Black Coal

Content maintained by Mike Huleatt

• Black Coal
• Resources
• Accessible EDR
• JORC Reserves
• Exploration
• Production and Trade
• World Ranking
• Industry Developments

Coal is a sedimentary rock formed from vegetation which has been altered by temperature and pressure over millions of years. Black coal consists of anthracite, bituminous and sub-bituminous coals and ranges in age from 140 to 225 million years old. The higher rank black coals are mainly used as a fuel in the generation of electricity (thermal coals) and to produce coke (metallurgical or coking coals) for the iron and steel making process. Black coal is used also in cement manufacturing, alumina refineries, paper manufacture, food processing and the manufacture of chemicals. Black coal occurs in all States and the Northern Territory, but Queensland with 55%, and New South Wales with 25% and have the largest share of Australia's total identified resources. The main producers of black coal were Queensland (54%) and New South Wales (43%). In addition there are locally significant operations at Collie in Western Australia, Leigh Creek in South Australia and in the Fingal Valley and at Kimbolton in Tasmania. In Australia about 75% of black coal is produced from open-cut mines.

A major review of Australia's black coal resource inventory was undertaken as part of the resource assessment process for the preparation of the December 2010 national resource estimates. Particular attention was paid to: resources which were reported prior to the Joint Ore Reserve Committee (JORC) Code; those which had not been updated or reconfirmed over the past decade; and those resources reported prior to 1990 that were of a general regional nature for which no spatial location was known and which could not be verified by more recent data.

Results of the review show that Australia's recoverable Economic Demonstrated Resources (EDR) in 2010 was reduced by 4.5% to 41 848 million tonnes (Mt). In situ EDR was reduced by 7.5% to 56 135Mt. Queensland (59%) had the largest share of recoverable EDR in Australia and was followed by New South Wales (37%). The Sydney Basin (31%), Bowen Basin (33%), Surat Basin (13%) and the Galilee Basin (8%) had the largest shares of recoverable EDR in Australia.

In 2010, estimates of Australia's recoverable Paramarginal Demonstrated Resources fell from 1800Mt to 970Mt mainly because of the removal of some resources from the national inventory following the comprehensive review of coal resources. Similarly there was a reduction in recoverable Subeconomic Demonstrated Resources from 5900Mt to 4184Mt.

There was a substantial reduction in both in situ and recoverable Inferred Resources following the review with the in situ Inferred Resources falling by about 46 000Mt to 78 963Mt and recoverable Inferred Resources falling by 20 000Mt to 58 046Mt. Almost all of these reductions resulted from the removal of historical estimates of Inferred Resources which were based on pre-1990 data. These historical figures had been included in the national inventory but were deleted from the latest estimates because the resource estimates could not be verified and were of a general regional nature for which no spatial location could be ascertained. It was considered that this lack of data, especially recent data, on these coals was sufficient reason to exclude them from the national inventory.

Almost all black coal EDR is accessible with only a relatively small tonnage at Hill River (WA) being quarantined within State Reserves.

JORC Code Reserves are 17 238Mt or 41% of Accessible EDR. Included in this tonnage are estimates by Geoscience Australia of reserves of some 1 200Mt at operating mines for which no reserves were reported by the mining companies. BHP Billiton, Rio Tinto and Xstrata Coal manage about 66% of JORC Code Reserves in Australia. The estimated resource life of the JORC Code Reserves is 38 years at the 2010 rate of production.

Data published by the Australian Bureau of Statistics (ABS) on coal indicated that exploration expenditure for 2010 totalled $340.7 million which is an increase of 9% from $312.7 million in 2009. Expenditure in Queensland rose by 29% to $287.8 million or 85% of all Australian coal exploration spending. In New South Wales coal exploration expenditure almost halved falling to $37.4 million from $73.7 million in 2009 while the State's share of Australian coal exploration spending fell from 23.6% in 2009 to 11% in 2010. Exploration also occurred in South Australia, Western Australia, Tasmania and Victoria but the ABS does not release details of expenditure in those States. In 2010, coal exploration expenditure contributed 13.8% to the total mineral exploration expenditure in Australia which was slightly less than the 15.5% achieved in 2009.

Australian production of raw black coal in 2010 was 449Mt (445Mt in 2009). This yielded 356Mt of saleable coal, 3% more than the 345Mt produced in 2009. Of the total production of both raw and saleable coal 75% was from open cut mines. Queensland and New South Wales dominate Australian black coal production and in 2010 accounted for 54% and 43% respectively of total raw coal production and 55% and 42% respectively of saleable coal production. Black coal was also produced in Western Australia (8Mt raw), South Australia (4Mt raw) and Tasmania (0.64Mt raw) in 2010. Exports of black coal during 2010 were 159Mt of metallurgical coal an increase of 24Mt over the 135Mt exported in 2009 and 141Mt of thermal coal, 2Mt more than in 2009. Australian coal exports in 2010 were valued at $42 969 million according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). ABARES has forecast that Australia's production of thermal coal will rise to 320.7Mt in 2015-16 and exports will rise to 242.0Mt in the same year. Metallurgical coal production is projected to rise to 220Mt by 2015-16 and exports to rise to 213Mt.

International data for world coal resources and production uses an aggregation of coal by rank, which is different to that adopted in Australia. In terms of resources, international estimates refer to anthracite plus bituminous coal as one group and sub-bituminous coal and lignite as a second. Australian statistics for both resources and production refer to black and brown coal where black coal includes anthracite, bituminous and sub-bituminous coal and brown coal refers to lignite. Using the international categories Australia has 9.2% of the world's proven reserves of anthracite plus bituminous coal and 8.6% of the world's proven reserves of sub-bituminous coal plus lignite. In terms of production (all coal) in 2010, Australia accounted for 6.3% of world output.

In terms of the Australian coal categories it is estimated that Australia has in the order of 6% of the world's recoverable black coal economic resources and ranks fifth behind the USA (31%), Russia (22%), China (14%) and India (8%). Similarly Australia produced about 6% of the world's black coal in 2010 and ranked fourth after China (51%), the USA (16%) and India (9%).

Development activity in the coal sector continued at high levels in 2010. ABARES provided a comprehensive overview of developments in its report Major Development Projects – October 2010 which was released in November 2010. In that report ABARES recorded that seven coal mining projects in New South Wales were under construction or committed and there were five similar projects in Queensland. The report also noted that in New South Wales there was an additional 22 coal mining projects at a less advanced stage while in Queensland there were 43 less advanced projects and one in Western Australia.

In addition to the mining projects, ABARES recorded that there were seven coal infrastructure projects under construction or committed and a further 15 projects were less advanced. The infrastructure projects include port development and expansion and rail capacity expansions.

Queensland coal mine projects reported by ABARES as under construction or committed in October 2010 include:

• Expansion of the Curragh mine to an annual capacity of 8.5Mt with an expected start up in 2011,
• Expansion at the Newlands Northern underground operation scheduled for completion in 2011 to have a capacity of 3Mt,
• Expansion of the Kestrel operation to add 1.7Mtpa of coking coal capacity due for completion in 2012,
• Isaac Plains expansion to add 1.6Mtpa of coking and thermal coal capacity,
• Middlemount Stage 1 construction is to have a run-of-mine capacity of 1.8Mtpa of coking coal with production scheduled for 2012.

The following brief project overviews are typical of the activity in projects reported by ABARES as being at a less advanced stage of development:

• Aquila Resources Ltd announced in July 2010 that a feasibility study of its Washpool hard coking coal project near Blackwater in the Bowen Basin had confirmed the technical and economic feasibility of the project. It envisaged open cut hard coking coal production of 1.6 million tonnes per annum (Mtpa) over a 25 year mine life from Proven and Probable Reserves of 108.3Mt. Subsequently, Aquila announced that the project would proceed to a definitive feasibility study and that the production target for the study would be expanded to 2.6Mtpa with a 15 year mine-life.

• Stanmore Coal Ltd announced an initial Inferred Resource of 117Mt of coal at The Range project located in the Surat Basin 24 kilometres (km) south east of Wandoan. The resource estimate was subsequently increased to 219Mt from which it is anticipated that a low ash thermal coal could be produced. The company announced that a concept study had indicated that the project was likely to be both economically and technically viable. This led to applications being lodged with the Queensland Government for a Mining Lease and Environmental Authority.

• BHP Billiton announced US$267 million of pre-approval capital expenditure to accelerate the development of the Caval Ridge and Hay Point Coal Terminal Stage 3 Expansion projects. The funds were for feasibility studies, the procurement of long-lead time items and initial project activities. Later in the year the Queensland Government gave conditional approval for the Caval Ridge mine which is part of the Peak Downs project. Production is anticipated to commence in 2014 and when operating at capacity will have an expected annual production of 5.5Mt of coking coal.

New South Wales coal mine projects reported by ABARE as under construction or committed in October 2010 include:

• Construction of the Mangoola open cut mine which is expected to start production in 2011 with a capacity of 8Mtpa of thermal coal,
• Expansion of the Mt Arthur open cut which will add 3.5Mtpa of thermal coal capacity from 2011,
• The Moolarben Stage 1 which will generate up to 12Mtpa (8Mtpa open cut, 4Mtpa underground) of run-of-mine thermal coal by 2012,
• Expansion of the Boggabri open cut with additional capacity of 2.8Mtpa of thermal coal by 2013,
• Expansion of the Wilpinjong mine to add between 2 and 3Mtpa of thermal coal capacity by 2013,
• Expansion of the Metropolitan longwall operation to give an additional 1Mtpa capacity by 2014,
• Ulan West development with a capacity of 6.7Mtpa of thermal coal by 2014.

The following brief project overviews are typical of the activity in projects which are at a less advanced stage of development:

• Whitehaven Coal Ltd announced that production of coal from its Narrabri Mine, 28 km south of the town of Narrabri, commenced on 28 June 2010 when the first continuous miner cut coal. While initial production will be 0.5 to 0.7Mtpa, at full production the mine output will be some 6Mtpa of PCI¹ coal and low ash thermal coal for export.

• In December 2010, NuCoal Resources NL announced the successful completion of a Development Concept Study on its Doyles Creek project in the Hunter Valley. The study indicated that a financially robust project could be developed at an estimated $500 million capital cost. The positive outcome of the study resulted in the company moving to initiate a preliminary feasibility study which is scheduled for completion by mid-2012.

• Coalworks Ltd completed a Preliminary Feasibility Study into the development of the Vickery South coal mine, coal handling and preparation plant and mine infrastructure which indicated that a positive return could be achieved from the project at a production rate of between 2 and 3Mtpa. The main outcome of the study was a multi-seam open cut operation with a life of 18 years. Production was indicated as 2Mtpa of run of mine coal which would yield an average of 1.41Mtpa semi soft coking coal and 0.28Mtpa of export thermal coal at full production. Coalworks Ltd said that the preliminary feasibility study would provide the basis for a bankable feasibility study which, if positive, would result in construction commencing in late 2011 or early 2012 and first production by 2014.

Rey Resources Ltd was in the process of preparing a feasibility study into the potential development of a mine at its Duchess-Paradise project in the Canning Basin. Rey is reportedly examining the possibility of a project capable of producing 2Mtpa of thermal coal from about 2013.

1. Pulverised coal injection.