Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Xinhua News reports the mining operations of China National Coal in Shaanxi Province, the country’s coal heartland, were ordered suspended after eight miners were confirmed dead in a colliery flooding on Saturday. Officials said the flooding exposed “serious problems” in the implementation of safety measures and state-owned ChinaCoal would only resume operations after an overhaul. ChinaCoal is the country’s second largest coal producer – output grew 23% to 154 million tonnes last year.
Due to a paucity of gas and oil China relies on coal for 70% of its energy needs and government analysts expect annual coal demand to reach at least 4 billion metric tons by 2020 even after taking into account unprecedented levels of investment in nuclear, wind, solar, and hydro. Official statistics show the death rate per million metric tons of coal produced stood at 2.63 in 2010.
State news agency Xinhua reports the decision to suspend operations came at a provincial work safety meeting held a day after the accident. Shaanxi Vice Governor Li Xiaopeng said the flooding exposed “serious problems” in the implementation of safety measures and vowed a thorough investigation into the accident.
Rescuers Saturday recovered the bodies of eight workers who had been trapped underground in a flooded coal mine since Friday afternoon in Shanyin County. Three others remain missing. The mine is operated by Jinhaiyang Yuanbaowan Coal Company – a ChinaCoal subsidiary – and produces 900,000 tonnes of coal a year. ChinaCoal grew output 22.9% to 154 million metric tonnes last year. The company’s profit in 2010 reached 12.1 billion yuan (US$1.94 billion).
Reuters reported in January that China produces around a third of world coal supplies, but is responsible for about 80% of global mining fatalities. Illegal mining operations account for almost 70% of the country’s fatalities. China has been cracking down on them, while lifting safety standards at licensed mines. Official statistics show the death rate per million metric tons of coal produced stood at 2.631 last year, a considerable improvement on 2002, when it reached a peak of 6.995.
