5 Coal India Limited represented to investors in its August 2010 Red Herring

5 coal india limited represented to investors in its

This preview shows page 6 - 8 out of 32 pages.

and approximately 85% of India’s coal is non-coking coal. 5 Coal India Limited represented to investors in its August 2010 Red Herring that it had 21.7 billion tons of extractable coal reserves. 6 New estimates for 2011, released in 2012 by its geological exploration arm (Central Mine Planning and Design Institute Limited) show 18.2 billion tons, a 16% reduction in CIL’s economically extractable coal reserves 7 as compared to extractable reserve figures identified in its 2010 Red Herring Prospectus. Since the new assessment was conducted, CIL has produced 1.02 billion tonnes, further reducing its extractable reserve. One year later, as of August 1, 2013, the Coal India website does not reflect this 16% reduction in extractable reserves, nor have the stock exchanges been informed of this material change. The rest of CIL’s coal (62 billion tonnes) meets the United Nations Framework Classification for Fossil Fuel and Mineral Resources (UNFC) definition of ‘resource’. A resource is currently not extractable, either for economic, technical or other reasons. 16000 17000 18000 19000 20000 21000 22000 23000 2010 estimate (ISP) 2011 estimate (UNFC) Million Tonnes Figure 1: Coal India’s extractable reserves - Comparison between 2010 estimate under ISP and 2011 estimate under UNFC 4 Coal India: Running on empty?
Image of page 6
0 Reserve (extractable) Resource Total 20000 40000 60000 80000 100000 UNFC categories Figure 2: Coal India’s Reserves under UNFC system National and International Reserve Classification Systems CIL’s 2010 Red Herring estimate of 21.7 billion tonnes was made pursuant to the India Standard Procedure system (ISP), India’s mineral classification system through 2001. 8 Extractable coal reserves under the ISP are those reserves remaining after deduction of losses due to: i) geological features, ii) coal under rivers, roads, railways etc, iii) barriers and iv) mining losses. 9 Per the Comptroller and Auditor General’s 2012 performance report on coal augmentation, 10 the ISP system addresses only volume and tonnage and does not address structural delineation and what is economically and technically extractable. CIL has considered mining studies on 30.3 billion tonnes and estimated that its extractable coal reserves under the ISP system are 21.7 billion tonnes. 11 According to SRK Consulting, Coal India’s coal consultant for the purposes of the 2010 Red Herring, 12 “CIL’s definition of Extractable Reserves is largely in line with that of Reserves as defined internationally.” 13 SRK concludes that CIL’s application of India’s standards results in reserve classifications, including the Extractable Reserve classification that is “analogous to the feasibility studies that are typically produced for international projects and which form the basis of requirements for debt and equity finance.” 14 Coal India relies upon the SRK study in the 2010 Red Herring to make this summary representation to investors related to its coal reserves: “our definition of “Extractable Reserves” is largely in line with that of “Reserves” as defined under the JORC code and CRIRSCO Code.” 15 Like most other major mineral producing countries in the world, India’s markets and decision makers have historically relied on nation-based mineral classifications like the ISP. The reserve
Image of page 7
Image of page 8

You've reached the end of your free preview.

Want to read all 32 pages?

  • Fall '10
  • BOB
  • Coal, Coal India Limited, CIL’s extractable coal reserves

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes