This article is an in-depth guide on how to invest in a coal mining company. I will cover the key metrics used to assess the profitability of a coal mine, the history of coal, what coal is, the different types and uses of coal, coal mining methods, the costs of coal mining, give an overview of the global coal market including an overview of the world’s largest coal mining companies and also explain how coal is priced.
Note: This article forms part of my series on coal. I will link them here once I have finished publishing them. In particular I will analyse the climate change related risks faced by coal mining companies. I have already written an article on Coal stocks listed on the ASX here. But for now…here’s Part 1.
- An Overview of Coal
- A Brief History of Coal: The Worlds First Fossil Fuel
- What Is Coal?
- Types of Coals
- Thermal Coal
- Metallurgical Coal
- Coal Mining Methods
- Surface Mining
- Open Cut Mining
- Dragline System
- Truck and Shovel System
- Integrated System
- The All Important Strip Ratio
- Conclusion – Which Is Best?
- Open Cut Mining
- Underground Mining
- Longwall Mining
- Room and Pillar Mining
- Surface Mining
- Costs of Mining
- The Importance of a Well-Designed Mine Plan: Hail Creek Case Study
- Transport Infrastructure
- Electric Locomotives Versus Diesel Locomotives
- Coal Market Overview – Major Coal Producing Companies
- Seaborne Thermal Coal Market
- Seaborne Metallurgical Coal Market
- Pricing of Coal
An Overview of Coal
A Brief History of Coal: The World’s First Fossil Fuel
Coal which outcropped onto the earths surface has been used since antiquity for heating and in metallurgy. Industrial coal use began in Belgium during the twelfth century and in England in the thirteenth – in both cases due to the depletion of biomass resources as a result of charcoal production (used primarily for iron-making). Coal production increased significantly with the introduction of James Watt’s steam engine in the late 1700s which eventually lead to the introduction of steam ships and steam railways in the 1800s. Electricity production using coal took off after the introduction of the steam turbine, invented by Charles Parsons in 1884. It was during the 1890s that the world’s coal use surpassed the use of biomass resources (wood, crop residues and dung).
Coal accounted for 95% of commercial energy production in 1900 and decreased to 50% in the late 1950s. Despite this relative decline in coal use, in absolute terms coal use increased substantially from just 825 million tonnes during the beginning of the twentieth century to 4.725 billion tonnes by the century’s end. In 2015 coal provided thirty percent of the world’s primary energy and more than 40% of the world’s electricity. In the 1960s oil use surpassed coal use and the rate of natural gas consumption is currently increasing faster than the rate of oil consumption, in other words, natural gas use will eventually surpass oil use. Today coal is used primarily because of its power density relative to other sources, its abundance and its price.
What Is Coal?
Coal is a sedimentary rock composed of combustible organic material and incombustible mineral matter and water. Coal is formed from ancient plants in swamps which have partially decomposed, been covered with sediments and subjected to high temperatures and pressure for up to 350 million years (called ‘coalification’). Using the plural of coal – coals – is a more accurate description as there are many different types of coal which are categorised based on many variables (see below). For the sake of consistency with industry practice I will use both forms of the word interchangeably.
Types of Coals
Coal can be divided into many different categories based on end use, appearance, density, carbon content, energy content, ash content, moisture content or geological period, among many other variables. Coal is most commonly distinguished based on whether the coal is primarily used for its heating/energy value (thermal coal) or in steel production (metallurgical coal). The characteristics of coal are determined by a geological process called ‘coalification’. The US and Russia have the largest coal reserves (see below image).
Two broad categories of coal are hard coal and low rank coal (see below image). Low rank coals consist of lignite, often called brown coal, and sub-bituminous coal. Lignite is only used in power generation while sub-bituminous coal is used for power generation, cement production and other industrial uses. These coals, particularly lignite, have a low energy density and higher moisture content than hard coals. Germany and Russia are the main producers of lignite.
Hard coal consists of higher quality coals – namely bituminous coal and anthracite. China and the US account for 55% of global hard coal reserves (see below image). Sometimes sub-bituminous coal is also considered a hard coal.
Anthracite is the highest quality coal due to its very high carbon and energy content, low moisture content and few impurities. This makes the coal very useful for environments where smokeless fuel is required. Low quality anthracite is used for electricity generation while higher anthracite grades are used for various industrial uses, primarily in metallurgy. Anthracite is scarce relative to other types of coals.
In terms of production, China is by far the world’s largest hard coal producer. In 2015 China produced 3.75 billion tonnes of hard coal while the US produced over 800 million tonnes (Mt), India produced 677 Mt, Australia produced 485 Mt and South Africa 252 Mt (Vaclav Smil, 2017). These top five producers accounted for 75% of hard coal production. This means that coal production is restricted to fewer nations than crude oil production (Vaclav Smil, 2017). Only 12 nations outside the top five produce more than 25 Mt of coal annually (Vaclav Smil, 2017). The vast majority of coal production in China and India is consumed domestically. I will discuss the coal export market in a later section.
Most of the world’s coals are bituminous and sub-bituminous. Bituminous and sub-bituminous coals are further divided into thermal coal and metallurgical coal. This is the most common classification used when discussing coal.
Thermal coal, sometimes also called steaming coal, is predominately used in base-load electricity generation and in industrial processes such as cement production.
When most analysts talk about thermal coal they are referring to black coal used in the generation of power and to a lesser extent cement production and other industrial uses. Thermal coal consists of both sub-bituminous and bituminous coal. Anthracite can also be considered thermal coal but due to its relatively rarity it is usually considered separately or not at all. Lignite (brown coal), while used exclusively for electricity generation, is not generally considered thermal coal.
Cement production, while only accounting for around 4% of global coal consumption, is the most rapidly increasing of all coal markets. Approximately 0.1 tonnes of coal is required for every 1 tonne of cement. Globally, this equates to about 400 Mt of coal being used in cement production.
Thermal coal has many different properties which determine its value. The most important properties are the coal’s calorific value, sulphur and SO² content, ash content and moisture content.
Metallurgical coals (often called ‘Met coals’) are high quality coals used in the Blast Furnace – Basic Oxygen Furnace (BF-BOF) route of steel production. Met Coals can be divided into four main categories: Hard coking coal (HCC), Semi-hard coking coal (SHCC), Semi-soft coking coal (SSCC) and Pulverised Coal Injection coal (PCI). The three former types of met coal are known as coking coals. Met coals can also be categorised based on their volatile content (Low-Vol, Mid-Vol or High-Vol).
HCC is required to make strong coke, an important element in the production of pig iron – a precursor to steel. SHCC is a lower quality HCC. SSCC is a lower quality coking coal used to make coke and is generally blended with the more expensive HCC. SSCC can also be sold as thermal coal, although it is usually worth more as a coking coal. Most SSCC is produced as a by-product of thermal coal production. PCI coal is injected directly into blast furnaces. This reduces the amount of coke required. Like SSCC, PCI coal can also be sold as thermal coal but is usually more valuable as a PCI coal.
Like thermal coal, met coal has many different qualities which determine its price. The most important properties are the coals volatile matter content, ash content, free swelling index, fluidity, total dilatation, mean maximum reflectance, coke strength after reaction (CSR) and phosphorus content.
Coal Mining Methods
There are two methods of coal mining: surface mining and underground mining. Surface mining is used when the coal is located close to the surface and underground mining is used when the coal is deep beneath the surface. Coal mining methods are the same regardless of the type of coal being mined.
As described by Arch Coal:
Surface mining involves removing the topsoil then drilling and blasting the overburden (earth and rock covering the coal) with explosives. We then remove the overburden with heavy earth‑moving equipment, such as draglines, power shovels, excavators and loaders. Once exposed, we drill, fracture and systematically remove the coal using haul trucks or conveyors to transport the coal to a preparation plant or to a loadout facility. We reclaim disturbed areas as part of our normal mining activities. After final coal removal, we use draglines, power shovels, excavators or loaders to backfill the remaining pits with the overburden removed at the beginning of the process. Once we have replaced the overburden and topsoil, we reestablish vegetation and plant life into the natural habitat and make other improvements (Arch Coal Inc. 2018 10K, p. 10).
There are four main types of surface mining:
- Open Cut mining (strip mining);
- Highwall mining;
- Contour Mining; and
- Auger Mining.
Surface mining is the most prolific type of mining, accounting for 65% of US coal production and 50% of Russian production. China is the only major coal producer with predominately underground mines – just 10% of Chinese coal mines are surface mines. I will focus on Open Cut mining in this article as it is the most prevalent method of coal extraction worldwide.
Open Cut Mining
Since the 1970s Open Cut mining (sometimes referred to has Open Cast mining or Open Pit mining) has been the dominant method of coal extraction. Open Cut mining is generally safer than underground mining and with the advent of larger machines overburden removal has become much easier and cheaper.
Open Cut mining involves ‘strip mining’ where either draglines, truck and shovels or a combination of both are used to remove the overburden covering the coal seam in ‘strips’ or lines. Strip mining is ideal for use when the surface and the coal seam are horizontal and shallow and a wide area is available. Open Cut mining can be further categorised based on the geology of the coal seam/s being mined. For example, a company mining five separate 30 centimetre thick seams uses a very different mining method to a company mining one 50 metre thick seam.
Regardless of the method of Open Cut mining, all mines use either a dragline system, a truck and shovel (or excavator) system or an integrated system utilising dragline/s and truck and shovels.
In the correct conditions, dragline systems are the lowest cost waste removal systems available – although they have higher initial capital costs compared to truck and shovel methods and are less flexible. Dragline systems are restricted to:
- “Large deposits to ensure adequate strip length and sufficient reserves to justify the capital expenditure
- Gently dipping deposits, due to spoil instability on steep dips
- Simple geology and gentle terrain to ensure minimal changes in overburden thickness along a strip, and
- Shallow deposits, as draglines usually excavate a maximum of 60-70m of overburden due to dump reach and height limitations” (Paul Westcott, 2004).
The design of a dragline has changed little over the course of 100 years. For example, the rigging on a normal dragline weighs 20 tonnes which is one of the primary factors limiting its flexibility.
One variation of the dragline system is the dragline pre-strip system. Pre-strip is the overburden material in excess of the dragline dig depth. This material is excavated with other mining equipment (usually a truck/shovel combination) from future mining strips and placed onto previous dragline dumps.
Truck and Shovel System
The truck and shovel system is the most flexible system available to an Open Cut coal mine. A truck and shovel system also has less initial capital costs but these are offset by higher operating costs on a bank cubic metre (bcm) per hour removal rate.
In the truck and shovel system, a shovel digs up overburden and dumps it into a truck which transports it to the appropriate destination (spoil dump etc.). Excavators are often used to load coal onto haul trucks for transport to the Coal Handling Preparation Plant (CHPP). Truck and shovel systems are best suited to:
“1. Geologically complex deposits with resultant irregular pit shapes, which could not be efficiently mined by a dragline.
2. Steeply dipping deposits, where the equipment cannot operate on the seam roof and floor. Mining commences at one end of the deposit and advances along strike with strips laid out down dip. Overburden is initially dumped ex pit and then in pit when sufficient dump room is available. The pit is excavated as a series of horizontal benches (terraces) and coal and waste are exposed on every bench. Each bench extends from the floor of the lowest seam to the down dip economic pit limit.
3. Basin deposits that combine the problems of steep dips at the margins with short strike length and varying overburden depth along the strip.
4. Small deposits, which do not require the high productivities gained through use of a dragline” (Rudrajit Mitra and Serkan Saydam, 2012).
The integrated system includes both draglines and truck and shovels. This system aims to get the benefits of both systems while minimising the negatives of both. In this system a dragline is used for overburden removal while the truck and shovel system removes the overburden that the dragline is unable to remove.
A good example of an integrated system is the Curragh Mine in Queensland, Australia where the dragline, truck and shovel and truck and excavator methods are used to move overburden.
The All Important Strip Ratio
One of the most important metrics used to assess the economic viability of an Open Cut mine is the strip ratio (also called the stripping ratio). The strip ratio is the ratio of overburden required to be removed per one tonne of raw coal produced. For example, a mine that has a a strip ratio of ten means that for every one tonne of coal mined ten tonnes of overburden must be removed. A mine which has a strip ratio of one means that one tonne of overburden must be removed per one tonne coal mined. The lower the strip ratio the better. Over the years the average global strip ratio has increased as the cost of overburden removal has reduced.
Conclusion – Which is Best?
The mining system chosen should be based on the individual characteristics of the mine site, particularly the geology of the site. As you can see in the academic analysis contained in the table below, draglines typically have a significantly higher capital cost but also have a significantly lower operating cost. When both the capital and operating cost are considered together, the dragline is considerably cheaper than the truck and shovel method. Despite this, the inflexibility of draglines means that truck and shovel systems must often be implemented in conjunction with the dragline system. Further, if the geological conditions are not appropriate for draglines, a truck and shovel system is often much cheaper than a dragline system.
There are two main types of underground coal mining: longwall mining and room-and-pillar mining (also called bord and pillar mining). I will only briefly discuss underground mining. In general, the deeper the coal the more expensive it is to mine.
As described by Arch Coal:
Longwall mining involves using a mechanical shearer to extract coal from long rectangular blocks of medium to thick seams. Ultimate seam recovery using longwall mining techniques can exceed 75%. In longwall mining, continuous miners are used to develop access to these long rectangular coal blocks. Hydraulically powered supports temporarily hold up the roof of the mine while a rotating drum mechanically advances across the face of the coal seam, cutting the coal from the face. Chain conveyors then move the loosened coal to an underground mine conveyor system for delivery to the surface. Once coal is extracted from an area, the roof is allowed to collapse in a controlled fashion (Arch Coal Inc. 2018 10K, p. 11).
Room and Pillar Mining
As described by Arch Coal:
Room‑and‑pillar mining is effective for small blocks of thin coal seams. In room‑and‑pillar mining, a network of rooms is cut into the coal seam, leaving a series of pillars of coal to support the roof of the mine. Continuous miners are used to cut the coal and shuttle cars are used to transport the coal to a conveyor belt for further transportation to the surface. The pillars generated as part of this mining method can constitute up to 40% of the total coal in a seam. Higher seam recovery rates can be achieved if retreat mining is used. In retreat mining, coal is mined from the pillars as workers retreat. As retreat mining occurs, the roof is allowed to collapse in a controlled fashion (Arch Coal Inc. 2018 10K, p.12).
As you can see in the above image, the room and pillar method of underground mining leaves at least half of the coal seam behind. As a result, most underground mining has been replaced with the much more efficient longwall technique wherever the thickness and layout of the coal seams are suitable. The longwall technique can extract more than 90% of the coal seam compared to under 60% for the room and pillar technique (Vaclav Smil, 2017).
Costs of Mining
The costs of a mine can be divided into two groups: capital costs and operating costs (see below image). Capital costs can be further divided into start-up capital costs and stay in business capital costs. Operating costs can also be divided into fixed operating costs and variable operating costs.
The most significant operational costs to a mine is overburden (waste or spoil) removal. For example, at the Curragh Mine in Queensland, Australia waste removal accounts for over 50% of the total cost of production (see below image).
The most significant cost incurred to remove overburden and coal is haulage. This explains why, in a typical open cut mine, haulage accounts for 70% of mine production costs compared to just 12% for blasting, 10% for loading and 8% for drilling.
Minimising haulage expenses will have a substantial positive financial impact on the profitability of a coal mine. There are many ways to minimise haulage costs including:
- minimising distances traveled;
- minimising queuing trucks;
- minimising shovel/excavator hang time (waiting for trucks);
- reducing the size of the fleet;
- progressive rehabilitation as close to the mining face as possible (less handling and haulage distances);
- minimising driving on steep elevations/driving on flat elevations where possible; and
- using a dragline where conditions are appropriate.
Importantly, reducing haulage costs to the minimum involves creating and implementing a life of mine plan which predicts future haulage routes while balancing other factors such as rehabilitation plans, regulatory approvals, coal price movements, differing coal seam quality, competing investment priorities across the company, geotechnical factors and the often unknown future coal seam geology.
The Importance of a Well-Designed Mine Plan: Hail Creek Case Study
An example of a sub-optimal mine plan can be found at the Hail Creek Coal Mine in Queensland, Australia while it was operated by Rio Tinto. Prior to the mine’s sale to Glencore in 2018, the Hail Creek Coal Mine employed 1360 full-time-equivalent employees. Once Glencore assumed operational control of the mine it quickly set about designing and implementing a new mine plan.
One of the most important changes Glencore made was redesigning the west-pit mine plan. This plan involved making substantial changes to haulage routes to reduce shovel hang time, reduce the distance traveled by the fleet, minimise queuing and minimise driving on steeper elevations. By re-designing the haulage routes and making other operational improvements Glencore reduced the workforce required to run the mine from 1360 to just 933 full-time-equivalent employees.
This change resulted in a $110 million per annum reduction in spend post restructure while still increasing production levels. Compare this $110 million saving to the $357 million pre-tax profit Hail Creek made while operating under the previous inefficient Rio Tinto mine plan – the $110 million saving is equivalent to over 30% of the pre-tax profit made by the mine in 2017 under Rio Tinto management. This shows the importance of mine planning, particularly haulage route planning, to the profitability of a mine. Rio Tinto’s unwillingness – or inability – to efficiently operate Hail Creek was likely a key factor in their decision to sell the mine to Glencore, although Rio Tinto would likely deny this. As a result of Glencore’s operational improvements Hail Creek is now Glencore’s most significant cash generating coal asset.
The cost of infrastructure access is a major consideration when determining where a coal mine will be built. Proximity to existing infrastructure substantially reduces the start-up costs of establishing a new mine. There are four main ways coal is transported from the mine to coal markets: via road, rail, barge (on major rivers and lakes), port (via bulk carriers) and/or belt. I will focus on rail and port infrastructure in this article as they are the most common methods of coal transportation for coal destined for the seaborne market. The below graph produced by Yancoal shows the total cash costs per tonne per mine categorised by cost type. As you can see, freight is a substantial component of the overall cash cost per tonne, particularly for the Moolarben mine.
Smaller producers tend to transport their coal by road in most countries due to the substantial capital costs of building a rail link. Barge transportation is restricted to mines located close to a river or lake, such as is the case with coal mines in the US located near the Ohio River or the Great Lakes.
The way infrastructure access is contracted for also differs between countries. For example, in Australia port and rail contracts are usually long term ‘take-or-pay’ contracts whereas in the US rail contracts are negotiated annually. Take-or-pay contracts are particularly important to understand because mine operators have to pay the infrastructure owner for their contracted capacity regardless of whether they actually utilise it or not.
The most important economic considerations to consider when coal is being transported via rail is the capacity of the rail line to haul the required amount of coal and whether the locomotives are electric or diesel.
Most mines do not operate their own rail network but instead outsource it to existing rail network operators (such as Aurizon in Australia, or Union Pacific or BNSF in the United States) meaning that a mine operator will have to make contractual arrangements with the rail network operator to use its network and locomotives. For those readers interested I found this article by the National Academic Press which gives a great overview of coal transportation in the United States (including rail).
Electric Locomotives Versus Diesel Locomotives
Coal mine operators are often required to build the rail link to the mine themselves. This means that mine operators will have to consider, amongst other things, whether the link is electrified or not and the the ability of the network operator to supply diesel or electric locomotives. The specifications of the rail link must be compatible with the rest of the rail network it is being connected to.
Electric locomotives are highly effective for heavy-haulage environments where high tractive effort and high tractive power is required such as is required when hauling coal (Queensland Competition Authority, 2007). Diesel locomotives are perfectly capable of hauling coal but their operating costs are higher due to their poor thermal efficiency relative to electric traction locomotives. The capital costs of installing an electric rail link are higher than installing a rail link which uses diesel locomotives however this higher electrification cost is offset by lower operating costs. See below for a more in-depth discussion of the pros and cons of each locomotive type.
Proximity to a suitable port is a vital consideration for coal mines exporting to the seaborne coal market. These ports often have multiple terminals where large bulk carriers are loaded with the coal. The deadweight tonnages of the largest bulk carriers can exceed 100,000 deadweight tonnes. Additionally, the port must have the required capacity to handle the coal produced from any new mine.
Another important consideration regarding port infrastructure is the days it takes for the coal to arrive at its destination once it has left the port. The less days it takes the better.
The costs of shipping are also incredibly important for the economic viability of a mine. Specific costs will vary by terminal.
With the introduction of stringent environmental legislation in many coal mining jurisdictions, rehabilitation must no longer be an afterthought to be considered after mining has ceased. Progressive rehabilitation must be an integral part of a mine plan. By progressively rehabilitating mined land the mining company reduces its future liabilities and the amount of funds it has to pay as financial assurance (or similar) to the government.
Financial assurance is money paid to government in case the mining company is no longer able to carry out its rehabilitation obligations, such as when a company goes bankrupt. For example, the Curragh Mine owned by Coronado Resources in Queensland, Australia has paid AUD 279.7 million dollars as financial assurance relating to mine rehabilitation. This money is held by the Queensland Government in the form of a bank guarantee. This cost can be reduced over the life of the mine by proactively rehabilitating mined land rather than leaving it to the last minute or selling the mine to another company. Progressively rehabilitating mined land is not only the most financially sound method of dealing with rehabilitation but it is also what the community expects.
Coal Market Overview – Major Coal Producing Companies
There are two broad coal markets: the land-based coal market and the seaborne coal market. As the name suggests, the land-based market consists of coal which is traded over land. Most of this coal is traded within China and to a lesser extent exported to China over land from Mongolia and Russia, and within Europe, Africa and North America. It is in the land-based market that the largest Chinese coal companies of the world sell their coal (such as the Yanzhou Coal Mining Company). The seaborne coal market refers to coal which is shipped via large ocean going vessels. The seaborne coal market is the focus of this article as it is the market most coal companies outside of China trade in.
The seaborne coal market is divided into two markets: the Atlantic Market and the Pacific Market. These markets are also sometimes referred to as the Atlantic Basin and the Pacific Basin. The worlds largest seaborne coal exporter is Indonesia followed by Australia, Russia, Colombia and South Africa. Glencore has the world’s largest seaborne coal portfolio. The seaborne coal market is further divided into the thermal coal market and the metallurgical coal market.
Seaborne Thermal Coal Market
The majority of the seaborne thermal coal market is traded in the Pacific market with 742 Mt sold in the Pacific market in 2017 compared to 175 Mt sold in the Atlantic market.
The world’s largest seaborne thermal coal exporting company is Glencore. Glencore’s managed thermal coal sales in 2017 were 110 Mt and Glencore’s coal trading activities on behalf of other producers accounted for another 100 Mt of the seaborne coal market. This means that Glencore’s managed coal sales accounted for 12% of the total seaborne thermal market and their traded coal accounted for an additional 11% of the seaborne market, bringing Glencore’s total market share to around 23% of the seaborne thermal coal market. Additionally, Macquarie Bank estimates that Glencore’s share of the premium seaborne thermal coal segment is about 35%. Premium coal has a higher energy content and produces less pollution compared to lower quality coals. This type of coal is in high demand throughout North Asia and commands a higher price. This gives Glencore significant influence over the premium coal price in the Pacific market.
Glencore’s dominance of the seaborne thermal coal market is unsurprising considering Glencore is the largest seaborne exporter of thermal coal (and coal generally) in Australia and is the second largest seaborne exporter of thermal coal in Colombia and South Africa. All three of these nations are major thermal coal exporters. Glencore’s influence in the market can be seen by Glencore’s ability to delay its annual price negotiations with Japanese thermal coal buyers so that they could win a higher price, a feat they could only accomplish if they knew the buyers would not go to alternative producers.
Seaborne Metallurgical Coal Market
The largest seaborne metallurgical coal producer is Australia followed by the United States, Russia, Canada and Mozambique. Australia dominates the global met coal export market accounting for 62% of all seaborne metallurgical coal exports in 2017. BMA is the worlds largest seaborne metallurgical coal exporting company followed by Teck, Anglo American, Glencore, Coronado Global Resources and Peabody.
While Glencore dominates the seaborne thermal coal market, BHP dominates the seaborne metallurgical coal market. Macquarie Bank estimates that BHP controls 22% of the seaborne metallurgical coal market (via BMA and BMC). This 22% market share is even more significant when you consider that BHP’s market share is from BHP managed production rather than a combination of managed production and the traded production of other producers as is the case with Glencore.
Pricing of coal
Like all markets the pricing of coal is based on supply and demand. There are a number of coal price indices which are used by coal producers and coal trading companies to price their contracts. These benchmark indices are based on the coal’s quality and the region in which it is produced. Some example indices include:
- API 2: The industry standard reference price for coal imported into northwest Europe
- API 4: The price for all coal exported from Richards Bay, South Africa
- API 5: The price of NAR 5,500 kcal/kg, high-ash coal exported from Australia
- API 6: The price of NAR 6,000 kcal/kg coal exported from Australia
- API 8: The price of NAR 5,500 kcal/kg coal delivered to south China
- API 12: The price of NAR 5,500 kcal/kg coal delivered to east India
NAR stands for net as received, as opposed to GAR which stands for gross as received. NAR and GAR refer to the coal’s specific energy value. S&P Global produced an in-depth methodology behind various coal index benchmarks which you can view here.
In recent years increased demand for higher quality coal from North Asia has increased the price premium between low and high quality coal.
I hope this article was useful to anyone investing in coal mines. For my other ASX-related coal articles click here. I plan on writing a series on coal mine investing – including climate change issues – in the future. I will link them here once I have published them. Stay tuned!
- Accenture Thermal Coal Production Growth Opportunity Coal Mining Industry Asia
- BHP Group
- Coaltrans Conferences
- Commodity Insights
- Coronado Global Resources Prospectus
- Dragline or Truck Shovel Some Technical and Business Considerations by Paul Westcott
- Energy: A Beginners Guide by Vaclav Smil
- Glencore Annual Report 2018 and Company Presentations
- Global Cement Magazine
- Surface Coal Mining Methods in Australia by Rudrajit Mitra and Serkan Saydam
- New Hope Corporation Annual Report 2018 and Company Presentations
- Parametric estimation of capital costs for establishing a coal mine South Africa case study
- Queensland Competition Authority
- Resources and Energy Quarterly March 2019 Australian Government Department of Industry, Innovation and Science
- Wiggens Island Coal Export Terminal
- World Coal Association
- Yancoal Prospectus and Company Presentations