ASSESSMENT OF THE COAL RESOURCES OF THE KYRGYZ REPUBLIC:
COAL CHARACTER AND DISTRIBUTION, GEOLOGY, MINING, AND IMPORTANCE TO THE NATION'S FUTURE
USGS Open File Report 97-137A (English)
E. PAST AND PRESENT PRODUCTION, PRICING LEVEL
1. Past and present production
In 1979, about 4.5 million tonnes of coal were produced in Kyrgyzstan. From 1980 to 1990 the production ranged between 3.5 and 4.0 million tonnes. Since then production has decreased drastically and the production for 1995 was about 455 thousand tonnes. Coal production from 1961 to 1994 is shown on figure 23. The sixty-five year production history of the Kok-Yangak mining area in the East Fergana Coal Region, shown in figure 24, exemplifies the production history of much of the coal industry of Kyrgyzstan.
Many reasons have been offered to explain the precipitous decline in production, and it seems clear that a combination of many factors is responsible. Cited reasons are depletion of reserves, antiquated, worn-out machinery, fuel shortages, reluctance of miners to work unpaid, loss of experienced personnel, loss of markets by extra-national decisions, poor transportation infrastructure, and problems in transition from a centrally-planned union economy to a market-based national economy.
Table 15 shows the actual production, imports and exports of coal for Kyrgyzstan in the years 1990-1992, and the same data as planned for the period 1993-2010. Obviously, the plan is badly askew with present reality of less than one million tonnes of coal produced in 1994. No data was available regarding imports and exports in 1994.
In the first four months of 1996 34,400 tonnes of coal were exported to Uzbekistan, 1,800 tonnes to Tadjikistan, and 2,800 tonnes to Kazakstan. Of this 39,000 tonnes all but 600 tonnes were fine coal that presumably was used in district heating plants. Because currencies are not convertible, the coal was bartered largely for foodstuffs which then are distributed to the coal mine workers in lieu of wages.
2. Present and potential utilization
The bulk of the coal resources of Kyrgyzstan are suited for use as a source of thermal energy. A small part of the resources in the Eastern Fergana Coal Region may possess characteristics allowing use as metallurgical coke for smelting iron and other ores, foundry coke, and as smokeless household fuel. The coals are friable and the product of the operating mines includes a large percentage of fine fragments. The fine fragments are not a major problem if the coal is used in powder-coal fired installations such as large thermal electricity and heat stations. The coarser-grained portion of the mines production is usable in a wider range of applications, from stoker-fed boilers to domestic heating and cooking in a variety of stoves.
Unfortunately, there is little market for the fine-grained coal from the Kyrgyz mines. The coarser coal is in demand for heating installations and domestic use. The mining systems in use in Kyrgyzstan inevitably produce a large amount of fine coal for which there is no demand, along with the coarse coal which is in demand. Though changes in mining methods may reduce the amount (percentage) of fine coal produced, the friability of the coal dictates that there will always be a considerable amount of fines produced along with coarser-sized coal. Development of a use for the fine coal is necessary. Of potential uses for fine coal, the application of briquetting technology to produce cohesive aggregations of the fine coal for use in coarse-coal applications appears most practical and possible.
The coarse coal produced in mining will almost certainly be in demand for the foreseeable future as long as it can be supplied for an affordable price. Small cogeneration facilities using coarse coal to produce heat and electricity in remote areas of the republic could abate present and future energy shortages in those areas if suitable nearby coal deposits are available.
3. Coal pricing structure
a. General
Kyrgyzstan's change to a free market economy during the past four years has disrupted many aspects of business activity. The condition of the general economy of the country can be characterized as distressed and the pricing of commodities is unstable. The information obtained in regard to coal pricing for the purposes of this report reflects these uncertainties. The price is certainly being affected by supply (with factors of quality and location) and by regional demand. However, the overall market can be categorized as being in turmoil due to the following series of factors.
The primary problem is the decline in sale (and hence, mining) of fine size coal with attendant reduction in the availability of coarse sizes. Next, the lack of hard currency payments by heating, electricity generating, and industrial plants to the mines, which could be used to import equipment and supplies, has forced reduction in tonnage mined. In some cases, the market for fine coal was lost when the national government obtained barter agreements across borders, primarily with Kazakstan. In these cases, transportation costs were certainly a factor. Also basic to the problem is the instability of the new currencies of the newly established central Asian countries and hence, the lack of established exchange rates.
As a result, the nation's coal production has declined over a six year period from about 4 million tonnes to 455 thousand tonnes in 1995. The steady loss of market for the fine sizes and non-payment in cash for coal delivered to bulk consumers has forced mines to reduce or cease fine coal shipments and, therefore, maximum production. The resulting decline in availability of funds caused mines to reduce maintenance of equipment, number of miners, support personnel, and staff.
In Kyrgyzstan, the price of coal is affected by the above problems. The price of coal to a consumer anywhere is made up of two main parts: (1) its price at the mine and (2) the price of transportation to its point of use. While a complete coal price analysis is beyond the scope of this study, inquiries made which centered on the coal price at the mine did result in the following information.
b. Price of coal
Kyrgyzstan's historic coal market price is based on the size of coal particles available for sale. The major portion of the market was formerly coal fines defined as 13 mm (1/2") or less. Coal particle sizes over 13 mm are generally considered to be coarse coal which is used primarily for home heating/cooking in less urban areas and is currently in short supply. There are indications that sizes greater than 20 mm (3/4 inch) brings a premium price and is also in short supply nationwide.
COAL PRICES PER METRIC TON FOB MINES/CLEANING-SIZING PLANTS
[in US$ at 10 Som to 1 US$]
FINE COAL (Generally, particle size 13 mm or less):
Note: Price range is due to quality (all are high ash: 20-35%). Fines are being stockpiled at several mines.
COARSE COAL (Generally, particle size more than 13 mm to 20 mm):
Note: Quality is about the same as fine coal.
COARSE COAL (Generally, particle size greater than 20 mm, called Lump Coal):
Notes: We were told, in the town of Kyzyl Kiya, that premium lump coal sells for $40 - $50/ton delivered. The supply of this coal is very limited and some of the price paid by the consumer will be in the form of bartered vegetables, wood fuel or traded labor.
The BBC television news, aired in Bishkek, interviewed people in the street willing to pay $48/ton (in Kyrgyz Soms) for lump coal delivered for winter heating, if it was available.
The above prices were stated to include cost of production only (direct costs). No indirect costs such as amortization charges for development, equipment and facility depreciation, interest, and other fixed costs are included. The mine that stated a $20/ton price claimed that 18% is profit (the only mine to declare that their price included a profit) and the rest is direct cost of production. This means that coal prices are understated.
In May, 1996, further discussions of prices and taxes elicited the following: the small mines operating under the Private Enterprises Mine Program reach an agreement quarterly with the local government tax office on the value per ton of the coal that they have mined or will mine. This is called the Tax Price. They pay a five percent tax on the coal produced, whether they sell it or not. They then can sell the coal for more or less than the Tax Price. The 5% tax is distributed 20% to local government, 30% to the Oblast, and 50% to the central Government. In addition to the 5% tax on production, they pay 25% tax on sales to the Central Government, 5% insurance (social liability?), 1.5% for road maintenance, and 1.5% to a Water and Air Quality Protection Fund. These taxes must be paid on barter transactions also and the same tax structure applies to all coal mines of the private enterprise program. We do not yet have information about the former state mines, now being converted to state stockholding companies.
In the fourth quarter of 1995, the value of coal produced - the Tax Price - by the Private Enterprises mines ranged from 90 to 120 soms ($9-12) per ton with an average of about 100 soms ($10) per ton. The average for the state-owned mines was about 185 soms ($18.5) per ton and the range was as follows: Kyzyl-Kiya-182 soms per ton, Solyukta-195, Almalyk-142, Agulak (and Kara-Keche?)-96, Tash-Kumyr-173, Kok-Yangak-175, Dzhergalan-242, and Soguty-322. These prices probably are direct cost of production, only. No market (sale) prices were available.
c. Coal Transportation Prices
The price for transportation is as important as the mine price of the coal itself. It is not uncommon for transportation charges to exceed the mine price of coal. In Kyrgyzstan, we were quoted prices of $8 and $10/ton for transporting coal in 7 to 20 ton truckloads. The distances are too vague to consider these prices to be anything but general indicators. We estimate that coal transportation by truck demands a price in the $0.40 to $1.00/ton-mile range. (These prices currently include all, or partly, bartered food stuffs and other agricultural products.) Government subsidy in the form of improved road networks, upgrading and maintenance of existing roads, and an extended internal railroad system will lower the stated high ton per mile transportation costs.
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