Interview

Coal treatment is inevitable for market competitiveness

2019  |  December   |  025

We spoke with B.Batmunkh, Chair of  Big Mogul Coal & Energy Company LLC.

-Your coal mine operates in Dundgobi province. You opened a new coal treatment plant last year. Has it started operating?

-The plant isn’t operational yet. The tests are finished. We are planning to operate the plant at full capacity from next April. We estimated an annual output of 690 thousand tons of treated coal per one million tons. The coal from our Khuut mine is excellent in treatability and quality and classified under a medium lifetime. The average calorific value is 5200 which will rise after treatment. The ash content will also reduce after this process. Sulfur content is an important specification for export coal. Our product is low in this value and we further confirmed that the sulfuric content went down during the treatment process.

Generally, we are hoping to have a high-quality and regular export product that has less variance in quality.   

-When did “Big Mogul Coal & Energy” enter the sector? What is your annual export capacity? 

Australia combine various types of coal into high-quality coal for steel factories, coking coals are made especially for the specific factory

-I have been working in the industry for 16 years. I conducted exploration activities in the Khuut valley and prepared the mine in the past ten years. The location of our mine is relatively remote from the infrastructure, around 100 km from Choir. We started exporting small quantities from 2006. The quantity varies depending on market conditions and logistics issues. Sometimes, export fully stops. Therefore, we decided to create our product that can withstand logistics difficulties and cost challenges. So, we finished constructing a plant with the capacity to treat one million tons of coal annually last fall in 2019.  

-There seem to be several technologies that utilize a wet-treatment method. Which one is yours?

-It took us a long time to select the technology. At the result of several tests, we chose the wet treatment and flotation method. 

-How are you planning to manage water?

-We have water in our open pit quarry. We opened this open-pit mine in 2017 for the plant, which took almost a year and a half. We will now begin treating the coal extracted from this new mine. Soil water is produced during the mining process, which we are expecting to filter and use. Generally, our plant is less water-intensive. There are standards on minerals extraction and treatment water. The plant is meeting these exact standards. In other words, we will use water seeping from our quarry for 70-80 percent of the total water requirement. There will be a reserve, of course. A deep well will be built. After testing the water, we discovered it wasn’t for drinking. However, it was confirmed suitable for industrial use. The classification is rather strict, nowadays, with drinking water especially classified. After careful analysis of water basins, the water is classified as either drinking or industrial purposes.  

-How will you manage power to the mine and treatment plant?

-We are planning to receive power from Bayanjargalan soum in 29 km from the mine through a high-voltage line. The line should be finished around mid-next March. This is one of the major activities of this year. Although we do have electricity on the mine, the current capacity isn’t sufficient. This is the reason we’re having this unexpected cost. 

-How much investment did the coal treatment plant require?

-The plant’s equipment alone costs 3.5 billion MNT. Then come construction and other expenses, which brings the cost to around 5.5 billion MNT. If we estimate the cost of the power lines at approximately one billion MNT, we can see that the total investment required to open the treatment plant is 6.5 billion MNT.  

-Is that Mongolian investment? 

-Yes, it’s a 100 percent Mongolian investment. I have previously worked in cooperation with a US-investment fund. Also, I have a private investment foundation that funds mining and other sector projects. The foundation’s activities intensified from 2017. I also served as a board member for Shariin Gol LLC in 2003-2018. So, essentially, I shifted my focus towards my private business since spring 2018. The investment foundation oversees several on-going mining projects, one of which is Khuut or Khuut valley coal project. 

-The Chinese Government closed down its outdated treatment plants. There was a rumor that Mongolians have been importing the technologies of these decommissioned plants at a cheaper cost. Is the technology used at your plant old or new?

-Our equipment is brand new and the technology is relatively up-to-date. Coal treatment methods are becoming more environmentally friendly, productive and water-efficient in the last years. The most important aspects seem to be water and ecology. China has been using a blending method for coal treatment lately. Australia has a good practice in this regard. They combine various types of coal into high-quality coal. For steel factories, coking coals are made especially for the specific factory. Australians can blend and produce specific coal for consumer requirements. For example, if the client gives five specifications and requests specific coal, they can provide the exact product. For us, we’re only exporting what we have available.  

-You mentioned that your company started exporting coal from 2006. How much have you exported so far?

-Although we started many years ago, our export volume hasn’t been significantly large. Depending on many factors including market and price, the volume varied. So far, we have exported over 300 thousand tons of coal.

-How about this past year?

-The past two years were spent on construction efforts. We have two mines close to each other. The smaller one has been ongoing. The larger one was opened in 2017. Of course, we haven’t started exporting straight away once the mine was opened. We estimate at least three years in advance to start operating the mine pit at full capacity. This cost us a lot. In any case, we have successfully tried exporting in smaller volumes. Generally, we plan to treat all our export coals.

-How are private companies making an effort to treat their export coal and improve their market competitiveness? What policies do you think companies should implement in the future?

It’s wrong to turn the public against the only cash and salary generating industry

-The southern gobi region constitutes a key part of the country’s exports. It contains numerous mines. I believe our companies are doing the right thing by building their coal treatment plants next to their mines. It is indeed inevitable to treat coal to compete in the market. In Bayannuur of Inner Mongolia just across the border, they already built 5-6 treatment plants. It’s expected that they will buy our coal to wash at these plants. Perhaps, if we can negotiate well, we can supply coal to their plants and receive a portion of their profits.  

Coal wasn’t this expensive before. If we observe the 30-year dynamic of coal prices, they were cheap for many years – around 25-30 USD only. Then, the price jumped up to 180 USD from 2008-2009 and fell back again. This shows that the price hike was merely a bubble. Now, the average price is 70 USD. We have to accept this is a normal market price. Although prices were predicted to fall in 2018-2019 again, this didn’t happen. We are now hoping against any price swings.   

Mining businesses require long-term planning, at least 10-20 years ahead. If key commodities maintain their average prices, a business can be stable. If prices go up too high, negative paradoxes arise. This means too much hike causes a strong fall afterward. For us, price and political stability are essential.

-Our political and legal environment is considered unstable. How does this affect your work?

-We’re seeing a political trend where mining is used as the main “punching bag”. It’s problematic to attack the cash cow who’s feeding you. Politicians themselves create this image among the public where miners are these earth digging, rich, fat entities. In reality, mining businesses have to overcome many obstacles. Much exploration is needed. Risks have to be managed. Then come extraction plans and the actual mining activities. So, all these things require at least 5-10 years. Just as we’re drawing breath from these challenges, politicians jump out and deteriorate the situation. They started turning the public’s opinion against the mining sector. I believe it’s wrong. Just last year, we’ve hit record profits from our coal exports. Look how much the state budget increased. How can we sustain our other sectors without our only cash-generating sector? They certainly know that mining is “watering” in other industries. It’s wrong to turn the public against the only cash and salary generating industry. We have to let these businesses continue operating without suffocation as much as possible.

-Everyone keeps saying that foreign investment must be increased. But, how would investors feel if we’re bullying the only sector that they’re interested in? What’s your opinion on this matter?

-We simply cannot scare away our investors who played a major role in the current mining industry growth in our country. Unfortunately, almost everyone called the shots and went out. The vacuum is now being filled by Chinese investors. You can see them everywhere. It’s a thing worth thinking about. The only thing our politicians achieved was to cancel licenses. They are becoming experts at distracting the public’s attention and can drag the industry’s reputation down the dirt. They can throw in any new topic every time we wake up, successfully using the web and social media. We are being restrained. I only hope it’s just one societal phenomenon.

-It seems the mining sector doesn’t go out in the public that often. Are they somehow fearful about getting into trouble?

-Some of us in the industry think it’s best to stay silent. Every time someone gives an interview or goes public, they are relentlessly attacked and labeled as a “dirty crook”. Miners are only trying to do their job. They don’t even have the time more often. Our current mining sector can be defined by a single quote. A major global company’s executive was once asked “Can you tell us about your company’s success? How did you come this far?” to which he replied “I never thought about success. I only tried not going bankrupt. That’s how we’re here.” The same goes for our industry. We’re racking our brain on staying alive. Most of us aren’t gaining huge amounts of profit or creating large savings at banks. Today, no business owner has a savings account. I can tell you that for certain. Despite a handful of companies, the majority of businesses do not have actual opportunities to create savings. We’re merely getting by, living hand-to-mouth in this struggle. Some businesses are going strong thanks to their hard work. This is the reality. Generally, businessmen want only one thing. We are not asking for government support and whatnot. We just wish to be left alone to do our job properly. We need a stable environment.  

 



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