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Coal - Australia's most valuable mineral asset.

The coal industry exists, largely, to export. That tonnage could exceed 220 Mt/y by 2000

Since Australia's coal industry was last reviewed in these pages (MM, October 1991, pp. 200-209) some of the most significant developments have been the growing involvement of Korean finance in Australian coal mining, following the continuing Japanese interest. With examples such as Peabody's purchase and expansion of Costain's Australian coal interests and the rapidly growing stature of Arco, the U.S. influence is also making itself felt.

There is concern that new developments are not likely to come on stream soon enough to take full advantage of the continuing strong growth in the south-east Asian energy market. However, both the Queensland and New South Wales (NSW) governments have recently offered important new resources to international tender.

Australia exports more than two-thirds of its hard coal output. It has been the world's leading coal exporter since 1984. Production costs are now being kept down by the expansion or restructuring of many existing mines. The country has vast reserves which could be mined and exported at costs not much higher than the full costs (including capital recovery) of the existing mines|1~. Since Australia's population is unlikely to increase significantly, its own coal needs will only increase modestly. Therefore, it will greatly expand its exports, and its location close to the fastest growing coal markets of South East Asia only strengthens its export potential.

Coal exports totalled 126,242,000 t in 1992, made up from 67,937,000 t of metallurgical coal and 58,295,000 t of thermal coal. For the first nine months of last year, thermal coal exports were down 4.1%, compared with the 1992 period, to 42,445,000 t, while metallurgical exports were up 8.5% to 55,072,000 t. The total showed a 2.6% rise on the 1992 nine-month figure to 97,517,000 t.

Ms Meredith Hellicar, director (NSW) of the Australian Coal Association pointed out at the World Coal Institute conference last year|2~: "The Asian region is growing faster than any other. Its energy needs are exploding. This is the region in which decisions on major energy developments are being taken seemingly every week. There are opportunities, in Asia especially, for collaboration on energy policy, energy infrastructure, project development and research and development. The Australian industry is increasingly involved -- both in cooperating bilaterally and within the new forum of APEC."

Coal supplies 40% of Australia's primary energy requirements|3~ (the OECD average is 21%) and 77% of its electricity production requirements, where the OECD average is 40%. Australian production in 1992 was 179.8 Mt of hard coal and 51.1 Mt of lignite. The total 117.8 Mt of off equivalent represented 5.4% of total global output|4~. Consumption in 1992 was just 39.9 Mt oil equivalent.

More than any other coal producing nation, Australia's industry is dominated by exports, indeed it is dependent on the export market for survival. In 1992 the proportion of total tonnage produced which was sold for export (126 Mt) was 70%. The comparable figure for the U.S. was 11% (exporting 93 Mt), South Africa 28% (50 Mt) and the world's largest producer, China, just 2% (21 Mt). Only Canada, which exported just 27 Mt that year, exported a higher share of national output, 83%. The proportion exported by both Indonesia (16 Mt) and Colombia (15.2 Mt) is about the same as that of Australia, but is a much lower tonnage in each case.

Coal is the country's largest export earner; its contribution to the 1992/93 balance of payments was $A7,600 million (9.9% of total exports of goods and services or 12.1% of total merchandise exports). Furthermore, as Mr Tony Haraldson, former chief executive of producer Coal & Allied, points out(3): "Over 60% of Australia's total exports are energy or energy intensive products and coal supplies the lion's share of Australia's electricity; it also has a key role in steel making."

In addition coal's contributions to government revenues are huge. Payments in 1990/91 were over $A2,500 million in the form of taxes and rail freight and some port charges.

As an employer, the coal industry accounts for around 25,000 jobs directly in Queensland and New South Wales (NSW), with many more employed in support industries such as railways, ports and engineering.

Competing internationally

A number of factors have led to the country's leading export position. A major breakthrough came in September 1988 when the industry was provided with a much more flexible industrial framework under which to operate. From a structure which previously permitted coal production on only some 240 days per year, now coal production is allowed on 363 days. Further labour reforms since then, particularly associated with the removal of demarcation, have helped improve plant utilisation and productivity and should allow future productivity improvements and cost savings.

In NSW the coal loaders have been privatised, leading to dramatic cuts in charges. Negotiations have continued with state governments on rail freight charges and reduced rates (efficiency rebates and volume incentives) have resulted. In NSW privatisation of the Hunter Valley rail freight system is a possibility.

Mine productivity improvement has also resulted from capital expenditure, in longwall installations underground and larger capacity equipment for surface mines. The proportion of opencut mining to underground has been increasing.

The NSW Coal Association survey for 1991/92 showed that productivity had outstripped wage increases (9.5% versus 7.1%) for the first time in four years. Unhappily, that same survey, representing 80% of the NSW industry, also showed that 50% of the respondents were unprofitable. Total operating profits were $A83 million ($A49 million after abnormal and extraordinary items), on total assets of $A3,956,000 million and total revenue of $A3,543 million. The average return on shareholder funds was 4.7% from operating profits and 2.8% after extraordinaries. However, there was an improvement in 1992/93. Unprofitable respondents had fallen to 38% and total operating profits earned were up to $A198 million ($A149 million after abnormals and extraordinaries) on total assets of $A4,357 million and total revenue of $A3,710 million. The average return on shareholder funds rose to 9.2% from operating profits and 6.9% after extraordinaries.

Towards the end of last year, the U.S. Bureau of mines released a report|5~, comparing mining costs in the U.S., Australia, Canada, Colombia and South Africa. The following extracts put Australia's basic mining costs into a world context. For large, longwall export mines, U.S. mines are generally lower cost than Australian operations. In large, continuous miner export mines, U.S. and Australian mines are comparable in cost; but Australian mines have higher operating costs, while U.S. mines have higher regulatory costs. For surface mines with few level, thick seams, South African mines are generally lowest cost. In ascending cost order, U.S. mines are generally the next highest cost, followed by mines in Canada and Australia. South African and U.S. mines have the lowest capital and operating costs, and South Africans have the lowest land costs. Canadian and U.S. mines have the highest regulatory costs.

Turning to delivered costs, from the same report, to Europe, Colombia is the lowest cost supplier, followed in general ascending order by South Africa, the U.S. and Australia. For the Japanese electric utility market, Australian and South African suppliers are competitive, followed by the U.S. In Japan's metallurgical market, Australia is the lowest cost supplier, followed by Canada and the U.S. Finally, for the electric utility market of the U.S. gulf coast, Colombia is the lowest cost supplier, followed by South Africa, the U.S. and Australia.

The main issues

The NSW Coal Association lists seven main issues currently facing the Australian coal industry.

Profitability: While many companies have returned to profitability, one of the main reasons has been the movement in the $A/$US exchange. The recent strengthening of the $A against the $US has, of course, eroded some of the earlier benefits. Productivity in the industry has continued to increase (for example production per employee per hour in NSW rose by 8% in 1992-93, following a 7.1% increase in 1991-92). Nevertheless, there is a need to further improve efficiency in the industry in view of the increasing competition from other countries, particularly low-cost producers in Indonesia and South Africa.

Market outlook: For example, good prospects in the steaming coal market in Asia.

Industrial relations: The continuing need for reform if the industry is to succeed against increasingly intense international competition.

Ports and infrastructure: A Commission of Inquiry Report has been prepared on the proposed Port Kembla Coal Terminal expansion, and is now with the Minister awaiting his response. There is also a need to reduce rail freight rates.

Community attitudes: The 1992 community attitude survey conducted by the NSW Coal Association revealed that Australians know little about coal and that lack of knowledge tends to be correlated with negative perceptions of the industry. The Association is developing a more formalised public affairs strategy to help ensure that it continues to provide information to address the needs of government, education and the general community.

Environmental issues: Community and government concerns about land rehabilitation and the possibility of an enhanced 'greenhouse effect' also require the more effective dissemination of information by industry, government and science.

Safety: The industry has made major improvements in its performance in recent years but acknowledges the need for further improvement.

Export growth

Considering current capacity, expansion plans and potential new projects in NSW and Queensland, Australian export capacity could grow from 126 Mt/y in 1992 to 176 Mt/y by 1995 to 225 Mt/y by the year 2000. Transport infrastructure is well developed with seven coal export ports currently able to accommodate Panamax and Cape-size vessels. Their current combined throughput is some 150 Mt/y and expansions are underway. For instance, the Port of Newcastle in NSW handled some 42 Mt of exports in 1993. Its capacity today is 46 Mt/y and it is being expanded to 53 Mt; further expansions will be made in line with demand.
NSW coal - salient data

NSW Coal Industry                          1990/91     1991/92     1992/93
Mine production (Mt)

Opencut                                       34.4        39.6        39.4
Underground                                   45.7        44.3        44.8
Exports (Mt)
Metallurgical                                 19.3        20.6        23.6
Steaming                                      32.0        32.9        33.8
Employment                                  16,433      15,820      14,458

Financial Survey Data (A$ million)
Survey coverage (%)                             88          80          82
Shareholders funds                           1,688       1,811       2,250
Borrowings                                   1,223       1,132       1,035
Expenditure on fixed and
deferred assets                                426         390         295
Total assets                                 3,705       3,792       4,152
Operating revenue                            3,411       3,371       3,473
Labour costs
Gross wages and salaries                       874         889         833
Other labour costs                              90          92          95
Payroll tax                                     57          61          58
Interest expense                                95         104          76
Exchange losses/(gains)                       (18)         (5)          24
Costs before resource based
taxes and income taxes                       3,168       3,259       3,263
Direct taxes                                   161         173         121
Income tax                                      38          49         (1)
Mineral royalties, etc.                        116         118         118
Land taxes and rates                             6           6           6
Operating profits before
income and resource-based taxes                329         185         280
Net profits
Exploration and mining                         129          71         157

The other natural advantages that will ensure the continued growth of the Australian export coal industry are the proximity of the mines to the ports, generally favourable geology and over 300 years of reserves of high energy coal which is low in sulphur and ash. According to WEFA Energy's figures|1~, Australian hard and brown coal reserves amount to 90,900 Mt, and its reserves to production ratio (based on 1990 production) at 435 years is second only to Indonesia (3,000 years) among the major coal exporters.

In the short term however, some Australian, and Canadian, producers are suffering because Japan's steel mills have weathered more than three years of severe recession and many are incurring substantial losses. Output this year could fall below 95 Mt, from 102 Mt in 1993. Thus, they have struck a hard bargain with their principal coking coal suppliers. BHP Australia Coal (BHPAC) and seven other Australian producers have had to accept disappointing price cuts, in part due to Canadian competition and the opportunity those producers had to cut prices due to the weakening Canadian dollar.

BHPAC supplies will reduce from 7.9 Mt to 7 Mt and its prices for hard coking coal range from $US45.45/t for Goonyella mined coal (previously $49.30/t) to $40.55/t for Blackwater ($44.40/t). Soft coking coal prices have fallen by $US3.30/t and range between $37.58/t for Gregory ultra-high volatile product to $33.85/t for Blackwater coal.

Over the past four years the price at which Australian coking coal has been sold to Japan's steel mills has fallen by some 15%. Producers have already pared back costs substantially in response to previous price cuts and a number could now move into the red. BHPAC estimates that if it had not competed on price it could have lost a further 2 Mt of coking coal sales.

Steaming coal sales to the south-east Asian region present an entirely different picture with healthy and increasing demand providing a strong backing for prices.

NSW analysis

Reviewing the 1992/93 year in mid-December, NSW Coal Association chairman, Bob Humphris, commented that: "Like so many other Australian export industries, we have been greatly assisted by the fall in the Australian dollar and the lowering of corporate tax rates. And, like them, our industry has further reduced debt levels at the expense of capital investment. The reduction in capital investment of 26% or $A114 million to $A331 million, following on a 25% reduction in the previous year, does not augur well for the industry's ability to meet the forecast growth in demand to the year 2000. It also reflects a continuing lack of improvement in the fundamentals of costs and prices."

The Association's latest survey shows that the ten-year average return on shareholders funds for the coal industry is only 2.6%. When abnormals and extraordinaries are included, this figure drops to only 0.5% - a stark contrast to the ten-year average for the mining industry overall of 10.9%. Mr Humphris explains that: "With such extremely low returns and with 38% of the survey respondents continuing to make losses, the lack of capital investment in the industry is not surprising, but it is Very worrying for the future. If the NSW coal industry is to take advantage of growing demand, particularly for steaming coal in Asia, it must improve its ability to withstand fierce international competition for this market. Higher returns are crucial for funding the development needed to cater for the growing Asian market."
Coal resources of New South Wales (in millions of metric tonnes)

Coalfield        Measured and indicated     Inferred       Total
Open cut                   737                 400        1,137
Underground              1,893               1,310        3,203
Total                    2,630               1,710        4,340
Open cut                10,947                 470       11,417
Underground              8,071               3,160       11,231
Total                   19,018               3,630       22,648
Open cut                   209                 160          369
Underground              4,472               3,150        7,622
Total                    4,681               3,310        7,991
Open cut                   --                  --           --
Underground              4,346              12,701       17,047
Total                    4,346              12,701       17,047
Open cut                   544                 100          644
Underground              1,606              29,510       31,116
Total                    2,150              29,610       31,760
Open cut                   104                  30          134
Underground                 39                  30           69
Total                      143                  60          203
Open cut                 1,388                 --         1,388
Underground                --                3,260        3,260
Total                    1,388               3,260        4,648
Total NSW               34,356              54,281       88,637
NSW new projects

New Project       Location             Company      Type   Capacity

Boggabri          NE of Boggabri       Idemitsu     S&U    0.25 Mt/y(*)      A
Bulga             S of Singleton       Oakbidge      S     3.3 Mt/y          B
Dartbrook         NW of Muswellbrook   Shell         U     3 Mt/y
1996 Glennies Creek    NW of Singleton      MMC(1)        U     0.8 Mt/y
    A Lachlan           Near Wakefield       OCA(2)        U     1.9 Mt/y
     A Maules Creek      NE of Boggabri       Coal Cliff    S     5.6 Mt/y
      A Mitchells Flat    E of Singleton       OCA(2)        U     0.35 Mt/y
       A Springvale        NW of Lithgow        Clutha        U     2.6 Mt/y

* Initial trial mine. 1. Maitland Main Collieries 2. Oceanic Coal Australia.
Hunter Valley Coal Corp. U = underground, S = surface. A = coal lease granted,
B = construction development in progresses or committed. Source: Minfo,
October 1993, Australian Coal Report, August 1993, 1993 New South Wales Coal
Industry Profile.

Mr Humphris was critical of the slow pace of the NSW State Rail Authority's reduction in rail freight rates which, in 1993, were only reduced to $A0.058/tkm - still considerably higher than for comparable hauls in the U.S. In an earlier statement, Mr Humphris had said that: "Many NSW producers pay rates which, on a per tonne per kilometre basis, are 30 to 40% and more above comparable U.S. rates.

Turning to improvements in some areas within the control of the industry itself, he highlighted the further improvement in mine productivity (up 7.7%) and the significant decline (54.9%) in days lost due to industrial disputes. "A more concerted change in attitudes away from traditional custom and practice and restrictive rules and procedures, through integration of the coal industry into the industrial relations mainstream, will help speed up the achievement of the much greater degree of flexibility needed to gain the industry's share of future demand."

Total average labour costs per employee (including payroll tax, fringe benefits tax, training and other benefits) increased from $A73,842 to $A75,875 per annum. Operating costs per tonne also rose by 4.2%. Lost time injury rates fell by 27.8%, following a reduction of 24.5% in 1991/92. There was a considerable increase in the accumulated balance of the provision for rehabilitation and environment costs from $A15.1 million in 1991/92 to $A23.3 million last year.

Summing up, Mr Humphris said: "Whilst we maintain our position as the largest expert earner in NSW, pay out over half a billion dollars annually in wages and contribute nearly a billion dollars each year in government taxes and charges, our shareholders continue to fail to earn an adequate return on investment. This means improvements in prices and reductions in costs continue to be essential to the industry's ongoing viability."

NSW resources

NSW's primary resource is the Sydney-Gunnedah Basin which is 500 km long by 150 km wide. It extends from south of Wollongong to the north of Newcastle, and north-west through Narrabri into Queensland. There are five major coalfields within the basin: Hunter, the state's largest producer, Newcastle, Southern, Western and Gunnedah. Coal types range from low-volatile, hard coking coals to high quality thermal coals. Less important resources are found in the Gloucester, 55 km north of Newcastle, and Oaklands, south-west of Sydney, Basins. The total identified NSW resource is over 80,000 Mt, as shown in the table.

Expanding exploration

In mid-December last year, the NSW Minister for Mines, Ian Causley MP, announced the calling of registrations of interest for the evaluation of the coal potential of two areas near Wyong, within 70 km by rail of Newcastle, to the north-east. The areas are located to the north-west of Wyong township and to the east beneath Tuggerah Lake.

At the time, Mr Causley pointed out that: "Contrary to popular belief, NSW could face a serious shortage of export quality thermal coal in the not too distant future. Coal of sufficient quality, close to infrastructure and within reasonable transport distance of the major coal terminals, is very restricted."
Queensland coal - salient data
                                              1991/92               1992/93
Number of operations                               43                    42
Longwall output                           5,811,728 t           6,373,929 t
Other underground output                  1,839,892 t           2,109,944 t
Opencut output                           75,922,618 t          76,817,193 t
Total                                    84,085,042 t          85,301,066 t
Total sales                              84,073,908 t          86,452,981 t
Metallurgical sales                                            49,304,197 t
Thermal sales                                                  37,148,784 t
Metallurgical exports                    44,858,950 t          48,838,796 t
Thermal exports                          24,796,860 t          22,205,017 t
Total exports                            69,655,810 t          71,043,813 t
People directly employed                       10,950                10,469
Output/employee year                          7,737 t               7,981 t
Output/employee shift (average)               28.99 t               30.18 t
Opencut overall                               31.97 t               33.69 t
Underground face                              43.12 t               37.24 t
Undergroundoverall                            15.02 t               15.52 t
Queensland coal resources (measured and indicated million tonnes)

                       Coking coal        Non-coking coal
Basin           Opencut   Underground   Opencut Underground     Total

Bowen(1)         2,685      10,481        2,707      9,078     24,951
Galilee(1)          --          --        2,585         --      2,585
Moreton(2)          --          --        2,211          7      2,218
Surat(2)            --          --        2,650         --      2,650
Callide(2)          --          --          214        553        767
Ipswich(2)          --          --            4        570        574
Mulgildie(2)        --          --          110         --        110
Styx(2)             --          --           --          4          4
Tarong(2)           --          --          424         --        424
Laura               --         157           --         --        157
Total            2,685      10,638       10,905      10,212    34,440

1. Permian Basins.

2. Mesozoic Basins.

The Newcastle coalfield was Australia's first coal mining centre, with production commencing in the 1800s. Many of its mines have been in operation for over 50 years and several have closed in recent years because of dwindling reserves.

The Department of Mineral Resources has identified the areas near Wyong as containing high quality thermal coal suitable for the export market. They represent the last unallocated areas of high quality coal in the Newcastle coalfield.

Assuming sufficient interest is displayed, the State government will examine the feasibility of calling for exploration and development proposals for the area. The two areas are estimated to have a resource export value of more than $A40,000 million.

A number of new coal projects and expansions are well advanced in NSW although, as previously mentioned, it is not felt that there is sufficient new capacity under serious consideration to take full advantage of the growing market opportunities in South East Asia.

Expansions underway are numerous but the most significant include BHP's Elouera mine, 15 km south-west of Wollongong. This is a combination of the former Wongawilli and Nebo underground mines, between and west of the old workings, and should be producing 2 Mt/y by next year. BHP is also expanding the Tower underground mine 45 km north-west of Port Kembla. Output should rise by 800,000 t, to 2 Mt/y, by next year. Also scheduled for next year is the completion by Kembla Coal & Coke of its Tahmoor expansion (80 km south-west of Sydney) to 2.3 Mt/y. Nearby, Clutha has commissioned a longwall that should raise Oakdale's production from 700,000 t to 2.2 Mt/y by 1995. At Warkworth, 15 km west of Singleton, United Collieries' United mine will increase output by two-thirds to 1 Mt/y.

This year Novacoal's Vickery output, from 23 km north of Gunnedah, should double to 1 Mt. Coal & Allied's Hunter Valley Mount Owen extension should add 700,000 t to the existing capacity of 5.4 Mt/y.

Longer term, Denehurst expects Metropolitan's (41 km north of Port Kembla) output to double to 1.5 Mt/y by 1997.

The proposal under current state government consideration to expand the Port Kembla Coal Terminal (PKCT) would raise its capacity from 16 Mt/y to 20 Mt/y.

The terminal improvements will also reduce ship turnaround times from just over five days to just three days per vessel, representing savings of $A51 million over a 20 year period. It will also assist in improving the competitive position of the southern coalfields in international markets.

Queensland analysis

Coal dominates Queensland's mining industry. In the 1992/93 financial year, the contribution of mineral exports to the state's total export earnings was 44%. Total Queensland mineral production was valued at $A5,600 million and Australia's total value of mineral exports was $A29,800 million. The value of Queensland coal exports, the state's leading export commodity, was $A4,344 million. Coal accounts for over 67% of those directly employed by Queensland's mining industry.

Michael Pinnock, chief executive of the Queensland Mining Council summed up the major changes for MM: "Our growth has been predominantly steaming coal, and the emerging new producers Arco (Gordonstone) and White Mining/Sumitomo (North Goonyella) have come into production. Arco is now a major player (in tonnage, roughly equivalent to Pacific Coal) as the equal third and fourth producers after BHP and MIM.

"We see RA55 has good support - areas which will probably produce mines by the year 2000.

"The other major development has been the taking over of the coal research levies ($A0.05/t). Until June last year, this was paid to the Federal Government and raised approximately $A6-7 million a year. The same levy applies, but it is raised by the industry and paid to our own research organisation which we have established under the aegis of the Australian Coal Association. The programme is known as ACARP (Australian Coal Association Research Programme). The ACA appointed AMIRA (Australian Mineral Industry Research Association) as managers for the projects once they have been awarded."

Unsurprisingly, increased production and lower prices characterised Queensland coal in 1992/93. The state's 40 coal mines and two fines recovery operations produced 85,301,066 t of saleable coal, up from 84,085,042 t the previous year.

Queensland expansions

For statistical purposes, Queensland's industry is divided into three districts, Northern, Central and Southern, containing eight, 17 and 17 operations respectively. The major event in Northern was the opening of North Goonyella. This opening was important in labour relations in that it sees further application of extended shift rosters in the Bowen Basin. These consist of four days on and four off with each working day consisting of a 12-hour shift. North Goonyella is a drive-in/drive out mine where employees live in company accommodation at the mine and return to their permanent place of residence during off periods. It is a longwall operation currently producing some 1 Mt/y with out put building up to 3 Mt/y by 1995.

The Queensland Coal Board also issued an approval for a new operation at the Newlands mine (MIM 75%), an underground mine to supplement the existing opencut activities.

Three main developments were the highlights of the year in the Central District. Construction started at the Ensham-Yongala and Crinum mines, operated by Ensham Resources and BHP Australia Coal, respectively.

Opencut thermal output from the former, now around 500,000 t/y, is building up to 4 Mt/y by 1997. Crinum, an underground operation on the Gregory mine leases, will produce both thermal and coking coals, solely for export, with a target of 2.5 Mt/y by 1996.

Thirdly, QCT Resources announced its commitment to the Kenmare longwall mine. It will produce some 2.5 Mt/y of product coal, lifting the long-term production capacity for South Blackwater to 4 Mt/y. It is planned to have the longwall in full production by mid-1996.

There were no developments of great significance in Southern District.

Turning to the state's rising star, Arco, its Gordonstone mine is now producing from the first longwall and development is sufficiently advanced to allow installation of the second longwall late this year. Current output is some 2.2 Mt/y and should achieve 4.2 Mt/y by 1995. Arco also operates the 5.7 Mt/y Curragh mine, has 17% of the 8.5 Mt/y Blair Athol mine and very recently purchased a 19.5% interest in the Clermont project near Blair Athol. In 1992 Arco produced 8.3 Mt, by the end of next year it should be producing at least 11.4 Mt/y.

Central Queensland bids

Like NSW, though earlier last year, the Queensland government offered new areas for tender; potentially 12 of the richest coal areas in the world. The Department of Minerals and Energy was accepting bids for the high quality coking and thermal coals between December 1 last year and January 4 this year. The release virtually removes all the restrictions imposed by former Restricted Area 55 (RA55) which covered some 280,000 |km.sup.2~ of Queensland's most important coal resource, the Bowen Basin, for more than 20 years.

At the beginning of this year, Queensland's Minister for Minerals and Energy, Tony McGrady, was able to announce a good response to the RA55 coal exploration land release. "A total of 17 tenders were received from 11 companies and consortia, including major Australian and overseas firms, for seven of the 12 areas offered. A total of 14 tenderers submitted cash bids for six of the areas, and the seventh was the subject of a work programme bid. Offers of exploration permits will be made to the successful tenderers in the near future. If all are accepted, the total amount of cash bids received will be $A12.9 million.

The first tender winner is NSW-based Savage Resources which is to spend $A5 million on exploring a resource near Gladstone. It has been reported in the Australian press that Savage, as operator, and its two partners, Mitsui Mining and a Korean consortium, each with a one-third share, paid $A3 million for the 475 |km.sup.2~ Togara North property 45 km southwest of Blackwater. A preliminary study has indicated an 800 Mt resource of high-quality thermal coal.

The joint venture intends to develop an underground mine producing up to 4 Mt/y within the next ten years. The project is adjacent to QCT's 2 Mt/y South Blackwater mine.

The rescinding of RA55 has resulted in an important boost to coal exploration in Queensland. Some 16 new Exploration Permits for Coal (EPCs) were granted during the last quarter of the 1992/93 financial year. Ground held under EPCs rose from 9,800 |km.sup.2~ in July 1992 to over 16,000 |km.sup.2~ at the end of June 1993. This level of activity is expected to rise still further this year and continue high for the next year or so.

Victorian brown coal

Victoria has a significant brown coal mining industry; its total resource has been estimated at some 200,000 Mt, with about 30,000 Mt immediately accessible|11~. This is mined by the State Electricity Commission of Victoria (SECV) in the Latrobe Valley of the Gippsland Basin in the south-east of the state. SECV is Australia's largest single coal mining company, producing about 45 Mt/y.

Power generation is the primary use of this coal, supplying 5,500 MW of electricity generation, but the state government is encouraging the development of new industries based on this huge resource. An advanced liquefaction project is being financed by the Japanese government and other projects include carbonisation, humic acid based fertilisers, binders and drilling muds, and activated carbon technology.

There are three surface mines based on bucketwheel excavator continuous mining systems. Each of the three, Loy Yang, Morwell and Yallourn, produces some 15-16 Mt/y. The first supplies the Loy Yang power station and the Lurgi dried coal plant and Morwell supplies the Hazelwood and Morwell power stations. Yallourn is the largest and lowest cost producer in the Latrobe Valley. During 1992/93 its output was 16.7 Mt and productivity for material excavated rose from 43 to 57 |m.sup.3~ per employee. It supplies the Yallourn power station and Morwell briquette plant.

In October last year Energy Brix Australia was formed by joining the marketing and administration functions of the Coal Corp. of Victoria (CCV) with the SECV's Morwell Briquette Factory and Power Station Complex. Besides its domestic business, Energy Brix Australia supplies brown coal briquettes to international markets that include Slovenia, Korea, Japan, New Zealand, the U.K., Ireland, Denmark and Italy. Europe is much the largest overseas market and the advantages of Victorian briquettes over those produced in Europe are their lower levels of ash, nitrogen and sulphur.

Western Australia

The Collie Basin in the south-west of Western Australia (WA) is the only coalfield being mined in this state. Some 100 Mt have been mined since 1889 and a demonstrated resource of 1,600 Mt remains. Of this, 500 Mt is currently accessible by opencut methods. In addition, 830 Mt can be extracted from underground operations.

Total production by the two operating companies, Griffin Coal Mining and Western Collieries, is around 6 Mt/y. About 80% of this is burned by the state's power generating authority, SECWA, at its Muja (1,040 MW), Kwinana (880 MW) and Bunbury (120 MW) power stations. The remainder is consumed by the alumina, nickel, mineral sands and cement industries. There are currently five mines of which three are opencut - Griffin's Muja and Chicken Creek and Western's No. 5. Western also operates the Deep No. 6 and Deep No. 2 Collieburn underground mines.

To accommodate a projected increase in coal demand, Griffin and Western each have plans for $A100 million expansions within their current lease holdings. Environmental approval has been given for Griffin to develop its Ewington mine and Western its Premier mine. The timing will depend on the companies' ability to win the contract to supply a new 300 MW power station which should start feeding the grid around the year 2000. The government has committed to the construction of this new coal-fired facility at Collie, costing some $A880 million, with construction commencing in early 1995.

Collie coal is non-coking with low ash and sulphur contents. Sub-bituminous, with a specific energy of only 19.7 GJ/t, it ranks between the brown coal of Victoria and the black coals of the eastern states.

Aside from Collie there are five other significant coal resources in southern WA. Hill River, some 200 km north of Perth, is estimated to contain 600 Mt of sub-bituminous coal. The Vasse Shelf, located between Busselton and Margaret River, south-west of Collie, has a resource of some 800 Mt of export-quality steaming coal of a quality superior to that at Collie. The Irwin River-Dongara region coal quality is similar to that of Collie. Precious Metals Australia plans a small mine near Mingenew to supply a proposed vanadium plant at Wagoo Hills, some 200 km to the north-east. The mine would have the capacity to supply other coal users in the Geraldton area. Located 30 and 45 km south of Collie respectively, the Wilga and Boyup Basins have sub-bituminous coal similar to Collie. Resources are estimated at 260 Mt for Wilga and 90 Mt for Boyup. The Scaddon-Balladonia coastal region in the south-east contains over 3,000 Mt of lignite and/or oil shale.

The other states

Northern Territory is the only non-coal producer. Even Tasmania produces some 300,000 t/y of saleable coal, and South Australia about 3 Mt/y. In the latter, Meekatharra Minerals is exploring a number of additional options for possible development of the Arckaringa coal resource which is strategically located on the existing railway line just north of Coober Pedy. This heavy-duty all weather standard gauge rail line connects Alice Springs in the Northern Territory with the major Australian standard gauge network in South Australia. The government has already committed funds for the completion of the standard gauge network from South Australia through to Melbourne. Coal from one of the Arckaringa deposits, that from Wintinna, has been shown to be superior to all undeveloped mineable steam coals in South Australia in respect of ash, sulphur, chlorine, sodium, moisture and, most importantly, heat content, and is suitable as-mined for use in conventional power stations.

Meekatharra is in discussions with the Australian proponents of an overseas power station and port development project which may purchase an initial 1 Mr/y, rising to 2 or 3 Mt/y of a Wintinna low-sulphur export product. It is also discussing the use of Arckaringa coal to supplement Leigh Creek brown coal supplies to the 500 MW Northern power station in Port Augusta. Arckaringa is also possibly the lowest cost alternative for new base load power in South Australia, while coal export opportunities are being assessed, including use of coal water mixtures (CWM). Industry experts expect the worldwide market for CWM could grow from some 500,000 t last year to about 20 Mt/y by 2000.


1. Lee, Hugh M., The long-run world demand for imported coal for power generation, Coal for Development Conference, World Coal Institute.

2. Hellicar, Meredith, The role of the energy supplier and coal producer in stimulating demand for coal and developing the required technology, Coal for Development Conference, World Coal Institute.

3. Haraldson, A.J., Contribution to economic growth and energy source for present and future power generation, Coal for Development Conference, World Coal Institute.

4. BP Statistical Review of World Energy, June 1993.

5. A cost comparison of selected coal mines from Australia, Canada, Colombia, South Africa and the United States, USBM, August 1993.

6. 1992/93 Coal Industry Survey, NSW Coal Association.

7. 1993 New South Wales Coal Industry Profile, Department of Mineral Resources.

8. Personal communications with the NSW Coal Association.

9. 42nd Annual Review 1992-93, Queensland Coal Board.

10. Personal communications with the Queensland Mining Council.

11. Victoria, Mining Journal Country Supplement, May 15, 1992.

12. Bursztyn, Louis, Powerhouse of the west, Prospect, December'93-February'94, Western Australian Department of Resources Development.
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Author:Chadwick, John
Publication:Mining Magazine
Article Type:Industry Overview
Date:Mar 1, 1994
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