The financial viability of coal reserves within previously mined areas of the Witbank Coalfield

Abstract

The future of coal mining in the Witbank Coalfield over the next 30 years and beyond depends on effective and responsible utilization of the remaining reserves, both within unmined and previously mined areas. Similar to all mineral resources, coal is also non-renewable and the current resources will not last forever. Unlike most other resources coal resources have to be considered in long term strategic planning for energy supply. It has therefore become very important to use the remaining resources and reserves to their full potential. This has prompted mining companies to re-mine or do secondary extraction of areas mined during the previous 50 years. Reliable and internationally accepted valuation techniques and reporting standards are well established for virgin areas. The challenge is now to develop an equally robust and reliable system for remaining resources and reserves in previously mined areas. A number of established operations already exist in South Africa and internationally which are utilizing such reserves. Due to numerous factors affecting the viability of this type of operation a system or matrix is proposed for defining such resources and reserves. This classification scheme caters for the obvious geological, mining and beneficiation factors, and also for the multitude of lesser known but equally important factors. The effects of some of these factors on a future mining operation are demonstrated in a case study of such a previously mined area. Factors affecting the Run of Mine (ROM) tons and saleable tons are: a) derating percentage b) percentage mining extraction c) percentage dilution and contamination d) percentage fines generated e) spontaneous combustion Numerous pitfalls are identified such as top coaled areas, water accumulations, no access to old areas to verify existing information and the time lapsed since previous mining occurred. Another complicating factor is the lack of a method for the quantification of the impact of spontaneous combustion on remaining reserves. The financial viability of mining these areas are especially sensitive to the coal price, R/$ exchange rate, change in production and capital expenditure. The information generated during the investigation is processed in a financial model which is used to evaluate different scenarios and risk sensitivities. It is demonstrated that in evaluating previously mined areas, it is not the obvious factors that often determine the financial viability of a project, but rather the not so obvious financial factors.