If there is one mined commodity that attracts attention and polarising opinions, it is thermal coal.
Amid these contrasting views, thermal coal is being abandoned by some long-term producers as more and more investors exclude the commodity from their portfolios.
Despite this trend, thermal coal has sparked a 26 per cent hike in the value of Australia’s coal exports in December 2020 compared with the previous month.
The surging demand for Australian coal was largely driven by the northern hemisphere as it stocked up for its winter months.
Coal sales to Vietnam and India – the world’s second largest coal importer – also increased during December, offsetting the blow of China’s decision to restrict the amount of Australian coal imported into the country.
Capitalising on a market that is forecast to exceed a billion tonnes a year of imports into Asia within the next decade, many mining companies in Australia have held on to their thermal coal assets.
Australia’s higher quality thermal coal, which is prized for its high energy, low impurity composition, is a testament to this decision.
Bravus Mining and Resources (formerly Adani Mining) puts the coal that will be mined at its Carmichael coal mine and rail project in Queensland into this category.
Adani Australia chief executive and country head Lucas Dow says the company is equipped with a coal handling and preparation plant that resizes and processes the coal into the desired quality requirements.
“In doing so, the finished product is more energy efficient and environmentally friendly. It is these facilities that will see Carmichael coal become some of the better-quality coal from around the world,” Dow tells Australian Mining.
“The quality of coal from the Carmichael mine is better than the coal it will replace in the market, meaning it will produce fewer emissions when burnt to produce electricity, which makes it suitable for the new generation coal-fired power plants in India and Asia that are more energy efficient and produce fewer emissions.”
Bravus has secured an end market for the 10 million tonnes of coal that will be produced at the Carmichael mine each year from late 2020.
Dow is confident the demand for thermal electricity is still growing in India and Southeast Asia.
“Both coal and renewables are needed to provide safe, affordable and reliable power,” he says.
“Bravus’ parent company, the Adani Group, has a unique view of the market and we see there will be a need for both coal and renewables in the energy mix to meet growing energy demand in Asia as people there emerge from poverty.”
A Minerals Council of Australia (MCA) report released last October reaffirms that much of the Asian demand growth will rely completely on higher quality imported coal.
It notes India, a key destination for coal produced at India-owned Bravus’ Carmichael project, is a hotspot for high population growth.
“The 10 million tonne per annum thermal coal project is a clear example of the potential that a burgeoning trade and investment relationship between India and Australia holds,” Dow says.
“India offers tremendous trade and investment opportunities for Australia, which could result in a significant uplift to our domestic economy.”
It is also a country that hosts the largest ever solar offtake award won by the largest solar power developer globally based on operational, under construction and awarded projects, according to Mercom Capital Group, Adani Green Energy.
The offtake involves eight gigawatts of solar power that will be delivered for the state-owned Solar Energy Corporation of India over five years.
Establishing itself as India’s largest private electricity generator, Bravus also opened its Rugby Run solar farm near Moranbah in Central Queensland in 2019, using its parent company’s international expertise.
“On a global scale, with total capacity of 12.3 (gigawatts), Adani Group’s rapid expansion into the renewable energy sector will help to displace 1.4 billion tonnes of carbon dioxide over the life of its assets,” Dow explains.
“The latest ranking by Mercom Capital found Adani is roughly 70 per cent larger than the next-largest solar power generation company and that its renewable energy portfolio exceeds the total capacity installed by the entire United States solar industry in 2019.
“As renewable technology improves there is no doubt that it will supply more energy, however this will take significant time as thermal power stations won’t be retired until they reach the end of their lives which is decades away. That is why we are committed to both coal and renewables.”
Yancoal is another thermal coal producer that supports the inclusion of renewables as part of the energy mix.
A member of Low Emissions Technology Australia (LETA), Yancoal has participated in the New South Wales Energy Savings Scheme at the Mount Thorley Warkworth coking and thermal coal project, with more assets in the state to follow suit.
Yancoal also chooses to combust its methane-rich waste at the Ashton coking coal underground mine in New South Wales rather than adopting a free-venting approach to help reduce emissions on site.
Sharing the belief that higher-quality coal will remain a key component of the regional energy mix, Yancoal is progressing several brownfield opportunities and extension projects.
The company is conducting a pre-feasibility study for a conceptual underground mine at Mount Thorley Warkworth, potentially increasing production to around five million run-of-mine tonnes a year.
It is also planning to lift production and processing profiles at the Moolarben open cut and underground thermal coal project in New South Wales, with approvals for the expansion received.
Beyond this, Yancoal is making space for even further expansion across its coal portfolio, including “acquisitive growth opportunities as they arise.”
“We are committed to only acquiring appropriately priced assets of genuine future value and adhere to a disciplined approach when considering external opportunities for long-term strategic growth,” Yancoal explains in a statement to Australian Mining.
Such growth ambitions aren’t unfounded, even when investor appetite for coal is waning.
Yancoal experienced a 180 per cent increase in saleable coal production, which grew from 18.6 million tonnes in 2015 to 52.1 million tonnes in 2019.
This is primarily driven by the Moolarben, Mount Thorley Warkworth and Hunter Valley operations, all of which produce thermal coal.
“Yancoal considers that there will be a continuing need for coal to play a key role in delivering economic growth and improved quality of life across Asian markets,” the company states.
“By the end of this decade, the increasing global demand profile for coal is likely to ease and to coincide with a declining international coal supply profile, which we anticipate will create a more stable long-term price outlook.
“The ongoing shift toward high efficiency, low emissions power generation should underpin the demand and premium price paid for the high-quality thermal coal that Yancoal produces.”
The China-backed company is, therefore, ready to capitalise on the increasing energy and infrastructure requirements associated with expected population growth and urbanisation across Asia.
It states that no single country contributes more than 26 per cent of the company’s revenue.
Claiming that it has not received any special treatment in regard to the reported Chinese restrictions on Australian coal imports, the company, which only has assets in Australia, takes pride in its successful relationship with China.
“Yancoal should be held up as an example of successful Chinese investment in Australia, and successful Chinese-Australian collaboration and cooperation,” the company states.
China, along with Singapore, South Korea and Taiwan, accounted for nearly 80 per cent of Yancoal’s revenue from coal sales in 2019.
“Yancoal acknowledges that some equity investors and financial market participants are moving away from exposure to fossil fuel-related investments for a variety of reasons,” the company states.
“In addition to those investors, there are other investors and capital providers, including our existing shareholders and financiers, that identify Yancoal (and the coal industry more generally) as profitable and sustainable business that is servicing the continued demand for high-quality coal used in efficient electricity generation and steel production.”
With supporters of thermal coal remaining in the market, companies such as Yancoal and Bravus are fearlessly blazing their way to deliver the commodity (and potentially expand their projects) to meet the extraordinarily high demand forecast by some.
This story also appears in the February issue of Australian Mining.