The Coal Mining Industry And Investing In It

December 26th, 2012 admin

The History Of Coal Usage

Coal was initially used as a domestic fuel, until the industrial revolution, when coal became an integral part of manufacturing for creating electricity, transportation, heating and molding purposes. The large scale mining aspect of coal was introduced around the 18th century, and Britain was the first nation to successfully use advanced coal mining techniques, which involved underground excavation and mining.

Initially coal was scraped off the surface by different processes like drift and shaft mining. This has been done for centuries, and since the demand was quite low, these mining processes were more than enough to accommodate the demand in the market.

However, when the practical uses of using coal as fuel sparked industrial revolution, the demand for coal rose abruptly, leading to severe shortage of the coal output, gradually paving the way for new ways to extract coal from under the ground.

Coal became a popular fuel for all purposes, even to this day, due to their abundance and their ability to produce more energy per mass than other conventional solid fuels like wood. This was important as far as transportation, creating electricity and manufacturing processes are concerned, which allowed industries to use up less space and increase productivity. The usage of coal started to dwindle once alternate energies such as oil and gas began to be used in almost all processes, however, coal is still a primary fuel source for manufacturing processes to this day.

The Process Of Coal Mining

Extracting coal is a difficult and complex process. Coal is a natural resource, a fossil fuel that is a result of millions of years of decay of plants and living organisms under the ground. Some can be found on the surface, while other coal deposits are found deep underground.

Coal mining or extraction comes broadly in two different processes, surface mining, and deep excavation. The method of excavation depends on a number of different factors, such as the depth of the coal deposit below the ground, geological factors such as soil composition, topography, climate, available local resources, etc.

Surface mining is used to scrape off coal that is available on the surface, or just a few feet underground. This can even include mountains of coal deposit, which is extracted by using explosives and blowing up the mountains, later collecting the fragmented coal and process them.

Deep underground mining makes use of underground tunnels, which is built, or dug through, to reach the center of the coal deposit, from where the coal is dug out and brought to the surface by coal workers. This is perhaps the most dangerous excavation procedure, where the lives of all the miners are constantly at a risk.

Investing In Coal

Investing in coal is a safe bet. There are still large reserves of coal deposits around the world, and due to the popularity, coal will be continued to be used as fuel for manufacturing process. Every piece of investment you make in any sort of industry or a manufacturing process ultimately depends on the amount of output the industry can deliver, which is dependent on the usage of any form of fuel, and in most cases, coal.

One might argue that coal usage leads to pollution and lower standards of hygiene for coal workers. This was arguably true in former years; however, newer coal mining companies are taking steps to assure that the environmental aspects of coal mining and usage are kept minimized, all the while providing better working environment and benefits package for their workers. If you can find a mining company that promises all these, and the one that also works within the law, you can be assured safety for your investments in coal.

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Mining and Nigeria’s 2020 Goals

December 25th, 2012 admin

Revitalising the mining sector is part of extended government efforts to rectify massive imbalances in the economy, and the solid mineral sector is seen as crucial to overcoming the historic dependence on oil and gas. Mining activities suffered heavily because of official neglect during more than three decades of political turmoil and civil war that shattered the Nigerian economy. The richly endowed nation boasts vast reserves of iron ore and coal, besides significant gold, uranium, gypsum, barite and tantalum deposits. Over many years, a sharp decline in the production of coal, tin and columbite weakened the mining sector and dragged its GDP contribution down to 0.5%. Together with a determined fall in global oil prices and decline in crude production due to surging violence in the Niger Delta region, it brought home catastrophe to Nigeria’s foreign exchange reserves.

Focus on the non-oil sector returned only after a peaceful transition to civilian power at the end of the last century. The democratic government under former president O Obsanjo successfully negotiated a $120 million World Bank assistance package in 2004 to revive the solid minerals sector. The six-year long project that concludes in 2010 has been the most serious attempt by far at sustainable management of Nigeria’s mineral resources. To Abuja’s credit, the renewed focus on solid minerals was not motivated by immediate compulsions alone.

Soon after its election to office, the Obsanjo dispensation adopted a radical blueprint intended to establish Nigeria as a significant economic and political entity in the African continent as well as internationally. The specific goal of the Vision 2020 document was to confirm the country’s position among the twenty largest economies in the world by that year. The document identifies 29 focus areas – from agriculture and food security to judicial and political reform – as crucial for sustained and rapid growth. One of the unspoken objectives of this comprehensive policy was poverty eradication, which remains a fundamental challenge to inclusive growth in Nigeria.

Regressive policies pursued by successive civilian and military governments in the last century devastated most of the country’s traditional systems of livelihood. The hegemony of oil prevented economic diversification and deepened social divides by concentrating employment and income to select urban populations. Administrative failure was surpassed by massive corruption and together they sealed the trickle-down effects of Abuja’s significant income in petrodollars. The inadequacy and failure of welfare schemes shrouded much of rural Nigeria in progressively degrading levels of food shortage, unemployment and poverty. The state of Nigerian affairs is accurately gauged from a World Bank estimate that says 80% of the country’s oil profits benefit just 1% of the population. Consequently, more than half of the 148 million Nigerians continue to live in abject poverty. It also explains why per capita GDP at $1,418 is among the lowest in the world despite the country registering substantial economic growth over the last decade.

The realisation of Nigeria’s 2020 goals is fundamentally dependent on unclenching the overwhelming grip of poverty on its people. Rapid enterprise development is crucial for the renewal of both rural and urban economies. Considering its ambitious goals and the timeframe involved, a revolution in entrepreneurial growth is the only viable answer to Abuja’s quest for economic glory. This is where mining, along with other important non-oil sectors with potential, come into the spotlight.

In the years since 1999, Abuja has rolled out significant incentives for existing and prospective investors in the mining sector. Fiscal adjustments include cutting down on capital gains and companies profits taxes, increase in capital allowances, along with a three year tax holiday for new mining ventures. Additional tax exemptions were introduced to bolster exports and encourage further exploration and prospecting in solid minerals. The country saw the establishment of its first diamond cutting and polishing centre in 2002. To reinforce the importance of mining as a poverty alleviation strategy, the Sustainable Management of Mineral Resources Project was initiated with World Bank assistance in 2004 to provide long-term, low interest loans to the sector. Through extensive disbursement of easy credit repayable over 35-year periods, Nigeria hopes to cut down on poverty in mining communities and achieve a diversified economy.

The present government under President UM Yar’Adua is actively pursuing a micro-grants programme for the mining sector, and has succeeded partly at least in roping in commercial banks to provide seed funds and loans to small and medium-scale mining ventures. While the impact of such measures are still being tabulated, the SMD announced earlier this year that it hoped to achieve a significant revenue stream from mining operations within the next 5 years. The Mines and Steel Development Minister went further to say the sector would start contributing 20% of overall GDP within a span of ten years.

Tin mining is one sector that has massive potential for expansion, in such a scheme of things. Nigeria has known reserves of the mineral in excess of 31,000 tonnes, most of it concentrated in the central Jos plateau, and was a major exporter before the oil boom of the ’70s. However, annual production fell drastically from 11,000 tonnes in 1975 to just about 2,000 tonnes currently. Only a very small portion of the Jos deposits have so far been tapped, some estimates putting the total area of mining operation at just 4% of full potential. Official neglect of the sector has resulted in elaborate smuggling operations that run on unregulated mines. Considering the fact that Nigerian tin is regarded as one of the top qualities in the world, there is scope for massive development of the sector. Stricter regulation and incentives for entrepreneurial ventures in tin mining can significantly boost export revenue, besides generating employment and sustaining extensive ancillary industries. Reviving the sector is critical to Nigeria’s rapid-development goals.

There are four essential challenges to Nigeria’s mining aspirations, in general:

I. Increasing productivity in artisan and small-scale mining operations through socially and environmentally sound processes; diversifying the economy by empowering and consolidating scattered mining communities.
II. Developing public mining institutions that work efficiently in a transparent and modernised atmosphere, restructured to handle administrative loopholes and promote institutional capacity building through international best practices.
III. Facilitating better private and public sector cooperation to strengthen the mining infrastructure; developing geological mapping and mineral assessment databases and information systems specifically designed to promote investment and exports.
IV. Devising effective monitoring and assessment systems that can track multiple programmes simultaneously and spell out necessary interventions, policy redirections and corrective measures in a comprehensive and timely manner.

More than 80% of Nigeria’s tin deposits today occur at a depth of 36 metres below the ground, twice as deep as twenty years ago. Although the mineral accounts for only a minor fraction of the country’s foreign exchange, it appropriately indicates the gravity of obstacles facing the country’s mining sector in general. In the years to come, Nigeria’s high hopes for a more impressive standing in world affairs are certain be determined in part at least by how deep it manages to dig!

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Car Insurance and Mining Companies Resource Super Profit Tax

December 24th, 2012 admin

So what does car insurance have to do with mining companies? Apart from the fact that these companies have fleets of cars and some rather large fleets of vehicles that cost millions of dollars and need to be insured. Have you ever seen one of the big “Tonker trucks” for want of a better name, hauling ore from the mine site to a processing plant or rail head?

The wheels of these massive vehicles alone are head and shoulders above the height of a tall man. Just insuring the tyres alone against malicious damage would cost a small fortune!

Australia has just released a report to overhaul our tax system. In all, there were 138 recommendations on what we need to do to upgrade our taxation system. There are winners and losers and one of the big ‘losers’ are the mining companies who have previously enjoyed some serious tax perks and indeed, start up exploration mining companies still will, and this is only fair that they do so. No one begrudges them this and we seriously want to encourage entrepreneurship in the mining industries. After all, Australia is world renowned for our innovative capabilities.

The ‘big losers’ are those well established multi-national resource companies who are largely owned by shareholders of other nations profiting from our resources. There are obviously a lot of “Mum and Dad” Australian investors in these mining companies too and indeed many of our big superannuation financial institutions own substantial shareholdings which is wonderful.

Once upon a time, not so long ago, there was the big Australian Company called BHP which started life as an exploration venture back in 1885 and struck it rich. Over time and good management, it developed into a huge mining company in Broken Hill; which is in the outback of New South Wales. A few years ago they merged with Billerton Mining which originally was a Netherlands based mining company and who now owns 40% of BHP Billerton. Needless to say, BHP Billerton is not impressed with the new resource rent tax.

The reasoning behind imposing a rent resource tax on multinational mining companies I believe, as do many other Australians, to be a fair thing. This new tax income is designed to fund the superannuation of retiring Australians for years to come so they can continue to enjoy a reasonable standard of living. The natural resources of our country belong to all Australians, not just the mining companies, their shareholders or their over-paid CEO’s.

But all these over-paid CEO’s, Company shareholders and indeed the mining companies themselves all need to insure their cars and vehicles. No matter how the new rent resource tax will impact their shareholder profits, they still need good vehicle insurance policies to minimise losses.

If this rent resource tax on these oligarchy mining companies is not implemented, few Australians in their retirement will be able to afford cars let alone insurance on them.

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