Bernard Guarnera was the star act on day one of the inaugural Australian edition of the Mines & Money conference circuit, which landed in Sydney on Monday.

It was at M&M that Guarnera, chairman of Behre Dolbear, a global minerals consulting business, outlined the reasons why coal prices are likely to stay high for years, with Australian coal miners set to be the biggest winners from the ongoing coal boom.

In a supremely confident presentation, delivered while strutting the stage rather than hiding behind a lectern, Guarnera displayed the sort of masterful grasp of the coal market that comes from having accurate facts and figures at his fingertips.

As chairman of one of the world’s leading minerals consultancies, Guarnera, was able to call up numbers which should have investment bank analysts reprocessing their coal company share price tips.

Whether they will is another question, but for anybody interested in coal as an investment there were a lot of positives to be extracted from a 20-minute talk.

The six key facts extracted by The Hog from Guarnera’s talk were:

• The price of metallurgical coal is not reflected in the share price of met-coal miners, and while he did not come out and say directly that coal stocks were a screaming buy he came awfully close.
• China is driving the coal price today.
• India will be the driver tomorrow.
• Despite political pressure, coal consumption will grow at a faster rate than all other energy sources, combined.
• Australia (and Indonesia) share a significant transport cost advantage over other coal producing countries.
• Coal-mining cost inflation is a big issue, especially in South Africa.

Ticking off that six point list, this is what Guarnera had to say.

“If you look at the cost curve for metallurgical coal producers you see that at current prices they are very comfortable,” he said. “That’s not reflected in their stock prices. The cost curve is very, very, favourable for metallurgical coal.”

Guarnera added that Australian metallurgical coal producers occupied the lower end of the global cost curve, with a single US producer edging into the sub-$US80 per tonne range, and with Chinese domestic costs running at $US110/tonne.

“China has to build a power grid equivalent in gigawatts to the entire power grid of Britain each year for the next 15 years,” he said. While China is a major producer of coal in its own right it will have to expand its level of imports to meet that enormous increase in demand, which is being driven by the movement of 20 million people a year into cities.

“India may become the largest consumer of coal. India’s power plant expansion is dynamic. It is trying to move its middle class up as quickly as it can,” he said. The increase in Indian electricity production will accelerate rapidly over the next four years, matched by a major expansion of port capacity. “By 2020 India will be importing approximately 350 million tonnes of coal a year. India is projected to be the world’s largest coal importer.”

“If you look at global demand, coal will outpace other fuel sources. It is estimated to grow by 53% by 2030. That’s more than 1.5 times the combined growth of natural gas, nuclear, hydro and renewable. Asia will account for 90% of that demand, or approximately three billion tonnes,” he said.

“Indonesia and Australia are the key suppliers into Asia,” he said, pointing to a table on the delivered cost of coal. The key point on transport cost was that Indonesia could deliver to China at a cost of $US9-to-$US11 a tonne thanks to a bulk carrier sailing time of 8-10 days. Australia’s transport cost to China was $13-19 a tonne after a sailing time of 12-15 days. US west coast coal cost $18-21 a tonne to deliver after sailing times of 29-35 days.

“Australia had 18 per cent mine cost inflation in 2010. South Africa had 30 per cent inflation and the rest of the [coal exporting] countries didn’t do much better,” he said. Globally, the mine cost inflation figure was more than 15%, an excellent indicator of an industry under intense cost pressure to satisfy surging demand.

Few politicians will welcome Guarnera’s facts and figures to support his central hypothesis that coal is booming, not fading.

Coal miners, and coal investors, will be delighted with his view of the future.