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MAGAZINE

Inside the Asia Pacific coal industry

AUGUST 2013

Indonesia

spotlight

INSIDE

Neighbour on the agenda

• Explosive issue • No Pike charges • Coal Prep


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regular

features

Editor’s Chair ............................ 2 News ........................................ 9 Regional Round-up .................. 20

4

Coal Prep ................................ 25

Inside the Asia Pacific coal industry

Inside the Asia Pacific coal industry

MAGAZINE

Published by Aspermont Ltd (ABN: 66 000 375 048)

Inside the Asia Pacific coal industry

MANAgiNg Editor: Michael Cairnduff SENior Editor ENErgy: Noel dyson Editor At LArgE: Lou Caruana WritErS: tess ingram, James Mcgrath, donna Schmidt, david Upton Inside the Asia Pacific coal industry

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Cover Story: Indonesian attitude

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Safer Indonesia

Despite Prime Minister Kevin Rudd’s calls, Australia’s miners are well and truly involved with Indonesia.

Safety is set to improve in Indonesia despite the race for more tonnes.

ExECUtiVES: Chief Executive officer – Colm o’Brien general Manager – trish Seeney Chief Financial officer – John detwiler

13 Explosive answers

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20 Regional Round-up

How a gas shortage may start to cost Australian coal miners.

Coal news from around the Asia-Pacific.

25 Coal Prep

Belting technology has evolved to the point where it can take the place of chains.

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from the

editor’s

chair

Political times AS THIS edition of CoalAPAC goes to print, Australia may actually have a date for its next election. The poll had been due on September 14, however, a last minute leadership challenge left the country run by Kevin Rudd for a second time. The recycled Rudd wasted no time in scrapping the September 14 election date – if nothing else an astute political decision to put the Opposition off balance. However, he also wasted no time in showing he had not learned anything from his previous axing. Back in 2010 Rudd’s cabinet colleagues lost patience with his noninclusive way of working and tipped him out in favour of his then-deputy Julia Gillard. The emissions trading scheme and the Resources Super Profits Tax – basically sprung on cabinet colleagues, industry and the public alike – were prime examples.

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Gillard quickly showed she was a master of consensus politics and also a very capable cabinet manager – all the things Rudd was not. Hence the return of Rudd. Rudd II was going to be far more inclusive. He was going to listen to industry and his colleagues. Already the signs are there that nothing has changed. In quick order Rudd has done away with the carbon tax and made a change to fringe benefits tax to pay for it that could not only destroy the car leasing industry but also Australia’s struggling car manufacturing industry too. No consultation with industry at all. Then came his move to have all illegal entrants to Australia resettled on Papua New Guinea. Given some of the commentary coming from Rudd’s Labor colleagues, it

appears that decision was as much a surprise to them as it was to the rest of Australia. One positive thing Rudd has done is try to revive Australia’s business ties with Indonesia. Back in the mid-1990s Indonesia was all the rage for Australian businesses in all manner of industries. Indeed, Asian countries such as Indonesia, Malaysia, Taiwan and Thailand were very much the target for Australian businesses. Back then, of course, the Chinese dragon was still slumbering. This all went extremely well and a lot of very good business was being done. Then the Asian cash cow became a mad cow and the 1997 Asian financial crisis struck. For a while Asia was forgotten – until a dragon started to stir. – Noel Dyson

August 2013 I CAP


COVER STORY

Indonesian attitude Prime Minister Kevin Rudd has called for Australian businesses to look to Indonesia for opportunities. Well, Australia’s mining sector is leading the way. By Noel Dyson

Companies such as Thiess have been active players in the Indonesian market for the past 25 years.

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August 2013 I CAP


J

ust days after he reascended to the Prime Ministership, Kevin Rudd was on a plane to Jakarta to catch up with his old friend Susilo Bambang Yudhoyono, the President of Indonesia. Once there, he stressed the point that Australian businesses should be looknig to Indonesia as a potential source of business. At this point, it might be churlish to point out that a number of Australian agricultural businesses in the livestock game had been looking to Indonesia until a former Labor Agriculture Minister shut down live exports for a while. “Today, Australia and Indonesia are much more than near neighbours,” Rudd said. “We are close partners. We are strategic partners. We are strong proud democracies. “We sit at the same diplomatic tables around the world – the G20, APEC, the East Asia Summit. “Both our countries are living through a time of truly historic change.” A few days later at the the National Press Club, Rudd picked up the refrain again, this time pointing to the resources sector’s lead role in this area. “I am also concerned that if you went through our business elites, you would not find a whole lot of the top 25 executives in each of our top 100 firms who have spent any of their career time serving in Asia, the engine of the global economy through until mid-century,” he said. “Remember, this is the Asian century. “The truth is, Australia is much underdone in Asia beyond the resource and energy sector. “Indonesia is a classic example – an economy which, by 2050, is on track to become the fourth-largest econonmy in the world after China, India and the US. “But at present, Indonesia does not fall within our top 10 trading partners or our top 20 investment destinations.” Rudd’s refrain is not an uncommon one among Labor leaders. Back in the early 1990s, then prime minister Paul Keating got the Indonesiafacing ball rolling. Indeed, through much of the ’90s, Indonesia was on the to-do list of every Australian business with export aspirations. Then the Asian financial crisis struck and suddenly, Indonesia was just too far away for most. It never really won back its place in Australian business hearts either, because then China happened. Why go for number four, when number one is waking up? That is the general business community, though. Australia’s mining and mine supply companies have had Indonesia on their radar since about 1992 and never left. Thiess, for example, has been supplying mining services to Indonesia for the past 25 years. It holds a host of major contracts there.

CAP I August 2013

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Cover Story Much of the coal mining is done at surface, but there is a push for miners to go underground.

Austmine chairman Alan Broome, whose organisation represents Australia’s mining equipment, technology and services sector, said Indonesia was still very much one of its major export destinations. One such METS supplier is Remote Control Technologies. It has been supplying its systems, which allow miners to remotely control equipment such as bulldozers and underground loaders, to Indonesia since the early 1990s. RCT managing director Bob Muirhead said the company made its first foray into Indonesia in 1992. He said its products were used across all of the mining sectors there, from the Indonesian coal fields to the massive underground workings of Freeport McMoran’s Grasberg operation in Papua. The company also supplied the Ok Tedi mine. “We looked at it as a natural extension to the Australian market,” Muirhead said. However, just because it was an extension of the market did not mean it behaved like the Australian market. The way of doing business there is different to that in Australia. “It’s a market you need to have perserverance and persistence with,” Muirhead said. “The way of doing business there was so different to doing business in Australia. “But that’s no different to dealing in the 12 odd countries in Africa that we operate in. 6

“We just had to adjust to that. Then it was just a matter of working out the best way. “Our business model is to work directly with the mine, but we had to make adjustments where there is a local government requirement to have somebody in between the transaction. “Anyone who goes in thinking it’s exactly the same as doing business here has to adapt. You have to be broad in your perspective.”

the way of doing business there [Indonesia] is different to that in Australia. Not that Indonesia is the only place where companies such as RCT face challenges. “It’s no less challenging than going into the CIS [Commonwealth of Independent States] market and dealing with the middle of Siberia at -40C,” Muirhead said. Australian coal miners have also enjoyed success in the Indonesian market. Pan Asia Corporation is pursuing the TCM Underground High CV Thermal Coal Project in South Kalimantan, Indonesia. It differs from the other players, who are mainly pursuing coal at surface. However, Pan Asia executive Mitch Jakeman believes Indonesian conditions are suitable for underground coal mining and

that economics will eventually lead the push below surface. Orpheus has had good success with its surface mines in South Kalimantan operations. It is also considering a move into the infrastructure space, which may turn out to be a more lucrative option than actually mining the coal. Orpheus has also enjoyed some success in Papua. It seems every time it sends a team onto its Papuan tenements, they return with tales of even greater coal outcrops. Cokal is another Indonesia player having exploration success. It recently found what it was hoping for at its newly acquired Tambung Benua Alam Raya project in Indonesia, identifying more than 35 coal seam outcrops after just four weeks of geological surface mapping. TBAR sits adjacent to the company’s flagship Bumi Barito Mineral coal project in Central Kalimantan. “Although TBAR had never been explored in the past, we had an idea that there was strong potential to find coking coal based on the coal geology we delineated in BBM, which lies to the north,” the company said. “These initial results confirm our interpretation of the geology of the basin and we are confident of finding further undiscovered metallurgical coal in the region.” Cokal said although the mapping had covered just 25% of the TBAR tenement August 2013 I CAP


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Cover Story A typical Indonesian coalloading and barge facility.

area to date, the results were very encouraging – with a number of outcrops measuring 1.75m to 1.85m in thickness. Channel samples of each coal outcrop were acquired and subsequently analyzed to give an indication of the coking potential of the TBAR coal. “The laboratory results on these initial outcrop samples confirm our expectations that the coal seams in TBAR will have premium metallurgical properties,” Cokal executive director Pat Hanna said. “Some results confirm the outcrops are in fact coking coal with crucible swelling numbers of 8 and 9, which is unusual to find when the coking properties are expected to have been oxidised. “This indicates that the depth to which Cokal may find fresh premium coking coal could be as little as 5m below the surface.” Hanna said the company was progressing geological mapping, with the aim of completing the survey within the next three months. Following that, Cokal will drill shallow boreholes near the outcrops to confirm their coking properties. Deep stratigraphic boreholes will also be drilled to identify the stratigraphic sequence and number of the seams. It is hoped the program will provide enough information to develop an initial JORC resource. 8

The TBAR project will be able to utilize the infrastructure associated with BBM, including the shallow river barging in the Upper Barito River, while the haul road used to take BBM’s coal to the port passes through TBAR. On the funding front, Cokal recently won an investor and an initial $US8.7 million in funding for the development of its BBM project in Indonesia this year.

Blumont has recently been expanding its interests in mining, supporting fellow Australia-listed Celsius Coal ... The company’s 15,000 hectare Bumi Barito Mineral project in Central Kalimantan has a JORC resource of 77 million tons, comprising 70Mt inferred and 7Mt indicated. Cokal is completing definitive studies and obtaining the necessary approvals for BBM, with the aim of starting construction in October and first production in the first half of 2014. As part of the financing arrangement, Singapore-based Blumont Group will be issued just over 60 million fully paid

shares at 16c each to raise $A9.6 million ($US8.7 million). The private placement will be issued in five tranches, in line with Cokal’s planned drilling and engineering plans at BBM between July and November. The money raised will be used to fund the work and for general corporate pruposes, Cokal says. Blumont has recently been expanding its interests in mining, supporting fellow Australia-listed Celsius Coal in February with a $US5.2 million financing agreement. Cokal executive chairman Peter Lynch said the company was pleased to have the support of the major investment company, which had a mining focus as part of its longer term investment strategy and was looking to develop mining opportunities in the Asian region. “This is an ideal opportunity for Cokal to expand its shareholder base into Asia with a mining-focused strategic investor,” Lynch said. “The placement to Blumont will provide sufficient funds to complete the drilling program and the definitive feasibility study for BBM project.“ Cokal has interests in five projects in Central Kalimantan. It also has another project in West Kalimantan. All of these projects are prospective for cap metallurgical coal. August 2013 I CAP


News

safer Indonesia Safety is set to improve in Indonesia, despite the race for more tonnes. David Upton explains

I

ndonesia is the world’s fastest growing coal producer, with local miners under huge pressure to deliver greater tonnages to domestic and export markets. Total production climbed 9% in 2012 to 237.4 million tonnes, according to the June 2013 BP Statistical Review of World Energy, taking Indonesia past India to become the world’s fourth-largest producer. The way things are going Indonesia should have no trouble overtaking Australia this year, with exports to China and India driving the boom. However, is mine safety the first casualty in the race to boost production? While statistics on accidents and fatalities in Indonesia’s coal industry are difficult to find, reports suggest dozens of miners in small and often illegal open cut operations are killed each year. In 2009, a blast at an illegal underground mine in West Sumatra killed 31 workers. Mine safety is back in the spotlight with the tragic loss of 28 miners at the Grasberg copper-gold mine in May. The accident triggered an order from President Susilo Bambang Yudhoyono for a departmental review of safety at all mines in Indonesia. In the coal industry, the risks are set to increase as Indonesia’s predominantly open cut coal mine industry prepares to head into more hazardous underground mining. However, one of the leaders in the shift to underground coal mining, Australian Securities Exchange-listed Pan Asia Corporation says the trend should actually improve safety in Indonesia’s coal industry. Pan Asia Corp technical director Mitch Jakeman, who was formerly Anglo Coal Australia’s coal operations head, said safety in Indonesia’s coal mines had already changed for the better over the past decade with the arrival of mine operators from Australia. “Australians have been over there for the past 10 years working in the open cuts and transforming the culture of Indonesia’s coal mining industry,” Jakeman said. “There has been an improvement in safety but there are still some problems. “For example, many of the open cuts are still operated by small companies. They have upscaled and brought in bigger trucks and built roadways but when you go there you see the trucks up to 25 tonnes capacity that

CAP I August 2013

While Pan Asia Corp has surface coal operations, it believes underground operations are the way forward.

are interacting with light vehicles, including public vehicles and even motorcycles. “You don’t see many accidents because its part of the Indonesian culture to have motorcycles everywhere but it’s a safety hazard that we wouldn’t tolerate in Australia.”

“Foreign companies have brought in best practices and changed the safety culture.” – Pan Asia Corporation technical director Mitch Jakeman Pan Asia Corp’s executives argue that large-scale underground coal mines near the coastline are the only way Indonesia can maintain its growth in coal production. The company says traditional resistance to underground coal mining in Indonesia is based on misconceptions that local ground conditions are too soft and mining would be unsafe. Jakeman said the development of modern underground coal mines in Indonesia would

be led by operators from Australia, the US and developed markets. BHP Billiton is at the forefront of the trend with its 75%-owned Indomet coal project in Kalimantan, which is being developed in stages as an open cut and underground mine. “We’ll see the same trends underground as we have seen with modernisation of the country’s open cut mines, where foreign companies have brought in best practices and changed the safety culture. “For foreign companies such as Pan Asia Corp, it’s not just about getting coal out of the ground to meet the customer demand. We’re about doing it the right way.” The company is planning the development of an underground mine in South Kalimantan known as the TCM project, based on 177Mt of high calorific value thermal coal adjacent to PT Arutmin’s ATA mine. Pre-development work is well advanced with a view to a start date in 2014. Jakeman said underground mining would begin by bringing in overseas contractors for an initial period and training local miners to take over after they had reached high standards in operational and safety practices. “Safety is all about how well you train people and the equipment you use,” cap he said. 9


NEWS

Orpheus’ Indonesian odyssey As the world’s largest thermal coal exporting nation, positioned close to increasing demand from China and India and boasting relatively low operating costs, Indonesia appears to be a mining oasis in a desert of global uncertainty. By Tess Ingram A barge being loaded with Orpheus’ coal.

F

oreign mining companies consistently rank Indonesia highly in terms of coal prospects despite assessments of its mining policies and investment climate not being so positive. The country has had its teething problems, with eager overseas investors rushing in to reap the benefits of vast unexplored areas but becoming tangled in permit boundaries and legal webs. A lack of regulatory certainty, extensive permitting delays and poor reporting standards have all stood in the way of substantial foreign investment in Indonesian mining. However, as the rest of the world is hit by depressed global coal prices, more red tape than ever and tougher environmental standards, Indonesia continues to produce quality coal – and cheaply. Australian Securities Exchange-listed Orpheus Energy has been operating in Indonesia since its spin-off from Australian coal developer Coalworks in 2011. With one mine in production, a second production licence and three other projects in development, Orpheus has been thriving in its home away from home. Orpheus executive chairman Wayne Mitchell told CoalAPAC the secret was to be fair and patient. “A lot of it is about how you position yourself,” he said.

10

“We don’t go in as an Australian company wanting 100% of a project. We go in as an Australian company quite happy with 51% because that’s where the government wants us to be. “Indonesia has faced a bit of a bad wrap over the last 12 to 18 months and largely it has been because foreign companies are going in and not doing their homework. They’re not really making sure the titles are in order.” Mitchell said Orpheus had earned a good reputation in Indonesia and had no major problems, thanks to its willingness to cooperate with local people and the law. “The biggest challenge we have had is time. Tomorrow is tomorrow in an Australian way of thinking but tomorrow could be in three months time in an Indonesian way of thinking,” he said. Despite Mitchell’s comments, the company has moved very rapidly into production since its inception. Its first producing mine, the Kintap ADK project in South Kalimantan, was only acquired in early 2012 and is already helping the company move towards a positive cash flow. Mitchell said the company had no problem mining the coal, or selling it, with sales of more than 40,000 tonnes in April and May and in June alone totalling more than 30,000t. One of the biggest challenges, however, has been getting the coal out.

The mine is less than 10km from the coastline. Not a problem – until the coal reaches the coast and the company has to compete for slots at the port. “There is a port with three slots and we have the right to half a slot out of the three and we’re negotiating to increase our slot usage substantially,” Mitchell said. The mine has the potential to produce at much higher tonnages but until Orpheus has the capacity to ship more coal, Mitchell says there is no point producing it. “We are very selective with what we are doing at the present time for one reason – until you can get continuity with what you are doing with loading slots, you don’t want to be mining coal and putting it on the stockpile because the quality will go down,” he said. “But we are in the stages of solving that problem by working on agreements with the port owners. We expect to solve it within the month hopefully.” Once Orpheus has greater loading capacity at the port, Mitchell says everything will “come together very rapidly”. The company is one of the few coal miners in the area to hold a trading permit as well as a mining permit, giving Orpheus the green light to legally trade other companies’ coal. Orpheus executive director David Smith said the trading licence would help the company reach its goal of complete independence. August 2013 I CAP


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NEWS

Orpheus has a trading permit as well as a mining permit, meaning it can trade other miners’ coal.

“One of our long held and publicly stated objectives has been to adopt a vertically integrated strategy to control our own destiny from the mine mouth to the end user,” Smith said. “By that we mean coal from our own mines – from our own exploration with our own infrastructure and then sold through our own trading division. And that is all coming together now.” Smith said Orpheus’ direction was to be a cashflow positive company through sales and infrastructure development – at the moment it was economically far more attractive to be loading coal than mining it. While the company prepares for port expansion and increased production at Kintap ADK, it has other projects to keep the market excited. Orpheus’ second project in South Kalimantan, Citra Bara Prima, is fully permitted and ready to begin production once port infrastructure has been cemented. The company also has two blocks in East Kalimantan with a combined exploration target of 5-10 million tonnes and calorific value of 7200-8100 kilocalories per kilogram.

A drilling program has started on Block 4 with the aim of achieving an initial JORCcompliant resource for the project. “It is difficult terrain so we would expect to get some results out of that in the next couple of months,” Mitchell said. “The intention is to just see exactly what we have got. Look at the quality, look at the infrastructure and determine the economics of development and then move it into the next stage of development.” Orpheus’ final, least advanced but arguably most exciting exploration project is in Papua. The project consists of four greenfields tenements covering about 125,000 hectares in the predominantly unexplored northwest of Papua. “The area is well known for having a lot of coal, it’s just about defining how much and the type of coal and then getting it out,” Smith told CoalAPAC. “Our guys, every time they’ve gone in they’ve found outcropping coal.” Following two successful seam discoveries in the first tenement’s rivers earlier this year, a May greenfields exploration traverse has discovered a third seam locality in the tenement’s Budewa River.

The team went up the Amewa River from west to east across the midsection of the southern portion of the concession and found two additional outcrops close to the intersection of the two rivers, about 35km from the coast. The terrain is difficult, there is little surrounding infrastructure and not a great deal is known about the area so the company said a longer-term exploration program was planned for the project. It may seem like enough for the small Australian company but Mitchell says Orpheus has its sights set on further acquisitions, particularly some larger projects. “Until we prove up a project we wish to proceed with, we won’t be announcing it but it is a good time for looking at projects and we are getting several projects at a time offered to us on a regular basis,” he said. “We are very hopeful of having some new exciting coal assets coming under our register in the not-too-distant future. It is fair to say we are in detailed due diligence on a couple of them.” Producing, acquiring and potentially expanding into infrastructure management to diversify its cash flow, Orpheus seems to be leading the pack in Indonesia – while Mitchell and Smith don’t see it slowing down. “I feel very bullish about the future of coal,” Mitchell said. “You’ve got to look at the countries that need coal. Until at least 2030 the demand for coal is going to continue to increase and there are going to be stronger and stronger demands to get that coal from countries that can produce it at a fair and reasonable price – and that’s Indonesia. “As we have seen over the past 12 months, Australian projects are becoming harder and harder to get up and to maintain. “What we are seeing in Asia specifically is that expenditure and operating costs are dramatically lower. “Indonesia is a really exciting place to be CAP at the moment.”

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August 2013 I CAP


Orica’s manufacturing plant on Kooragang Island uses the bulk of the gas Orica buys on the east coast. Image courtesy of Orica

Strike, that’s a good idea A recent deal may provide an answer to a problem that may soon vex Australia’s east coast coal miners: how to keep ammonium nitrate costs down? By Noel Dyson and James McGrath

T

here is a problem looming on Australia’s east coast. At the moment, there is a fair bit of gas to be had for all sorts of manufacturing endeavours. That is all going to change from about 2015, when the massive LNG export projects at Gladstone, in Queensland, start to operate. There are already fears that New South Wales – which produces just 5% of the gas it uses – will be in dire straits. At the moment, much of the gas it uses comes from the Cooper Basin in the centre of Australia or down from Queensland’s CSG wells. The state has enormous reserves of CSG, but is reticent to develop them for what essentially are political reasons. It has been one of the leaders in the call for domestic gas reservations. CAP I August 2013

So what does this have to do with the AN coal miners use? Gas is a key feedstock for the development of ammonia, which is then used to create AN. Here is the clever bit. Orica, one of the world’s largest producers of mining explosives and initiation systems, has signed a binding term sheet with gas junior Strike Energy for up to 150 petajoules of gas over a 20-year period. Under the deal, Strike will undertake a rapid evaluation program to commercialise its prospective gas resource in the Cooper Basin. The deal means Strike will possibly take a haircut on the price it may have achieved, but it gets its project developed faster. Subject to various milestones being achieved, Orica will make pre-payments

towards future gas deliveries to fund pilot test work and development expenditure. To secure its gas offtake Orica can elect to make up to $52.5 million of gas pre-payments as Strike achieves appraisal and development milestones. This helps Strike get its project up to speed faster than if it had been forced to try and raise the funds on its own. For Orica, it helps it ensure that it has access to natural gas into the future. Explosives companies Orica and Dyno Nobel, which is part of Incitec Pivot, set up long-term contracts with gas providers and their explosives customers. CoalAPAC understands both have their long-term gas contracts in place for now. However, it also is understood the major gas suppliers on the east coast are reticent 13


NEWS

to discuss beyond those existing deals. The gas suppliers are eyeing oil-price indexed export gas prices, which are about three to four times the prices east coast manufacturers such as Orica and Dyno Nobel have been paying. Strike has a prospective resource of 2.7 trillion cubic feet to 6.3Tcf. This roughly equates to 2847.4PJ of gas to 6644.07PJ. Assuming a $6 per gigajoule pricing mechanism and that the full 150PJ is taken up by Orica across 20 years, this could net Strike a tidy $900 million over the period. However, the deal involves Orica getting access to gas at below-market trend pricing in

exchange for funding pilot and development activities on the permit, meaning Strike will take away less in gas sales. Strike managing director David Wrench told CoalAPAC sister publication EnergyNewsPremium.net that the deal’s structure was essential to getting the capital to prove up the resource at the permit, even if it meant a lower price. “The reason we’ve done it is that it allows us to access some funding support on the way through the development phase of the project as we need it,” he said. “Yes, we’ve taken a haircut on the price for the sale of this gas, but we get upfront costs back.

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“The gas we’re committing here is 150 petajoules out of a resource that has the potential to be in the thousands of petajoules and, therefore, the real value for Strike shareholders is around being able to prove and demonstrate that commercial production is possible, and the balance of the resource is still available for sales to other customers at market pricing.” Strike is set to start field activities at the permit in the fourth quarter, with Wrench saying that it would seek to drill wells designed as extended production test wells in the second quarter next year. Importantly, the gas junior would retain total equity in the permit and Orica would not seek to take a position in Strike. “I think another interesting thing is that we retain the equity in the project and they haven’t taken a position in us as a company,” Wrench said. “So another important factor was to avoid dilution at a corporate level as we go through this development phase, which is important for us.

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“I don’t think people have quite picked up on the uniqueness of this deal yet, but we’re confident it’s a really good one for us and Orica.” Being in the Cooper Basin, Strike’s project is relatively close to the extensive pipeline assets that take gas from the region to Queensland and New South Wales. For his part, Orica managing director Ian Smith is happy to have another gas supply option. “This agreement has the potential to provide a future new souirce of gas supply to our Australian east coast manufacturing plants at an affordable price,” he said. At the moment, the AN price has not risen, which is probably a result of the long-term contracts between the AN makers and the miners. More importantly, perhaps, given the share falls in the coal prices, there has not been a downturn in the amount of AN being used. On the east coast, the AN-producing facilities are Orica’s Yarwun at Gladstone, Queensland and Kooragang Island off Newcastle in New South Wales. Together, these facilities are responsible for about 1 million tonnes per annum of AN. August 2013 I CAP


Kooragang Island takes up about 70% of the gas, though. Orica general manager communications Simon Westaway said the deal gave the company some security. “We’re a large user of gas,” he said. “We have two large plants that require source. “Our two facilities are operating at very high levels.” On top of those two plants going at, or near, capacity, Orica also brought on stream its Bontang AN facility in Indonesia last year. It also is building an AN plant in Western Australia’s Pilbara region to make use of ammonium from the Burrup Fertilisers plant there. Dyno Nobel also is reporting good demand for its AN in the east. It has a plant at Moranbah, Queensland with a nameplate capacity of 330,000tpa and a plant at Moura, Queensland in joint venture with Wesfarmers. The Moura plant turns out about 150,000tpa. Incitec Pivot corporate affairs manager Stewart Murrihy said gas supply was a concern for the fertiliser and explosives producer. Indeed, Murrihy said, the gas price was more of an issue for its fertiliser operation than its explosives concern. “If we had a [gas] reservation policy over

Ammonium nitrate is the main blasting medium in most east coast surface coal mines.

here it would be very helpful,” he said. However, Murrihy agreed that getting on board with juniors was another way to go and a path the company had followed in the past. One of its fertiliser plants is supplied by the Queensland Gas Company under a contract that has been in place for about 15 years. “QGC, way back then, was effectively underwritten by Incitec’s contract,” Murrihy said.

It is a path Incitec Pivot is considering going down again, too. “There are a number of medium-ranking companies and juniors who are offering these sort of arrangements,” Murrihy said. “The sorts of prices the medium and junior-ranking companies are looking at are below what the big guys are offering. “The issue is around their ability to cap deliver.”

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HEAT management is rapidly becoming an issue for miners in the Asia Pacific region. Temperatures are starting to approach 55C at some underground coal mines in the Bowen Basin. Some Chinese mines are starting to exceed 1000 metres. And some mine designs with 10 million tonne per annum outputs have been used. They have been considered as an integration patter in the integration of small coal mines in some Chinese provinces, such as Shanxi. All of these issues are putting more pressure on heat management in coal mines. Not only are miners having to deal with the ambient temperatures from the rocks at depth, they also have to handle the heat generated from mining equipment. As a result, the problems of heat injury and safety issues such as ventilation, gas accidents and mine fires are becoming more and more serious. This is why the Liaoning Technical University is holding a symposium on Mine Ventilation and Heat Harm Prevention. The symposium is to be held in Huludao City, in Liaoning Province in China. Representatives participating in the symposium will discuss a range of issues. These will include ventilation and heat management in the underground coal mining industry.

No doubt one area for discussion will be the use of cooling media around the longwall. The organisers are calling for papers on a host of topics including: • Mine ventilation techniques for deep mining, high-temperature mines; • Mine ventilation techniques for high-gas, easy spontaneous combustion and intensive mining operations; • Optimisations and reformations of ventilation systems in the integration of small mines with intensive productions; • Theories and techniques for mine ventilation simulation; • Theories and technologies for gas prevention; • Theories and technologies for spontaneous combustion control; • Theories and technologies for dust control; • Theories and techniques for mine airflow temperature simulation; • Humidity and cooling load calculations for airconditioning in mines; • Theories and algorithms for heat and moisture exchange in underground mines; and • Refrigeration techniques for underground mines. No doubt one area for discussion will be the use of cooling media around the longwall. In this case, water is run through a chiller unit at service and piped down to the longwall. The water is then distributed from the sprays on the longwall unit that are used to keep dust and fire risk down. Workers at the face have the benefit of a cooling spray coming back at them from the longwall and also from standing in the cool water pooling behind the machine to offset the heat of being at depth. cap August 2013 I CAP


Smooth operator Keeping onsite roads in order is a major task, but as one contractor has discovered, having the right equipment can make a massive difference.

The Terex TA400’s tailgate seal has proved a boon to Garwoods.

G

arwoods Civil & Maintenance is responsible for the site maintenance on one of Australia’s busiest coal mines. The company has a fleet of 13 Terex TA400 articulated trucks, along with 45 staff on site. “We’ve had the TA400 articulated trucks for more than two years now, and we use them for everything, carting rock, coal, material rejects, mud,” Garwoods’ John Ashton said. “We have the only earthmovers on site, so we look after all of the haulage as well as the maintenance and grading of the roads.” Arguably the biggest benefit the TA400 has brought to Garwoods has come courtesy of its tailgate seal. “We move a lot of sludge,” Ashton said. “Because it is an open cut mine, when it rains the water accumulates and the big sumps fill with silt ... which we cart out. “We only ever use a Terex truck on mud because the tailgate seal is so good. “We have four Terex TA400 trucks that run mud all the time and they hardly spill a drop.” CAP I August 2013

The TA400 has a maximum payload of 38 tonnes. Its tray can handle a heaped capacity of 23.3 cubic metres and, as Ashton has mentioned, manage materials with high moisture pretty well. That body has a twin-angle tail chute, which helps with the material retention but also, equally importantly, load ejection. This is particularly important when carrying muddy, sticky materials. A truck’s utility gets greatly reduced if it is carrying back a large amount of the material it had taken to the dump. Helping it move around is a 331 kilowatt power plant. This is matched with a planetary transmission that can operate either fully automatically or as a manual. The drop box has both high and low ratios and is designed to offer optimised rim pull and speeds for all conditions. The TA400 comes with a three-stage selectable engine brake and a six-stage

selectable output transmission retarder. This makes for safe downhill hauls without the use of service brakes. Its cab has been redesigned to reduce noise levels and give the operator an improved working environment. The airconditioning has been beefed up for better temperature control. This is important for those working in hotter climates such as Queensland and through much of the Asian region. Controls and the steering wheel have been repositioned to make for better operation. The truck’s bogie beam rear suspension allows independent wheel movement to make for a smoother ride. The TA400 also has load-sensing hydraulics. This system has variable displacement piston pumps that consume power only when needed. This makes for reduced power loss, lower fuel consumption and heat generation. Garwoods has been delievering onsite mine and civil maintenance works since 1992. cap 17


NEWS

Coal loses another friend US President Barack Obama started a war on coal in the US. Now the World Bank Group has turned its back on the commodity. By Tess Ingram and Donna Schmidt

The World Bank Group has added to the pressure on coal power stations.

T

he World Bank Group has ended its support of global coal-fired power after a proposed policy paper was approved by the bank’s executive board. In its Energy Sector Directions Paper, the bank said it would only finance coalfired power plants in “rare circumstances”, in a move that echoing US President Barack Obama’s policy to curb climate change. The bank said an example of rare circumstances was when it needed to “meet basic energy needs in countries with no feasible alternatives”. The paper states WBG will make every effort to “minimise the financial and environmental costs of expanding reliable energy supply” while also recognising that “each country determines its own path for achieving its energy aspirations”. It emphasises the importance of selecting areas in which the bank can best help countries mobilise energy solutions that reduce poverty sustainably. WBG president Jim Yong Kim, who led the discussion with the executive board, said the paper’s directions were anchored in the group’s overarching goals of reducing the global rate of extreme poverty to 3% by 2030 and fostering the income growth of the bottom 40% in every country. “We need affordable energy to help end poverty and to build shared prosperity,” Kim said. “We will also scale up efforts to improve energy efficiency and increase renewable energy – according to countries’ needs and opportunities.” The bank’s move may not have a huge practical impact. It has not funded a major coal project since providing South Africa with a $3 billion loan in 2010. However, the move signals a growing global pressure and trend for major organisations and world powers to take steps 18

away from the fossil fuel. In a recent blog, Centre for Global Development visiting policy fellow Scott Morris weighed up the World Bank’s options and said while it was important the bank minimised its lending for coal, it needed to ensure it did not do so at the expense of its larger goals. “The bank should be ambitious in working towards clean energy approaches in its development strategies, but it would be a mistake to definitively rule out coal in all circumstances,” Morris said. “Such a decision would be bad for development and would also undermine the very goals that the bank’s coal critics espouse by further pitting developing and developed countries against each other in the climate debate occurring within the bank.” In the US, Obama confirmed coal power station emissions standards that threatened to change the industry, and fairly quickly. Bypassing Congress, which was to review the outlines, Obama spoke at Georgetown University to present his major climate strategy push that would result in significant changes both domestically and internationally. The three-pronged strategy, presented as a 21-page “blueprint”, focuses on slicing domestic carbon emissions – which may likely result in staggering changes to US coal production and electricity generation – as well as upping investments in climate resilience measures and stepping up to a lead role in international climate change issues. On the domestic front, the administration’s Climate Action Plan includes an order to the US Environmental Protection Agency to “expeditiously” complete performance standards to lower carbon emissions from existing power plants and the finalising of carbon limits rules for new facilities by September 20 of this year.

The EPA has also been directed to draft carbon limits for existing power plants by June of next year that will ultimately be finalised in 2015. The US Department of the Interior will work to permit renewable energy projects such as wind and solar facilities on public lands, with the goal of powering 6 million homes by 2020, and install 100 megawatts of renewables on federally assisted housing by the same time. Obama has set a carbon pollution reduction goal of 3 billion metric tons, cumulatively, by 2030 – more than half of the nation’s annual carbon pollution level from energy – via new efficiency standards. The President also had designs on the financing of coal stations in other parts of the world. He called for an end to US government support for public financing of new coal-fired power plants overseas. An exception will be made for facilities with carbon capture and sequestration, as well the world’s poorest countries where no other alternatives exist. The CAP also commits the US to expanding major new and existing international initiatives. These include bilateral agreements with China and India, along with other emissions-heavy areas of the globe. Again on the renewables front, the US will be working with trading partners to launch negotiations at the World Trade Organisation, Obama said, for a global free trade in environmental goods to include wind turbines, solar panels and other clean-energy technologies. The administration’s plan has the potential to send the coal industry, particularly in the US, into a tailspin. At the very least, it will have significant impacts on the market, jobs and how mining and electricity generation CAP are performed at this time. August 2013 I CAP


‘No Pike River charges’ NEW ZEALAND police say they will not be laying any individual criminal charges over the Pike River Mine disaster. Meanwhile, it appears a re-entry into the disaster site may occur soon. Spokesman for the families of the Pike River victims, Bernie Monk, says he believes re-entry into the disaster site, which still holds the bodies of 29 victims of the blast, is not far away. The police investigation began the day after the tragic November 2010 explosion that ripped the heart out of a small New Zealand mining community. It determined there was insufficient evidence to lay manslaughter charges against anyone involved in the management of Pike River Coal Limited prior to the tragedy. “The lack of any causative link to the specific events which led to the explosion means a manslaughter prosecution of any individual does not meet the standard of evidential sufficiency,” police said. Detective-Superintendent Peter Read, who

led the inquiry, said it was a difficult decision that police did not take lightly. Read said he had informed the families of the 29 men and knew they would be very disappointed. “I can only give them my absolute assurance that we have been meticulous in our investigation and consulted widely as the inquiry progressed,” he said. Police said they could lay a charge of criminal nuisance, but it would interfere with prosecutions being pursued by the government. “At this time, police believe this matter is most appropriately dealt with through the health and safety prosecutions led by the Ministry of Business, Innovation and Employment,” Read said. Pike River Coal Limited was ordered to pay almost $A3 million last month in compensation and fines after being found guilty of nine health-and-safety breaches. Peter Whittall, PRC’s CEO at the time of the explosion, had 12 charges laid

against him under the Health and Safety in Employment Act. Read said the investigation was one of the most complex the New Zealand police had ever undertaken. It involved formal interviews with 284 individuals, 25,000 pages of witness statement transcripts and some 34 million pages of documentation relating to the operation of the mine. Up to 16 police investigators were involved at any one time, a range of experts provided technical input and advice was sought from Crown Law and the Crown Solicitor. The superintendent said the decision was based purely on information available at the time and there was a chance that the case could be reopened if more information became available. “It is possible that at some point in the future, re-entry to the mine might be achieved, allowing a scene examination to be completed,” Read said. – Tess Ingram

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REGIONAL ROUND-UP

CHINA

Blackgold profits in China WHILE depressed global coal prices have battered companies in the US and Australia, mining in China has proved very fruitful for Blackgold International Holdings. The Chinese coal miner increased its net profit 19% to $A27.2 million for the half year ended April 30. The growth marks continued healthy demand for coal from the company’s four mines, with total H1 2013 production increasing 28.5% to 843,200 million tons, compared to H1 2012. The Australian Securities Exchange-listed miner also reported an increase in revenue to $64.6 million, up 64% from the previous corresponding period. The H1 2013 aggregate quantity traded increased by 134% or 220,000 tons to 384,000t compared with H1 2012. “The demand for Blackgold’s product remained healthy,” director James Tong Chi Ho said. “Blackgold is evaluating its purchasing model and had contacted foreign suppliers with the intention to expand its coal purchasing activities beyond the People’s Republic of China region.” Blackgold’s Caotang, Heiwan, ChangHong

and small-quantity WuShan MaoJiaWang mines are situated in the Chongqing and Guizhou regions of southwest China. The four mines have combined JORCcompliant reserves of 121.1Mt, including 44.6Mt probable and 76.4Mt proven, with an average calorific value of 5613 kilocalories per kilogram. The mines also have inferred resources of 41.9Mt and combined exploration targets of 19.8Mt to 24.6Mt.

Yanzhou goes after Yancoal CHINESE coal giant Yanzhou is seeking to consolidate its Australian assets by buying out the minorities in its 78%-owned Yancoal Australia, which is listed on the ASX. Under the conditional proposal, Yanzhou would acquire the 22% of shares in Yancoal that it did not own via a share exchange. Yancoal shareholders would receive 0.91 Yanzhou CHESS Depositary Interests for every Yancoal ordinary share held. Yanzhou is the only Chinese coal mining company that is listed on the Shanghai, Hong Kong and New York stock exchanges. “The Yancoal IBC [independent board

committee] is undertaking appropriate due diligence investigations to enable it to assess the proposed terms of the proposal and will engage in discussions with Yanzhou before making a recommendation to shareholders,” Yancoal said in a statement. “The IBC has retained investment bankers Blackstone Advisory Partners and Lazard and lawyers Minter Ellison to assist in that process.” Yancoal listed on the ASX through the takeover of Gloucester Resources and has a portfolio of coal mining assets in New South Wales and Queensland that includes the giant Moolarben and Austar mines. As part of its Foreign Investment Review Board approval for the $3.5 billion acquisition of Felix, Yancoal had to list on the ASX. The listed Yancoal came from a merger of assets of Gloucester Coal and specific assets of the previously unlisted portfolio of Yancoal Australia Limited. Yancoal is now one of Australia’s largest pure-play coal companies. Yanzhou would apply for a foreign exempt listing of those CDIs on the ASX and it was proposed that holders of the CDIs could transmutate those securities into their underlying share, the company said.

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August 2013 I CAP


Russia

Roaring ahead The last quarter was a busy one for Russiafocused Tigers Realm, with exploration and approvals advancing on both of its Amaam project tenements. Tigers’ Amaam project is in the Chukotka province of far eastern Russia and consists of two tenements, the 60%-owned Amaam and 80%-owned Amaam North. The Amaam tenement may have been the star in the company’s portfolio during the March quarter, but the company’s most recent quarterly report shows that nearby Amaam North has stolen the limelight, at least for now. The Australian-listed company announced an initial JORC-compliant resource of 26.8 million tons at Amaam North on July 4, including 7.2Mt measured, 4.6Mt indicated and 15Mt inferred. In April, 40 holes were drilled in a small portion of the Amaam North licence block, called Project F, at a depth of 30-160m. The area was chosen due to the presence of outcropping thick and shallow coking coal seams close to existing infrastructure. The drill results confirmed shallow-dipping seams with a cumulative coal thickness of 2-11m, with approximate depth of cover of 5-115m. It showed 20.9Mt of the total resource was in the open pit domain less than 150m from surface. Below 150m, the resource totals 5.9 Mt, providing significant potential upside from future underground operations. “The deposit remains open down dip and along strike, and continuation of the coal seams around the anticline to the south and along strike to the east is expected to yield further shallow coals with similar properties to those currently drilled,” Tigers Realm said. Following initial air-dried coal quality testing, Tigers said the coal at Project F appeared to be a mid-to-high-volatile bituminous coking coal. The upper coal seams comprise about 63% of the deposit and have an average ash content of 9.3%. These seams will provide the majority of the raw product for direct shipping that will be targeted in the first phase of the project’s operations. Tigers added that the lower seams had an average ash of 19.3% and would require washing to produce a coking coal product, but clean coal testwork was not yet complete. An independent consultant geologist previously defined an exploration target of 30-40Mt for the licence based on data collected to June 2012. Tigers said it would follow up on prospective areas to the south and east of Project F, with field mapping programs CaP I August 2013

Tigers Realm drilling at its Amaam project.

during August and September and further drilling slated for November. Work on a prefeasibility study for the open pit potential of Project F is underway, with results anticipated for the third quarter of 2013. Tigers said it expected the PFS to demonstrate the viability of Project F as a starter coking coal mine development. Subject to completion of a definitive feasibility study in Q1 2014 and obtaining all necessary approvals, development of Project F is expected to start in early 2014. A PFS for the company’s other project, Amaam, was completed in March and confirmed a large-scale, long-life open pit and underground mine with production of 6.5 million tons per annum of coking coal. Of this, 5Mtpa would come from open pit and 1.5Mtpa from underground over the 20-year life of mine. During the quarter the company continued work on the Amaam bankable feasibility study, through a further drilling program comprising 24 exploration holes; a bulk sample taken for pilot plant processing; field work; data collection; and ongoing optimization studies. As well as providing data for the study, it is hoped the continued exploration work will expand the project’s resource. As sufficient additional drilling and study

work is completed to convert resources into reserves for inclusion in the mine plan, Tigers will apply for a mining licence covering the remainder of the Amaam coking coal deposit. Total Amaam resources comprise 412Mt of coking coal. Tigers Realm can grow its 60% stake in Amaam to 80% once a bankable feasibility study is completed. It already owns 80% of Amaam North. Another focus for the company during the quarter was to advance the development of its Arinay coal terminal. The proposal for the 15Mt terminal at Arinay Lagoon was included in the Russian government’s most recent scheme of territorial planning in the March quarter. Since then, the company has started detailed design and engineering work, including the completion of the preparation of preliminary scopes of work and contracts for marine studies to be undertaken through until early next year. “The coming months are shaping up to be an exciting period for Tigers Realm as the company continues with a large volume of work on the study of Project F,” Tigers Realm said. “[Tigers] will continue to keep the market up to date with the results of the PFS as we work towards confirming Project F as a gamechanging starter project for the company.” 21


REGIONAL ROUND-UP

KYRGYZ

Celcius turns up exploration heat A SECOND season of exploration has started at Celsius Coal’s Uzgen Basin coking coal project in the Kyrgyz Republic. Last year’s exploration work on the project resulted in the estimation of a JORC-inferred resource of 255 million tons, located across two of the project’s three tenements. Celsius chairman Alexander Molyneux said the sophomore program aimed to expand and consolidate the project’s existing resource inventory. “Based on 2012 work, we are already looking at the right approach to start mining, including some very low-cost scenarios both in terms of capital and cash cost,” Molyneux said. “The point with this 2013 program is to acquire the data that we need to move on so we can be mining here within the next two years or so.” The program will consist of 4000m to 5000m of diamond core drilling as well as a number of bulk samples for coal quality analysis. The maiden exploration program consisted of seven holes drilled by the company in 2012 as well as 60 past drill holes, but Celcius said the 2013 program would be targeting exploration in areas with limited historical drilling, which were mostly prospective for the highest ranking coking coals. As well as expanding the resource, Celsius hoped the second round of drilling, which began in July, would convert the resource to indicated status and use data collected for mining studies such as environmental baseline and geotechnical data. Celsius has a field team of 40 people working on the program, which it hopes to complete by October of this year. Molyneux said all of the work remained fully funded and there was the capacity to expand the exploration program if needed.

The 80%-owned project is not targeted for production until 2015, but the company is already making strides determining viable markets for its future product. In June, Celsius said it had identified a gap in a burgeoning Chinese market that, if viable, could prove lucrative. The announcement followed the completion of a market study into the outlook for coking coal in Xinjiang, a province in northwest China that neighbors the company’s mines in the Kyrgyz republic. “The study confirms our understanding that a significant supply gap for premium coking coals exists in the region, leading to the potential for a far more positive market dynamic in Xinjiang than the current outlook for seaborne coking coals,” Molyneux said at the time. The four-month study analyzed more than 20 potential coal customers in the province’s three major cities. It involved direct visits to end users as well as general market and pricing analysis. The study was conducted with the assistance of independent consultants Bryanston Eesources GmbH, a leading advisory and investment firm in commodities. Celsius said the Bryanston study concluded the Xinjiang coking coal market was poised for strong growth in demand over the next five years. The consultants forecast steel production in the province by 2015 to increase by 87.5% on last year, and for coking coal consumption to logically follow suit. One of the cities, Kashgar, already has three blast furnaces recently commissioned or under construction. Resource constraints in the province have already resulted in a supply and demand gap, with total coking coal production remaining stagnant for the past four years, despite a 144% increase in consumption.

Exploration at Bel Alma.

Bryanston said just 2% of Xinjiang’s coal resources had coking properties, while just 5% of this was considered equivalent to a premium hard coking coal. The company also forecast the province’s price of premium hard coking coal to rise from $US145 per ton to $US235 per ton by 2017. Celsius technical and operations director Alistair Muir said “the information we have gained is a valuable piece in our overall market analysis review and can be used to help optimise our mine planning studies”. The company is focusing on fostering relationships with potential customers in Xinjiang with the goal of establishing an off-take agreement. Au st ra lia n Co al Su pp lie rs Gu id e 20 13

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August 2013 I CAP


MONGOLIA

Aspiring for success

FIRST production is not targeted until 2016, but Aspire Mining has already signed non-binding memoranda of understanding with four north Asian steel mills and other buyers for coal to be produced by its Mongolian Ovoot mine. It is good news for the company, which says it has only just begun an initial stage of marketing and approached just half of the Chinese target market to date. The four MoUs total a possible purchase of up to 5.6Mtpa of coking coal, which represents nearly all of the planned total saleable production from stage one of the mine. Aspire said it had also met with other large-scale potential Chinese customers as well as steel mills and coke producers in Japan, Russia and Eastern Europe, which had indicated additional significant buying interest. Managing director David Paull said the company was pleased with the interest, especially considering the short time it had been marketing its product. “It is clear that interest in north Asia is substantial and well in excess of the potential volume of sales from our first stage of development at Ovoot indicated by the non-binding MOU’s signed to date,” he said.

Modun the choice for Mongolian briquettes THE Mongolian government has chosen Modun Resources as a preferred coal briquette supplier for part of its Clean Air Initiative to reduce air pollution in Ulaanbaatar. Modun is one of four preferred suppliers following the government’s tender process through the Mongolian National Committee for Air Pollution Reduction. The tender process sought domestic and international expressions of interest to establish a cleaner fuel production facility. The Ministry of Environment and Green Development and the Ulaanbaatar City Mayor’s Office are to negotiate a product sale-andpurchase agreement with Modun for the supply of the company’s Nuurst Project coal briquettes. Talks are expected soon about turning the preferred supplier status into a formal offtake agreement. Modun is using a binderless coal briquetting process. The raw coal is crushed and hot gas is used to dry the coal to extract moisture. The dry coal is then compressed under extreme pressure to bind it into briquettes. Independent testing of the Nuurst briquettes in Australia and Mongolia resulted in a substantial energy increase and emissions decrease. CAP I August 2013

The Aspire board at its Ovoot mining site.

Aspire completed coke oven test work on an indicative bulk sample of Ovoot coking coal. This confirmed that when used as part of a coke oven feed blend, the coal could be used to replace hard coking coals and improve the caking ability of lower-quality coking coals and coke breeze, a recycled coke oven residue. Within the Chinese market, Ovoot Project coking coal falls within the clean fat coal specification, a category of coking coal that is highly valued and in short supply in China, Aspire said. Fat coal is used in China to blend with lower-quality, lower-caking coals to replace hard coking coals in coke batches, therefore reducing batch costs and reliance on the seaborne-traded hard coking coals.

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23


REGIONAL ROUND-UP

INDONESIA

Bumi saga ending? BUMI Plc chairman Samin Tan has agreed to buy out the Bakrie family from the Indonesian coal producer in a deal that has infuriated co-founder and major shareholder Nathaniel Rothschild. Rothschild has accused the Bumi board of subjecting shareholders to a “significantly inferior” deal as the troubled group tries to untangle its tortuous ownership structure. Bumi has been marred recently by internal conflict, financial misreporting and various other scandals, resulting in its shares being suspended on the London Stock Exchange. The Bakrie family – the company cofounder and major stakeholder – has been in talks to sever ties with Bumi for more than nine months. Various cash and shares proposals have been floated, but Bumi recently confirmed the agreement of a very different deal with chairman Samin Tan’s PT Borneo Lumbung Energi & Metal. Under the deal, Tan will double his shareholding in the group to nearly 48% by buying out the Bakries through Borneo, making him the company’s largest shareholder.

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“The new proposal consolidates control of Bumi Plc by Samin Tan, who would own 47.6% of voting shares, compared with around 30% of voting shares today.” – Bumi Plc shareholder Nathaniel Rothschild Borneo said in a statement to the Indonesia Stock Exchange in July that it had agreed to pay the Bakries $223 million for their 23.8% stake in Bumi. “Borneo hopes to see, and will endeavor to restore, stability in Bumi Plc, so as to allow its management to refocus on activities that create value for all stakeholders,” it said in the statement. The second stage of the deal would have the Bakries buying back Bumi’s 29.2% stake in coal exporter PT Bumi Resources for more than $500m. The Borneo-Bakrie deal is subject to conditions, including a waiver from Borneo having to make a general offer for Bumi. Rothschild, who quit Bumi’s board in October but still owns 14.8%, argues the proposal “deprives minority investors of any upside in respect of the Bakrie stake in Bumi”.

“The new proposal consolidates control of Bumi Plc by Samin Tan, who would own 47.6% of voting shares [assuming independent shareholder approval], compared with around 30% of voting shares today,” he said. Tan is due to step down as chairman once a successor has been identified, but Rothschild believes he should leave the board immediately. “The primary source of Bumi Plc’s difficulties over the past three years has been the concentrated control by the Bakrie concert party, which included Samin Tan,” Rothschild said. “This deal does not change that.” The 41-year-old billionaire financier has called for all existing shareholders to be offered parts of the Bakries’ Bumi stake, rather than it be sold to Tan, who could instead underwrite the offer and be free to buy any stock not taken up.

August 2013 I CAP


Coal PreP

Belting some chains Synchronous belt technology has evolved to the point where it can match the performance of roller chain, while cutting weight, mess and maintenance.

K

eeping the big wheels turning and the screens screening is a challenge for many coal mines. In an environment where cost is king, being able to do that as efficiently and with as few resources as possible becomes more important. This is where changing up what has been an accepted technology in the coal space starts to make sense. A roller screen being used at an Australian coal wash plant for run-of-mine coal screening was being driven by roller chains running in an oil bath. A recirculating pump was installed down the drive end and a sump fitted beneath the feed end to store the oil. The pump would come on every 30 minutes and pump the oil into the chain guard at the discharge end. The chains would drive the oil to the feed end with the natural motion of the drive. Unfortunately, the existing roller chain drivers were stretching, breaking and needed to run in an oil bath or be heavily greased. There were 39 chains requiring replacement in one year on the screen, creating significant costs in maintenance and downtime. Chain is well suited to hostile environments. It can withstand temperatures above 80C, and tolerate oily, dusty, dirty and corrosive atmospheres, albeit at the expense of longer life. Roller chain drives can also tolerate fluctuations in centre distance caused by a non-rigid or compliant drive mounting. Unfortunately, there also are a number of characteristics that can make chain drives less than ideal for many power transmission applications. The most significant factors include chain stretch or elongation, the need for lubrication and high noise. Chain stretching or elongation results from pin and bushing wear at the articulated joints of the chain. This means the chain has to be retensioned at regular intervals. Lubrication is essential to the proper functioning of a chain drive. Without it ,chains and sprockets wear out quickly and have to be replaced. Lubricating roller chain is an unwelcome chore, particularly at a time when maintenance personnel are being pushed to their limits. CaP I August 2013

Gates Poly Chain GT Carbon helped boost production through coal screens.

To compensate, equipment designers may include an oil bath or oil spray system, or they may specify lube-free chains. These all add to the cost of the system. However, there is another alternative.

lubricating roller chain is an unwelcome chore, particularly at a time when maintenance personnel are being pushed to their limits. Belts have been developed with polyurethane bodies and carbon-fibre tensile cords. These belts can compete with standard roller chain in a wide range of power transmission applications. When used in a dynamic application such as being the tensile member of a synchronous belt, carbon fibre delivers a number of benefits. The use of carbon-fibre tensile cords had dramatically increased the load-carrying

capacity of synchronous belts to the point where they can replace roller chain width for width. In this case, Gates Poly Chain GT Carbon belts replaced the chains on the roller screen drive. These belts require no lubrication, which is a key advantage over the most problematic aspect of a roller chain drive. However, when first installed, the belts were running in the oil bath without any issues and without compromising their performance. In addition, once a belt drive is installed and properly tensioned and aligned, it never needs retensioning. Roller chain, no matter how well maintained and lubricated, eventually stretches and has to be retensioned. According to Gates, a synchronous beltdrive system is essentially maintenance-free. It says the drives on the roller screen have run for 24 months without requiring any maintenance. This has meant a significant reduction in maintenance costs due to an eliminated need cap for regular chain replacement. 25


Coal PreP

No fish out of water ONE of the problems coal miners face in parts of the Asia Pacific is not in preparing the coal, but finding ways to get it on to ships. Parts of the region have a severe lack of infrastructure. This is where a product from Minnesota’s Superior Industries comes into play. The company has released a materialhandling product aimed at reducing port and terminal downtime. Called the Stingray mobile shiploader, the portable unit cuts facility downtime by trimming multiple hatches from one feed point. “Repositioning a ship loader’s feed point or loading hopper cuts off the material flow from loader to ship, resulting in costly downtime,” Superior Industries’ engineering vice-president Bob Domnick said. “Our goal is to reduce the number of times a feed point needs to be moved and then speed the time it takes when relocation is required.” It is not Superior’s first foray into telescopic conveyor technology. The company incorporated it into its products in 1997, and since then has manufactured nearly 1000 conveyors with the technology. In marine terminal applications, the Stingray telescopic conveyor permits the equipment to extend an extra 30%. This, in turn, allows multiple hatches to be reached from the single feed point. In addition, the company said, extension and retraction of the telescopic conveyor meant fully trimmed hatches while positioned over a hatch. “We know of one client who compared a unit without this conveyor technology to one of our telescopic units,” Domnick said. “According to their load sequence, our telescopic conveyor reduced the amount of moves required to load their vessel from 35 to seven.” Aiding in the important factor of conveyor mobility, each Stingray is manufactured with expanded mobility packages at the feed-point or tail of the conveyor and at its radial or drive tires. “Often manufactured with track technology, portability at the shiploader’s feed-point allows

for rapid relocation from hold to hold, and simplifies movement on, off and throughout a terminal or port,” he said, noting that in addition to the 360-degree rotation at the tail, the conveyor’s drive tires were equipped to move inline, transversely and radially. A slight arch in the conveyor’s structure is a fresh feature for Superior. On the Stingray, the design allows it to maintain a tight clearance between the conveyor and vessel deck. Making that adjustment, officials say, not only reduces the shiploader’s drop height to eliminate dust but also preserves material integrity and reduces the length of discharge chutes.

“our goal is to reduce the number of times a feed point needs to be moved and then speed the time it takes when relocation is required.” – Superior Industries engineering vice president Bob Domnick Superior said it would work closely with clients to build Stingrays for individual applications and specifications. This includes specific components and enhancements such as galvanized or epoxy finishes, belt covers, dust-suppression/extraction systems, onboard power, remote controls, spillage defense, telescopic chutes and hoppers. “Superior’s experience includes engineering and manufacturing work of some of the most complexly engineered conveyors, including the world’s highest-capacity mobile, telescopic, radial travel conveyor,” he said. “The 1800mm wide by 58m long unit moves 5000 tons per hour at the Port of Tampa in Florida. “The first Stingray mobile shiploader is designed for Panamax vessels, but can be altered to accommodate other dimensions of dry bulk vessels and barges.”

Virtualisation solution offers opportunities HONEYWELL has launched the latest Experion Virtualisation Solutions package, hailing it the industry’s first turnkey blade solution optimised for virtualisation and the needs of the processcontrol industry. The theory is that by applying virtualisation to industrial control systems, processing plants can simplify their computing environments, streamline maintenance and reliability, and reduce the amount of hardware space needed. Virtualisation is a major productivity and efficiency tool for commercial and industrial operations. Process controls typically require separate servers to support different applications. Virtualisation allows a single server to simultaneously run multiple operating systems and applications, insulating the operating systems from hardware changes. It also improves overall server utilisation, simplifies maintenance and reduces costs. “Customers are demanding higher availability from their virtual environments,” Honeywell Process Solutions vice-president of technology Jason Urso said. “Virtualisation solutions using blade servers offer that extra layer of reliability, but it’s about more than just reducing downtime.” The latest member of the Experion Virtualisation family, called the Premium Platform, is based on blade server technology. The Premium Platform reduces setup time by 90%, generates 40% better energy savings, has 22% greater density than alternative virtualised server platforms, and allows recovery from a processer failure in minutes.

Better rolling with eriez electromagnets THE SE 7000 model line produced by technologies company Eriez has extra power, via industrial suspended electromagnets, intended specifically for the coal and mining sectors. The larger magnets, referred to formally as “BAMs”, are available with magnet sizes starting at 90 square inches (228.6 centimeters). These are ideal for processing operations that use wide, high-tonnage conveyor belts with deep burden depths. 26

“These larger magnets remove oversized pieces of tramp metal that represent a hazard to downstream crushers, mills, pulverizers and grinders,” the company said. “The BAMs also remove sharp metal that can damage or tear conveyor belts, especially at transfer points.” As with other models in the SE 7000 line, Eriez’s BAMs are available with a five-year warranty on the coil assembly. The larger SE magnets also feature the

company’s exclusive external oil expansion tank to assure fully immersed coils for better performance and longer life. BAMs are available in Self Clean versions as well, with a short-belt conveyor built around the magnet to effect automatic removal of tramp iron from the magnet face. Based in Erie, Pennsylvania, Eriez manufactures and markets from 12 international facilities on six continents. August 2013 I CaP


COAL PREP

Weir’s Enduron WEIR Minerals has launched its Enduron line of comminution equipment including crushers, screens and feeders. The equipment is designed to maximise customers’ operational efficiency. The Enduron range expands Weir Minerals’ comminution solutions range. It adds, particularly, to its range of mill circuit products. The use of KHD high-pressure grinding roll equipment in conjunction with the range of Enduron vibrating screens, feeders and crushers provides cost-effective comminution packages. These are supported by Weir Minerals’ global organisation comprising more than 100 service centres. “Screens and crushers are typically the workhorses of an ore-processing [or coal prep] operation,” Weir global vice-president of comminution Dr Ekkhart Matthies said. He said the company was already developing the next generation of crusher technology for future applications. The Enduron line will be sold and serviced

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The Enduron SP0600 crusher.

through Weir Minerals’ existing global teams and create a platform for further expansion into the crushing and screening market. “The introduction of the new Enduron brand provides the quality, scale and

breadth of product to help mine operators maximise efficiency and productivity, while maintaining field safety,” Matthies said. Headquartered in Melbourne, Weir Minerals has facilities on six continents. CAP

August 2013 I CAP


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HARDWARE

Longwall

running

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August 2013 I CAP


WHILE much of the coal mining in the Asia-Pacific region is at surface, there is a growing move towards underground operations. Whether longwalls will be the way forward, it may not be very likely that this sort of colour scheme will be chosen. The bright-pink machine here is the Caterpillar EL3000 Longwall Shearer deployed at Rio Tinto’s Kestrel mine. That machine has a nameplate capacity of 5000 tonnes per hour. The EL3000 has been developed for medium to high seams to meet the requirements of the most demanding longwall installations. It offers two 860 kilowatt cutting motors combined with two 150kW haulage motors. There also is a 75kW pump motor. The EL3000’s mainframe is designed to allow retrofit of 1200kW ranging arms and 200kW haualage units. A split mainframe is available in case there are transport limitations. Caterpillar’s patent-pending Trapping

CAP I August 2013

Shoe lx Exchange cuts the weight that has to be handled during replacement from more than 500kg to less than 50kg per insert. It also reduces the time required for the exchange. Because the weight is lower the change out can take place anywhere along the face. Previously, this work has had to be done at the gate ends, where heavy lifting equipment was available. The EL3000’s control system is on an ethernet-based approach. Because of this, the failure of one component does not impact the whole system. The system can continue to operate in “fault-tolerant” mode while systematic isolation identifiies faulty units while production continues. As for the pink? The EL3000 usually comes in Caterpillar yellow. The colour to symbolise Rio Tinto’s partnership with the McGrath Foundation and Caterpillar to support breast cancer care patients and their families late last year. That bright-pink is expected to fade rapidly CAP with the machine in production.

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Software

extended features MINING software developer Geovia has released an updated version of its Surpac geology and mine-planning software. Geovia’s Hub and Surpac integration delivers a powerful data-sharing and collaboration experience. Surpac supports both open pit and underground operations as well as exploration projects. This edition, Surpac 6.5, integrates with two new Geovia products, DraftSight Pro Pack and Geovia Hub 1.7. DraftSight Pro Pack provides geologists, mining engineers and surveyors access to a 2D computer-aided design product to extend their plotting capabilities, industry to help increase productivity and reduce costs. Geovia said DraftSight provided a faster and more effective way to create, edit and view plots, including support for the widely used DWG file format. By providing seamless interoperability with Surpac, it eliminates the cumbersome import and export processes associated with other well-known CAD products and geology and mine-planning software. The Geovia Hub integration module allows Surpac users to exchange planning, production or exploration data onsite or with other locations around the world. Hub centralises and secures data, enabling it to be easily shared, synchronised and published from within the Surpac

Geovia’s Hub and Surpac integration delivers a powerful data sharing and collaboration experience.

user interface, according to Geovia. Democratic Republic of the Congo’s Eurasian Natural Resources Corporation chief geologist Albert Quaye said the best feature of the Hub was the ability to lock files to allow users to safely and confidently work on data. “The integration provides clarity about what information is currently in use, what information is the ‘right’ information to work

with, without unnecessary communications to verify the data,” Quaye said. “The file icons clearly indicate the current status of files, what actions you need to take and give immediate feedback once you’ve made changes to your data.” Geovia was formerly known as Gemcom Software prior to its 2012 acquisition by Dassault Systèmes. The deal was made cap official last April.

online tool to take sting out of JorC changes AN ONLINE tool has been launched to help miners deal with pending changes to the guidelines for reporting exploration results, mineral resources and ore reserves under the JORC code. Those guidelines are due to come into effect in December. Coffey is offering the tool, which is designed to help companies understand their reporting requirements under the revised reporting guidelines. These guidelines are intended to ensure better-quality information flows to managers, investors, analysts and economists, among others. Coffey general manager of mining in Western Australia John Hearne said the consultancy had developed a quick and easy online tool to provide a way for most companies to understand their 32

exposure under the revised JORC code. “An in-house executive committee, for example, would then have the option of engaging with Coffey’s independent technical teams to verify their internal assessments, provide independent recommendations and judge fully the implications on their current reporting,” he said. “We think most firms know about the changes that are required from December, but they may not understand exactly what they mean for their businesses. “Using the online tool, they can get an immediate read on their position.” Besides the JORC Code 2012 Edition, modified ASX Listing Rules relating to the disclosure of reserves and resources by ASX-listed miners take effect from December.

The guidelines could have a significant impact on a company’s assets and on the decisions of those auditing and valuing those assets. Overall, companies will be providing their investors with more information on the underlying material assumptions their resource numbers are based on. Coffey’s online tool is free to users. It provides a self-assessed, confidencelevel audit on a project-by-project basis to indicate compliance confidence to the revised guideline. In turn, this health check tool will help board members and others to better understand compliance with the revised code. “It will assist decision-making for both technical and non-technical stakeholders,” Hearne said. August 2013 I CaP


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Coal Asia Pacific - August 2013  

Indonesia Spotlight, Safer Indonesia - safety set to improve, Gas shortage may cost Australian coal miners, Coal Prep - belting technology e...