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Wednesday, September 10, 2014

Coal mining CEOs are failing their shareholders

With thermal coal prices falling to five year lows and the price of natural gas soaring to unprecedented highs, coal-mining CEOs selling coal at or near the cost of production are failing their shareholders.

According to ACIL Allen Consulting coal in New South Wales is currently valued at around $2 per gigajoule. This low price cuts the dividends shareholders can expect to receive. It also reduces the valuation of coal reserves on the which the price of their shares depends.

Photo: Sam Walsh has faced investors at his first AGM as Rio's chief executive. (AAP)
Photo: Sam Walsh has faced investors at his first AGM as Rio's chief executive. (AAP)

It can only be a matter of time before shareholders' complain of inaction by coal mining directors to substantially increase the value of coal and coal reserves.

Shareholders have a right to know why coal mining directors are selling coal for just $2 per gigajoule instead of converting it to natural gas that can be sold at $9 per gigajoule.

Update February 4, 2017

Update, 15 February 2016

Chinese LNG demand falls for the first time on record

Update, 19 January 2015

South Korean steelmaker sets up synthetic natural gas subsidiary

Latest Oil and Gas News:  April 7, 2014
- POSCO, South Korea's top steelmaker, said April 3 it has set up a subsidiary to operate a synthetic natural gas business to trim its LNG consumption.

The subsidiary, POSCO Green Gas Technology, was established in POSCO's Gwangyang complex on the country's southern coast, where it is building a synthetic natural gas plant with a capacity of 500,000 metric tons per year.

The plant will produce SNG by processing low-cost coal. It will be completed by August and start up in January 2015.

Update, 15 February 2016

One year later the message sinks in...
"In the interest of our shareholders and customers AGL will not proceed with the Gloucester Gas Project and will cease production at the Camden Gas Project."

Published on Jan 27, 2015

This is the video shown to tour guests at the Great Plains Synfuels Plant.

Update, 20 January 2015

Leading businesses call for senate reform to restore order

Tony Boyd and Michael Smith :  January 6, 2015
Leaders of Australia's biggest businesses have blasted the nation's Senate as obstructive and demanded reform to restore order to government.

What leaders of Australia's biggest businesses have blasted is democracy working properly. Its review body is putting the brakes on outlandish and unreasonable decisions by the Abbott Government.

Any similar review on corporate decision-making is clearly lacking in Australia's leading businesses:
  • Natural gas exporting business executives are pressing ahead blindly with expensive coal seam gas fracking technology and 
  • coal mining executives insist on the correctness of their absurd decisions to export increasing volumes of coal at steadily falling prices.
  • Both decisions lack the common sense shown by South Korean business leaders who have done the sums and realised it is in their shareholders' interests to buy cheap coal from Australia and manufacture their own natural gas from it.

Gas and coal prices

Natural gas and coal prices used in 2013 emissions projections work

ACIL Allen Consulting, Electricity Sector Emissions:
Modelling of the Australian Electricity Generation Sector, September 2013