By Dan Oancea

 

Last week’s spot light was occupied by the world’s largest private-sector coal company Peabody Energy (NYSE: BTU), which made a strategic move in getting involved in a massive coal project located in the world’s top coal producing country - China.

Peabody’s partners are the government and the local railroad company of the 1.2 million square kilometers province of Inner Mongolia. The company is asked to participate in developing a large surface mine and a 1.2 million tonnes downstream coal gasification facility, which is supposed to produce methanol and/or equivalent fuel. As for the coals, the project is located in Eastern Inner Mongolia, a region deemed to hold more than 200 billion tonnes in coal reserves. In the future mine’s vicinity coal seams thicknesses vary from 25 to over 170 meters.

The benchmark mid-term (1 October 2008 to 30 September 2009) thermal coal price agreed to be paid by TEPCO - Japan’s top utility company - to XStrata Coal was increased by 24 percent to $155 per tonne. The Japanese also agreed to pay $131.40 per tonne for thermal coal imported from China, a price which includes a 10 percent export tax. The tax was recently introduced by the Chinese in an attempt to discourage coal exports and provide for their power starved industry.

For the week ended October 3, 2008 the globalCOAL’s Newcastle Index dropped another 6.1% reaching $121.17, a six month low. Is there a decoupling between lower spot coal prices and mid-term contract prices? Many think so. Most analysts also agree that low oil prices had a bearing in keeping thermal coal prices lower than expected.

During the month of September 2008, South Africa’s Richard Bay Port shipped less coal in comparison with the previous year’s September because of railroad accidents.

The Canadian listed North American Gem (TSX-V: NAG) reported that is acquiring Appalachia Coal Corp., a private B.C. company which holds over 80 square kilometers of prospective coal leases in West Virginia. In other news, North American Gem announced that 69 coal prospecting permits have been issued to the company in Saskatchewan, Canada.

Teck Cominco (NYSE: TCK), simplified its name by dropping Cominco, and at the same time launched five new business units specialized in metallurgical coal, copper, gold, zinc and energy.