Coking coal mining investment: Boosting European Union's raw materials initiative

In 2014, the list of Critical Raw Materials for the European Union included for the first time an energy fossil resource: coking coal. Its presence was due to its high economic importance, being the second raw material in the list immediately after tungsten, although with a low supply risk as Australia and USA were the main exporters of coking coal to the European Union in recent years. However, on the 2017 list, coking coal is considered a borderline case. Although it narrowly misses the economic importance threshold, for the sake of caution, coking coal is kept on the list and thus included in the table. However, it will be phased out from the next list should it fail to meet the criteria in full. Successive depletion of coking coal deposits generates the need to develop new mines in order to maintain the production level of coal mining companies for the years to come. The process of building new mines is high capital-intensive, with long terms needed for the different investment steps. That is why providing a tool for the coal mining companies that will allow quick discrimination between feasible and unfeasible projects, in order to reduce time consuming analysis together with their costs, while shortening mine development cycles is a critical issue. Trying to boost the European Union's Raw Material Initiative by complementing its efforts from an economic perspective, this paper provides an exhaustive analysis of present day coking coal mining investment. To achieve this goal, it analyses in first place the trends and evolution of coking coal prices in order to contrast the forecasts used by the different projects. Secondly, it will study five ready-to-go coking coal projects around the world: the Lublin underground project in Poland; Kodiak underground project in the USA; Amaam opencast project in Russia; Makhado opencast project in South Africa; and Crown Mountain opencast project in Canada. Conclusions of this research clearly state that it is possible to establish a relationship between capital expense and clean coal production in opencast projects and that the predicted yield and the transport costs are critical parameters in order to assess the operating costs of a coking coal mining investment project. Finally, the financial outcomes claimed by the projects are compromised due to the lack of adequate price forecasting and to the use of fictitious discount rates for calculating the Net Present Value.