The Aussies chasing European coal

EXPANSION of the coal industry in Australia appears to be off the agenda of most mining companies, which caused Hogsback to wonder why Australian coal explorers thought they could do better in Europe.

Staff Reporter

The answer might be found in two peculiarly European factors. It is the region of the world that has “gone green” fastest, and it is the most depressed region of the western world.

Both of those sound negative for coal, but not when you look behind the headlines and analyse what has drawn at least two Australian companies, Balamara Resources and Prairie Downs, to Europe.

While one plans to enter the thermal coal business in eastern Poland (Prairie Downs) and the other wants to become a metallurgical coal producer in the southwest of the country (Balamara) the same economic and environmental forces are at work, such as:

  • Europe going too green, too fast, with the net result being that it is suffering from power shortages as North Sea wind turbines and solar arrays fail to supply the base load power needed by industry
  • some European countries compounding the problem of power shortages by prematurely closing their nuclear power plants after the Fukushima melt-down in Japan
  • the green factor and power shortages leading to the rebirth of mothballed coal-fired power stations and the building of new coal-fired plants because they are the low-cost leaders
  • European industry waking up to the fact that even as economic recovery takes hold it is being priced out of key markets by US rivals enjoying the benefits of that country’s shale-gas revolution and super-low power prices
  • Poland in particular placing a big bet on its own gas revolution, which has failed to arrive meaning coal demand is increasing as the country requires more power.

Connect the dots and a picture emerges of a region hungry for coal despite the pressure being applied by environmental agencies. It is also a region where there is a skilled and willing workforce prepared to accept reasonable wages to get a job.

Into this situation have plunged Balamara and Prairie Downs. While either is yet to deliver a tonne of coal to a customer in Poland the outlook for sales is somewhat brighter than it is back home in Australia.

Balamara’s plan to enter the European metallurgical coal business centres on the historic Nowa Ruda area of the country. This is part of the Lower Silesian Coal Basin and best known as a source of coking coal, anthracite and high-grade thermal coal.

The concessions awarded to Balamara by the Polish Government include old mine workings that last produced in 1995, and associated infrastructure close to three operating coke plants that have previously been customers for Nowa Ruda met coal.

Those coking plants will be the primary marketing target because part of their coal supply is being imported from as far afield as the US, a comment on both a lack of cost competitive local material and the lengths to which US miners will go to expand outside their home market and its excess of coal supply.

Currency could also be a factor aiding Balamara with the US dollar rising against the Polish zloty and the euro, which is used across the nearby boarder with Germany.

In theory, Balamara’s Polish adventure is in a near-perfect location to market coal, with the biggest challenge being to prove there are sufficient economic reserves in the old workings and that it can be extracted at a viable cost.

While Balamara looks for a way into the Polish met coal business, Prairie Downs is making steady progress with its exploration efforts at the Lublin thermal coal project in the east of Poland.

Latest developments include the recruitment of a new chief executive, the start of a scoping study and a seven-hole drilling program to follow up extensive drilling of the four coal tenements it has near the Bogdanka mine operated by a local mining company.

Prairie Downs has already published a maiden inferred resource for its Lublin project of 1.6 billion tonnes of high quality thermal coal. However, that encouraging estimate was based on 200 holes drilled by previous explorers. Fresh drilling will be needed to check their work and provide samples for quality checking.

After its scoping study Prairie Downs plans to move on to a feasibility study to determine likely capital and operating costs for the Lublin project.

In both cases, Balamara and Prairie Downs, there is a long way to go before coal-mining can start. However, it is also true that in both cases there is more chance of developing a mine in Poland than there is in Australia.

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