Posted on 05/05/2008 7:50:31 PM PDT by DeaconBenjamin
CHENNAI: Coal has become a hot property with India Inc. Just sample this: India Cements wants coal mines abroad, rookie NRI businessman C Sivasankaran wants one too, Reliance Power and GMR just got one while the Tatas already have it. Corporates are franatically lapping up coal mines from Africa to Indonesia to Australia.
The reasons for these are three-fold. First, companies want to have a complete control on the supply of coal, considered essential fuel for power plants, cement and steel units. Buying coal mines ensures supplies and brings about a security. Second, having a captive coal mine wouldn't subject the industries to the vagaries of rising prices. The near panic-buying of coal fields are showing up on the price of coal as well. The prices have doubled in the past three months to peak at $350 a tonne. Third, corporates buy mines to ensure quality of coal and also drive in efficiencies in mining.
The power sector accounts for 75-80% of total coal demand and coal requirements for power generation is estimated to be in the region of 500 to 540 million tonnes by 2013. According to some studies, coal demand from power generation companies is likely to outstrip domestic supply by atleast 55 to 60 million tonnes by 2013 and in two years from thereon the shortfall could increase to 100 million tonnes.
A quick glance at coal mine buys by Indian companies show that Indonesia is the first port of call. In March, Reliance Power announced that it acquired three mines in Sumatra, Indonesia. The estimated reserves in these mines are in the range of two billion tonnes. Binani Cements is in negotiations with PT Berau of Indonesia to aquire coal mines. Rough estimates suggest that the shopping cart would be in the region of $100 million.
ETA Star Group and Surana Industries announced their acquisitions in January this year, while Knowledge Infra Systems, AMR Group and Madhucon Industries have declared their access to coal mines there. Tata Power signed a deal in March last year to buy 30% stake in two major Indonesian therman coal producers, both promoted by PT Bumi Resources for $1.1 billion. While Tata Steel had purchased coal mines in Queensland, Australia with a 5% stake in Carborough Downs Coal project.
GMR Group struck a deal with South African Homeland Mining and Energy SA wherein the Indian entity acquired 5% stake for $15 million and also has options to raise its stake up to 50%. The total value of the deal including options is approximately $155 million. Besides Coal Ventures International has completed due diligence for two blocks in Mozambique and has invited EoI from investment bankers to help acquisitions of coal mines in Australia, Canada, the US, Mozambique, Zimbabwe and South Africa.
Tata Steel acquired 35% interest in two of Riversdale's key Mozambique exploration tenements. The estimated value of the transaction is $88 million. All acquisitions have made coal assets pricier.
India Indians have take a sizeable position in the American iron ore and steel biz. If they had been here 25 years ago, they would have bought into the western coal fields like the Germans did. They still might do this.
meanwhile, any expansion of american coal for producing electricity
produces a flood of lawyers all across the country.
Yep, we’re definitely plunging headlong toward being cold in winter, boiling hot in summer, hungry and confined to home. It’s no wonder record numbers think the country is “on the wrong track.”
The Dems have just abou given up on drilling for oil. Maybe they will also sell Indai our coal reserves to boot.
The Dems have just about given up on drilling for oil, or adding nuclear powered energy to America. Maybe they will also sell India our coal reserves to boot.
“The near panic-buying of coal fields are showing up on the price of coal as well. The prices have doubled in the past three months to peak at $350 a tonne. Third, corporates buy mines to ensure quality of coal and also drive in efficiencies in mining.
The power sector accounts for 75-80% of total coal demand and coal requirements for power generation is estimated to be in the region of 500 to 540 million tonnes by 2013. According to some studies, coal demand from power generation companies is likely to outstrip domestic supply by atleast 55 to 60 million tonnes by 2013 and in two years from thereon the shortfall could increase to 100 million tonnes.”
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Just as a piece of clarification....coal destined for coke-making eg; steelmaking eg; “metallurgical” coal aka “met” coal vs coal for heating “steam coal” is the grade of coal achieving these much higher prices. About 20% of consumption. Met coal is a more refined grade of coal in the sense it is cleaner. Met coal can be used for steam coal, but not vice versa.
The coal stocks have been going utterly berzerko lately (much like the ags have done) but they reflect businesses that, all things being equal, find themselves able to sell their product for 3x what they could last year.
Look at WLT today, +15% on top of another 5% Friday.
Coal has an enormous future. It remains way behind nat gas and of course petroleum in terms of cost per BTU. Many nations are cutting off exports because of peculiar conditions last year (China had extremely cold winter; So. Africa had mine shutdowns because they cannot get their electrical act together; Australia had mine shutdowns due to heavy rains which flooded mines) All this amidst screaming oil prices, and coal goes to da moon.
It is interesting (to me) that in our networked, GPS-enabled, DNA-based, database-linked world, two commodities formerly regarded as just-above-dirt (coal & fertilizer) are suddenly top dogs.
Let’s hear the DUmmies and their Democrat buds in congress defend hammering the US economy with Kyoto while it’s obvious India and China have no intentions on reducing “global warming gasses” anytime within, say, a generation.
Cheap(er) energy is going to help their economies skyrocket while ours will be hamstrung by the likes of hemp and Algore.
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