Coking coal in Kyrgyzstan - untapped mining resources

Materials World magazine
1 Aug 2013

Michael Forrest talks to Alex Molyneaux, CEO of Australian mining company Celsius Coal, about developing coking coal mines in the Kyrgyz Republic.

The growth rate in China’s economy might be slowing, but its level remains the envy of western countries. One criterion for measuring economic growth is the consumption of steel, because it is used in many sectors from construction to manufacturing. Chinese steel reached a low growth point in 2012 of 2.9%, with predictions of a 4.6% rise in 2013 based on record production in January and April. Despite domestic resources, China’s steel industry is dependent on imported iron ore, which has been stimulating investment by major producers in Australia and Brazil.

There is another component in steel production that also has a world trade, and that is coking coal. Its geological distribution does not follow consumption, with some 276Mt shipped around the world, according to data from the World Coal Association. China is the world’s largest producer with 504Mt in 2011, yet demand is such that the country relies on imports of 40Mt to feed its steel mills. Furthermore, its coking coal mines are located in north and central China, far away from the coastal economic zone and the investments taking place in the far western province of Xinjiang.

The Chinese Government has highlighted the province as a special economic zone to help it catch up with the richer, eastern side of the country. The 2.1 trillion Renminbi (RMB) policy-led investment programme in Xinjiang includes 8,200km of new rail, 170,000km of roads and 22 airports. In the steel sector, the objective is to increase production almost threefold by 2018 to a target of around 35Mt a year, including 10Mt of special-grade steels. Annual demand for coking coal in the region is projected to be 10Mt at Urumqi, 8Mt at Aksu (Yili) and 9Mt at Kashgar.

Meeting this demand is a challenge for any government when domestic resources are already insufficient and distance to market is an issue, as a result of concomitant freight charges and capacity constraints. Alex Molyneaux, CEO of Celsius Coal, explains, ‘We are developing coking coal resources in neighbouring Kyrgyzstan. These are closer to the developing Xinjiang steel mills than the coking coal mines in China.’ Celsius has licences in the south of the country including in the Uzgen Basin, where compliant resources have been established. While Uzgen is a well-explored basin, in the past it lacked the scale of markets that warranted the kind of economic investment that is now apparent. ‘Past exploration under the Soviet regime was comprehensive, but it lacked the market that Xinjiang now offers,’ adds Molyneaux.

Exploring Uzgen
Geological investigations of the Uzgen Basin began at the turn of the 20th Century, following earlier investigation of the southern coal deposits of the Fergana Basin. Building on this work, the first five-year plans of the Soviet regime recognised the area’s potential to become a major contributor to the Union’s industrial development and to this end, several geological missions were engaged in quantifying coal deposits in Kyrgyzstan. It was Professor NV Shabarov who in 1920–1930 made what is perhaps the most important discovery of hidden deposits in the Uzgen Basin.

The Uzgen Basin formed the target for extensive drilling and investigations, with 60 diamond core holes over a total length of 28,290m completed from 1947–1953, and an additional 15,000m of trenching and adits (horizontal shafts). The result was the identification of a 250-metre-thick coal-bearing sequence comprising 16 coal seams with a cumulative thickness of nearly 40m. However, the Soviet regime did not follow this up with economic-scale production.

Soviet exploration covered a number of sites of the Uzgen Basin, where the coal-bearing Tuyuk formation outcrops. Here, the coal beds are gently dipping, allowing significant resources to be measured near surface. Celsius’s licence covers the Tuyuk, Kargasha, Kokkia and Min Teke project areas, where depths are particularly shallow.

‘The Soviet legacy represented an opportunity to accelerate the development of the Uzgen Basin to meet the growing demand in the region,’ says Molyneaux. To this end, Celsius undertook a drilling programme to confirm the historical results and bring the resource estimation to compliant code standards. In 2012, the company core-drilled some 3,709 metres, 3,230 metres of this being at its premium coking coal Kargasha-Tuyuk prospect, the results from which have been compared with Soviet cores in the same area. This required compilation of drill data and trenching, twinning of existing holes and re-surveying the old drill collars. In addition, samples from the bores were sent to SGS laboratories to determine coal quality. Also in 2012, some 7,500t of near-surface coal was mined from Min Teke and sold into the domestic thermal coal market at Osh.

Results from the twinning were encouraging. At Kargasha, five drill holes out of seven were located within five to 50 metres of the Soviet holes and, after detailed logging, showed good correlation with coal thickness in individual seams of 1.63–9.28 metres. Coking coal was established on hole DD12TK001 and was also reported in the Soviet test work. Drill results also indicated continuation of the coal seams to the north in the Kargasha Valley and to the east towards Celsius’s Kokkia project. Good correlation placed confidence in historical data, which included extensive exploration in 180 adits that penetrated the coal seams from the Tuyuk and Kargasha valleys. Location and sample data are currently being fed into the company’s mine modelling software.

Calculating resources
In March 2013, Celsius established a maiden resource calculation to JORC standards. The work, completed by Australian technical consultancy G&S Resources, revealed an inferred resource of 255Mt, of which 230Mt are within the Kargasha licence area and the remainder at Kokkia. ‘This is a very large contiguous resource,’ says Molyneaux, adding that it will be a significant factor in negotiations with potential customers in China. In summer 2013, a drill programme will infill and extend the drill pattern at Kargasha and Kokkia and upgrade a portion of the resource to indicated. A resource estimate will also be compiled for Min Teke later in 2013.

According to the recent proposal by the Chinese National Energy Agency to ban low-grade imported coal, low grade is defined as greater than 1% sulphur, and with thermal values of less than 4,540Kcal/kg and ash in excess of 25%. A good proportion of Kargasha and Kokkia coal fulfils the criteria as coking coal, with low ash contents of 12.7% and 9.9% respectively and, critically, low sulphur in the range of 0.64–0.65%. Calorific value is high and ranges from 7,800– 8,500Kcal/kg – ‘This will easily meet the customers’ steel mill requirements,’ says Molyneaux.

The location, quality and size of the Uzgen Basin coal deposits will be beneficial to plans to increase steel production in the Xinjiang Province. ‘Historically, it was unfortunate that the proposed markets were far away in the west. Now they will be a short train journey to the east,’ says Molyneaux, referring to the feasibility study recently completed by the Kyrgyz and Chinese governments that will see a Trans-Asia railway on the Chinese network connecting the two countries at Kashgar. Set for completion in 2016, it will significantly improve the current 250km road link. This, along with the large inventory of Soviet geological and metallurgical testing, is enabling Celsius to advance its coal deposits at a much faster rate than it would from greenfield exploration.