New and Newsworthy on InfoMine

The costs of building and operating coal mines and plants increased steeply in 2007 to mid-2008 followed by a precipitous decrease in late 2008-2009 due to a combination of two factors: the coinciding rapid rise and fall over the same period in prices of the commodities, industrial chemicals, fuel and steel.

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Using CostMine’s exclusive Mining Cost Service coal mine and prep plant indexes, we examined a period between January 2007 and March 2009 to see how costs have been impacted by the recent economic downturn. As shown by the chart, most affected were the operating costs at surface coal mines and preparation plants. These operations experienced a 22-24 percent increase in costs peaking in July 2008, but both categories ended the period with a 9 percent increase overall.

Closer examination of nine major cost indexes (mine equipment, lumber, #2 diesel fuel, electric power, explosives, hourly earnings, industrial chemicals, steel products, and tires) for the same time period reveals the causes behind these increases and decreases in the indexes. Diesel fuel, industrial chemicals, and steel products showed the largest increases ranging from 46 to 239 percent, with the diesel fuel index peaking at plus 239 percent in July 2008. Other cost indexes showed only slight increases; however the lumber index decreased 25 percent. At the end of the 27-month period in March 2009, steel ended at minus 4 percent, diesel fuel at minus 27 percent and industrial chemicals increased 6 percent. By comparison, Appalachian coal futures increased from $45 per tonne to $158 in June 2008 and then fell to $55 per tonne in the same period.

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Our Mining Cost Service indexes for coal are available by request from CostMine. Please contact us at info@costmine.com to learn for about our 2009 Coal Cost Guide and our other cost estimating publications and tools.