Peabody pursuing mine, coal plant in China
Three years after Peabody Energy Corp. opened an office in Beijing, the company announced plans to pursue a large-scale mine in coal-rich Inner Mongolia and a plant that would convert the fuel normally used in power plants and steel mills into more valuable methanol and chemicals.
The project, estimated to cost as much as $2.5 billion, would be developed by a group that includes Peabody, the world’s largest private-sector coal company, Inner Mongolia Jitong Railway Group Ltd. and the Chinese government. The parties signed an agreement Wednesday morning in Peabody’s downtown St. Louis offices.
"America and China both face some of the same challenges," Peabody President Rick Navarre said. "We both have growing energy needs, low supplies of oil and natural gas and we have a desire to be secure in our energy supplies and provide our people with a better standard of living."
The project is still years away, but it represents a first for an American coal producer in China and another sign of Peabody’s ambition to expand in developing countries that are relying on coal to help fuel their economies. The company also is studying possible opportunities in Mozambique.
A few years ago, Peabody derived only a tiny fraction of revenue and net income from overseas. Today, mostly because of acquisitions in Australia, international operations represent half of sales and profit, and fast-growing China is a cornerstone in Peabody future expansion plans, Navarre said.
The mine in Inner Mongolia would tap a 3 billion-ton block of coal reserves in one of the region’s three major coal basins and produce 10 million to 20 million tons a year. Peabody would lease coal reserves from the Chinese government and operate the mine near the town of Xilinhaote, about 250 miles north of Beijing.
The coal-conversion plant would be able to produce 1.2 million tons of methanol, an alcohol frequently used to make chemicals used in plastics and paint. Methanol also can be used to make gasoline. Peabody and the other parties also are in discussions with major chemical manufacturers as possible equity partners in the mine and plant.
The structure of the agreement with Jitong Railway and timetable for development haven’t been finalized http://paydayintime.com. Peabody would have "a significant stake in ownership," Navarre said. The next steps include a feasibility study.
Peabody opened an office in downtown Beijing in summer 2005. Since then, the company has worked to develop relationships with business and government leaders in the country. It has begun trading operations and importing coal into China from Australia, Russia and Indonesia.
Peabody’s interest in China is clear. As recently as 2005, the country was among the world’s biggest exporters, shipping 80 million tons of coal a year, mostly to Japan, Korea and other Pacific Rim countries. Last year, however, China became a net importer as demand for fuel to run power plants and steel mills outstripped the ability of domestic mines to produce it.
Increasingly, China also is depending on its coal reserves to provide methanol used to make chemicals and transportation fuel to run automobiles. But the country’s reliance on coal also is leading to concern about increasing emissions of carbon dioxide, a heat-trapping gas produced by coal-burning power plants and linked to global warming, and other pollutants that contribute to respiratory disease and other ailments.
Historically, most of the coal mined in China has come from underground mines. Today, the there is trend toward larger, more efficient and safer surface mining projects, Tayeb Tahir, president of Peabody China, said in an interview.
It’s a reason why China is looking to Inner Mongolia, an autonomous region in the north that’s characterized by coal seams up to 500 feet thick, wide open vistas and grasslands. The region is not unlike the Powder River Basin of northeast Wyoming, the most prolific U.S. coal-producing region. There, Peabody operates the world’s largest coal mine, North Antellope Rochelle, which produced about 91 million tons of coal last year.
Peabody took a delegation from Inner Mongolia this week to see its mining operations and meet with Wyoming Gov. Dave Freudenthal.
jtomich@post-dispatch.com | 314-340-8320
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