Court Rules for Drummond in Colombian Cases

In two rulings during early November, a federal district court in Birmingham, Alabama, dismissed the latest efforts by Colombian plaintiffs, backed by the United Steelworkers and Colombian labor unions, to hold Drummond Co., Drummond Ltd. and certain Drummond employees liable for paramilitary violence in Colombia.

Three related lawsuits have been filed against the company in recent years. An initial lawsuit, brought by heirs of three murdered union leaders and other workers who claimed to have been threatened by paramilitaries, was tried to a jury in July 2007 and resulted in a complete vindication of the defendants. That judgment was affirmed by the U.S. Court of Appeals in December 2008.

A few months later, a number of plaintiffs backed by the United Steelworkers and Colombian labor unions filed two new lawsuits making similar allegations. The first, Baloco v. Drummond Company Inc., was brought by heirs of the deceased union leaders who claimed they were not bound by the judgment in the earlier trial. The Court in its recent ruling found this argument to be “disingenuous,” and dismissed the lawsuit in its entirety on the grounds that plaintiffs either were bound by the prior judgment or lacked standing to bring suit for the injuries they claimed.

The third lawsuit, Doe v. Drummond, was brought by relatives of victims of paramilitary violence who alleged that the company enlisted paramilitaries to pacify the area of Colombia where Drummond mines and transports coal. The company moved to dismiss the lawsuit on several grounds, including the lack of a basis to find that the defendants conspired with or aided and abetted paramilitaries in acts of violence, and the lack of a basis to find that these acts were “war crimes” as claimed by the plaintiffs. The court agreed, finding the motion to dismiss “has clear merit.” The court stopped short of dismissing the case in its entirety because plaintiffs had requested leave to amend their complaint, and the court decided to allow them that opportunity before a final ruling. However, the court dismissed plaintiffs’ wrongful death claims based on Colombian law.

Cloud Peak IPO Raises $741 million

Rio Tinto reported that it will receive at least $741 million in connection with Cloud Peak Energy Inc.’s initial public offering (IPO) and related transactions. This includes proceeds of at least $434 million from the sale of part of Rio Tinto’s interest in Cloud Peak Energy Resources LLC (CPER) in connection with the IPO of common stock and a cash distribution by CPER of $307 million from the proceeds of its debt offering of $600 million. Rio Tinto expects to retain an interest in CPER of up to 48%.

“The successful pricing of Cloud Peak Energy’s debt offering and its fully subscribed IPO has proved that the IPO route was the best option for divesting these assets,” said Guy Elliott, CFO, Rio Tinto. “Including the sale of Jacobs Ranch, we will realize proceeds of at least $1.5 billion before tax for assets that were previously part of Rio Tinto Energy America, while retaining a substantial interest in CPER. We continue to make strong progress with our divestment program, realizing considerable value for shareholders.”

Cloud Peak Energy is headquartered in Wyoming and is the third largest coal producer in the U.S. The company owns and operates three surface coal mines in the Powder River Basin, the Antelope and Cordero Rojo mines, located in Wyoming, and the Spring Creek mine, located near Decker, Montana.

Fatalities in Chinese Mine Explosion Climb to 108

The Xinhua News Agency reported that 108 miners perished as a result of a gas explosion at the state-run Xinxing mine in Hegang, China, which lies near the Russian border. Chinese authorities blamed crowded conditions, insufficient ventilation and slow rescue efforts for the high death toll from the explosion, which hit before dawn on November 21, 2009. More than 500 miners were underground when evacuation began. Year-to-date, the Xinxing mine, produced more than 1 million metric tons (mt) of coal. It is owned by the Heilongjiang Longmei Mining Holding Group, making it larger than most operations where colliery accidents occur. In the first half of this year, 1,175 people died in officially recorded coal mine accidents across China, a fall of 18.4% compared to the same time last year, according to the State Administration of Coal Mine Safety. An explosion in a mine in central Henan province in September left 79 workers dead or missing and likely dead. In 2005, a coal mine explosion in northeast Liaoning province killed 214.

NMA Predicts Modest Decline in Total U.S. Production

U.S. coal production this year is likely to reach 1.078 billion short tons by year’s end, a 7.9% drop from 2008, according to a recently completed U.S.-based National Mining Association (NMA). In 2010, U.S. mines are forecast to produce 1.047 billion tons, a 2.9% annual reduction despite a 5.6% increase in consumption. The reason: higher consumption is offset by record coal stockpiles at the nation’s power plants. “It will take a year or possibly more for stockpiles to fall back to historic averages,” said NMA economist Paul Georgia. Nevertheless, coal’s share of the electricity generation market in 2010 is expected to expand to 47.6%, an increase over the 45% share likely in 2009. Exports are forecast to rise next year to 62 million tons, up from 58 million tons in 2009.

GE Announces Intent to Enter Joint Venture with Shenhua

Marking a significant step toward the deployment of “cleaner coal” technology in China, GE and Shenhua Group Corp. announced that they have agreed to a framework for an industrial coal gasification joint venture which would combine GE’s expertise in gasification and cleaner power generation technologies with Shenhua’s expertise in building and operating coal gasification and coal-fired power generation facilities, to advance “cleaner coal” technology solutions in China.

The memorandum of understanding, which was signed as part of the U.S.-China clean energy cooperation signing ceremony in Beijing, would result in a joint venture company, in which GE and Shenhua would execute a strategic vision for expanding to improve cost and performance of commercial scale gasification and integrated gasification combined cycle (IGCC) solutions. This includes industrial coal gasification applications in China as well as jointly pursuing the deployment of commercial scale IGCC plants with carbon capture.

Shenhua is one of the world’s largest coal and energy companies, with coal reserves, coal-fired power generation, and a national role in the development of new coal-related technologies such as coal-to-liquids and carbon sequestration. Shenhua has significant experience in the development of coal-to-chemicals facilities and in the operation of coal gasification systems over a range of technology configurations.

Vena Resources Completes EIS for Oyon Project

Vena Resources Inc. recently completed an environmental impact study (EIS) for the coal property in Oyon it purchased earlier this year and is expecting that by year-end it will have received all necessary government permits to start exploring and developing a production unit to serve the needs of the local cement manufacturers.

Once the permits are obtained, the company plans to set up a mining operation with an initial production capacity of 350 metric tons (mt) per day, with the aim of supplying coal to a nearby cement plant which had previously been purchasing coal from this mine and has already expressed interest in reinitiating the purchases. Given the scale of the operation, a feasibility study has not been completed and there is no certainty the proposed operation will be economically viable.

Vena, through its subsidiary in Peru, Sudamericana de Carbon S.A. (SDC), has reviewed several producing anthracite coal mines and is evaluating several potential sites for its coal classification facility in northern Peru. SDC expects to acquire two or three of these properties with a view to increasing production levels to service the needs of the local and international markets.

The Alexia and Micaela seams outcrop in the region for more than 670 m with average thicknesses of 4 m and 2 m, respectively. The results obtained from chemical analyses of channel samples show ash content ranging from 6.0% to 31.5%; moderate to low volatile content ranging between 8.8% and 16.0%; fixed carbon ranging between 58.3% and 82.5%; and sulfur content below 1%.

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