News

April 08, 2008

Churchill Mining Makes The Most Of Fabulous Times In The Coal Market

By Alastair Ford

“Coal is hot”, according to Churchill Mining’s representatives in London. Over in Indonesia, Paul Mazak, Churchill’s managing director, wouldn’t disagree. He’s just orchestrated a near 50 per cent increase in the size of Churchill’s land package at East Kutai on the eastern side of the island of Borneo, and expects that by the end of the year his company will be able to boast resources of over 500 million tonnes of coal, of which 100 million will be in reserves. Admittedly this is thermal coal rather than the real high-stakes metallurgical coal used in steel making, but a key use of thermal coal is in power generation, and power looks set to become one of the big issues of at least the first half of this century. There’s famously not enough coal to keep the lights on in South Africa, while in Churchill’s neck of the woods the Chinese are sucking in supply, and Indonesia itself is planning for another 10,000 megawatts of capacity.

Hence recent market moves in the pricing of coal have been sharply upwards. For metallurgical coal, broker Fairfax deduces from a combination of data lifted from Bloomberg and inferred from BHPBilliton that the prevailing contract price has moved up 200 per cent to around US$300 a tonne. For thermal coal, the rise is slightly more modest, but when all’s said and done, it’s actually no less sexy at US$125 per tonne, according to the latest contracts between Japan’s Chubu Electri and Xstrata....