Oracle announces 1.4 billion tonnes of lignite coal at Block VI, Pakistan

[fatman17]

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Oracle announces 1.4 billion tonnes of lignite coal at Block VI, Pakistan

Monday , 19 May 2008


Drilling validation defines 1.4 billion tonnes JORC compliant Measured Resources and 371 million tonnes Proved Reserves at Block VI Thar Coalfield, Tharparkar, Province of Sindh, Pakistan.

Highlights

* Measured Resource at Block VI, Thar Coalfield, of 1.423 billion tonnes

* Proven Reserve of 371 million tonnes at phase I and phase II mine areas at Block VI

* Coal is of lignite quality and suitable for combustion in power generation

Oracle Coalfields PLC (PLUS: ORCP) the coal explorer and developer, announces the results from its seven borehole drilling programme at its 80% owned Block VI coal project located on the Thar Coalfield in Pakistan. The results have returned a total measured resource at Block VI of 1.423 billion tonnes of lignite coal. The area of Block VI that has been delineated as the mine area has returned a proved reserve of 371 million tonnes of lignite coal.

The results from the seven borehole drilling programme have validated the results of a 35 borehole drilling programme undertaken in 2006 by the China North Eastern Geological Survey Bureau as commissioned by the Sindh Coal Authority. The results have enabled the project to be taken to the internationally recognised JORC standard (JORC: Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia). The main principles of JORC Code (2004 Edition) and definition of the resource can be read as per the following link: (JORC : Mineral Resources and Ore Reserves)

Analyses of the results were carried out by the Company's independent UK coal consultants, Dargo Associates Ltd ("Dargo").

The area of Block VI that has been outlined for the mining area is that which shows the most favourable stripping ratio in relation to the overburden and the thickness of the coal seam.

Analyses of the 42 boreholes has shown the geology at Block VI to be simple with no known dislocations and confirmed the quality of coal to be suitable for combustion in power generation


Lignite Measured Resources Mt
Lignite Proved Reserves Mt

Block VI Area
1,423
-

Total Mine Area
-
371


Mt = Million Tonnes

Shahrukh Khan, Chairman, commented:

"We are delighted to announce the JORC results at Block VI of the Thar Coalfield, which have exceeded our expectations. We now look forward to taking the project into the next phase of development. We are reviewing the programme and strategy and shall inform the market of our progress in the near future."

 

[maqsad]

Ok who was the genius that sold 80% of the coal field to "Oracle"? The coal belonged 100% to Pakistan before it was discovered so how did the govt manage to decrease the pakistani stake to 20% and whose pockets are heavy(with peanuts) because of this?

 

[Comet]

What does this really mean?
Oracel will take 80% coal from thar while leaving 20% for us?
this is insane. we need power and only thing we had was coal.

 

[Proud to be Pakistani]

It is not that they can take 80% with them!

Since the investment has been made by them for all the exploration etc. they will have 80% share in whatever the reserves are used for.

 

[Comet]

it means that if pakistan uses coal for creating electricity than every consumer of that electricity will be paying to ORACLE?

 

[niaz]

it means that if pakistan uses coal for creating electricity than every consumer of that electricity will be paying to ORACLE?

Hon Friends,

No doubt it looks bad. However, Thar coal deposits are not new. I have known about these at least for the last 5 years. Where is the electricity from it??

A country has two alternatives:

Do every thing yourself. This requires a lot of investment in money and manpower resources. You have seen what happens to govt operated companies; 80% of the investment is not spent at all but is siphoned off to line the pockets of the beaurocrats. PIA's example is enough to show how a company can turn into a white elephant. The coal produced by the state owned enterprise would probably cost double and need govt subsidy to survive. This happened in UK as well !!

A better alternative is to offer a third party to develop the field at their cost in return for equity. The country gets a developed coal field without any cost to the tax payer. The profits will only be achieved if and when coal power plants are installed which may take a long time. Therefore kindly dont get carried away with the percentages.

Besides, it a proven fact that in nearly all the countries, private enterprise is far more efficient.

 

[Neo]

Hon Friends,

No doubt it looks bad. However, Thar coal deposits are not new. I have known about these at least for the last 5 years. Where is the electricity from it??

Sir,
After problems with the Chinese I think we're finally moving ahead with the Thar Coal Project.

Thar coal project to generate 5000 megawatts of electricity: Prime Minister ​

KARACHI (May 21 2008): The government has chalked out a plan to produce 5,000 megawatts (MW) of electricity under Thar Coal Power Generation Project. This was stated by the Prime Minister Syed Yousuf Raza Gilani in a message on the occasion of second anniversary of a magazine Energy Update here on Tuesday.

Power generation capacity under this project was to be enhanced to 20,000 MW in the long run. He said that the country was presently in the grip of a serious power crisis with power shortages of 3,000 MW and this shortage was likely to go up to 4,000 mega watts next year. He recalled that the ever-biggest investment from the day of establishment of Pakistan in the power sector was made during the previous PPP government.

The Power Policy of 1994 led to an additional 3,078 MW of electricity production, which in return, led to $3.5 billion investment. Giving a detail of the measures, being taken on urgent basis, Gilani said the present government has devised and is implementing an ambitious plan to coup with the immediate and future needs of the country in the energy sector. During this year, we shall install 2200 mega watt power generation units, he said.

The Prime Minister said the government was giving equal attention on energy saving. We plan to save 500-mega watt of electricity through special load management campaigns, thereby scaling down load shedding. Moreover, Pepco has been directed to ensure provision of 10 million energy saver bulbs at an appropriate price to consumers, he added. He said that he was pleased to learn that the magazine was objective in reporting, open to suggestions and pragmatic in advice to the government, while adhering to healthy norms of journalism.

It is encouraging that the "Energy Update" is projecting all aspects of energy sector and highlighting its true potentials in Pakistan as well as abroad, he observed. The Prime Minister hoped the national media including the "Energy Update" will support the energy saving campaign and also supplement the government's efforts to achieve energy security, which is vital for a sustainable growth of the national economy.

"I congratulate the management and the editorial staff of the "Energy Update" on the second anniversary of the magazine and wish them success in future. Meanwhile, Sindh Governor Dr Ishratul Ibad Khan in his message said that the government was taking every measure to improve power supply to industry, business as well as household on the one hand, and pursuing the steps for energy conservation on the other hand.

He also acknowledged the role of Energy Update in highlighting the crucial importance of energy in country's economic development through its candid analysis and objective reporting. It heartening to note that the magazine was also trying to persuade the government by publishing foreign and local technical and research reports on the use and benefits of alternate sources of energy like wind and solar, said the Governor.

Business Recorder [Pakistan's First Financial Daily]

 

[vish]

Oracle is not going to take 80% of the coal; the company will have an 80% share in the profit.

Can somebody tell me whether the selling price of the coal in this block based on market rates or has it been pre-decided?

Moreover, in either case, the government will have the right (and this is what my thinking says) to buy all the coal it needs.

So stop panicking.

 

[khanz]

did anyone notice the name ? shah rukh khan lol

 

[Comet]

Still I have my doubts. I smell some bribery here. 80% is too much.

 

[AgNoStiC MuSliM]

Hon Friends,

No doubt it looks bad. However, Thar coal deposits are not new. I have known about these at least for the last 5 years. Where is the electricity from it??

A country has two alternatives:

Do every thing yourself. This requires a lot of investment in money and manpower resources. You have seen what happens to govt operated companies; 80% of the investment is not spent at all but is siphoned off to line the pockets of the beaurocrats. PIA's example is enough to show how a company can turn into a white elephant. The coal produced by the state owned enterprise would probably cost double and need govt subsidy to survive. This happened in UK as well !!

A better alternative is to offer a third party to develop the field at their cost in return for equity. The country gets a developed coal field without any cost to the tax payer. The profits will only be achieved if and when coal power plants are installed which may take a long time. Therefore kindly dont get carried away with the percentages.

Besides, it a proven fact that in nearly all the countries, private enterprise is far more efficient.

A rational voice indeed.

Niaz sahib is correct, rather than fretting over how much Oracle is getting, think about how much we would be losing if we waited X number of years to get this project off the ground.

The additional cost for undertaking it at a later date, the associated costs of not having the power generation this project is supposed to bring, the impact of that lack of power on industry, peoples lives, foreign investment etc.

 

[araz]

Aquestion for Niaz Sahib.
There have been news items to the effect that the chinese company who were assigned the task of excavating(?) the copper and Gold mines at Saindak are getting too much ore out and by the time they hand over to the Government, there would not be much left. The question is when contracts are negotiated are there any guarantees that the company responsible would excavate X amount of ore out and not more. How do these contracts work? Thanks in advance for your explanation
WaSalam
Araz

 

[khanz]

is this the same oracle as in the software company ?

 

[maqsad]

Here is an article from the Sunday Star Times dated 27th April 2008. It gives figures for a coal mining operation in Pike River, Queensland, Australia. When they started the business prospectus in 2007 the price of coal was about $100 per tonne. Since then the price is projected to shoot up to $300 per tonne. Do the math.

Coal is the new gold​

By JENNY RUTH - Sunday Star Times | Sunday, 27 April 2008


It's likely to make greenies shudder but the prospects for Pike River Coal just keep getting better.

The company is still drilling its 2300m tunnel with about 250m to go before it hits the coal seam and starts producing the black stuff, expected in July.

The price of coal, particularly the premium hard coking coal Pike River will produce, just keeps rising.

Pike River has pre-sold 70% of its first three years' expected production and 55% of expected production for the life of the mine, most of it to its two cornerstone Indian shareholders, Saurashtra with 10.2% and Gujarat with 9.4%. The price will vary every year, benchmarked off the price set between the major Queensland producers and their Japanese customers.

The company is expecting to produce only 200,000 tonnes in the year ending June 2009, but forecasts an increase to about a million tonnes a year thereafter.

When Pike River floated in mid-2007, it was forecasting a price of $US101 ($126.53) a tonne. By the time it issued its rights issue prospectus in January, it was expecting something above $US130 a tonne for the year beginning April 1.

Now, managing director Gordon Ward says the price is likely to be close to $US300 a tonne.

That's based on BHP Billiton's acknowledgement earlier this month that market rumours were on the mark. Rather than spell out actual prices, the big Australian said it expects pricing to increase by between 206 and 240%.

BHP said it had reached settlements initially with customers outside Japan and "more recently with key Japanese customers".

BHP's followed a similar announcement from South Korean steel maker Posco. Another coal giant Xstrata is reported to be holding out for more than $US300 a tonne.

The Goonyella, Queensland, price used in the company's prospectuses was $US96 a tonne last year.

A number of one-off factors, including flooding of Queensland mines in February, electricity problems in South Africa and snowstorms in China, have contributed to short-term supply problems which have bumped up the price temporarily. But there are also underlying fundamental demand factors driving prices higher: voracious demand coming from China and India.

Analyst Jason Familton at First NZ Capital says the Asian coal team at sister broking firm Credit Suisse are predicting China will need an additional 100 million tonnes of lesser- quality thermal coal by 2010 if its current power demand continues at current levels. They also expect India will need another 35 million tonnes if its power generation growth picks up 4%. Familton says the underlying drivers are similar for coking coal.

Familton is now expecting Pike River's coal price will average about $US95 a tonne long-term, up from his previous $US80 assumption. That's near the middle of current market expectations ranging between $US80 and $US120 a tonne. And it's way higher than historical prices: industry newsletter the McCloskey Coal Report shows Goonyella coal sold for just $45.30 a tonne in 2003.

Ward isn't so sure about those long-term predictions. "It's going to take a few years for prices to drop to that level."

He points to what's been happening in the oil market, saying it took a long time for people to realise that a step- change upwards in pricing was occurring, rather than any short-term blip.

Analysts' predictions "may turn out to be a little on the conservative side", Ward says. He's heard Canadian coal producers are struggling to make any money at prices below $US100 a tonne which is likely to put a floor under the price. "We may see longer-term coal prices stay higher for longer but who knows how much."

Not surprisingly, Pike River shares have been among the best performers on the stock market recently. They traded as high as $1.35 last week, well above the $1 float price and the 90 cents rights price. Since it listed, the benchmark Top 50 Index has shed about 15%. The shares are still well below analysts' valuations which, if Ward is correct, my prove to be overly conservative.

Familton has a $1.39 valuation but a 12-month target of $1.55 and rates the stock "outperform". Guy Hallwright at Forsyth Barr has a $1.45 valuation and an "accumulate" recommendation. Perhaps not so surprising since his firm is Pike River's sponsoring broker and underwrote the rights issue (it was over-subscribed), John Kidd at McDouall Stuart is the most optimistic with a $1.75 price target.

* Jenny Ruth is a freelance financial journalist and a columnist for the Independent Financial Review.

Coal is the new gold - New Zealand's source for business, stock market & currency news on Stuff.co.nz

So lets look at it in a very simple way. Profits = revenue minus expenses, everyone knows that. 1.4 billion tonnes is 1,400,000,000 tonnes of coal. At around $100 per tonne the total revenue was $140 billion. Now how much was the calculated cost in 2007? Obviously less than $140 billion. I am taking a wild wild guess that maybe it was something like a little more than $50 billion in costs to extract all that coal?

So for that entire 1.4 billion tonnes of coal the profit was going to be around $90 billion using 2007 rates I am guessing. So Oracle would get $90 X 80% = $72 billion in profits for the entire coalfield. Just for organising the digging out of the coal!

But wait, now that the price of coal goes up so Oracle will make more than $72 billion in profits for the same expense. How much more? Well revenue at $300 a tonne of coal will now jump from $140 billion to $420 billion dollars. That is an extra $280 billion in profits alone from the coal. Oracle will get 80% of that extra so Oracle will make $244 billion in extra profit.

But hold on, guess what else? The price of coal to pakistanis for their own coal that was in Sindh went up from almost free, to $100 a tonne, to $300 a tonne. Wow. So the pakistan govt will be making 20% on the PROFIT that the coal is sold to the same country that owns it. But pakistanis will pay 80% of the profit...to Oracle for digging out the coal in Sindh which Pakistan could have dug itself.

The question that comes to my mind is how did the GOP allow this disaster to happen? If pakistanis could eat grass to make a few nukes in the 1980s then why not eat grass to figure out how to dig coal out from under pakistan's own soil? How could the GoP just give away more than $200 billion in profits to some foreign company? That $200 in hard cash could have been used to build so many J10s and FJ-17s. It could turn the foreign debt from -40 billion to a surplus +40 billion. But Gop just gave those hundreds of billions of dollars in profits away.

 

[Quwa]

I say let Oracle drill and extract 100% of the coal, but under a defacto agreement it should sell it all to the Pakistani govt. From then the Pakistani govt should process and sel it at whatever rates it wishes.