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Coal gas ruling leaves miner's future on hold

by: ANDREW FRASER
From: The Australian
July 09, 2013 12:00AM

Source: The Australian


A MINING company worth $24 million has put its future on hold after the Queensland government released a report yesterday preventing any future commercial mining developments using the controversial underground coal gasification method.

Carbon Energy, one of two companies conducting UCG trials in Queensland, requested a trading halt immediately after the government released the report.

The company is due to update the market either later today or before trading on the Australian Securities Exchange starts tomorrow morning.

UCG involves burning coal while it is still underground.

The previous Queensland government allowed three companies to set up trial projects using the method, which is used only in two other countries, one of which is Uzbekistan.

One of the three companies, Cougar Energy, has had its Queensland operations near Kingaroy suspended after a suspected leakage of gas from the plant.

The charge against the company was never proved and Cougar is now taking legal action against the Queensland government over the matter.

The Newman government commissioned an expert panel to look at the technology and its effects on the environment, headed by Queensland University mining expert Chris Moran, and yesterday it found that the trials being run by Carbon Energy and Linc Energy at Chinchilla in western Queensland could continue.

But the report also found that "neither company has yet demonstrated effective remediation of underground chambers" after they had been burned.

Consequently, the report recommended that "a planning and action process be established to demonstrate successful 'decommissioning' of the underground cavities used as part of the UCG process", and that "until decommissioning can be demonstrated, no commercial UCG facility should be commenced".

Effectively, the industry still needs to demonstrate whether it is possible to return coal seams that have been burned while still underground to normal, without affecting any other environmental elements underground.

Although Linc Energy is the larger company, Carbon uses more advanced technology involving methods developed by the CSIRO. Both Linc and Carbon have their plants in the area around Chinchilla on the western Darling Downs, but Linc in the past few years has diversified its operations greatly, so most of its activities are conducted offshore and underground coal gasification is only a small part of what it does.

Speaking from the US yesterday, Linc chief executive Peter Bond said while his company welcomed the decision to allow its trial to continue, it came about three years too late.

"Look, we think that we can get all the evidence they need and tick all those boxes in the next 12-18 months, but the fact is that it's not as big a project for us as it used to be," he told The Australian.

Mr Bond owns about 40 per cent of Linc and is showing a dramatic $800 million loss on his investment.

The company traded at $5.25 a share in 2008 but has fallen to about $1 trading now, with the company valued at about $540m.

Mr Bond said that even if environmental approval were granted the company might not proceed with a commercial UCG operation in western Queensland.

Earlier, he said in a statement that while the Queensland government's announcement put UCG "back on the agenda" in the state, "the business case now needs to stack up on a global basis following the significant progress the company has made over the past four years in places such as South Africa, Ukraine, Poland and Russia".

Linc's share price rose 7c yesterday to $1.045.