Black Coal

AIMR 2013

TopBlack Coal

Coal is a combustible sedimentary rock formed predominantly from plant material that has been deposited in ancient marshy environments. Through burial over long periods of geological time, the plant material is transformed by microbial action, pressure and heat into coal. This process is commonly referred to as "coalification". In Australia, the term "black coal" includes anthracite, bituminous coal and sub-bituminous coal. The higher rank (greater degree of coalification) black coals are predominantly used in either electricity generation (thermal coals) or to produce coke for the iron and steel making industry (metallurgical or coking coals). Black coal is also used in cement manufacturing, alumina refining, paper manufacturing and several other industrial applications.

Black coal occurs in all States and the Northern Territory (NT). Most of Australia's Identified Resources of black coal occur in Queensland (Qld) (62 per cent) and New South Wales (NSW) (24 per cent). Australian coal production is dominated by Qld and NSW. In the twelve months to 31 December 2012, Australia produced 501 million tonnes (Mt) of raw coal. Of this total, Qld produced 256 Mt (51 per cent) and NSW produced 235 Mt (47 per cent). During this period, approximately 79 per cent of black coal production came from open-cut mining operations. There are locally important coal mines at Collie in Western Australia (WA), Leigh Creek in South Australia (SA) and in the Fingal Valley and at Kimbolton in Tasmania (Tas).

TopResources

Between December 2011 and December 2012, the estimate of Australia's Recoverable Economic Demonstrated Resources (EDR) of black coal increased by 6 per cent to 61 082 Mt (Table 1). The estimate of in situ EDR also increased during this period (by 9 per cent) to 77 589 Mt. Most of Australia's Recoverable EDR is located in Qld (59 per cent) and NSW (37 per cent) within four coal bearing, sedimentary basins (Bowen, Sydney, Surat and Galilee Basins). Approximately 31 per cent of Recoverable EDR is located in the Sydney Basin (NSW), 31 per cent in the Bowen Basin (Qld), 13 per cent in the Surat Basin (Qld) and 10 per cent in the Galilee Basin (Qld).

In the twelve months to December 2012, estimates of Australia's Recoverable Paramarginal Demonstrated Resources increased by 38 per cent to 1134 Mt and estimates of Recoverable Submarginal Demonstrated Resources remained virtually unchanged at 3984 Mt. Estimates of Recoverable and in situ Inferred Resources increased by approximately 12 per cent (to 64 184 Mt and 89 194 Mt, respectively) during this period.

Table 1: Recoverable resources of black coal in States and Northern Territory at December 2012 (million tonnes).

State JORC Reserves
(% of Accessible EDR)
Demonstrated Inferred
Economic Paramarginal Submarginal
New South Wales 7 749 22 963 169 26 8 739
Northern Territory          
Queensland 12 677 36 855 872 3 43 729
South Australia   758 40 3 930 9 788
Tasmania   520 3   303
Victoria          
Western Australia 236 986 50 25 1 625
Total Australia 20 662 (38%) 61 082 1 134 3 984 64 184

TopAccessible EDR

Nearly all black coal EDR is accessible. A relatively small tonnage of EDR is quarantined within State Reserves at Hill River in WA.

TopJORC Reserves

Australia's Joint Ore Reserve Committee (JORC) Code reserves are estimated at 20 662 Mt or 38% of Accessible EDR. Included in this tonnage are estimates by Geoscience Australia of reserves associated with operating mines for which reserves were not reported by the mining companies. The estimated resource life of the JORC Code Reserves at the 2012 rate of production is approximately 41 years.

TopExploration

Data published by the Australian Bureau of Statistics (ABS) for coal indicate that exploration expenditure during 2012 declined 6 per cent from the previous year to $709 million. Most of the decline occurred in Qld where expenditure fell 7 per cent to $611 million. In NSW, exploration expenditure fell by 3 per cent to $87 million. (Exploration expenditure data for South Australia, Western Australia, Tasmania and Victoria are not available). In 2012, 19.4 per cent of total expenditure on mineral exploration in Australia was attributable to coal exploration. While this represents a 1.8 per cent fall from the previous year, it is substantially higher than the 14.5 per cent recorded in 2010.

TopProduction and Trade

In 2012, Australian production of raw black coal increased to a record 501 Mt. Due to lower contract and spot prices for both metallurgical and thermal coal during the latter half of 2012, however, the value of Australian coal exports declined from $47 013 million in 2011 to $41 563 million in 2012.

Of the 501 Mt of raw coal produced during 2012, 379 Mt comprised saleable coal. Queensland and New South Wales dominate Australian black coal production and in 2012 accounted for 51 per cent and 47 per cent, respectively, of total raw coal and saleable coal production. During 2012, small quantities of black coal were produced for the domestic market in Western Australia (5 Mt raw), South Australia (3.8 Mt raw) and Tasmania (0.64 Mt raw).

During 2012, Australia exported 145 Mt of metallurgical coal and 171 Mt of thermal coal – an increase in export volumes over the previous year of 9 per cent and 16 per cent, respectively. While Japan remains the primary destination for Australia's coal exports, most of the additional export volumes reported for 2012 were exported to the Peoples Republic of China. (In 2012, imports of thermal coal into China increased by 59 per cent due to increasing electricity demand and the relatively low cost of imported coal).

In 2012, Australian coal exports were valued at $41 226 million. The Bureau of Resources and Energy Economics (BREE) forecasts that between 2012 and 2018, Australia's exports of thermal coal will rise at an average rate of 8 per cent a year to 271 Mt.

TopWorld Ranking

Data on world coal resources are compiled and aggregated under two classification systems. In Australia, the term 'black coal' includes anthracite, bituminous and sub-bituminous coal and the term 'brown coal' refers to lignite. Under the international system, only anthracite and bituminous coal are included in the 'black coal' category and sub-bituminous coal is included with lignite and referred to as 'brown coal'.

Under the international classification system, at the end of 2012, Australia was estimated to have 9.2 per cent of the world's proven reserves of black coal and ranked fifth in the world behind the United States of America (26.8 per cent), China (15.4 per cent), India (13.9 per cent) and Russia (12.1 per cent). Under the Australian classification system, it is estimated that Australia has approximately 9.2 per cent of the world's economic recoverable black coal resources.

In 2012, total world coal production of black and brown coal reached record levels and Australia was ranked fifth in the world behind China, the United States of America, India and Indonesia in terms of total coal production. Australia exported 319 Mt of black coal during this period and was the world's largest exporter of metallurgical coal and the world’s second largest exporter of thermal coal (behind Indonesia).

TopIndustry Developments

New South Wales

  • In March 2012, Yancoal Australia received approval to proceed with the Stage 3 Modification to the Austar underground mine located 12 km southwest of Cessnock. The modification involves removal of an existing longwall and the re-alignment of other longwalls with the direction of principal stress.
  • In June 2012, BHP Billiton approved US$845 million of expenditure to sustain operations at Illawarra Coal by establishing a mine replacement area at the Appin coal mine. Known as Appin Area 9, the new area will be operational in 2016 and replace production at the West Cliff Mine.
  • In July 2012, Cockatoo Coal Limited announced a JORC resource upgrade for the Hume Project. Located approximately 160 km from Sydney in the southwest portion of the Southern Coalfield, Identified Resources at Hume were upgraded to 451 Mt (an increase of 58 per cent).
  • In September 2012, Nucoal Resources Ltd executed an agreement with Mitsui Matsushima International Pty Ltd to develop the Doyles Creek Underground Coal Project and training facility in the Hunter Valley.
  • In December 2012, Pacific National Coal launched a $110 million train support facility at Greta in New South Wales. It is anticipated that the facility will increase the efficiency of services in the Hunter Valley and provide significant capacity benefits to the Hunter Valley coal chain.
  • In December 2012, Gujarat NRE Coking Coal received approval to continue mining a new longwall block and to construct associated surface infrastructure at the NRE No.1 Colliery located 8 km north of Wollongong.
  • Idemitsu Kosan is proceeding with its expansion of the Boggabri coal mine 17 km northwest of the town of Boggabri. The Boggabri Project involves a brownfield expansion of the existing 1.5 Mtpa open-cut mine to 4.3 Mtpa by 2013/14. By 2016, Idemitsu Kosan plans to increase production at Boggabri to be in the range 6.6 to 7.0 Mtpa.
  • During 2012, the expansion of underground mining operations at the Metropolitan colliery 30 km north of Wollongong continued. Peabody Energy is extending longwall mining operations to the north of the existing mine to increase production of saleable hard coking and semi-hard coking coal from 1.5 Mtpa to 2.8 Mtpa. In 2012, the mine produced 2.1 Mt of saleable coal.
  • Xstrata Coal continued construction of the Ravensworth North Project during 2012. Located near Singleton in the Hunter Valley, the project is a large open-cut mine that will produce up to 8 Mtpa of saleable semi-soft and thermal coal. Construction on the project is scheduled for completion in the fourth quarter of 2013.
  • Xstrata Coal is proceeding with the installation of a second longwall mining operation at the Ulan West mine located 42 km north-northeast of Mudgee. Production from the new longwall mine is scheduled to commence in 2014. When completed, Ulan West will produce 6.7 Mtpa of thermal coal for the export market.

Queensland

  • During 2012, either maiden JORC resource estimates or JORC resource upgrades were announced for seventeen coal projects and deposits in Queensland. Of these, six are located in the Bowen Basin (Comet Ridge, Baralaba, Moorlands, Rockwood, T9 Block (Tiaro) and Tennyson), seven are located in the Surat Basin (Back Creek, Thorn Hill, Bushranger, Krugers, Davies Road, Columboola and The Range), two are located in the Galilee Basin (Hughenden and Galilee Project (Tiaro)) and two are located in the Clarence-Moreton Basin (Amberley and Bremer View).
  • In June 2012, Cockatoo Coal Limited (as part of the North Surat Joint Venture) announced that it had been selected as a 4.2 Mtpa user of the Wiggins Island Coal Export Terminal (WICET) Stage 1 Expansion in Gladstone. The North Surat Joint Venture will commence supplying coal from the Collingwood, Taroom and Woori thermal coal projects to the terminal in 2016. Capacity commitments were also confirmed with Cockatoo Coal Limited, Stanmore Coal Limited and Xstrata Coal for their share of the 32.2 Mtpa capacity needed to support the WICET Stage 2 Expansion.
  • In August 2012, Cougar Energy announced that it planned to sell its Queensland coal assets and focus on underground coal gasification in Asia.
  • In response to falling coal prices and oversupply, in September 2012, Anglo American announced plans to cut production and staffing levels at its operations around Moranbah. The company stated, however, that it remained committed to tripling production of coking coal from its Moranbah operations by 2020.
  • In December 2012, the Adani Group formalised an agreement to develop the Carmichael Coal Project in the Galilee Basin. The project is one of the largest in the world. The Adani Group proposes to build a 400 km rail link from the Galilee Basin to the Abbot Point Coal terminal near Bowen. The Adani Group acquired the Abbot Point Coal terminal in 2011 and plans to increase its capacity from 50 Mtpa to 120 Mtpa. When operational, output from both underground and open-cut mining operations at Carmichael is projected to rise to 60 Mtpa.
  • Elsewhere in the Galilee Basin, the Hancock-GVK Joint Venture received approval for its 30 Mtpa Alpha Coal Project and the proposed development of the Abbot Point coal terminal. The joint venture also submitted an Environmental Impact Statement for the proposed Kevins Corner Project – a large deposit of thermal coal located immediately to the north and adjacent to the Alpha Project.
  • During 2012, due to shrinking profit margins, the closure of 12 coal mines was mooted. In Qld, closures include the Gregory open-cut mine operated by Xstrata Coal (although underground mining operations at the associated Crinum mine continue), the New Oakleigh mine near Ipswich operated by New Hope Corporation, Norwich Park operated by the BHP Billiton Mitsubishi Alliance and the Blair Athol mine operated by Rio Tinto. Many other mines continued to operate despite negative cash margins due to transport and port contracts (known as "take-or-pay" contracts). Some companies (Yancoal Australia and the BHP Billiton Mitsubishi Alliance) shelved plans for selected mine expansions.
  • The BHP Billiton Mitsubishi Alliance continued with its expansion of the Broadmeadow mine and the development of new mines at Daunia and Caval Ridge. The three mines are located in the Bowen Basin near the town of Moranbah. When completed in 2013/14, Daunia and Caval Ridge will have the combined capacity to produce 10 Mtpa of coking coal for the export market.
  • During 2012, the development of a further two new mines located near the town of Moranbah (Eagle Downs and Grosvenor Underground) proceeded. Eagle Downs (operated by Aquila Resources Ltd and Vale SA) will be a hard coking coal, longwall mine adjacent to the BHP Billiton Mitsubishi Alliance's Peak Downs operation. Eagle Downs is expected to have a 47 year mine life with a peak production rate of 5.9 Mtpa. The Grosvenor Project (operated by Anglo American) is a greenfields, underground coal mine which will produce up to 7 Mtpa run-of-mine coking coal for the export market.
  • Approximately 50 km northeast of the town of Emerald, Rio Tinto Energy continued its expansion of underground operations at the Kestrel mine. Scheduled for completion in 2013, the extension will add 20 years to the life of the mine and increase production of hard coking coal to around 6 Mtpa.
  • Also near Emerald, Ensham Resources continued the transition to increased underground mining operations at the Ensham coal mine. Known as the Ensham Central Project, the operator is undertaking bord and pillar underground mining operations within the footprint of the existing open-cut mine.
  • In 2011, the Jellinbah Group commenced the expansion of open-cut mining operations at the Lake Vermont mine located 20 km north of Dysart. As part of the expansion, a second Coal Handling and Processing Plant was constructed. In 2013, production of hard coking and PCI coal from the mine is expected to increase to 6 Mtpa.
  • Millennium is an open-cut mine located 160 km south-southwest of the town of Mackay and operated by Peabody Energy. The mine produces coking and PCI coal for the export market. Peabody Energy plans to expand open-cut operations at the mine into two new mining leases and increase production at Millennium by 1.4 Mtpa.
  • Northwest of Rolleston in the Bowen Basin, a joint venture led by Glencore Xstrata is seeking approval to extend the life of the existing Rolleston coal mine by expanding open-cut mining operations into adjacent mining leases. The Rolleston Coal Expansion Project has the potential to extend the life of the Rolleston mine by 30 years and increase total production capacity at the mine to 14 Mtpa. Rolleston produces thermal coal for both the domestic and international market.

South Australia

  • In August 2012, Altona Energy announced that the Altona-CNOOC Joint Venture had all the necessary regulatory approvals in place to allow it to commence a drilling program designed to gather further technical data for its Arckaringa CTL Project. The joint venture holds interests in three exploration licences that cover a combined area of 2500 km2 in the Permian Arckaringa Basin and is evaluating the potential of the northern part of the basin for a coal-to-liquids project.

Western Australia

  • During 2012, Rey Resources Limited continued its environmental evaluation and stakeholder consultation for the proposed Duchess Paradise mine located in the Canning Basin. The project will include a slot/high wall mine and a Coal Handling and Processing Plant. Rey Resources proposes to truck coal from the Duchess Paradise mine to the port of Derby where it will be loaded onto barges for transhipment to export vessels.
  • In July 2012, TPL Corporation Limited announced a maiden coal intercept from its drilling program at the Lightjack Hill Coal Project in the Canning Basin. In August 2012, the company announced a second coal intercept (2 metres thick at a depth of 103 – 105 metres) at Lightjack Hill. TPL has several targets in the Canning Basin based on the location of the subcrop of the Permian Lightjack Formation (Liveringa Group) within its 14 exploration licences.
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