Quarrying & Mining Magazine
coal mining Q&M

Brighter future for coal

This article first appeared in Q&M‘s December-January issue.

Coal is an important resource in this country and there is a profound relief in the industry that the international price of that resource is rising steadily.

This country has extensive coal resources, mainly in the Waikato and Taranaki regions of the North Island and the West Coast, Otago and Southland regions of the South Island. These coals cover almost the full range of coal ranks, but resource quantities are heavily skewed towards low rank coals. National in-ground resources of all coals are over 16 billion tonnes, but 80 percent of this is lignite in the South Island and this is of a very poor quality.
Coal production in 2015 was 3.4 million tonnes, of which 1.4 million tonnes was exported. Coal accounts for about 10 percent of our primary energy (excluding transport fuels). The domestic coal market is complex for its small size, dominated by steel making and milk processing, with a declining quantity being used for electricity generation at Huntly. Coal is also used for cement making, and to provide process heat for the meat and timber industries. The many medium to small users of coal include hotels, schools, hospitals and various industries. Coal is the only cost-effective option for fuelling industrial plant and primary production in the South Island because there is no reticulated gas.
While lignite dominates our coal inventory, bituminous and sub-bituminous coals for thermal and metallurgical use have been by far the most important economically since mining began in the 1860s. In-ground resources of these coals are about four billion tonnes, but a large proportion does not have reasonable prospects for eventual economic extraction. There are 22 ‘official’ coal mines in this country, 17 of which are producing.
The 2016 AusIMM conference at Te Papa in Wellington was a rather subdued affair as mineral prices are still relatively low. However senior coal geologist for NZ Petroleum & Minerals (NZP&M), Alan Sherwood, brought an air of optimism and confidence to the conference when he said domestic prices were strong and export prices improving. Coking coal has now reached US$140/tonne – up 80 percent in the past six months.
There were profitable domestic operations flying under the radar and, in the public sector, Bathurst Resources declared a first full year profit in August, while Stevenson Mining lodged resource consents for Te Kuha, near Westport.
Of the major consumers Huntly Power Station coal use stepped back from 3.3 million tonnes in 2005 to 550,000 tonnes in 2015.
NZ Steel still needs a constant 800,000 tonnes and, with the cutback of Waikato mines, was relying more on importation.
Fonterra runs three North Island plants on coal.
In the North Island coal production dropped 50 percent from two million tonnes in 2010 to one million tonnes in 2015, with Rotowaro production halved to 860,000 tonnes.
The Huntly East underground mine stopped operating in late 2015, while Genesis Energy cancelled its coal import contracts in 2014 to rely solely on Rotowaro coal.
Alan Sherwood said South Island milk processing was all performed on coal energy. Thirteen dairy plants use 70 percent of South Island production, and a large number of small industrial and commercial users have no cost-effective alternative to coal.
As a comparison, coal was between $5-$7 gigajoules delivered, gas $10-$15/GJ, wood-waste $15/GJ, and general electricity $20/GJ. Sherwood said domestic thermal prices were better than global prices.
Almost all coal from the West Coast is coking coal, where exports dropped from 2.42 million tonnes (Mt) in 2010 to 1.37 Mt in 2014. At present exports are not viable at bottom prices of US$75/tonne. They need to be around US$120-$140/tonne – but international prices are rising. The reduction of export volumes impacted on KiwiRail, because no coking coal is being exported through the Port of Lyttelton at present.
Sherwood told the conference the export infrastructure and transport costs are significant constraints on scale and profits. These costs can be more than one-third of FOB shipping costs.
Sherwood also called for the need for an inventory – markets were not informed by the major resource owner – the Crown – and the government has not maintained a national coal resource inventory for over 20 years.
The public/private ownership of the resource is a major problem in compiling such an inventory, he added.

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