ikwezi mining on the road to coal production, page-17

An interesting article about shale gas in USA.

http://www.goldismoney2.com/showthread.php?46317-Collapse-of-Shale-Gas-Ponzi-Scheme-MeansHuge-Opportunity-in-US-Coal-Mining-Stocks

Collapse of Shale Gas Ponzi Scheme MeansHuge Opportunity in US Coal Mining Stocks

There is a looming collapse in the US shale gas industry to the scale of teh 2007 collapse of the housing bubble. This means a giant investment opportunity in the US coal mining sector.

Geologist Arthur Berman has been alarming people of the shale gas Ponzi Scheme. The shale gas industry systematically over-estimate EUR (Estimated Ultimate Recovery) of shale gas wells to suck in investor money and bank loans and boost stock price. In reality, shale gas well ultimate production may be only HALF of what producers clai they could be. That means natural gas can not be profitable until gas price is double or triple to $10/mmBtu, from where it is now, $4/mmBtu.

Conventional gas production, currently at 35 BCF/day, continues to decline at-9% per year. Shale gas wells decline atmuch faster pace. The existing US shale gas wells, collectively as a group, declines -50% in a year. The industry has to spend $135B per year just to drill enough new shale gas wells to offset the decline in shale gas wells. This drilling activity has been sustained by almost endless supply of capitals from bank loans and from investor pockets. This can not last for long.

As aresult, production of gas is going to plummet soon, leading to skyrocketing gas price, which lifts coal price as well. The one to benefit most, is US coal mining companies.

Internationally, coal is also lined up for perfect conditions of a super coal cycle:

1. China's coal imports grow rapidly. China only started to import coal in 2009. prior to 2009 China was a net coal exporter. By 2011, China already beat Japan to be the world's largest coal importer at 182.4M tons per year. By 2012, China imported 290M tons of coal, another big lead from 2011. That import growth was in the context of China having excessive flodding and excessive hydro-electricity. The extra generation in hydro-electricity in 2012 saved China by 10M tons worth of coal consumption. If only China's rain fall returns to normal in 2013, that alone will mean another extra 100M tons of coal needed just to keep things equal.

2. India's crunching electricity needs. In earlyJuly 2012 India suffer the worse power blackout in human history, plunging 600M people (half of India's population) in darkness for three days. China has to massively import more coal to meet its own needs and India handedly beats Japan in coal imports in 2012, pushign Japan to 3rd place. India will beat China down to 2nd place soon.

3. Indonesia, an island nation of too much population and too little natural resource, has only 0.6% of the world's coal reserve. But it claims to be the world's No. 1 coal exporter due to reckless illegal coal mining. Indonesia's coal is oflow quality, low heat content, and can be produced cheaply by open-pit operation. But guess what, the vast majority of Indonesia's coal is buried much deeper and can not be produced by open-pit. The ground condition on Indonesia islands are sandy, very soft, and very fragile. It is virtually impossible to dig tunnels with the sand collapsing in. So producing the underground coal will be proven to be very difficult and very costly if not impossible. All indications are that Indonesia's surface coal is near deplete. As they are unabel to switch to underground coal mining, there will be a sudden collapse of Indonesia's coal production and export.

Every thing bodes well for the US coal mining sector. Right now US coal mining stocks are at historic lows. I expect an easy 10 fold gain in some coal mining stocks in the next 12 to 24 months, just like inthe past coal bull cycles. But this time it could be way much bigger.