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GLG News by this Author

THE BOWL THEORY OF MINERAL ECONOMICS

June 23, 2009

Analysis of:US Has Almost 100-Year Supply of Natural Gas | www.rigzone.com

This article does not state the price point for this conclusion. Technology such as directional drilling and the ability to access resources to 16-20,000 feet below the surface have added dramatically to the resource base. However, unless a price point is specified there can be no certainty whether this resource can be accessed and brought to market as a reserve.

THE ELEPHANT IN THE ROOM

June 4, 2009

Analysis of:Nuclear, Low-Carbon Platform Solutions To Climate Change - G8 | online.wsj.com

The subject that few are talking about is the aging of the nuclear power fleet world wide. In the US the 104 plants averge age is over 35 years and is in the process of repermitting what may be the final phase of their economic life. The French Atomic Energy Agency says that this is a world wide problem. The US will need to replace its fleet over the next 30 years and will need another 104 units to meet forecasted demand. World wide this amounts to a 900 million ton coal equivalent loss of generation capacity.

OVER SUPPLY IS MISSED

April 28, 2009

Analysis of:Coal Prices Crumble | www.forbes.com

At the end of 2007 the US was over produced, especially in Central Appalachia, by approximately 50 mm tons per annum. This production was supported by the IRC Section 29 (c) tax credits that expired on 31 December 2007. Instead of shutting in this non-competitive production the export market doubled in 2008 and in effect took up an additional 50 mm tons in 2008. This overhang still exists. Additionally, the Illinois Basin has permitted and is permitting an additional 100 mm tons of production. This amounts to 10 per cent of the thermal coal market. Even if only a fraction of this production comes to the market, the oversupply will continue to put pressure on prices and declines in 2009 pricing should not be a surpise.

The US historically shipped approximately 4mm tons per month on the world seaborne market. Recent shipments have exceeded 8mm tons per month. That is unsustainable.

December 9, 2008

Analysis of:U.S. Coal Export Boom Over for Now | www.guardian.co.uk

THE US HAS BEEN A SWING SUPPLIER SINCE THE JAPANESE ENCOURAGED THE DEVELOPMENT OF MINES, RAILS AND PORTS IN THE EARLY TO MID-SEVENTIES. LARGE INFUSIONS OF CAPITAL FROM THE OIL COMPANIES CONTRIBUTED TO A SIGNIFICANT OVERPRODUCTION. AS THE WORLD DEMAND FOR STEEL HEATED UP THIS DECADE, AUSTRALIA AND SOUTH AFRICA WERE UNABLE TO MEET THE GROWTH IN DEMAND, PRIMARILY FROM CHINA AND INDIA. SINCE AUSTRALIA DELIVERS INTO ASIA AT LOWER FREIGHT RATES, IT CONCENTRATED ON ASIA. US DELIVERIES INCREASED TO EUROPE TO MAKE UP FOR THE DEFICIT. AS THE EUROPEAN MARKET SLOWS US COALS WILL BE FORCED BACK INTO THE US THERMAL MARKET. AS THE US DOLLAR STRENGTHENS VS. THE AUSTRALIAN DOLLAR MORE MARKETS WILL SWITCH TO AUSTRALIAN COALS, THUS FORCING MORE COALS BACK INTO THE US THERMAL MARKET. SWITCHING AS MUCH AS 4MM TONS PER MONTH OF COALS BACK INTO THE US THERMAL MARKET WILL OVERSUPPLY THE MARKET AND DRIVE PRICES DOWN THE AVERAGE COST OF PRODUCTION.  THIS WILL HAVE A DELETERIOUS EFFECT ON MARGINS.

Metallurgical coal valuations tied to steel production snap back. If as Arcelor Mittal believes that a second half 09 snap back is likely, high quality US metallurgical coals will continue to be a supplier to the European steel segment. The caveat is the strengthening of the US dollar.

December 9, 2008

Analysis of:Sector Snap: Coal Sector Falls on Weak Demand | money.cnn.com

Both Alpha Natural Resources and Massey Energy have significant exposure to the European steel market. If the market returns in the second half of 09 these two producers will take the lion's share of exports. Should the US dollar continue to strengthen they face competition from Australia.

COAL IS NOT THE CULPRIT.

August 6, 2008

Analysis of:Coal's future is safe - but what about the climate? | www.reuters.com

Most of the temperature rise since the last ice age occurred before the Industrial Revolution according to studies of Icelandic coring. Even though countries such as India and China are not signatory to any global warming treaty they are pursuing a course of cleaning up their pollutants. India for instance has passed legislation that requires cleaning of raw coal that is to be transported over the rail system for 1000km. At any one time China cleans less than 10% of the coals used for the production of electricity. A rule such as the one promulgated in India would substantially improve China's pollution. Should China consider this they would also have the advantage of reducing the severe constraints of their less than modern rail system.  Finally, long cycle cooling and the end of the eleven year storm cycle of the sun contribute much more to the temperatures experienced on earth than any manmade cause.

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