Essar loses coal mine for failing to clear payment
The coal ministry has issued a termination notice to Essar Power ending the contract for development of the Tokisud North coalmine in Jharkhand for not making the upfront payment for the block.
As per coal block auction norms, Essar Power will be barred from bidding in coal block auctions for a year. The ministry is also considering stern action against the company, including disqualifying it from Coal India supplies, a senior government official said.
The move is in line with coal minister Piyush Goyal's stand to prevent private companies from derailing the auction process or reneging on contracts. Essar Power said it has approached the coal ministry to clear the dues. The company said it has invested Rs 450 crore on development by way of cash payments and performance guarantees and has made all the necessary efforts to commence mining at the coal block.
"Essar would like to state that the company has recently approached and responded to the coal ministry stating that Essar will be paying Rs 17 crore towards the final instalment and will execute the mining lease for the Tokisud mine and awaiting a suitable response," the company said in response to an ET query. "We have not been able to commence any development work, as Essar could has not received important data and documents pertaining to Rehabilitation and Resettlement settlements, as concluded with project affected persons of the Tokisud mine. This was due to the ongoing court cases between the earlier allottee of the mine and the ministry of coal."
ET was the first to report on August 5 that Essar Power is likely to lose the Tokisud coal mine owning to non-payment.
"The termination notice will come into effect from October 6. The firm's Rs 261-crore bank guarantee will also be forfeited," a government official said.
A decision on the allocation of Tokisud mine will be taken in due course, he said. The mine is the most expensive block of those bid out to the power sector. The company had won the producing coal block in an aggressive bid of Rs 1,110 per tonne. Scrapping the coal block will have an adverse impact on Essar Power's 1,200-mw Mahan power plant in Madhya Pradesh that has been shut for several years. Mahan's Unit I had begun operations in April 2013 but had to suspend them because of coal wasn't available.
The mining licence for an attached Mahan coal block was cancelled by the Supreme Court in October 2014.
http://economictimes.indiatimes.com/articleshow/54490814.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Coal India Limited seeks alternative coal blocks from Mozambique government
State-run Coal India (CIL) has asked for alternative coal blocks from the Mozambique government since it did not find any commercially viable reserves in the block it was allotted a few years ago.
"We have asked for alternative blocks from the Mozambique government since there was no mineable coal in the one we were given," Sutirtha Bhattacharya, chairman at Coal India, told ET.
Another top executive at the company told ET on condition of anonymity that Coal India has in fact surrendered the block and asked for a fresh allotment. "The government is yet to get back to us," the executive said.
CIL was allotted two exploratory blocks covering 224 sq km at Tete province in Mozambique in August 2009. Following this, it floated a wholly-owned subsidiary in Mozambique— Coal India Africana Limitada (CIAL)—for exploring the blocks.
Initially, the validity of Coal India's exploration licence was August 2014, but it was extended up to August 2019.
Coal India discovered that out of the 224 sq km of the total license area, 170 sq km had no 'coaly' horizon till a depth of 500 meter and it surrendered this block to the Mozambique government.
It, however, retained the remaining 54 sq km of area, for which the Mozambique government had issued a new licence that was valid till August 2019.
But Coal India later discovered that it was not feasible to do mining in this area as well. "Based on the results of various exploration activities in the licenses area 3450L and 3451L, the geological report has been prepared," the company said in its annual report. "A mineability study has been undertaken based on the findings of the geological report. The study revealed that it is technically not feasible to do mining in the license area of CIAL."
"Accordingly, the CIL board accorded its approval for surrender of the blocks to the Mozambique government. Pursuant to this decision, application for complete surrender of prospecting license has been submitted to the National Institute of Mines. The response of the government of Mozambique is awaited."
An official close to the development said Rio Tinto, the world's second largest mining company, has done extensive exploration work in some areas Mozambique and the best option for Coal India may be to take up the mines that International Coal Ventures Ltd (ICVL), aconsortium of some Indian staterun companies, had acquired from Rio Tinto. "ICVL mines are ready for development," the official said.
Government forms panel for ‘tentative’ policy on coal reject disposal
Government has constituted a panel to frame a “tentative policy” for disposal of low-grade coal rejects from washeries at thermal power plants.
The five-member panel has been asked to submit the same in 15 days, an official said.
Coal quality is enhanced by washing and the plant where such activity is carried out is called coal washery.
The panel will “prepare a tentative policy for disposal of washery rejects keeping a harmonious balance between the (draft) policy formulated by the coal ministry and comments or suggestions furnished by the stakeholders,” the official said.
The terms of reference of the panel also include listing out amendments in the draft policy as formulated by the coal ministry vis-a-vis comments from stakeholders and listing out the reasons for acceptance or rejection of the said comments or suggestions, if any.
CMD of Coal India’s consultancy arm CMPDIL is the chief coordinator of the committee. Other members of the panel include Coal India director (marketing) and coal controller.
Coal price surge paves the way for Whitehaven rebound
The death spiral for coal miners has been effectively rebutted with the five-fold surge in the share price of Whitehaven Coal so far this year thanks to the spike in coal prices on the back of China's move to rein in domestic coal production.
The company's shares were up again on Monday, this time by 5.4 per cent to $2.53 by early afternoon.
Whitehaven doesn't sell to China, but as China's actions have seen the coal price surge this year, so has its share price, even though it has a larger exposure to steaming coal which is mostly used in power generation and not coking coal, which is where the price rally has been most notable.
Coking coal, which is mostly used in the steel-making process has enjoyed a doubling of its price.
The spot price for steaming coal is holding at $US75 a tonne, up around 40 per cent in recent months, with the spot price of coking coal at around $US215 a tonne, up from around $US155 earlier this month.
Whitehaven generates around 80 per cent of its revenue from steaming coal, although this will reduce to closer to 65 per cent over the next few years, once the new $770 million Maules Creek mine, which produces both coking and steaming coal, is fully operational.
Ditching debt
Critically for Whitehaven, it has been able to use the surge in the coal price to slash debt, which is giving it added leverage to coal's revival. It has reduced its borrowings by $77 million since the start of the year.
Its net debt figure stood at $859 million by the end of June, with a further $35 million paid off since.
"2017 for sure is debt-reduction focused," Whitehaven chief executive Paul Flynn told analysts last month when discussing the revived coal price and the outlook for paying dividends.
"After, I think it would be appropriate for the board to contemplate capital management, including dividends. I think it's just a little premature based on this recent recovery to be outlining scenarios right now on that."
At present prices, the company is generating free cashflow estimated at more than $250 million annually which, if sustained, means it can potentially wipe out virtually all of its borrowings in just over three years, analysts say.
Maules Creek boost
And that could increase if the group succeeds in raising output from the Maules Creek project, which is under study at the moment. Maules Creek produces both coking and steaming coal, which significantly lifts its economics compared with other mines in the Hunter region of NSW.
Whitehaven receives close to the spot price for its exports, receiving the monthly average price for coal shipped through Newcastle port.
The broader market is benefiting from China's push to reduce coal production, primarily by limiting the number of days per month coal can be mined as it moves to close unprofitable mines.
As a result, the rise in the domestic coal price in China has feed through to the international market, coal industry figures say.
Chinese coal companies to boost thermal coal output to placate steel mills
The meteoric rise in coking coal prices over the last couple of months has had a painful effect on China's steel producers, who are having to pay a lot more for coking coal, a key ingredient in steel production. The cost inflation gave rise to a protest from the China Iron and Steel Association which represents large state-owned steel mills. On Friday the country's state-owned coal mining companies relented, and agreed to increase output, which should cause Chinese coal prices to level off.
Cranking up production is actually the opposite of what Beijing wants to do for Chinese coal. For months the Chinese government has tried to rectify overcapacity by mandating production cuts and shutting debt-ridden mines that are close to the end of their lives. Beijing has also limited coal mines to operating a maximum 276 days a year.
How will the increase in thermal coal output affect coking coal prices in China? According to theFinancial Times it won't necessarily resolve the supply squeeze of coking coal, which tightens up in winter when cold weather slows mining operations northern China and Mongolia. However, increasing the nation's output of thermal coal will "help keep a lid on coal prices in China, reducing pressure on thermal power generators and preventing the rally in coal prices from feeding through to the power sector."
Meanwhile on Saturday, the State Council of the Chinese government approved the merger of Baosteel and Wuhan Iron and Steel. The combined entity will be the largest steel company in China and the second largest in the world, after European steel giant ArcelorMittal, CCTV reported.
http://www.mining.com/chinese-coal-companies-boost-thermal-coal-output-placate-steel-mills/
JSW Steel, Vedanta, NMDC among 9 firms qualify to bid for Karnataka iron ore mines
India’s largest iron ore producer National Mineral Development Corp. Ltd (NMDC), JSW Steel Ltd and Anil Agarwal-controlled Vedanta Ltd, among others, have technically qualified to take part in Karnataka’s iron ore mine auctions.
Others who have technically qualified include MSPL Ltd, Kalyani Steels Ltd, Kirloskar Ferrous Industries Ltd, BMM Ispat Ltd, state-owned Kudremukh Iron Ore Co. Ltd (KIOCL) and SLR Metaliks Ltd.
These 14 deposits have an estimated 127 million tonne (MT) of iron ore reserves. India’s iron ore production for financial year 2015-16 rose to an estimated 135 MT compared with 129 MT the previous year.
According to information available on the website of Karnataka government’s mines and geology department, the technical bids for 14 ‘C’ category iron ore mines were opened on 15 September. However, technically qualified bidders have been announced only for seven iron ore deposits, with the remaining seven blocks finding no takers.
These mines, referred to as category C mines, are primarily located in Bellary and Chitradurga districts.
The Supreme Court had cancelled the leases of 51 iron ore mines in the state in April 2013 wherein it found massive irregularities in terms of environment degradation. These mines were then classified as category C mines by the Supreme court-appointed Central Empowered Committee. Those with few irregularities have been classified as category A mines.
“It is informed that the training and mock auctions for the technically qualified bidders on e-auction platform by MSTC will he held on 26 September,” Karnataka government’s mines and geology department said in a 22 September notification.
MSTC Ltd, a central government undertaking which provides electronic platform for mineral auctions.
The Mines and Minerals (Development and Regulation) Amendment Act, 2015 (MMDR), which was notified in March 2015, allows states to auction mines bearing minerals excluding coal and lignite. However, mineral auctions have not picked up speed.
Queries emailed to the spokespersons of Karnataka government’s mines and geology department, NMDC, JSW Steel Ltd, Vedanta Ltd, MSPL Ltd, Kalyani Steels Ltd, Kirloskar Ferrous Industries Ltd, BMM Ispat Ltd, KIOCL and SLR Metaliks Ltd. on 25 September remained unanswered.
The state government had earlier postponed the auction of these iron ore deposits after potential bidders raised concerns regarding high stamp duty and registration tax.
Experts believe that big firms have evinced interest due to high iron ore grades in these mines.
“Initial results clearly show that companies have shown interest in bigger deposits, rather than smaller ones. These mines will be profitable as it has higher grades of ore. Also, smaller deposits will be taken up by smaller players in next tranche,” said Naresh Chandra Pant, professor at department of geology, University of Delhi.
India’s iron ore production during the first quarter this financial year went up 43% to 48.23 MT compared with 33.71 MT during the first quarter of the last financial year.
India, which accounts for about 4% of the global iron ore production, has recently seen a boost in output with the government taking a slew of measures, including waiver of export duties and pruning of railway freight charges.
Warm Regards
Anurag Singal
Sr. Manager-Business Development
EMIL, Aditya Birla Group
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