Sunday, January 18, 2009

T3. Coal Reserves, or what can I count as real?

So you want to start a coal mine – where to begin? The first thing that you need is some coal, and in most cases today the coal seams that are exposed at the surface are known and owned by somebody else. So you will need to drill some exploratory boreholes down into the earth to find some suitable seams. For the sake of example I am going to use a project in South Africa. Other than having found it on the Web I know nothing about the coal, or the company so please don’t think of this as any endorsement or otherwise of the property.

Quite often new developments are based on where folk have found coal before. If there is a mine then, with deposits such as coal there may well be more coal, out beyond the boundaries of that original property. This is because of the way that coal was formed as vegetation spread over a large swampy area that ran for many miles. Unlike oil, once the vegetation was put in place, and slowly buried, it changed composition in place, and so coal seams may well run for many miles, although they may get different names in different places. Thus, for example the Pittsburgh seam extends over perhaps 8,000 sq. miles, while the Herrin seam in Southern Illinois has about the same range (And this does not include cannel coal, some of which is found in Kentucky, which was moved from the original site by the actions of water).

Because these quasi-horizontal seams were formed over such a large area, and because the stratigraphy (order of the rocks as you take a core down through them) will remain relatively constant, in many cases, it is not necessary to make the exploration holes that close together. Thus in the example above, the boreholes were placed some 4 km apart and the volume of coal inferred from the thickness of the beds found, and assuming that they ran continuously from borehole to borehole.

This is referred to as:
Reconnaissance Resource: is quantified as a minimum one cored borehole with coal quality data per 400 ha (approximately 2km spacing) for multiple seam deposit types, while for thick interbedded seam deposit types a reconnaissance coal deposit is quantified by a minimum one cored borehole with coal quality data per 1,600 ha (approximately 4km spacing).
In this case the property was drilled over an area that required 402 boreholes, and it identified 5 seams of coal that could be produced. However it brings me to the point of this post, which is how much of the coal can be counted and as what type of reserve. This is quite an important distinction, since in the debate that I have had with others in the past, including David Rutledge, the confusions of what has been counted and how it is defined is often overlooked. This is how the information was reported:

So what are the different definitions of the reserves? Isn’t this coal all a reserve, well no, the coal seam is divided into different quality of reserve, depending on how far it is from one of the proving wells. Let’s consider the official definitions:

Points of Observation This is the point where the coal presence has been physically seen either at an outcrop or in the recovered core from a borehole.

Inferred coal reserves are those that can be extrapolated from a Point of Observation but to a distance of no more than 2 km.

Indicated coal reserves are those that can be extrapolated from a Point of Observation, but to a distance of no more than 1 km.

Measured coal reserves are those that can be extrapolated from a Point of Observation, but to a distance of more than 500 m.

So that, when we are assessing the amount of coal that we consider available at a site, if we are conservative, we are only reporting the measured coal reserves as that within 500 m of each of the boreholes, even though the consistency of the seam has seemingly been proven over many kilometers. It is a very conservative system, note that only 17% of the likely coal is considered a measured resource. To make this post more comprehensive, and to include some definitions that I will come back to in later posts, let me now go on to include the ranges of economically recoverable coal (in terms of thickness and depth) that are currently accepted.

In terms of international definition of resource the US Geological Survey has set up some definitions, that have also been adopted by the Federal Government, in their Code of Federal Regulations, which were just revised. The new regulations are a little more inclusive than the older ones (at the USGS site).
(5) Coal reserve base shall be determined using existing published or unpublished information, or any combination thereof, and means the estimated tons of Federal coal in place contained in beds of:
(i) Metallurgical or metallurgical-blend coal 12 inches or more thick; anthracite, semi-anthracite, bituminous, and sub-bituminous coal 28 inches or more thick; and lignite 60 inches or more thick to a depth of 500 feet below the lowest surface elevation on the Federal lease.
(ii) Metallurgical and metallurgical-blend coal 24 inches or more thick; anthracite, semi-anthracite, bituminous and sub-bituminous coal 48 inches or more thick; and lignite 84 inches or more thick occurring from 500 to 3,000 feet below the lowest surface elevation on the Federal lease.
(iii) Any thinner bed of metallurgical, anthracite, semi-anthracite, bituminous, and sub-bituminous coal and lignite at any horizon above 3,000 feet below the lowest surface elevation on the Federal lease, which is currently being mined or for which there is evidence that such coal bed could be mined commercially at this time.
(iv) Any coal at a depth greater than 3,000 feet where mining actually is to occur.
(6) Commercial quantities means 1 percent of the recoverable coal reserves or LMU recoverable coal reserves. . . . .
(19) Logical mining unit (LMU) means an area of land in which the recoverable coal reserves can be developed in an efficient, economical, and orderly manner as a unit with due regard to conservation of recoverable coal reserves and other resources. An LMU may consist of one or more Federal leases and may include intervening or adjacent lands in which the United States does not own the coal. All lands in an LMU shall be under the effective control of a single operator/lessee, be able to be developed and operated as a single operation, and be contiguous.
(20) Logical mining unit (LMU) recoverable coal reserves means the sum of estimated Federal and non-Federal recoverable coal reserves in the LMU.
(21) Maximum economic recovery (MER) means that, based on standard industry operating practices, all profitable portions of a leased Federal coal deposit must be mined. At the times of MER determinations, consideration will be given to: existing proven technology; commercially available and economically feasible equipment; coal quality, quantity, and marketability; safety, exploration, operating, processing, and transportation costs; and compliance with applicable laws and regulations. The requirement of MER does not restrict the authority of the authorized officer to ensure the conservation of the recoverable coal reserves and other resources and to prevent the wasting of coal. . . . . .
(23) Minable reserve base means that portion of the coal reserve base which is commercially minable and includes all coal that will be left, such as in pillars, fenders, or property barriers. Other areas where mining is not permissible (including, but not limited to, areas classified as unsuitable for coal mining operations) shall be excluded from the minable reserve base.
(24) Mine means an underground or surface excavation or series of excavations and the surface or underground support facilities that contribute directly or indirectly to mining, production, preparation, and handling of coal.
It is important to note item 23, since no underground method of mining will remove all the coal from a seam, but will leave significant quantities of the coal in place as pillars to hold the roof up, and thus protect the miners and their equipment from the roof falling in. (In the African example the percentage of coal that might be recovered is about 50% of the reserve volume).

Well that’s enough for today, we’ll go on to talk about what that means in terms of mining practice, and what is and is not really available in future posts.

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