding area.
“This major milestone moves us one step closer to creating family-wage jobs in Longview, while meeting Washington’s strict environmental standards,” concluded Chapman. “We will build this project right and honour the longstanding support we have earned from Labour and the Longview community.”
It is now over four years since permitting began for the proposed expansion work, which would expand the terminals coal export capacity.
Edited by Jonathan Rowland.
China’s largest coal mining company, Shenhua Group, has signed a memorandum of understanding (MoU) with a Californian developer of utility-scale solar power projects to build 1 GW of solar projects in China.
The MoU was announcement was made in a signing ceremony in Washington DC attended by US Deputy Secretary of Energy, Dr Elizabeth Sherwood-Randall and US Deputy Secretary of Commerce Bruce Andrews.
“As part of Chenhua’s strategic objective to become a world-class clean energy provider, we are interested in developing utility-scale concentrating solar power plants,” said Dr Ling Wen, CEO Shenhua Group. “We look forward to working with SolarReserve in bringing its world-class proprietary technology to China”.
Santa Monica-based SolarReserve proprietary solar thermal energy storage technology “solves the intemittency issues experienced with other renewable energy sources,” the company explained in a press release, allowing the delivery of fully-renewable baseload and dispatchable power.
“SolarReserve is excited about the opportunity to China meet its emissions reductions goals by working with the world’s largest coal company as it expands into large=scale solar thermal,” said Kevin Smith, SolarReserve’s CEO.
“Our 1000 MW partnership with Shenhua is at a scale that will lead to substantially lower costs, while contributing clean and renewable energy to China’s growing power needs. This is just part of China’s target to build 10 000 MW of CSP over the next five years.”
SolarReserve has more than US$1.8 billion of projects in construction and operational worldwide. Its technology uses mirrors to focus sunlight to directly heat molten salt and then stores it, allowing the production of electricity at any time of the day.
Edited by Jonathan Rowland.
Atrum Coal has received a bulk sample permit for its Groundhog North mining complex from the British Columbia government, according to a company release.
The permit allows the company to extract 100 000 t by way of surface cut-and-cover and underground mining and allows it to begin supplying customers with trial cargoes of Groundhog Ultra 10% ash anthracite for testing in blast furnaces and sinter plants.
These trial cargoes are required to secure long-term offtake agreements for Atrum’s Groundhog Ultra 10% ash product.
“Obtaining the bulk sample and associated permits is a major step forward in the development of the Groundhog anthracite project,” said Atrum’s Executive Chairman, Bob Bell.
“The awarding of these permits allows us to move to the next phase of development as a mining company and being construction at our Groundhog North Mining Complex.”
Edited by Jonathan Rowland.
FuelCell Energy Inc. and Exxon Mobil Corp. have concluded an agreement where the companies will work together to pursue novel technology in power plant carbon dioxide capture through a new application of carbonate fuel cells, which could substantially reduce costs and lead to a more economical pathway toward large-scale application globally.
“Advancing economic and sustainable technologies to capture carbon dioxide from large emitters, such as power plants, is an important part of ExxonMobil’s suite of research into lower-emissions solutions to mitigate the risk of climate change,” said Vijay Swarup, Vice President for Research and Development at ExxonMobil Research & Engineering Company. “Our scientists saw the potential for this exciting technology for use at natural gas power plants to enhance the viability of carbon capture and sequestration while at the same time generating additional electricity. We sought the industry leaders in carbonate fuel-cell technology to test its application in pilot stages to help confirm what our researchers saw in the lab over the last two years.”
Chip Bottone, President and CEO of FuelCell Energy, Inc., said his company is pleased to bring its global leadership in the development of carbonate fuel cells to this project.
“Carbon capture with carbonate fuel cells is a potential game-changer for affordably and efficiently concentrating carbon dioxide for large-scale gas and coal-fired power plants,” Bottone said. “Ultra-clean and efficient power generation is a key attribute of fuel cells and the carbon capture configuration has the added benefit of eliminating approximately 70%p of the smog-producing nitrogen oxide generated by the combustion process of these large-scale power plants.”
Two years of comprehensive laboratory tests have demonstrated that the unique integration of two existing technologies — carbonate fuel cells and natural gas-fired power generation — captures carbon dioxide more efficiently than existing scrubber conventional capture technology. The potential breakthrough comes from an increase in electrical output using the fuel cells, which generate power, compared to a nearly equivalent decrease in electricity using conventional technology.
The resulting net benefit has the potential to substantially reduce costs associated with carbon capture for natural gas-fired power generation, compared to the expected costs associated with conventional separation technology. A key component of the research will be to validate initial projected savings of up to one-third.
The scope of the agreement between ExxonMobil and FuelCell Energy will initially focus for about one to two years on how to further increase efficiency in separating and concentrating carbon dioxide from the exhaust of natural gas-fired power turbines. Depending on reaching several milestones, the second phase will more comprehensively test the technology for another one to two years in a small-scale pilot project prior to integration at a larger-scale pilot facility.
ExxonMobil is a leader in carbon capture and sequestration and has extensive experience in all of the component technologies of carbon capture and storage, including participation in several carbon dioxide injection projects over the last three decades. In 2015, ExxonMobil captured 6.9 million t of carbon dioxide for sequestration – the equivalent of eliminating the annual greenhouse gas emissions of more than 1 million passenger vehicles.
“We are continually researching technologies that have an ability to reduce carbon dioxide emissions,” Swarup said. “Most solutions that can make an impact of the scale that is required are not found overnight. Our research with FuelCell Energy will be conducted methodically to ensure that all paths toward viability are explored.”
Using fuel cells to capture carbon dioxide from power plants results in reduced emissions and increased power generation. In the carbon capture context, power plant exhaust is directed to the fuel cell, replacing air that is normally used in combination with natural gas during the fuel cell power generation process. As the fuel cell generates power, the carbon dioxide becomes more concentrated, allowing it to be more easily and affordably captured from the cell’s exhaust and stored.
Edited from press releases by Harleigh Hobbs
Siwertell, part of Cargotec, has received an order from PT Asahimas Chemical, one of AGC Asahi Glass’s consolidated subsidiaries in Indonesia, to provide coal unloading and conveying equipment for installation at its chemical plant site in Cilegon, Indonesia.
The coal is used to generate power for the plant. The order was booked into Cargotec’s 1Q16 order intake.
The contract calls for the delivery of an ST 790-D ship unloader with a rated capacity of 1400 tph and two jetty belt conveyors. The order includes supervision of the construction and commissioning phase and spare parts appropriate for two years of operation. The components will be constructed in Sweden and China and are scheduled for delivery by June 2017.
“An increasing number of operators around the world are appreciating the virtually dust-free nature of our unloaders, loaders and conveyors,” said Pierre Öhrwall, Siwertell Sales Manager. “For this client, extremely clean coal handling is absolutely essential, because any significant amount of coal dust would have the potential to contaminate the chain of production processes at the chemical plants. As an indicator of the importance placed on cleanliness, the coal stock is stored undercover.”
Öhrwall continued: “Consequently, in this case a Siwertell system was almost self-selecting because of the high priority placed on exceptional environmental performance. Combining a Siwertell screw-type unloader with Siwertell’s totally-enclosed belt conveyors arguably delivers the cleanest possible solution.”
Dust emission at the transfer point from the unloader to the conveyors is controlled by Siwertell’s standard arrangements; the conveyors have cover belts and the unloader has belt lifters with dust-extraction filters.
“Asahimas Chemical will also benefit from Siwertell’s other well-known qualities, including high performance, low energy demands, reliability, ease of operation, light weight construction and excellent, global aftersales service,” added Öhrwall.
Edited from press release by Harleigh Hobbs
The first bulk carrier carrying coal docked at Rhenus Midgard’s Bulk Terminal Wilhelmshaven (BTW) in 1976. Since then, the facility has handled more than 60 million t of coal for local power plants and consignees further inland. In 2015, the terminal handled its highest amount of coal: 3.65 million t. The terminal was modernised and extended between 2008 and 2013 to handle future demand.
“Handling coal is an important mainstay for Rhenus Midgard’s business in Wilhelmshaven. Again and again, we’ve managed to create the conditions to ensure that vessels are unloaded quickly and reliably. The extension work completed during the last few years has created one of the most efficient coal terminals in Europe,” said Matthias Schrell, Managing Director of Rhenus Midgard in Wilhelmshaven.
BTW is the only facility in Germany that is able to handle fully-laden capesize vessels with a load-carrying capacity of up to 250 000 t and a draught of 18.50 m. The equipment there also includes Europe’s most modern wagon loading unit with a loading capacity of 2000 tph; its technology ensures that the load factor in the wagons is higher than 99%.
“Using the extended and modernised equipment that has been installed, we’re aiming to gradually increase the annual record handling figure of 3.65 million t, which was achieved at the site in 2015. Our next goal is to move towards an annual volume of 5 million t. Looking even further into the future, it will be possible to handle double this figure at the BTW,” said Schrell emphatically, as he looks forward to the next few years at the terminal in Wilhelmshaven.
Edited by Jonathan Rowland.
Rio Tinto is aiming to cut operating costs by a further US$3 billion over the next two years and remove US$3 billion in CAPEX compared to previous guidance, according to outgoing CEO Sam Walsh.
Speaking at the company’s annual general meeting (AGM), Walsh noted the company’s achievement in reducing costs by US$6 billion since 2013. But he said more was needed: “While we have achieved a great deal, we recognise the current environmental required even more from us.”
The company will reduce its CAPEX spend to US$4 billion this year and US$5 billion in 2017, after CAPEX spend of US$4.7 billion in 2015. Meanwhile, operating costs will be cut by US$1 billion this year and another US$1 billion in 2017.
This cuts will come not “at the expense of future growth by reassessing projects, lowering costs and only investing in the highest returning projects,” Walsh continued.
“These actions are designed to ensure we maintain out balance sheet strength and deliver shareholder returns commensurate with the economic environment and supported by the quality of our world-class assets.”
Rio Tinto’s coal assets remained cash-flow positive through 2015, “despite ongoing price challenges,” Walsh added, with minimal working capital. Over the last year, the company has completed or announced US$841 in coal assets sales.
Edited by Jonathan Rowland.
Stewart Butel, the Managing Director of Wesfarmers Resources since 2006, has decided to retire.
Butel will retire at the end of July 2016, supporting a smooth leadership transition in the resources business. Which includes Wesfarmers Curragh and Wesfarners’ 40% interest in the Bengalla coal mine.
Richard Goyder, Wesfarmers Managing Director, indicated that Butel had contributed significantly to the growth of the resources business and the wider group since he first joined in 2000.
Butel became Managing Director of Wesfarmers Premier Coal in 2002 and Director Coal Operations for Wesfarmers Energy in 2005.
Goyder explained that the Curragh acquisition and expansion through the Curragh North had been “outstanding investments” for shareholders.
He said: “The strong cash generation from Curragh, under Stewart’s leadership, significantly contributed to our ability to finance the purchase of the Coles Group in 2007. As conditions have become tougher for coal, both Curragh and Bengalla remain world-scale, low-cost mines with long mines lives.”
Craig McCabe, who is currently General Manager of Wesfarmers Curragh, will take on the new role of Chief Operating Officer at Wesfarmers Resources, effective June 2016. He will report to Rob Scott, Managing Director of the Wesfarmers Industrial Division.
Edited from press release by Harleigh Hobbs
China’s March coal output fell 4.5% y/y to 293.8 milllion t, according to the latest data from China Coal Resource, bringing coal output for 1Q16 to 807.26 million t – a fall on 4.8% on 1Q15.
China has been cutting coal production to reduce oversupply in the domestic coal market with the State Council targeting the elimination of 1 billion t of coal production capacity within the next five years. Half of the cuts will come from mine closures and half through company consolidation.
The majority of Chinese coal production comes from just five provinces: Shanxi, Inner Mongolia, Shaanxi, Shandong and Guizhou. Between them, these five provinces accounted to 70.4% of 1Q16 production, according to China Coal Resource.
Inner Mongolia was the highest production province over the quarter, mining 205.83 million t. But this was still down 8.79% y/y. Shanxi came in second place with 200.31 million t – down 5.82% y/y.
Shanxi’s coal production was hit by widespread safety checks at its mines following a mine accident in late March as a Datong Coal Ming Group mine. The provincial government has also asked operating mines to reduce output to meet its aim of cutting 100 million t of surplus capacity by 2020.
In Shaanxi – China’s third largest coal producer – coal production fall 12.58% in 1Q16 and by 66.64% in March as its small mines haven’t restarted production after the Lunar New Year holiday and a mine accident in Shenmu in January. According to China Coal Resource, more than 130 coal enterprises in Shenmu have closed following the accident.
Looking ahead and coal output may continue to fall as weather impacts mining operations in April, said China Coal Resource.
Provincial governments have also continued to release new capacity targets in response to central government’s target of reducing coal oversupply.
Inner Mongolia has asked coal mines to cut capacity by 16.05% to 325.15 million t – although this does not cover mines owned in the province by the central government. Similarly, in Guizhou the Energy Administration has told mines to reduce capacity by 15.63% to 151.59 million t – although again mines owned by the central government are not covered by the rule.
Finally the Shandong provincial government has pledged to cut coal capacity at 143 local mines from 170.32 million t to 141.95 million t.
Mines owned by the provincial government will target capacity cuts from 114.42 million t to 95.35 million t, while mines owned by local municipalities and prefectures have been asked to cut capacity from 50.13 million t to 47.16 million t.
Edited by Jonathan Rowland. Based on data from China Coal Resource.
Three key factors will decide the fate of the dry bulk shipping market this year, according to the latest market analysis from BIMCO: Chinese imports or coal and iron ore and the demolition rate.
“Nothing else really matters to an extent that can either improve or damage the fundamentals of the dry bulk shipping market,” said Peter Sand, BIMCO’s Chief Shipping Analyst.
Better than expected
And on the first two indicators, 2016 has been more positive than expected with Chinese iron ore imports growing by 6.4% to 155.8 million t in January and February. Coal imports fell over the same two months by 10% but picked up strongly in March to leave 1Q16 coal imports down only 1.2% y/y.
Iron ore imports also continued their positive trend in March, hitting 85.8 million t.
Unfortunately, the uptick in Chinese coal and iron ore imports has yet to have too much of an impact on the dry bulk shipping market with earnings remaining below operating costs for the largest part of the fleet, continued Sand.
The dry bulk fleet is also continuing to grow, despite record demolition rates. In 1Q16, 16.7 million DWT of new capacity entered the market while 14 million DWT was sold for scrap. For the full year, BIMCO expects the fleet to grow by 1.1% – or 10 million DWT.
Looking ahead, BIMCO expects volumes to grow over April – July to help underpin freight rates on the back of an expected volume of grain and soybean exports from Argentina and Brazil.
But clouds on the horizon
The medium-term outlook is however more clouded with BIMCO concerned that supply cuts may slow as the BDI improves. “If shipowners slow demolition of ships considerably, the fleet will keep growing. This will widen the fundamental imbalance further because we forecast the demand side to grow slowly in the coming years,” said Sand. “In order to reverse several years of adding capacity in excess of demand growth, we need to develop a multi-year trend of negative fleet growth.”
Of particular concern is the recently announced order of 30 VLOCs – each with a capacity of 400 000 DWT – for delivery between 2018 and 2019. This new batch of VLOCs will effectively remove 48 million tpy of iron ore from the open market and, with the current VLOCs, will account for over half of Brazil’s iron ore exports to China.
“Without doubt this is bad news for international owners and operators,” said Sand.
There are also questions over the Indian coal imports with Indian power minister, Piyush Goyal, saying the country could stop thermal coal imports over the next 2 – 3 yrs. India imported 176 million t of thermal coal in 2015 and SSY expects a similar level in 2016.
“Coal imports into India may change if the retained political vision of making India self-sufficient in thermal coal becomes a reality,” said Sand. But “surely the jury is still out on that.”
Edited by Jonathan Rowland.
Mastermyne Group Ltd has been faced with a weakness in customer operations and difficulties in the mining sector, and therefore is taking steps to reduce the impact this is having on the group in order to maintain a strong financial foundation and provided leading supplier of contract services.
The group’s unaudited results from the most recent quarter were weaker than the first half results. Revenue for the quarter was $38 million, which resulted in a breakeven EBITDA. Mastermyne anticipates that it is unlikely to see improvement during the fourth quarter of the financial year.
Despite the challenges the company has faced, it has maintained a strong balance sheet and reduced its net debt position during the quarter with unaudited net dent position totalling $10.2 million – a reduction of $3.8 million during the quarter.
With the intention to reduce board costs, Darren Hamblin, a company Founder and Non-Executive Director, has resigned with immediate effect.
Hamblin said: “My decision to resign is motivated by a desire to effect immediate cost reduction for the company. I have always put the Mastermyne business interests ahead of my own and I see this decision as in the best interest of the company. I plan to remain a substantial shareholder and will retain a close interest in the perormance of Mastermyne.”
Mastermyne Chairman Colin Bloomfield commented: “Darren’s actions demonstrate the character of a person who has built a tremendous business from nothing. His long-term vision and leadership are a key reason the company has grown to be a leader in its field. The Board of Mastermyne thanks Darren for his tireless efforts over the last twenty years.”
The remaining Non-Executive Directors of Mastermyne have agreed to reduce their individual salaries by 20% from the headline rates until market conditions improve.
It is expected that the reduction in salaries as well as the resignations of Darren Hamblin and James Wentworth plus other efficiencies will reduce board related costs by about 50%.
Edited from press release by Harleigh Hobbs
Cokal Ltd, a global metallurgical coal group, has released an updated coal resource statement for the Eastern portion of the Bumi Barito Mineral (BBM) coal project.
Since the last coal resource report in January 2015, BBM’s total coal resource estimate remains at 266.6 million t, which compromises 90% metallurgical coal and 10% PCI.
The estimate includes 19.5 million t measured and 23.1 million t indicated and 224 million t inferred coal resources in accordance with the 2012 JORC Code.
The coal resource has been confirmed as a metallurgical coal from analyses conducted in an Australian laboratory.
Cokal has reported that this update further demonstrates that after further review of the analytical results from seams B, C and D outcrop samples, both metallurgical coal and PCI are suitable for direct-to-ship extraction due to very low ash content of the three seams.
The B, C and D metallurgical coal and PCI products are indicated to have premium qualities, consisting of low ash, low sulfur, low moisture and ultra-low phosphorus.
Additionally, it was noted that the BBM coal resource includes resources that have the potential to be economically extracted using both opencast and underground mining methods.
The coal seams are generally thicker than 1 m and the roof predominantly consists of very hard sandstone (up to 95 Megapascals [Mpa]) while the immediate 1 m to 2 m of roof consists generally of a competent siltstone. This combination is ideal for extraction of the deeper coal resource using underground methods, such as thin-seam longwall mining.
The coal resources for BBM have been estimated in accordance with the 2012 version of the JORC Code. The area covered by the current coal resource estimate is 30% of the total area of the BBM production IUP tenement licence.
Edited from press release by Harleigh Hobbs
Resource Generation (ResGen) has concluded an agreement with Sedgeman for the design, procurement and construction of a coal handling and preparation plant (CHPP) at its Boikarabelo coal mine in South Africa’s Waterberg region.
The US$141 million contract represents a substantial saving on previously announced estimates, according to ResGen, as the Sedgeman design offers a smaller footprint with associated capital savings, while maintaining production output.
The provisions of the agreement as includes as intent to negotiate a three-year CHPP operations contract with Sedgeman. This would follow the expiry of a 15 month operations contract to cover the post-commissioning warranty period.
Sedgeman is part of Spanish-owned CIMIC Group and is a leading EPC contractor in the coal and minerals industries. The ASX-listed company has a record of delivering coal projects in southern Africa with over thirty major coal projects delivered over the past decade.
“The conclusion of the EPC contract with a leading contractor basd on the significantly reduced capital cost of the project is a major milestone for the Boikarabelo mine and ResGen and is a step closer to securing full funding for its completion,” said Rob Lowe, ResGen’s CEO.
ResGen is an ASX and JSE-listed coal producer. Its Boikarabelo project has reported reserves of 744.8 million t of coal. Stage 1 on mine development targets saleable coal production of 6 million tpy.
Edited by Jonathan Rowland.
Flexco recently announced the addition of Modular Impact Beds to its line of load zone solutions. Engineered with maximum capacity in mind, while ensuring full containment, the modular beds are designed with universal components that offer effective and affordable load zone protection.
The new Modular Impact Beds feature a 2 ft (600 mm) sectional design, which allows the user to choose the layout of their load zone, depending on application-specific performance requirements.
“Users can choose to use an all-bar section for high-impact areas, or a slider impact section, where lower impact resistance or sealing is required,” Kevin Fales, BCP marketing specialist for Flexco, said. “And when both styles are combined, users can achieve ultimate performance in the load zone.”
Along with offering total design control in the load zone, the new Modular Impact Beds can also be paired side-by-side with each other to match specific load zone lengths and requirements.
The Modular Impact Beds feature slide-out service in three pieces, offering service to each section right at the conveyor, complete with long-lasting 1 in. (25 mm) UHMW bars that are designed for use on reversing belts.
Universal components and field-adjustable trough angles reduce lead time and make the Modular Impact Beds easier to service.
Edited from press release by Harleigh Hobbs
Dynegy Inc. plans to shut down multiple Illinois coal-fired units in the US.
Units one and three at the Baldwin power plant in Baldwin, and unit two at the Newton power plant in Newton, are expected to shut down operations over the next year.
The decision to shut down operations at the Baldwin and Newton units was made after they failed, again, to recover their basic operating costs in the most recent MISO capacity auction.
In total, Dynegy is requesting that MISO remove 1835 MW from MISO Zone 4. An additional 500 MW are targeted for shutdown, and a final determination is likely later this year.
Earlier this year, Dynegy announced the 465 MW Wood River power plant would retire in June for similar reasons.
In total, 2800 MW of generation from Illinois will be lost – approximately 30% of the power generation capacity in southern Illinois. According to a 2014 economic impact study by Development Strategies, the Newton and Baldwin plants combined have historically supported nearly 4000 direct and indirect jobs and US$1 billion annually in economic activity for the region. Newton is responsible for US$5 million in property taxes and Baldwin pays US$4.8 million each year.
“This is a difficult decision, and we don’t take it lightly. For 40 years, the employees of the Baldwin and Newton power stations have generated reliable and affordable power for the people of Illinois,” said Robert C. Flexon, Chief Executive Officer of Dynegy. “The men and women of these stations, just like the Wood River employees, have proudly and professionally served and safely operated these facilities for decades while contributing greatly to their communities.”
According to Dynegy, the units shutting down received no compensation to recover their basic operating costs in the recent MISO capacity auction. The company believes that Illinois policy makers must take immediate action to preserve jobs and economic benefits.
“Resolution of this issue in a way that serves Illinois as a whole can only be achieved with the immediate help and leadership of the Illinois state government for which we believe we have solutions, and we urgently need an audience. In the limited time left before closures occur, we are ready to work quickly with MISO, the state of Illinois, union leadership, and all stakeholders to rectify the situation and preserve the jobs and economic base in downstate Illinois, while continuing to provide safe, low cost, and reliable power to the region,” concluded Flexon.
As part of the shutdown process, a notice filed with MISO for each unit triggers a reliability review by MISO. If MISO determines the units aren’t needed for reliability, Dynegy expects to shut down operations at Newton unit two in September 2016, Baldwin unit one in October 2016, and Baldwin unit three in March 2017.
Edited from press release by Harleigh Hobbs
Carbon Energy Ltd is to help form a globally significant underground coal gasification (UCG) research centre in China in conjunction with one of the world’s largest mining universities, the China University of Mining and Technology (CUMT).
Carbon Energy has two representatives on the governing body of the CUMT International Research Centre for Underground Coal Gasification, which has been established to develop the highest standards for China’s growing UCG industry and was officially opened on 24 April 2016 in Xuzhou, Jiangsu Province.
The centre will initially be funded by Chinese private industry participants and CUMT, and it is anticipated that additional funds for it will become available from government sources.
The centre has established a technical advisory committee consisting of a panel of international experts renowned for their industry, academic and scientific achievements, and includes the previous Chief Scientist of Australia, Professor Robin Batterham. In his remarks during the opening of the centre, Professor Batterham noted that there are many areas where UCG can be competitive as coal is often available where natural gas is not, particularly in China and where coal seams are too deep and too variable to warrant mining. He also noted that UCG offers the chance to utilise such resources in an effective and responsible manner.
According to Carbon Energy, the establishment of the centre is an important step forward in the advancement of the company’s expansion plans in China, where it has a joint venture with Beijing JinHong Investment Co. Ltd to develop a vertically integrated gas business in China.
Morné Engelbrecht, CEO of Carbon Energy, commented: “This is an important development in a market that is highly receptive to UCG technology. The establishment of the centre funded by the university indicated the Country’s willingness to establish a world leading UCG industry based on science.”
Carbon energy beeleives China’s strong demand for lower emission coal technologies, as well as its supportive government policy, makes China a compelling opportunity for Carbon Energy’s keyseam technology. The centre has been established to encourage the development of UCG technology by industry and government groups alike, as the environmentally acceptable utilisation method for coal. This is closely aligned to the Chinese government’s 13th five year plan, which is a vital macro driver underpinning the expansion of China’s UCG industry.
The centre will bring together potential collaborators in the industry to evaluate technologies for specific coal deposits and industry applications and is an important platform for Carbon Energy to showcase its technology to an influential and highly receptive industry audience in China.
The centre will seek to simplify the regulatory process by establishing national and international standards of operation for UCG and formally seek recognition by government. These clear parameters will encourage further investment in the industry in China. The work of the centre is expected to support project developers in obtaining permits and to significantly reduce the time required to commence projects.
Edited from press release by Harleigh Hobbs
Greg Lane
Let’s face it. Coal is on the nose.
Coal has gone from being one of the popular kids in school during the massive boom, to being the kid who is bullied from even those who were once buddies.
It’s been somewhat of a perfect storm. From record prices and massive demand to an oversupply and market glut. Share prices and job numbers reflect the dive in coal’s popularity – and let’s not mention the treasury coffers.
Politicians were once big fans, with the largesse from the boom padding those coffers and pumping up royalties – plus the added bonus of winning over the voter with the likes of juicy tax cuts, new roads, schools and hospitals, to name a few.
But it would seem even some of our closest buddies are turning their noses up at coal in preference to sexy renewables. After all, who wouldn’t love a shiny new solar panel sitting atop their roof? It’s fashionable, it’s subsidised, it’s relatively cheap and you can say you’ve ditched coal. After all, no-one would publicly admit that they were buddies with coal anymore, would they? They fear that, if they did, the schoolyard bullies could turn their attention to them.
And those bullies come in the form of the taxpayer-funded anti-coal activists.
We don’t hear the environmental activists chanting or brandishing placards with slogans ‘no copper’, ‘no aluminium’, ‘no gold’; however, we see and hear the loud-and-clear roar against coal.
The broad argument dished out by the activists is that, in the future, it’s a case of fossil fuels or renewables. Their narrative touts the suggestion that we can flip the switch and turn off fossil fuels, then turn on renewables: a case of all or none. While most of us know that’s just not possible, there are many who are jumping on that noisy bandwagon. And little do they acknowledge – or realise – that the bandwagon is made from coal.
The activists forget, ignore or don’t even realise that metallurgical coal and iron ore is required to make the steel for many bandwagons: cars, buses, trains, ferries, bikes and so on. An average refrigerator requires 70 kg of steel. Every solar frame is made from some steel. Every 1 MW of wind turbine capacity requires 220 t of coal – or the equivalent of 220 small cars – while the foundation is made from concrete, which is made using products of coal.
One of the main uses of thermal coal is in electricity generation. The activists screech to all who will listen that the tap to this cheap and reliable fuel source can be turned off. Regardless of their rhetoric, the International Energy Agency (IEA) has forecast that the demand for coal is set to increase as Asia’s demands grow in its bid to alleviate poverty and a life of darkness.
While the western world – including green activists – enjoy the luxuries of flicking on a switch to light homes and offices, heating food on an electric or gas stove or simply having a hot shower every morning, there are 1.3 billion who don’t. Therefore, by 2040, Asia is projected to account for four out of every five tonnes of coal consumed globally to meet the demand and help fill the void. In Southeast Asia, the share of coal in electricity generation is forecast to rise from 32% to 50%.
And Queensland is in pole position to feed that demand over the coming decades. It’s simple: our coal contains a higher energy value at 6100 kcal/kg and produces lower emissions than that of some of our market competitors. One tonne of our thermal coal can produce as much energy as 1.5 t of Indian coal, which sits at 3500 kcal/kg: replacing Indian coal with Australian coal therefore produces roughly one third less emissions. The coal produced by our Indonesian neighbours, which measures 5130 kcal/kg, also burns less efficiently due to, in part, its high moisture content.
Queensland coal is the perfect choice to help reduce global emissions. It is also a better fuel supply for the new generation of high-efficiency lower-emission (HELE) power plants being built. The IEA report also notes that based on the strong demand for coal in Southeast Asia, there is significant opportunity for greater investment in highly-efficient power plants that have the ability to reduce emissions by up to 40%. There are already 670 HELE generation units operating across wider Asia and about 1000 more on the drawing board.
So despite the current bullying war that is being waged by the anti-coal activists, the outlook for coal is not diminishing. It’s time for people to understand that coal’s future is not dead; it’s time to buddy up and accept that future global energy needs will be met using a mix of different fuels feeding in through different mechanisms. The answer is not ‘all or none’ as some would have the public and the policy makers believe. The answer is that, long into the future, fossil fuels will provide a crucial and significant role in the energy mix. It’s not a case of fossil fuels OR renewables – it’s a case of fossil fuels AND renewables.
Note: This article first appeared in the May 2016 issue of World Coal.
About the author: Greg Lane is Acting Chief Executive of the Queensland Resources Council.
Fred Palmer
In the 20th Century, the culmination of a decade-long effort was to land a man on the moon in 1969: an amazing achievement for mankind that marked a milestone in the industrial evolution of the human community.
Despite the progress this achievement represents, almost fifty years later there are billions of people on the planet with no – or grossly inadequate – access to electricity. To provide modern levels of electricity supply on a universal basis, meaning every human on earth has a right to live the way we do, we need a new man-on-the-moon vision, with a man-on-the-moon effort to achieve universal energy access.
Because of the huge amount of un-met human need, both in the present and the future, 21st Century coal is the only path to achieve this transformational goal. Fortunately, 21st Century coal has a man-on-the-moon vision to pursue in achieving it, as articulated by the actual man on the moon himself: Neil Armstrong. In 2000, Armstrong, on behalf of the National Academy of Engineering, said: “the top-rated improvement to the life of earthlings in the 20th Century was electrification. If anything shines as an example […] it is clearly the power that we use in our homes and businesses.”
In recognising 20th Century electrification in the US as a driver of the country’s success, the academy recognised by definition the power of coal in driving electrification, improving the lives of all of its citizens, as well as the human and natural environment.
Of course, the US urbanised as it electrified; the two proceed together, hand-in-glove. And in the 20th Century, coal provided well over half of the total electricity consumed as the population and the economy surged following the end of World War II.
The human environment
The human environment is identified in the laws of the US in the National Environmental Policy Act (NEPA):
- NEPA establishes the ‘human environment’ as the focus for all federal agencies in exercising regulatory authority for development of the country’s natural resources.
- It requires the government to prepare environmental impact statements before taking major federal action that impacts the ‘human environment’.
- It was signed into law by President Nixon in 1970.
- It is our ‘Environmental Magna Carta’ and should be treated as such.
In 1972, the UN Conference on the Human Environment in its Stockholm Declaration defined the human environment as identified two years earlier in NEPA:
“Man is both creature and moulder of his environment, which gives him physical sustenance and affords him the opportunity for intellectual, moral, social and spiritual growth […] Both aspects of man’s environment, the natural and the manmade, are essential to his well-being and to the enjoyment of basic human rights: the right to life itself.”
In the US, electrification has powered the economy with steady improvement to the human environment from the beginning. As an inherent part of that process, coal used with ever-improving technology has been relied on to grow the economy and facilitate urbanisation with continued improvement in the human environment. The development of the Tennessee Valley Authority (TVA) is a clear case of this.
The TVA: a story of electrification
Life before the TVA
Before the TVA, farmers in the Tennessee Valley earned only about a third of what farmers averaged across the country – and most farms produced just barely enough food to feed the family. Life on a typical valley farm at the time lacked most of the modern conveniences enjoyed by those in nearby cities:1
- No running water, which meant no indoor bathroom. Any water the family needed for drinking, washing and bathing had to be carried in from a well, stream or lake.
- No refrigerators to store butter, cream or milk, which the family could have sold to make money.
- No modern appliances, such as washing machines, so a lot of time was spent washing clothes by hand and doing other manual chores.
- No electric lights for the family to read or study by in the evenings.
- No electricity to power a radio to hear the latest news, sports scores and music.
Life after the TVA
When TVA brought electricity to the country, life changed for the better. The following details what the same farm looked like after being hooked up to TVA power:1
- A new electric-powered water pump and a washing machine meant the family did not have to spend so much of their time hauling water and cleaning clothes. With more time and energy, they could focus on other activities.
- A new electric-powered refrigerator allowed the farmer to sell butter, cream and milk.
- Electric lights in the henhouse, the yard and the laundry room helped the farm become more productive.
- The addition of electric lights and electric appliances helped the farmer produce more goods to sell, which meant the family earned more money and was able to produce more than enough food to eat.
- With more spending money, the family could paint the house, remodel the kitchen and add hot and cold running water. The farmer could buy more chickens, cows and pigs and increase his income even more.
Conclusion: the TVA example today
The TVA story may be a uniquely American story, but the lessons learned from it are not. The 20th Century story of the TVA establishes how electrification improves the quality of life in the US, informs US leadership on a 21st Century coal path for the future, and clearly shows a path forward for electrification in the developing world in the 21st Century. What electrification did for the people of the Tennessee Valley can be done across the globe in places such as Africa, China and India, where people still live like the people of the Tennessee Valley did almost a century ago.
The following statistics need to be understood by policy makers who should put in place a regime that solves these horrendous problems:
- 3.5 billion people lack proper energy for basic needs.
- 3 billion people burn primitive biomass for cooking and heating in India, South Asia and other developing nations.
- 2.5 billion people lack clean water and sanitation facilities.
- Over 4 million people die each year from indoor air pollution.2
A huge increase in population in cities is on the way. The UN estimates that the worldwide population will increase, primarily in the developing world, by 3 billion people by the year 2100 to 10 billion people. The UN also estimates that over 70 million people are expected to be added to cities each year by the year 2050. Simply doing the maths suggests well over 2 billion additional people in cities by the year 2050.
How much additional coal use will this massive urban growth require? In a 2015 presentation I made in Paris to the Coal Industry Advisory Board, an IEA group, and using historical past coal, population and urbanisation numbers as prologue, we concluded electricity demand would grow 130% and require total world coal production and consumption of 13 billion tpy. This compares to just under 8 billion tpy consumed today. This powerful story of urbanisation and electrification needs to be explained consistently and persistently, and in detail, to world policymakers and to the public.
At the same time, we need to recognise the need for a long-term societal discussion on carbon. How do you deal with that? It has to be educational and it needs to start with people’s values. You start with the strictures people will face under the grip of energy poverty and move on to the wonders of electrification and what it has done for everybody.
The next part of the work is to paint a technology picture to show how technology is continually evolving. As the price point of advanced technology is brought down, we will be always more efficient. In fact, we are at near-zero criteria emissions pollutants today in state-of-the-art power plants. If the human community decides as a whole that we want geologic storage of CO2, we have the means to do that – and we can do that.
Most importantly, new policies in the US and abroad are needed to give near-zero CO2 emission coal technology the same electric production tax credits and set asides as wind and solar as we preserve the existing coal fleet in our policy work. If that happens, I have no doubt the private sector will provide a number of alternatives superior to CCS as a long-term carbon answer.
References
- For more on the history of the TVA see: http://www.tvakids.com
- Yadama, G.M., Fires, Fuel and the Fate of 3 Billion: the State of the Energy Impoverished (OUP; 2013).
Note: This article first appeared in the May issue of World Coal.
About the author: Fred Palmer is former Senior Vice President of Government Affairs at Peabody Energy and now a Partner are public affairs firm, Total Spectrum/Steve Gordon and Associates.
Edited by Jonathan Rowland.
Jonathan Rowland
Coal industries around the world have taken a beating over the past few years and none more so than in Indonesia, which saw its coal production collapse from 462.11 million t in 2014 to just 369.69 million t in 2015, according to BMI Research. It will fall again to 314.23 million t this year, before recovering slowly to 2020 – although production will remain under its 2014 levels.1
Similarly, the Indonesia Investments website, which sources its figures from the Indonesian Coal Mining Association and the Ministry of Energy and Mineral Resources, puts coal production at 458 million t in 2014, slumping to 376 million t in 2015.2,3 Of this, exports were estimated at 382 million t in 2014, falling to 296 million t in 2015 – a 22.5% fall and the first time since 2011 that exports were under 300 million t (despite this Indonesia remains the top exporter of thermal coal).4 Meanwhile, the IEA puts Indonesian exports higher in 2014 at 408 million t; its estimate for 2015 is not yet available.5
Despite recent production falls, however, the slump in Indonesia’s coal production has come much slower than many had expected when coal prices started their decline in 2012.6 This stickiness in Indonesia’s coal production and exports reflects two important themes in global coal markets. Firstly the success of producers in reducing costs – helped by an unusually strong US dollar. This allowed them to maintain production despite the falling prices. And secondly, the behaviour of China.
Indonesia’s coal export landscape
China: from saving grace to market from hell
Until mid-2014, Chinese imports had functioned as the chief method of clearing supply growth in the seaborne thermal coal supply, as favourable import arbitrage drove the replacement of higher-cost Chinese domestic supply with cheaper seaborne imports. In 2014, however, that started to change and in 2015 China’s thermal coal imports slumped. This change in China’s importing behaviour resulted in Indonesian supply cuts becoming the main market adjustment mechanism.7
According to figures provided to World Coal by Dr Bart Lucarelli of Roleva Energy, Chinese thermal coal imports dropped from 147.28 million t in 2014 to 103.05 million t in 2015. Imports of Indonesian thermal coal (i.e. medium-rank sub-bituminous and bituminous coals) more than halved from 28.86 million t in 2014 to 13.16 million t in 2015, while imports of Indonesian ‘lignite’ (i.e. low-rank sub-bituminous coals) fell from 58.73 million t in 2014 to 46.44 million t in 2015.8
A number of factors lie behind China’s changed import demand. On a macro scale, the country is moving away from more energy intensive industries. But the Chinese government has also placed a variety of restrictions on coal imports in order to protect its domestic coal industry, which is mostly loss making. Indeed such is China’s fall from grace in the eyes of traders and producers that it is now viewed as the “market from hell, due to the capricious and self-serving nature of the [country’s] coal import regulatory framework,” according to Lucarelli.6
As a recovery in Chinese import demand now seems unlikely, Indonesia’s coal producers are in need of significant new markets. Much hope is now pinned on the world’s largest coal importer (a crown it took from China last year): India.
India: rising sun or false dawn?
“Rising demand in India has provided Indonesian producers an alternative export market for sub-bituminous coal,” explained Matthew Boyle, Principal Consultant at CRU, who is more bullish on Indonesian exports for this year than others surveyed.9 CRU forecasts Indonesian coal exports of 340 million t this year mostly to India and Southeast Asian markets. Meanwhile, the International Energy Agency in its World Energy Outlook 2015 forecasts that India and Southeast Asia will displace the lost seaborne demand from China and Japan, based partly on the assumption that China and Japan will implement carbon taxes by 2020.10
Yet that narrative is being challenged by India’s government. Last month, India’s Coal and Power Minister Piyush Goyal was reported as saying that India could stop thermal coal imports altogether within 2 – 3 yrs as a result of rising domestic production, although metallurgical coal imports would need to continue as India lacks domestic supplies of the steelmaking coal.11,12 In the last fiscal year to April 2015, India reduced its coal imports by 34.26 million t on the back of record production at state-owned coal mining company, Coal India (CIL).
“India has been one of the big disappointments from an exporter’s perspective,” Macquarie said in a recent note. “Imports will most likely be down y/y in 2016 (potentially significantly) due to domestic coal production growth running at about 9% y/y over the same period. So what was the big hope for the seaborne market will have passed peak imports, if anything close to the current production growth is sustained.”7
Yet this may be premature. To maintain the levels of production growth seen in India over the past year would require a monumental effort on the part of Coal India – traditionally a company with a less-than-stellar record of meeting its targets. The development or new and existing mines in India also remains a particularly difficult business fraught with challenges that range from India’s Byzantine bureaucracy to logistical shortfalls – with a Maoist terrorist threat in key coal-bearing areas thrown in. On balance, it seems unlikely that India will be able to jettison its need for thermal coal imports anytime soon – ministerial hubris notwithstanding.
Good neighbours: Southeast Asian coal demand
If Indian imports of thermal coal tail off, further significant drops in Indonesian coal exports should be expected as the country is left to look to neighbouring Southeast Asian countries to take its coal.
“Demand for coal in the Philippines is rising steadily and we expect coal imports to follow suit over the next few years,” according to BMI Research, on the back of government plans to increase coal’s share in the energy mix by a further 25% and the inability of Filipino coal producers to meet such growth in demand.1
Vietnam is also anticipated to undertake a significant build out of its coal-fired power capacity as the country seeks to meet growing power demand, although Lucarelli suggests some caution here, describing the country as a “graveyard for IPP projects”.8
“There is a lot of chatter about coal-fired IPP projects in Vietnam, but very little substance to that chatter,” Lucarelli continued.
The climate factor
Perhaps the final caveat to Indonesia’s coal export picture comes from the risk of tightening environmental regulations in the key regions of potential demand for Indonesia’s coal. This comes in two forms: a general risk of government regulation of power plant emissions and a specific risk to Indonesia’s coal based on its quality.
According to Lucarelli, the big concern among all coal producers is whether coal consuming countries in the region will impose significant carbon emissions taxes on coal-fired power plants. At present, China, South Korea and Japan have either announced or started to impose a tax on carbon emissions but not at levels that would be considered significant. There are no indications at present that Southeast Asian countries will follow suit in the near term. But if they should follow the lead of East Asia and if these taxes were to rise to significant levels, this regulatory event alone could prove disastrous for Indonesia’s coal industry.8
But the challenge is not limited to emissions regulation. Indonesia’s lower-quality coals are also more expensive to transport on a calorific value per tonne basis, cause operational issues in power plant boilers and dust control issues in coal unloading and storage operations. They also provide a higher risk of self combustion when stored for a period of two weeks or more.5 These characteristics mean that buyers demand high price discounts for Indonesian low-rank coal; they also present a “problematic long-term issue for Indonesia’s coal industry”, according to Lucarelli.6
He asserts that “over time, low coal prices will correct but the undesirable qualities of Indonesia’s low-rank coal reserves will remain with Indonesia’s coal industry forever.”
The next big market: domestic power plants
Big plans
With such risks facing export demand, Indonesia’s coal producers could receive a significant boost from a previously under-mentioned source: the domestic power industry. To support expected growth in electricity demand of 7.8% per year to 2022, the government has announced targets to develop 35 GW of new electricity capacity, of which 20 GW is coal.13
As a result, CRU expects Indonesia’s domestic coal demand to rise to 100 million t this year, with state-owned utility, Perusahaan Listrik Negara (PLN) requiring 80 million t.9 Growth in domestic demand will also be the prime driver of production growth, with export production growing at a CAGR of just 0.7% from 2016 – 2020 but overall coal production growing at a CAGR of 1.7%. Beyond that, Indonesia’s domestic coal demand may hit 166 million t by the end of 2019 and 173 million t by the end of 2024, should the planned build-out in coal-fired capacity occur on schedule.13
Enough in reserve?
Yet the government’s planned build-out of coal-fired power – indeed the country’s coal industry as a whole – faces a potential challenge in the form of a shortage of proven reserves, according to a recent report from PwC. Combining information from a confidential survey of coal companies, interviews with coal miners, independent power producers and independent geologists, and publically available data on miners, PwC estimated that Indonesia’s mineable reserves would be 29% lower than those reported in 2012 figures “if the current market price were used as the basis for long-term planning.”13
As a result, Indonesia’s proven reserves could be as low as 8.3 billion t. That would only be enough to last until 2036 at current production rates – and only 2033 for non-coal-mine-mouth power plants.
Lucarelli, however, was sceptical of the report’s conclusions:6 “When it comes to Indonesia’s coal reserves and resources, I have always had my doubts about the accuracy of the numbers being put forth by the government of Indonesia. Its approach to reporting reserves and resources is non-transparent and might even be labelled as secretive. However, my concern is not whether reserves are sufficient to meet demand from PLN and export customers [as] coal prices will recover long before 2036 or 2033 and, along with that price recovery, reserves will also recover. In the meantime, 2033 appears to be a sufficiently long time for that recovery to take place.”
More specifically, Lucarelli expects an incremental reduction of market supply as coal prices continue to be depressed, which will gradually result in supply shortfalls and a recovery of price levels. This will ultimately encourage investment in the Indonesian coal sector and an expansion in coal output long before PwC’s 2033 or 2036 deadlines, helped by the relatively easy geological conditions in Indonesia compared to its competitors. “In short, we will not fall off a cliff in 2033,” Lucarelli concluded.6
Government and the coal industry
Low prices have not just challenged the viability of Indonesia’s coal reserves; they have also hit the government’s bottom line. “The main impact [of the coal downturn] has been on government revenues because it has a fairly shallow tax base and so the government depends quite a lot on the mining sector,” Anwita Basu, Indonesia Analyst at The Economist Intelligence Unit (EIU), told World Coal.14 This in turn raises the spectre of rising taxes on the mining industry – including its coal producers.
“The government doesn’t tend to raise taxes on income or corporate taxes but they tend to impose royalties and taxes on the mining sector,” continued Basu.
Last year, the government had said that it was considering raising royalties for coal mining companies that hold Mining Business Permits (IUPs). Under the proposed rise, coal with a CV of 5100 kcal/kg would have seen royalties rise to 9% from 5%, while coal with a CV of more than 6100 kcal/kg would have been charged a royalty of 13.5%, up from 7%. But the move was postponed in July 2016 because of the weakness in coal prices internationally: any increase in royalties would hit Indonesian coal’s competitiveness on the global market and could have led to further production cuts.1
A more serious risk to the Indonesian coal industry is the ongoing renegotiation of first generation (1st Gen) Coal Contracts of Work (CCOWs), the form of mining licence under which the vast majority of Indonesian coal production takes place. Holders of first generation CCOWs include most of Indonesia’s largest coal companies, including Kaltim Prima Coal, Adaro, Kideco, Arutmin and Berau.15 According BMI Research, about 80% of Indonesia’s coal production comes from miners holding CCOW status.1
“The big […] push to renegotiate 1st Gen CCOWs has been underway for some times now and it is not clear what changes, if any, have been agreed by large 1st Gen CCOW holders,” explained Lucarelli.6 If, however, the renegotiation results in mining licences “structured on unfavourable commercial terms, Indonesia will most likely experience significant coal disruptions sometime between 2020 and 2023.” The first 1st Gen CCOW (Arutmin) will expire in 2019 and the last 1st Gen CCOW (Kideco) in 2024.
Whatever the outcome of the CCOW renegotiation, the continued reliance of Indonesia on its mining sector for government revenues is unsustainable. As a recent Bloomberg View editorial concluded: “The government needs to bring more citizens, in both the informal and formal economics, into the tax net […] Indonesia’s revenue crunch is a long-term problem that demands lasting change.”16
Overall, however, the current Indonesian government seems far less interested in the coal sector than the previous administration of President Susilo Bambang Yudhoyono under whom foreign investors in the sector faced significant uncertainty – not least because of the 2009 Mining Law. In contrast, President Joko Widodo was elected on a pro-business anti-corruption platform and, while he has perhaps not lived up to all of the hype, The EIU’s Basu sees significant opportunity for optimism. “He’s one of the few presidents who is actually looking to [follow] a more methodical and evidence-based [approach] to policymaking,” Basu said.14
Yet not all are convinced: according to Lucarelli, “numerous opportunities exist for the government of Indonesia to ‘go off the rails’ on the regulatory front in the quest to plug budget shortfalls and possibly to punish its coal industry for daring to be successful and profitable.” In addition to the risk of new taxes and higher royalties, these include the following:6
- The imposition of new price regulations on existing offshore coal supply contracts.
- Restricting the amount of coal that can be exported each year.
“The degree of fecklessness demonstrated by the government of Indonesia on the regulatory front will play a large role in determining whether there will be new investments in Indonesia’s coal mining sector that identify sufficient proven reserves to meet future demand from domestic power producers and Indonesia’s export customers,” concluded Lucarelli.6
References
- “Industry Forecast – Coal: Subdued Growth Ahead” (BMI Research; 8 April 2016).
- “Indonesian Coal Association: Coal Price to Remain around $50/ton in 2016”, Indonesia Investments (14 April 2016).
- Estimating exact production and export figures for Indonesian coal is made difficult by sometimes patchy reporting and the widespread practice of illegal mining – although the government has been cracking down on the latter in recent years.
- Resources and Energy Quarterly (Department of Industry, Innovation and Science; March 2016).
- Coal Information 2015 (International Energy Agency; 2015).
- Emailed comments to author from Dr Bart Lucarelli (22 April 2016)
- “Commodities Comment: Is India the Next Arbitrage Market in Thermal Coal?” (Macquarie Research; 6 April 2016).
- Emailed comments to author from Dr Bart Lucarelli (25 April 2016)
- Emailed comments to author from Matthew Boyle (18 April 2016)
- See New Policies Forecast Scenario in World Energy Outlook 2015 (International Energy Agency; November 2015).
- “India To Stop Coal Imports And Save Rs 4,000 Crore, Says Power Minister Piyush Goyal”, India Times (15 April 2016).
- “Coal Import Bill Drops by Rs 28,000 crore in FY16”, The Economic Times (6 April 2016).
- “Supplying and Financing Coal-Fired Power Plants in the 35 GW Programme” (PwC/Indonesian Coal Mining Association; March 2016).
- Author’s phone interview with Anwita Basu.
- LUCARELLI, B., “Government as Creator and Destroyer: Indonesia’s rapid rise and possible decline as a steal coal supplier to Asia” in THURBER M.C. and MORSE, R.K., The Global Coal Market (CUP; 2015), pp. 294 – 374.
- “Indonesia Needs More Tax Payers”, Bloomberg View (28 March 2016).
Acknowledgements
My thanks to Matthew Boyle of CRU, Anwita Basu of The Economic Intelligence Unit and Dr Bart Lucarelli, Roleva Energy, for sharing their insight into the Indonesian coal industry with me.
Note: This article first appeared in the May 2016 issue of World Coal.
About the author: Jonathan Rowland is the Editor of World Coal.
Holders representing the vast majority of the issued shares in Universal Coal have accepted Coal of Africa’s (CoAL) takeover offer, according to CoAL’s latest quarterly report. The offer period has been extended to 20 May.
“I’m pleased to report that CoAL has now received 93.2% acceptances from its shareholder for the potential acquisition of Universal Coal,” said CoAL’s CEO, David Brown. “The acquisition will transform CoAL into a cash generative mid-tier South African producer.”
This level of acceptances satisfies the 50% minimum acceptance condition of the office, the company said. Meanwhile, the 40% minimum loan note acceptance has also been satisfied.
On 3 March, CoAL shareholders approved the acquisition. The South African Competition Commission has also approved the deal.
The Universal acquisition will provide CoAL with a cash flow during the construction of its flagship Makhado project.
Edited by Jonathan Rowland.
ASX-listed Aspire Mining is actively considering acquiring metallurgical coal assets, according to the company’s latest quarterly report, and has teamed up with Asian funders to access potential opportunities.
“There are major structural shifts occurring the metallurgical coal industry at present with the larger companies that participated in the consolidation of the industry by using cheap access to debt […] now significantly weakened,” the company said. “Even companies with quality assets are weighed down by these financial burdens”.
With most of the major diversified miners are seeking to exit the metallurgical coal industry (with the exception of BHP Billiton) and Aspire’s view that the metallurgical coal price has formed a base, the company believes there to be significant potential opportunities to buy metallurgical coal assets.
There has been a steady rise in metallurgical coal prices in 1Q16 with spot prices at a 12 month high of US$99/t FOB Australia for premium hard coking coal. This was driven primarily by an increase in steel production in China, which also increases in demand and prices for iron ore in early 2016.
Combined with continued rationalisation of Chinese domestic supply, Aspire said that it believed the market found its bottom at the end of 2015.
“The company has been reviewing acquisition opportunities for existing and near production coking coal projects both in Australia and Mongolia,” it said and has “formed a consortium with Asian-based funders to access these opportunities.”
Edited by Jonathan Rowland.
Government-level negotiations on forming an ‘Economic Corridor’ rail link between Russia and China via Mongolia are ongoing, according to Aspire Mining’s latest quarterly update. Its planned Erdenet-to-Ovoot railway could form the first stage of this new railway.
The Erdenet-to-Ovoot line is being developed by Aspire Mining’s subsidiary Northern Railways under a public-private partnership with the government of Mongolia.
As well as forming the potential first link in the Economic Corridor, it would connect Aspire’s metallurgical coal project at Ovoot to Mongolia’s existing railway system – and onto international markets.
Northern Railways has completed the necessary staged to provide definition of the start of the rail feasibility study and is now seeking funding for this study and the additional work required to support the study.
The proposed Economic Corridor forms part of China’s New Silk Road policy, which aims to improve Euro-Asian trade, and Russia’s policy of establishing a Euro-Asian economic zone. It aims to improve trade by reducing regulation, improving transport capacity at borders and improving road and rail infrastructure.
Edited by Jonathan Rowland.
The Federal Court of Australia has appointed a provisional liquidator to ASX-listed Continental Coal after an application from Australia’s market regulator, the Australian Securities and Investments Commission (ASIC).
“All the evidence suggests that the company lacks any proper government or management at this point,” the court said in its decision, which appointed Robert Kirman of McGrathNicol at provisional liquidator.
ASIC’s application alleged the “the company is not being properly managed and has been involved in multiple contraventions of the corporations legislation.” Its investigation into the coal company is ongoing.
A further hearing will take place on 27 May at with ASIC said it would apply to wind up the company and seek the appointment of Kirman as the official liquidator.
Continental Coal has been suspended from trading on the ASX since June last year.
At the end of July last year, it reported ROM coal production of 271 142 t from the Vlakvarkfontein mine in South Africa with another mine, Prenumbra, in care and maintenance. In its 3Q15 quarterly report, the company said both mines had been sold.
Addressing the “uncertainty concerning the proper management of whatever assets the company does have” will be a key concern for the provisional liquidator, as well as addressing issues around regulatory non-compliance and the company’s solvency.
Edited by Jonathan Rowland.
South African coal miner, Wescoal, has appointed Bothwell Mazarura as Group Financial Director and Chief Financial Officer (CFO), the company said in a media statement. The appointment will be effective from 1 July.
Bothwell previously held various senior financial roles at South African platinum miner, Lonmin, including Head of Group Finance, Head of Treasury and Acting CFO. Before Lonmin, Bothwell worked for Deloitte in South Africa and the UK.
Izak can der Walt, Wescoal’s acting CFO, will take on the role of General Manager Finance for Operations from 1 July, providing support to the group and board financial roles.
JSE-listed Wescoal is active in both coal mining, processing and trading through two primary divisions: Mining and Trading.
The Mining Division accounts for 92% of the company’s operational EBITDA and also includes the its coal processing operations.
Although smaller, the Trading Division is much smaller, accounting for about 8% of operational EBITDA, and represents the company’s original business when it was incorporated in 1996 as Chandler.
Edited by Jonathan Rowland.
Voith has installed two TT Drives on the H2 belt conveyor in the Prosper-Haniel coal mine in Germany – without interrupting production and resulting in sustained coal reduction for the mine’s owner, RAG Deitsche Steinkohle.
The first TT Drive was installed in the mine to allow it to carry on using a heavily damaged steel cord belt (ST5000) until the next scheduled downtime. It was thus able to prevent an unplanned shutdown and corresponding production loss.

The H2 belt conveyor of RAG during belt replacement. (Photo: RAG)
During the next downtime, Voith installed a second TT Drive in the H2 belt conveyor. This allowed for a further reduction in belt tension forces and Prosper-Haniel has since been able to operate the belt conveyor with a cost-saving textile belt (PVG2000/1).
Project Managers, Ralf Dohle and Wolfgang Kosiuk, from RAG Deutsche Steinkohle, are satisfied with Voith’s project management and the booster drives: “Voith’s solution has provided us with a dual benefit. Not only did we manage to avoid an unplanned shutdown because of the damaged belt, we are now able to use a textile belt instead of an expensive steel cord belt for the system. We would choose a solution from Voith again anytime.”

The Voith TurboBelt TT Linear Booster Drive allowed RAG to replace a steel cord belt with a cost-saving textile belt.
The H2 belt conveyor transports the mined coal over 1270 m with a lift of 186 vertical meters. Its operating speed amounts to 3.2 meters per second with a capacity of 2000 tph.
The Voith TurboBelt TT Linear Booster Drive is a high-performance secondary drive for belt conveyors. It extends the use of belts in existing systems and increases their available power. In new belt conveyor systems, it reduces the requirements on belt quality, leading to considerable cost savings.

Functional principle of the Voith TurboBelt TT Linear Booster Drive.
The Prosper-Haniel mine is part of RAG Deutsche Steinkohle and produces 3 million tpy. RAG Deutsche Steinkohle has been relying on Voith TurboBelt TT Linear Booster Drives for almost 40 yrs.
Voith Turbo, a Group Division of Voith GmbH, is a specialist in industrial drive solutions for industries including oil and gas, energy, mining and mechanical engineering, ship technology, and rail and commercial vehicles.
Yancoal has placed its Donaldson coal operation into care and maintenance, according to a company press release. The move followed the end of mining operations at the Abel underground mine.
The move to care and maintenance comes in response to ongoing challenges in the global coal market, the company said. It is now considering the future development of new underground working areas with the start of new feasibility studies.
The majority of Donaldson employees have been redeployed to the neighbouring Austar and Ashton underground coal operations.
Edited by Jonathan Rowland.
Shares in New World Resources (NWR) have been suspended from the London Stock Exchange with the stock exchanges in Prague and Warsaw expected to follow suit shortly after requests from the company.
NWR is the parent company of Czech coal mining company, OKD, which recently announced it had filed an insolvency petition with the Czech court. As OKD is the only trading subsidiary of NWR, it is expected that the company will now be wound up for broken up.
In the event that the company is wound up or broken up, “there will be very minimal or no returns to the shareholders of NWR”, the company said in a statement.
OKD is the largest hard coal mining company in the Czech Republish, producing coal for the steel and energy sectors in Central Europe.
Edited by Jonathan Rowland.
Kibo Mining has released the results of the Power Definitive Feasibility Study (PDFS) for the Mbeya coal-to-power project (MCPP) in Tanzania, confirming total estimated project costs well below those stated in the prefeasibility study (PFS)
Tractabel Engineering prepared the PDFS and confirmed the recommendation made in the PFS of a 2 x 150 MW plant design using circulating fluidised bed technology. The PDFS also includes provision for near-term expansion of the power plant to at least 600 MW.
The PFS annual production target of 1840 GWh was also confirmed, requiring average consumption of 1.497 million tpy of ROM coal from the co-located mine site.
“The PDFS is the cornerstone of the MCPP and the positive results confirm the very robust fundamentals of the MCPP,” said Louis Coetzee, Kibo’s CEO.
“With the PDFS in place, the final development phase of the integrated bankable feasibility study will commence and the parallel work streams in the MCPP feasibility programme can now be completed.”
Edited by Jonathan Rowland.