Black Coal

Coal is a sedimentary rock formed from vegetation which has been altered by temperature and pressure over millions of years. The term black coal as used in Australia 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 other metallurgical applications, cement manufacturing, alumina refineries, paper manufacture and a range of industrial applications. Black coal occurs in all States and the Northern Territory (NT), but Queensland (Qld) with 59%, and New South Wales (NSW) with 26% have the largest share of Australia's total identified resources. Queensland (53%) and NSW (45%) are also the main producers of black coal. There are locally important coal mining operations at Collie in Western Australia (WA), Leigh Creek in South Australia (SA) and in the Fingal Valley and at Kimbolton in Tasmania (Tas). In Australia, about 79% of black coal is produced from open-cut mines.

Resources

A major review of Australia's black coal resource inventory was undertaken for the December 2010 national resource assessment. Continued analysis of the 2010 coal resource data identified additional resource data and an inconsistency in the processing of some 2010 data held in Geoscience Australia's database. Consequently a revised 2010 black coal resource inventory was prepared and is shown in Table 2.

Table 2. Australia's recoverable resources of black coal as at December 2010 (revised).
Black Coal JORC Reserves
(% of Accessible
EDR)
Demonstrated
Economic
(Mt)
Demonstrated
Paramarginal
(Mt)
Demonstrated
Submarginal
(Mt)
Inferred
(Mt)
Accessible
EDR
(Mt)
In situ   65 749 1 492 5 405 78 691  
Recoverable 17 335 (36%) 49 188 926 4 014 58 231 48 188

Australia's Recoverable Economic Demonstrated Resources (EDR) as at December 2011 (Table 3) rose by 17% to 57 538 million tonnes (Mt) while in situ EDR rose by 8% to 71 146 Mt. Queensland (61%) and NSW (36%) had the largest share of recoverable EDR in Australia. The Sydney Basin in NSW (30%) and the Bowen (35%), Surat (11%) and Galilee (8%) basins in Qld had the largest shares of recoverable EDR in Australia.

In 2011, estimates of Australia's recoverable Paramarginal Demonstrated Resources fell by 11% to 822 Mt, mainly because the reclassification of some resources to the EDR category. There was a 1% reduction in recoverable Submarginal Demonstrated Resources to 3986 Mt.

The level of Inferred Resources was little changed in 2011. In situ Inferred Resources rose by less than 1% to 79 013 Mt while recoverable Inferred Resources fell by 2% to 57 305 Mt.

Table 3. Recoverable resources of black coal in States and Northern Territory at December 2011.
State JORC Reserves
(% of Accessible EDR)
Demonstrated
Economic
(Mt)
Demonstrated
Paramarginal
(Mt)
Demonstrated
Submarginal
(Mt)
Inferred
(Mt)
New South Wales 7 442 20 552 149 35 9 763
Northern Territory          
Queensland 11 547 34 848 580 3 36 120
South Australia   758 40 3 923 9 788
Tasmania   394 3 0 9
Victoria          
Western Australia 236 986 50 25 1 625
TOTAL AUSTRALIA 19 225 (38%) 57 538 822 3 986 57 305

Accessible EDR

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

JORC Reserves

Joint Ore Reserve Committee (JORC) Code reserves are 19 225 Mt or 38% of Accessible EDR. Included in this tonnage are estimates by Geoscience Australia of reserves of some 1.2 gigatonne (Gt) at operating mines for which no reserves were reported by the mining companies. The estimated resource life of the JORC Code Reserves is about 40 years at the 2011 rate of production.

Exploration

Data published by the Australian Bureau of Statistics (ABS) for coal indicated that exploration expenditure for 2011 totalled $757.1 million which was more than double the revised data for 2010 of $361.8 million. Expenditure in Queensland rose by 112% to $653.8 million or 86% of all Australian coal exploration spending. In New South Wales coal exploration expenditure recovered strongly, after a major reduction in 2010, with an increase of 141% to $90.1 million while its share of Australian coal exploration spending increased slightly from 11% in 2010 to 12% in 2011. Exploration also occurred in South Australia, Western Australia, Tasmania and Victoria, but ABS does not release details of expenditure in those States. In 2011, coal exploration expenditure contributed 21.2% of the total mineral exploration expenditure in Australia, which was substantially higher than the 14.5% achieved in 2010.

Production and Trade

Australian production of raw black coal in 2011 was 468 Mt (466 Mt in 2009). This yielded 461 Mt of saleable coal, slightly less than the 360 Mt produced in 2010. In 2011, 79% of production of both raw and saleable coal was from open cut mines. Queensland and New South Wales dominate Australian black coal production in 2011 accounting for 56% and 42% respectively of total raw coal production and 51% and 47% respectively of saleable coal production. Black coal was also produced in Western Australia (raw), South Australia (3.8 Mt raw) and Tasmania (0.64 Mt raw) in 2011. Exports of black coal in 2011 were 133 Mt of metallurgical coal, a reduction of 26 Mt over the 159 Mt exported in 2010, and 148 Mt of thermal coal, 6 Mt more than in 2010. The reduced shipments of metallurgical coal were mainly because of adverse weather conditions in Queensland. Australian coal exports in 2011 were valued at $47 013 million compared to $42 969 million in 2010 according to the Bureau of Resources and Energy Economics (BREE). BREE forecast that Australia's production of thermal coal will rise to 224.7 Mt in 2011-12 and exports will rise to 162.6 Mt in the same year. Metallurgical coal production is projected to rise to 156 Mt in 2011-12 and exports to rise to 150 Mt.

World ranking

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 2011 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 economic recoverable black coal 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%).

Industry Developments

New South Wales

In December 2010, Gloucester Coal Ltd was granted environmental and planning approvals for its Duralie Extension Project in the Gloucester Basin. Subsequently Mining Lease ML1646 was granted in January 2011 but the project was delayed by a merit appeal challenge in the NSW Land and Environment Court against the NSW Planning Minister granting environmental approvals for the project. In November, the Court granted approval for the project, but with revised conditions. Implementation of the project will increase production from the Gloucester Basin to 3.5 million tonnes per annum (Mtpa) by 2014, including up to 2 Mtpa of coking coal.

BHP Billiton Ltd announced a US$400 million expansion of its thermal coal operations in the Hunter Valley. The RX1 project will result in an increase of 4 Mtpa of run of mine thermal coal from the Mount Arthur operation to some 24 Mtpa. The first coal from the expansion is expected in the second half of 2013.

Gujarat NRE received approval from the NSW Planning Assessment Commission for the $122 million upgrade of existing infrastructure at the NRE No.1 mine at Russell Vale. The approval allows the extraction of up to 1 Mtpa of coking coal from the Bulli and Wongawilli seams for the next three years, the continuation of the coal being transported by truck to the Port Kembla Coal Terminal and upgrades to the existing surface facilities and infrastructure.

Coal & Allied Industries Ltd has a 150 year history in the Hunter Valley as one of the State's major coal producers with current operations at Mount Thorley-Warkworth, Hunter Valley Operations and Bengalla as well as development projects including the Mount Pleasant deposit. In August, the company reported that it had a proposal from Rio Tinto Ltd which could lead to a takeover offer being made to acquire all the outstanding Coal & Allied shares not held by Rio Tinto and Mitsubishi Development Pty Ltd. It was announced in December that all outstanding shares had been acquired and subsequently Coal & Allied was delisted from the Australian Securities Exchange.

Queensland

Queensland's strategic cropping land is subject to competing land uses from the agriculture, mining and urban development. The government's aim is to strike a balance between these sectors. In December 2011, the Strategic Cropping Land Act 2011 and the Strategic Cropping Land Regulation 2011 were approved by the Governor in Council. The new Act and Regulation will commence on 30 January 2012. Under the terms of the legislation proposed new mining developments will be assessed to determine whether they fall into regions defined as Strategic Cropping Land.

Wiggins Island Coal Export Terminal Pty Ltd announced that it had finalised financing and tenure arrangements allowing construction of the 27 Mtpa first stage of the Wiggins Island Coal Export Terminal (WICET) to commence. Stage One is owned by eight coal producers and will be operated by Gladstone Ports Corporation. The eight stage one owners are Aquila Resources, Bandanna Energy, Caledon Resources, Cockatoo Coal, Northern Energy Corporation, Xstrata Coal on behalf of the Rolleston Joint Venture, Yancoal Australia and Wesfarmers Curragh. The eight have executed take or pay agreements with WICET and the first coal shipments are expected from mid-2014. A feasibility study for expansion of the terminal was expected to be completed by the end of 2011. Expressions of interest were received for the expansion in July 2010 from 22 coal producers for more than 176 Mtpa of export capacity. Once completed, WICET is expected to provide more than 80Mtpa of additional coal export capacity through the Port of Gladstone.

Mine development and expansion decisions by BHP Billiton Ltd and Mitsubishi Development Ltd will see almost 13 Mtpa of metallurgical coal production capacity be added to the alliance's Bowen Basin operations. New mine developments approved were the Daunia mine with a capacity of 4.5 Mtpa and the Caval Ridge mine, which will produce 5.5 Mtpa. In addition, the existing Peak Downs mine will have its capacity increased by 2.5 Mtpa and the life of the Broadmeadow mine will be extended by 21 years with production capacity increased by 0.4 Mtpa to 4.8 Mtpa. There will be an increase also in capacity at the Hay Point Coal Terminal from 44 Mtpa to 55 Mtpa.

The Queensland Government issued a mining lease for the Eagle Downs coking coal project to partners Aquila Resources Ltd and Vale SA. The Eagle Downs deposit is in the Bowen Basin adjacent to BHP Billiton-Mitsubishi Alliance's Peak Downs coking coal mine. The proposed project covers the development and operation of an underground multi-seam longwall mine which will have an average annual production of 4.5 Mtpa from one longwall over the first 10 years of operation.

In December, the Queensland Government announced that it had allocated land south of Mackay for the development of the proposed Dudgeon Point coal export port and for associated infrastructure. The proposed facility will have an annual export capacity of up to 180 Mtpa. Adani Mining and Dudgeon Point Project Management Pty Ltd are the preferred developers of Dudgeon Point and will be responsible for funding the detailed design and construction of the new terminals at Dudgeon Point. Construction is expected to commence in mid-to-late 2012 and operations in 2015-16.

Stanmore Coal Ltd completed a pre-feasibility study (PFS) for The Range Project in the Surat Basin 25 kilometres (km) southeast of Wandoan. The PFS confirmed the project's technical and commercial viability. The study was based on Probable Coal Reserve of 117.5 Mt, which is expected to yield a marketable Coal Reserve of 94 Mt. These reserves are derived from 151 Mt of Indicated Coal Resources and 78 Mt Inferred Coal Resources. The project is proposed to have a 5 Mtpa output from a conventional open cut operation over a mine life of 26 years

South Australia

WPG Resources Ltd reported that Evergreen Energy Inc completed test work on coal samples from the Penrhyn coal deposit which has an estimated Measured and Indicated Coal Resource of 352.4 Mt. Penrhyn is owned by Southern Coal Holdings Pty Ltd, the joint venture company with Evergreen which has the exclusive rights to use Evergreen's coal upgrading technology in Australia for the first 15 Mtpa of product coal. Processing of Penrhyn samples using this technology generated an export-quality thermal coal with a calorific value of at least 5000 kcal/kg which is 25 to 40% higher than the value for raw coal. In addition, Evergreen noted that the process reduced the sodium content by up to 50% and chloride content by up to 70% in the processed coal compared to levels in the raw feedstock.

Western Australia

Attila Resources Ltd reported that drilling at the Talisker North project in the Carnarvon Basin, 650 km north of Perth, intersected a four metre (m) coal seam at 50 m depth. It is approximately 45 km north of the 1980s Talisker coal discovery in the northern Perth Basin. Following this intersection, Attila applied for an additional six exploration licences in the area. The coal is reportedly similar in quality to that in the Collie Basin although Collie coal has lower ash and sulphur. The calorific value of Talisker North coal samples as reported by Attila is 4348 kcal/kg on an as received basis and 7263 kcal/kg on a dry ash-free basis.

Cullen Resources Ltd reached agreement with the private, Singapore-based company Advaita Power Resources Pty Ltd under which Advaita is required to spend $1.5 million before 31 October 2012 to earn 75% in Cullen's Canning Basin coal tenements. Initial drilling aimed at understanding the region's stratigraphy and exploring for coal in the Lightjack Formation of the Permian Liveringa Group. Coal was intersected and initial analysis suggested that it is potentially a medium rank thermal coal. This drilling is to the north of the Rey Resources's Canning Basin coal project.