The company said in a statement on Tuesday that it had completed a market study into the outlook for coking coal in Xinjiang, a province in northwest China that neighors the company’s mines in the Kyrgyz republic.
“The study confirms our understanding that a significant supply gap for premium coking coals exists in the region, leading to the potential for a far more positive market dynamic in Xinjiang than the current outlook for seaborne coking coals,” executive chairman Alex Molyneux said.
The four-month study analyzed more than 20 potential coal customers in the province’s three major cities. It involved direct visits to end users as well as general market and pricing analysis.
The study was conducted with the assistance of independent consultants Bryanston resources GmbH, a leading advisory and investment firm in commodities.
Celsius said the Bryanston study concluded that the Xinjiang coking coal market is poised for strong growth in demand over the next five years.
The consultants forecast steel production in the province to increase by 87.5% on last year by 2015, and for coking coal consumption to logically follow suit.
One of the cities, Kashgar, already has three new blast furnaces recently commissioned or under construction.
Resource constraints in the province have already resulted in a supply and demand gap, with total coking coal production in the province remaining stagnant for the last four years despite a 144% increase in consumption.
Bryanston said that only 2% of Xinjiang’s coal resources have coking properties and only 5% of this coal is considered equivalent to a premium hard coking coal.
The consultants also forecast the province’s price of premium hard coking coal to rise from $US145 per tonne to $US235 per tonne by 2017.
Celsius technical and operations director Alistair Muir said “the information we have gained is a valuable piece in our overall market analysis review and can be used to help optimize our mine planning studies.”
Celsius said it is now focusing on fostering relationships with potential customers in Xinjiang with the goal of establishing an off-take agreement.
“With a development stage coal resource in the Kyrgyz Republic, where project studies are progressing with a view to assessing road and rail production scenario’s into the neighboring Xinjiang market, Celsius is well positioned to capitalize on opportunities in the Xinjiang market,” Celsius said in the statement.
The company’s 80% owned Uzgen Basin project consists of three tenements holding a JORC compliant resource of 255 million tonnes.
It also holds 90% ownership of two tenements that together make the Alai Range project.
