Torrential rain today where I live...so I was house bound and did some research...thought it was ESI encouraging for those that think LT...
"The Galilee Basin is being mooted as rivalling the Hunter Valley in the future in terms of coal production."
If all the mooted projects in the Galilee Basin get legs - there will be up to 200mtpa being exported...how would that affect the Vic Pilbara's aspirations...?
How does the Galilee coal economics/coal quality compare with LV's BCE...?
"Mr Harsh V Mishra CEO Australia of Adani Group told Business Line in an E mailed response “The project is capable of producing coal as per UMPP requirements. That is no problem at all. The ash will vary according to degree of washing and the mine plan. It can go lower than 9% also.”
The Indian ministry of environment and Forests recently issued a guideline to restrict import of coal below 5,000 gross calorific values for UMPPs. The ash content and sulphur content are capped at 12% and 0.8% respectively .
Australia based eco group Market Forces informed that it has alerted the Securities and Information Exchange Board of India to a significant material risk to the Adani Group, which the company has failed to disclose to the market. It said that “Coal from Adani Group’s proposed AUD 7.1 billion, 60 million tonne per annum Carmichael coal mine and export operation in Queensland, Australia, will not meet the Indian government’s coal quality specifications for imported coal.”
The letter of Market Forces to SEBI says “Adani is the proponent of the Carmichael project, a new coal mine with a production capacity of 60 million tonnes per annum thermal coal in the Galilee Basin region of Queensland. The project requires the construction of a new railway corridor and an increase in export terminal capacity. The mine is expected to cost AUD 5.9 billion and the associated rail infrastructure AUD 1.2 billion. The coal seams to be targeted by the Carmichael mine vary from 22% to 38% ash .
Adani is intending to build a coal washing plant that has capacity to wash less than a third of the coal mined. This will be blended with other coal to achieve the targeted 25% ash product. If a lower ash product was to be targeted a significantly larger portion of the raw coal would require washing. This would require a significantly larger coal washing plant to be constructed resulting in increased water demand. The mine intends to source water from local rivers and mine dewatering. It is questionable whether these sources could satisfy this increased demand and it is unclear what increased cost this would place upon the Carmichael project.”
""The IEEFA report said the Alpha mine would struggle to be profitable with production costs at $US70 a tonne or higher, not far off current prices of about $US80...
''Our (Adani) projects are financially robust, with some of the lowest operating costs in the global coal industry [$US55 a tonne FOB ] and represent a very large, high-quality and new source of low-ash, low-sulphur, low-gas thermal coal,'' it said." ________________________________ Below is my take on things:
Coal quality :
Galilee - ash ~12% (after plenty of expensive washing)...0.5% sulphur...~6100cv
LV/Coldry - ash 2.4%...0.35% sulphur...-~5850 cv
Economics :
IEEFA say Galilee prod'n costs ~$70 (so FOB would be much higher)...while Adani say FOB $55
Coldry is ~$51 FOB...however $20 of that is the transport to the port. I believe that is via truck. Apparently the figure via rail will be closer to $10. So lets say Coldry FOB ~$41. Shipping to eg Japan is not much different believe it or not - 13 days from LV and 10 from Qld.
So Coldry FOB ~$41 V Galilee FOB $55
Sounds good to me - when/if a Coldry demo is proven - maybe folks like Gina will be headed LV way?
((((((As a side VIP point - $18 of the Coldry prod'd cost is raw lignite feedstock via AGL (that's ~2.25/tonnes lignite that AGL etc can dig up for say total ~$4...imagine the economics for AGL/Hazelwood etc to build their OWN Coldry modules (Pas - AGL Aug public statement is not far away and who knows what AGL are thinking) ...the mind boggles with unbeatable economics. I wonder if this was the prime motivation for AGL's 100% move last year...co-incidence with DFT stage 1 etc...?))))))
The enviro aspect comparison is critical. Galilee is facing severe opposition for both rail/port...eg the Great Barrier Reef /Port standoff. This issue is a HUGE negative imo and wont go away ever. Also, the rail is no push over if you research it - 500km through land owners property. Notice above the Galilee coal neeeeds huge amounts of water to wash the coal from ~27% ash down to acceptable ~12%.
In contrast - LV has 13 Billion tonnes (potential ~6B/tonnes BCE/diesel etc) drilled ready to go that greens/opposition groups will likely largely "accept" - especially IF a portion is designated for urea/diesel/LPG and other non BCE products that can be sold locally. Some rail already exists - so depending on the route...say 70-100km...there will be minimal concerns with land owners compared to Galilee imo. Port concerns re greens is obviously farrrr less of a concern in Vic than Qld.
Being naturally 2.4% ash...~0.5% sulphur and expelling only clean water as a bi/product (where does Exergen fit in here...?)...overall - I see the enviro aspect as dwarfing the Galilee scenario.
Bottom line for us:
The World is moving towards cheaper "cleaner coal"...low ash/sulphur - +5500cal value the focus. A premium will be paid for LT guaranteed supply from a low sov risk nation.
I've done the Hunter Valley v LV BCE scenario. I've done the Indonesian/USA/China scenarios. Fact is the World wants more coal LT. ATM the World burns ~7B tonnes pa...China burns ~3.5B of that...but by 2030 I believe the figures are said to be China burning ~6.5B...India has a definite standout need for ~200mtpa down the track...
The ECT website India update states things are moving in India. Didn't Kel via BCIA state that a Coldry demo cost would be a third of the cost here...imagine that - a demo in India that costs ~25m instead of ~$70m. Imagine the economics of upscaling to say 20mtpa...Id imagine a swift scale up in India...after all - its only the DFT that held India etc back.
My conclusion is the Vic Pilbara economics are glaringly too attractive to ignore for the Oz Govts. The need for jobs etc etc is a motivating bonus - but the BCE economics rule. Seems to me the Govts have done some very studious work here.
April 22 2012 - via the new Energy and Resources Minister
"LOWER-emission technologies to take advantage of Victoria's massive brown coal deposit - the second-largest in the world - are the centrepiece of the state's energy future."."
Its all about the NEW drying techs the Govts has stated - is Coldry one...?
How many NEW economic drying techs are there that have LT running pilot plants running on LV b/coal
Needless to say - I'm just a hack trying to see the Vic/Fed Pilbara Govt mindset as to WHY they PERSIST with the Pilbara whilst the thermal coal market has soooo mannnny LT obstacles. Heck - July 1 Ryan becomes head of the new super dept that the Govt has clearly stated is brown coal orientated to facilitate the coming Pilbara. I strongly doubt he wants to front a LT lemon.
Anyway - back to reality - sp 0.8c...imminent $ raising obvious...Monash dragging the chain...no ESI ASX ann update since Mar 1. IMO an update is needed pronto - its now been close to 4 mth without an update and its clear to all that the ALDP decisions have been delayed a few weeks according to the "indicative timetable".
What can I say ! - we hold and await the ALDP scenario.
IMO the sp will spike one way or another bigtime in the coming month or so as its inevitable that with soooo many groups involved - insiders will buy/sell.
tick tock...
ESI Price at posting:
0.8¢ Sentiment: Buy Disclosure: Held
(20min delay)