A new report from the Coal Industry Advisory Board (CIAB) attempts to identity and quantify the socio-economic impacts of advanced coal technologies using advanced coal-fired power plants in China, India and Germany as case studies, finding that such plants have “large economic benefits by any measure.”

The Indian case study is based around the Sasan ultra mega power project (UMPP), an advanced 3960 MW coal-fired power plant in Madhya Pradesh in central India. The CIAB report found that the Sasan plant was expected to provide an economic impact of US$12 billion during the four-year construction phase, as well as an additional US$42 billion economic impact over the 25 year operating life of the plant.

Jobs created by the plant would total 600 directly involved in the operations of the plant, with an additional 19 500 indirect jobs over the 25 year life of that plant. That’s in addition to the 5000 jobs that were provided over the construction phase.

Meanwhile, the increased access to electricity provided by the plant would result in an additional 157 000 new jobs, enable 22 million people to access safe water supplies and electrify more than 12 000 schools.

On the environmental side, the Sasan plant’s use or advanced supercritical technology would reduce the plants emissions by the equivalent of removing 641 000 vehicles from the road in year.

Similar economic, social and environmental benefits were seen in China, where the Ninghai and Zhouzhen power plants in Zhejian Province, eastern China, were the subject of study. Benefits of advanced coal plants here focus particularly on the need to improve the country’s severe air quality challenges, as well as meet a growing need for electricity.

In Germany, the Neurath lignite-fired power plant was found to provide a major driver of the local economy, covering not only power generation but also the extraction and refining of the plants lignite fuel. Generation from flexible coal plants also helps to contribute to the power price stability, as key part of Germany’s success as a leading global manufacturer.

The study also found an “additional geopolitical dimension” to the use of advanced coal technology. “Coal is frequently an indigenous, domestic resource (as it is in the three case studies chosen). By using a domestic fuel rather than an imported fuel, more socioeconomic benefits accrue to the population rather than being exported.”

This also creates an advantage when it comes to energy security – particularly when compared to natural gas: “As natural gas supply emerges as a potential geopolitical weapon, it Is important that nations be reminded of the important role coal-fuelled generation plats in national security,” the report concludes.

Edited by Jonathan Rowland.

Liv Carroll BSc MSc DIC CGeol FGS FIMMM, Technical Director of Geology and Business Development, Wardell Armstrong International.

Last week, I was in Cape Town for Mining Indaba, Africa’s largest annual mining gathering, with the Indaba itself reportedly the biggest mining investment event in the world. I’m sure all those who attended would agree that though the overall numbers were lower, the conference and all associated events were excellent opportunities to have some seriously focussed conversations with some seriously focussed people. I returned to London under no illusions about the issues facing the industry but, at the same time, more convinced than ever that most if not all of the answers are in our own hands.

It is undeniable that the mining industry is in the worst downturn experienced by those currently working in the sector. While there are some shoots of spring with gold gaining last week (though taking a bit of a hit so far this week) and iron ore having gained just over 5% in a recent 24 hr period, the industry remains in an unprecedented state in an unprecedented world.

The world in which we operate has never been so connected, nor in a position to respond and change so rapidly. The Internet, social media and technological advances, including the Internet of Things, has thrown multiple influences at the mining industry that now have to be factored in.

There was a time when if you had a decent product – copper or coal for example – that you could get out of the ground, could separate from the waste rock and could get to market, you would be able to realise some value. Not anymore. Quite apart from deposits being harder to find, deeper and some of lower quality or difficult chemistry, the world market is currently in oversupply on many commodities. And our recently acquired web-enabled connectivity means that social licence to operate is harder to come by and even harder to maintain. Share prices can be decimated by a simple, misguided tweet.

Necessity for evolution

With unstable markets, demand less easy to predict and commodities increasingly competitive on supply, the mining industry needs to evolve now more than ever. Funding is limited no matter how good your project is. Balance sheets are debt heavy. Investors are wary due to over dilution, poor performance and uncertain returns in recent times. This is often coupled with a lack of understanding about the mining value chain and just how long it takes to get a project from exploration (brownfields included) through the various study stages and into development – if it even gets that far and quite apart from the cost.

We in the industry are partly to blame for this, given that there have been (and unfortunately still are) quite a number of so-called ‘lifestyle’ companies where not a penny is being generated but management are still paying themselves US$250 000 plus pa. In addition to this, investors have been kept in the dark about the process and timescales to avoid scaring them off. They have had their fingers burnt – and now understandably they do not want to put them back in.

Honesty and good communications

How do we fix this? By honesty and good communications. We need to inform investors upfront of the likely timeframe and scale of costs, so we improve their understanding and manage their expectations. Mining is not a short-term business with returns within a few years. It is long-term and high risk. If Mother Nature is kind, if the geologists and engineers all do their job well, if all other areas are covered off and if the planets are aligned, investors could see a return in eight to ten years. Patient capital is required, as are investors who understand at least the basic principles of the business of mining.

Funding options

So where can companies look for funding in the current climate? Options are indeed limited and funding structures will be more complicated. But there are options, including private equity. PE, which is holding most of the cards at the moment, seems to be waiting for the bottom of the market but is indeed willing to invest in the right projects. Other options include off-take, royalties and streaming, as well as debt for high-quality projects as long as the balance sheet is not already unbalanced. And management, you’re going to have to dilute your holdings in order to keep the project and/or company breathing and healthy. A lower percentage of 100% is after all better than 0% of nothing!

Of the commodities most likely to attract funding, iron ore and coal, seem to be dead in the water. On the other hand, China is still growing at an official 6.9% for 2015 (although some believe this to be nearer to 4%) and the world is still powered by coal more than any other source – something that’s not going to change any time soon.

Gold is set to be favourite for the year, perhaps because gold assets are largely understood and seen as a safe haven during times of political instability, what with Syria and Ukraine – not to mention the looming US election. Lead and zinc were also spoken of highly during the Mining Indaba, and although copper seems to have fallen out of favour, largely due to recent oversupply, it’s always going to be required globally.

The more specialist commodities needed for specific purposes such as lithium, REE, tungsten and antimony will continue to be required as the technologies they relate to won’t be superseded in the foreseeable future. The demand for them is driven by communications and alternative energy supply technologies, fuelled further by climate change initiatives.

The big question

So the big question. How do we return to long-term sustainable growth in the mining sector?

First of all: good projects with products that are needed in the next five to twenty years. Secondly: sensible and smart management who are willing to take a reasonable salary and adjust to the needs of the business. Thirdly: first movers in PE who ?call the bottom of the market, creating positive market sentiment that ripples out to institutions, high net worth individuals and small scale share investors.

It will inevitably take some time to address the debt burden in many companies. Some of these companies may not survive if they’re unable to meet the capex/opex they need to generate sufficient cash flow to service their debt – but this may bring the change the industry needs.

It will also take time for supply and demand to rebalance, especially where commodities have been in oversupply. In the case of iron ore, several companies are continuing with their production growth plans despite that being bad for the iron ore market. Can you blame them? As was said during Mining Indaba, a company’s responsibility is to its shareholders and not to the market as a whole, so they may continue with their plans if they have the margins to do so and remain profitable.

Political instability aside, I come back to my view that most, if not all, of the answers are in our own hands. The industry has the opportunity to return to a steady state as long as greed is kept in check and we do not end up over-correcting ourselves once things do start to pick up. And it will; but it will take a coordinated effort, solid management, focus and discipline. Not necessarily characteristics that the industry has been noted for in the past – but absolutely essential now.

Edited by Harleigh Hobbs

Powder River Basin (PRB) coal miner, Cloud Peak Energy, has announced a full year loss of US$204.9 million in 2015 compared to a profit of US$79 million in 2014. Coal shipments fell by over 10 million short t to 75.1 million on the back of reduced customer demand for coal its Cordero Rojo mine.

The company also said it was stopping its coal exports due to oversupply on the global market and uncertainty over Chinese and Indian demand, following the renegotiation of its contracts with port operator, Westshore Terminals, and rail company, BNSF.

Impairment charges were recorded against port access rights at Westshore, as well as two planned terminals: Gateway Pacific and Millenium. The company also wrote off its equity investment in Gateway Pacific Terminal in response to weakened international demand.

Wood Mackenzie recently noted in a blog post that the planned coal export terminal developments on the West Coast were facing irrelevancy as the competitiveness of US coal on the international market had been hit by falling global demand and a strong US dollar. US coal exports have plummeted since 2012 to just 58.7 million short t in 2015 compared to a peak of 125.8 million t in 2012.

On the domestic front, Cloud Peak forecast another drop in shipments to between 64 and 70 million short t as its expected US coal burn falls to 720 million short t in 2016. Although that represents a much smaller decrease than the 100 million short t fall experienced in 2015, shipments will be hampered further by utility stockpile drawdown.

“We expect 2016 to be another difficult year for US thermal coal producers,” said Cloud Peak’s CEO, Colin Marshall – although he added Cloud Peak was “optimistic that coal demand will begin to stabilise in 2016.”

“It is important to remember that there will be a significant amount of coal burned in America for many years to come and that the PRB will provide a large portion of it,” Marshall concluded.

Edited by Jonathan Rowland.

A proposed reduction in West Virginia’s coal severance tax – a levy on coal production – would provide multiple economic benefits to the state’s economy, according to a new report from PwC.

Legislation has been proposed to bring the coal severance tax down from 5% – one of the highest rates in the country – 2%. The move is currently opposed by state Governor Ear Ray Tomblin and state legislators on the basis that it could results in a loss of annual revenue of more than US$100 million.

But that is not correct, according to the PwC study, which found that reducing the severance tax would lead to an increase of US$299 million in West Virginia’s GDP, as well as creating 1864 direct and indirect jobs and boosting labour income paid to workers by US$132 million.

“The economic study PwC released today demonstrates that quick legislative action on coal severance tax relief can significantly reduce this hemorrhaging of jobs,” Chris Hamilton, Senior Vice President of the West Virginia Coal Association (WVCA), told The Intelligencer/Wheeling News-Register newspaper. “In other words, if our legislature fails to enact the 3% rate cut immediately, these savings would not occur and the consequences would be disastrous.”

Governor Tomblin is already planning to planning to remove a 56 cent per short ton tax on coal production that was imposed to help pay of workers’ compensation debts. But the severance tax is particularly controversial, as it has been sighted as the reason behind a number of recent layoffs in the West Virginia coal industry.

Last month, the President and CEO of Murray Energy, Robert E. Murray, blamed the layoff of 674 coal miners on a US$7.6 million severance tax payment. “West Virginia’s excessive coal severance tax is a significant cause of the recent layoffs,” the WVCA’s President, Bill Raney said, also speaking to The Intelligencer/Wheeling News-Register. “It must be reduced immediately to prevent more job losses.”

Edited by Jonathan Rowland.

Energy security concerns in the Philippines will result in increased coal production and imports to 2020, according to a new report from BMI Research, with production reaching 10.8 million t in 2020 on average annual growth of 4%.

The Philippines remains “severely exposed to power supply shortages”, according to BMI Research, as growth in power capacity has not kept up with growth in demand driven by improved electrification rates and robust GDP growth. Electricity consumption is expected to reach 111.8 TWh in 2025 compared to 73.2 TWh in 2016.

Coal remains a key part of the government’s plans to fill this gap with aims to boost its role in the energy mix by 25%. Currently coal accounts for only a third of energy production in the country, but over 55% of planned power projects in the Philippine Energy Plan 2012 – 2030: a total of 26 new plants.

On the production side, Semirara Mining Corp. will continue to dominate and account for much of the increase in output. The company currently operates one opencast mine with plans to open another in 2016 and a third thereafter. On the back of that, the company’s production is expected grow from 8.46 million t in 2014 to 10.75 million t in 2020.

Despite the expected growth in production, BMI Research expected demand to outstrip domestic output, requiring an increase in imports over the forecast period. There are also considerable infrastructure challenges associated with the fact that the Philippines is an archipelago nation comprising more than 7000 islands.

“With coal reserves scattered over many islands, developing the infrastructure to mine and transport coal that is economically recoverable after identification will be difficult and time consuming,” BMI Research concludes. This will see the country to continue to rely on imports to meet its supply gap.

Domestic protests against coal production also pose a risk with environmental groups and indigenous tribes supported by the country’s powerful Catholic Church in opposing coal mine expansion. This is likely to see a step up in government oversight of the mining sector, noted BMI Research, even if an outright ban is not likely.

Edited by Jonathan Rowland.

Anna Vikström Persson, Executive Vice President and Head of Group function Human Resources at Sandvik, has decided to resign from her position, effective 1 June 2016.

“Anna Vikström Persson has developed the HR organisation and its operations in a significant way during challenging years for Sandvik. I have appreciated working with Anna and want to thank her for her valuable contributions. I wish her good luck in her future career” said Björn Rosengren, Sandvik’s President and CEO.

Anna Vikström Persson has served in her current position since 2011.

“I have had the opportunity to work for a company with fantastic and truly professional people. I fully support the important ongoing work and activities in Sandvik, however, after five years, I felt time is right for a change” she added.

The process has begun to find Anna Vikström Persson’s successor.

Edited from press release by Angharad Lock

Hargreaves Services, which operates a number of opencast mines in Scotland, as well as coal import operations, will move away from the thermal coal market, the company announced in its most recent results.

“Market conditions in the UK coal and Steel sectors remain very challenging,” said Hargreaves’ Chairman. “Given continuing weak commodity prices, low coal demand and the announcement of further coal station closures, the board has taken the decision to reduce the group’s exposure to thermal coal markets over the next 18 months.”

The company’s decision will see it move to a single mine operation in Scotland that is more focused on servicing the speciality coal markets, as well as the restructuring of its coal import operations to deal with low volumes of thermal coal.

Under the UK government’s energy plan, the country’s remaining coal-fired power plants will be phased out by 2025. In early February, SSE announced it was likely that three our of four units at its Fiddler’s Ferry coal-fired power plant in Cheshire would close by April 2016, while Engie said it was considering closing its Rugely plant in the summer.

This continues a trend of coal plant closures in the UK that has seen significant capacity shuttered over the last 12 months on the back lower gas prices and the UK’s high carbon tax, known as the Carbon Price Floor.

The early closures at Fiddlers Ferry and Rugely would hit Hargreaves’ earnings for the year ending 31 May 2017 and result in redundancy payments of £0.3 million in this financial year, the company said.

Hargreaves reported revenue for the six months to the end of November 2015 of £174.8 million – a slight fall on the previous year’s total of £176.4 million, reflecting lower coal sales from its coal mines and import business. Operating profit was $4.1 million compared with £21.9 million the previous year.

Edited by Jonathan Rowland.

Australian engineering company, Monadelphous Group, has announced a fall in revenues of almost 30% in the six months to December 2015 on the back of a slowdown in investment in major projects. The company offers engineering services to industries including coal, metals mining and processing, LNG, coal seam gas and water.

Sales revenues for the six months to December 2015 were AUS$737 million, while the company’s net profit was down 37.9% at AUS37.6 million.

Despite the slowdown, however, the company’s maintenance and industrial services division picked up almost AUS$1 billion in new or extended contracts. “Maintenance prospects remain positive,” said Monadelphous Managing Director, Rob Velletri.

Among the new contracts, the company has picked up a contract with BMA Coal Operations to provide maintenance works for a major dragline shutdown at Blackwater coal mine in Queensland, as well as a two-year contract to provide dragline maintenance at various BMA mines in the Bowen Basin.

“The outlook for maintenance and industrial services is more positive as maintenance activity begins to normalize and new process facilities continue to transition from the construction to the operating phase,” the company said in its outlook.

The engineering construction division reported sales revenue from 43% in 2H15 with business conditions more challenging here than for maintenance services. “Opportunities for new major construction contracts in core customer markets are likely to remain at low levels,” the company said. “Delays to new projects seeking final investment decisions persist and there remains a backlog of projects at the feasibility stage.”

Underlining this outlook, the company secured and undertook only AUS$100 million in new contracts in 2H15. This included a three-year contract with APLNG for the fabrication and supply of wellhead separator skids in the Surat Basin, Queensland.

The company also announced a new agreement in the US with a US-based contractor for the establishment of a jointly-owned company, Monaro.

“Monadelphous’ US entry is a key component of the group’s long-term growth strategy and is a major step in developing a position in the US energy market,” the company said.

Edited by Jonathan Rowland.

Coal of Africa (CoAL) has extended the deadline for shareholders of Universal Coal to accept its takeover offer to 11 March. Currently, CoAL has received acceptances from shareholders owning just over 41% of Universal.

CoAL’s offer values Universal at AUS$91 million and has been recommended by Universal’s board of directors. The South African Competition Commission has also approved the deal.

A general meeting of CoAL shareholders to approve the deal will be held 3 March.

CoAL and Universal Coal own coal assets in South Africa, including the operating mines at Vele and Kangala, as well as various development projects.

Edited by Jonathan Rowland.

Jeff Erikson has been appointed General Manager, The Americas at the Global CCS Institute.

He replaces former Interim General Manager Victor Der, who will continue with the Institute as Executive Advisor, The Americas.

Institute CEO Brad Page said: “Jeff joins the Institute at an exciting time for the global carbon capture and storage (CCS) industry, with the US and Canada firmly in the spotlight. Five of the next seven large-scale integrated projects, anticipated to become operational within the next 18 months, are in the Americas and demonstrate the region’s significant commitment to developing CCS at scale.”

“Jeff’s vast knowledge of sustainability issues across a broad range of industries, coupled with his expertise in the business implications of global climate change, will be a valuable asset to the Institute, its members and CCS stakeholders as we work together to accelerate the development and deployment of CCS technologies to help meet our global climate change challenge,” Page continued.

Before joining the Institute, Erikson was Director of Global Projects at the Carbon War Room, an international non-governmental organisation working on issues regarding market-based solutions to climate change.

Previously, Erikson served as Senior Vice President at SustainAbility, a global strategic advisory firm, where he led global business development and headed up the Washington, DC office. Erikson also spent 14 years at Mobil Oil and Exxon Corp., where he was responsible for projects and programmes in multiple engineering specialties and across a broad range of environmental, health and safety issues.

Edited from press release by Harleigh Hobbs

CSX CFO Frank Lonegro has highlighted the company’s track record of success during the energy market transition and updated expectations for company performance at the Barclays Industrial Select Conference in Miami, Florida.

According to Lonegro, over the past five years, CSX has grown its merchandise and intermodal business faster than the economy and delivered strong pricing and efficiency gains despite a secular decline in coal and shifts in other energy markets. As a result, the company delivered compound annual growth in earnings per share of 4% during that period and an operating ratio below 70% for 2015.

However, the difficulties the coal industry is facing, the impact of the strong US dollar and low global commodity prices that impacted CSX in 2015 are expected to further challenge results in 2016.

CSX anticipates that coal volumes are likely to decline more than % and most other markets to continue posting y/y declines this year.

“Based on the trends so far this year, we expect volume to decline in the mid-high single digits this quarter and to gradually moderate as we move through the year,” Lonegro said. “We expect first quarter earnings to decline significantly, reflecting both this volume environment and the fact that we are cycling more than US$100 million in unique items from the first quarter of 2015.”

For 2016, the company is carrying targeting US$200 million in productivity savings. In addition, Lonegro reiterated that CSX continues working to further reduce structural resources and to match resources with volume declines near term, while also remaining well-positioned to serve demand shifts once the economic challenges begin to subside.

“In this environment, we continue to focus on the things most in our control, including delivering safe, reliable service that increases operational efficiency and supports strong pricing for the value we provide to customers,” Lonegro explained. “As we look toward a future with significantly less coal, our strategy includes rationalising and realigning the network to match decreased demand in some markets and adjust to increases in others, investing in clearance and terminal projects to leverage intermodal growth, and optimising technology to serve the CSX of tomorrow as we continue to target a mid-60s operating ratio longer term.”

Edited from press release by Harleigh Hobbs

Caterpillar Inc. has selected Rimco, a privately owned Puerto Rico-based company, to be the Cat dealer for Cuba.

Currently, Rimco serves as the Cat dealer for Puerto Rico and the Eastern Caribbean. Upon easing of trade restrictions, customers in Cuba will be able to purchase Cat products through Rimco in accordance with US and Cuba regulations.

“We’re pleased to take this important step with our longtime partner, Rimco,” said Philip Kelliher, Vice President with responsibility for the Americas & Europe Distribution Services Division. “Cuba needs access to the types of products that Caterpillar makes and, upon easing of trade restrictions, we look forward to providing the equipment needed to contribute to the building of Cuba’s infrastructure. This momentous announcement is part of our preparations in anticipation of the United States lifting its 55-year-old trade embargo on Cuba.”

“We’re exceptionally proud of our 34-year relationship with Caterpillar,” explained Richard F. McConnie, President of Rimco. “There is great affinity between Cuba and Puerto Rico as a result of our shared language, culture and traditions. Rimco will be honoured to serve the Cuba market once the United States and Cuba re-establish commercial relations.”

On 17 December 2014, President Obama announced that the US would move to normalise relations with Cuba. Since that historic day, embassies have opened in each nation and there have been gradual steps to open diplomatic and economic ties between the two countries.

While steps remain until relations are fully normalised, including lifting the embargo, Rimco and Caterpillar will continue preparations to best serve the Cuban marketplace with construction and mining equipment, power systems, marine and industrial engines.

Edited from press release by Harleigh Hobbs

Bharat Heavy Electricals Ltd (BHEL) has successfully commissioned a 270 MW coal-based power project in Punjab, India.

The unit has been commissioned at the upcoming 540 MW (2 x 270 MW) Goindwal Sahib coal-fired Thermal Power Project of GVK Power & Infra Ltd (GVKPIL), located in the historic city of Goindwal Sahib in Tarn Taran district, near Amritsar in Punjab.

BHEL expect to commission the project’s second unit shortly.

For the same developer, earlier this fiscal year, BHEL had commissioned 4 hydro sets of 82.5 MW each at Alaknanda Hydro Power Project in Uttarakhand. The thermal sets of 270 MW rating are an in-house improvisation of the 210/250 MW sets supplied earlier by BHEL, which form part of the backbone of the Indian power sector and have been performing much above the national average as well as international benchmarks.

BHEL has so far contracted 35 sets of 270 MW rating, out of which 10 sets have now been commissioned.

BHEL’s scope of work in the Goindwal Sahib project envisaged design, engineering, manufacture, supply, erection and commissioning of Steam Turbines, Generators, Boilers, associated Auxiliaries and Electricals, besides state-of-the-art Controls & Instrumentation (C&I). The Boiler and its auxiliaries have been manufactured by BHEL at its Tiruchirapalli and Ranipet works in Tamil Nadu, while the Steam Turbine and Generator were manufactured at the company’s Haridwar plant. The Pumps and Heat Exchangers were manufactured at its Hyderabad plant and the Electricals at the Bhopal plant, while the C&I system was supplied by BHEL’s Electronics Division, Bangalore.

Edited from press release by Harleigh Hobbs

Following the Supreme Court staying the Environmental Protection Agency’s (EPA) Clean Power Plan, the state of Michigan said that it is no longer preparing to comply with the Obama administration’s new emissions regulations for coal-fired power plants and intends to suspend carbon rule activities pending the court resolution to comply with the rule and its timeline for submissions.

Michigan will wait for resolution of the issue through the courts and then determine how best to proceed.

The state will, however, complete the modelling project currently under way and paid for, as those findings will be helpful for other planning and compliance activities.

DTE Energy Chairman and CEO Gerry Anderson has responded to Michigan’s intention to suspend work on the state’s plan to comply with the Clean Power Plan.

Anderson indicated that it was understandable to suspend development on the state’s energy plan until the regulations are clarified since “developing national energy policy is a complex process with a diversity of views nationally”.

He explained: “Here at DTE, we intend to stay focused on what is important to our customers – providing, affordable, reliable and clean energy.”

“Between DTE’s aging coal plants – some upwards of 60 yrs old – and the continuing costs of meeting a variety of new EPA regulations, many of these plants will need to be retired within the next few years and that process will continue in the decade ahead. We need to move forward with the retirement of these plants and replace these facilities with cleaner natural gas and renewable generation,” Anderson continued.

“We will continue to work with our legislators in Lansing to develop energy policy that ensures Michigan residents get the reliable energy supply they need as we proceed through this transition. The key elements of what is being discussed in the proposed energy legislation are foundational to ensuring that Michigan retains control of its clean energy future and provides the framework for replacing aging infrastructure, including much of our state’s coal generation fleet.”

Edited from press release by Harleigh Hobbs

New coal export terminals on the Pacific Coast of North America were a “miscalculation”, according to a new blog post from Wood Mackenzie’s Andy Roberts, as the slump in global coal prices and contraction in Asian demand has made US coal unable to compete with regional suppliers.

“Three short years ago, the conventional wisdom was both that growing thermal coal demand in Asia couldn’t be met by regional suppliers and that low-cost coal from the US would fill the breech,” Roberts writes. “The intervening three years have made clear what a miscalculation that was. Opposition to major projects – Gateway Pacific, Millenium and Port Morrow – has been effective […] But as challenging as this was for port developers, the larger problem has been economic.”

Roberts point out that over the past three years the cost advantage that coal from the Powder River Basin (PRB) enjoyed over Indonesian coal has disappeared to the extent that the delivered cost of Indonesian coal is now US$12 below that of PRB coal. Three years ago the roles were reversed: the delivered cost of PRB coal to Asia was US$20 below Indonesian coal.

The decline in competitiveness of US coal on the global market has seen US coal exports plummet over recent years to just 58.7 million short t in 2015 compared to a peak of 125.8 million short t in 2012, according to date from the US Energy Information Administration.

In addition to falling demand for coal and associated weakening of global prices on an oversupplied market, US exports have been particularly hit by the strong US dollar against other producer currencies – particularly the Australian dollar and Indonesian rupiah.

In a sign of the times, last year PRB-focused miner Cloud Peak Energy revised its shipping agreements with Canadian port, Westshore Terminals, and US rail operator, BNSF, to eliminate volume obligations for the period 2016 – 2018. As a result, Westshore said it expected coal throughput to drop to 26 million short t in 2016 from a forecast 30 million short t.

Edited by Jonathan Rowland. Read Andy Robert’s full blog here. 

US shipments of coal by rail have started the year significantly lower than the same period in 2015, according to data from the Association of American Railroads (AAF).

Coal carloads fell 30.3% in the week ending 6 February – the latest week data is available for – to 73 298 carloads, continuing a trend seen in January, when coal carloads were down 33.3% on 2015.

2016 coal rail shipments (purple) have slumped by about a third compared to 2015 (blue)

The slump in coal shipments comes as US utilities turn increasingly to low-cost natural gas, as well as drawing down stockpiles of coal that stood at 175.8 million short t at the end of October 2015, according to date from the US Energy Information Administration (EIA).

Meanwhile, Peabody Energy said it expects shipments of coal to fall by between 150 and 170 million short this year on projected coal plant retirements and natural gas switching, which will see utility demand for coal fall by 40 – 60 million short t, as well as stockpile drawdown.

In its recent full-year results release, US rail company Norfolk Southern announced coal revenues down US$1.8 billion in 2015 due to a 16% fall in volumes and announced a series of measures to control costs in 2016.

Earlier in January the company said it would combine its Virginia and Pocahontas divisions, which cover the Appalachian coal region, into one new Pocahontas division, saying that it needed to be “nimble and adapt to changing market conditions.”

Fellow US rail operators, BNSF – which covers the Power River Basin (PRB) in the west of the country – revised its agreement with PRB coal miners Cloud Peak Energy, removing volume obligations for the period 2016 – 2018: another acknowledgement that coal shipments were to be lower than forecast when the agreements were first signed.

In addition to falling utility demand, US coal shipments have also suffered from the collapse in US coal exports from a peak of 125.7 million short t in 2012 to just 58.7 million short t in 2015 – with further falls expected this year.

Edited by Jonathan Rowland.

“Resources is to the Australian economy what the baggy green is to Australian sport,” according to Australian Minister for Resources, Energy and Northern Australia, Josh Frydenberg, referencing the iconic cap worn by the Australian national cricket team. “Totemic. Iconic. Indispensable to our national story and synonymous with out national identity.”

Speaking to the National Press Club in Canberra, Frydenberg launched a passionate defense of Australia’s resource industry and outlined a number of policies to support the industry through the current downturn.

“I want to dispel the fallacy that because the Chinese economy is transitioning that suddenly the demand for our hard commodities and the subsequent export income we earn from their sale will dry up,” Frydenberg continued. “To paraphrase Mark Twain: the rumours of death in Australia’s resource sector are greatly exaggerated.”

To back this up, the minister pointed to resilient exports of Australian iron ore and coal – which have increased substantially over the period from 2011 to 2015, despite falls in commodity prices.

“Despite price falls of between 43% and 57%, export earnings from [iron or and coal] fell only 16%,” Frydenberg said. “This reflects the lower Australian dollar and a 30% increase in coal export volumes and 60% increase in iron ore export volumes.”

Looking forward, Frydenberg noted that China – so often painted as the cause of the commodity markets woes – would still need Australia’s commodities, noting in particularly the need to grow China’s rail system.

“For a country with such a large land mass and population, its rail system is one third of the size of that of the US and sixth of that in the EU,” Frydenberg noted. “That seems to provide a lot of scope for Australia’s iron ore and metallurgical coal.”

Frydenberg also pointed to Indian demand – particularly for thermal coal – noting that India’s Minister for Power, Coal and New and Renewable Energy, Piyush Goyal, has said on a recent visit to Australia that his country could “be expanding our coal-based thermal power. That is our baseload power.”

India’s steel consumption is also comparatively low, offering opportunities to increase metallurgical coal imports as demand grows. Unlike thermal coal, India lacks the good quality metallurgical coal that is Australia’s speciality.

“But we can’t be complacent,” Frydenberg concluded, calling on the industry to continue to invest in science and innovation and outlining a number of policies that the federal government was exploring to support the country’s resources industry.

These focused on using government expertise – in the form of Geoscience Australia – to support geological exploration, as well as reforming industrial relations within the mining industry.

“Geoscience Australia has the technical capacity to undertake geological mapping of mineral deposits both near the surface and to depths down hundreds of meters,” Frydenberg said. “This can be of great assistance to companies who cannot afford mapping on such a large scale in search of the next tier one deposit”

Frydenberg also pointed to a Western Australian study that estimated that the rate of return for every dollar invested in pre-competitive programs has a multiplier of more than 20 times. “With pressures on company balance sheets leading to a significant decline in exploration activity, there is no better time for the government to undertake such a programme,” Frydenberg concluded.

The minister also called for a more collaborative approach to industrial relations, arguing that there was a need to “leave the mindset of capital versus labour”.

That claim may sound hollow to unions, however, as Frydenberg described a number of reforms that would see the reestablishment of the Australian Building and Construction Commission, which was abolished in 2012 by the government of Julia Gillard and which had been responsible for monitoring workplace relations in the Australian building and construction industries.

Frydenberg also said the government would reduce union right of entry at sites where they have no members and have not been invited, as well as extending the duration of greenfield agreements to the duration of the construction period.

The minister finished on a note of optimism: “The resources and energy sector have been here before […] The good new for the sector is that Australia has the economies of scale, innovative practices, highly-stilled workforce and proximity and access to markets that give us the resilience we need at this time.”

Edited by Jonathan Rowland.

Sandvik has joined the Coalition for Energy-Efficient Comminution (CEEC), an organisation established by the mining industry, for the mining industry, to support knowledge sharing and change in an area of high energy consumption.

The mining sector is an energy intensive industry and almost half of this energy is consumed by the comminution process: size reduction to liberate the valued minerals for subsequent processing/beneficiation stages. Attempts have been made to reduce the amount of the energy consumed in comminution by setting up energy efficient comminution circuits. CEEC has made efforts to increase the rate at which more energy-efficient comminution data sets, processes and technologies are developed, demonstrated, shared and applied.

This is expected to contribute directly to the industry’s target of reducing the energy needed in comminution, protect the environment and reduce operational costs, while delivering shareholder value.

“By being a part of the CEEC organisation, our objective is to take an even more active role in supporting and developing eco-efficient comminution solutions for our mining customers globally and to collaborate with other CEEC’s sponsors towards sustainability,” commented Hamid-Reza Manouchehri, Global Manager, Process Intelligence and Development, Sandvik Mining. “Our sponsorship will also facilitate closer collaboration among different manufacturers and academics towards sustainability.”

Comminution is the process in which ores/rocks are reduced in size by blasting, crushers and mills and other related equipment to liberate valued minerals for beneficiation stage. As mining’s major energy consumer, comminution has long been the main focus for sustainability. Sustainability in comminution, in particular its energy efficiency, has been the subject of several research, development and innovative projects worldwide.

Billions of tons of ores, cement and agreagates are comminuted annually due to the increasing demand for sustainable development. To meet the rapid growth in demand, significant advances have occurred in the design and construction of equipment, mainly due to improvement in energy and materials technologies that must be adapted specifically for the comminution process.

“As a leading supplier to the mining industry we offer safe, reliable and productive solutions to support the sustainable development of the industry,” Manouchehri explained. As the comminution arm of Sandvik Mining, I believe Sandvik crushing and screening has a lot of knowledge, experience and R&D heritage to strongly contribute in improving energy efficiency in comminution. CEEC is an ideal platform to share the knowledge, ideas and experience.”

Edited from press release by Harleigh Hobbs

One of Talen Energy Corp.’s subsidiaries has completed the sale of C.P. Crane LLC, which owns and operates the 399 MW C.P. Crane coal-fired power plant near Baltimore, Maryland, US, to an affiliate of Avenue Capital Group.

The sale supports mitigation measures required by a December 2014 Federal Energy Regulatory Commission order approving the transactions that formed Talen Energy.

The company expects to complete the remaining asset sales to satisfy the FERC order by the end of 1Q16.

Proceeds of the sale were not material. Effects of the sale on 2016 Net Income, Adjusted EBITDA and Adjusted Free Cash Flow are not expected to be material.

Goldman Sachs served as financial advisor to Talen Energy. Kirkland & Ellis was Talen Energy’s transaction counsel.

Edited from press release by Harleigh Hobbs

Kibo Mining has released the results of the special analysis (specific metallurgical tests) on the Mbeya coal resource – part of the Mbeya coal-to-power project (MCPP) – in Tanzania.

“The metallurgical test results received have proven that the Mbeya coal not only meets, but exceeds the standard technical requirements of the power plant,” said Louis Coetzee, Kibo’s CEO. “With these latest results, the Mbeya coal resource has now passed all the technical and economic requirements to qualify as a suitable long-term fuel sources to the Mbeya power plant.”

The MPCC includes the development of a 250 – 350 MW mine-mouth coal-fired power plant. Last year it signed a joint development agreement with Chinese EPC contractor, SEPCO III, for the completion of the definitive prefeasibility studies (DFS) related to the project.

“The results from the metallurgical work on the Mbeya coal resource marks another major step forward in the development of the MCPP,” Coetzee continued. “We can not focus all our attention and resources on concluding the remaining mostly administrative and commercial aspects of the MCPP DFS.”

The metallurgical tests found that the ash fusion temperature (in both oxidizing and reducing environments) of Mbeya coal was well above the boiler operating temperature, while the abrasive index was well with the specifications for use with fluidised bed technology.

Sulfur content of Mbeya coal is within tolerance and lime injection technology will be able to keep sulpfur dioxide emissions within international standards. Ash content was within tolerance levels for similar coal deposits in southern Africa.

Kibo Mining is listed on the AIM market in London and the AltX in Johannesburg. The company is focused on developing mineral projects in Tanzania with various gold-focused interests, as well as its coal interested at the MCPP and coal and uranium Pinewood project, which it is developing in joint venture with Metal Tiger Plc.

Edited by Jonathan Rowland.

Thermal coal imports were among the biggest growth sectors for India’s major ports, coming in behind only finished fertilizer in terms of year-on-year growth – but with a significantly higher total tonnage.

Thermal coal imports were up 13.32% in the period April 2015 – January 2016 compared to the same period the year before. In total, India’s 12 major ports handled 80.1 million t of thermal coal compared to 70.6 million t between April 2014 and January 2015.

Port of Paradip handled the most thermal coal with imports for the period totaling 25.3 million – up slightly on the year before. Port of Kamarajar (formerly known as Ennore) handled 20.5 million t.

Port of Kandla continued to show strong growth in its thermal coal imports, handling 12.4 million t compared to 8.2 million t over the previous year. Growth was also strong at V.O.Chidambaranar, which handling 9.6 million t of thermal between April 2015 and January 2016, compared to 6.8 million t the year before.

On the metallurgical coal side, things were less positive with the major ports handling 1.2% less than the previous year. Overall, the major ports – which are controlled by the Indian central government and are responsible for the majority of Indian seaborne cargo traffic – saw an increase of 3.36% in cargo traffic.

Edited by Jonathan Rowland.

At Coal & Allied’s Mount Thorley Warkworth mine in the Hunter Valley region of New South Wales, a new system of ‘light horns’ has been used to replace audible horns during night operations in order to reduce noise during night-time operations for neighbouring community members.

The entire fleet of excavators and shovels at the opencast coal mine is now equipped with visual light horns.

Mount Thorley Warkworth General Manager Operations, Mark Rodgers, said: “We’ve invested in installing light horns as part of our ongoing work to continuously improve the way we manage noise from our operations for our neighbours. The light horns use coloured flashing beacons to replace the traditional system of audible horn signals used to communicate between operators in trucks, excavators and shovels during positioning and loading.”

Rodgers continued: “Using these visual light signals is now compulsory on all excavators and shovels used in our operations at night, with the exception of conditions such as heavy rain that may limit visibility.”

The introduction of light horns complements a range of other measures being applied at Mount Thorley Warkworth to reduce noise for community members. These include being on track to sound attenuate all of heavy mining equipment by the end of this year, real-time and attended noise monitoring, and machinery modifications, such as the installation of ‘quackers’ that reduce the long distance noise from trucks reversing.

Edited from press release by Harleigh Hobbs

Doosan Skoda Power, a subsidiary of French ENGIE (ex-GDF Suez), was recently awarded a turnkey contract to supply a high-efficient steam turbine generator set for the IEM1 (Infraestructura Energética Mejillones) coal-fired power plant in Chile.

Located in the Antofagasta region, this will be the largest steam turbine from Doosan Skoda Power to be installed in Latin America with an output of 375 MW.

“Skoda has been providing services to IEM1 in Chile for more than 20 years. Based on our long-term partnership, we now have the unique opportunity to participate in this new and important project. Doosan is proud to be part of an important chapter in the Chilean power sector, as also proved by the selection of Doosan Boiler (DHI) for the IEM1,” commented David Zeman, Manager for Latin America, Doosan Skoda Power.

The steam turbine is specifically designed to withstand high seismic activity in Chile and is based on proven Doosan Skoda Power designs installed near the Antofagasta region, a similarly high-risk earthquake zone.

It has a double casing design with a combined high-pressure and intermediate pressure part, a double flow low-pressure part and steam reheat, and uses advanced structural elements and nodes, such as highly efficient 3D blading and welded rotor.

“Following Doosan Skoda Power’s success in the CSP Atacama projects and the CCPP Kelar project in Chile, the EIM1 project brings another reassurance that the focus on Latin American markets is the right path for strengthening the company’s position,” explained Zeman.

The EIM1 power plant is scheduled to come online in mid-2018 and design manufacturing of major components is scheduled to be delivered by the end of 2016.

This project will subsequently increase the total capacity of Doosan Skoda Power steam turbines installed for the past 15 years in Latin America to nearly 2.4 GW.

Edited from press release by Harleigh Hobbs

A leading underground coal contractor, Mastermyne Group, has recorded 1H16 revenue of AUS$99.7 million – up 28% on pcp. 1H16 EBITDA came in at AUS$3.5 million, which is an increase of 73% on pcp, and an underlying NPAT loss was AUS$0.5 million – an improvement on the previous period, which was AUS$5.8 million. Mastermyne reduced debt by AUS$2.5 million over this period.

Mastermyne’s Managing Director, Tony Caruso, commented: “All things considered we are pleased to have delivered a resilient performance amidst the tough conditions being experienced across the resources sector at this time. Our underground Division, which has again, delivered a robust result and we are confident that we have built a solid platform which will enable us to continue to generate cash returns.”

The company has reported a strong balance sheet to support operations and has made a resilient performance despite tough industry conditions. It has indicated its Mining Division has continued to deliver projects injury free and deliver a strong financial result. The Mastertec Division was noted to have suffered from the continued deferral of maintenance and engineering spending.

During this period, Mastermyne has been restructuring the parts of its business that were not delivering by consolidating workshops, reducing overhead roles and focusing on business development and tendering, in order to reduce overheads and minimise costs.

The company has indicated it will focus on business development and tendering, diversification and key partnerships in order to stay cash positive.

Edited from press release by Harleigh Hobbs

A mountaintop removal operation in Wise County, Va.

By THE EDITORIAL BOARD

February 16, 2016

Leigh Creek Energy Ltd (LCK) has completed the sale of the final tranche (6 263 802 shares) of the remaining Treasury shares owned by LCK. Approximately 80% of these shares have been placed with US domiciled funds, with the remaining shares committed to Australian investors and to be finalised over the coming days. This final tranche will raise AUS$1.63 million before applicable costs.

LCK owned shares in itself as a result of the acquisition of ARP TriEnergy Pty Ltd (TriE) and then re-listing in July 2015. TriE owned 15 million shares at the time of its acquisition and the original purchase price of these shares was AUS$0.037 per share for a total of AUS$555 000.

The cumulative sale of the 15 million Treasury shares will have raised a total of AUS$3.428 million (gross) for an average sale price of AUS$0.229 per share creating a gross profit on sale of AUS$2.873 million. LCK has used the purchase and the sale of these shares as a mechanism to fund its operational needs without additional dilution to shareholders in the early stage of its efforts at the Leigh Creek Energy project (LCEP).

LCK was required by the regulator to dispose of the Treasury shares it owned by July 2016.

David Shearwood, Managing Director of LCK commented: “The use of Treasury shares to fund the early stage of LCK has been a success by creating an extra AUS$3 million in non-dilutive capital. This mechanism has permitted LCK to reach the stage of gas supply contract negotiations without the need to dilute existing shareholders and follows the recent delivery of independent certified 2C recoverable gas resources.”

Shearwood continued: “Importantly as we now work towards securing gas contracts, we are concurrently intending to monetise some of our gas resources in order to again reduce our need for equity. This may come in many forms, from gas options, to gas pre-payments, sale of gas in ground or sale of a part of the LCEP itself. The board of LCK is open to all possibilities as financial modelling indicates the rate of return to shareholders is significantly enhanced by gas monetisation.”

“I am very pleased with the progress of gas sales discussions which are being driven by Mr Garry Marsden, our General Manager Commercial, as we work towards bringing our gas to market and provide an additional source of gas to the supply constrained Australian east coast gas market,” stated Shearwood.

He concluded: “This is an exciting time for our staff, shareholders and our wider stakeholders and I take this opportunity to thank all of you for your efforts and invaluable support. I look forward to updating investors frequently with additional news.”

Edited from press release by Harleigh Hobbs

The US Mine Safety and Health Administration (MSHA) has asked for US$397 million in funding and 2277 full-time workers as part of President Barack Obama’s 2017 budget request to Congress – a small increase from the US$395 million funding requested last year. The MSHA funding forms part of a US$1.9 billion request for the Department of Labor’s worker protection agencies.

“Everyone is entitled to a safe place to work so that they can earn a living and provide for their family,” wrote Joseph Main, Assistant Secretary of Labor for Mine Safety and Health, and Dr David Michaels, Assistant Secretary of Labor for Occupational Safety and Health, in a blog post defending the budget requests. “Yet everyday, workers across the country and injured and killed on the job in preventable accidents. We need to make strong investments in the health and safety of America’s workforce so that everyone can return home safely.”

The MSHA funding will be used to finalise and implement new rules on dust control in underground coal mining – a part of the ‘End Black Lung – Act Now’ campaign – and proximity detection systems on continuous miners, as well as provide training assistance to the mining industry.

The second phase of MSHA’s coal dust rule came into effect on 1 February and requires coal mine operators to collect an increased number of samples to prevent overexposure to coal mine dust – the cause of black lung or coal miners’ pneumoconiosis. The rule survived a legal challenge at the end of January from two groups representing the coal industry and now moves on to phase three in August 2016, which tightens dust exposure levels to just 1.5 milligrams per cubic meter of air.

The budget request also includes US$2 million to replace laptops carried by the agencies enforcement personnel, which are used by to log violations and notes following mine inspections.

“No one should have to sacrifice their life for their livelihood,” conclude Main and Dr Michaels. “President Obama’s budget request reflects that commonsense imperative. The Labor Department is proud to work everyday to protect more than 130 million workers on 8 million work sites in the United States and this budget will enable us to do so in 2017 and beyond.”

Edited by Jonathan Rowland.

Morien Resources Corp. has provided an update on development activities at the Donkin coal project in Cape Breton, Nova Scotia, Canadian province, where owner/operator Kameron Collieries ULC, a subsidiary of The Cline Group LLC, has been actively advancing the project toward production.

Initial mining is anticipated to commence in 2H16 with coal sales to follow the construction of a coal handling, preparation and processing plant (wash plant) – the design of the wash plant and earthworks are underway.

It is expected that, in the next 60 days, bulk sampling of target coal seam for testing by local power utility Nova Scotia Power Inc.

Additional underground assessment drilling has been completed and tunnel refurbishment is nearing completion.

A 69 kV electrical line from the town of Glace Bay to a newly constructed electrical sub-station at the project has been completed.

The assembly of the initial mine fleet has commenced, which includes one continuous miner, two roof bolters, and three personnel carriers on site, with a second continuous miner expected by mid 2016.

Mining plan calls for a room-and-pillar operation, which includes the use of four continuous miners.

The installation of conveyor infrastructure in the main access tunnel is underway with full installation of the conveyor system anticipated in 1H16.

A new warehouse/washhouse/office is under construction with scheduled completion in 1Q16.

Morien has reported that key members of operational team have been hired. There are 36 employees/contractors now on site and recruitment for the operating phase is continuing.

Edited from press release by Harleigh Hobbs

Anglo American has announced underlying earnings of US$457 million in its coal business in 2015 – level with the previous year despite a drop in revenue of US$920 million. Overall the company achieved underlying earnings of US$827 million, down 63% from US$2.2 billion in 2014, resulting in a full year loss of just under US$5.5 billion.

In Australia, the company recorded a 6% rise in coal production on the back of strong performance at the company’s longwall operations – including record production at Grasstree. Overall, production from Australian underground operations was up 33% on the previous year, while production from opencast operations fell 4%.

Underlying earnings from Australia and Canadian operations were up by US$191 million to US$190 million as the production rise, cost reductions (including the benefits of a weaker Australian dollar) helped to offset a 19% fall in the average quarterly hard coking coal benchmark price. Export FOB cash costs of US$55 per tonne were 23% lower in US dollar terms and 7% lower in local currency terms than 2014.

The closure of the company’s Canadian operations at Peace River also had a positive impact on earnings.

In South Africa, export production fell 4% due to the planned closure at Goedehoop and lower production at Mafuba as its transitioned to a new mining area. Industrial action at Landau also resulted in the loss of 0.6 million t of production. Despite this, export sales rose by 13% as the company drewdown stocks.

Meanwhile, production from mines supplying state utility, Eskom, fell 15% to 27.7 million t on the back reduced offtake by the power company at New Vaal and Denmark and unplanned dragline maintenance at Isibonelo. South African earnings fell 34% to US$230 million – a result of a 21% fall in the export coal price and the industrial action at Landau.

Earnings from Anglo American’s stake in the Cerrajon mine in Colombia also fell by 45% to US$90 million owing to weaker prices and a weather-related fall in production, which saw company’s share of production fall by 1% to 11.1 million t. Cerrajon is jointly owned by Anglo American, Glencore and BHP Billiton.

Edited by Jonathan Rowland.

Despite difficult market conditions, Whitehaven has reported a net profit after tax of AUS$7.8 million for the half year ended 31 December 2015 (the first half of FY2016).

The company’s sales revenue rose 54% to AUS$574.3 million. Operating EBITDA rose 104% to AUS$106.4 million on the back of a 40% increase in operating margin and operating cash flow saw an increase of 421% to AUS$118.3 million.

Whitehaven saw record ROM and sales of coal of 7.1 million t and 7.3 million t, 59% and 55% higher respectively than the pcp reflected increased production and sales from Narrabri and first commercial production and sales from Maules Creek.

The company reported that Narrabri established a new calendar year production record of 8.3 million t ROM coal for 2015 – positioning the mine as one of the top three underground mines in Australia.

Maules Creek exceeded its ramp up schedule by producing 3.3 million t ROM coal in the first half and was operating at 8.5 million tpa ROM coal rate in December.

Whitehaven Coal Managing Director and CEO Paul Flynn commented: “Whitehaven recorded a range of significant achievements in the first half with major improvements across all key financial performance indicators. The results are particularly pleasing because they have been achieved at a challenging time for the industry, meeting all our commitments we have made to the market.”

“Whitehaven’s high-quality coal, which produces more energy and fewer emissions per tonne than almost all competing coals, is being well received in our Asian markets where there is strong and growing demand for cleaner coal … Customer feedback on the coal we are producing at Maules Creek is exceptionally positive,” continued Flynn.

“Whitehaven remains positive about the medium- and long-term outlook for coal, particularly the outlook for the high-quality coal we produce. Our coal is highly sought after by customers and countries that have an appreciation for the critical role high-quality coal does play in creating an economically competitive, low emissions future,” concluded Flynn.

Edited from press release by Harleigh Hobbs

Anglo American has signaled its intent to exit from coal production as the company aims to slim down to just 16 assets focused on its De Beers diamond, platinum group metals (PGMs) and copper businesses.

As a result, the Moranbah and Grosvenor metallurgical coal mines in Australia will join the list of assets on the company’s lengthy for-sale list. The company has already agreed the sale of the Dartbrook and Callide coal mines in Australia and had previously announced it would look for buyers for its South African coal business.

The Grosvenor project has only recently been completed and is likely to be one of the company’s more attractive assets – but Anglo is unlikely to receive anywhere near the US$1.95 billion that its construction cost.

In addition to coal, the company is also aiming to sell its nickel, niobium and phosphates businesses and said it would consider its options for its Kumba Iron Ore subsidiary – including a spin off. Options for the company’s Minas-Rio iron ore project in Brazil would also be assessed following completion of development work over the next three years.

The company also said that it would further cut costs and improve productivity, aiming for a US$1.9 billion boost to its underlying earnings in 2016. Of this, US$700 million will be productivity-related gains, while US$1.2 billion will come from reducing operating and support costs – including a 60% reduction in the size of Anglo American’s business support operations from a current 11 500 roles to fewer than 5000.

CAPEX will also fall by US$3 billion in 2016 compared to 2015 as various projects – including Grosvenor – reach completion and Minas-Rio continues to ramp up. In 2017 CAPEX will fall again to US$2.5 billion.

“We are taking decisive action to sustainably improve our cash flows and materially reduce net debt, while focusing on our most competitive assets,” said Anglo’s CEO, Mark Cutifani. “We are creating the new Anglo American.”

The significant realignment in Anglo’s business comes as the company announced a full-year loss of almost US$5.5 billion that comes on the back to weakening commodity demand around the world – but particularly in China – that has seen commodity prices crash.

Edited by Jonathan Rowland.

The latest coal export data for January has shown that regional Queensland continues to do the heavy-lifting for the state’s coffers and demand continues to remain strong for the region’s high-energy, lower-emission coal.

Figures show that January 2016 saw a record of just over 19 million t for coal exports – 8% higher than January 2015.

The latest export figures for January show that Queensland regions are also the heavy lifters when it comes to royalty contributions, according to Queensland Resources Council Chief Executive Michael Roche. He indicated the Queensland government would receive royalties on those 19 million t, even though one in every three Queensland coal mines is operating at a loss.

Roche said although industry has taken a hit during the commodities fall, record production levels persist across the sector. He explained that “the coal ports of Abbot Point, Dalrymple Bay, Hay Point and Gladstone all had their strongest ever January.”

According to Roche, the export figures also show there is strong demand from Asia for Queensland’s high-energy value, lower-emission coking and thermal coal remains strong.

Roche said that the Queensland coal industry’s ability to maintain this strong export performance is not unlimited, especially for those mines running at a loss: “Some mines remain open only because their high fixed costs (for example rail and port charges) mean that, if they were to close, the losses could be even greater. This higher production allows mines to spread their fixed costs over more tonnes,” Roche said.

He continued: “If the Queensland government wants to see this strong export performance and flow of royalties continue, then they need to work with industry on a comprehensive plan to deliver some breathing space … In the absence of such a plan, our fear is that more mines will be forced to close.”

Edited from press release by Harleigh Hobbs

Global growth in coal demand will slow to just 0.5% per year over the next 20 yr, according to the latest BP Energy Outlook. This compares with growth of 3% per year over the past two decades. In contrast, global gas demand will grow by 1.8% per year over the outlook period, seeing the fuel overtake coal as the second-largest primary energy source by 2035.

“Coal suffers a sharp reversal in its fortunes,” the oil and gas giant said. “After gaining share since 2000, the gowth of coal is projected to slow sharply such that by 2035 the share of coal in primary energy is at an all-time low.”

Coal’s slowdown will come primarily on the back of significant slowing in coal demand from China as its economy rebalances away from energy-intensive heavy industries. According to BP, China’s demand for coal will grow by just 0.2% per year to 2035 – sharply down from the growth of over 8% experienced between 2000 and 2014.

By 2030, China’s coal demand falls into decline, although it remains the world’s largest coal market and is still responsible for over half of global coal supplies by 2035. Coal demand also falls significantly in both the US and OECD Europe on plentiful gas, cheaper renewable generation and strong environmental regulation with both regions seeing demand decline by more than 50%.

In contrast, India shows the largest growth in coal demand and overtakes the US to become the world’s second-largest consumer of coal.

Not all agree with BP’s outlook, however, with World Coal Association CEO, Benjamin Sporton, criticisng the oil and gas giant for failing to take into account International Energy Agency (IEA) forecasts that show key economies in southeast Asia turning increasingly to coal in coming years. As a result, the IEA sees coal’s share in power generation increasing from 32% to over 50%.

Edited by Jonathan Rowland.

World Coal Association CEO, Benjamin Sporton, has made the case for supporting advanced coal technologies in India at the sixth World PetroCoal Congress in Delhi.

“India has made it very clear that coal will be critical to delivering its economic development and energy access objectives,” Sporton told the conference. “India is working hard to reduce emissions from coal but it would benefit from greater international support to build modern coal technology.”

Key to his argument were the findings of a recent WCA report on India’s energy needs that found high-efficiency low-emission coal technology to be essential in if India is to provide affordable energy while still cutting emissions.

“Our research shows that, while renewable technologies, such as solar PV, in India could result in high emission abatement, they do not provide the scale of generation growth required to meet electrification targets. Modern high efficiency coal plants can actually abate carbon emissions at a much lower cost compared to solar PV and provide almost four times as much increase in power generation,” Sporton said.

“All forms of electricity will have a role to play in India, indeed non-hydro renewables are forecast to grow almost exponentially – but our analysis shows the huge co-benefits of building modern coal plants. It’s for that reason that the WCA believes there must be more international support for high efficiency low emission coal technology,” Sporton said.

Yet current developments in international coal financing policy seem to be heading in the opposite direction, with more restrictive positions from the World Bank and OECD.

“The international community needs to be taking an approach that helps deploy the most efficient coal in place of the least efficient coal technology, rather than just ignoring the reality that coal will play a very significant role in industrialising and urbanising economies like India,” Sporton concluded.

Edited by Jonathan Rowland.

US coal companies should be far more aggressive in closing mines if the oversupply in the US market is to be resolved. Failure to do so is to miss the “fundamental point of this depressed market,” the Institute for Energy Economics and Financial Analysis concludes in a recent report into Peabody Energy’s recent financial performance.

Peabody recently reported a full-year loss of US$1.86 billion from its continuous operations and lowered its outlook for coal demand at US utilities by 40 – 60 million short t. That, combined with an expected running down of power plants stockpiles, could see US coal shipments fall by 150 – 170 million short t in 2016.

“Current coal markets […] highlight the fact that the coal industry in general […] must become substantially smaller to [survive]. More mines need to close,” argue the report’s authors, Tom Sanzillo, Tim Buckley and Clark Derry-Williams.

Looking specifically at Peabody, the report calls the company’s production reduction plans “inadequate and [not] fully responsive to the declining price of coal”. Moreover, it current strategy of asset divestments risks exacerbating the problem as the buyers of those assets continue to flow of unwanted coal onto the market.

“Peabody is trying to manage its debt problems by selling mines for cash to competitors who will then further flood an already oversupplied market,” the report continues. As a result, “Peabody’s debt management plans – asset sales, debt exchange and self-bonding cost control – will be insufficient even if they are successful.”

Sanzillo, Buckley and Williams-Derry conclude that “if coal prices have any chance of turning around, the company must use the primary tool it has in its control: closing mines to drive down the supply of coal commensurate with market demand.”

That criticism was echoed by coal industry analyst, Stephen Doyle, founder of Doyle Trading Consultants and President of BtuBarron, who called Peabody’s results “every bit as ugly as they appear” in an emailed statement to World Coal.

According to Doyle, proposed production cuts in the US coal sector have come “way to late”.

“The mantra of 2014 was how much liquidity the coal companies had – including those who have since filed for Chapter 11 [bankruptcy protection]. Instead of collectively using that liquidity to close production, the coal companies collectively thought they all could be the last man standing,” Doyle said.

Edited by Jonathan Rowland.