Intermittent Risks and Degree of Sensitiveness for Underground Captive Coal Block Already Allotted to Cement Sector

Underground Coal Block Mining and the Associated Sensitivity (Risks)

There are three parameters namely operating cost, rate of production and capital expenditure which would govern the output cost of the coal at large and hence are considered most prone to the risks. These factors are put to variance using the discount factor of 12% . For an underground mine such as Mandla North Coal Block we have considered two cases upon which the parameters would be varied as highlighted in Table 01 and Table 02 respectively.

table-01-risk-and-degree-of-sensitiveness-for-underground-captive-coal-block-operations-allotted-to-cement-sectorBefore witnessing the variations extent in the spider diagram representation it is important for us to understand the parameters considered for sensitivity. The parameters are elaborated as under:

Operating Cost : This is the cost which is derived out of the summation of direct and indirect costs as these are the two components which are used to produce the run of mine (RoM) coal and the other components like taxes and royalties and transportation cost are calculated over RoM coal component.

Production: This parameter highlights the rate of RoM coal production with respect to each individual year as per the life of mine and mineable reserves in MTs for the mine.

Capital Expenditure: This parameter would indicate the derived cost of bidding of each block which is determined for the base case scenario wherein the cost of bidding for the block is assumed at 20% of the final price per kg of coal and the end user plant is assumed within a distance of 125 km.

Apart from the above listed parameters the other LCOC driving parameters like transportation and tax components are not considered because these components apply only post production of the coal and not prior to that.

Case Study of Mandla North Coal Block

in case of an under ground operations the LCOC which comes out for the life of mine is INR. 3.96/kg. Basis the LCOC the mentioned three parameters are varied as per Case I to obtain the variance and hence the sensitivity. The parametric variation as per Case I is depicted in Table 9.10 for -40% to 30% variance.


The degree of variance as depicted in Table 02 in form a spider diagram as per the change in percentage is depicted in Exhibit 01 for the Mandla North UG Coal Block for Case I.




From Exhibit 01 it istable-03_eninconperspectives-com evident that the Mandla North Coal Block for UG operations is maximum sensitive to the operating cost and production with production leading marginally in case of sensitivity. Similarly for Case II wherein the variation in parameters is from -10% to 20% is indicated in sections as below.



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*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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